FABIUS POMPEY CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS AND STATEMENTS. For the Year Ended June 30, 2011

FABIUS POMPEY CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS AND BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2011

TABLE OF CONTENTS AUDITOR'S REPORTS Independent Auditor's Report MANAGEMENT'S DISCUSSION AND ANALYSIS 1-2 3-12 BASIC FINANCIAL STATEMENTS District-Wide Financial Statements Statement of Net Assets Statement of Activities 13 14 Fund Financial Statements Balance Sheet - Governmental Funds 15 Reconciliation of Total Governmental Fund Balances to the District-Wide Net Assets 16 Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Funds 17 Reconciliation of the Statement of Revenues and Expenditures of the Governmental Funds to the Statement of Activities 18 Fiduciary Fund Financial Statements Statement of Fiduciary Net Assets 19 Statement of Changes in Fiduciary Net Assets 20 Notes to Basic Financial Statements 21-38 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT'S DISCUSSION AND ANALYSIS Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - General Fund Schedule of Funding Progress of Other Postemployment Benefits 39 40 OTHER SUPPLEMENTARY INFORMATION Schedule of Change from Original Budget to Revised Budget and Use of Unassigned Fund Balance - General Fund Schedule of Project Expenditures - Capital Projects Fund Schedule of Certain Revenues and Expenditures Compared to ST-3 Data Investment in Capital Assets, Net of Related Debt 41 42 43 44 SINGLE AUDIT REPORTS AND SCHEDULES Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 45 Independent Auditor's Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A- 133 46-47 Schedule of Expenditures of Federal Awards 48 Notes to Schedule of Expenditures of Federal Awards 49 Schedule of Findings and Questioned Costs - Federal Compliance Requirements 50 Status of Prior Year's Findings and Questioned Costs - Federal Compliance Requirements 51

DArcangelo&Co.,LLP Certified Public Accountants & Consultants 200 E. Garden St., P.O. Box 4300, Rome, N.V. 13442-4300 315-336-9220 Fax: 315-336-0836 Independent Auditor's Report Board of Education Fabius Pompey Central School District We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Fabius Pompey Central School District, as of and for the year ended June 30, 201 1, which collectively comprise the School District's basic financial statements as listed in the table of contents. These fmancial statements are the responsibility of the Fabius Pompey Central School District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Fabius Pompey Central School District, as of June 30, 201 1, and the respective changes in financial position, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note 1 to the basic fmancial statements, the School District adopted the provisions of Governmental Accounting Standards Board Statement (GASB) No. 54 "Fund Balance Reporting and Governmental Fund Type Definitions" as of July 1,2010. GASB 54 distinguishes fund balance between amounts that are considered nonspendable and other amounts that are classified based on the relative strength of constraints that control the purpose for which amounts can be spent. As summarized in Note 12, the beginning fund balances for the School District's governmental funds have been restated to reflect the new classifications. In accordance with Government Auditing Standards, we have also issued our report dated September 1,2011, on our consideration of the 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Mid-Hudson Utica/Rome/Oneida' Westchestel'

DArcangelo&CQ,L(,P CCI'I,iticd Public ilccountants & Consultants Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 12 and supplementary information on pages 39 through 44 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 and the New York State Education Department, 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Fabius Pompey Central School District's financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A -133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statements. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been SUbjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. o\ September 1, 201 1 Rome, New York 2

MANAGEMENT'S DISCUSSION AND ANALYSIS The Fabius Pompey Central School District's discussion and analysis of financial performance provides an overall review of the District's financial activities for the fiscal years ended June 30, 20 11 and 20 10. The intent of this discussion and analysis is to look at the District's financial performance as a whole. This should be read in conjunction with the financial statements, which immediately follow this section. 1. FINANCIAL IDGHLIGHTS Key financial highlights for fiscal year 20 1 1, are as follows: The District's total net assets, as reflected in the District-wide financial statements, decreased by $1,647,006. The primary factor contributing to this decrease is the Government Accounting Standards Board's Statement No. 45, Accounting and Financial Reporting by Employers of Postemployment Benefits Other than Pensions. This required the recognition of a current year expenditure of $2,286, 157 and a cumulative liability of $8,749,187. The District's expenses for the year, as reflected in the District-wide financial statements, totaled $18,747,628. Of this amount, $247,458 was offset by program charges for services. General revenues of $15,555,40 1 amount to 91.0% of total revenues. State and federal revenue decreased by 3.1% to $7,789,328 in 201 1 from $8,036,792 in 2010. The School District received $373,30 1 in State Fiscal Stabilization funds through the Recovery Act (ARRA) in 20 11, and $3 1 2,452 in Education Jobs Fund monies which are not available in 20 1 1-2012. The general fund's total fund balance, as reflected in the fund financial statements on pages 15 and 17, increased by $29,789 to $2,872,148. This was due to an excess of revenues over expenditures based on the modified accrual basis of accounting. The District received $1,297,763 in operating grants to support instructional and food service programs. 2. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of four parts - Management's Discussion and Analysis (MD&A), the basic financial statements, required supplementary information, and other supplementary information. The basic financial statements consist of districtwide financial statements, fund financial statements, and notes to the financial statements. A graphic display of the relationship of these statements is as follows: r" -" -"-" -" -"-"-" -" -"-" -" -" -"-" -" -"l.... I I I i Management's Basic Required Discussion Financial Supplementary and Analysis Statements Information I Other Supplementary Information I I District-Wide Fund Notes to Financial Financial Financial Statements Statements Statements I 3

MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) A. District-wide Financial Statements The District-wide financial statements are organized to provide an understanding of the fiscal performance of the District as a whole in a manner similar to a private sector business. There are two District-wide financial statements - the Statement of Net Assets and the Statement of Activities. These statements provide both an aggregate and long-term view of the District's finances. These statements utilize the accrual basis of accounting. This basis of accounting recognizes the financial effects of events when they occur, without regard to the timing of cash flows related to the events. The Statement of Net Assets The Statement of Net Assets presents information on all of the District's assets and liabilities, with the difference between the two reported as net assets. Increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating, respectively. The Statement of Activities The Statement of Activities presents information showing the change in net assets during the fiscal year. All changes in net assets are recorded at the time the underlying financial event occurs. Therefore, revenues and expenses are reported in the statement for some items that will result in cash flow in future fiscal periods. B. Fund Financial Statements The fund financial statements provide more detailed information about the District's funds, not the District as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District also uses fund accounting to ensure compliance with finance-related legal requirements. The funds of the District are reported in the governmental funds and the fiduciary funds. These statements utilize the modified accrual basis of accounting. This basis of accounting recognizes revenues in the period that they become measurable and available. It recognizes expenditures in the period that they become measurable, funded through available resources and payable within a current period. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the Districtwide financial statements. However, the governmental fund financial statements focus on shorter term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year for spending in future years. Consequently, the governmental fund statements provide a detailed short-term view of the District's operations and the services it provides. Because the focus of governmental funds is narrower than that of District-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the District-wide financial statements. By doing so, the reader may better understand the long-term impact of the District's nearterm financing decisions. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains five individual governmental funds, general fund, school lunch fund, special aid fund, debt service fund, and capital projects fund, each of which is considered to be a major fund and is presented separately in the fund financial statements. Fiduciary Funds Fiduciary funds are used to account for assets held by the District in its capacity as agent or trustee. All of the District's fiduciary activities are reported in a separate Statement of Fiduciary Net Assets. The fiduciary activities have been excluded from the District's District-wide financial statements because the District cannot use these assets to finance its operations. 4

MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) B. Changes in Net Assets The results of this year's operations as a whole are reported in the Statement of Activities in a programmatic format in the accompanying financial statements. In the accompanying financial statements STAR (school tax relief) revenue is included in the other tax items line. However, in this MD&A, STAR revenue has been combined with property taxes and nonproperty tax items. A summary of this statement for the years ended June 30, 2011 and 2010 is as follows: Increase Percentage Revenues 2011 2010 {Decrease) Change Program Revenues Charges for Services $ 247,458 $ 241,631 $ 5,827 2.4% Operating Grants 1,297,763 1,300,176 (2,413) (0.2%) General Revenues Property Taxes, STAR, and Other Real Property 7,636,290 7,494,499 141,791 1.9% Tax Items State and Federal Sources 7,789,328 8,036,792 (247,464) (3.1%) Other 129,783 245,153 (115.370} (0.5%) Total Revenues 17,100,622 17,318.251 (217,629) (1.3%) Expenses General Support 2,878,263 3,046,486 (168,223) (5.5%) Instruction 12,949,946 12,858,681 91,265 0.7% Pupil Transportation 1,935,888 1,771,959 163,929 9.3% Community Service 4,010 4,390 (380) (8.7%) Debt Service-Unallocated Interest 547,727 610,188 (62,461) (10.2%) Food Service Program 431,794 454,858 (23,064) (5.1%) Total Expenses 18,747,628 18,746.562 1.066 (0.0%) Total Change in Net Assets $ 0,641 QQ6) :& (l,4s,311) :& (218,625) The District's revenues decreased by 1.3% in 2011 or $217,629. The major factors that contributed to the decrease were: Operating grants decreased by $2,413 due to Recovery Act decreases in Title I and Special Education Grants, offset by Education Jobs Fund monies received. Property tax, STAR, and nonproperty tax items revenues increased by $141,791. State and federal aid decreased by $247,464 due to a decrease in ARRA Stabilization Grant. The District's expenses for the year remained consistent with prior year.

MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) A graphic display of the distribution of revenues for the two years follows: Other 0.7 Charges for Services 1.45% Operating Grants 7.59% State and Federal Sources 45.55% Property Taxes, STAR, and Other Real Property Tax Items 44.65% For the Year Ended June 30, 2010 Charges for Services Other 1.40% Sta te and Federa I Sources 46.41 % perty Taxes, STAR, and Other Real PropertyTax Items 43.26% 7

MANAGEMENT'S DISCUSSION AND ANALYSIS (COlLtinued) A graphic display of the distribution of expenses for the two years follows: Community Service Pupil 0.02 Transporta tio 10.33% Debt Service Unallocated Interest 2.92% Food Service Program 2.30% General Support 15.35% Instruction 69.09% For the Year Ended June 30, 2010 Community Service 0.02% Pupil Transportation 9.45% Debt Service Unallocated Food Service Program 2.43% General Support 16.25% Instruction 68.60%

MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) 4. FINANCIAL ANALYSIS OF THE DISTRICT'S FUNDS At June 30, 2011, the District's governmental funds reported a combined fund balance of $2,446,299, which is a decrease of $1,180,168 over the prior year. This decrease is due to a deficit of revenues over expenditures for the year. A summary of the change in fund balance by fund is as follows: (Restated) Increase General Fund 2011 2010 {Decrease) Restricted for: ljnemploymentlnsurance $ 75,000 $ 105,000 $ (30,000) Employee Benefit Accrued Liability 730,128 794,488 (64,360) Retirement Contribution 160,000 160,000 Liability 175,000 175,000 Repairs 125,000 125,000 Total Restricted 1.265,128 1,359,488 (94,360) Assigned 1,044,128 817,359 226,769 ljnassigned 562,892 665,512 (102,620) Total General Fund 2,872,148 2,842,359 29,789 School Lunch Fund Nonspendable 9,996 8,374 1,622 Assigned 36,201 32,665 3,536 Total School Lunch Fund 46, 197 41,039 5,158 Debt Service Fund Restricted for Debt Service 487,438 736.418 (248,980) Total Debt Service Fund 487.438 736,418 (248,980) Capital Projects Fund Restricted 6,651 (6,651) ljnassigned (Deficit) (959,484) (959,484) Total Capital Projects Fund (959,484) 6,65 1 (966,135) Total Fund Balance - All Funds $ :2 446 229 3,626,461 $ (1.1 Q,l68J Beginning with fiscal year ending June 30, 2011, the School District implemented GASB Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions." This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government's fund balances more transparent. A complete description of fund balance classification is located in the notes to the financial statements. The June 30, 2010 balances have been restated for presentation purposes to reflect the new classifications. Combined decreases of $94,360 to the general fund restricted fund balances during the year ended June 30, 20 11, includes an expenditure for retirement incentives and unemployment from available reserves. The School Lunch Fund had an excess of expenditures over revenue of $14,842 for the year ended June 30, 20 11 before a transfer of $20,000 from the General Fund. This is due primarily to a decrease in revenues of $6,260, while expenditures increased by $8,430. 9

MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) 5. GENERAL FUND BUDGETARY HIGHLIGHTS A. 2010-2011 Budget The District's general fund adopted budget for the year ended June 30, 2011, was $16,629,129. This is an increase of $140,972 over the prior year's adopted budget. The budget was funded through a combination of revenues and designated fund balance. The majority of this funding source was $ 7,636,290 in estimated property taxes, STAR and Other Real property tax items, and State and Federal Aid in the amount of $7,789,328. B. Change in General Fund's Unassigned Fund Balance (Budget to Actual) The General Fund's unassigned fund balance is the component of total fund balance that is the residual of prior years' excess revenues over expenditures, net of transfers to reserves and designations to fund the subsequent year's budget. It is this balance that is commonly referred to as the "fund balance". The change in this balance demonstrated through a comparison of the actual revenues and expenditures for the year compared to budget follows: Opening, Unassigned Fund Balance $ 665,512 Revenues and Other Sources Over Budget 258,031 Expenditures and Encumbrances Under Budget 507,442 Net Decrease to Restricted Funds 94,360 Increase in Assigned Fund Balance (226,769) Miscellaneous (1) Appropriated for June 30, 2012 Budget (735.683) Closing, Unassigned Fund Balance $ 62,822 Opening, Unassigned Fund Balance The $665,512 shown in the table is the portion of the District's June 30, 2010, fund balance that was retained as unassigned. This was 4.0% of the District's 2010-2011 approved operating budget. Revenues and Transfers from Other Funds Over Budget The 2010-2011 final budget for revenues and transfers from other funds was $15,959,129. The actual revenues received for the year were $16,217,160. The actual revenue was over the amount budgeted by $258,031 of which $205,784 was in State Aid partially offset by a reduction in miscellaneous revenue of $11,878. This variance contributes directly to the change to the unassigned portion of the general fund balance from June 30, 2010 to June 30, 2011. Expenditures and Encumbrances Under Budget The 2010-2011 final budget for expenditures was $16,776,489. The actual expenditures and encumbrances were $16,269,047. The final budget was under expended by $507,442, primarily in central services and teaching expenditures. This under expenditure contributes to the change to the unassigned portion of the general fund balance from June 30, 2010 to June 30, 2011. 10

MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Appropriated Fund Balance The District has chosen to use $962,452 of its available June 30, 20 1 1 fund balance to partially fund its 20 11-20 12 approved operating budget. Closing, Unassigned Fund Balance Based upon the summary changes shown in the above table, the District will begin the 20 11-20 12 fiscal year with an unassigned fund balance of $562,892. This is a decrease of $102,620 over the unassigned balance from the prior year as of June 30, 20 10, and is within the 4% limit. 6. CAPITAL ASSET AND DEBT ADMINISTRATION A. Capital Assets At June 30, 201 1, the District had invested in a broad range of capital assets, including land, constmction in progress, buildings, and vehicles, furniture, and equipment. The net increase in capital assets is due to capital additions more than depreciation recorded for the year ended June 30, 20 11. A summary of the District's capital assets, net of accumulated depreciation at June 30, 20 11 and 20 10, is as follows: Increase 20 11 20 10 {Decrease) Land $ 425,550 $ 425,550 $ Constmction in Progress 968,810 968,810 Buildings and Improvements 20,161,035 20,818,927 (657,892) Furniture, Equipment, and Vehicles 1,108,037 1,097,074 10,963 Capital Assets, Net $ 22663432 $ 22 341 551 $ 321,881 B. Debt Administration At June 30, 20 11, the District had total bonds payable of $13,107,050. A summary of the outstanding debt at June 30, 20 11 and 20 10, is as follows: Issue Interest Increase Date Rate {%2 20 11 20 10 (Decrease} 04/02 3.0-4.6 $ 705,000 $ 1,035,000 $ (330,000) 12/03 3.6-3.7 5,1 1 5,000 5,480,000 (365,000) 06/04 3.7-3.8 1,080,000 1,270,000 (190,000) 06/04 4.1-4.3 2,975,000 3,185,000 (2 10,000) 10/05 5.0-5.8 50,000 53,000 (3,000) 12/05 4.0-4. 1 440,000 540,000 (100,000) 10/05 3.6 40,000 (40,000) 07/08 3.6 327,000 490,000 (163,000) 07/09 3.0 150,000 183,250 (33,250) 04/10 2.0-3.0 1,995,000 2,295,000 (300,000) 07110 3.0 270,050 270,050 $ 13,IQ1,Q50 $ 14,511,250 $ 0.464 200) During the year the district issued a statutory installment bond in the amount of $270,050. 11

MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) 7. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The assigned fund balance applied to the June 30, 2011 budget in the amount of $962,452, is a significant increase over prior years. The voters passed the 2011-2012 budget in May of 2011 with a total appropriation of $16,847,352, an increase of $218,223 from the prior year. The District will have a reduction in Federal Jobs Money for the 20 11-12 fiscal year. The district has appropriated an additional $312,452 to offset this reduction. The Audit and Finance Committee has a five year plan to continue this level of appropriation if the economic climate does not improve over the next five years. The economic climate and financial status of the State of New York brings uncertainty of the state sustaining and/or increasing State Aid in the future for the School District. Costs will escalate in the areas of medical insurance and retirement contributions, making it more difficult to contain costs. The School District has negotiated changes in health insurance plans to minimize increases. It has established reserves to offset significant increases in retirement costs, and has worked to purchase electricity and fuel in the least expensive manner. 8. CONTACTING THE DISTRICT This financial report is designed to provide the School District's citizens, taxpayers, customers, investors, and creditors with a general overview of the School District's finances and to demonstrate the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Business Office, at Fabius-Pompey Central School District, 1211 Mill Street, Fabius, New York l3063. 12

STATEMENT OF NET ASSETS June 30, 2011 Assets Cash and Cash Equivalents Restricted Cash and Cash Equivalents Receivables Due from Other Governments Due fr om Fiduciary Funds Other Receivables Inventory Capital Assets (Net of Accumulated Depreciation) Total Assets $ 2,967,850 1,750,282 660,717 3,744 40,779 9,996 22,663.432 $ 28.096800 Liabilities Accounts Payable Accrued Liabilities Retainage Percentages Payable Accrued Interest Payable Due To Other Governments Teacher's Retirement System Employees' Retirement System Short-Term Notes Payables Bond Anticipation Note Deferred Credits Overpayments and Collections in Advance Deferred Revenue Noncurrent Liabilities Due Within One Year Bonds Payable Due in More Than One Year Compensated Absences Other Postemployment Benefit Liability Bonds Payable Total Liabilities $ 482,668 124,677 18,556 8,571 792 569,974 66,24 1 1,700,000 3,981 67,899 1,812,050 596,202 8,749, 187 11,227,000 25.427,798 Net Assets Investment in Capital Assets (Net of Related Debt) Restricted Unrestricted (Deficit) Total Net Assets Total Liabilities and Net Assets 9,600,657 1,752,566 (8,684,22 1 ) 2,669,002 $ 28,Q26,800 The Accompanying Notes are an Integral Part of These Financial Statements. 13

STATEMENT OF ACTIVITIES Program Revenues Net (Expense) Functions/Programs General Support Instruction Pupil Transportation Community Service Debt Service - Unallocated Interest Food Service Program Total Functions/Programs Expenses $ 2,878,263 12,949,946 1,935,888 4,0 10 547,727 431,794 $ 18.747.628 Operating Charges for Grants and Services Contributions $ $ 39,859 1,167,503 207,599 130,260 $ 247.458 $ 1.297 763 Revenue and Changes in Net Assets $ (2,878,263) (11,742,584) (1,935,888) (4,0 10) (547,727) (93,935} (17,202.407) General Revenues Real Property Taxes STAR and Other Real Property Tax Items Nonproperty Tax Items Use of Money and Property Sale of Property and Compensation for Loss State and Federal Sources Miscellaneous Total General Revenues Change in Net Assets Net Assets, Beginning of Year Net Assets, End of Year 6,138,430 1,338,0 17 159,843 38,223 1,645 7,789,328 89,915 15,555.401 (1,647,006) 4316,008 $ 2,662,002 The Accompanying Notes are an Integral Part of These Financial Statements. 14

BALANCE SHEET-GOVERNMENTAL FUNDS June 30, 2011 School Special Debt General Lunch Aid Service C[I it!l1 Total Assets Cash and Cash Equivalents Restricted Cash and Cash Equivalents $ 1,730,364 $ 531 $ 680 $ 1,265,128 485,154 $ 1,236,275 $ 2,967,850 1,750,282 Receivables Due from Other Governments Due from Other Funds Otber Receivables Inventory Total Assets 458,329 7,587 194,801 280,422 57,459 128,789 40,779 9,996 $ 3 17.5 02 15m $ 3::I2ZQ 2,284 ::IBZ ::IJ $ I 236 21 660,717 468,954 40,779 9,996 a2s 51 Liabilities Accounts Payable Retainage Percentages Payable Accrued Liabilities Accrued Interest Payable Due To Other Governments $ 3,992 62,627 8,571 $ 3,757 5,760 792 $ $ Other Funds Teacher's Retirement System Employees' Retirement System Bond Anticipation Note 186,770 569,974 66,241 19,067 257,089 Overpayments and Collections in Advance 3,981 Deferred Revenue 718 61,181 Total Liabilities 902,874 29.376 324,270 $ 474,919 $ 482,668 18,556 18,556 68,387 8,571 792 2,284 465,210 569,974 66,241 1,700,000 1,700,000 3,981 67,899 2.195,759 3.452.279 Fund Balance (Deficit) Nonspendable Restricted Assigned Unassigned (Deficit) Total Fund Balance (Deficit) 9,996 1,265,128 487,438 1,044,128 36,201 562.892 2.872,148 46,197 487.438 9,996 1,752,566 1,080,329 (952,484) (396,592) (959.484) 2.446,299 Total Liabilities and Fund Balance $ 317.5 02, 15m 32 220 ::I2!l3 1236m $ S2B 52 The Accompanying Notes are an Integral Part of These Financial Statements. 15

RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO THE DISTRICT-WIDE NET ASSETS June 30,2011 Total Governmental Long-Term Reclassifications Statement of Funds (Modified Accrual} Assets & Liabilities and Eliminations Net Assets Total Assets Cash and Cash Equivalents Restricted Cash and Cash Equivalents $ 2,967,850 $ $ 1,750,282 $ 2,967,850 1,750,282 Receivables Due from Other Governments 660,717 660,717 Due from Other Funds 468,954 (465,210) 3,744 Other Receivables 40,779 40,779 Inventory 9,996 9,996 Capital Assets 22,663,432 22,663,432 Total Assets $ 5,898,578 22,663,432 (465,210) 28,096,800 Liabilities Accounts Payable Accrued Liabilities $ 482,668 $ $ 68,387 56,290 $ 482,668 124,677 Retainage Percentages Payable 18,556 18,556 Accrued Interest Payable 8,571 8,571 Due To Other Governments Other Funds Teacher's Retirement System Employees' Retirement System Bond Anticipation Note Compensated Absences Other Liabilities Bonds Payable 792 465,210 569,974 66,241 1,700,000 Overpayments and Collections in Advance 3,981 Deferred Revenue 67,899 596,202 8,749,187 13,039,050 Total Liabilities 3.452,279 22.440,729 (465,210) (465,210) 792 569,974 66,241 1,700,000 596,202 8,749,187 13,039,050 3,981 67,899 25.427,798 Total Fund Balance/Net Assets 2,446,299 222,703 Total Liabilities and Fund Balance/Net Assets $ 5,898,578 22,663,432 2,669,002 (465,210) 28,096,800 The Accompanying Notes are an Integral Part of These Financial Statements. 16

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUNDS School Special Debt General Lunch Aid Service CaEital Total Revenues Real Property Taxes STAR and Other Real Property Tax Items Nonproperty Tax Items 6,138,430 S $ 1,338,017 159,843 6,138,430 1,338,017 159,843 Charges for Services 39,859 39.859 Use of Money and Property 31,339 88 6,796 38,223 Sale of Property and Compensation for Loss 1,645 1,645 Miscellaneous 89,622 293 89,915 State Aid 7,789,328 7,866 30,362 7,827,556 Federal Aid 373,301 122,394 763,840 1,259,535 School Lunch Sales Total Revenues 2Q2 29 15.961,384 338240 794.202 6.796 207 599 17.100 622 ExpendItures General Support Instruction Pupil Transportation 1,847,164 7,183,479 706,319 1,090,519 848,657 120,153 267,375 2,695,82 t 8,009,95 t 1,357,894 Community Service 2,217 2,217 Food Service Program 326,336 326,336 Employee Benefits 3,760,176 26,746 90,306 3,877,228 Debt Service - Principal 1,734,250 1,734,250 Debt Service - Interest 547,143 547,143 Total Expenditures 16,164.948 353 082 796,625 1 236 185 18 550 840 Excess (Deficit) Revenues Over Expenditures 1203.564) (14,842) 12.423) 6.796 (1.236,185) ( 1.450.218) Other FInancing Sources (Uses) Proceeds of Long-Term Debt 270,050 270,050 Transfers from Other Funds 255,776 20,000 2,423 278,199 Transfers to Other Funds (22 423) (255.776) (278 199) Total Other Financing Sources (Uses) 233.353 20QOO 2423 1255,776) 270050 270 050 Excess (Deficit) Revenue. Over ExpendItures and Other FInancing Sources 29,789 5,158 (248,980) (966,135) (1,180,168) Fund Balance Beginning of Year 2.842,359 41 039 736,418 6.651 J 626.467 Fund Balance (Deficit), End of Year $ 2,812,148 46,197 487,438 (959,484l 2,446,299 The Accompanying Notes are an Integral Part of These Financial Statements. 17

RECONCILIATION OF THE STATEMENT OF REVENUES AND EXPENDITURES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Net Changes in Fund Balance - Total Governmental Funds $ (l, 180, 168) Capital Outlays to purchase or build capital assets are reported in governmental funds as expenditures. However, for governmental activities, those costs are shown in the statement of net assets and allocated over their useful lives as depreciation expenses in the statement of activities. This is the amount by which capital outlays exceeded depreciation in the period. Depreciation Expense Capital Outlays (921,715) 1.243,596 321,881 Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayments of bond principal is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the amount by which repayments exceeded bond proceeds. Issuance of statutory installment bond Repayment of Bond Principal (270,050) 1.734,250 1,464,200 Certain expenses in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Amortization of Bond Issuance Costs Change in Accrued Interest on Serial Bonds Change in Compensated Absences Increase in OPEB Liability (8,500) 7,916 33,822 (2,286,157) (2,252,919) Change in Net Assets Governmental Activities $ (J 647.006) The Accompanying Notes are an Integral Part of These Financial Statements. 18

STATEMENT OF FIDUCIARY NET ASSETS June 30, 2011 Private Purpose Trusts Assets Cash and Cash Equivalents - Unrestricted $ Cash and Cash Equivalents - Restricted 16,615 Due from Other Funds Total Assets $ 16.615 $ $ Agenc:y 137,245 522 137 767 Liabilities Due to Other Funds Agency Liabilities Extraclassroom Activity Balances Total Liabilities $ $ 4,266 70,877 62,624 137.767 Net Assets Restricted for Scholarships $ 16,615 Total Liabilities and Net Assets $ 16,615 The Accompanying Notes are an Integral Part of These Financial Statements. 19

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS Additions Investment Income Gifts and Contributions Total Additions Deductions Scholarships and Awards Change in Net Assets Net Assets, Beginning of Year Private Purpose Trusts $ 24 7,425 7,449 1.300 6,149 10,466 Net Assets, End of Year $ 16.615 The Accompanying Notes are an Integral Part of These Financial Statements. 20

NOTES TO BASIC FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the Fabius-Pompey Central School District (the School District) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as they apply to governmental units. Those principles are prescribed by the Governmental Accounting Standards Board (GASB), which is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Certain significant accounting principles and policies utilized by the School District are described below: Reporting Entity The School District is governed by the laws of New York State. The School District is an independent entity governed by an elected Board of Education consisting of seven members. The President of the Board serves as the chief fiscal officer and the Superintendent is the chief executive officer. The Board is responsible for, and controls all activities related to public school education within the School District. Board members have authority to make decisions, power to appoint management, and primary accountability for all fiscal members. The reporting entity of the School District is based upon criteria set forth by GASB. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The accompanying basic financial statements present the activities of the School District. The School District is not a component unit of another reporting entity. The decision to include a potential component unit in the School District's reporting entity is based on several criteria including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, the following is a brief description of certain entities included in the School District's reporting entity. Extraclassroom Activity Funds The Extraclassroom Activity Funds of the School District represent funds of the students of the School District. The Board of Education exercises general oversight of these funds. The Extraclassroom Activity Funds are independent of the School District with respect to its financial transactions and the designation of student management. Separate audited financial statements (cash basis) of the Extraclassroom Activity Funds can be found at the School District's office. The School District accounts for assets held as an agent for various student organizations in an agency fund. Joint Venture The School District is a component district in the Onondaga, Cortland, and Madison Counties Board of Cooperative Education Services (BOCES). A BOCES is a voluntary, cooperative association of school districts in a geographic area that shares planning, services, and programs which provide educational and support activities. There is no authority or process by which a School District can terminate its status as a BOCES component. BOCES' are organized under 1950 of the New York State Education Law. A BOCES' Board is considered a corporate body. Members of a BOCES' Board are nominated and elected by their component member boards in accordance with provisions of 1950 of the New York State Education Law. All BOCES' property is held by the BOCES' Board as a corporation [ 1 950(6)]. In addition, BOCES' Boards also are considered municipal corporations to permit them to contract with other municipalities on a cooperative basis under 1 19-n(a) of the New York State General Municipal Law. A BOCES' budget is comprised of separate budgets for administrative, program, and capital costs. Each component district's share of administrative and capital cost is determined by resident public school district enrollment, as defined in the New York State Education Law, 1950(4)(b)(7). In addition, component districts pay tuition or a service fee for programs in which its students participate. 21

NOTES TO BASIC FINANCIAL STATEMENTS Basis of Presentation (a) District- Wide Statements The Statement of Net Assets and the Statement of Activities present financial information about the School District's governmental activities. These statements include the financial activities of the overall government in its entirety, except those that are fiduciary. Eliminations have been made to minimize the double counting of internal transactions. Governmental activities generally are financed through taxes, State aid, intergovernmental revenues, and other exchange and nonexchange transactions. Operating grants include operating-specific and discretionary (either operating or capital) grants. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with and are clearly identifiable to a particular function. Indirect expenses, principally employee benefits and depreciation expense, are allocated to functional areas in proportion to the payroll expended for those areas. Program revenues include charges paid by the recipients of goods or services offered by the programs, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. (b) Fund Financial Statements The fund statements provide information about the School District's funds, including fiduciary funds. Separate statements for each fund category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All funds of the School District are displayed as maj or funds. The School District reports the following major governmental funds: General Fund: This is the School District's primary operating fund. This accounts for all financial resources not accounted for and reported in another fund. Special Revenue Funds: To account for the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service and capital projects. Special Aid Fund: This fund accounts for the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service and capital projects. School Lunch Fund: This fund is used to account for transactions of the School District's lunch and breakfast programs. Capital Projects Fund: This fund is used to account for and report financial resources that are restricted or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Debt Service Funds: This fund accounts for and reports financial resources that are restricted to expenditure for principal and interest. Debt service funds should be used to report resources if legally mandated. (c) Fiduciary Funds This fund is used to account for and report fiduciary activities. Fiduciary activities are those in which the School District acts as trustee or agent for resources that belong to others. These activities are not included in the District-wide financial statements, because their resources do not belong to the School District, and are not available to be used. There are two classes of fiduciary funds: Private Puroose Trust Funds: These funds are used to account for and report trust arrangements in which principal and income benefits annual third party awards and scholarships for students. Established criteria govern the use of the funds and members of the School District or representatives of the donors may serve on committees to determine who benefits. 22

NOTES TO BASIC FINANCIAL STATEMENTS Agency Funds: These funds are strictly custodial in nature and do not involve the measurement of results of operations. Assets are held by the School District as agent for various student groups or extraclassroom activity funds and for payroll or employee withholding. Measurement Focus and Basis of Accounting The District-wide and fiduciary fund 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 at the time liabilities are incurred, regardless of when the related cash transaction takes place. Nonexchange transactions, in which the School District gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The governmental fund statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if the revenues are collected within ninety days after the end of the fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. 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 amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas, including computation of OPEB liabilities, encumbrances, compensated absences, potential contingent liabilities, and useful lives of long-lived assets. Cash and Cash Equivalents The School District's cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments with original maturities of three months or less from date of acquisition. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the State. Permissible investments include obligations of the United States Treasury, United States Agencies, repurchase agreements, and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and Districts. Property Taxes Real property taxes are levied annually by the Board of Education and become a lien no later than September 1. Taxes are collected during the period September 1 to November 15. The Counties of Onondaga and Madison subsequently enforce uncollected real property taxes. The County pays an amount representing uncollected real property taxes transmitted to the County for enforcement to the School District no later than the following April 1. Receivables Receivables are shown gross, with uncollectible amounts recognized under the direct write-off method. No allowance for uncollectible accounts has been provided since it is believed that such allowance would not be material. 23

NOTES TO BASIC FINANCIAL STATEMENTS Interfund Transactions and Transfers The operations of the School District include transactions between funds. These transactions may be temporary in nature, such as with interfund borrowings. The School District typically loans resources between funds for the purpose of providing cash flow. These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include the transfer of expenditure and revenues to provide financing or other services. Such transfers are made in accordance with state and local laws. The amounts reported on the Statement of Net Assets for due to and due from other funds represents amounts due between different fund types (governmental activities and fiduciary funds). Eliminations have been made for amounts due to and due from within the same fund type. A detailed description of the interfund transactions for governmental funds throughout the year is shown in Note 11 to the financial statements. Inventories The inventories of food and/or supplies in the School Lunch Fund are recorded at cost on a first-in, first-out basis or, in the case of surplus food, at stated value which approximates market. Purchases of inventoriable items in other funds are recorded as expenditures at the time of purchase, and year-end balances are not maintained. Capital Assets Capital assets are reported at actual cost for acquisitions subsequent to July 1, 2004. For assets acquired prior to July 1, 2004, estimated historical costs, based on appraisals conducted by independent third-party professionals were used. Donated assets are reported at estimated fair market value at the time received. The School District uses capitalization thresholds of $1,000, (the dollar value above which asset acquisitions are added to the capital asset accounts). Depreciation methods and estimated useful lives of capital assets reported in the district-wide statements are as follows: Vested Employee Benefits Buildings Building Improvements Furniture, Equipment, and Vehicles Lives 50 Years 20-25 Years 5-20 Years Method Straight Line Straight Line Straight Line Compensated absences consist of unpaid accumulated sick leave, vacation, and sabbatical time. The School District employees are granted vacation in varying amounts, based primarily on length of service and service position. Some earned benefits may be forfeited if not taken within varying time periods. Sick leave eligibility and accumulation is specified in negotiated labor contracts, and in individual employment contracts. Upon retirement, resignation, or death, employees may receive a payment based on unused accumulated sick leave, based on contractual provisions. Consistent with GASB Statements, an accrual for accumulated sick leave is included in the compensated absences liability at year end. The compensated absences liability is calculated based on the pay rates in effect at year end. In the fund statements, only the amount of matured liabilities is accrued within the General Fund based upon expendable and available financial resources. Those amounts are expensed on a pay-as-you go basis. 24

NOTES TO BASIC FINANCIAL STATEMENTS Other Benefits District employees participate in the New York State Employees' Retirement System and the New York State Teachers' Retirement System. Short-Term Debt The District may issue Bond Anticipation Notes (BAN), in anticipation of proceeds from the subsequent sale of bonds. These notes are recorded as current liabilities of the funds that will actually receive the proceeds from the issuance of bonds. State law requires that BAN's issued for capital purposes be converted to long-term financing within five years after the original issue dated. Accrued Liabilities and Long-Term Obligations Payables, accrued liabilities and long-term obligations are reported in the District-wide financial statements. In the governmental funds, payables and accrued liabilities are paid in a timely manner and in full from current financial resources. Claims and judgments, and compensated absences that will be paid from governmental funds, are reported as a liability in the funds financial statements only to the extent that they are due for payment in the current year. Bonds and other long-term obligations that will be paid from governmental funds are recognized as a liability in the fund financial statements when due. Long-term obligations represent the District's future obligations or future economic outflows. The liabilities are reported as due in one year or due within more than one year in the Statement of Net Assets. Deferred Revenue Deferred revenues are reported when potential revenues do not meet both the measurable and available criteria for recognition in the current period. Deferred revenues also arise when resources are received by the School District before it has legal claim to them, as when grant monies are received prior to the incidence of qualifying expenditures. In subsequent periods, when both recognition criteria are met, or when the School District has legal claim to the resources, the liability for deferred revenues is removed and revenues are recorded. Equity Classifications (a) District-wide Statements In the District-wide statements there are three classes of net assets: Invested in capital assets, net of related debt - consists of net capital assets (cost less accumulated depreciation) reduced by outstanding balances of related debt obligations from the acquisition, construction or improvements of those assets. Restricted net assets - reports net assets when constraints placed on the assets are either externally imposed by creditors (such as through debt covenants), grantors, contributors, laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. Unrestricted net assets - reports all other net assets that do not meet the definition of the above two classifications and are deemed to be available for general use by the District. (b) Fund Statements Beginning with fiscal year ending June 30, 201 1, the School District implemented GASB Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions." This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government's fund balances more transparent. As summarized in Note 16, the beginning fund balances for the School District's governmental funds have been restated to reflect the above classifications. 25

NOTES TO BASIC FINANCIAL STATEMENTS The following classifications describe the relative strength of the spending constraints: Non-Spendable Fund Balance Includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Non-spendable fund balance includes the inventory recorded in the School Lunch Fund. Restricted Fund Balance This category includes amounts with constraints placed on the use of resources either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Generally, the District's policy is to use restricted resources only when appropriated by the Board of Education. When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the School District's policy concerning which to apply first varies with the intended use, and with associated legal requirements. The School District has established the following restricted fund balances: Unemployment Insurance Reserve - According to General Municipal Law 6-m, must be used to pay the cost of reimbursement to the State Unemployment Insurance Fund for payments made to claimants where the employer has elected to use the benefit reimbursement method. The reserve may be established by Board action and is funded by budgetary appropriations and such other funds as may be legally appropriated. Within sixty days after the end of any fiscal year, excess amounts may either be transferred to another reserve or the excess applied to the appropriations of the next succeeding fiscal year's budget. If the School District elects to convert to tax (contribution) basis, excess resources in the fund over the sum sufficient to pay pending claims may be transferred to any other reserve fund. This reserve is accounted for in the General Fund. Employee Retirement Reserve - According to General Municipal Law 6-r, must be used for financing retirement contributions. The reserve must be accounted for separate and apart from all other funds and a detailed report of the operation and condition of the fund must be provided to the Board. This reserve is accounted for in the General Fund. Reserve fo r Employee Benefits Accrued Liability - According to General Municipal Law 6-p, must be used for the payment of accrued employee benefit due an employee upon termination of the employee's service. This reserve may be established by a majority vote of the Board and is funded by budgetary appropriations and such other reserves and funds that may be legally appropriated. This reserve is accounted for in the General Fund. Reserve for Liability - This reserve is used to pay for liability claims incurred. The total amount accumulated in the reserve may not exceed 3% of the total annual budget. The reserve is accounted for in the General Fund. Reserve fo r Repairs - This reserve is used to accumulate funds through voter approval to finance future costs of major repairs to capital improvements or equipment. Expenditures from this reserve may be made only after a public hearing has been held. In an emergency, expenditures may be made from the reserve fund without a public hearing with approval of two-thirds of the Board of Education. The emergency expenditure must be repaid within the next two succeeding years. The reserve is accounted for in the General Fund. Reserve for Endowments and Scholarships - This reserve is used to account for various endowment and scholarship awards. This reserve is accounted for in the Fiduciary Fund. Capital Fund - This Fund is used to account for and report the financial resources that are restricted by a voter approved proposition for acquisition, construction, or major repair of capital facilities. 26

NOTES TO BASIC FINANCIAL STATEMENTS Debt Service Fund - This fund is used to account for and report the financial resources that are restricted to pay debt service. The funds include unused debt proceeds and interest and earnings on the temporary investment of debt proceeds. Unrestricted Resources When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the School District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the School District has provided otherwise in its commitment or assignment actions. Committed - Includes amounts that can only be used for the specific purposes pursuant to constraints imposed by formal action of the School District's highest level of decision making authority; i.e. the Board of Education. The School District has no committed fund balances as of June 30, 201 1. Assigned - Includes amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. All encumbrances other than in the Capital Fund are classified as Assigned Fund Balance in the respective fund. The amount appropriated for the subsequent year's budget of the General fund is also classified as Assigned Fund Balance in the General Fund. Unassigned - Includes all other net assets that do not meet the definition of the above classifications and are deemed to be available for general use by the School District. In other Governmental Funds, if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned, then it may be necessary to report negative unassigned Fund Balances in the respective fund. Order of Use of Fund Balance The District's policy is to apply expenditures against nonspendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year. For all funds, nonspendable fund balances are determined first and then restricted fund balances for specific purposes are determined. Committed and assigned fund balances are determine next, with any remaining fund balance reported as unassigned. 2. DIFFERENCES BETWEEN GOVERNMENTAL FUND STATEMENTS AND DISTRICT-WIDE STATEMENTS Due to the differences in the measurement focus and basis of accounting used in the governmental fund statements and the District-wide statements, certain financial transactions are treated differently. The basic financial statements contain a full reconciliation of these items. The differences result primarily from the economic resource management focus of the Statement of Activities, compared with the current financial resource management focus of the governmental funds. Total Fund Balances of Governmental Funds Compared To Net Assets of Governmental Activities Total fund balances of the School District's governmental funds differs from "net assets" of governmental activities reported in the Statement of Net Assets. This difference primarily results from the additional long-term economic focus of the Statement of Net Assets versus the solely current financial resources focus of the governmental fund Balance Sheet. Statement of Revenues, Expenditures, and Changes In Fund Balance Compared To Statement of Activities Differences between the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balance and the Statement of Activities fall into one of four broad categories. (a) Long-Term Revenue Differences Long-term revenue differences arise because governmental funds report revenues only when they are considered "available," whereas the Statement of Activities reports revenues when earned. Differences in long-term expenses arise because governmental funds report on a modified accrual basis, whereas the accrual basis of accounting is used on the Statement of Activities. 27

NOTES TO BASIC FINANCIAL STATEMENTS (b) Capital Related Differences Capital related differences include the difference between proceeds for the sale of capital assets reported on governmental fund statements and the gain or loss on the sale of assets as reported on the Statement of Activities, and the difference between recording an expenditure for the purchase of capital items in the governmental fund statements and depreciation expense on those items as recorded in the Statement of Activities. (c) Long-Term Debt Transaction Differences Long-term debt transaction differences occur because both interest and principal payments are recorded as expenditures in the governmental fund statements, whereas interest payments are recorded in the Statement of Activities as incurred, and principal payments are recorded as a reduction of liabilities in the Statement of Net Assets. (d) Employee Benefit Allocation Expenditures for employee benefits are not allocated to a specific function on the Statement of Revenues, Expenditures, and Changes in Fund Equity based on the requirements of New York State. These costs have been allocated based on total salary for each function. 3. STEWARDSHIP AND COMPLIANCE Fund Balance Limitations NYS Real Property Tax Law 1318 limits the amount of unexpended surplus funds a school district can retain to no more than 4% of the School District's budget for the General Fund for the ensuing fiscal year. Nonspendable and restricted fund balance of the General Fund are excluded from the 4% limitation. Amounts appropriated for the subsequent year and encumbrances are also excluded from the 4% limitation. At June 30, 2011, the School District had an unassigned fund balance of $562,892 or 3.3%, which is within the fund balance limit. Budgetary Procedures and Budgetary Accounting The School District administration prepares a proposed budget for approval by the Board of Education and the voters of the School District for the General Fund for which legal (appropriated) budgets are adopted. Appropriations are adopted at the program line item level. Appropriations established by the adoption of the budget constitute a limitation on expenditures (and encumbrances) which may be incurred. Appropriations lapse at the end of the fiscal year unless expended or encumbered. Encumbrances will lapse if not expended in the subsequent year. Supplemental appropriations may occur subject to legal restrictions, if the Board approves them because of a need that exists which was not determined at the time the budget was adopted. Budgets are adopted annually on a basis consistent with GAAP. Appropriations authorized for the year are increased by the amount of encumbrances carried forward from the prior year. The budget and actual comparison for the Special Revenue Funds (if any) reflects budgeted and actual amounts only for funds with legally authorized (appropriated) budgets. 4. CASH AND CASH EOUIV ALENTS Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. New York State statutes govern the School District's investment policies, as discussed previously in these notes. 28

NOTES TO BASIC FINANCIAL STATEMENTS As of June 30, 2011, $4,055,811 of the School District's total bank balances of $5,061,317 not covered by FDIC and were exposed to custodial credit risk and collateralized as follows: $ 4.055 81 1 Collateralized with securities held by an agent of the pledging financial institution in an account in the District's name. Restricted Cash and Cash Equivalents Restricted cash and cash equivalents of$i,265,128 in the General Fund represents the following: Description Retirement Contribution System Reserve Unemployment Insurance Reserve Employee Benefit Accrued Liability Reserve Liability Reserve Repair Reserve Total Amount $ 160,000 75,000 730,128 175,000 125.000 $---1265 128 Restricted Cash and Cash Equivalents of $485,154 in the Debt Service Fund represents funds restricted for debt service of outstanding deficit financing bonds. In addition, $2,284 shown as an amount due from the General Fund is also restricted for this purpose. Restricted cash at $16,615 in the Private Purpose Trusts are restricted to awards and scholarships in accordance with donor intent. 5. PARTICIPATION IN BOCES During the year, the School District was billed $1,685,637 for BOCES' administrative and program costs. Financial statements for the BOCES are available from the Onondaga, Cortland, and Madison BOCES' administrative office at 6820 Thompson Road, Syracuse, New York. 6. CAPITAL ASSETS Capital asset activity for the year ended June 30, 201 1, is as follows: Beginning Ending Balance Increases (Decreases) Balance Capital Assets Not Being Depreciated Land $ 425,550 $ $ $ 425,550 Construction in Progress 968,8 10 968,8 10 425,550 968,810 1,394,360 Capital Assets Being Depreciated Buildings and Improvements 30 597,223 30,597,223 Furniture, Equipment, and Vehicles 3,627,746 274,786 (185,1 32) 3,7 1 7,400 34,224,969 274,786 (1 85,132) 34,3 14,623 Accumulated Depreciation Buildings and Improvements 9,778,296 657,892 10,436, 188 Furniture, Equipment, and Vehicles 2,530,672 263,823 (185,132) 2,609,363 12,308,968 921,715 (185,132) 13,045,551 Net Capital Assets $ 22 34 1 $ 321,881 $ $ 22 132 29

NOTES TO BASIC FINANCIAL STATEMENTS Depreciation expense of $921,715 is charged as follows: 7. SHORT-TERM DEBT Function/Program General Support Instruction Pupil Transportation Food Service Program $ 567,633 127,521 215,487 11,074 Total Depreciation $,=92Ib>,bll,.!. The changes in short-term debt and bond anticipation notes during the year are as follows: == Balance at Balance at Descript ion 07/01110 Issued Paid 06/3011 1 BAN-Renovations (dated 2/25111; 1.21 %) $ $ 1.700.000 $ $ 1,700,000 Total $ =- ==== $ 1 700 000 $ $ 1.700 000 Interest on short-term debt for the year was composed of: Interest Paid Plus: Interest Accrued in the Current Year Total Expense $ o 8,571 $==d!8, 5 7,!,1 8. NONCURRENT LIABILITIES A summary of the balances and activity of noncurrent liabilities is as follows: Beginning Ending Balance Additions Deductions Balance Bonds Payable Serial and Statutory Installment Bonds $ 14,571,250 $ 270,050 $ 1,734,250 $ 13, 107,050 Refunding Bond Issuance Cost (76,500) (8,500) (68,000) Other Liabilities Compensated Absences 630,024 33,822 596,202 OPEB Liability 6,463,030 3,1 38,454 852.297 8,749,187 Total Noncurrent Liabilities $ 21,581,8Q1 $ 3,4Q8504 $ 2,61 1,869 $ 22,384,432 Amounts Due Within One Year $ 1,812,050 8,500 $ 1,82Q,55Q The General Fund has typically been used to liquidate noncurrent liabilities through budget appropriations. Serial and Statutory Installment Bonds The School District borrows funds on a long-term basis for the purpose of financing acquisitions of land and equipment and construction of buildings and improvements. This policy enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets. These long-term liabilities for governmental funds are maintained separately and represent a reconciling item between the fund and District-wide statements. Interest associated with long-term debt is recorded as an expenditure when such amounts are due. 30

NOTES TO BASIC FINANCIAL STATEMENTS The fo llowing is a statement of serial bonds outstanding: Date of Original Original Payable fromldescrigtion Issue Amount General Fund Refunding Bond 2003 04/02 $ 3,240,000 2001 Construction 12/03 $ 7,255,000 2001 Construction 06/04 $ 2,270,000 2001 Construction 06/04 $ 4,299,724 200 1 Construction 10/05 $ 65,276 2005 Deficit Financing 12/05 $ 1,004,573 2008 Statutory Installment Bond 07/08 $ 682,000 2009 Statutory Installment Bond 07/09 $ 183,250 2010 Refunding Bond 04110 $ 2,595,000 2010 Statutory Installment Bond 07110 $ 270,050 Total Date of Final Maturity 2013 2022 2016 2022 2021 2015 2014 2015 2019 2015 Interest Rate (%) 3.0-4.6 3.6-3.7 3.7-3.8 4.1-4.3 5.0-5.8 4.0-4.1 3.6 3.0 2.0-3.0 3.0 Outstanding Amount $ 705,000 5,115,000 2,975,000 1,080,000 50,000 440,000 327,000 150,000 1,995,000 270,050 $ 13,107,050 Interest on long-term debt for the year was composed of: Interest Paid Less: Interest Accrued in the Prior Year Plus: Interest Accrued in the Current Year Plus: Amortization of Bond Issuance Cost Total Expense $ Principal and interest payments due on serial bonds debt is as follows: 2012 2013 2014 2015 2016 2017-2021 2022 Total Prior-Year Defeasallce of Debt Principal $ 1,812,050 1,809,000 1,343,000 1,329,000 1,224,000 4,699,000 891.000 $ 13,107"Q5Q Interest $ 483,618 416,152 347,3 12 298,214 249,369 652,430 24,508 $ 2.471 603 In prior years, the School District defeased certain general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's financial statements. On June 30, 201 1, $2,845,000 of bonds outstanding are considered defeased. Debt Limit Pursuant to the Local Finance Law, the School District has the power to contract indebtedness for any school district purpose authorized by the legislature of the State of New York provided the aggregate principal amount thereof shall not exceed ten per centum of the full valuation of the taxable real estate of the School District and subject to certain enumerated deductions such as State aid for building purposes. The Constitutional and statutory method form detennining full valuation consist of taking the assessed valuation of taxable real estate for the last completed assessment roll and applying thereto the ratio (equalization rate) which such assessed valuation bears to the full valuation; such ratio is detennined by the State Board of Real Property Services. The Legislature also is required to prescribe the manner by which such ratio shall be determined by such authority. 31

NOTES TO BASIC FINANCIAL STATEMENTS The following table sets forth the computation of the debt limit of the School District and its debt contracting margin: Full Valuation of Taxable Real Property Debt Limit (10% of Full Valuation) $ 222,953,321 29,295,340 Outstanding Indebtedness (Principal Only) Bonds Bond Anticipation Note $ 13,107,050 1.700,000 Total Net Indebtedness Debt Contracting Margin $ 14,807,050 $ 14,488,22Q Percentage of Debt Contracting Power Exhausted The above debt limit calculation does not include any applicable exclusion for State Aid to be received on debt service payments. Compensated Absences Compensated absences represent the value of earned and unused portion of the liability for compensated absences. 9. PENSION PLANS The School District participates in the New York State Employees' Retirement System (NYSERS) and the New York State Teachers' Retirement System (NYSTRS). These are cost-sharing multiple employer public employee retirement systems. The Systems offer a wide range of plans and benefits, which are related to years of service and final average salary, vesting of retirement benefits, death, and disability. The New York State Teachers' Retirement Board administers NYSTRS. The System provides benefits to plan members and beneficiaries as authorized by the Education Law and the Retirement and Social Security Law of the State of New York. NYSTRS issues a publicly available financial report that contains financial statements and required supplementary information for the System. The report may be obtained by writing to NYSTRS, 10 Corporate Woods Drive, Albany, New York 12211-2395. NYSERS provides retirement benefits as well as death and disability benefits. New York State Retirement and Social Security Law governs obligations of employers and employees to contribute and benefits to employees. The System issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to NYSERS, Governor Alfred E. Smith State Office Building, Albany, New York 12244. The Systems are noncontributory, except for employees who joined the Systems after July 27, 1976, who contribute 3% of their salary, except that employees in the Systems more than ten years are no longer required to contribute. For NYSERS, the Comptroller certifies the rates expressed as proportions of members' payroll annually, which are used in computing the contributions required to be made by employers to the pension accumulation fund. Pursuant to Article 1 1 of the Education Law, the New York State Teachers' Retirement Board establishes rates annually for NYSTRS. The School District is required to contribute at an actuarially determined rate. The School District contributions made to the Systems were equal to 100% of the contributions required for each year. The accrued amount for ERS at June 30, 201 1, and the required contributions for the current year and two preceding years were: For the Years Ended June 30, 2012 2011 2010 2009 ERS District Contribution Rate 15.9-21.5% 11.3-14.0% 8.00-10.70% 8.10-J.O.80% District Contributions $ 66,241 $ 184,886 $ 117,282 $ 130,70 I TRS District Contribution Rate 8.62% 6.19% 7.63% District Contributions $ 469,1 56 $ 376.158 $ 446.720 32

NOTES TO BASIC FINANCIAL STATEMENTS 10. POSTRETIREMENT HEALTH CARE BENEFITS (a) Plall Descriptioll The School District administers the Payment of Postretirement Healthcare Benefits for Retirees of the School District (the Plan) as a single-employer defined benefit Other Postemployment Benefit plan. The Plan provides for continuation of medical and dental insurance benefits for certain retirees and their spouses and can be amended by action of the School District subject to applicable collective bargaining and employment agreements as follows: Plan Types - The School District provides medical and dental benefits to its eligible retirees. The medical benefits are provided through fully insured plans that are sponsored by a regional health insurance consortium. The dental benefits are based on an annual flat rate reimbursement from the School District. Eligibility - Employees are required to reach age 55 and provide 15 years of service to the District to qualify for medical and dental benefits. Employees hired before July 1, 1989 that have reached age 55 and served 15 years will also get reimbursed for Medicare Part B. Benefit Cost Sharing - The School District pays 100% of the retiree's benefits for medical insurance. The school will reimburse retirees for up to $100 of dental expenses. In addition, employees hired before July 1, 1989 also receive Medicare Part B reimbursement. Spouse Benefit - The School District contributes towards the cost of eligible spouses. Spouses receive medical benefits and are required to contribute 25% to cover the costs. In addition, spouses of employees hired before July 1, 1989 also receive Medicare Part B reimbursement. Surviving Spouse Benefit - The spouse will continue to receive medical benefits after the death of a retiree. However, they will not receive reimbursement for Medicare Plan B. The Plan does not issue a stand alone publicly available financial report since there are no assets legally segregated for the sole purpose of paying benefits under the Plan. (b) Funding Policy The obligations of the Plan members, employers, and other entities are established by action of the School District pursuant to applicable collective bargaining and employment agreements. The required contribution rates of the employer and the members vary depending on the applicable agreement. For the year ended June 30, 2011, the School District's Plan contributions ranged from 75% to 100% of the required annual premiums. The District's annual other post-employment benefit (OPEB) cost (expense) for each plan is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The employer currently contributes enough money to the Plan to satisfy current obligations on a pay-as-you go basis. The costs of administering the Plan are paid by the School District. (c) Anllual OPEB Cost Normal Cost Amortization of VAL Interest ARC Interest on OPEB Obligation Adjustment to ARC OPEB Expense $ 201 1 1,561,795 1,677,769 41.044 3,280,608 164,807 306,961 3 138.454 33

NOTES TO BASIC FINANCIAL STATEMENTS (d) Reconciliation of Net OPEB Obligation Net OPEB Obligation at the Beginning of the Year OPEB Expense Net OPEB Contributions Made During the Fiscal Year Net OPEB Obligation at the End of the Year Percentage of Annual OPEB Expense Contributed $ $ 20 I I 6,463,030 3,138,454 (852,297) 8,749.187 27.2% (e) Trend Information Fiscal Year Ending June 30, 2009 June 30, 2010 June 30, 201 1 Annual Net OPEB Expense $ 4,254,700 $ 3,411,555 $ 3,138,454 OPEB Expense Contributed $ 706,622 $ 496,603 $ 852,297 % of Expense Contributed 16.6% $ 14.6% $ 27.2% $ Net OPEB Obligation 3,548,078 6,463,030 8,749,187 (f) Funding Status Actuarial Accrued Liability (AAL) Actuarial Value of Assets Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio (Assets as a Percentage of AAL) Annual Covered Payroll UAAL as a Percentage of Covered Payroll $ 35,772,755 0 $ 35,112,155 0.00% $ 7,643,189 468.03% (g) Actuarial Methods and Assumptions Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. For this reason, the results in this report should be viewed as estimates. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The projections of benefits are based on the types of benefits provided under the substantive plan at the time of the valuation date and on the pattern of cost-sharing between the employer and Plan members. In addition, the projections do not explicitly incorporate the potential effects of legal or contractual funding limitations on the pattern of cost-sharing between the employer and Plan members in the future. The actuarial calculations reflect a long-term perspective; actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The actuarial measurement date was dated July 1, 2010. Effective July 1, 2008, the School District's other postemployment benefit (OPEB) cost for all employee health insurance benefits is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The fo llowing table shows the components of the School District's annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the School District's net OPEB obligation. (h) Health Care Trend Factors Medical care costs are assumed to increase in accordance with the following schedule: Year Trend 2012 9.0% 2013 8.0% 2014 7.0% 2015 6.0% 2016 5.0% 34

NOTES TO BASIC FINANCIAL STATEMENTS (i) Additional Information Actuarial Valuation Date Actuarial Cost Method Amortization Method Amortization Period Amortization Period (Years) Amortization Discount Method Used to Determine Actuarial Value of Assets Projected Salary Increase Fiscal year that the Rate Reaches the Ultimate Trend Rate July 1,2010 Projected Unit Credit Level Dollar Single Amortization Period 30 2.55% N/A 0% 2016 11. INTERFUND TRANSACTIONS Fund General Special Aid Capital Projects Debt Service Trust and Agency School Lunch Total Receivable $ 280,422 128,789 2,284 522 57.459 $ 469.476 Interfund Payable $ 186,770 257,089 2,284 4,266 19,067 $ 469.476 Revenues $ 255,776 2,423 20,000 $ 278.199 Interfund Expenditures $ 22,423 255,776 $ 278,199 Interfund Receivables and Payables are considered temporary. The School District intends to repay the amounts within the next fiscal year. The School District typically loans resources between funds for the purpose of mitigating the effects of transient cash flow lssues. The School District made a transfer of $20,000 from the General Fund to the School Lunch Fund to supplement the School Lunch operations. The School District made a transfer of $255,776 from the Debt Service Fund to the General Fund to reduce debt service expense. The School District made a transfer of $2,423 from the General Fund to the Special Aid Fund for State Aid reductions. 12. FUND BALANCE The following is the disaggregation of the fund balance that is reported in summary on the Governmental Fund's Balance Sheet: NonspendabJe School Lunch Inventory General Fund $, -- School Lunch Fund $,_-----"-'9,"'-'99"-"6 Debt Service Fund $,--- Capital Fund $._-- Total $._9,99,--,,-6 Restricted Unemployment Insurance Retirement Contribution Reserve Employee Benefit Liability Reserve Repair Reserve Debt Service Fund Total Restricted 75,000 160,000 730,128 175,000 125,000 1,265,128 487.43 8 487.43 8 75,000 160,000 730,128 175,000 125,000 487.43 8 1,752,566 35

NOTES TO BASIC FINANCIAL STATEMENTS Assigned School Lunch General Fund: General Support Instruction Pupil Transportation Appropriated Fund Balance Total Assigned School Debt General Lunch Service Fund Fund Fund 36,201 55,214 12,492 13,970 962,452 1,044,128 36,201 Capital Fund Total 36,201 55,214 12,492 13,970 962,452 1,080.329 Unassigned (Deficit) 562,892 (959,484) (3 96,592) Total Fund Balance $ 2,872,148 $ 46,197 $ 487.438 $ (959.484) $ 2.446,299 The following is a sunmlary of the change in selected general fu nd restricted fund balance during the year ended June 30, 201 1: Reserve General Fund Employee Benefits Accrued Liability Employee Retirement System Repair Reserve Unemployment Insurance Liability Reserve Total General Fund Balance at 07/01110 $ 794,488 160,000 125,000 105,000 175,000 $ 1.359.488 $ $ (Decrease) in Reserves (64,360) (30,000) (24,360) Balance at 06/30/11 $ 730,128 160,000 125,000 75,000 175,000 $ 1,26.5.1 28 13, PRIVATE PURPOSE TRUST FUNDS - DONOR-RESTRICT.ED ENDOWMENTS The School District administers endowment funds, which are restricted by the donor for the purposes of scholarships. The School District authorizes expenditures from donor-restricted endowments in compliance with the wishes expressed by the donor, which varies among the unique endowments administered by the School District. 14, RISK MANGEMENT General In/ormation The Fabius-Pompey Central School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; injuries to employees; eltors and omissions and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years, Workers ' Compensation COllsortium The School District participates in a Workers' Compensation Consortium for its employees, Benefits are provided through selffunding by the individual participants through the purchase of insurance and through the purchase of "stop-loss" coverage. A member may withdraw from the Plan by submitting a notice of withdrawal by May 1 preceding the school year of withdrawal. Upon withdrawal, the Board will determine amounts owed by the member or amounts that may be due to the withdrawing member. The School District paid premiums to the Workers' Compensation Consortium which totaled $97,743 for the year ended June 30, 20 11. 36

NOTES TO BASIC FINANCIAL STATEMENTS Health Insurance Consortium The School District participates in a non-risk retained public entity risk pool for its employee health insurance coverage. A member of the Health Consortium may withdraw from the plan by submitting a notice of withdrawal by May 1 preceding the school year of withdrawal. Upon withdrawal, the Board will determine amounts owed by the member or amounts that may be due to the withdrawing member. If the Plan's assets were to be exhausted, members would be responsible for the Plan's liabilities including additional assessments if necessary. Premiums paid to the health consortium totaled $2,281,956 for the year. ended June 30, 201 1. Financial statements for both risk pools are available at the OCM BOCES business office, 6820 Thompson Road, Syracuse, New York, 13221. 15. CONTINGENCIES AND COMMITMENTS Potential Grantor Liability Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the Federal and State governments. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amounts, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the School District expects such amounts, if any, to be immaterial. Construction Commitments As of June 30, 201 1, the voters and the Board of Education authorized $16,958,865 in capital projects. Through June 30, 201 1, the School District has cumulative project expenditures of $15,501,749 with the remaining in outstanding constmction commitments. Encumbrances Encumbrance accounting is employed as an extension of formal budgetary integration for the General Fund, Special Revenue Funds, and Capital Projects Fund. At June 30, 201 1, certain amounts which were previously restricted, committed, or assigned for specific purposes have been encumbered in the governmental funds. Encumbrances included in governmental fund balances are as follows: Assigned General Fund General Support $ 55,214 Instmction 12,492 Pupil Transportation 13,970 Total Encumbrances $ 16. RESTATEMENT OF PRIOR YEAR'S FUND BALANCE 81 616 Restricted Capital Fund Total $ 1,473,650 $ 1,528,864 12,492 13,970 $ 1,413,65Q $ 1.555 3 Beginning fund balance for the School District has been restated to reflect the fund balance classifications in accordance with GASB 54, as follows: School Debt General Lunch Service Capital Fund Fund Fund Fund Total Nonspendable $ $ 8,374 $ $ $ 8,374 Restricted 1,359,488 736,418 6,651 2,102,557 Assigned 817,359 32,665 850,024 Unassigned (Deficit) 665,5 12 Total $ 2,842,352 $ 41,Q32 $ 736,418 $ 6,651 $3,626,461 665,5 12 37

NOTES TO BASIC FINANCIAL STATEMENTS 17. DEFICIT FUND BALANCE The Capital Fund had an unassigned fund deficit of $959,484 at June 30, 2011. This deficit is due to the issuance of a $ 1,700,000 BAN in the current year for the capital project authorized in 2009. The BAN proceeds are expended, but the liability remains until permanent financing is issued or payments are made from General Fund appropriations. 18. SUBSEQUENT EVENT On July 25, 201 1, the School District issued $2,415,000 in a Bond Anticipation Note (BAN) bearing an interest rate of 1.25%. The BAN matures on July 25, 2012, and were issued to finance building renovations. 38

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - GENERAL FUND Final Budget Original Final Variance With Budge t BudEe t Actual Actual Revenues Local Sources Real Property Taxes $ 6, 1 52,331 $ 6,152,331 $ 6, 1 38,430 $ (13,901) STAR and Other Real Property Tax Items 1,346,933 1,346,933 1,338,017 (8,916) Nonproperty Tax Items 107,000 107,000 159,843 52,843 Charges for Services 29,285 29,285 39,859 10,574 Use of Money and Property 39,000 39,000 31,339 (7,661) Sale of Property and Compensation for Loss 1,645 1,645 Miscellaneous 101,500 101,500 89,622 (1 1,878) State Aid 7,583,544 7,583,544 7,789,328 205,784 Federal Aid 383,301 383,3 01 373 301 (1 0,000) Total Revenues 15,742,894 15,742,894 15,961,384 218,490 Other Financing Sources Transfers from Other Funds 216,235 216,235 255,776 39,541 Appropriated Fund Balance 817,3 60 S 1 7,3 60 (8 1 7,3 60) Total Revenues and Other Financing Sources $ lm62 lmm 16,2 17,160 $ (mml Expenditures Final Budget Variance With Original Final Year-End Actual Budget Budge t Actual Encumbrances And Encumbrances General Support Board of Education $ 12,282 $ 11,520 $ 9,223 $ $ 1,803 Central Administration 188,633 195,000 193,667 1,333 Finance 243,704 250,724 245,219 1,866 3,639 Staff 67,636 72,358 70,609 1,749 Central Services 1,441,068 1,371,416 1,182,072 52,854 136,490 Special Items 147,3 1 147,856 146,3 74 1,482 Total General Support 2.100,651 2048 8:Z4 1,847,164 55,214 146,496 Instruction Instruction, Administration, and Improvement 330,283 329,357 318,028 255 11,074 Teaching - Regular School 4,467,984 4,369,002 4,246,256 3,460 119,286 Programs for Children With Special Needs 1,180,252 1,251,952 1,223,963 27,989 Occupational Education 160,390 160,390 159,390 1,000 Teaching - Special School 109,038 122,274 112,292 9,982 Instructional Media 416,284 450, 120 441,398 2,83 1 5,891 Pupil Services 709,838 735,667 682,1 52 5,946 47,569 Total Instruction 7,3 74,069 7,418,762 7,183,479 12,492 222,:Z9 1 Pupil Transportation 1,078,327 1,132,169 1,090,5 19 13,970 27,680 Community Services 2,850 2,850 2,217 633 Employee Benefits 3,927,843 3,878,589 3,760,176 118,413 Debt Service - Principal 1,734,250 1,734,250 1,734,250 Debt Service - Interest 538,496 538,572 547.143 (8,571) Total Expenditures 16,756,489 16,754,066 16,164,948 81,676 507,442 494 Other Financing Uses Transfers to Other Funds 20,000 22,423 22,423 Total Expenditures and Other Financing Uses $ l!il1fim III ZZ 4B2 16,1 87,371 Im QZ 4, Net Change in Fund Balance 29,789 Fund Balance - Beginning of Year 2,842,359 Fund Balance - End of Year $ 2 an 148 Notes to Required Supplementary Information: The School District administration prepares a proposed budget for approval by the Board of Education fo r the General Fund, the only fund with a legally adopted budget. The budget is adopted annually on a basis consistent with GAAP. Appropriations authorized for the year are increased by the amount of encumbrances carried forward from the prior year. 39

SCHEDULES OF FUNDING PROGRESS OF OTHER POSTEMPLOYMENT BENEFITS Fiscal Year Ending Actuarial Actuarial Accrued Unfunded Value of Liability-Projected Actuarial Accrued Assets Unit Credit jabiji (VAAL) Funded Ratio Covered Pa}'rol1 (a) (b) (b)-(a) (a)/(b) (c) UAAL as % of Covered Pa}'rol1 [(b)-(a»)/(c) June 30, 2009 $ June 30, 201O $ June 30, 201 1 $ $ 40,263,188 $ 40,263,188 $ 36,936,634 $ 36,936,634 $ 35,772,755 $ 35,772,755 0% 0% 0% $ 6,079,728 $ 6,61 8,000 $ 7,643,189 662.25% 558.12% 468.03% 40

SCHEDULES OF CHANGE FROM ORIGINAL BUDGET TO REVISED BUDGET AND USE OF UNASSIGNED FUND BALANCE - GENERAL FUND Change from Adopted Budget to Revised Budget Adopted Budget $ Add: Prior Year's Encumbrances Original and Final Budget $ 16,629,129 147,360 16776489 Use of Unassigned Fund Balance Unassigned Fund Balance - As of the Beginning of the Year $ Less: Assigned Fund Balance Used For Subsequent Year's Appropriations Unassigned Fund Balance - As of the Beginning of the Year $ 1,335,512 670.000 665.512 41

SCHEDULE OF PROJECT EXPENDITURES - CAPITAL PROJECTS FUND Ex enditures Methods offinancinll Fund Original Authorization Revised Authorization Prior Current Unexpended Proceeds of Years Year Total Balance Obligations Federal and Local Balance (Deficit) State Aid Sources Total June 30, 2011 PROJECT TITLE District Renovations 2000 $ 14,410,000 $ 14,425,865 HVAC 2007 118,000 118,000 2011 Excel Project 2.415.000.,41 5.000 Total Projects 16943 000 16958 865 $ 14,425,162 $ $ 14,425,162 $ 703 $ 14,41 0,000 107,777 107,777 10,223 968.810 968.810 1.446,190 14 532 939 968,8 10 15,501.749 1.457 116 14.410,000 $ $ 5,907 $ 14,415,907 $ (9,255) 14,514 103,486 118,000 10,223 (968.810} 14 514 109,3 93 14 533 907 (967 842) Buses Buses - 2011 270,050 270,050 Buses - 2010 183,250 183,250 Buses - 2009 270,000 270,000 Buses - 2008 265,000 265,000 Buses - 2007 280,000 280,000 Buses -2006 169,625 168,665 Buses - 2005 145.000 140,935 Total Buses 1582 925 1 577 900 267,375 267,375 270,050 183,239 183,239 II 183,250 268,939 268,939 1,061 269,200 264,614 264,614 386 159,000 279,910 279,910 90 224,000 168,665 168,665 169,625 140 935 140,935 29,800 1,306,3 02 267,375 1573 677 1.548 1,304,925 270,050 2,675 183,250 II 269,200 261 106,000 265,000 386 55,910 279,910 169,625 960 115,2 00 145,000 4.065 277,1 10 1,582,035 8.358 Totals I,a 1 2m I 9,41 I ;;lj!i 15 11 oz 4jl!i 14 2 S In1:l2;15 S I 1 4 J!i Q Hi 115 942 '2 2 l 42

SCHEDULE OF CERTAIN REVENUES AND EXPENDITURES COMPARED TO ST-3 DATA Code ST-3 Amount Audited Amount Revenues Real Property Taxes A -1001 $ 6,138,430 State Aid AT-3999 $ 7,789,328 Federal Aid AT-4999 $ 373,301 Total Revenues* AT-5999 $ 16,217,161 $ 6, 138,430 $ 7,789,328 $ 373,301 $ 16,217,160 Expenditures General Support* AT-1999 $ 1,847,162 Pupil Transportation AT-5599 $ 1,090,519 Debt Service - Principal AT-9798.6 $ 1,734,250 Debt Service - Interest* AT-9798.7 $ 547,142 Total Expenditures* AT-9999 $ 16,187,372 $ 1,847,164 $ 1,090,519 $ 1,734,250 $ 547,143 $ 16,187,371 * Differences due to Rounding 43

INVESTMENT IN CAPITAL ASSETS, NET OF RELATED DEBT Capital Assets, Net $ 22,663,432 Add: Capital Fund Unspent Bond Proceeds Serial Bond for Deficit Financing 1,236,275 440,000 1,676,275 Deduct: Bond Anticipation Note Short-Term Portion of Bonds Payable Serial Bonds Payable 1,700,000 1,812,050 11,227,000 14,739,050 Investment in Capital Assets, Net of Related Debt $ 2,6QQ 651 44

DArcangelo&Co,LLP Certified Public Accountants & Consultants 200 E. Garden St., P.O. Box 4300, Rome, N.Y. 13442-4300 315-336-9220 Fax: 315-336-0836 Report on Internal Control Ovc." Financial Repo rting and on Compliance and OHler Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Board of Education Fabius Pompey Central School District Independent Auditor's Report We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Fabius Pompey Central School District, as of and for the year ended June 30, 201 1, which collectively comprise the Fabius Pompey Central School District's basic financial statements and have issued our report thereon dated September 1, 201 1. 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 ComptrolIer General of the United States. Internal Control Over Financial Reporting Management of Fabius Pompey Central School District is responsible for establishing and maintaining internal controls over financial reporting. In planning and performing our audit, we considered Fabius Pompey Central School District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Fabius Pompey Central School District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Fabius Pompey Central School District's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether Fabius Pompey Central School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the Fabius Pompey Central School District, in a separate letter dated September 1, 201 1. This report is intended solely for the information and use of the Board of Education, management, New York State Education Department, and the New York State Comptroller's Office, and Federal and other awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. tl. 4;. L-(... i> September 1, 201 1 Rome, New York Mid-Huclson Utica!Rome/Oneicia Westchester 45

DArcangelo&Co,LLP Certified Public Accountants & Consultants 200 E. Garden St., P.O. Box 4300, Rome. N.Y. 13442-4300 315-336-9220 Fax: 315-336-0836 Independent Auditor's Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Comoliance in Accordance With OMB Circular A-133 Board of Education Fabius Pompey Central School District Compliance Independent Auditor's Report We have audited the Fabius Pompey Central School District's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Fabius Pompey Central School District's major Federal programs for the year ended June 30, 201 1. Fabius Pompey Central School District's major Federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Fabius Pompey Central School District's management. Our responsibility is to express an opinion on Fabius Pompey Central School District's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A- 133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about Fabius Pompey Central School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Fabius Pompey Central School District's compliance with those requirements. In our opinion, Fabius Pompey Central School District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 201 1. Internal Control Over Compliance Management of the Fabius Pompey Central School District, is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Fabius Pompey Central School District's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Fabius Pompey Central School District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify anv. d neficienc.ies in internal contr t o] Qv r compliance that we consider to be material l'vn l'!uclson ULlca; Kome;unelC a wes,cflestel wea kn esses, as d e fi me d a b ove. 46

DArcangelo&Co,LLP Certified Public Accountants & Consultants This report is intended solely for the information and use of the Board of Education, management, New York State Education Department, and the New York State Comptroller's Office and Federal and other awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. O' Le., September 1, 20 I I Rome, New York 47

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Federal Grantor/Pass-Through Grantor/Program Title Federal CFDA Number Current Year Expenditures U.S. Department of Agriculture (Passed Through the State Education Department of the State of New York) School Breakfast Program National School Lunch Program Cash Assistance Subtotal National School Lunch Program (Noncash) 10.553 10.555 10.555 $ 20,367 81,925 102,292 20,102 Total U.S. Department of Agriculture 122,394 U.S. Department of Education (Passed Through the State Education Department of the State of New York) Title I Grants to Local Educational Agencies Special Education - Grants to States, (IDEA, Part B) Special Education - Preschool Grants, (IDEA Preschool) Special Education - Grants to States (IDEA Part B), Recovery Act Educational Technology State Grants, (Title IID) Special Education-Preschool Grants (IDEA Preschool), Recovery Act State Fiscal Stabilization Fund (SFSF) Education State Grants, Recovery Act Improving Teacher Quality State Grants, (Title IIA) Education Jobs Fund 84.010 84.027 84.173 84.391 84.3 18 84.392 84.394 84.367 84.410 112,061 202,650 2,072 95,102 910 4,419 373,301 36,078 312.452 Total U.S. Department of Education 1,139,045 Total Federal Financial Assistance $ 1,261,132 See Notes to Schedule of Expenditures of Federal Awards and Independent Auditor's Report. 48

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 1. SIGNIFICANT ACCOUNTING POLICIES Organization The accompanying Schedule of Expenditures of Federal Awards represents all Federal awards administered by the Fabius Pompey Central School District. The School District's organization is defined in Note 1 to the School District's basic financial statements. Basis of Accounting The expenditures in the accompanying schedule are presented on an accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements Food Donation Non-monetary assistance is reported in the schedule at fair market value of the food commodities received. At June 30, 201 1, the School District had food commodities totaling $ 1,995 in inventory. Cluster Programs The following programs are identified by "OMB Circular A-133 Compliance Supplement" to be part of a cluster of programs: U.S. Department of Agriculture Nutrition Cluster CFDA #10.553 School Breakfast Program CFDA #10.555 National School Lunch Program U.S. Department of Education Special Education Cluster CFDA #84.027 Special Education - Grants to States (IDEA, Part B) CFDA #84. 173 Special Education - Preschool Grants (IDEA Preschool) CFDA #84.391 Special Education - Grants to States (IDEA, Part B), Recovery Act CFDA #84.392 Special Education - Preschool Grants (IDEA, Preschool), Recovery Act 49

DArcangelo&Co,LLP Certified Pu lic Accountants & Consultants FABIUS POMPEY CENTRAL SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS - FEDERAL COMPLIANCE REQUIREMENTS Summary of Auditor's Results (d) (l)(i) Type of Financial Statement Opinion Unqualified (d) (l)(ii) Were there any material control weakness conditions No reported at the financial statement level (GAGAS)? (d) (J)(ii) Were there any other significant deficiencies reported at the No financial statement level (GAGAS)? (d) (l)(iii) Was there any reported material noncompliance at the No financial statement level (GAGAS)? (d) (l)(iv) Were there any material internal control weakness No conditions reported for major Federal programs? (d) (J)(iv) Were there any other significant deficiencies reported for No major Federal programs? (d) (J)(v) Type of Major Programs' Compliance Opinion Unqualified (d) (J)(vi) Are there any reportable findings under.510? No (d) (J)(vii) Major Programs (list): U.S. De ru:tment of Education CFDA #84.394 State Fiscal Stabilization Fund Education State Grants, Recovery Act CFDA #84.410 Education Jobs Fund; Special Education Cluster CFDA #84.027 Special Education - Grants to States (IDEA, Part B); CFDA #84. 173 Special Education - Preschool Grants (IDEA, Preschool); CFDA #84.391 Special Education - Grants to States (IDEA, Part B), Recovery Act CFDA #84.392 Special Education - Preschool Grants (IDEA, Preschool), Recovery Act ( d) (J)(viii) Dollar Threshold: Type A \B Programs Type A: > $ 300,000 Type B: all others (d) (J)(ix) Low Risk Auditee? No Findings - Financial Statement Audit None noted. Findings and Questioned Costs - Major Federal Award Programs None noted. 50