GATEWAY SCHOOL DISTRICT

Transcription

1 MONROEVILLE, PENNSYLVANIA FINANCIAL STATEMENTS YEAR ENDED

2 YEAR ENDED CONTENTS Independent Auditor s Report 1-2 Page Management s Discussion and Analysis 3-10 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements Balance Sheet Governmental Funds 13 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 14 Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds 15 Reconciliation of the Governmental Fund Statement of Revenues, Expenditures, and Changes in Net Position to the Statement of Activities 16 Statement of Net Position - Proprietary Fund 17 Statement of Revenues, Expense, and Changes in Net Position Proprietary Fund 18 Statement of Cash Flows - Proprietary Fund 19 Statement of Fiduciary Net Position 20 Statement of Changes in Fiduciary Net Position 21 Statement of Changes in Assets and Liabilities Fiduciary Fund 22 Notes to Financial Statements Required Supplementary Information Schedule of Changes in the District s Total OPEB Liability and Related Ratios 48 Schedule of Revenues, Expenditures and Changes in Fund Balance-Budget and Actual 49 Schedule of the District s Proportionate Share of the Net Pension Liability-Last 10 years 50 Schedule of the District s Contributions-Last 10 Years 51

3 Zelenkofske Axelrod LLC Board of Directors Gateway School District 9000 Gateway Campus Boulevard Monroeville, Pennsylvania Report on the Financial Statements Independent Auditor s Report 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 GATEWAY SCHOOL DISTRICT, as of and for the year ended 2017, and the related notes to the financial statements, which collectively comprise GATEWAY SCHOOL DISTRICT S basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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 GATEWAY SCHOOL DISTRICT as of June 30, 2017, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Harrisburg Philadelphia Pittsburgh Greensburg 830 Sir Thomas Court, Suite 100 Harrisburg, PA Fax York Road, Suite A-5 Jamison, Pa Fax McKnight E. Drive, Suite 3805 Pittsburgh, PA Fax Tollgate Hill Road Greensburg, PA Fax

4 Board of Directors Gateway School District Page 2 Adoption of GASB Statements As described in Note 1 to the financial statements, in 2017, the District adopted the provisions of Governmental Accounting Standards Board s Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provision of GASB Statements 67 and 68, Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, Statement No. 80, Blending Requirements for Certain Component Units-an amendment of GASB Statement No. 14, Statement No. 81, Irrevocable Split-Interest Agreements, and Statement No. 82, Pension Issues-an amendment of GASB Statements No. 67, No. 68, and No. 73. Our opinion is not modified with respect to these matters. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, schedule of funding progress for postemployment benefits other than pensions, budgetary comparison, schedule of district s proportionate share of the net pension liability last 10 years, schedule of districts contributions last 10 years, and schedule of changes in the district s total opeb liability and related ratios information on pages 3 through 10 and 48 through 51 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2017, on our consideration of GATEWAY 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 GATEWAY SCHOOL DISTRICT S internal control over financial reporting and compliance. December 15, 2017 Pittsburgh, Pennsylvania ZELENKOFSKE AXELROD LLC

5 MANAGEMENT S DISCUSSION AND ANALYSIS Page 3 The discussion and analysis of the Gateway School District s (District) financial performance provides an overall review of the District s financial activities for the fiscal years ended June 30, 2017 and The intent of this discussion is to look at the District s financial performance as a whole. Readers should also review the notes to the basic financial statements to enhance their understanding of the District s financial performance. The Management s Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments issued in June Certain comparative information for the fiscal years ended June 30, 2017 and 2016 has been included, for it is required to be presented as a part of the MD&A. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements and notes to those financial statements. These statements are organized so the reader can understand the District as a financial whole or an entire operating entity. The statements then proceed to provide an increasingly detailed look at specific financial activities. The Statement of Net Position and the Statement of Activities (on pages 11 through 12) provide information about the activities of the District as a whole and present a longer-term view of the District s finances. Fund financial statements start on page 13. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the District s operations in more detail than the government wide statements by providing information about the District s most financially significant funds. Reporting the District as a Whole The Statement of Net Position and the Statement of Activities Our analysis of the District as a whole begins on page 5. One of the most important questions asked about the District s finances is Is the District as a whole better off or worse off as a result of the current year s activities? The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its activities in a way that helps to answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting method used by most private-sector companies. Accrual of the current year s revenues and expenses are taken into account regardless of when the cash is received or paid. These two statements report the District s net position and the changes in them. The District s net position, the difference between the District s assets and liabilities, are one way to measure the District s financial health, or financial position. Over time, increases or decreases in the District s net position are one indicator of whether its financial health is improving or deteriorating, respectively. The causes of this change may be the result of many factors, some financial, some not. To assess the overall health of the District, you need to consider additional non-financial factors, such as changes in the District s property tax base and the performance of the students. In the Statement of Net Position and the Statement of Activities, we divide the District into two kinds of activities: Governmental Activities: Most of the District s programs and services are reported here including instruction, support services, operation and maintenance of facilities, pupil transportation, debt service, and extracurricular activities.

6 MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) Page 4 Business-Type activities: These services are provided on a charge for goods or services basis to attempt to recover all of the expenses of the goods or services provided. For the fiscal years ended June 30, 2017 and 2016 the District s food service operation is reported as a business-type activity. Reporting the District s Most Significant Funds Fund Financial Statements Our analysis of the District s major funds begins on page 8. The fund financial statements begin on page 13 and provide detailed information about the most significant funds or major funds not the District as a whole. The District s major governmental funds are the General Fund, the Capital Reserve Fund, and the Food Service Fund. The District s two kinds of funds (governmental and proprietary) use different accounting approaches. Governmental Funds: Most of the District s activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the District s general operations and the services it provides. Government fund information helps you to determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s educational programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds as a reconciliation in the financial statements. Proprietary Funds: This type of fund is used to account for the District activities that are 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 are generally reported in proprietary funds. The Food Service Fund is the District s proprietary fund and is the same as the business-type activities that we report in the government-wide statements, but provide more detail and additional information, such as cash flows. This Space Intentionally Left Blank

7 MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) Page 5 THE DISTRICT AS A WHOLE The District s total net position was ($91,374,685) at June 30, 2017 or a decrease of ($3,177,569) or (3.6%) under the prior fiscal year. Governmental Activities Business-Type Activities Totals Assets: Current assets $ 20,707,702 $ 19,431,999 $ 361,698 $ 437,220 $ 21,069,400 $ 19,869,219 Noncurrent assets 56,140,212 58,681, , ,571 56,375,259 58,910,032 Deferred outflows of resources 19,458,319 9,599, , ,704 19,835,706 9,792,052 Total assets and deferred outflows 96,306,233 87,712, , ,495 97,280,365 88,571,303 Liabilities: Current liabilities 6,997,739 6,949,340 (259,203) (62,918) 6,738,536 6,886,422 Noncurrent liabilities 177,144, ,845,679 2,559,768 2,183, ,704, ,029,356 Deferred inflows of resources 2,056,513 1,816, ,385 36,461 2,211,898 1,852,641 Total liabilities and deferred inflows 186,199, ,611,199 2,455,950 2,157, ,655, ,768,419 Net position: Net Investment in capital assets 10,039,084 10,798, , ,571 10,274,131 11,027,208 Restricted for capital projects 30, , , ,553 Unrestricted (99,962,701) (98,081,581) (1,716,865) (1,527,296) (101,679,566) (99,608,877) Total net position (89,892,867) (86,898,391) (1,481,818) (1,298,725) (91,374,685) (88,197,116) Total liabilities and deferred inflows of resources and net position $ 96,306,233 $ 87,712,808 $ 974,132 $ 858,495 $ 97,280,365 $ 88,571,303 Most of the District s net assets are invested in capital assets (land, buildings, and equipment). The remaining unrestricted net assets are a combination of committed and unassigned amounts. The restricted for capital projects balances are the remaining balances in the Capital Reserve Fund. The results of the operations as a whole for the years ended June 30, 2017 and 2016 are reported in the Statement of Activities. All expenses are reported in the first column. Specific charges, grants, revenues, and subsidies that directly relate to specific expense categories are represented to determine the final amount of the District s activities that are supported by other general revenues. The two largest general revenues are the local taxes assessed to community taxpayers and the Basic Education Subsidy provided by the Commonwealth of Pennsylvania (Commonwealth).

8 MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) Page 6 Table 2 takes the information from that Statement, rearranges it slightly, so you can see our total revenues for the fiscal years ended June 30, 2017 and Table 2 Changes in Net Assets For the Years Ended June 30, Governmental Activities Business-Type Activities Totals Revenues: Program revenues $ 12,735,002 $ 12,363,555 $ 1,469,137 $ 1,149,437 $ 14,204,139 $ 13,512,992 General revenues: Property taxes, net 43,543,127 44,250, ,543,127 44,250,098 Other taxes, net 6,400,055 6,045, ,400,055 6,045,456 Grants, subsidies, and contributions, unres. 7,580,223 7,258, ,580,223 7,258,621 Investment earnings 72,644 32, ,865 33,092 Charges for services 124, , , , , ,099 Capital grants and contributions 409, , , ,270 Miscellaneous income 483, , , ,131 Total revenues 71,348,589 70,991,975 2,043,115 1,782,784 73,391,704 72,774,759 Expenses: Instruction 48,218,480 44,961, ,218,480 44,961,384 Instruc. Student support 5,249,321 4,222, ,249,321 4,222,515 Admin. And financial support services 6,213,793 5,555, ,213,793 5,555,394 Operation and maint. of plant services 6,974,169 6,202, ,974,169 6,202,695 Pupil transportation 4,217,340 4,011, ,217,340 4,011,206 Student activities 1,200,130 1,071, ,200,130 1,071,994 Community services 47,051 47, ,051 47,471 Int. on long-term debt 2,222,781 2,139, ,222,781 2,139,997 Food services - - 2,226,208 1,879,757 2,226,208 1,879,757 Total expenses 74,343,065 68,212,656 2,226,208 1,879,757 76,569,273 70,092,413 Increase (decrease) in net assets (2,994,476) 2,779,319 (183,093) (96,973) (3,177,569) 2,682,346 Net position July 1 (74,280,942) (77,060,261) (1,258,314) (1,161,341) (75,539,256) (78,221,602) Restatement (Note 15) (12,617,449) - (40,411) - (12,657,860) - Net position June 30 $ (89,892,867) $ (74,280,942) $ (1,481,818) $ (1,258,314) $ (91,374,685) $ (75,539,256) The tables above present the expenses of both the Governmental Activities and the Business-type Activities of the District.

9 MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) Page 7 Table 3 shows the District s largest functions: instruction, instructional student support, administrative and financial support services, operation and maintenance of plant services, pupil transportation, student activities, community services, bond issuance costs, interest on long-term debt, food service as well as each program s net cost (total cost less revenues generated by the activities). This table also shows the net costs offset by the other unrestricted grants, subsidies, and contributions to show the remaining financial needs supported by local taxes and other miscellaneous revenues. Table 3 Governmental Activities For the Years Ended June 30, Total Cost of Services Net Cost of Services Functions/Programs Instruction $ 48,218,480 $ 44,961,384 $ 42,838,940 $ 40,146,096 Instruction student support 5,249,321 4,222,515 1,090,297 79,401 Administrative and financial support services 6,213,793 5,555,394 5,536,617 4,975,022 Operation and maintenance of plant services 6,974,169 6,202,695 6,214,140 5,554,637 Pupil transportation 4,217,340 4,011,206 2,657,191 2,053,980 Student activities 1,200,130 1,071,994 1,069, ,007 Community services 47,051 47,471 41,924 42,556 Interest on long-term debt 2,222,781 2,139,997 1,625,131 1,381,166 Total governmental Activities $ 74,343,065 $ 68,212,656 61,073,582 55,193,865 Less: Unrestricted grants, subsidies (7,580,223) (7,258,621) Total needs from local taxes and other revenues $ 53,493,359 $ 47,935,244 Table 4 reflects the activities of the Food Service program, the only Business-Type activity of the District. Table 4 Business-Type Activities For the Years Ended June 30, Total Cost of Services Net cost of Services Functions/Programs Food Services $ 2,226,208 $ 1,879,757 $ 183,314 $ 97,187 Less: Investment Earnings (221) (214) Total business-type activities $ 183,093 $ 96,973 The Statement of Revenues, Expenses, and Changes in Fund Net Position for this proprietary fund will further detail the actual results of operations.

10 MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) Page 8 THE DISTRICT S FUNDS At June 30, 2017, the District s governmental funds reported a combined fund balance of $14,596,862, which is a net increase of $1,405,826 or 10.66% over the prior fiscal year. The primary reason for this net increase is specific to one fund: General Fund: The District s General Fund Balance increased by the net amount of $1,759,629. The primary reason for the net increase was due to the General Fund paying various categories of actual expenditures (utilities, pupil tuition, salaries, and benefits) far less than the budgeted expenditures and receiving actual revenues (Basic Education Subsidy, mercantile taxes, and earned income taxes) far greater than the budgeted revenues. General Fund Budget On June 22, 2017, the Gateway Board of School Directors (Board) passed the General Fund Budget. The real estate tax millage rate was maintained at mills for the fiscal year. One net mill of real estate taxes is worth approximately $2,293,885 for the District. The District applies for various federal, state, and local grants, and the actual amount of these grants to be received cannot always be accurately anticipated and reflected in the budgeting process. CAPITAL ASSET AND DEBT ADMINISTRATION CAPITAL ASSETS At June 30, 2017, the District had total capital assets of $110,668,730 invested in a broad range of capital assets, including land, buildings, and furniture and fixtures with the majority of that total, $84,873,903 invested in buildings and building improvements. The recognition of the current year depreciation and the prior fiscal year accumulated depreciation in the District s financial statements results in total net capital assets of $56,375,259 or a decrease of (3.50%) under the prior fiscal year. Table 5 All Activities Capital Assets-Net of Depreciation For the Years Ended June 30, Governmental Activities Business-Type Activities Totals Capital Asset Land $ 4,281,588 $ 4,281,588 $ - $ - $ 4,281,588 $ 4,281,588 Land Improvements 3,393,310 3,713, ,393,310 3,713,745 Buildings 8,542,515 8,871, ,542,515 8,871,710 Building Improvements 39,326,760 40,617, ,326,760 40,617,191 Furniture and Fixtures 596, , , , , ,066 Total capital assets $ 56,140,212 $ 58,191,729 $ 235,047 $ 228,571 $ 56,375,259 $ 58,420,300 As of July 1, 2016, the District had total outstanding general obligation bonds of $47,485,000. During the fiscal year, the District made payments against the principal balance on the Refunding Series of 2007 General Obligation Bonds and the Refunding Series of 2012 General Obligation Bonds. On October 26, 2016, the District refunded a portion (except for $1,340,000) of the outstanding Refunding

11 MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) Page 9 Series of 2007 General Obligation Bonds and replaced them with the Series of 2016 (Federally Taxable) General Obligation Bonds in the amount of $18,845,000. The resulting net ending outstanding general obligation bond balance at June 30, 2017 is $46,555,000. Table 6 Outstanding Debt For the Years Ended June 30, General Obligation Bonds: Bonds, Refunding Series of 2007 $ 1,340,000 $ 20,430,000 Bonds, Refunding Series of ,370,000 27,055,000 Bonds, Refunding Series of ,845,000 - Total General Obligation Bonds 46,555,000 47,485,000 Total Outstanding Debt: $ 46,555,000 $ 47,485,000 The District previously borrowed $2,772,000 from PNC Equipment Finance LLC during the fiscal year for the acquisition and replacement of various types of computer and technological equipment throughout the District. This Technology Loan was paid in full by the District in June Other obligations include accrued vacation pay and sick leave for specific employees of the District. Additional detailed information about the District s long-term liabilities is included in Note 7 to the financial statements. Detailed information regarding the District s net OPEB Liability of $14,271,104 at June 30, 2017 is included in Note 13 to the financial statements. Detailed information regarding the District s net pension liability of $118,292,146 at June 30, 2017 is included in Note 8 to the financial statements. ECONOMIC FACTORS, NEXT YEAR S BUDGET, AND MILLAGE RATE On September 25, 2003, the District increased the amount of its debt or bonds payable by $30,500,000. This additional General Obligation Bond debt was known as the Series of 2003 bond issue. The additional debt was incurred by the District to fund the construction renovations at the Gateway High School Stadium that began during the school year and to fund the construction renovations and additions to the Gateway High School which were completed during the fiscal year. On January 9, 2007, the District advance refunded the Series of 1997 General Obligation Bonds and replaced them with the Refunding Series of 2007 General Obligation Bonds in the amount of $29,490,000. The net proceeds from this transaction in the amount of $2,135,544 have been fully utilized by the District for various capital improvements to the Dr. Cleveland Steward, Jr. Elementary School which were completed during the fiscal year. On May 1, 2012, the District advance refunded the Series of 2003 General Obligation Bonds and replaced them with the Refunding Series of 2012 General Obligation Bonds in the amount of $29,490,000. The net proceeds from this transaction in the amount of $1,612,064 were utilized by the District for various capital improvements to the school buildings and grounds throughout the District. The various capital improvements were completed during the fiscal year. On October 26, 2016, the District refunded a portion (except for $1,340,000) of the outstanding Refunding Series of 2007 General Obligation Bonds and replaced them with the Series of 2016 (Federally Taxable) General Obligation Bonds in the amount of $18,845,000. The District elected to realize the savings from this bond refinancing in the form of debt service reduction instead of solely utilizing the net proceeds option from the transaction for various capital improvements to the District s school buildings and grounds as was utilized during the District s two previous bond refinancings explained above.

12 MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) Page 10 The District has been experiencing some residential and commercial construction growth throughout the Municipality of Monroeville. However, it is very difficult to determine the exact dollar impact on the District s real estate tax base. Any increases in the District s real estate tax revenue have been further complicated by the District s refund of previously received real estate taxes through the Allegheny County property assessment appeal process. For the year ended June 30, 2017, the District refunded $138,059 of prior years real estate tax revenue. The District budgeted $149,000 for the refund of prior years receipts in spite of the great difficulty in determining the exact dollar impact as well as the exact timing of actual real estate taxpayer refunds related to successful real estate taxpayer assessment appeals. The District has budgeted $0 for the refund of prior years receipts during the fiscal year. The General Fund Revenue Budget for the fiscal year is $75,749,000 and represents a net increase of $4,594,000 more than the fiscal year revenue budget. This results in a net increase of 6.46% in budgeted revenues for the fiscal year. Increases in the Basic Education Subsidy and increases in the employer retirement expenditure refunds from the Commonwealth comprise a portion of the net increase in budgeted revenues. The majority of the net increase in budgeted revenues is from the projected utilization of $3,819,000 in Unassigned Fund Balance to directly fund various required capital repair and improvement projects throughout the District. Thus the ending General Fund Balance (comprised of Unassigned, Committed, and Nonspendable components) for the fiscal year is projected to be $10,747,112. The General Fund Expenditure Budget for the fiscal year is $75,749,000 and represents a net increase of $4,594,000 more than the fiscal year expenditure budget. This results in a net increase of 6.46% in budgeted expenditures for the fiscal year. The expenditures from employer retirement increases comprise a portion of the net increase for the fiscal year. The majority of the net increase is for the budgeted $3,819,000 in expenditure transfers to the District s Capital Reserve Fund to directly fund various required capital repair and improvement projects throughout the District. On November 25, 2014, the District completed and filed a Municipalities Continuing Disclosure Cooperation Initiative Questionnaire for Self-Reporting Entities with the U.S. Securities and Exchange Commission (SEC) in regards to bond continuing disclosure obligations. The District has retained Digital Assurance Certification (DAC) to assist the District in fulfilling its continuing disclosure obligations both in the future and with respect to any potentially delinquent filings. In addition, on January 28, 2015 the District adopted a Municipal Securities Post-Issuance Disclosure Policy for District compliance with the SEC s Rule 15c2-12 for outstanding bond issues. On March 3, 2017, the District received an response from the SEC to the Questionnaire stating, We have concluded our review of the submission pursuant to the Municipalities Continuing Disclosure Cooperation Initiative from Gateway SD Allegheny County. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Gateway SD Allegheny County. CONTACTING THE DISTRICT FINANCIAL MANAGEMENT Our District financial report is designed to provide all of our internal and external stakeholders including but not limited to our citizens, taxpayers, parents, students, investors, and creditors with a general overview of the District s finances and to show the Board s accountability for the money it receives. If you have any questions about this report or wish to request additional information, please contact Paul A. Schott, MS.Ed., PRSBA, Business Manager/Board Treasurer at the Gateway School District, Administration Offices, 9000 Gateway Campus Boulevard, Monroeville, PA , Phone Number: (412) , pschott@gatewayk12.org

13 STATEMENT OF NET POSITION Page 11 Primary Government Governmental Business-type Assets Activities Activities Total Current assets: Cash and Cash Equivalents $ 15,001,827 $ 281,887 $ 15,283,714 Accounts Receivable 881,071 5, ,665 Taxes Receivable 1,596,830-1,596,830 Due from Other Governments 2,415,822-2,415,822 Other Receivables 8,765-8,765 Prepaid Expenses 803, ,387 Inventories - 74,217 74,217 Capital Assets: Non-depreciable 4,281,588-4,281,588 Depreciable (net) 51,858, ,047 52,093,671 Total Assets 76,847, ,745 77,444,659 Deferred Outflows of Resources Deferred Loss on Refunding 826, ,570 Pension - Deferred Contributions Subsequent Measurement Date 9,188, ,372 9,383,330 Pension - Deferred Outflows - Changes in Assumptions 3,136,226 66,340 3,202,566 Pension - Deferred Difference Between Projected and Actual Investment Earnings 5,372, ,643 5,486,125 Deferred OPEB Contributions Subsequent to Measurement Date 934,083 3, ,115 Total Deferred Outflows of Resources 19,458, ,387 19,835,706 Total Assets and Deferred Outflows $ 96,306,233 $ 974,132 $ 97,280,365 Liabilities Current Liabilities: Accounts Payable $ 895,580 $ 2,508 $ 898,088 Accrued Wages and Benefits 3,329,668-3,329,668 Accrued Interest on Debt 422, ,879 Unearned revenue 4,017 22,450 26,467 Due to Fiduciary Funds Internal Balances 284,161 (284,161) - Current Portion of Long-Term Liabilities: Bonds Payable 2,060,000-2,060,000 Compensated Absences Non-Current Portion of Long-Term Liabilities Bonds and Notes Payable 44,495,000-44,495,000 Other Post Employment Benefits 14,224,936 46,168 14,271,104 Compensated Absences 2,210,438 63,230 2,273,668 Premiums on Bonds (net) 372, ,698 Net Pension Liability 115,841,776 2,450, ,292,146 Total Liabilties 184,142,587 2,300, ,443,152 Deferred Inflows of Resources Pension - Deferred Changes in Proportion 1,358, ,629 1,499,540 Pension - Deferred Difference Between Actual and Experience 697,602 14, ,358 Total Deferred Inflows of Resources 2,056, ,385 2,211,898 Net investment in capital assets 10,039, ,047 10,274,131 Restricted for capital projects 30,750-30,750 Unrestricted (99,962,701) (1,716,865) (101,679,566) Total Net Position (89,892,867) (1,481,818) (91,374,685) Total Liabilities, Deferred Inflows, and Net Position $ 96,306,233 $ 974,132 $ 97,280,365 The accompanying notes are an integral part of these financial statements.

14 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Page 12 Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: Instruction $ 48,218,480 $ 124,786 $ 5,254,754 $ - $ (42,838,940) $ - $ (42,838,940) Instructional Student Support 5,249,321-4,159,024 - (1,090,297) - (1,090,297) Administrative and Financial Support Services 6,213, ,176 - (5,536,617) - (5,536,617) Operation and Maintenance of Plant Services 6,974, ,029 - (6,214,140) - (6,214,140) Pupil Transportation 4,217,340-1,560,149 - (2,657,191) - (2,657,191) Student Activities 1,200, ,788 - (1,069,342) - (1,069,342) Community Services 47,051-5,127 - (41,924) - (41,924) Interest on Long-Term Debt 2,222, , ,695 (1,625,131) - (1,625,131) Total Government Activities 74,343, ,786 12,735, ,695 (61,073,582) - (61,073,582) Business-Type Activities: Food Services 2,226, ,757 1,469, (183,314) (183,314) Total Primary Government $ 76,569,273 $ 698,543 $ 14,204,139 $ 409,695 (61,073,582) (183,314) (61,256,896) General Revenues: Taxes: Property Taxes, Levied for General Purposes 43,543,127-43,543,127 Public Utility, Realty, Earned Income and Mercantile Taxes Levied for General Purposes 6,400,055-6,400,055 Grants, Subsidies, and Contributions Not Restricted 7,580,223-7,580,223 Investment Earnings 72, ,865 Miscellaneous Income 483, ,057 Total General Revenues 58,079, ,079,327 Change in Net Position (2,994,476) (183,093) (3,177,569) Net Position - Beginning (restated, see note 15) (86,898,391) (1,298,725) (88,197,116) Net Position - Ending $ (89,892,867) $ (1,481,818) $ (91,374,685) The accompanying notes are an integral part of these financial statements.

15 BALANCE SHEET GOVERNMENTAL FUNDS Page 13 Assets Nonmajor Total Capital Reserve Governmental General Fund Fund Funds Cash and Cash Equivalents $ 15,001,827 $ - $ 15,001,827 Taxes Receivable (Net) 1,596,830-1,596,830 Due From Other Funds 29,879-29,879 Due From Other Governments 2,415,822-2,415,822 Prepaid Expenditures 772,637 30, ,387 Other Receivables 889, ,836 Total Assets 20,706,831 30,750 20,737,581 Liabilities Due to Other Funds 314, ,624 Accounts Payable 895, ,580 Accrued Salaries and Benefits 3,321,922-3,321,922 Unearned Revenue 4,017-4,017 Payroll Deductions and Witholdings 7,746-7,746 Total Liabilities 4,543,889-4,543,889 Deferred Inflows of Resources Unavailable Revenue-Property Taxes 1,596,830-1,596,830 Total Deferred Inflows of Resources 1,596,830-1,596,830 Fund Balances Nonspendable 772,637 30, ,387 Committed 5,667,514-5,667,514 Unassigned 8,125,961-8,125,961 Total Fund Balances 14,566,112 30,750 14,596,862 Total Liabilities and Fund Balances $ 20,706,831 30,750 $ 20,737,581 The accompanying notes are an integral part of these financial statements.

16 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Page 14 Amounts reported for governmental activities in the Statement of Net Position are different because: Total fund balances of governmental funds $ 14,596,862 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $109,603,233 and the accumulated depreciation is $53,463,021. Taxes receivable will be collected, but are not available soon enough to pay for current year's expenditures, and therefore are deferred in the Governmental Funds. 56,140,212 1,596,830 Long-term liabilities and related deferrals such as debt, accrued interest, and compensated absences are not due and payable in the current period and accordingly are not reported as fund liabilities. Both current and long-term liabilities are reported in the Statement of Net Position. Bonds Payable $ (46,555,000) Bond Premium (372,698) Loss on Bond Refunding 826,570 Accrued Interest (422,879) Other Post Employment Benefits (14,224,936) Deferred OPEB Contributions 934,083 Deferred Pension Contributions 9,188,958 Changes in Assumptions 3,136,226 Changes in Pension Proportions (1,358,911) Difference Between Projected and Actual Investment Earnings 5,372,482 Difference between Actual and Expected Experience (697,602) Net Pension Liability (115,841,776) Compensated Absences (2,211,288) (162,226,771) Total net position of governmental activities $ (89,892,867) The accompanying notes are an integral part of these financial statements.

17 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED Page 15 Nonmajor Total Capital Reserve Governmental General Fund Funds Funds Revenues Property Taxes $ 42,598,041 $ - $ 42,598,041 Other Taxes 7,397,591-7,397,591 Federal Revenue Received From Other Public Schools 884, ,679 Fees and Charges 124, ,786 Earnings on Investments 72, ,644 Miscellaneous 317, ,115 State Sources 18,871,241-18,871,241 Federal Sources 1,134,942-1,134,942 Total Revenue 71,400, ,401,039 Expenditures Current Operating: Instruction 44,239,449-44,239,449 Support Services 20,703,058 4,812 20,707,870 Noninstructional Services 1,141,559-1,141,559 Debt Service: Principal 1,960,000-1,960,000 Interest 1,676,578-1,676,578 Other Purchased Services 3,375-3,375 Capital Outlay 120, , ,812 Total Expenditures 69,844, ,882 70,198,643 Excess (deficiency) of Revenues 1,556,199 (353,803) 1,202,396 Over Expenditures Other Financing Sources (uses) Proceeds from Long Term Debt 18,845,000-18,845,000 Transfer to Escrow Agent (18,641,570) - (18,641,570) Total Other Financing Sources (uses) 203, ,430 Net Change in Fund Balance 1,759,629 (353,803) 1,405,826 Fund Balance, Beginning of Year 12,806, ,553 13,191,036 Fund Balance, End of Year $ 14,566,112 $ 30,750 $ 14,596,862 The accompanying notes are an integral part of these financial statements.

18 RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN NET POSITION TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Page 16 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances-total governmental funds $ 1,405,826 Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over the estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period. Capital Outlays $ 469,812 Depreciation Expense (2,521,329) (2,051,517) Payments of long-term debt and certain expenditures of debt issuance are expensed when paid in the Governmental Funds, but are amortized or recorded as a reduction of long-term liabilities in the Statement of Net Position. Issuance of Bond Proceeds (18,845,000) Debt Principal Repayments 19,775,000 Deferred Loss on Refunding 826,570 Bond Discounts (489,732) Bond Premiums 25,126 Change in accrued interest (78,322) 1,213,642 Some expenses reported in the statement of activities do not require the use of current financial resources, and, therefore, are not reported as expenditures in governmental funds Change in Net Pension Liability and Deferred Amounts (4,204,507) Change in OPEB and Deferred Amounts 731,624 Change in compensated absences $ (37,094) (3,509,977) Taxes reported include receipt of prior year delinquent taxes and do not include revenue attributable to the current year's delinquent tax receivable. This amount is the net effect of these differences: (52,450) Change in net position of governmental activities $ (2,994,476) The accompanying notes are an integral part of these financial statements.

19 STATEMENT OF NET POSITION PROPRIETARY FUND Page 17 Assets Business-Type Activities - Enterprise Fund Cafeteria Fund Current Assets: Cash and Cash Equivalents $ 281,887 Accounts Receivable 5,594 Due from Other Funds 314,040 Inventories 74,217 Total Current Assets 675,738 Noncurrent Assets: Machinery and Equipment 1,065,497 Accumulated Depreciation (830,450) Total Noncurrent Assets 235,047 Total Assets 910,785 Deferred Outflows of Resources Pension: Deferred Contributions Subsequent to the Measurement Date 194,372 Deferred Outflows - Changes in Assumptions 66,340 Deferred Difference Between Projected and Actual Investment Earnings 113,643 OPEB: Deferred OPEB Contributions Subsequent to the Measurement Date 3,032 Total Deferred Outflows of Resources 377,387 Total Assets and Deferred Outflows $ 1,288,172 Liabilities Current Liabilities: Unearned Revenues $ 22,450 Accounts Payable 2,508 Due to Other Funds 29,879 Total Current Liabilities 54,837 Noncurrent Liabilities: Compensated Absences 63,230 OPEB Liability 46,168 Net Pension Liability 2,450,370 Total Noncurrent Assets 2,559,768 Total Liabilities 2,614,605 Deferred Inflows of Resources Pension: Deferred Changes in Proportion 140,629 Deferred Difference Between Actual and Experience 14,756 Total Deferred Inflows of Resources 155,385 Net Position Net Investment in Capital Assets 235,047 Unrestricted (1,716,865) Total Net Position (1,481,818) Total Liabilities, Deferred Inflows and Net Position $ 1,288,172 The accompanying notes are an integral part of these financial statements.

20 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUND YEAR ENDED Page 18 Business-Type Activities - Enterprise Fund Cafeteria Fund Operating Revenues Food Service Sales: Lunch and Breakfast Sales $ 551,134 Special Function Revenue 22,623 Total Operating Revenue 573,757 Operating Expenses General Supplies 33,736 Food 749,753 Salaries 656,878 Employee Benefits 719,630 Depreciation 36,900 Repairs and Maintenance 20,347 Travel 1,859 Miscellaneous, Dues and Fees 7,105 Total Operating Expenses 2,226,208 Operating Loss (1,652,451) Nonoperating Revenues (Expenses) Federal Sources 1,277,190 States Sources 191,947 Earnings on Investments 221 Total Nonoperating Revenues (Expenses) 1,469,358 Change in Net Position (183,093) Net Position, Beginning of Year (restated, see note 15) (1,298,725) Net Position, End of Year $ (1,481,818) The accompanying notes are an integral part of these financial statements.

21 STATEMENT OF CASH FLOWS PROPRIETARY FUND FOR THE YEAR ENDED Page 19 Enterprise Fund- Food Service Cash Flows from Operating Activities: Cash Received From Users $ 380,406 Cash Payments to Employees for Services (1,066,175) Cash Payments to Suppliers for Goods and Services (802,285) Cash Payments for Other Operating Expenses (7,105) Net Cash Used for Operating Activities (1,495,159) Cash Flows From Noncapital Financing Activities: State Sources 191,947 Federal Sources 1,277,189 Net Cash Provided by Noncapital Financing Activities 1,469,136 Cash Flows from Investing Activities: Earnings on Investments 221 Net Cash Provided by Investing Activities 221 Cash Flows from Capital Activities: Acquisition and Construction of Capital Assets (43,376) Net Cash Used by Capital Assets (43,376) Net Decrease in Cash and Cash Equivalents (69,178) Beginning Cash and Cash Equivalents 351,065 Ending Cash and Cash Equivalents $ 281,887 RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES Operating Loss $ (1,652,451) Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation and Amortization 36,900 (Increase) decrease in assets Accounts Receivable (3,928) Inventories 10,272 Due from Other Funds (190,279) Deferred Outflows (183,766) Increase (decrease) in liabilities Accounts Payable and Deferred Revenue (6,006) Net Pension Liability 367,039 Deferred Inflows 118,924 Increase in Compensated Absence Liability and OPEB 8,136 Net Cash Used In Operating Activities $ (1,495,159) The accompanying notes are an integral part of these financial statements.

22 STATEMENT OF FIDUCIARY NET POSITION Page 20 Private Purpose Assets Trust Fund Fiduciary Fund Current Assets: Cash and Cash Equivalents $ 35,314 $ 74,356 Due from the General Fund Total Assets 35,314 74,940 Liabilities Current Liabilities: Due to Student Groups - 74,940 Total Liabilities - 74,940 Net position Reserved for Scholarships Total Net Position 35,314 - Total Liabilities and Net Position $ 35,314 $ 74,940 The accompanying notes are an integral part of these financial statements

23 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED Page 21 Private Purpose Trust Fund Additions: Interest $ 19 Total Additions 19 Deductions: Scholarships Awarded 3,500 Total Deductions 3,500 Change in Net Position (3,481) Net Position, Beginning of Year 38,795 Net Position, End of Year $ 35,314 The accompanying notes are an integral part of these financial statements.

24 STATEMENT OF CHANGES IN ASSETS AND LIABILITIES-FIDUCIARY FUND FOR THE YEAR ENDED Page 22 Student Activities Fund Balance Balance July 1, 2016 Additions Reductions June 30, 2017 High School: AIM $ (48) $ 700 $ 646 $ 6 Amnesty 360 1,610 1, Art Club Band ,256 10,209 2,315 Choir 256 2, ,856 Class of 2013 (3,316) 3, Class of Class of Class of Class of ,649 14,631 16, Class of ,593 1,279 2,435 Class of Class of ,450 1, Community Service Computer Club Cooking Club - 1,146 1, Culture Club Cycling Club Environmental Club 3,523 1,226 1,378 3,371 FBLA (310) 38,533 38,506 (283) German Club - 2,170 1, Gator Greenhouse JCL 532 8,438 8, Key Club Literacy Club Musical ,831 70,237 2,887 National Honor Society (331) 1, Nursery 1,410 1,515 1, Orchestra Portavian 2,387 3,855 2,387 3,855 Prom Committee 4,671 22,982 20,646 7,007 Robotics 8,077 15,181 16,216 7,042 SAGA Science Club 286 1,138 1,726 (302) SGA 3,150 29,316 19,876 12,590 Snowsports (197) 8,166 7, Expect Respect 1, Tapestry Teen Institute The Future is Mine 191 1, Video Club 2, ,454 Youth Alive Gator Café 4,236 9,725 6,028 7,933 FCCLA 605 1,047 1, Gator Pride Musical Theater Due from the General Fund 4,203-3, Total High School 40, , ,066 63,670 Middle School: Student Council 7,501 30,179 30,272 7,408 Teams 7A, 7B, 7C 2, ,496 Teams 8A, 8B, 8C 1, ,366 Total Middle School 11,173 30,399 30,302 11,270 Total District $ 51,903 $ 292,405 $ 269,368 $ 74,940 The accompanying notes are an integral part of these financial statements.

25 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Page 23 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Gateway School District (the District) operates five elementary schools, two middle schools and one high school in Allegheny County, Pennsylvania. The District operates under current standards prescribed by the Pennsylvania Department of Education in accordance with the provision of the School Laws of Pennsylvania. The District operates under a locally elected nine member board form of government. The financial statements of the District have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the authoritative standard setting body for the establishment of governmental accounting and financial reporting principles. The more significant of these accounting policies are discussed below: A) Reporting Entity The criteria set forth in GASB Statement No. 61, The Financial Reporting Entity Omnibus an Amendment of GASB Statement No. 14 and No. 39, is followed by the District to determine which governmental organizations should be included or excluded from the reporting entity. Criteria for inclusion of any entity (component unit) into a primary governmental unit s financial statements includes but is not limited to legal standing, fiscal dependency, imposition of will, financial benefit or burden and appointment of a voting majority of the governing board. B) Joint Ventures The District is one of nine member school districts participating in a joint venture for the operation of the Forbes Road Career & Technology Center ( Forbes ). Forbes was created for the operation of certain vocational-technical training and education programs for the benefit of the participating students of the member school districts. In the event of dissolution of Forbes, its net assets will be distributed to the member school districts in the same proportion as they were originally contributed. Forbes is governed by a board composed of appointees from each member school district. Each member school district remits a proportionate share of the operating budget to Forbes. The District s share of net funding expenditures incurred for the year ended June 30, 2017 was $745,364, which has been reported as an expenditure in the District s General Fund. The District s proportionate share of general fixed assets of Forbes has not been determined. Complete financial statements of Forbes can be obtained from the Forbes administrative offices at 607 Beatty Road; Monroeville, PA