BENSALEM TOWNSHIP SCHOOL DISTRICT BENSALEM, PENNSYLVANIA AUDIT REPORT JUNE 30, 2015

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1 BENSALEM, PENNSYLVANIA AUDIT REPORT JUNE 30, 2015

2 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS l 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 Balances - Governmental Funds to Statement of Activities - Budgetary Comparison Statement - General Fund - Statement of Net Position - Proprietary Fund - Statement of Revenues, Expenses, and Changes In Net Position - Proprietary Fund - Statement of Cash Flows - Proprietary Fund - Statement of Net Position - Fiduciary Funds - Statement of Changes in Net Position - Fiduciary Fund NOTES TO FINANCIAL STATEMENTS

3 TABLE OF CONTENTS REQUIRED SUPPLEMENTARY INFORMATION Schedule of the District's Proportionate Share of the Net Pension Liability Schedule of District Contributions Schedule of Funding Progress - Post-employment Healthcare Plan SINGLE AUDIT SUPPLEMENT Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A- 133 Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Recommendations

4 Barbacane, Thornton & Company LLP 200 Springer Building 3411 Silverside Road Wilmington, Delaware INDEPENDENT AUDITOR'S REPORT T F January 7, 2016 Board of School Directors Bensalem Township School District Bensalem, Pennsylvania Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Bensalem Township School District (the "District"), Bensalem, Pennsylvania, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement. whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements BARBAO\NE 1HORNTON &COMPANY CERTIFIED PU!lLIC ACCOUNTANTS

5 Board of School Directors Bensalem Township School District We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Bensalem Township School District, Bensalem, Pennsylvania, as of June 30, 2015 and the respective changes in financial position and, where applicable, cash flows thereof, and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Notes 1 and 1 7 to the financial statements, the District has adopted the requirements of GASB Statement No. 68, "Accounting and Financial Reporting for Pensions," and GASB Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date -An Amendment of GASB Statement No. 68." These statements modify the accounting for the District's pensions. As a result, the beginning governmental activities, business-type activities, and food service fund net position have been restated. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4 through 15 and the schedule of the District's proportionate share of the net pension liability, schedule of District contributions, and schedule of funding progress - Postemployment Healthcare Plan on pages 51 through 53 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Bensalem Township School District's basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, "Audits of States, Local Governments, and Non-Profit - 2 -

6 Board of School Directors Bensalem Township School District Organizations," and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January , on our consideration of the Bensalem Township School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations. contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance. ;$~~1c!7 LLP BARBACANE, TH;RNTON & COMPANY LL~ - 3 -

7 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED JUNE 30, 2015 The Management's Discussion and Analysis ("MD&A"} of the Bensalem Township School District's ("the District") financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, The intent of the MD&A is to look at the District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the District's financial performance. FINANCIAL HIGHLIGHTS The District's total net position decreased in the amount of $7. l million on an entity-wide basis. The decrease is mainly the result of increased personnel-related costs. Revenue for the current year increased at the entity-wide lever. This was due to an increase in local taxes and state funding. The retirement rate increased from percent in 2014 to percent in Program revenues at the entity-wide fever accounted for $22.9 million, or 17.2 percent, of total revenues of $133.6 million, and general revenues accounted for $110.7 million, or 82.8 percent. Pennsylvania's Special Session Act l of 2006 provides property tax relief for homestead and farmstead owners through gaming revenue. Approved homestead/farmstead property owners received approximately $189 in property tax relief per property for the fiscal year. The District received approximately $2.27 million from state sources to distribute tax relief to approved property owners. The General Fund completed the fiscal year with a positive committed fund balance of $19.8 million for future benefits funding and future expenditures, and $5.9 million in unassigned fund balance. Total General Fund fund balance equates to 18.8 percent of the $136.8 million operating budget. A portion of fund balance was used to balance the budget. In the General Fund, the instructional programs (including special education, vocational education, summer school, homebound instruction, and adjudicated programs) cost $83.8 million for salaries, benefits, technical services, tuition for private and approved private schools, supplies, and equipment. The cost of the instructional programs was supported by 64.6 percent of total revenue. In the General Fund, the support services programs (including pupil services, guidance, psychological services, home and school visitor, child accounting, curriculum and assessment, school and central office administration, school board of director services, tax collection, legal services, community relations, student health services, operation and maintenance of plant services, and student transportation) cost $38.2 million for salaries, benefits, supplies, utilities, diesel fuel and gasoline, the insurance program, and equipment. The cost of the support programs was supported by 29.5 percent of total revenue. In the General Fund, the operation of non-instructional services programs (including student activities and athletics) cost $1.4 million for salaries, supplemental contracts, dues, fees for officials, supplies, and equipment. The cost of the non-instructional services programs was supported by 1.1 percent of total revenue

8 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 In the General Fund, the debt service expenditures cost $10.3 million for interest and principal payments. The cost of debt service expenditures was supported by 7. 9 percent of total revenue. OVERVIEW OF FINANCIAL STATEMENTS The accompanying financial statements have been prepared in accordance with GASB Statement No. 34 and present both entity-wide and fund level financial statements using both the accrual basis and modified accrual basis of accounting, respectively. Entity-wide Financial Statements The first two statements are entity-wide financial statements - the statement of net position and the statement of activities. These provide both long-term and short-term information about the District's overall financial status. 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 the assets, deferred outflows of resources, liabilities, and deferred inflows of resources 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 into consideration regardless of when cash is received or paid. These two statements report the District's net position and changes in the net position 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 tax base, current property tax laws, student enrollment, and facility conditions in arriving at a conclusion regarding the overall health of the District. The entity-wide financial statements of the District are divided into two categories: Governmental Activities - All of the District's basic services are included here, such as instruction, administration, and community services. Property taxes and state and federal subsidies and grants finance most of these activities. Business-type Activities - The District operates a food service operation and charges fees to staff and students to cover the costs of the food service operation. Fund Level Financial Statements The remaining statements are fund financial statements that focus on individual parts of the District's operations in more detail than the entity-wide statements. The governmental funds statements tell how the District's general services were financed in the short term as well as what remains for future spending. Proprietary fund statements offer short-term and long-term financial information about the - 5 -

9 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 activities that the District operates like a business. For the District, this is our Food Service Fund. Fiduciary fund statements provide information about financial relationships for which the District acts solely as a trustee or agent for the benefit of others. Governmental Funds - Most of the District's activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. The District's major governmental funds are the General Fund, the Capital Projects Fund, and the Bond Fund. Governmental funds are reported using the modified accrual accounting method, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's operations and the services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent 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 financial statements. Proprietary Funds - These funds are used to account for District activities that ore similar to business operations in the private sector: or where the reporting is on determining net income, financial position, changes in financial position, and a significant portion of funding through user charges. When the District charges customers for services it provides - whether to outside customers or to other units in the District - these services generally are reported in proprietary funds. The Food Service Fund is the District's proprietary fund and is the same as the businesstype activities reported in the entity-wide statements. Fiduciary Funds - The District is the trustee, or fiduciary, for some student activity and scholarship funds. All of the District's fiduciary activities are reported in a separate statement of fiduciary net position. These activities are excluded from the District's other financial statements because the District cannot use these assets to finance its operations. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. Implementation of GASB Statements No. 68 end 71 During the year, the District implemented Government Accounting Standards Board ("GASB") Statement No. 68, "Accounting and Financial Reporting for Pensions," and GASB Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date - An Amendment of GASB Statement No. 68." The purpose of these statements is to improve the transparency, consistency, and comparability of the pension information reported by state and local governments (e.g. intermediate units, school districts). The adoption of GASB Statements No. 68 and No. 71 have had, and will continue to have, a profound effect on the financial statements and net position of governments not only in Pennsylvania, but across the nation. By recognizing the impact of any unfunded liability faced by defined benefit - 6 -

10 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 pension plans, plan administrators (at the direction of elected officials) and participants will be required to evaluate the cost of providing these benefits as compared to the benefit to be derived through providing for certain retirement benefits to the work force. More specifically, the District contributes to the Pennsylvania Public School Employees' Retirement System ("PSERS"), a governmental cost-sharing multiple-employer defined benefit pension plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. In cost-sharing multiple-employer plans, the plan assets and liabilities are shared. Plan assets can be used to pay the pensions of the employees of any employer that provides pensions through the plan. The new standards have shifted pension reporting from a funding-based approach, in which the District reported only its contributions to the plan, to an accounting-based approach. Under this new approach, the District will report its proportionate share of the net pension liability on the statement of net position of the government-wide and proprietary fund financial statements. Reporting in the governmental fund statements is not affected by the implementation of these statements. The net pension liability is the difference between the market value of pension fund assets and the actuarial present value of projected benefit payments at the measurement date. Included in the calculation are projected employer and employee contributions as well as the expectation that the assets will grow at the long-term assumed rate of return on plan investments. While the net pension liability is significant to the District's financial statements, it is a liability the District has limited control over. Over the last five years, the PSERS employer contribution rate has risen significantly, from 4.0 percent in to 20.5 percent in These increases are expected to improve the plan's funding level, which will reduce net position in future years. This rate is anticipated to continue to increase to a level of over 30 percent in future years. REPORTING THE DISTRICT AS A WHOLE 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, liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $126.5 million at the close of the most recent fiscal year. In the prior year, liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $119.4 million. A portion of the District's total net position, 17.6 million, reflects its net 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. A comparative analysis of fiscal year 2015 to 2014 follows: - 7 -

11 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 Statement of Net Position June 30, 2015 and 2014 Governmental Activities Business-type Activities Totals Current and other assets $ 119,556,538 $ 135,593,982 $ 230,694 $ 44,091 $ 119,787,232 $ 135,638,073 Capital assets 88,149,643 69,247,889 12,327 20,971 88,161,970 69,268,860 TOTAL ASSETS 207,706, ,841, ,021 65, ,949, ,906,933 Deferred Ou~ows of Resources 18,565,724 8,858, , ,061 18,881,074 9,012,813 Current liabilities 38,106,474 26,475,606 54,427 8,267 38,160,901 26,483,873 Noncurrent liabilities 299,725, ,603,415 2,979,639 2,947, ,705, ,550,730 TOTAL LIABILITIES 337,832, ,079,021 3,034,066 2,955,582 ~ -0,866, ,034,603 Deferred Inflows of Resources 12,247, , ,002 12,461, ,100 Net Position (Deficit): Net investment in capital assets 17,608,590 16,204,292 12,327 20,971 17,620,917 16,225,263 Restricted for capital projects 2,982,304 3,499,053 2,982,304 3,499,053 Unrestricted (Deficit) (1 44,399,098) ( 136,357,843) (2,701,024) (2,757,430) (147,100,122) (139,115,273) TOTAL NET POSITION (DEFICIT) $ (123,808,204) $ (116,654,498) $ (2,688,697) $ (2,736,459) $ ( 126,496,901) $ (119,390,957) The District's net position, net investment in capital assets increased by $1.4 primarily due to a change in accounting estimate stemming from a comprehensive physical inventory. The statement of activities shows the cost of program services, the charges for services, and grants offsetting those services. The table below reflects the cost of program services and the net cost of those services after taking into account the program revenues for the governmental and businesstype activities. Net Cost of Governmental and Business-type Activities Fiscal Years Ended June 30, 2015 and Net Cost Total Cost (Revenue) Total Cost Net Cost of Services of Services PROGRAM EXPENSES of Services of Services Governmental Activities: Instruction Support services: $ 86,447,323 $ 73,398,523 $ 77,505,452 $ 66,023,260 Instructional student support 12,066,237 11,117,120 9,795,119 9,027,657 Administrative and financial support services 9,279,778 8,726,324 12,363,773 10,271,335 Operation and maintenance of plant services 16,763,957 15,573,339 15,783,508 14,560,984 Pupil transportation 7,544,396 5,339,507 7,632,522 5,332,551 Student activities 1, 112, ,953 1,021, ,875 Community services 316, , , ,384 Interest on long-term debt 5, ,655,294 4, ,020,720 Total Governmental Activities 138,778, ,987, ,464, ,426,

12 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 Net Cost of Governmental and Business-type Activities Fiscal Years Ended June 30, 2015 and 2014 Business-type Activities: Food service Total Business-type Activities TOTAL PRIMARY GOVERNMENT 2015 Net Cost Total Cost (Revenue) Total Cost of Services of Services of Services 3,110,356!47,642l 2,862,030 3, 110,356 (47,642l 2,862,030 ~ 141,888,914 ~ 118,940,097 ~ 131,326, Net Cost of Services (56,675l (56,675l ~ 110,370,091 In total, governmental activities total cost of services increased by $10.3 million over the prior year. The most significant factor was the increase in instruction costs by $8.9 million. Another contributing factor was a $1.2 million increase in interest expense as a direct result of the large bond issuance for the high school renovation. An additional $2.3 million was attributable to increased costs for instructional student support. Statement of Changes in Net Position Fiscal Years Ended June 30, 2015 and 2014 Governmental Activities Business-tlpe Activities Totals REVENUES Program services: Charges for services $ 254,490 $ 196,246 $ 1,102,414 $ 1,'184,671 $ 1,356,904 $ 1,380,917 Operating grants and contributions 19,536,329 17,841,083 2,055,584 1,734,034 21,591,913 19,575, 117 General revenues: Property taxes 90,233,046 88,255,713 90,233,046 88,255,713 Other taxes 5,961,883 5,599,999 5,961,883 5,599,999 Grants. subsidies, and contributions not restricted 13,363,526 13,363,431 13,363,526 13,363,431 Other revenue 1,106, , ,106, ,924 TOTAL REVENUES 130,455, ,162,276 3,158,118 2,918, ,613, ,081,101 EXPENSES Instruction 86,447,323 77,505,452 86,447,323 77,505,452 Instructional student support 12,066,237 9,795,119 12,066,237 9,795,119 Administrative/financial support 9,279,778 12,363,773 9,279,778 12,363,773 Operation and maintenance of plant services 16,763,957 15,783,508 16,763,957 15,783,508 Pupil transportation 7,544,396 7,632,522 7,544,396 7,632,522 Student activities 1,112,265 1,021,380 1,112,265 1,021,380 Community services 316, , , ,621 Interest on long-term debt 5,247,615 4,020,720 5,247,615 4,020,720 Food service 3,110,356 2,862,030 3, 110,356 2,862,030 TOTAL EXPENSES 138, 778, ,464,095 3,110,356 2,862, ,888, ,326,125 Change in accounting estimate ,575 CHANGE IN NET POSITION (7,153,706) (2,301,819) 47,762 56,795 (7,105,944) (2,245,024) BEGINNING NET POSITION (DEFICIT) (116,654,498) (114,352,679j (2,736,459) (2.793.,154) (119,390,957l (117,145,933) ENDING NET POSITION (DEFICIT) I 1123,808,204) $ {116,654,498} I (2,688,697! _l_g,_736,459) I (126,496,901) I {119,390,~ - 9 -

13 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 For the District as a whole, revenues increased by $4.5 million, while expenses increased by $10.6 million. Notably, funding from local sources (real estate taxes, business taxes, interest income, and user fees) and state sources (basic education subsidy and other program-restricted grants and subsidies) have increased. The large increase in expenses is primarily related to the increased costs of instruction and support services. More specific analysis will be provided later in the discussion. FUND FINANCIAL STATEMENTS The fund financial statements of the District's major funds 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. Fund Balance Fund Balance June 30, 2015 June 30, 2014 Decrease General Fund $ 25,751,031 $ 29,683, 109 $ (3,932,078) Capital Projects Fund 2,982,304 3,499,053 (516,749) Bond Fund 56,052,180 78,536,685 (22,484,505) Total $ 84,785,515 $ 111,718,847 $ {26,933,332) The District's governmental funds reported a combined fund balance of $84.8 million, which is a decrease of $26. 9 million over last year's total of $ million. The decrease is mainly attributable to the high school renovation project. General Fund Overall, revenue increased by $3.2 million, or 2.6 percent. Local revenue increased $800 thousand due primarily from a spike in real estate transfer taxes. State sources increased by $2.1 million, reflecting increased retirement subsidy to offset roughly 50 percent of the increase in retirement expenses. Other Funds The Capital Project Funds has a slight $51 7 thousand decrease in fund balance associated with smaller pay-as-you-go renovation contracts. - l O -

14 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 The Bond Fund fund balance decreased significantly, reflecting the use of bond proceeds for the high school renovation project. Business-type Activities The only business-type activity in the District is the Food Service program. This program had a slight increase in net position of approximately $48 thousand for the fiscal year due to a slight operational surplus during the year. General Fund Budget Information The District keeps its books and prepares its financial reports on a modified accrual basis. Major accrual items are payroll taxes and pension fund contributions payable, loans receivable from other funds, and revenues receivable from other governmental units. The District's financial statements are audited annually by a firm of independent certified public accountants, as required by Commonwealth Law. The District budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by the Superintendent and Director of Management Services and submitted to the Board of School Directors for approval prior to the beginning of the fiscal year on July l each year. The most significant budgeted fund is the General Fund. Spending Review The final budget for expenditures reflects required Board-approved budgetary transfers in function categories due to spending patterns. REVENUES Local sources State sources Federal sources TOTAL REVENUES EXPENDITURES Instruction: Regular programs Special programs Vocational programs Other instructional programs Non-public programs Total Instruction Budgeted Amounts Original Final $99,097,200 $99,097,200 28,060,917 28,060,917 2,731,000 3,302, ,889, ,460,440 51,344,515 54, ,318,660 26,072,340 3,510,994 4,083,139 20,000 47,602 35,572 80,194,169 85,059,692 Actual Variance Final Budget (GMP Positive Percentage Basis) (Negative) Difference $97,852,359 $(1,244,841) -1.26% 28,796, , % 3,030,157 (272, 166) -8.24% 129,678,742 (781,698) -0.60% 53,893, , % 25,701, , % 4,083, % 46,531 1, % 35,572 83,759,602 1,300, %

15 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 Variance Actual Final Budget Budgeted Amounts (GAAP Positive Original Final Basis) (Negative) Support sences: Student sences 4,463,835 4,765,393 4,499, ,259 Instructional staff 5,225,977 5,398,820 5,166, ,277 Administration 8,469,920 6,543,885 6,428, ,992 Pupil health 1,495,559 1,525,913 1,460,652 65,261 Business 1,348,527 1,369,833 1,323,711 46,122 Operation and maintenance of plant 10,505,660 11,928,748 11,177, ,530 Transportation 6,294,405 7,112,949 6,925, ,105 Central 671, , ,957 25,853 Other support seniices 3,220, , , Total Support Seniices 41,695,303 39,920,326 38,230,677 1,689,649 Operation of noninstructional activites: Student activities 1,221,854 1,062,848 1,057,454 5,394 Corn rnunity ser\lices 306, , ,973 18,278 Total Operation of Noninstructional Activities 1,527,854 1,390,099 1,366,427 23,672 DebtseNce 10,401,821 10,298,529 10,299,030 (501) Budgetary reserve 2,190, , ,958 TOTAL EXPENDITURES 136,009, ,832, ,655,736 3,176,868 Percentage Difference 5.59% 4.30% 1.76% 4.28% 3.37% 6.30% 2.63% 3.30% 0.05% 4.23% 0.51% 5.59% 1.70% 0.00% 2.32% DEFICIENCY OF REVENUES UNDER EXPEND ITU RES (6,120,030) (6,372,164) (3,976,994) 2,395,170 OTHER FINANCING SOURCES (USES) Refund of prior year expenditures 44,916 44,916 Operating transfers in 1,000,000 1,0 00,000 (1,000,000) Operating transfers out (260,000) TOTAL OTHER FINANCING SOURCES 740,000 1,000,000 44,916 (955,084) NET CHANGE IN FUND BALANCE (5,380,030) (5,372,164) (3,932,078) 1,440,086 FUND BALANCE, BEGINNING OF YEAR 29,683,109 29,683,109 29,683,109 FUND BALANCE, END OF YEAR $24,303,079 $23,739,622 $25,7 51,031 $ 2,011,409 The most significant changes in the District's final budgeted revenues and expenditures versus actual revenues and expenditures were: Local revenue sources trailed the final budget by $1.2 million, or 1.3 percent. This was attributable to budgeting for resolution of a significant appeal in fiscal that was not resolved until Slight good fortune in state and federal sources offset the local revenue deficiency, permitting actual results to be within $210 thousand of the final budget. Expenditures for support services were $1.7 million, or 4.2 percent below the final budget, led by positive variance in electricity and natural gas totaling $476 thousand. The largest portions of General Fund expenditures are for salaries and benefits. The District is an educational service entity and, as such, is labor-intensive

16 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 CAPITAL ASSETS At June 30, 2015, the District's governmental activities had $88, 149,643 of capital assets, net of accumulated depreciation, invested in a broad range of capital assets, including land, buildings, and furniture and equipment. Capital Assets Net of Accumulated Depreciation June 30, 2015 June 30, 2014 Land Construction-in-progress Land improvements Buildings Furniture and equipment $ 3,216,902 26,989, ,478 51,905,981 5,131,205 $ 3,216,902 3,461,467 1,074,270 56,458,770 5,036,480 $ 88,149,643 $ 69,247,889 Additionally, business-type activities owned $12,327 and $20, 971 (net of accumulated depreciation) worth of net capital assets as of June 30, 2015 and 2014, respectively. These assets consist of movable equipment that will be depreciated in future years. More detailed information about the District's capital assets is presented in the notes to the financial statements. As of July l. 2014, the District had total outstanding debt $131,304, 182. Total debt outstanding as of June 30, 2015 was $12 7,025, 7 64, of which $5,250,000 is to be paid within the next year. June 30, 2015 June 30, 2014 General Obligation Bond $ 14,075,000 $ 22,875,000 General Obligation Bond ,120,000 6,085,000 General Obligation Bond ,500,000 18,390,000 General Obligation Bond ,355,000 78,000,000 General Obligation Bond ,780,000 Bond premium 5,195,764 5,954,182 $ 127,025, 764 $ 131,304,

17 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 FACTORS EXPECTED TO HAVE A SIGNIFICANT EFFECT ON FUTURE OPERATIONS The District's general obligation bond rating is a Moody's Aa2. The Aa2 rating reflects extremely strong financial management practices and consistent budgeting leading to large reserve levels and stable operations. It also reflects a large tax base, with an average socio-demographic profile, and modest debt burden. The District's bonds payable total as of June 30, 2015 is $127 million. At the time that these financial statements are being prepared, management is aware of the following factors which could have significant impact on its future financial health: The real estate market is a major factor in the economic environment. The Township is mostly residential, but also includes significant commercial properties, most notably the Keystone Turf Club casino and racetrack, formerly known as Philadelphia Park. The casino is undergoing an expansion, and its prior assessment appeal has been resolved and court approved. Employer Contribution Rates of the Public School Employees' Retirement System ("PSERS"} are expected to increase significantly over the next few years and were the subject of recent state legislative action. The employer rate of 4.65 percent increased to percent for and is projected to exceed 30 percent of payroll for All school districts within the Commonwealth are required to contribute to PSERS at the rates established annually. State legislation will continue to have an impact on the nature of school funding and budgeting. Specifically, a district cannot enact a tax increase in any year in which the budgeted undesignated, unreserved fund balance exceeds eight percent of the budgeted expenditures. Act l of 2006, the "Homeowner Tax Relief Act," links several separate funding concepts. Gaming revenues received by the state, along with local earned income or personal income tax receipts, is used to lower real estate taxes. Initiated under Act 72, the District is required to adhere to an earlier budget adoption timetable. Real estate tax increases are limited to an inflation-related index, unless approved by referendum or needed to cover certain exceptions related to specified extraordinary increases requiring PDE or court approval. The District currently has collective bargaining or similar agreements which include various expiration dates. They cover: Aides, through August 31, 2017; Bus and van drivers, through June 30, 2017; Cafeteria workers, through June 30, 2016; Custodial and maintenance employees, through June 30, 2015; Secretaries, through June 30, 2017: and Teachers, through June 30,

18 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) - UNAUDITED (CONT'D) JUNE 30, 2015 CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT The District's financial report is designed to provide 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 monies it oversees. If you have questions about this report or wish to request additional financial information, please contact Christopher M. Berdnik, Director of Business Operations, Bensalem Township School District, 3000 Donallen Drive, Bensalem, PA General District office phone number is: (215)

19 STATEMENT OF NET POSITION JUNE 30, 2015 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Current Assets: Cash and cash equivalents Investments Investment - restricted Taxes receivable Due from other governments Other receivables Internal balances Prepaid expenses Inventories Total Current Assets Noncurrent Assets: Land Construction-in-progress Land improvements Buildings and improvements Furniture and equipment Accumulated depreciation Total Noncurrent Assets TOT AL ASSETS Governmental Activities $ 101,802, ,000 9,027,260 3,384,444 3,948, ,762 6,717 28, ,556,538 3,216,902 26,989,077 6,577, ,381,942 21,174,424 (106, 190,092) 88, 149, ,706, 181 Business-type Activities $ 167,651 (6,717) 69, , ,244 (768,917) 12, ,021 Totals $ 101,969, ,000 9,027,260 3,384,444 3,948, ,762 28,762 69, ,787,232 3,216,902 26,989,077 6,577, ,381,942 21,955,668 (106,959,009) 88,161,970 $ 207,949,202 DEFERRED OUTFLOWS OF RESOURCES Deferred amounts on bond refunding Deferred pension contributions Deferred pension TOTAL DEFERRED OUTFLOWS OF RESOURCES 432,531 11,717,519 6,415,674 18,565, , , , ,531 11,921,296 6,527,247 18,881,074 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 226,271,905 $ 558,371 $ 226,830,276 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION (DEFICIT) LIABILITIES Current Liabilities: Accounts payable Accrued salaries and benefits Payroll deductions and withholdings Other current liabilties Accrued interest Unearned revenue Bonds payable, net Taxes paid under protest and held in escrow Total Current Liabilities Noncurrent liabilities: Bonds payable, net Accumulated compensated absences Net pension liability Other post-employment benefits Total Noncurrent Liabilities $ 14,068,246 7,602,066 33,894 1,006, , 120 5,782,154 9,027,260 38,106, , ,451, ,334,361 1,696, ,725,637 $ 15,866 38,561 54,427 2,979,639 2,979,639 $ 14,084, 112 7,602,066 33,894 1,006, , ,561 5,782, 154 9,027,260 38, 160, ,243,610 5,451, ,314,000 1,696, ,705,276 TOTAL LIABILITIES 337,832, 111 3,034, ,866, 177 DEFERRED INFLOWS OF RESOURCES Deferred pension TOTAL DEFERRED INFLOWS OF RESOURCES 12,247,998 12,247, , ,002 12,461,000 12,461,000 NET POSITION (DEFICIT) Net investment in capital assets Restricted Unrestricted (Deficit) TOTAL NET POSITION (DEFICIT) 17,608,590 2,982,304 (144,399,098) (123,808,204) 12,327 (2,701,024) (2,688,697) 17,620,917 2,982,304 (147, 100, 122) (126,496,901) TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION (DEFICIT) $ 226,271,905 $ 558,371 $ 226,830,276 The accompanying notes are an integral part of these financial statements

20 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 GOVERNMENTAL ACTIVITIES: Instruction lnstructionai student support Administrative and financial support services Operation and maintenance of plant services Pupil transportation Student activities Community services Interest on long-term debt TOTAL GOVERNMENTAL ACTIVITIES Pro~ram Revenues Operating Charges for Grants and Exeenses Services Contributions $ 86,447,323 $ $ 13,048,800 12,066, ,117 9,279, ,454 16,763,957 90,801 1,099,817 7,544,396 2,204,889 1, 112,265 48,976 66, , ,713 21,595 5,247,615 1,592, , 778, ,490 19,536,329 Capital Grants and Contributions $ Net (Expense) Revenue and Changes in Net Position Governmental Business-type Activities Activities Totals $ (73,398,523) $ $ (73,398,523) (1 1,117,120) (1 1,1 17,120) (8,726,324) (8,726,324) (15,573,339) (15,573,339) (5,339,507) (5,339,507) (996,953) (996,953) (180,679) ( 180,679) {3,655,294) {3.655,294) {118,987,739) {118,987, 739) BUSINESS-TYPE ACTIVITIES: Food service TOTAL BUSINESS-TYPE ACTIVITIES 3,110,356 1,102,414 2,055,584 3,110,356 1,102,414 2,055,584-47,642 47,642 47,642 47,642 TOTAL PRIMARY GOVERNMENT :1;141,888,914 :I! 1,356,904 :I; 21,591,913 _j_ {118,987,739) {118,940,097) GENERAL REVENUES Property taxes, levied for general purposes Taxes levied for specific purposes Grants and entitlements not restricted to specific programs Investment earnings Restitution Miscellaneous TOTAL GENERAL REVENUES 90,233,046 90,233,046 5,961,883 5,961,883 13,363,526 13,363, , , , , ,664, ,664,578 CHANGE IN NET POSITION BEFORE CHANGE IN ACCOUNTING ESTIMATE Change in accounting estimate CHANGE IN NET POSITION NET POSITION (DEFICIT), BEGINNING OF YEAR, RESTATED NET POSITION (DEFICIT), END OF YEAR (8,323,281) 47,762 (8,275,519) 1,169,575 1, 169,575 (7, 153,706) 47,762 (7, 105,944) {116,654,498) {2,736,459) (119,390,957) $(123,808,204) :I; (2,688,697) :I; (126,496,901) The accompanying notes are an integral part of these financial statements

21 BALANCE SHEET-GOVERNMENTAL FUNDS JUNE 30, 2015 ASSETS: Cash and cash equivalents Investments Investment - restricted Taxes receivable Due from other governments Other receivables Due from other funds Prepaid expenditures TOT AL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES: LIABILITIES: Accounts payable Accrued salaries and benefits Payroll deductions and withholdings Other current liabilities Taxes paid under protest and held in escrow TOT AL LIABILITIES DEFERRED INFLOWS OF RESOURCES: Unvailable revenues - delinquent taxes Unvailable revenues - PILOT TOTAL DEFERRED INFLOWS OF RESOURCES FUND BALANCES: Nonspendable Restricted Committed Unassigned TOTAL FUND BALANCES TOTAL LIABILITIES. DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES General Capital Projects Fund Fund $ 35,981,673 $ 3,155, ,000 9,027,260 3,384,444 3,948, ,762 6,717 28,762 $ 53,735,888 $ 3,155,283 $ 7,282,080 $ 172,979 7,602,066 33,894 1,006,734 9,027,260 24,952, ,979 2,732, ,000 3,032,823 28,762 2,982,304 19,775,000 5,947,269 25,751,031 2,982,304 $ 53,735,888 $ 3,155,283 Bond Fund Totals $ 62,665,367 $ 101,802, ,000 9,027,260 3,384,444 3,948, ,762 6,717 28,762 $ 62,665,367 $ 119,556,538 $ 6,613,187 $ 14,068,246 7,602,066 33,894 1,006,734 9,027,260 6,613,187 31,738,200 2,732, ,000 3,032,823 28,762 56,052,180 59,034,484 19,775,000 5,947,269 56,052,180 84,785,515 $ 62,665,367 $119,556,538 The accompanying notes are an integral part of these financial statements

22 RECONCILIATION OF BALANCE SHEET-GOVERNMENTAL FUNDS TO STATEMENT OF NET POSITION JUNE 30, 2015 TOTAL GOVERNMENTAL FUND BALANCES $ 84,785,515 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 Construction-in-progress Land improvements Buildings and improvements Furniture and equipment Accumulated depreciation Refunded and new debt issuance costs resulted in deferred charges which will be amortized over the life of new debt but do not represent current rights. Deferred charges on bond refunding 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, net Other post-employment benefits Accumulated compensated absences Accrued interest Net pension liability Deferred inflows and outflows related to the District's net pension liability are based on the differences between actuarially determined actual and expected investment returns, changes in the actuarially determined proportion of the District's amount of the total pension liability, and pension contributions made after the measurement date of the net pension liability. These amounts will be amortized over the estimated remaining average service life of the employees. Deferred pension contributions Deferred outflows of resources - pensions Deferred inflows of resources - pensions 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 unavailable in the funds. $ 3,216,902 26,989,077 6,577, ,381,942 21,174,424 (106,190,092) 432,531 (127,025,764) (1,696,647) (5,451,019) (586,120) (171,334,361) 11,717,519 6,415,674 (12,247,998) 88,149, ,531 (306,093,911) 5,885,195 3,032,823 NET POSITION (DEFICIT) OF GOVERNMENTAL ACTIVITIES $ (123,808,204) The accompanying notes are an integral part of these financial statements

23 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2015 DEFICIENCY OF REVENUES UNDER EXPENDITURES (3,976,994) (516,749) (22,636,815) NET CHANGE IN FUND BALANCES (3,932,078) (516,749) (22,484,505) FUND BALANCES, BEGINNING OF YEAR 29,683,109 3,499,053 78,536,685 FUND BALANCES, END OF YEAR ~ 25,751,031 _L 2,982,304 $ 56,052, 180 Totals $ 98,286,270 29,305,046 3,030, ,621,473 83,759,602 38,231,454 1,366,427 23,943,208 10,299, , ,752,031 (27, 130,558) 9,830,000 32,070 44,916 {9, 709, 760} 197,226 (26,933,332) 111,718,847 $ 84,785,515 General Capital Projects Bond REVENUES Fund Fund Fund Local sources $ 97,852,359 $ 101,642 $ 332,269 State sources 28,796, ,820 Federal sources 3,030,157 TOTAL REVENUES 129,678, , ,089 EXPENDITURES Current: Instruction 83,759, Support services 38,230, Operation of noninstructional services 1,366,427 - Capital outlays 617,614 23,325,594 Debt service 10,299,030 - Bond issuance costs - 152,310 TOTAL EXPENDITURES 133,655, ,391 23,477,904 OTHER FINANCING SOURCES (USES) Proceeds from bonds issued 9,830,000 Premium on bonds issued - 32,070 Refund of prior year expenditures 44,916 Payment to escrow agent to refund bonds {9,709,760} TOTAL OTHER FINANCING SOURCES 44, ,310 The accompanying notes are an integral part of these financial statements

24 RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES- GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS $ (26,933,332) Amounts reported for governmental activities in the statement of activities are different because: 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 capital outlays of $24,068,926 exceeded depreciation expense of $6,312,862. When capital assets are disposed of, the difference between original cost and depreciation is recorded as a loss on the disposal in the statement of activities. The change in the accounting estimate related to capital assets is not recognized in the fund statements. Because some revenues 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. Unavailable revenues decreased by this amount this year. The issuance of long-term debt (e.g. bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums and discounts when debt is first issued. whereas these amounts are deferred and are amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. In the statement of net position, deferred amounts on refunding debt are deferred and amortized. In the statement of activities, certain operating expenses- compensated absences (vacations and sick leave) and post-employment benefits- are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount offinancial resources used (essentially, the amounts actually paid). 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. Pension expenses in the statement of activities differ from the amount reported in the governmental funds because pension expenses are recognized on the statement of activities based on the District's proportionate share of the expenses of the cost-sharing pension plan, whereas pension expenditures are recognized in the governmental funds when a requirement to remit contributions to the plan exists. CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 17,756,064 (23,885) 1,169,575 (166,196) 5,027,439 (40,390) 824,886 64,366 (4,832,233) $ (7, 153,706) The accompanying notes are an integral part of these financial statements

25 BUDGETARY COMPARISON STATEMENT - GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2015 Budgeted Amounts Actual Original Final {GAAP Basis) REVENUES Local sources $ 99,097,200 $ 99,097,200 $ 97,852,359 State sources 28,060,917 28,060,917 28,796,226 Federal sources 2,731,000 3,302,323 3,030,157 TOTAL REVENUES 129,889, ,460, ,678,742 EXPENDITURES Instruction: Regular programs 51,344,515 54,821,039 53,893,128 Special programs 25,318,660 26,072,340 25,701,232 Vocational programs 3,510,994 4,083,139 4,083,139 Other instructional programs 20,000 47,602 46,531 Non-public programs 35,572 35,572 Total Instruction 80, 194, ,059,692 83,759,602 Support services: Student services 4,463,835 4,765,393 4,499,134 Instructional staff 5,225,977 5,398,820 5,166,543 Administration 8,469,920 6,543,885 6,428,893 Pupil health 1,495,559 1,525,913 1,460,652 Business 1,348,527 1,369,833 1,323,711 Operation and maintenance of p!ant 10,505,660 11,928,748 11,177,218 Transportation 6,294,405 7,112,949 6,925,844 Central 671, , ,957 Other support services 3,220, , ,725 Total Support Services 41,695,303 39,920,326 38,230,677 Operation of noninstructional activities: Student activities 1,221,854 1,062,848 1,057,454 Community services 306, , ,973 Total Operation of Noninstructional Services 1,527,854 1,390,099 1,366,427 Debt service 10,401,821 10,298,529 10,299,030 Budgetary reserve 2,190, ,958 TOT AL EXPENDITURES 136,009, ,832, ,655,736 DEFICIENCY OF REVENUES UNDER EXPENDITURES {6, 120,030) {6,372, 164) {3,976,994) OTHER FINANCING SOURCES (USES) Refund of prior year expenditures 44,916 Operating transfers in 1,000,000 1,000,000 Operating transfers out {260,000) TOTAL OTHER FINANCING SOURCES 740,000 1,000,000 44,916 NET CHANGE IN FUND BALANCE (5,380,030) (5, ) (3,932,078) Variance with Final Budget Positive {Negative) $ (1,244,841) 735,309 {272,166) {781,698) 927, ,108 1,071 1,300, , , ,992 65,261 46, , , , ,689,649 5,394 18,278 23,672 {501) 163,958 3, 176,868 2,395,170 44,916 (1,000,000) (955,084) 1,440,086 FUND BALANCE, BEGINNING OF YEAR 29,683,109 29,683,109 29,683,109 FUND BALANCE, END OF YEAR ~ 24,303,079 ~ 24,310,945 ~ 25,751,031 ~ 1,440,086 The accompanying notes are an integral part of these financial statements

26 STATEMENT OF NET POSITION - PROPRIETARY FUND JUNE 30, 2015 ASSETS CURRENT ASSETS: Cash and cash equivalents Inventories Total Current Assets PROPERTY AND EQUIPMENT: Furniture and equipment Accumulated depreciation Net Property and Equipment DEFERRED OUTFLOWS OF RESOURCES: Deferred pension contributions Deferred pension Total Deferred Outflows of Resources TOT AL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION (DEFICIT} CURRENT LIABILITIES: Accounts payable Due to other funds Unearned revenue Total Current Liabilities NONCURRENT LIABILITIES: Net pension liability Total Noncurrent Liabilities DEFERRED INFLOWS OF RESOURCES: Deferred pension Total Deferred Inflows of Resources NET POSITION (DEFICIT}: Investment in capital assets Unrestricted (Deficit) Total Net Position (Deficit) TOT AL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION (DEFICIT) Food Service Fund $ 167,651 69, , ,244 (768,917} 12, , , ,350 $ 565,088 $ 15,866 6,717 38,561 61, 144 2,979,639 2,979, , ,002 12,327 (2,701,024) (2,688,697) $ 565,088 The accompanying notes are an integral part of these financial statements

27 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2015 Food Service Fund OPERA TING REVENUES Food service revenues $ 1,095,705 Commissions 6,709 TOTAL OPERATING REVENUES 1,102,414 OPERATING EXPENSES Salaries 1,026,008 Employee benefits 561,413 Purchased professional and technical services 29,259 Purchased property services 119,322 Other purchased services 4,598 Supplies 1,361,112 Depreciation 8,644 TOT AL OPERA TING EXPENSES 3, 110,356 OPERA TING LOSS (2,007,942) NONOPERA TING REVENUES Earnings on investments 120 State sources 227,771 Federal sources 1,827,813 TOT AL NONO PERA TING REVENUES 2,055,704 CHANGE IN NET POSITION 47,762 NET POSITION (DEFICIT), BEGINNING OF YEAR, RESTATED (2, 736,459) NET POSITION (DEFICIT), END OF YEAR $ (2,688,697) The accompanying notes are an integral part of these financial statements

28 STATEMENT OF CASH FLOWS- PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers Payments to suppliers Payments to employees Payments of other operating expenses NET CASH USED BY OPERA TING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: State sources Federal sources NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Earnings on investments NET CASH PROVIDED BY INVESTING ACTIVITIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION OF OPERA TING LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Operating loss Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation Donated commodities Increase in: Inventories Deferred pension contributions Deferred pension Increase (Decrease) in: Accounts payable Due to other funds Unearned revenue Net pension liability Deferred pension NET CASH USED BY OPERATING ACTIVITIES Food Service Fund $ 1,132,708 (1,425,300) (1,503,384) (153, 179) (1,949,155) 229,651 1,681, 142 1,910, (38,242) 205,893 $ 167,651 $ (2,007,942) 8, ,276 (22,024) (49,716) (111,573) 15,866 (230,306) 30,294 32, ,002 $ (1,949,155) SUPPLEMENTAL DISCLOSURE: NONCASH NONCAPIT AL FINANCING ACTIVITY Donated commodities $ 172,276 The accompanying notes are an integral part of these financial statements

29 STATEMENT OF NET POSITION - FIDUCIARY FUNDS JUNE 30, 2015 ASSETS Private- Purpose Trust Agency Fund Cash TOTAL ASSETS $ 118,551 $ 118,551 $ 308,788 $ 308,788 LIABILITIES AND NET POSITION LIABILITIES: Other current liabilities $ $ 308,788 NET POSITION: Restricted 118,551 TOTAL LIABILITIES AND NET POSITION $ 118,551 $ The accompanying notes are an integral part of these financial statements

30 STATEMENT OF CHANGES IN NET POSITION FIDUCIARY FUND FOR THE YEAR ENDED JUNE 30, 2015 ADDITIONS Interest earnings and contributions TOT AL ADDITIONS Private- Purpose Trust $ 10,995 10,995 DEDUCTIONS Scholarships TOT AL DEDUCTIONS CHANGE IN NET POSITION NET POSITION, BEGINNING OF YEAR NET POSITION, END OF YEAR 15,641 15,641 (4,646) 123,197 $ The accompanying notes are an integral part of these financial statements

31 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Bensalem Township School District ("the District"), located in Bucks County, Pennsylvania, provides a full range of educational services appropriate to grade levels kindergarten through twelve. The District has a nine-member elected school board and an appointed superintendent and business manager who oversee the daily operations of the District. 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 ("GASB") is the authoritative standard-setting body for the establishment of governmental accounting and financial reporting principles. Reporting Entity GASB Statement No. 14, "The Financial Reporting Entity," as amended by GASB Statement No. 39 and GASB Statement No. 61, 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. The Bucks County Technical School ("the Technical School") is a joint venture of the District. The Technical School is a separate legal entity that unites five school districts located in Bucks County, Pennsylvania, and is not reported as part of the District's reporting entity. The purpose of the joint venture is to provide job training to students located in the Bucks County area and to share the costs associated with providing such training. Through a contractual arrangement with other participants, the District pays the Technical School for training given to District students. The financial statements of the Technical School may be obtained by contacting the Technical School. 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 ore 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

32 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES {cont'd) 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 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. Net investment in capital assets 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 of cash from the borrowing which has not yet been spent. 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 and the Bond Fund. Unrestricted net position consists of net position that does not meet the definition of "net investment in capital assets" 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. Each major fund is presented in a separate column. 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:

33 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) The General Fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Capital Projects Fund is used to account for resources set aside from the General Fund that are being used for the acquisition, construction, and renovation of major capital facilities and their related capital assets. The Bond Fund (a capital projects fund) is used to account for the proceeds of general obligation bonds that are being used for the acquisition, construction, and renovation of major capital facilities and their related capital assets. Revenue Recognition In applying the "susceptible to accrual concept" 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 government 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 ore reported as unearned 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 ore measurable and are recorded when the related fund liability is incurred. However, principal and interest on general long-term debt, which has not matured, ore 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 ore 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

34 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) Thus, General Fund expenditures which partially benefit the enterprise fund (utilities, janitorial services, insurance, etc.) are not proportionately recognized with the enterprise 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. Fiduciary Funds Fiduciary funds account for the assets held by the District as a trustee or agent for individuals, private organizations, and/or governmental units and are, therefore, not available to support the District's own programs. The District accounts for these assets in a Private-purpose Trust and Agency fund. The Private-purpose Trust Fund accounts for activities in various scholarship accounts, whose sole purpose is to provide annual scholarships to particular students as described by donor stipulations. The Agency Fund accounts for funds held on behalf of students of the District. The measurement focus and basis of accounting for the Private-purpose Trust is the same as for proprietary funds, while the Agency Fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. Cash and Cash Equivalents The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Investments Investments are stated at fair value. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the entity-wide financial statements as "internal balances."

35 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) The District experiences very small losses from uncollectible property taxes. Property taxes constitute a lien against real property and usually can be collected in full when title transfers. Only balances that remain after tax sales are written off each year. Accordingly, an allowance for doubtful accounts has not been established by the District for property taxes receivable. Property Taxes Taxes are levied on July l and are payable in the following periods: July l - August 31 September l - October 31 November l to collection January l Discount period, 2% of gross levy Face Period Penalty Period, l 0% of gross levy Lien Date Real estate taxes unpaid by January l must be liened with the Tax Claim Bureau ("the Bureau") in Doylestown by the Tax Collector. The Bureau imposes a penalty of.50 percent per month until the tax is paid. Taxes and interest collected by the Bureau are forwarded to the District less a commission of five percent. These taxes are considered delinquent and recorded by the District as delinquent taxes receivable. The tax on real estate, as levied by the School Board, was mills ($ per $1,000 of assessed valuation) for the fiscal year Assessed valuation of property is established by the Board of Assessments. and the elected or appointed tax collectors are responsible for collection. Real property in the District for the July 1, 2014 levy was assessed at $641, Prepaid Items and Inventories Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both entity-wide and fund financial statements. All inventories are valued at the lower of cost (first-in, first-out method) or market. Donated inventories are valued at average fair market value as determined by the U.S. Department of Agriculture at the date of donation. Capital Assets Capital assets, which include land and improvements, buildings and building improvements, and furniture and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statements for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at their fair market value on the date donated. The District defines capital assets as assets with an initial, individual cost equal to or greater than $1,500 and aggregate purchases greater than $15,000, and an estimated useful life in excess of one year

36 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed, inclusive of ancillary costs. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: School buildings Land and building improvements Furniture and equipment Vehicles Computer hardware 50 years 20 years 5-15 years 8-12 years 5 years Compensated Absences District policies permit employees to accumulate earned but unused vacation and sick days as stipulated in each bargaining unit's contract. The liability for these compensated absences is recorded as long-term debt in the entity-wide financial statements. In the fund financial statements, governmental funds report only the compensated absence liability payable from expendable available financial resources. Long-term Obligations In the entity-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts are netted against outstanding principal balances amortized over the life of the bonds. Bond issuance costs are expensed when incurred. Deferred amounts on refunding are recorded as a deferred inflow or outflow of resources and amortized over the life of the old debt or the life of the new debt, whichever is shorter. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received and discounts paid on debt issuances are reported as other financing sources and uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures. Deferred Inflows and Deferred Outflows of Resources In addition to assets and liabilities, the statement of net position and the governmental funds balance sheet will sometimes report separate sections for deferred inflows and deferred outflows of resources. These separate financial statement elements represent acquisition or use of net position that applies to a future period(s) and so will not be recognized as an inflow or outflow of resources (revenue or expense/expenditure) until that time. Delinquent taxes and payments in lieu of taxes not collected within 60 days of year end and, therefore, not available under

37 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) modified accrual reporting are reflected as deferred inflows of resources - unavailable revenues on the governmental funds balance sheet. The difference between the carrying value of refunded debt and the new debt is reflected as a deferred outflow of resources - deferred amount on refunding on the statement of net position. Other deferred outflows of resources relate to pension contributions made subsequent to the measurement date of the net pension liability (generally measured one year prior to the date of the financial statements), and the unamortized portion of contributions made in excess of the District's share of its proportionate contributions to its pension plan. Deferred outflows also encompass the actuarially determined amount of the additional expense resulting from the change in the District's share of the net pension liability from year to year. These amounts are amortized over the actuarially determined estimated remaining service life of all employees in the plan. In the statement of net positon, a deferred inflow of resources is recorded when the pension plan's investments realize a greater rate of return than the estimated rate of return used as part of the actuarial valuation of the plan; the excess amount is amortized over five years. See Note 1 O for further analysis of deferred outflows and inflows of resources related to the net pension liability. Fund Balances As of June 30, 2015, fund balances of the governmental funds are classified, if applicable, as follows: Nonspendab/e - amounts that would be associated with inventory, prepaids, long-term receivables, property held for sale, and the corpus of a permanent fund. In essence, nonspendable is the fund balance term to indicate that the respective resources are not available to be spent in any way due to their very nature and/or their lack of availability. Restricted - carries the same definition as set forth relative to net position. This would include any fund balance that is restricted in its use by: a) external parties; b) constitutional provisions; or, c) enabling legislation (i.e., Capital Projects Fund and Bond Fund). Committed - amounts for which the governing board imposes constraints on how funds may or may not be used. In such a case, the only way a constraint can be removed or changed is by the same type of action of the governing board. Assigned - amounts intended to be used for specific purposes with the intent being expressed by the governing board or the Director of Business Operations as authorized by the governing board. With the exception of the General Fund, amounts in all other governmental funds that are not nonspendable, restricted, or committed will be assigned. Unassigned - all other spendable amounts

38 NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) Budgetary Information The District follows the following procedures in establishing the budgetary data reflected in the financial statements: Prior to May 31, the District Board submits a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them for the General Fund. A public hearing is conducted to obtain taxpayer comments. Prior to June 30, the budget is legally enacted through passage of an ordinance. Legal budgetary control is maintained by the District Board at the departmental level. Transfers between departments, whether between funds or within a fund, or revisions that alter the total revenues and expenditures of any fund must be approved by the District Board as provided by school code. Budgetary data is included in the District's management information system and is employed as a management control device during the year. The budget for the General Fund is adopted substantially on the modified accrual basis of accounting, which is consistent with accounting principles generally accepted in the United States of America. Appropriations lapse at the end of the fiscal year. A budget is not required to be adopted for the Capital Projects Fund. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Implementation of GASB Statements During the year ended June 30, 2015, the District implemented GASB Statement No. 68, ',i.ccounting and Financial Reporting for Pensions," and GASB Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date -An Amendment of GASB Statement No. 68." GASB Statement No. 68 replaces the requirements of GASB Statement No. 27,

39 NOTES TO FINANCIAL STATEMENTS NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) with the objective of improving the accounting and financial reporting of state and local governments for pensions. It requires that state and local governments recognize and record the actuarially determined net pension liability or, for multi-employer cost sharing plans, the entity's share of the net pension liability in the entity's financial statements. GASB Statement No. 71 amends GASB Statement No. 68 and addresses an issue regarding application of the transition provisions in the year of implementation. It requires that in the year of implementation, the state or local government recognize a beginning deferred outflow of contributions for its pension contributions made after the date of measurement. NOTE 2 DEPOSITS Statutes authorize the District to invest in U.S. Treasury bills, time or share accounts of institutions insured by the Federal Deposit Insurance Corporation, or in certificates of deposit when they are secured by proper bond or collateral, repurchase agreements, the State Treasurer's investment pool, or mutual funds. Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the government's deposits may not be returned. The District does not have a policy for custodial credit risk but adheres to Commonwealth of Pennsylvania law ('~ct 72") for the collateralization requirements governing public funds. At June 30, 2015, the carrying amount of the District's deposits was $102,397,313, and the bank balance was $104,422,703. Of the bank balance, $368,551 was covered by federal depository insurance, and $4, l 06, l l l was exposed to custodial credit risk because, in accordance with Act 72 of the Commonwealth of Pennsylvania, it was uninsured; and the collateral held by the depository's agent was not in the District's name. The remaining cash deposits totaling $99,948,041 are in the Pennsylvania Local Government Investment Trust ("PLGIT") and Pennsylvania School District Liquid Asset Fund ("PSDLAF"). Although not registered with the Securities and Exchange Commission and not subject to regulatory oversight, PLGIT and PSDLAF acts like money market mutual funds in that its objective is to maintain a stable net asset value of $1 per share, is rated by a nationally recognized statistical rating organization, and is subject to an independent annual audit. As of June 30, 2015, PLGIT and PSDLAF had a Standard and Poor's rating of AAAm. NOTE 3 INVESTMENTS Under Section 440. l of the Public School Act of 1949 as amended, the District is permitted to invest funds consistent with sound business practices in the following types of investments:

40 NOTES TO FINANCIAL STATEMENTS NOTE 3 INVESTMENTS (cont'd) Obligations of (a) the United States of America or any of its agencies or instrumentalities backed by the full faith and credit of the United States of America, (b) the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the Commonwealth, or (c) any political subdivision of the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the political subdivision. As of June 2015, the District had the following investments: Pennsylvania Local Government Investment Trust ("PLGIT") Total Investments $ 10,019,260 $ 10,019,260 PLGIT is not registered with the Securities and Exchange Commission and not subject to regulatory oversight but acts like money market mutual funds in that their objective is to maintain a stable net asset value of $1 per share, is rated by a nationally recognized statistical rating organization, and is subject to an independent annual audit. As of June 30, 2015, PLGIT had a Standard and Poor's rating of AAAm. NOTE 4 RESTRICTED INVESTMENT A large taxpayer within the District's jurisdiction filed an appeal from the decision of the Bucks County Board of Assessment Appeals and has paid their , , , , and real estate taxes under protest. According to County law, the District has to deposit 25 percent of the amount of real estate taxes paid under protest into a separate depository account until the tax appeal is settled. As of June 30, 2015, the balance of this investment was $9,027,260, and has been reflected in the financial statements as investment - restricted and offset with a liability titled taxes paid under protest and held in escrow. NOTE 5 INTERNAL RECEIVABLES, PAYABLES, AND TRANSFERS The composition of interfund balances as of June 30, 2015 is as follows: Receivable To Payable From Amount General Fund Food Service Fund $ 6,717 lnterfund balances between funds result mainly from the time lag between when reimbursable expenditures occur and payments between the funds have been made. The balances generally are paid shortly after year end. There were no interfund transfers for the year ended June 30,

41 NOTES TO FINANCIAL STATEMENTS NOTE 6 CAPITAL ASSETS Capital asset activity for the year ended June 30, 2015 was as follows: Beginning Physical Ending Balance Additions Decreases Adjustment Balance GOVERNMENTAL ACTIVITIES: Capital assets not being depreciated: Land $ 3,216,902 $ $ $ $ 3,216,902 Construction-In-progress 3,461,467 23,527,610 26,989,077 Total Capital Assets Nol Being Depreciated 6,678,369 23,527,610 30,205,979 Capital assets being depreciated: Land improvements 6,577,390 6,577,390 Buildings and improvements l 36, 170, , ,381, 942 Furniture and equipment 19,717, ,945 2,119,613 3,246,242 21,174,424 Total Capital Assets Being Depreciated 162,465, ,316 2,119,613 3,246, ,133,756 Less accumulated depreciation for: Land improvements 5,503, ,792 5,670,912 Buildings and improvements 79,711,801 4,764,160 84,475,961 Furniture and equipment 14,681,370 1,380,910 2,095,728 2,076,667 16,043,219 Total Accumulated Depreciation 99,896,291 6,312,862 2, ,076, , 190,092 Total Capital Assets Being Depreciated, Net 62,569,520 (5, 771,546) 23,885 1,169,575 57,943,664 Governmental Activities Assets, Ne! $ 69,247,889 $ 17,756,064 $ 23,885 $1,169,575 $88,149,643 BUSINESS-TYPE ACTIVITIES: Capital assets being depreciated: Furniture and equipment $ 781,244 $ $ $. $ 781,244 Accumulated depreciation 760,273 8, ,917 Business-type Activities, Net $ 20,971 $ (8,644) $ $ $ 12,327 Depreciation expense was charged to functions/programs of the District as follows: Governmental Activities: Instruction Instructional student support Administrative and financial support services Operation and maintenance of plant services Pupil transportation Student activities Total Depreciation Expense - Governmental Activities $ 65, ,202 18,307 5,243, , l 35 10,732 $ 6,312,862 Business-type Activities - Food Service $ 8,

42 NOTES TO FINANCIAL STATEMENTS NOTE 7 BONDS PAYABLE The following is a summary of bonds payable for the year ended June 30, 2015: Outstanding Outstanding Due within June 30, 2014 Additions Deletions June 30, 2015 One Year General Obligation Bond $ 22,875,000 $ - $ 8,800,000 General Obligation $ 14,075,000 $ 100,000 Bond ,085,000 l,965,000 General Obligation 4,120,000 2,020,000 Bond ,390, ,000 General Obligation 17,500,000 1,230,000 Bond ,000,000 1,645,000 General Obligation 76,355,000 1,785,000 Bond ,830,000 50,000 9,780, ,000 Subtotal 125,350,000 9,830,000 13,350, ,830,000 5,250,000 Bond premium 5,954, , ,488 5, l 95, ,154 TOTALS $131,304,182 $ 9,862,070 $ l 4, 140,488 $127,025,764 $ 5,782, 154 Payments of bonds payable are expected to be funded by the General Fund. Principal and interest payments for the succeeding fiscal years are as follows: Year Ending June 30, Principal Interest Total 2016 $ 5,250,000 $ 4,759,709 $ l 0,009, ,435,000 4,576,484 l 0,011, ,610,000 4,405,209 10,015, ,815,000 4,214,934 10,029, ,980,000 4,062,384 10,042, ,360,000 25,554,622 58,914, ,015,000 l 0,337,900 51,352, ,365,000 l,221,400 20,586,400 $ 121,830,000 $ 59, 132,642 $ 180,962,642 Interest expense for the year ended June 30, 2015 was $5,247,615. Bonds payable at June 30, 2015 consist of: General Obligation Bonds Series of Original principal amount of $30,000,000, maturing June 15, 2028, bearing interest from 4.00% to 5.25%. Interest is payable semi-annually on June 15 and December 15. $ 14,075,

43 NOTES TO FINANCIAL STATEMENTS NOTE 7 BONDS PAYABLE (cont'd) General Obligation Bonds Series of 201 O - Original principal amount of $12,515,000, maturing July 15, 2016, bearing interest from 2.0% to 4.0%. Interest is payable semi-annually on January 15 and July 15. General Obligation Bond Series of Original principal amount of $19,250,000, maturing August 15, 2022, bearing interest from 2.0% to 5.0%. Interest is payable semi-annually on February 15 and August 15. These bonds were issued to provide for the current refunding of the remaining General Obligation Bonds Series of General Obligation Bond Series of Original principal amount of $78,000,000, maturing June 1, 2032, bearing interest from 2.0% to 5.0%. Interest is payable semi-annually on June l and December l. These bonds were issued for the purpose of providing funds to pay for the construction costs associated with the renovation of the Bensalem High School and to pay for the costs of issuing the bonds. General Obligation Bond Series of Original principal amount of $9,830,000, maturing April l, 2025, bearing interest from 2.0% to 3.0%. Interest is payable semi-annually on April l and October l. These bonds were issued to partially refund the General Obligation Bonds Series of This refunding resulted in a cash flows savings of $1,379,698 and an economic benefit of $1,251,401 for the District. 4,120,000 17,500,000 76,355,000 9,780,000 S ,000 NOTE 8 JOINT VENTURE In December 1995, the Bucks County Technical School Authority ("the Authority") issued 20-year School Revenue bonds in the aggregate amount of $35,360,000 for a new technical school and renovations on the old technical school. The bonds are secured under a trust indenture between the Authority and Wells Fargo Bank by a pledge of, and are payable solely from, lease rentals payable by the Technical School's member school districts, which includes the District under an assignment of the lease. Thus, the District is obligated for a portion of the above amount. Each member school district's portion of the debt service is based on a calculation of the apportionment of the lease rental among the member school districts made to create an equal millage impact upon all member districts which is effective for five years. The apportionment is then adjusted every five years thereafter until the lease expires or all payments are made. The debt was refinanced during fiscal year 2006, resulting in a new loan amount of $27,260,000. The District made rental payments in the amount of $575,452 for the year ended June 30, 2015, of which $465,372 represented principal payments

44 NOTES TO FINANCIAL STATEMENTS NOTE 8 JOINT VENTURE (cont'd) No amounts have been reflected in the statement of net position, as both the assets and related debt are recorded through a separate authority. Future rental payments are as follows: Year Ending June 30, Total Less: interest requirements Outstanding rental payments $ 575, , , ,632 2,297, ,633 $ 2,088,394 NOTE 9 COMPENSATED ABSENCES An analysis of compensated absences at June 30, 2015, including the changes during the year, is presented below: Outstanding Increase/ Outstanding June 30, 2014 (Decrease) June 30, 2015 Accrued Vacation $ 1,852,641 $ (801,618) $ 1,051,023 Accrued Sick 4,542,639 (142,643) 4,399,996 $ 6,395,280 $ (944,261) $ 5,451,019 NOTE 10 EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS The District contributes to the Public School Employees' Retirement System ("PSERS"), a governmental cost-sharing multiple-employer defined benefit pension plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. The members eligible to participate in the system include all full-time public school employees, parttime hourly public school employees who render at least 500 hours of service in the school year, and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania. PSERS issues a publicly available comprehensive annual financial report that includes the financial statements and required supplementary information for the plan. A copy of this report may be obtained by writing to the Public School Employees' Retirement System, P.O. Box 125, Harrisburg, Pennsylvania , or by visiting the PSERS website at

45 NOTES TO FINANCIAL STATEMENTS NOTE l O EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS (cont'd) Benefits Provided PSERS provides retirement, disability, and death benefits. Members are eligible for monthly retirement benefits upon reaching (a) age 62, with at least one year of credited service, (b) age 60 with 30 or more years of credited service, or (c) 35 or more years of service regardless of age. Act 120 of 2010 (''.Act 120") preserves the benefits of existing members and introduced benefit reductions for individuals who became new members on or after July l, Act 120 created two new membership classes, Membership Class T-E ("Class T-E") and Membership Class T-F ("Class T-F"). To qualify for normal retirement, Class T-E and Class T-F members must work until age 65 with a minimum of three years of service, or attain a total combination and age and service that is equal to or greater than 92, with a minimum of 35 years of service. Benefits are generally equal to two percent or two and one-half percent, depending upon the membership class, of the member's final average salary as defined in the Code, multiplied by the number of years of credited service. For members whose membership started prior to July l, 2011, after completion of five years of service, a member's right to the defined benefits is vested, and early retirement may be elected. For Class T-E and Class T-F members, the right to benefits is vested after lo years of service. Participants are eligible for disability retirement benefits after completion of five years of credited service. Such benefits are generally equal to two percent or two and one-half percent, depending upon the membership class, of the member's final average salary as defined in the Code, multiplied by the number of years of credited service, but not less than one-third of such salary nor greater than the benefit the member would have had at normal retirement age. Members over normal retirement age may apply for disability benefits. Death benefits are payable upon the death of an active member who has reached age 62 with at least one year of credited service (age 65 with at least three years of credited service for Class T-E and Class T-F members, or who has at least five years of credited service for Class T-E and Class T-F members). Such benefits are actuarially equivalent to the benefit that would have been effective if the member had retired on the day before death. Member Contributions Active members who joined the system prior to July 22, 1983 contributed at 5.25 percent (Membership Class T-C), or at 6.50 percent (Membership Class T-D) of the member's qualifying compensation. Members who joined the system on or after July 22, 1983, and who were active or inactive as of July 1, 2001, contribute at 6.25 percent (Membership Class T-C), or at 7.50 percent (Membership Class T-D) of the member's qualifying compensation. Members who joined the system after June 30, 2001 and before July 1, 2011 contribute at 7.50 percent (automatic Membership Class T-D). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January l,

46 NOTES TO FINANCIAL STATEMENTS NOTE 10 EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS (cont'd} Members who joined the system after June 30, 2011 automatically contribute at the Membership Class T-E rate of 7.50 percent (base rate} of the member's qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at percent (base rate} of the member's qualifying compensation. Membership Class T-E and T-F are affected by a "shared risk" provision in Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate to fluctuate between percent and percent. and Membership Class T-F contribution rate to fluctuate between percent and percent. Employer Contributions The District's contractually required annual contribution is based on an actuarially determined amount that, when combined with the employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2015, the rate of the employer contribution was percent of covered payroll, allocated percent to pensions and percent to health insurance assistance. The District's contribution to PSERS for the years ended June 30, 2015, 2014, and 2013 was $11,921,296, $9,012,812, and $6,743,428, respectively. Pension Liability and Expense, and Deferred Outflows and Inflows of Resources At June 30, 2015, the District reported a liability of $1 7 4,314,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by rolling forward the system's total pension liability as of June 30, 2013 to June 30, The District's proportion of the net pension liability was calculated utilizing the employer's one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2014, the District's proportion was percent, which was an increase of percent from its proportion measured as of June 30, For the year ended June 30, 2015, the District recognized pension expense of $16,83 7,565. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Net difference between projected and actual investment earnings Changes in proportions Difference between employer contributions and proportionate share of total contributions Contributions subsequent to the date of measurement Deferred Outflows of Resources $ 6,334, ,247 11,921,296 $18,448,543 Deferred Inflows of Resources $12,461,000 $12,461,

47 NOTES TO FINANCIAL STATEMENTS NOTE l O EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS (cont'd) Deferred outflows of resources in the amount of $11 921,296 resulted from the District's contributions subsequent to the measurement date, which will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts will be reported as deferred outflows and resources and deferred inflows of resources related to pensions and will be recognized in pension expense as follows: Year Ended June 30, $ 1,542,419 1,542,419 1,542,419 1,542,419 (235,923) $ 5,933,753 Actuarial Assumptions The total pension liability as of June 30, 2014 was determined by rolling forward the system's total pension liability as of the June 30, 2013 actuarial valuation to June 30, 2014 using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial cost method - Entry age normal, level percentage of pay. Investment return percent, including inflation of 3.00 percent. Salary increases- Effective average of 5.50 percent, which reflects an allowance for inflation of 3.00 percent, real wage growth of 1.00 percent, and merit or seniority increases of 1.50 percent. Mortality rates were based on the RP-2000 Combined Healthy Annuitant Tables (male and female) with age set back three years for both males and females. For disabled annuitants, the RP-2000 Combined Disabled Tables (male and female) with age set back seven years for males and three years for females. The actuarial assumptions used in the June 30, 2013 valuation were based on the experience study that was performed for the five-year period ended June 30, The recommended assumption changes based on this experience study were adopted by the PSERS Board of Directors at its March 11, 2011 Board meeting and were effective beginning with the June 30, 2011 actuarial valuation. The long-term expected rate of return on pension plan investments was determined using the building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation

48 NOTES TO FINANCIAL STATEMENTS NOTE l O EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS (cont'd) The pension plan's policy in regard to the allocation of invested plan assets is established and may be amended by the PSERS Board of Directors. Plan assets are managed with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension. A schedule of plan investments by asset class, target allocations, and long-term expected real rate of return is as follows: Long-term Expected Target Real Rate Asset Class Allocation of Return Public markets global equity 19% 5.0% Private markets (equity) 21% 6.5% Private real estate 13% 4.7% Global fixed income 8% 2.0% U.S. long treasuries 3% 1.4% TIPS 12% 1.2% High yield bonds 6% 1.7% Cash 3% 0.9% Absolute return 10% 4.8% Risk parity 5% 3.9% MLPs/infrastructure 3% 5.3% Commodities 6% 3.3% Financing (LIBOR) (9%) 1.1% % The above was the PSERS Board's adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, Discount Rate The discount used to measure the total pension liability was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at contractually required rates which are actuarially determined. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability

49 NOTES TO FINANCIAL STATEMENTS NOTE 10 EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS (cont'd) Sensitivity of the District's Proportionate Share of the Net Pension liability to Changes in the Discount Rate The following presents the net pension liability, calculated using the discount rate of 7.50 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.50 percent), or one percentage point higher (8.50 percent) than the current rate. District's proportionate share of the net pension liability 1% Decrease 6.50% $ 217,432,000 Current Rate Discount Rate 7.50% $ 174,314,000 1% Increase 8.50% $ 137,502,000 Pension Plan Fiduciary Net Position Detailed information about PSERS' fiduciary net position is available in PSERS Comprehensive Annual Financial Report, which can be found on the system's website at NOTE 11 OTHER POST-EMPLOYMENT BENEFITS Plan Description All employees who retire from the District and eligible dependents may continue to participate in the District's group health plan until the retired employee reaches Medicare age. Employees are eligible with 30 years of PSERS service or upon retirement. The retired employee must provide payment equal to the premium determined for the purposes of COBRA. The District subsidizes the premium rates paid by retirees by allowing them to participate in the plan at blended group (implicitly subsidized) premium rates for both active and retired employees. These rates provide an implicit subsidy for retirees because, on an actuarial basis, their current and future claims are expected to result in higher costs to the plan on average than those of active employees. Some employees retired under an incentive package, and the member must pay the difference between the premium and the District contribution set at the time of retirement. The plan is a single-employer defined benefit plan. Separate financial statements are not issued for the plan. Funding Policy The District has not advance-funded or established a funding methodology for the annual Other Post-employment Benefit ("OPEB") costs or the net OPEB obligation. Retiree contributions are based on weighted averages for the medical premiums, increasing at the same rate as the healthcare cost trend rate

50 NOTES TO FINANCIAL STATEMENTS NOTE 11 OTHER POST-EMPLOYMENT BENEFITS (cont'd) Annual OPEB Cost and Net OPEB Obligation The District's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer ("ARC"), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the District's OPEB cost for the year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation to the plan. Annual required contribution $ 965,722 Interest on net OPEB obligation 70,977 Adjustment to annual required contribution (359,287) Annual OPEB cost (expense) 667,412 Contributions made (558,037) Increase in net OPEB obligation 119,375 Net OPEB obligation - beginning of year 1,577,272 Net OPEB obligation - end of year $ 1,696,647 Funded Status and Funding Progress As of December l, 2013, the most recent actuarial valuation date, the plan was 0.00 percent funded. The actuarial accrued liability for benefits was $3,554,204, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability ("UAAL") of $3,554,204. The covered payroll (annual payroll of active employees covered by the plan) was $51, 192, 911, and the ratio of the UAAL to the covered payroll was 6.94 percent. The schedule of funding progress presented as required supplementary information ("RSI") immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the AAL for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations

51 NOTES TO FINANCIAL STATEMENTS NOTE 11 OTHER POST-EMPLOYMENT BENEFITS (cont'd) In the December 1, 2013 actuarial valuation, the entry age actuarial cost method was used. The actuarial assumptions included a 4.50 percent investment rate of return and an annual healthcare cost trend rate of seven percent in 2013, reduced by 0.5 percent each year to an ultimate rate of 5.5 percent in The actuarial assumptions also include a payroll growth of a 2.50 percent cost of living adjustment; one percent real wage growth; and, for teachers and administrators, a merit increase which varies by age from percent to 0.25 percent. The UAAL is being amortized based on the level dollar, six-year open period. The remaining amortization period at June 30, 2015 was four years. NOTE 12 FUND BALANCES As of June 30, 2015, fund balances are composed of the following: Capital Total General Projects Bond Governmental Fund Fund Fund Funds Nonspendable $ 28,762 $ $ $ 28,762 Restricted: Capital projects 2,982,304 56,052, ,034,484 Committed: PSERS 6,400,000 6,400,000 OPEB 2,625,000 2,625,000 Compensated absences 6,750,000 6,750,000 Capital projects 4,000,000 4,000,000 Unassigned 5,947,269 5,947,269 Total Fund Balances $ 25,751,031 $ 2,982,304 $ 56,052,180 $ 84, 785,515 NOTE 13 CONTINGENCIES AND COMMITMENTS Government Grants and Awards The District participates in both state and federally assisted grant programs. These programs are subject to program compliance audits by the granters or their representatives. The District is potentially liable for any expenditures which may be disallowed pursuant to the terms of these grant programs. Management is not aware of any material items of noncompliance which would result in the disallowance of program expenditures. Litigation Certain litigation claims are pending against the District. In the opinion of District management and legal counsel, the potential losses, if any, on such claims would not have a materially adverse effect on the District's finances

52 NOTES TO FINANCIAL STATEMENTS NOTE 13 CONTINGENCIES AND COMMITMENTS (cont'd) Construction Commitments As of June 30, 2015, the District had construction projects yet to be completed. The commitments and amounts completed to date are as follows: Contract Amount Completed as of June 30, 2015 Commitment Renovations $ 70,377,324 $ 21,606, 783 $ 48,770,541 In addition, the District has incurred costs totaling $5,382,294 for project costs that were not under a formal contract as of June 30, NOTE 14 RISK MANAGEMENT The District is exposed to various risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District has purchased various insurance policies to safeguard the assets of the District from the risk of loss. NOTE 15 EXCESS OF EXPENDITURES OVER APPROPRIATIONS The following General Fund function incurred expenditures in excess of appropriations in the following amount for the year ended June 30, 2015: Debt service $ 501 The excess of expenditures over appropriations was financed by savings in other budgeted expenditure line items. NOTE 16 INSURANCE RECOVERY/RESTITUTION Fraud was discovered at the District during the year ended June 30, 2012, which included the theft of items from the District by employees and employee falsification of attendance records. The police and district attorney's office investigated, and the employees involved with the fraud were prosecuted. The investigation determined the fraud occurred since the year 2001 through The loss to the District was determined to be $822, 359 for the theft of property and $207, 124 for theft of salary. For the year ended June 30, 2015, the District received restitution in the amount of $117,272. As of June 30, 2015, the District has received insurance proceeds and restitution in the amount of $958,

53 NOTES TO FINANCIAL STATEMENTS NOTE 1 7 PRIOR PERIOD RESTATEMENT The District has restated its July 1, 2014 net position in its governmental activities, business-type activities, and the food service fund to record the net pension liability and deferred outflows of resources at June 30, 2014 in accordance with the requirements of GASB Statement No. 68 and GASB Statement No. 71, as discussed in Note 1. The net result of this change is a decrease of $160,616, 933 in governmental activities net position and a decrease of $2, 793,254 in businesstype activities net position and food service fund net position. NOTE 18 CHANGE OF ESTIMATE The District has revised its estimate of its total capital assets during the current year to the actual physical amount determined per the performance of a physical inventory. The District believes that the physical asset amount per the inventory performed is a more accurate representation of overall capital assets. Total capital assets increased as a result of this change in estimate in the amount of $1, 169,575. See Note 6 for a summary of the changes by asset class. NOTE 19 DEFICIT NET POSITION For governmental activities, business-type activities, and the food service fund, the unrestricted net deficit amounts of $144,399,098 (governmental activities) and $2,701,024 (business-type activities and food service fund), respectively, includes the effect of the deferring the recognition of pension contributions made subsequent to the measurement date of the net pension liability, the unamortized portion of contributions made in excess of the District's share of its proportionate contributions to its pension plan, and the deferred outflows resulting from the change in the District's share of the net pension liability. This is offset by the District's actuarially determined pension liability and the deferred inflows resulting from the differences between projected and actual investment earnings. NOTE 20 SUBSEQUENT EVENTS The District receives a significant portion of its general fund revenues from State sources (including federal funds passed through the State). As of the date of this report, the Commonwealth of Pennsylvania has not approved a budget for the fiscal year and, as a result, appropriations of funds have not been released to Pennsylvania school districts. However, emergency funding equal of approximately 45 percent of state funding was released to the District in January To ensure consistency and comparability in financial reporting, receivables from the State which would normally be received within 60 days of the fiscal year end but have not yet been received as a result of the budget impasse are considered available under the modified accrual basis of accounting, as permitted by GASB. The District has evaluated all subsequent events through January 7, 2016, the date the financial statements were available to be issued

54 REQUIRED SUPPLEMENTARY INFORMATION

55 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY June 30, 2014 District's proportion of the net pension liability % District's proportion of the net pension liabilitydollar value $ 174,314,000 District's covered employee payroll $ 56,197,713 District's proportionate share of the net pension liability as a percentage of its covered employee payroll % Plan fiduciary net position as a percentage of the total pension liability 57.24% In accordance with GASB Statement No. 68, this schedule has been prepared prospectively as the above information for the preceding years is not readily available. This schedule will accumulate each year until sufficient information to present a ten-year trend is available

56 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DISTRICT CONTRIBUTIONS June 30, 2015 Contractually required contribution Contributions in relation to the contractually required contribution Contribution excess $ 11,404,806 $ 11,404,806 District's covered employee payroll Contributions as a percentage of covered-employee payroll $ 55,633, % In accordance with GASB Statement No. 68, this schedule has been prepared prospectively as the above information for the preceding years is not readily available. This schedule will accumulate each year until sufficient information to present a ten-year trend is available

57 SCHEDULE OF FUNDING PROGRESS - POST-EMPLOYMENT HEALTHCARE PLAN REQUIRED SUPPLEMENTARY INFORMATION Historical trend information about the plan is presented herewith as required supplementary information. It is intended to help users assess the plan's funding status on a going-concern basis, assess p rogress made in accumulating assets to pay benefits when due, and make comparisons with other state and local government retirement systems. (1) (2) (3) (4) (5) (6) (7) UAAL Act uarial asa Actuarial Accrued Percentage of Actuarial Value of Liability Unfunded Funded Covered Covered Valuation Assets (AAL) -Entry AAL (UAAL) Ratio Payroll Payroll Date (a) Age (b) (b)-(a) (a)/(b) (c) [(b)-(a)]/(c) 12/01 /13 $ - $ 3,554,204 $ 3,554, % $51, 192, % 12/01 /11 $ - $ 3,660,192 $ 3,660, % $40,823, % 12/01 /09 $ - $ 4,156,665 $ 4,156, % $54, 77 4, % The comparability of trend information is affected by changes in actuarial assumptions, benefit provisions, actuarial funding methods, accounting policies, and other changes. Those changes usually affect trends in contribution requirements and in ratios that use the pension benefit obligation as a factor

58 SINGLE AUDIT SUPPLEMENT

59 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Barbacane, Thornton & Company LLP 200 Springer Building 3411 Silverside Road Wilmington, Delaware T F January 7, 2016 Board of School Directors Bensalem Township School District Bensalem, Pennsylvania We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Aud;t;ng Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Bensalem Township School District, Bensalem, Pennsylvania as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Bensalem Township School District's basic financial statements, and have issued our report thereon dated January 7, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Bensalem Township School District's internal control over financial reporting ("internal control") to determine the audit procedures that are appropriate in the circumstances 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 Bensalem Township School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the Bensalem Township School District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is fess severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified BARBA CANE 11-IORNTON &COMPANY CERTIFIED PUllLIC ACCOUNTANTS

60 Board of School Directors Bensalem Township School District Compliance and Other Matters As part of obtaining reasonable assurance about whether the Bensalem Township School District's financial statements are free from 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. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ;j~~i~ LLP BARBACANE, TH;RNTON & COMPANY LL~

61 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Barbacane, Thornton & Company LLP 200 Springer Building 3411 Silverside Road Wilmington, Delaware T F January 7, 2016 Board of School Directors Bensalem Township School District Bensalem, Pennsylvania Report on Compliance for Each Maior Federal Program We have audited the Bensalem Township School District's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Bensalem Township School District's major federal programs for the year ended June 30, The Bensalem Township School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and recommendations. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the Bensalem Township School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations." Those standards and OMB Circular A-133 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 Bensalem Township School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Bensalem Township School District's compliance BARBA CANE IBORNIDN &CDMPANY CERTIFIED PUBLIC ACCOUNTANTS

62 To the Board of School Directors Bensalem Township School District Opinion on Each Major Federal Program In our opinion, the Bensalem Township School District, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal programs for the year ended June 30, Report on Internal Control Over Compliance Management of the Bensalem Township School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Bensalem Township School District's internal control over compliance with the types of requirements that could have a direct and material effect on its major federal programs to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for its major federal programs and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Bensalem Township School District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of infernal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. /j~~l~n-f LLP BARBACANE, THO;NTON & COMPANY LLP?