Financial Statements and Supplementary Information
Table of Contents Page INDEPENDENT AUDITOR'S REPORT 1 to 3 MANAGEMENT'S DISCUSSION AND ANALYSIS 4 to 14 FINANCIAL STATEMENTS Statement of Net Position 15 Statement of Revenues, Expenses and Changes in Net Position 16 and 17 Statement of Cash Flows 18 and 19 Notes to Financial Statements 20 to 42 Schedules of Funding Progress - Pension Plans 43 SUPPLEMENTARY INFORMATION Operations, by Division 44 Operating Expenses, by Division 45 Changes in Net Positon: Year Ended June 30, 2014 46 Year Ended June 30, 2013 47 Other Operating Statistics 48
Independent Auditor's Report To the Board of Directors Berks Area Regional Transportation Authority Reading, Pennsylvania Report on the Financial Statements We have audited the accompanying basic financial statements of the Berks Area Regional Transportation Authority (the Authority) which comprise the statement of net position as of June 30, 2014 and 2013, and the related statements of revenues, expenses and changes in net position and cash flows for the years then ended and the related notes to the financial statements. 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 an opinion on these financial statements based on our audits. We conducted our audits 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 the audit requirements of the Pennsylvania Department of Transportation. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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. 1
Auditor's Responsibility (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Berks Area Regional Transportation Authority as of June 30, 2014 and 2013, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Report on Required Supplementary Information Accounting principles generally accepted in the United States of America, require that the Management's Discussion and Analysis and other required supplementary information on Pages 4 to 14 and Page 43 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government 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 audits 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. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Authority's basic financial statements. The accompanying financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary information 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 information is fairly stated in all material respects in relation to the financial statements as a whole. The accompanying other operating statistics listed as supplementary information on Page 48 are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. 2
Other Reporting Required by Government Auditing Standards and Pennsylvania Department of Transportation In accordance with Government Auditing Standards and the audit requirements of the Pennsylvania Department of Transportation, we have also issued our report dated December 17, 2014 on our consideration of the Authority'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 and the audit requirements of the Pennsylvania Department of Transportation in considering the Authority's internal control over financial reporting and compliance. December 17, 2014 Wyomissing, Pennsylvania 3
Management's Discussion and Analysis The following discussion and analysis of the Berks Area Regional Transportation Authority's (BARTA or the Authority) activities and financial performance provides an introduction and overview to the Authority's basic financial statements for the fiscal year ended June 30, 2014. Please read it in conjunction with the Authority's financial statements, which begin on Page 15. Authority Activities and Highlights The Authority's net position, including accumulated depreciation, decreased by $2,248,506 or 6.6% for the year ended June 30, 2014, compared to a decrease of $992,387 or 2.8% for the year ended June 30, 2013 and to a decrease of $834,555 or 2.3% for the year ended June 30, 2012. Changes in net position are comprised of the following changes in both assets and liabilities: 2014 2013 2012 Cash and investments $ (841,419) $ 1,784,224 $ (113,617) Grants receivable (279,571) (787,669) 933,269 Other current assets (145,797) (3,286) (113,861) Capital assets, net (2,118,068) (866,960) (443,032) Net pension benefit (17,203) (25,885) (100,481) Liabilities 1,203,531 (44,173) 140,757 Postemployment benefit liability (47,123) (51,562) (288,854) Unearned grant funds (2,856) (997,076) (848,736) Increase (Decrease) in Net Position $ (2,248,506) $ (992,387) $ (834,555) The Authority's operating revenues increased by $304,430 or 4.6% while operating expenses, including depreciation, increased by $1,006,872 or 5.1% for the year ended June 30, 2014. The Authority's operating revenues increased $243,668 or 3.8% while operating expenses, including depreciation, increased by $248,943 or 1.3% for the year ended June 30, 2013, and for the year ended June 30, 2012, operating revenues increased $165,915 or 2.6% while operating expenses, including depreciation, increased by $1,044,568 or 5.6% for the year ended June 30, 2012. Changes in revenues resulted from the following: 2014 2013 2012 Passenger fares $ 163,307 $ 78,611 $ 307,449 Special services 32,211 (55,143) (66,349) State Medical Assistance Transportation Program 40,743 (109,879) (86,238) State Shared Ride Program 18,012 7,995 14,596 All other revenues 50,157 322,084 (3,543) Increase in Revenue $ 304,430 $ 243,668 $ 165,915 4
Management's Discussion and Analysis Authority Activities and Highlights (continued) Changes in operating expenses resulted from the following: 2013 2012 2011 Salaries and benefits $ 374,009 $ 239,095 $ 271,250 Purchased transportation (78,045) (177,325) (61,992) Contract services 132,296 11,258 66,067 Depreciation 19,334 145,854 256,531 Fuel 84,743 (43,607) 268,360 All other expenses 474,535 73,668 244,352 Increase in Expenses $ 1,006,872 $ 248,943 $ 1,044,568 The Authority provided 3,445,532 passenger trips during fiscal year 2014 compared to 3,405,276 passenger trips during fiscal year 2013. This represented an increase of 40,256 passenger trips or 1.2%. Fixed route passenger trips increased by 51,722 or 1.6%, while special service passenger trips decreased by 11,466 or 4.4%. The following charts show the five-year history of passenger trips for both fixed route and special services: Fixed Route Passenger Trips Special Services Passenger Trips 3500 265 Trips (in Thousands) 3000 2500 201 0 2011 Year 2012 2013 2014 Trips (in Thousands) 260 255 250 245 240 235 230 2010 2011 Year 2012 2013 2014 Overview of the Financial Statements BARTA's basic financial statements include a statement of net position, statement of revenues, expenses and changes in net position, statement of cash flows and notes to the financial statements. This report also includes other supplementary information in addition to the basic financial statements themselves. 5
Management's Discussion and Analysis Overview of the Financial Statements (continued) The Authority's financial statements are prepared on the accrual basis in accordance with accounting principles generally accepted in the United States of America promulgated by the Governmental Accounting Standards Board (GASB). Statement of Net Position - The statement of net position presents the financial position of the Authority. It presents information on BARTA's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. Statement of Revenues, Expenses and Changes in Net Position - The statement of revenues, expenses and changes in net position presents information showing how the Authority's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Revenues are recognized when earned, not when they are received. Expenses are recognized when incurred, not when they are paid. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned, but unused vacation leave). Statement of Cash Flows - The statement of cash flows presents information on the effects changes in assets and liabilities have on cash during the course of the fiscal year. Notes to the Financial Statements - The notes provide additional information that is essential to a full understanding of the data provided in the Authority-wide financial statements. The notes to the financial statements can be found on Pages 20 to 42 of this report. Other Information - In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Authority's progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on Page 43 of this report. Presented as other information in this report is information regarding the financial performance by division. The Authority has two operating divisions: the Fixed Route Division, which provides scheduled bus service on fixed routes, and the Special Services or Paratransit Division, which provides demand response transportation services in specially equipped vehicles. The statements by division can be found on Pages 44 and 45 of this report. A schedule of changes in net position is presented on Pages 46 and 47. A schedule of other operating statistics is presented on Page 48. Financial Analysis Net Position - As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of BARTA, assets exceed liabilities by $31,875,780, $34,124,286 and $35,116,673 at June 30, 2014, 2013 and 2012, respectively. 6
Management's Discussion and Analysis Financial Analysis (continued) A condensed summary of the Authority's statement of net position at June 30 is presented below: 2014 2013 2012 Assets Current assets $ 7,859,302 $ 9,126,089 $ 8,132,820 Capital assets, net 31,014,403 33,132,471 33,999,431 Other assets 1,829,830 1,847,033 1,872,918 Total Assets 40,703,535 44,105,593 44,005,169 Liabilities Current and other liabilities 1,039,048 1,036,192 992,019 Unearned grant funds 6,820,254 8,023,785 7,026,709 Postemployment benefit liability 968,453 921,330 869,768 Total Liabilities 8,827,755 9,981,307 8,888,496 Net Position Invested in capital assets 31,014,403 33,132,471 33,999,431 Unrestricted 861,377 991,815 1,117,242 Total Net Position $ 31,875,780 $ 34,124,286 $ 35,116,673 The largest portion of the Authority's net assets, $31,014,403, reflects its investment in capital assets (e.g., land, buildings, transit vehicles and equipment). BARTA receives capital grant funding from federal, state and local governments to acquire these capital assets. Therefore, certain restrictions are placed on their disposal. BARTA uses these capital assets to provide services to citizens. For this reason, and due to the restrictions placed on the disposal of these capital assets, these assets are not available for future spending. The remaining balances of $861,377, $991,815 and $1,117,242 for the years ended June 30, 2014, 2013 and 2012, respectively, consist of unrestricted net position. Of these amounts, $1,829,830, $1,847,033 and $1,872,709 for the years ended June 30, 2014, 2013 and 2012, respectively, represent the cumulative decreases in the net pension benefit asset. BARTA's Board of Directors has designated the remaining amounts for specific items. Consequently, BARTA's entire other net assets have been designated for specific purposes. Therefore, none of the amounts designated as other net assets can be used for the general operations of the Authority. 7
Management's Discussion and Analysis Financial Analysis (continued) The following charts show the major categories of total assets and total liabilities and net assets for the year ended June 30, 2014: Total Assets Other Assets 4% Current Assets 19% Capital Assets 77% Net Position Liabilities Unrestricted 3% Postemployment Benefit 10% Accounts Payable and Accrual 12% Invested in Capital Assets 97% Unearned Grant Funds 78% 8
Management's Discussion and Analysis Financial Analysis (continued) Changes in Net Position - A condensed summary of the Authority's statement of revenues, expenses and changes in net assets for three years ended June 30 are presented below: Statement of Revenues, Expenses and Changes in Net Position 2014 2013 2012 Operating Revenues Passenger fares $ 3,150,604 $ 2,984,661 $ 2,911,326 Government fare programs 2,955,526 2,864,560 3,037,577 Other operating revenues 799,564 752,043 408,693 Total Operating Revenues 6,905,694 6,601,264 6,357,596 Operating Expenses Salaries and payroll taxes 6,113,663 5,972,190 5,860,681 Fringe benefits 4,835,114 4,602,578 4,474,992 Fuel, lubricants and antifreeze 1,749,721 1,664,978 1,708,585 Purchased transportation 1,664,538 1,742,583 1,919,908 Depreciation 3,612,120 3,592,786 3,446,932 Other operating expenses 2,810,785 2,203,954 2,119,028 Total Operating Expenses 20,785,941 19,779,069 19,530,126 Nonoperating Revenues (Expenses) Capital funds used for operating assistance and planning grants, Federal government 10,137,689 9,459,594 9,308,808 Loss on disposal of capital assets (11,753) (53,814) (60,807) Interest income - - 170 Total Nonoperating Revenues (Expenses) 10,125,936 9,405,780 9,248,171 Capital Grant Funding 1,505,805 2,779,638 3,089,804 Decrease in Net Position $ (2,248,506) $ (992,387) $ (834,555) 9
Management's Discussion and Analysis Financial Analysis (continued) Statement of Changes in Net Position Year Ended June 30, 2014 Beginning Balance Increase/ (Decrease) Ending Balance Invested in capital assets $ 33,132,471 $ (2,118,068) $ 31,014,403 Unrestricted net assets 991,815 (130,438) 861,377 Total Net Position $ 34,124,286 $ (2,248,506) $ 31,875,780 Statement of Changes in Net Position Year Ended June 30, 2013 Beginning Balance Increase/ (Decrease) Ending Balance Invested in capital assets $ 33,999,431 $ (866,960) $ 33,132,471 Other net assets 1,117,242 (125,427) 991,815 Total Net Position $ 35,116,673 $ (992,387) $ 34,124,286 Statement of Changes in Net Position Year Ended June 30, 2012 Beginning Balance Increase/ (Decrease) Ending Balance Invested in capital assets $ 34,442,463 $ (443,032) $ 33,999,431 Other net assets 1,508,765 (391,523) 1,117,242 Total Net Position $ 35,951,228 $ (834,555) $ 35,116,673 10
Management's Discussion and Analysis The Authority's source of funds includes both operating and nonoperating revenues. Operating revenues consist primarily of passenger fares and government fare programs, while nonoperating revenues consist of funding from federal, state and local governments. Currently, the federal government provided approximately $1.2 million in capital funds that can be used for operating purposes. The following chart shows the percentage of expenses by type: Other 14% Expenses by Type Fuel 8% Salaries & Payroll Taxes 30% Depreciation 17% Purchased Transportation 8% Fringe Benefits 23% The following chart shows the sources and the percentage of revenues by type: Revenues by Type Other Operating 5% Federal 12% Other Cap. Grants 1% Local 2% Act 49 0% Act 3 1% Act 26 0% Gov't Fare Programs 16% Passenger Fares 17% Act 44 Tech Assist 0% A Act t 44 44 46% 11
Management's Discussion and Analysis Capital Acquisitions The Authority's investment in capital assets includes land, buildings, revenue vehicles, service vehicles, shop and garage equipment, furniture and office equipment, and miscellaneous revenue equipment. Capital acquisitions are recorded at cost. Acquisitions are funded by federal, state and local governmental grants. BARTA's investment in capital assets as of June 30, 2014, 2013 and 2012, net of accumulated depreciation, amounted to $31,014,403, $33,132,471 and $33,999,431, respectively. These amounts represent a net decrease (including additions, deletions and depreciation) of $2,118,068 or 6.4%, a net decrease of $866,960 or 2.5% and a net decrease of $443,042 or 1.3 for the years ended June 30, 2014, 2013 and 2012, respectively. Capital Assets at June 30 (Net of Accumulated Depreciation) 2014 2013 2012 Land $ 577,296 $ 577,296 $ 577,296 Construction in progress - 5,573,965 3,564,879 Buildings 19,911,561 15,641,695 16,375,088 Revenue vehicles 9,880,383 10,516,650 12,171,637 Service vehicles 69,344 70,838 99,630 Shop and garage equipment 276,190 352,093 449,434 Furniture and office equipment 154,684 106,474 207,676 Miscellaneous revenue equipment 144,945 293,460 553,791 Total Capital Assets $ 31,014,403 $ 33,132,471 $ 33,999,431 During the year ended June 30, 2014, the Authority expended $1,505,805 on capital activities. This included $1,351,952 for the purchase of passenger coaches, $18,592 for the purchase of shop equipment, $87,570 for the purchase of office equipment and $47,691 on miscellaneous revenue equipment. During the year ended June 30, 2013, the Authority expended $2,797,638 on capital activities. This included $566,502 for the purchase of passenger coaches, $147,218 for the renovation of facilities, $2,050,505 for construction of a new transportation center, $4,687 for the purchase of office equipment and $28,726 on miscellaneous revenue equipment. During the year ended June 30, 2012, the Authority expended $3,089,804 on capital activities. This included $6,356 for the purchase of passenger coaches, $2,697,742 for the renovation of facilities, $252,126 for construction of a new transportation center, $26,189 for the purchase of office equipment, $28,664 for the purchase of shop equipment and $78,727 on miscellaneous revenue equipment. See Note 9 for further detail on capital assets. 12
Management's Discussion and Analysis Capital Acquisitions (continued) The following chart shows the categories of capital assets, net of accumulated depreciation, for the year ended June 30, 2014: Furniture and Office Equipment 1% Miscellaneous Revenue Equipment 2% Land 2% Construction in Progress 10% Shop and Garage Equipment 1% Buildings 48% Service Vehicles 0% Revenue Vehicles 36% Economic Factors Long-term development trends have not traditionally favored public transportation. The majority of new residential and industrial construction has occurred in rural locations outside of the Authority's service area. While the demand for service in the urban areas remains high, there have been additional demands for new and changed service in other areas. In response to this demand and in order to improve the efficiency and effectiveness of the fixed route service, BARTA has both implemented new routes and revised existing routes. BARTA continues its efforts to promote and sustain economic development, relieve congestion and improve air quality issues. BARTA also continues to implement a marketing and advertising campaign on the convenience and usefulness of using BARTA's public transportation route system. 13
Management's Discussion and Analysis Economic Factors (continued) The Authority's total system revenue recovery ratio (the total amount of operating expenses covered by the total amount of operating revenues) is approximately 45.02%. The total Fixed Route revenue recovery ratio is approximately 40.11% and Special Services total revenue recovery ratio is approximately 55.75%. As a result, the Authority is primarily dependent on the Federal Transit Administration, the Pennsylvania Department of Transportation and the County of Berks for a significant portion of its funding. Transportation funding continues to be a challenge. The gap between current levels of funding and the needed levels continues to grow exponentially. State and federal funds, along with local matching funds, are absolutely essential to continued public transportation services throughout the County of Berks. Contacting the Authority's Financial Management This financial report is designed to provide our customers, creditors and funding agencies with a general overview of the Authority's finances and to show the Authority's accountability for the money it receives. If there are any questions regarding this report, or if additional financial information is required, please contact the Authority's Director of Finance at BARTA, 1700 North 11th Street, Reading, PA 19604. 14
Statement of Net Position June 30, 2014 2013 Assets Current Assets Cash and cash equivalents $ 251,445 $ 10,209 Cash and cash equivalents, restricted 4,875,891 6,452,040 Investments, restricted 1,730,505 1,237,011 Accounts receivable 134,722 68,563 Inventories 500,542 712,462 Prepaid expenses 195,966 183,116 Capital grants receivable 2,580 282,151 Due from Commonwealth of Pennsylvania 139,664 163,769 Due from County of Berks 27,987 16,768 Total Current Assets 7,859,302 9,126,089 Capital Assets Capital assets not being depreciated 577,296 6,151,262 Capital assets being depreciated, net 30,437,107 26,981,209 Total Capital Assets 31,014,403 33,132,471 Other Assets Net pension benefit asset, restricted 1,829,830 1,847,033 Total Assets 40,703,535 44,105,593 See accompanying notes.
June 30, 2014 2013 Liabilities Current Liabilities Accounts payable $ 311,416 $ 235,619 Accrued expenses: Wages 134,606 116,908 Vacation wages 415,863 421,754 Professional fees 29,500 31,000 Other 8,141 2,412 Payroll withholdings 61,985 92,785 Due to Commonwealth of Pennsylvania 14,122 14,122 Due to County of Berks 61,241 76,393 Proceeds from disposal of capital assets 2,174 45,199 Unearned Commonwealth of Pennsylvania, Act 49 funds 213,858 217,110 Unearned Commonwealth of Pennsylvania, Act 26, other grant purpose funds - 6,160 Unearned Commonwealth of Pennsylvania, Act 3 funds 387,987 542,423 Unearned Commonwealth of Pennsylvania, Act 44 funds 6,218,409 7,258,092 Total Current Liabilities 7,859,302 9,059,977 Long-Term Liabilities Postemployment benefit liability 968,453 921,330 Total Liabilities 8,827,755 9,981,307 Net Position Net Position Invested in capital assets 31,014,403 33,132,471 Unrestricted 861,377 991,815 Total Net Position $ 31,875,780 $ 34,124,286 15
Statement of Revenues, Expenses and Changes in Net Position Years Ended June 30, 2014 2013 Operating Revenues Passenger fares $ 3,150,604 $ 2,987,297 State Medical Assistance Transportation Program 1,844,576 1,803,833 State Shared Ride Program 777,641 759,629 State Welfare to Work Program 4,715 3,024 State Persons with Disabilities Program Grant 32,106 37,826 Area Agency on Aging 106,655 113,150 Mental Health/Intellectual & Developmental Disabilities 189,833 147,098 Other contract revenue 67,356 188,623 Advertising income 78,068 94,539 Other income 654,140 466,245 Total Operating Revenues 6,905,694 6,601,264 Operating Expenses 20,785,941 19,779,069 Loss from Operations (13,880,247) (13,177,805) Nonoperating Revenues (Expenses) Capital funds used for operating and planning grants, Federal government 1,216,106 3,186,086 Commonwealth of Pennsylvania Act 44 Funds 8,440,930 5,834,775 Commonwealth of Pennsylvania Act 44 Technical Assistance Funds 17,924 - County of Berks, Act 44 Matching Funds 460,539 438,733 County of Berks, other 2,190-10,137,689 9,459,594 Loss on disposal of capital assets (11,753) (53,814) Total Nonoperating Revenues (Expenses) 10,125,936 9,405,780 Loss before Capital Grant Funding (3,754,311) (3,772,025) See accompanying notes. 16
Statement of Revenues, Expenses and Changes in Net Position (continued) Years Ended June 30, 2014 2013 Capital Grant Funding Federal government $ 1,084,511 $ 714,081 Commonwealth of Pennsylvania 195,815 1,700,783 Commonwealth of Pennsylvania Act 49 Funds 3,750 56,506 Commonwealth of Pennsylvania Act 3 Funds 155,204 87,446 Commonwealth of Pennsylvania Act 44 Technical Assistance Funds 16,703 220,822 Commonwealth of Pennsylvania Act 26 Funds 6,165 - Asset disposal funds 43,657 - Total Capital Grant Funding 1,505,805 2,779,638 Decrease in Net Position (2,248,506) (992,387) Net Position at Beginning of Year 34,124,286 35,116,673 Net Position at End of Year $ 31,875,780 $ 34,124,286 See accompanying notes. 17
Statement of Cash Flows Years Ended June 30, 2014 2013 Cash Flows from Operating Activities Cash received from customers $ 6,142,143 $ 6,009,327 Cash payments to suppliers for goods and services (10,762,687) (10,175,046) Cash payments to employees for services (6,101,856) (5,952,100) Other operating cash receipts 721,496 654,866 Net Cash Used in Operating Activities (10,000,904) (9,462,953) Cash Flows from Noncapital Financing Activities Cash receipts from capital funds used for operating, operating and planning grants, and dedicated tax revenues 8,922,939 10,455,738 Net Cash Provided by Noncapital Financing Activities 8,922,939 10,455,738 Cash Flows from Capital and Related Financing Activities Receipts from capital grants 1,741,719 3,567,307 Proceeds from disposal of capital assets 633 3,771 Acquisition of capital assets (1,505,806) (2,779,639) Net Cash Provided by Capital and Related Financing Activities 236,546 791,439 Cash Flows from Investing Activities Purchase of investments (493,494) (935,357) Net Cash Used in Investing Activities (493,494) (935,357) Net Increase (Decrease) in Cash and Cash Equivalents (1,334,913) 848,867 Cash and Cash Equivalents at Beginning of Year 6,462,249 5,613,382 Cash and Cash Equivalents at End of Year $ 5,127,336 $ 6,462,249 See accompanying notes. 18
Statement of Cash Flows (continued) Years Ended June 30, 2014 2013 Reconciliation of Operating Loss to Net Cash Used in Operating Activities Operating loss $ (13,880,247) $ (13,177,805) Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation 3,612,120 3,592,786 (Increase) decrease in assets: Accounts receivable and other receivables (42,055) 62,929 Inventories 211,920 (56,583) Net pension benefit asset 17,203 25,676 Prepaid expenses and deposit (12,850) (1,918) Increase (decrease) in liabilities: Postemployment benefit liability 47,123 51,562 Accounts payable and other current liabilities 45,882 40,400 Net Cash Used in Operating Activities $ (10,000,904) $ (9,462,953) See accompanying notes. 19
Notes to Financial Statements Note 1 - Nature of Activity The Berks Area Regional Transportation Authority (the Authority) was organized October 1, 1973, under the laws of the Commonwealth of Pennsylvania in compliance with the Pennsylvania Municipality Authorities Act for the purpose of providing public transportation within the County of Berks. The Authority is governed by a nine-member board appointed by the Berks County Board of Commissioners. The Authority has two operating divisions; the fixed route division, which provides scheduled bus service on fixed routes and the special services division, which provides demand responsive transportation services in specially equipped vehicles to the general public and to qualifying elderly and handicapped persons. The Authority is funded by a combination of passenger fares, operating revenues, federal, state and county operating and capital grants. Note 2 - Summary of Significant Accounting Policies The accompanying financial statements conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The following is a summary of the more significant accounting policies used by the Authority: Reporting Entity Accounting principles generally accepted in the United States of America require that the reporting entity consists of the primary government and organizations for which the primary government is financially accountable. In addition, the primary government may determine through the exercise of management's professional judgment, that the inclusion of an organization that does not meet the financial accountability criteria that is necessary in order to prevent the reporting entity's financial statements from being misleading. In such instances, that organization should be included as a component unit if the nature and significance of their relationship with the primary government or other component units are such that exclusion from the financial reporting entity would render the financial reporting entity's financial statements incomplete or misleading. In evaluating how to define the reporting entity, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made based upon the above criteria. There are no agencies or entities which should be presented with the Authority. Measurement Focus, Basis of Accounting and Financial Statement Presentation The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues as soon as eligibility requirements imposed by the provider have been met. 20
Notes to Financial Statements Note 2 - Summary of Significant Accounting Policies (continued) Measurement Focus, Basis of Accounting and Financial Statement Presentation (continued) Operating revenues and expenses are distinguished from nonoperating items in the statement of revenues, expenses and changes in net position. Operating revenues and expenses generally result from providing services in connection with the Authority's principal ongoing operations. The principal operating revenues of the Authority are charges to customers for transportation services. Operating expenses include the cost of providing transportation services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The principal nonoperating revenues of the Authority are operating and capital grants from the federal, state and local governments and interest income. The principal nonoperating expenses of the Authority are interest expense and gain (loss) on disposal of capital assets. When restricted and unrestricted resources are available for its use, it is the Authority's policy to use unrestricted resources for current operating purposes first. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assets, Liabilities, Net Position, Revenues and Expenses Cash and Cash Equivalents For purposes of reporting cash flows, the Authority considers all cash and cash equivalent accounts, including accounts subjected to withdrawal restrictions, securities purchased under agreements to resell and all highly-liquid debt investments purchased with a maturity of three months or less to be cash and cash equivalents. Accounts Receivable All accounts receivable are shown net of an allowance for uncollectibles, as applicable. Accounts receivable in excess of 90 days are evaluated for collectibility and an allowance is established, as deemed necessary, based on the best information available and in an amount that management believes is adequate. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The allowance at was $-0-. 21
Notes to Financial Statements Note 2 - Summary of Significant Accounting Policies (continued) Assets, Liabilities, Net Position, Revenues and Expenses (continued) Investments The Board is permitted to invest the Authority's funds as defined in the Pennsylvania Municipality Authorities Act. Authorized types of investments include the following: A. U. S. Treasury Bills. B. Short-term obligations of the U. S. Government and federal agencies. C. Insured savings and checking accounts and certificates of deposit in banks, savings and loan associations, and credit unions. D. General obligation bonds of the federal government, the Commonwealth of Pennsylvania or any state agency, or of any Pennsylvania political subdivision. E. Shares of mutual funds whose investments are restricted to the above categories. When making investments, the Board can combine monies from more than one fund under the Authority's control for the purchase of a single investment and join with other political subdivisions and municipal authorities in the purchase of a single investment. Investments are stated at fair value. Restricted Assets Certain proceeds from the Authority's dedicated state tax revenues are classified as restricted assets on the statement of net position because they are maintained in separate bank accounts and their use is limited by state statute. Inventories and Prepaid Expenses Inventories are valued at the lower of cost or market on a first-in, first-out basis. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid expenses. 22
Notes to Financial Statements Note 2 - Summary of Significant Accounting Policies (continued) Assets, Liabilities, Net Position, Revenues and Expenses (continued) Capital Assets Capital assets are recorded at cost and depreciated utilizing the straight-line method over their estimated useful lives as follows: Buildings Revenue vehicles and equipment Service vehicles and equipment Shop and garage equipment Furniture and office equipment Miscellaneous revenue equipment 10 to 30 years 5 to 10 years 5 years 5 to 10 years 3 to 10 years 5 to 10 years Maintenance and repairs of capital assets are expensed when incurred. Upon retirement, sale or other disposition of capital assets, the cost and accumulated depreciation are eliminated from the accounts. Upon the sale of capital assets, the proceeds, net of disposal costs, may be required to be returned to the various funding sources that initially funded the acquisition of these items. Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. An asset is considered to be impaired when the undiscounted estimated net cash flows to be generated by the asset are less than the carrying amount. The impairment recognized is the amount by which the carrying amount exceeds the fair value of the impaired asset. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and discount rates reflecting varying degrees of perceived risk. Management has concluded that no impairment adjustments were required during the years ended, respectively. Compensated Absences The Authority records its obligation to compensate employees for vacation as the liability is incurred. The liability has been determined according to personnel policies of the Authority. Unearned Revenues Unearned revenues are those where asset recognition criteria have been met, but for which revenue recognition criteria have not been met. Such amounts are measurable, but are not available. 23
Notes to Financial Statements Note 2 - Summary of Significant Accounting Policies (continued) Assets, Liabilities, Net Position, Revenues and Expenses (continued) Net Position Net position is classified into three categories as follows: Invested in capital assets consists of capital assets, net of accumulated depreciation. Restricted net position is amounts that have externally imposed restrictions on how the funds can be spent. Unrestricted net position is amounts that do not meet the definitions of "invested in capital assets" or "restricted" and is available for Authority operations. Capital Grants Capital grants are recorded for amounts restricted to capital acquisition. The Authority recognizes capital grants when earned (generally when the related capital expenditure is incurred). Capital grants are reported in the statement of revenues, expenses and changes in net position after nonoperating revenues. Advertising Costs Advertising costs are expensed as incurred. Cost Allocations of Support to Operating Divisions Costs of support services are allocated to the fixed route division and special services division. Employee Benefits The Authority participates in three pension plans covering substantially all employees. Pension plan expense is determined as specified in each plan. The Authority's policy is to fund all required pension costs. Postemployment Benefits The Authority provides for one-half of the health insurance premiums for retired employees for the ages 62 through 64. The Authority funds postemployment benefits as they are incurred. 24
Notes to Financial Statements Note 2 - Summary of Significant Accounting Policies (continued) Recent Accounting Pronouncement In June 2012, Governmental Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial Reporting for Pensions, an amendment of GASB Statement No. 27. The objective of this Statement is to improve accounting and reporting by governments for pension plans, including recognition as a liability the unfunded pension liability. This Statement is effective for periods beginning after June 15, 2014 and the Authority will adopt this Statement in its June 30, 2015 financial statements. Note 3 - Budget Matters The Authority adopts an annual budget, however, it is not required by the Pennsylvania Municipality Authorities Act. Note 4 - Stewardship, Compliance and Accountability Compliance with Finance-Related Legal and Contractual Provisions The Authority had no material violations of finance-related legal and contractual provisions. Note 5 - Cash and Cash Equivalents, Deposits and Investments The Authority's available cash is invested in demand deposit accounts, money market funds and obligations of the U. S. Government. The carrying amounts of the cash deposits and investments at consist of the following: 25 2014 2013 Cash on hand and petty cash $ 6,689 $ 10,209 Cash and cash equivalents, restricted 5,120,647 6,452,040 Investments, restricted 1,730,505 1,237,011 $ 6,857,841 $ 7,699,260 Reconciliation to statement of net position: Cash and cash equivalents $ 251,445 $ 10,209 Cash and cash equivalents, restricted 4,875,891 6,452,040 Investments, restricted 1,730,505 1,237,011 $ 6,857,841 $ 7,699,260 Custodial risk is the risk that in the event of a bank failure, the Authority's deposits may not be returned. The Authority has a deposit policy for custodial risk that requires depository institutions to pledge securities as collateral for deposits that exceed depository insurance.
Notes to Financial Statements Note 5 - Cash and Cash Equivalents, Deposits and Investments (continued) At, the carrying amounts of the Authority's cash and cash equivalents deposits were $5,120,647 and $6,452,040, and the bank balances were $5,180,482 and $6,829,550, of which $4,660,141 and $5,834,196, respectively, was exposed to custodial risk because it was uninsured but was collateralized with securities held by the pledging financial institution's trust department or agent, but not in the Authority's name. The balance of funds that are uninsured and uncollateralized of $270,341 and $745,355 at, respectively, are held in a money market fund which invests in securities of federal, state and local governments. The Authority has $6,689 and $10,209 of cash on hand and petty cash at, respectively. Cost Investment Maturities (in Year) as of June 30, 2014 Fair Less Than One through Five Value One Year Years U. S. Government Obligations $ 742,826 $ 736,913 $ 160,037 $ 576,876 U. S. Government Agency Obligations 901,740 893,592 180,473 713,119 Certificate of Deposit 100,000 100,000 100,000 - $ 1,744,566 $ 1,730,505 $ 440,510 $ 1,289,995 Investment Maturities (in Year) as of June 30, 2013 U. S. Government Obligations $ 504,452 $ 493,273 $ - $ 493,273 U. S. Government Agency Obligations 754,337 743,738-743,738 $ 1,258,789 $ 1,237,011 $ - $ 1,237,011 Interest Rate Risk As a means of managing its exposure to fair value losses arising from increasing interest rates, the Authority's investment policy limits the value of investments with maturities greater than one year. Credit Risk The Pennsylvania Municipality Authorities Act limits investments to U. S. Treasury bills, short-term obligations of the U. S. Government and federal agencies, insured savings and checking accounts and certificates of deposit in banks, savings and loan associations and credit union, general obligation bonds of the federal government, the Commonwealth of Pennsylvania or any state agency, or any Pennsylvania political subdivision, and shares of mutual funds whose investments are restricted to the above categories. The Authority's investment policy is consistent with these limitations. 26
Notes to Financial Statements Note 5 - Cash and Cash Equivalents, Deposits and Investments (continued) Custodial Credit Risk For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the Authority will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of June 30, 2014, $2,000,846 is held by the investment's counterparty, not in the name of the Authority. Note 6 - Cash and Cash Equivalents and Investments, Restricted Cash and cash equivalents and investments, whose use is limited to a specific purpose, have been classified as "restricted" in the financial statements. Restricted assets at June 30, 2014 and 2013 consist of the following: 2014 2013 Act 3 funds $ 387,987 $ 542,423 Act 44 funds 6,218,409 7,146,628 $ 6,606,396 $ 7,689,051 At June 30, 2013, the Authority had utilized $111,464 of Act 3 and Act 44 funds on operations and capital projects, which are returned to the restricted account upon receipt of the federal and state share of those projects. Note 7 - Inventories The classification of inventories at is as follows: 2014 2013 Parts and supplies $ 448,874 $ 650,292 Fuel and lubricants 51,668 62,170 $ 500,542 $ 712,462 Note 8 - Capital Grants Receivable At, the following amounts are due for various capital projects: 27 2014 2013 Federal government $ - $ 28,882 Commonwealth of Pennsylvania 2,580 253,269 $ 2,580 $ 282,151
Notes to Financial Statements Note 9 - Capital Assets Capital asset activity for the years ended was as follows: 2014 Balance July 1, 2013 Additions Deletions Balance June 30, 2014 Capital assets not being depreciated: Land $ 577,296 $ - $ - $ 577,296 Construction in progress 5,573,966-5,573,966-6,151,262-5,573,966 577,296 Capital assets being depreciated: Buildings 23,747,034 5,308,833-29,055,867 Revenue vehicles and equipment 22,432,433 1,555,039-23,987,472 Service vehicles and equipment 266,172 24,090-290,262 Shop and garage equipment 1,127,260 18,594 20,965 1,124,889 Furniture and office equipment 577,594 116,785 156,592 537,787 Miscellaneous revenue equipment 1,747,448 56,428-1,803,876 Total capital assets being depreciated 49,897,941 7,079,769 177,557 56,800,153 Less accumulated depreciation for: Buildings 8,105,339 1,038,967-9,144,306 Revenue vehicles and equipment 11,915,784 2,191,305-14,107,089 Service vehicles and equipment 195,334 25,584-220,918 Shop and garage equipment 775,166 94,152 20,619 848,699 Furniture and office equipment 471,120 57,170 145,187 383,103 Miscellaneous revenue equipment 1,453,989 204,942-1,658,931 Total accumulated depreciation 22,916,732 3,612,120 165,806 26,363,046 Total capital assets being depreciated, net 26,981,209 3,467,649 11,751 30,437,107 Total capital assets, net $ 33,132,471 $ 3,467,649 $ 5,585,717 $ 31,014,403 28
Notes to Financial Statements Note 9 - Capital Assets (continued) 2013 Balance July 1, 2012 Additions Deletions Balance June 30, 2013 Capital assets not being depreciated: Land $ 577,296 $ - $ - $ 577,296 Construction in progress 3,564,879 2,050,505 41,418 5,573,966 4,142,175 2,050,505 41,418 6,151,262 Capital assets being depreciated: Buildings 23,599,816 147,218-23,747,034 Revenue vehicles and equipment 22,326,060 566,502 460,129 22,432,433 Service vehicles and equipment 266,172 - - 266,172 Shop and garage equipment 1,127,260 - - 1,127,260 Furniture and office equipment 572,907 4,687-577,594 Miscellaneous revenue equipment 1,832,812 29,007 114,371 1,747,448 Total capital assets being depreciated 49,725,027 747,414 574,500 49,897,941 Less accumulated depreciation for: Buildings 7,224,728 880,611-8,105,339 Revenue vehicles and equipment 10,154,423 2,195,402 434,041 11,915,784 Service vehicles and equipment 166,542 28,792-195,334 Shop and garage equipment 677,826 97,340-775,166 Furniture and office equipment 365,231 105,889-471,120 Miscellaneous revenue equipment 1,279,021 284,752 109,784 1,453,989 Total accumulated depreciation 19,867,771 3,592,786 543,825 22,916,732 Total capital assets being depreciated, net 29,857,256 (2,845,372) 30,675 26,981,209 Total capital assets, net $ 33,999,431 $ (794,867) $ 72,093 $ 33,132,471 Note 10 - Note Payable At, the Authority has a line of credit in the amount of $500,000 with a bank, including interest at The Wall Street Prime Rate, defined as the "Prime Rate" published in the "Money Rates" section of The Wall Street Journal, none of which was in use at June 30, 2014 and 2013. The line of credit expires January 31, 2015. The Authority has a Board member who is employed at this bank. The Authority also has depository accounts with this bank. 29