AVON GROVE SCHOOL DISTRICT WEST GROVE, PENNSYLVANIA AUDIT REPORT JUNE 30, 2012

Transcription

1 WEST GROVE, PENNSYLVANIA AUDIT REPORT JUNE 30, 2012

2 AVON GROVE SCHOOl DISTRICT TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAl STATEMENTS Entity-wide Financial Statements: - Statement of Net Position - Statement of Activities Fund Financial Statements: - Balance Sheet - Governmental Funds - Reconciliation of Balance Sheet - Governmental Funds to Statement of Net Position - Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds - Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds to Statement of Activities - Budgetary Comparison Statement - General Fund - Statement of Net Position - Proprietary Fund - Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Fund - Statement of Cash Flows - Proprietary Fund - Statement of Net Position - Fiduciary Funds NOTES TO FINANCIAl STATEMENTS

3 TABLE OF CONTENTS SINGLE AUDIT 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 with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 Schedule of Findings and Recommendations Schedule of Expenditures of Federal Awards and Certain State Grants Notes to Schedule of Expenditures of Federal Awards and Certain State Grants

4 INDEPENDENT AUDITORS' REPORT Barbacane, Thornton & Company LLP 200 Springer Building 3411 Silverside Road Wilmington, Delaware October 26, 2012 T F Board of School Directors Avon Grove School District West Grove, Pennsylvania We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Avon Grove School District (the "District"), West Grove, Pennsylvania, as of and for the year ended June 30, 2012, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of Avon Grove School District's management. Our responsibility is to express opinions on these financial statements based on our audit. The prior year summarized comparative information has been derived from the District's 2011 financial statements and, in our report dated October 31, 2011, we expressed unqualified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information. We conducted our audit in accordance with auditing standards generally accepted in the United Slates of America and the standards applicable to financial audits contained in Government Auditing standards, issued by the Comptroller General of the United states. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a lest 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Avon Grove School District, West Grove, Pennsylvania, as of June 30, 2012, and the respective changes in financial position and cash flows, where applicable, thereof and the budgetary comparisons for the general fund 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 26, 2012, on our consideration of Avon Grove School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 and should be considered in assessing the results of our audit BARBAO\NE 1HORNIDN &COMPANY CERTIFIED PUBUC ACCOUNTANTS

5 Board of School Directors Avon Grove School District Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 12 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limtted procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Avon Grove School District's financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards and Certain state Grants is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, "Audits of States, Local Governments and Nonprofit Organizations," and is not a required part of the financial statements. The Schedule of Expenditures of Federal Awards and Certain State Grants is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements 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 information is fairly stated in all material respects in relation to the financial statements as a whole

6 Avon Grove School District Management's Discussion and Analysis - Unaudited For the Fiscal Year Ended June 30, 2012 This discussion and analysis of Avon Grove School District's financial performance provides an overview of the District's financial activities for the fiscal year ended June 30, Financial Highlights The District's net position increased by $. 7 million, due primarily to increased revenues and the payment of long-term debt. Program revenues accounted for $12.9 million, or 17.0 percent of total revenues ($75.9 million); and general revenues accounted for $63.0 million, or 83.0 percent of the total. The general fund reported a positive unassigned fund balance of $6.1 million, or 8.0 percent of the $75.8 million operating budget. Actual expenditures in the general fund were $1.7 million less than budget. Reporting the District as a Whole The Statement of Net Position and Statement of Activities The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its overall activities. These statements include all assets and liabilities of the District (except for fiduciary funds held in trust for student purposes) using the accrual basis of accounting similar to the accounting used by private sector corporations. All of the current year's revenues and expenses are taken info consideration regardless of when cash is received or paid. These two statements report the District's net position and changes in it during the fiscal year. The change in net position provides the reader a tool to assist in determining whether the District's financial health is improving or deteriorating. The reader will need to consider other nonfinancial factors such as the District's property fax base, current property tax laws, student enrollment growth and facility conditions in arriving at a conclusion regarding the overall health of the District. Entity-wide Financial Analysis Net position may serve over time as a useful indicator of a government's financial position. In the case of the District, assets exceeded liabilities by $34.8 million at the close of the most recent fiscal year. In the prior year, assets exceeded liabilities by $34.1 million. A portion of the District's total net position reflects its investment in capital assets. The District uses capital assets to provide services; consequently, these assets are not available for future spending. Although the District's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. -3-

7 Avon Grove School District Management's Discussion and Analysis - Unaudited (confd) For the Fiscal Year Ended June 30, 2012 A comparative analysis of fiscal year 2012 to 2011 follows: STATEMENT OF NET POSITION June 30, 2012 And 2011 ASSETS: Governmental Activities Business~type Activities Totals Current and other assets $34,413,945 $33,740,983 $ 933,262 $ 991,011 $ 35,347,207 Capital assets 59,497,056 62,031, , ,172 59,628,980 TOTAL ASSETS 93,911,001 95,772,224 1,065,186 1,141,183 94,976,187 $ 34,731,994 62,181,413 96,913,407 LIABILITIES: Current liabilities 16,788,235 16,339,124 35,886 48,595 16,824,121 LongMterm liabilities 43,365,740 46,449,295 43,365,740 TOTAL LIABILITIES 60,153,975 62,788,419 35,886 48,595 60,189,861 16,387,719 46,449,295 62,837,014 NET POSITION: Invested in capital assets, net of debt 17,612,928 14,745, , ,172 17,744,852 Restricted 2,052,162 2,443,282 2,052,162 Unrestricted 14,091,936 15,794, , ,416 14,989,312 TOTAL NET POSITION $33,757,026 $32,983,805 $1,029,300 $1,092,588 $ 34,786,326 14,895,799 2,443,282 16,737,312 $ 34,076,393 Increases in cash and investments were offset by a net decrease in capital assets as depreciation exceeded total capital outlay. Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offselling those costs. The table on the following page reflects the cost of program services and the net cost of those services after taking into account the program revenues for the governmental activities. -4-

8 Avon Grove School District Management's Discussion and Analysis - Unaudited (cont'd) For the Fiscal Year Ended June 30, 2012 STATEMENT OF ACTIVITIES For The Years Ended June 30,2012 And Total Net Total Services Services Services PROGRAM EXPENSES Governmental Activities: Instruction $ 51,953,685 $ 45,440,411 $ 49,153,714 Instructional student support 4,102,180 3,636,535 4,566,219 Adm inistrat'1on 4,703,438 4,446,995 4,858,331 Maintenance 3,968,925 3,824,058 4,624,874 Pupil transportation 5,976,285 3,651,914 6,019,933 Student activities 1,273,873 1,022,813 1,480,795 Community services 7, ,549 Interest and fiscal charges 1,358, ,976 1,498,652 Total Governmental Activities 73,343,728 62,227,702 72,310,067 Business-type Activities: Food service 1,888,101 63,886 1,772,808 Total Business-type Activities 1,888,101 63,886 1,772,808 Total Primary Government $ 75,231,829 $ 62,291,588 $ 74,082, Net Services $ 38,200,311 4,247,682 4,657,850 4,508,302 3,713,391 1,361, , ,944 57,179,524 (105,480) (105,480) $ 57,074,044 The increases in the net cost of services for instruction are due to increasing personnel costs and tuition paid to charter schools and out-of-district programs and a significant reduction in revenue from federal grants. In addition, as dictated by prior year trends, the District experienced increases in the cost of special education services. In total, most other categories of expenses decreased slightly as the District continued to reduce the cost of support services. The net costs of food services increased as labor, food and operating costs increased. CHANGES IN NET POSITION For The Years Ended June 30,2012 And 2011 Governmental Activities Business~type Activities Totals REVENUES Program Revenues: Charges for services Operating grants Total Program Revenues General Revenues: Taxes Grants and entitlements Investment earnings $ 609,013 $ 398,579 10,507,013 14,731, '116,026 15,130,543 46,097,566 42,815,043 16,728,148 15,312, , ,166 $ 1,089, ,890 1,824, $ 1 '146, ,816 1,878, $ 1,698,338 11,241,903 12,940,241 46,097,566 16,728, ,807 $ 1,545,051 15,463,780 17,008,831 42,815,043 15,312, ,093 Miscellaneous Total General Revenues 63,000,923 58,322, ,001,521 58,323,326 TOTAL REVENUES 74,116,949 73,452,942, 1,824,813 1,879,215 75,941,762 75,332,157-5-

9 Avon Grove School District Management's Discussion and Analysis - Unaudited (confd) For the Fiscal Year Ended June 30, 2012 Governmental Activities Business~!Yl~:e Activities Totals EXPENSES Program Services: Instruction 51,953,685 49,153,714 51,953,685 49,153,714 Support services: Instructional staff support 4,102,180 4,566,219 4, 102,180 4,566,219 Administration 4,703,438 4,858,331 4,703,438 4,858,331 Maintenance 3,968,925 4,624,874 3,968,925 4,624,874 Pupil transportation 5,976,285 6,019,933 5,976,285 6,019,933 Student activities 1,273,873 1,480,795 1,273,873 1,480,795 Community services 7, ,549 7, ,549 Interest/fiscal charges 1,358,234 1,498,652 1,358,234 1,498,652 Food service 1,888,101 1,772,808 1,888,101 1,772,808 TOTAL EXPENSES 73,343,728 72,310,067 1,888,101 1,772,808 75,231,829 74,082,875 CHANGE IN NET ASSETS $ 773,221 $ 1,142,875 $ (63,288) $ 106,407 $ 709,933 $ 1,249,282 Reporting the District's Most Significant Funds Governmental Funds Most of the District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end available for spending in future periods. These funds are reported using the modified accrual method of accounting, which measures cash and other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's general government operations and the basic services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources available to spend in the near future to finance the District's programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the basic financial statements. Proprietary Funds Proprietary funds use the accrual basis of accounting, the same as on the entity-wide statements; therefore, the statements will essentially match the business-type activities portion of the entity-wide statements. Fiduciary Funds The District is the trustee, or fiduciary, for funds held on behalf of the District's students. All of the District's fiduciary activities are reported in the Statement of Net Position - Fiduciary Funds on page 23. These activities are excluded from the District's other financial statements because the assets cannot be utilized by the District to finance its operations. -6-

10 Avon Grove School District Management's Discussion and Analysis - Unaudited (cont'd) For the Fiscal Year Ended June 30, 2012 Fund Financial Statements The fund financial statements of the District's major funds begin on page 1 5 and provide detailed information about the most significant funds- not the District as a whole. Some funds are required to be established by State statute, while many other funds are established by the District to help manage money for particular purposes and compliance with various grant provisions. The District's three types of funds, governmental, proprietary and fiduciary, use different accounting approaches as further described in the notes to the financial statements. The District's governmental funds reported a combined fund balance of $21.9 million, which is less than last year's total of $22.0 million. The schedule below indicates the fund balance and the total change in fund balances as of June 30, 2012 and Fund Balance Fund Balance Increase June 30, 2012 June 30, 2011 (Decrease) General $ 19,884,589 $ 19,572,964 $ 311,625 Capital Projects 2,052,162 2,443,282 (391 '120) TOTAL $ 21,936,751 $ 22,016,246 $ (79,495) The decrease in the capital projects fund balance is the result of the expenditure of funds for instructional technology equipment. The increase in the District's general fund balance is due to real estate tax revenues exceeding projections and the District's continuing efforts to reduce noninstruclional operating costs. The tables and graphs that follow assist in illustrating the financial aclivnies and balance of the general fund Dollar Percent Revenues Amount Amount Change Change Taxes $ 46,097,566 $ 43,615,320 $ 2,482, % Intergovernmental 27,235,161 28,910,546 (1,675,385) (5.80)% Other revenue 831,028 1,722,400 (891,372) (51.75)% Total $74,163,755 $ 74,248,266 $ (84,511) (0.11 )% There was an increase in the lax rate from 2011 to 2012 of 5. 9 percent. Total current real estate taxes collected increased by $2,882,906, or 7.1 percent, due to the increased rate and an increase in assessed valuation. Delinquent tax collected decreased by $458,598, or 22.3 percent, due to settlement of a tax appeal received in the prior year. The collection rate of total current and delinquent taxes, returned to the historical collection rate of real estate taxes. Interest earnings decreased due to the general decline in interest rates during the year. - 7-

11 Avon Grove School District Management's Discussion and Analysis - Unaudited (cont'd) For the Fiscal Year Ended June 30, 2012 Intergovernmental revenue decreased by 5.8 percent due to decreased Commonwealth subsidies for basic education, charter schools and federal stimulus funds for both regular education and special education programs. Other revenue decreased by 51.8 percent due to the decreased amount of federal stimulus funds passed through another education agency. Fund Revenues 1.2% 34.7 i'iprop Tax a Local Other a State CJ Federal The District's reliance upon revenues from real estate property taxes and revenues from other focal sources is demonstrated by the chart above that indicates 62.2 percent of total revenues for government activities come from focal sources. As the graph below illustrates, the largest portions of District expenditures are for salaries and benefits (58.0 percent) and contracted services, including pupil transportation and charter school tuition (9.9 percent), other purchased services (19.8 percent) and debt service (9.2 percent). Equipment, purchased services and supplies make up the balance (3.1 percent) of total expenditures. General Fund Expenditures mwages Benefits CJ Purch Svc t1 Supplies Equipment Ell Mise 8 Debt/TRN 1:1 Oth Pch Svc -8-

12 Avon Grove School District Management's Discussion and Analysis - Unaudited (cont'd) For the Fiscal Year Ended June 30, 2012 Exeenditures by Object Change Salaries and wages $ 30,410,023 $ 31,411,636 $ (1,001,613) Benefits 12,391,559 11,567, ,549 Other purchased services 7,365,647 6,788, ,323 Purchased property services 14,655,481 14,068, ,086 Supplies 2,043,612 3,104,966 (1,061,354) Equipment 127, ,625 (52,171) Miscellaneous 61,523 53,495 8,028 Debt service/transfers 6, ,980,256 ( 4, 183,425) Total $ 73,852,130 $ 78,153,707 $ ( 4,301,577l Percent (3.19)% 7.13% 8.50% 4.17% (34.18)% (29.04)% 15.00% (38.10)% 5.50% Expenditures decreased by $4,301,577 (5.50 percent) due primarily to a decline of $5,000,000 in the transfer of funds from the general fund to the capital projects fund. This was offset, in part, by increased expenditure for purchased services such as tuition paid to out-of-district programs and the tuition paid to charter schools. Business-type Activities Business-type activilies consist of the food service program. This program had a decrease in net position of $63,288 due to increased labor, food and operating costs. General Fund Budget Information The District's budget is prepared in accordance with Pennsylvania law and is based on the modified accrual basis of accounting. The most significant budgeted fund is the General Fund. The final budget for expenditures reflects the required changes in functional categories due to spending patterns. Spending Review Variance Original Final Positive Percent Budget Budget {Neaative) Change Instructional services: Regular programs 1000 $ 33,207,065 $ 32,398,432 $ 808, % Special programs ,489,847 12,986,533 (496,686) (3.98)% Vocational programs ,069,000 2,069, % Other Programs , , % Total Instructional Services 47,940,597 47,628, , % -9-

13 Avon Grove School District Management's Discussion and Analysis - Unaudited (cont'd) For the Fiscal Year Ended June 30, 2012 Spending Review Variance (cont'dl Original Final Positive Budget Budget (Negative} Support services: Pupil personnel ,545,737 2,681,683 (135,946) Instructional staff services ,371,384 1,487,633 (116,249) Administrative services ,208,669 3,212,339 (3,670) Pupil health , ,464 (18,844) Business services , ,774 (977) Operation and maintenance of plant ,598,642 4,598,642 Student transportation services ,093,048 6,093,048 Central support services , ,160 (26,643) Other support services , (5,000) Total Support Services ,125,743 (307,329) Operation of noninstructional services: Student activities ,022,250 1,026,050 (3,800) Community services ,295 7,113 (818) Total Operation of Noninstructional Services 1,028,545 1,033,163 (4,618) Debt service/transfers ,790,812 6,790,812 $ 75,578,368 $ 75,578,368 $ Percent Change (5.34)% (8.48)% (0.11)% (2.77)% (0.18)% 0.00% 0.00% (3.54)% (13.89)% (1.55)% (0.37)% (12.99)% (0.45)% 0.00% 0.00% Using spending variances in excess of one percent, the most significant changes in the District's final budget expenditures vs. planned expenditures were: Variance Original Final Positive Percent Budget Budget (Negative) Change Regular programs 1000 $ 33,207,065 $ 32,398,432 $ 808, % Special programs ,489,847 12,986,533 (496,686) (3.98)% Pupil personnel ,545,737 2,681,683 (135,946) (5.34)% Instructional staff services ,371,384 1,487,633 (116,249) (8.48)% Pupil health , ,464 (18,844) (2.77)% Central support services , ,160 (26,643) (3.54)% Other support services ,000 41,000 (5,000) (13.89)% Community services ,295 7,113 (818) (12.99)% Due to budgetary changes and changes in funding from the Commonwealth of Pennsylvania, funds were reallocated to the special education function to budget and account for the cost of charter school special education and tuition-based special education programs. Funds for regular education were reallocated to special education programs

14 Avon Grove School District Management's Discussion and Analysis - Unaudited (confd) For the Fiscal Year Ended June 30, 2012 Funds for curriculum and staff development were received from federal government programs, and the budgets for these activities were increased to include the additional funding. The other variances are relatively small dollar amounts and resulted from minor changes in the budgets and expenditures required by programmatic changes. Capital Assets The District has $59.6 million invested in capital assets net of depreciation, with $59.5 million attributed to governmental activities. Acquisitions for governmental activities totaled $.5 million, and depreciation expense for the year was $3.1 million. The majority of the acquisitions were for instructional equipment. Detailed information regarding capital asset activity is included in the notes to the basic financial statements (Note 5). Debt AI June 30, 2012, the District had $41.5 million in outstanding general obligation bonds and $53.5 million in authorized but unissued general obligation bonds. The District had a net decrease of $5.4 million in outstanding general obligation bonds during the fiscal year. Detailed information regarding long-term debt activity is included in the notes to the basic financial statements (Note 7). Under current Commonwealth of Pennsylvania statutes, the District's nonelectoral general obligation bonded debt issues are subject to legal limitation based on 225 percent of the average revenues for the prior three years. AI June 30, 2012, the District's general obligation debt was $69.1 million below the legal limit. Factors Expected to have an Effect on Future Operations The District has experienced significant growth ( percent) in enrollment over the lost 10 years but enrollment in the last five years has remained relatively constant. If the growth patterns in student population change so that more students enter the District than currently anticipated, adjustments will hove to be mode to the financial models upon which assumptions hove been mode. The District's property tax bose is expected to remain relatively constant over the next several years. The District's ability to raise new real estate property tax revenues has been curtailed by property tax relief legislation that limits future tax rote increases and limits the future taxing authority of the District. It is anticipated that the rote of growth will return to the three percent to five percent range previously projected when the overall housing market improves. The District's enrollment is expected to remain relatively constant through fiscal year The District's facilities ore being studied to adequately accommodate future increases in student growth. While most of the District's facilities ore relatively new or renovated, and while all these facilities meet current federal, state, county and municipal guidelines for health and safety criteria, new mandates for facility upgrades con be imposed by any of these governments at any time

15 Avon Grove School District Management's Discussion and Analysis - Unaudited (cont'd) For the Fiscal Year Ended June 30, 2012 The reader is invited to review additional tax and enrollment information on the District's web page Cwww.avongrove.orgl and to review official offering statements of recent District bond issues that contain related housing, commercial and demographic information available at its business office located at the Avon Grove School District Administrative Office or at Contacting the District Financial Management Our financial report is designed to provide our citizens, taxpayers, parents, students, investors and creditors with a general overview of the District's finances and to show the Board's accountability for the money it receives. If you have questions about this report or wish to request additional financial information, please contact James A. Asciutto, Business Manager, at Avon Grove School District, 375 South Jennersville Road, West Grove, Pennsylvania 19390, (61 0) , extension 1 014; or asciutlo@avongrove. orq

16 STATEMENT OF NET POSITION JUNE 30, 2012 (With Summarized Comparative Data for June 30, 2011) Governmental Business-type Totals Activities Activities ASSETS Cash and cash equivalents $ 206,508 $ 115,379 $ 321,887 $ 2,108,069 Investments 30,981, ,566 31,803,276 28,719,218 Taxes receivable, net of allowance 1,745,079 1,745,079 1,871,719 Due from other governments 919,917 9, ,881 1,269,523 Internal balances 75,375 (75,375) Other receivables 21, , Inventories 61,691 61,691 55,874 Other current assets 211, , ,057 Issuance costs 252, , ,620 Land 11,035,789 11,035,789 11,035,789 Buildings and improvements 82,451,514 82,451,514 82,316,215 Furniture and equipment 4,748, ,848 5,471,751 5,048,511 Accumulated depreciation (38, 739, 150) (590,924) (39,330,074) (36,219, 102) TOTAL ASSETS $93,911,001 $ 1,065,186 $94,976,187 $ 96,913,407 LIABILITIES AND NET POSITION LIABILITIES: Accounts payable $ 1,107,879 $ 2,275 $ 1,110,154 $ 815,348 Accrued salaries, payroll with holdings and benefits 8,623,865 1,322 8,625,187 8,979,844 Accrued interest payable 260, , ,165 Deferred revenues 32,289 32,289 36,602 Long-term liabilities Portion due or payable within one year: Bonds payable 5,630,000 5,630,000 5,400,000 Capital lease payable 8,835 8,835 Add: Unamortized premium 84,316 84,316 84,136 Less: Unamortized discount (38,354) (38,354) (38,354) Less: Deferred amount on refunding (120) (120) (114) Accumulated compensated absences/ early retirement incentive 308, , ,426 Other post-employment benefit obligations 802, , ,666 Portion due or payable after one year: Bonds payable 35,870,000 35,870,000 41,500,000 Capital lease payable 35,340 35,340 Add: Unamortized premium 500, , ,763 Less: Unamortized discount (205,364) (205,364) (243,718) Less: Deferred amount on refunding (973) (973) (1,099) Accumulated compensated absences/ early retirement incentive 1,038,046 1,038,046 1,096,363 Other post-employment benefit obligations 6,128,243 6,128,243 3,512,986 TOTAL LIABILITIES 60,153,975 35,886 60,189,861 62,837,014 NET POSITION: Invested in capital assets, net of related debt 17,612, ,924 17,744,852 14,895,799 Restricted for capital projects 2,052,162 2,052,162 2,443,282 Unrestricted 14,091, ,376 14,989,312 16,737,312 TOTAL NET POSITION 33,757,026 1,029,300 34,786,326 34,076,393 TOTAL LIABILITIES AND NET POSITION $93,911,001 $ 1,065,186 $ 94,976,187 $ 96,913,407 The accompanying notes are an integral part of these financial statements

17 Program Revenues Operating Capital Net (Expense) Revenue and Changes in Net Assets Charges for Grants and Grants and Governmental Business-type Totals ~enses Services Contributions Contributions Activities Activities GOVERNMENTAL ACTIVITIES: Instruction $51,953,685 $ 335,550 $ 6,177,724 $ $(45,440,411) $ $(45,440,411) $(38,200,311) Instructional student support 4,102, ,645 (3,636,535) (3,636,535) (4,247,682) Administrative and financial support services 4,703,438 28, ,166 ( 4,446,995) (4,446,995) (4,657,850) Operation and maintenance of plant services 3,968,925 39, ,601 (3,824,058) (3,824,058) (4,508,302) Pupil transportation 5,976,285 2,324,371 (3,651,914) (3,651,914) (3, 713,391) Student activities 1,273, ,920 45,140 (1,022,813) (1,022,813) (1,361,566) Community services 7,108 7,108 (101,478) Interest on long-term debt 1,358,234 1,153,258 (204,976) (204,976) (388,944) TOTAL GOVERNMENTAL ACTIVITIES 73,343, ,013 10,507,013 (62,227,702) (62,227, 702) _(57, 179,524) BUSINESS-TYPE ACTIVITIES: Food service 1,888,101 1,089, ,890 (63,886) (63,886) 105,480 TOTAL BUSINESS-TYPE ACTIVITIES 1,888,101 1,089, ,890 (63,886) (63,886) 105,480 TOTAL PRIMARY GOVERNMENT $75,231,829 $1,698,338 $11,241,903 $ (62,227, 702) (63,886) _(62,291,588) (57,074,044) GENERAL REVENUES Property taxes levied for general purposes 45,388,911 45,388,911 42,142,886 Taxes levied for specific purposes 708, , ,157 Grants and entitlements not restricted to specific programs 16,728,148 16,728,148 15,312,190 Investment earnings 175, , ,093 TOTAL GENERAL REVENUES 63,000, ,001,521 58,323,326 CHANGE IN NET POSITION 773,221 (63,288) 709,933 1,249,282 NET POSITION, BEGINNING OF YEAR 32,983,805 1,092,588 34,076,393 32,827,111 NET POSITION, END OF YEAR $ 33,757,026 $ 1,029,300 $ 34,786,326 $ 34,076,393 AVON GROVE SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 (With Summarized Comparative Data for the Year Ended June 30, 2011) The accompanying notes are an integral part of these financial statements

18 Totals 2011 $ 1,961,787 27,898,059 1,871,719 63,941 1,237, ,057 $33,444,363 $ 815,348 8,958, ,426 1,439,772 11,428,117 12,443,282 2,000,000 7,572,964 22,016,246 $33,444,363 AVON GROVE SCHOOL DISTRICT BALANCE SHEET-GOVERNMENTAL FUNDS JUNE 30, 2012 (With Summarized Comparative Data for June 30, 2011) ASSETS Cash and cash equivalents Investments Taxes receivable, net of allowance Due from other funds Due from other governments Other receivables Other current assets General Fund $ 206,508 28,927,036 1,745,079 75, ,917 21, ,712 Major Funds Capital Projects Fund $ 2,054, $ 206,508 30,981,710 1,745,079 75, ,917 21, ,712 TOTAL ASSETS $32,107,049 $ 2,054,674 $34,161,723 LIABILITIES AND FUND BALANCES LIABILITIES: Accounts payable Accrued salaries, payroll withholdings and benefits Accumulated compensated absences/ early retirement incentive Deferred revenues TOTAL LIABILITIES $ 1,105,367 9,426, ,037 1,382,245 12,222,460 $ 2, ,512 $ 1,107,879 9,426, ,037 1,382,245 12,224,972 FUND BALANCES: Restricted for capital projects Committed for future retirement contributions Assigned for next year's budget Unassigned TOTAL FUND BALANCES 10,000,000 3,819,474 6,065,115 19,884,589 2,052,162-2,052,162 2,052,162 10,000,000 3,819,474 6,065,115 21,936,751 TOTAL LIABILITIES AND FUND BALANCES $32,107,049 $ 2,054,674 $34,161,723 The accompanying notes are an integral part of these financial statements

19 RECONCILIATION OF BALANCE SHEET- GOVERNMENTAL FUNDS TO STATEMENT OF NET POSITION JUNE 30, 2012 TOTAL GOVERNMENTAL FUND BALANCES $21,936,751 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. These assets consist of: Land Buildings and improvements (including Construction-in-progress) Furniture and equipment Accumulated depreciation $ 11,035,789 82,451,514 4,748,903 (38, 739, 150) 59,497,056 Some liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Those liabilities consist of: Bonds payable Capital lease payable Accumulated compensated absences/early retirement incentive Accrued interest payable Other post-employment benefits (41,500,000) (44,175) (1,038,046) (260,831) (6, 128,243) (48,971,295) Refunded debt and bond issuance costs resulted in deferred charges and credits which will be amortized over the life of the new debt but do not represent current rights. (87, 731) Some of the District's revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. 1,382,245 NET POSITION OF GOVERNMENTAL ACTIVITIES $33,757,026 These accompanying notes are an integral part of these financial statements

20 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2012 (With Summarized Comparative Data for the Year Ended June 30, 2011) 2011 $ 44,205,101 25,240,682 4,803,472 74,249,255 46,135,948 19,846,167 1,191,336 3,668,494 5,980,256 76,822,201 g5_7?,946) 5,000,000 {5,000,000) (2,572,946) 24,589,192 $ 22, Major Funds General Capital Projects Funcl Fund 2012 REVENUES Local sources $ 46,932,646 $ 1,441 $ 46,934,087 State sources 25,769,852 25,769,852 Federal sources 1,461,257 1,461,257 TOTAL REVENUES 74,163,755 1,441 74,165,196 EXPENDITURES Current: Instruction 47,808,098 47,808,098 Sup port services 18,365,252 18,365,252 Operation of noninstructional services 881, ,949 Capital outlays 392, ,561 Debt service 6,796,831 6,796,831 TOTAL EXPENDITURES 73,852, ,561 74,244,691 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 311,625 (391 '120) ( OTHER FINANCING SOURCES (USES) Transfers in Transfers out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES 311,625 (391 '120) (79,495) FUND BALANCES, BEGINNING OF YEAR 19,572,964 2,443,282 22,016,246 FUND BALANCES, END OF YEAR $ ,589 $ $ Totals The accompanying notes are an integral part of these financial statements

21 RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 NET CHANGE IN FUND BALANCES- GOVERNMENTAL FUNDS Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation ($3,080,423) exceeded captial outlays ($560,921) in the period. Loss on disposal of capital assets Because some property taxes will not be collected for several months after the District's fiscal year ends, they are not considered as "available" revenues in the governmental funds. Deferred tax revenues increased by this amount this year. Debt proceeds are reported as financing sources in the governmental funds and thus contribute to the change in fund balance. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities. Similarly, repayment of principal is an expenditure in the governmental funds but reduces the liability in the statement of net position. This is the amount by which debt proceeds ($44, 175) were less than debt repayments ($5,400,000). Governmental funds report bond issuance cost, discounts and deferred amounts on refunding as expenditures and bond premiums as revenue. However, these amounts are reported on the statement of net position as deferred charges and credits and are amortized over the life of the debt. This is the amount by which net amortization exceeded current issuance costs, discounts and deferred amounts on refunding net of bond premiums. $ (79,495) (2,519,502) (14,683) (48,247) 5,355,825 1,263 In the statement of activities, certain operating expenses-compensated absences (vacations and sick leave) and special termination benefits (early retirement)-are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This is the amount by which current period amounts paid were less than current period compensated absences earned. Compensated absences Other post-employment benefits Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due and, thus, requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. $ 58,317 (2,017,591) (1,959,274) 37,334 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 773,221 The accompanying notes are an integral part of these financial statements

22 NET CHANGE IN FUND BALANCE (2,858,271) (2,858,271) 311,625 3,169,896 FUND BALANCE, BEGINNING OF YEAR 18,642,818 18,642,818 19,572, ,146 FUND BALANCE, END OF YEAR $ 15,784,547 $ 15,784,547 $ 19,884,589 $ 4,100,042 AVON GROVE SCHOOL DISTRICT BUDGETARY COMPARISON STATEMENT GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2012 Final Budget Budgeted Amounts Actual Positive Original Final ( GAAP Basis) _ (Negative) REVENUES Local sources $ 46,237,082 $ 46,237,082 $ 46,932,646 $ 695,564 State sources 25,060,324 25,060,324 25,769, ,528 Federal sources 1,422,691 1,422,691 1,461,257 TOTAL REVENUES 72,720,097 72,720,097 74, EXPENDITURES Instruction: Regular programs 33,207,065 32,398,432 32,338,090 60,342 Special programs 12,489,847 12,986,533 13,212,189 (225,656) Vocational programs 2,069,000 2,069,000 2,048,143 20,857 Other instructional programs 174, , ,676 (34,991) Total Instruction 47,940,597 1L918,6!!Q 47,808,09JL _(179,448) Support services: Pupil personnel services 2,545,737 2,681,683 2,290, ,641 Instructional staff services 1,371,384 1,487,633 1,180, ,679 Administrative services 3,208,669 3,212,339 3,279,320 (66,981) Pupil health 679, , ,967 67,497 Business services 532, , ,238 (35,464) Operation and maintenance of plant services 4,598,642 4,598,642 3,593,205 1,005,437 Student transportation services 6,093,048 6,093,048 5,976, ,763 Central support services 752, , ,416 (28,256) Other support services 36,000 41,000 37,825 3,175 Total Support Services 19,818,414 20, ,365,252 1, Operation of non instructional services: Student activities 1,022,250 1,026, , ,209 Community services 6,295 7,113 7,108 5 Total Operation of Noninstructional Services 1,028,545 1,033, , ,214 Debt service 6,790,812 6, 790,812 6, 796,831 (6,019) TOTAL EXPENDITURES 75,578,368 75,578,368 73,852,130 1,726,238 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,858,271) (2,858,271) 311,625 3,169,896 The accompanying notes are an integral part of these financial statements

23 STATEMENT OF NET POSITION PROPRIETARY FUND JUNE 30,2012 (With Comparative Data for June 30, 2011) 2012 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 115,379 Investments 821,566 Due from other governments 9,964 Other receivables 37 Inventories 61,691 Total Current Assets 1,008,637 PROPERTY AND EQUIPMENT: Furniture and equipment 722,848 Accumulated depreciation (590,924) Net Property and Equipment 131,924 Major Fund Food Service Fund 2011 $ 146, '159 31, ,874 1,054, ,547 (560,375) 150,172 TOTAL ASSETS $ 1 '140,561 $ 1,205,124 LIABILITIES AND NET POSITION CURRENT LIABILITIES: Accounts payable $ 2,275 Payroll payable 1,322 Due to other funds 75,375 Deferred revenues 32,289 Total Current Liabilities 111,261 $ 21,273 63,941 27, ,536 NET POSITION: Invested in capital assets, net of related debt 131,924 Unrestricted 897,376 Total Net Position 1,029, , ,416 1,092,588 TOTAL LIABILITIES AND NET POSITION $ 1,140,561 $ 1,205,124 The accompanying notes are an integral part of these financial statements. -20-

24 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2012 (With Comparative Data for the Year Ended June 30, 2011) Major Fund Food Service Fund 2012 OPERATING REVENUES Food service revenues $ 1,089,325 $ Total Operating Revenues 1,089, '146,472 1,146,472 OPERATING EXPENSES Salaries 486,267 Employee benefits 260,811 Purchased professional and technical services 40,512 Other operating expenses 3,411 Supplies 1,066,551 Depreciation 30,549 Total Operating Expenses 1,888,101 OPERATING LOSS (798,776) NONOPERATING REVENUES Earnings on investments 598 State sources 96,686 Federal sources 638,204 Total Nonoperating Revenues 735,488 CHANGE IN NET POSITION (63,288) NET POSITION, BEGINNING OF YEAR 1,092, , ,836 22,206 2,888 1,003,286 30,647 1,772,808 (626,336) , , , , ,181 NET POSITION, END OF YEAR $ 1,029,300 $ 1,092,588 The accompanying notes are an integral part of these financial statements

25 STATEMENT OF CASH FLOWS- PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2012 (With Comparative Data for the Year Ended June 30, 2011) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers Payments to suppliers Payments to employees NET CASH USED BY OPERATING ACTIVITIES 2012 $ 1,094,276 (1,004,066) (755,595) (665,385) Major Fund Food Serv1ce Fund 2011 $ 1,158,701 (922,494) (715,905) (479,698) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: State sources Federal sources NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 98, , , ,727 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchase of capital assets NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES (12,300) (12,300) (23,431) (23,431) CASH FLOWS FROM INVESTING ACTIVITIES: Earnings on investments Purchase of investments NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 598 ( 411) (200,789) (199,862) NET DECREASE IN CASH AND CASH EQUIVALENTS (30,903) (67,264) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 146, ,546 CASH AND CASH EQUIVALENTS, END OF YEAR $ 115,379 $ 146,282 RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Operating loss Adjustments to reconcile operating Joss to net cash used by operating activities: Depreciation Donated commodities {Increase) Decrease in: Accounts receivable Inventories Increase (Decrease) in: Accounts payable Due to other funds Accrued payroll expenses Deferred revenue NET CASH USED BY OPERATING ACTIVITIES $ $ (798,776) 30, ,950 (16) (5,817) 2,275 11,434 (19,951) 4,967 (665,385) $ (626,336) 30,647 99,515 1,127 6,628 (257) 484 (2,608) 11 '102 $ (479,698) SUPPLEMENTAL DISCLOSURE: Noncash noncapital financing activity: USDA donated commodities $ 109,950 $ 99,515 The accompanying notes are an integral part of these financial statements. -22-

26 STATEMENT OF NET POSITION- FIDUCIARY FUND JUNE 30, 2012 (With Comparative Data for June 30, 2011) The accompanying notes are an integral part of these financial statements

27 NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Avon Grove School District (the "District") operates two elementary schools, one middle school and one senior high school to provide education and related services to the residents of Penn, London Grove, New London, Franklin and London Britain Townships and the Boroughs of Avondale and West Grove. The District operates under current standards prescribed by the Pennsylvania Department of Education in accordance with the provisions of the School Laws of Pennsylvania as a school district of the third class. The District operates under a locally elected nine-member Board form of government. The financial statements of the District have been prepared in accordance with generally accepted accounting principles ("GAAP") as applied to governmental units. The Governmental Accounting Standards Board f'gasb") is the authoritative standard-setting body for the establishment of governmental accounting and financial reporting principles. Reporting Entitv GASB Statement No. 14, "The Financial Reporting Entity," as amended by GASB Statement No. 39, established the criteria for determining the activities, organizations and functions of government to be included in the financial statements of the reporting entity. In evaluating the District as a reporting entity, management has addressed all potential component units which may or may not fall within the District's financial accountability. The criteria used to evaluate component units for possible inclusion as part of the District's reporting entity are financial accountability and the nature and significance of the relationship. The District is considered to be an independent reporting entity and has no component units. Basis of Presentation Entity-wide Financial statements The statement of net position and the statement of activities display information about the District as a whole. These statements distinguish between activities that are governmental and those that are considered business-type. These statements include the financial activities of the primary government, except for fiduciary funds. The entity-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting as further defined under proprietary funds below. This is the same approach used in the preparation of the proprietary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Therefore, governmental fund financial statements include a reconciliation with brief explanations to better identify the relationship between the entity-wide statements and the statements of governmental funds. The entity-wide statement of activities presents a comparison between expenses and program revenues for each function of the business-type activities of the District and for each governmental program. Expenses are those that are specifically associated with a service or

28 NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) program and are, therefore, clearly identifiable to a particular function. Program revenues include charges paid by the recipients of the goods or services offered by the programs, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Revenues which are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program is self-financing or draws from the general revenues of the District. Except for interfund activity and balances between the funds that underlie governmental activities and the funds that underlie business-type activities, which are reported as transfers and internal balances, the effect of interfund activity has been removed from these statements. The entity-wide financial statements report net position in one of three components: invested in capital assets, net of related debt; consists of capital assets, net of accumulated depreciation; and reduced by the outstanding balances of borrowings attributable to acquiring, constructing or improving those assets. Net position is reported as restricted when constraints placed on net position use 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. Those restrictions affect net position arising from the capital projects fund. Unrestricted net position consists of net position that does not meet the definition of "invested in capital assets, net of related debt" or "restricted." Fund Financial Statements During the school year, the District segregates transactions related to certain District functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements report detailed information about the District. The focus of governmental and enterprise fund financial statements is on major funds rather than reporting funds by type. Fiduciary fund financial statements are presented by fund type. Governmental Funds All governmental funds are accounted for using the modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable. The District reports the following major governmental funds: The General Fund is the government's primary operating fund. II accounts for all financial resources of the general government, including the athletic fund, except those required to be accounted for in another fund. The Capital Projects Fund is used to account for the acquisition, construction and renovation of major capital facilities and their related capital assets and to account for funds set aside for future capital needs

29 NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (conl'd) Revenue Recognition In applying the "susceptible to accrual concepf' under the modified accrual basis, revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers tax revenue to be available if collected within 60 days of the end of the fiscal period. Revenue from federal, state and other grants designated for payment of specific District expenditures is recognized when the related expenditures are incurred; accordingly, when such funds are received, they are reported as deferred revenues until earned. Other revenues, including certain other charges for services and miscellaneous revenues, are recorded as revenue when received in cash because they generally are not measurable until actually received. Expenditure Recognition The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Most expenditures are measurable and are recorded when the related fund liability is incurred. However, principal and interest on general long-terrn debt which has not matured are recognized when paid. liabilities for compensated absences and special termination benefits are recognized as fund liabilities to the extent they mature each period. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds. Proprietary Funds Proprietary funds are accounted for using the accrual basis of accounting. These funds account for operations that are financed primarily by user charges. The economic resource focus concerns determining costs as a means of maintaining the capital investment and management control. Revenues are recognized when they are earned and expenses are recognized when they are incurred. Allocations of certain costs, such as depreciation, are recorded in proprietary funds. The District does not attempt to allocate all "building-wide costs" to the proprietary fund. Thus, general fund expenditures which partially benefit the proprietary fund (utilities, janitorial services, insurance, etc.) are not recognized proportionately within the proprietary fund. Similarly, the proprietary fund does not recognize a cost for the building space it occupies. These funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fund's principal ongoing operations. The principal operating revenues of the District's proprietary fund are food service charges. Operating expenses for the District's proprietary fund include food production costs, supplies and administrative costs. All revenues or expenses not meeting this definition are reported as nonoperating revenues and expenses