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FinancialStatements

WestChesterArea School District

WestChester,Pennsylvania

June 30, 2005

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TABLE OF CONTENTS

Title Page No.

independent Auditors’ Report on Financial Statements 1-2

Management’s Discussion and Analysis 3-14

BASIC FINANCIAL STATEMENTS

Government- Wide Financial Statements:

Statement of Net Assets 15

Statement of Activities16

Fund Financial Statements:

Balance Sheet - Governmental Funds 17

Reconciliation of the Governmental Funds Balance Sheetto the Statement of Net Assets 18

Statement of Revenues, Expenditures, and Changes inFund Balances - Governmental Funds 19

Reconciliation of the Governmental Funds Statement ofRevenues, Expenditures, and Changes in Fund Balancesto the Statement of Activities 20

Statement of Net Assets - Proprietary Funds 21

Statement of Revenues, Expenses, and Changes in FundNet Assets - Proprietary Funds 22

Statement of Cash Flows - Proprietary Funds 23

Statement of Fiduciary Net Assets 24

Statement of Changes in Fiduciary Net Assets 25

Notes to the Financial Statements 26-42

RequIred Supplementary In formation:

Budgetary Comparison Schedule - General Fund 43

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INDEPENDENT AUDITORS REPORT

Board of School DirectorsWest Chester Area School DistrictWest Chester, Pennsylvania

We have audited the accompanying financial statements of the governmental activities, thebusiness-type activities, each major fund, and the aggregate remaining fund information of West ChesterArea School District as of and for the year ended June 30, 2005, which collectively comprise the SchoolDistrict’s basic financial statements as listed in the table of contents. These financial statements are theresponsibility of the School District’s management. Our responsibility is to express opinions on thesefinancial statements based on our audit.

We conducted our audit in accordance with U.S. generally accepted auditing standards and thestandards applicable to financial audits contained in GovernmentAuditing Standards, issued by theComptroller General of the United States. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles usedand the significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects,the respective financial position of the governmental activities, the business-type activities, each majorfund, and the aggregate remaining fund information of West Chester Area School District as of June 30,2005, and the respective changes in financial position and cash flows, where applicable, thereof for theyear then ended in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report datedOctober 17, 2005, on our consideration of West Chester Area School District’s internal control overfinancial 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 scopeof 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. Thatreport is an integral part of an audit performed in accordance with GovernmentAuditingStandardsandshould be considered in assessing the results of our audit.

2 Campus Boulevard, Suite 220 11 9 North High StreetNewtown Square, PA 1 9073-3270 West Chester, PA 1 9380-3012Tel:610-353-4610 .Fax: 610-3S3-6948 Tel: 610-738-4206 + Fax: 610-738-3917

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The management’s discussion and analysis and budgetary comparison information on pages 3through 14 and 43, are not a required part of the basic financial statements but are supplementaryinformation required by U.S. generally accepted accounting principles. We have applied certain limitedprocedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation of the required supplementary information. However, we did not auditthe information and express no opinion on it.

Rainer & CompaOctober17, 2005

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(Dainer&Comvan’t

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCert~i:dPub~cAccountants Management’s Discussion and Analysis

June 30, 2005

The discussion and analysis of West Chester Area School District’s financial performance providesan overall review of the District’s financial activities for the fiscal year ended June 30, 2005. The intent ofthis discussion and analysis is to look at the District’s financial performance as a whole. Readers shouldalso review the transmittal letter, notes to the financial statements and financial statements.

Management’s Discussion and Analysis (MD&A) is an element of the new reporting modeladopted by the Governmental Accounting Standards Board (GASB) in their Statement Number 34, BasicFinancial Statements - and Management’s Discussion and Analysis - for State and Local Governmentsissued June 1999. Comparative information between the current year and the prior year is required tobe presented in the MD&A.

FINANCIAL HIGHLIGHTS

• The trends of prior years reflect significant increases in the costs for special education instruction,charter school tuitions, student transportation, debt service and benefits for our employees andthis continued in the 2004-05 year.

• In the budgeting process, the Board of School Directors was able to balance the budgetwith a96 mill increase ($.96 per $1,000 of assessed value) to the taxpayers within Chester County.

a The District’s total net assets were $23,702,309 at June 30, 2005. This represents an increase of$3,872,306 from last year.

• The District’s General Fund total revenue increased by $15,412,791 or 10.7%. Property taxes,which include current and interim real estate taxes, increased by $10,091,273 or 10.6%.Operating grants and contributions, which include state subsidies, increased by $3,045,602, anincrease of 16.6%. Included in the change in operating grants and contributions is the increaseof $1,030,909 in the state subsidy for debt service reimbursement on construction projects.

• On a Government-Wide Basis, compared to the prior year, the District’s expenses increased by$11,044,406, an increase of 7.6%. Major increases by category include include salaries, whichincreased by $3,633,846, employee benefits, which increased by $2,253,664, charter schooltuition, which increased by $516,931, other tuition costs, which increased by $587,758, pupiltransportation (excluding salary and benefits), which increased by $834,566 and interest expenseon debt which increased by $1,754,420. Included in the change in other tuition costs is anincrease of $302,039 in tuitions paid to approved private schools and PRRIs for special educationchildren.

OVERVIEW OF FINANCIAL STATEMENTS

The accompanying financial statements have been prepared in accordance with GASB StatementNumber 34 and present both government-wide and fund level financial statements using both theaccrual basis and modified accrual basis of accounting, respectively.

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A Profess,snal corporatton WEST CHESTER AREA SCHOOL DISTRICT

CertAed Pubhc Accountants ~~ement’s Discussio~~p~lsis

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Government-Wide Financial Statements

The first two statements are government-wide financial statements - the Statement of Net Assetsand the Statement of Activities. These provide both long-term and short-term information about theDistrict’s overall financial status.

The government-wide statements report information about the District as a whole usingaccounting methods similar to those used by private-sector companies. The Statement of Net Assetsincludes all of the government’s assets and liabilities. All of the current year’s revenues and expenses areaccounted for in the Statement of Activities regardless of when cash is received or paid.

The two government-wide statements report the District’s net assets and how they havechanged. Net assets, the difference between the District’s assets and liabilities, are one way to measurethe District’s financial health or position.

Overtime, increases or decreases in the District’s net assets are an indication of whether itsfinancial health is improving or deteriorating, respectively.

To assess the overall health of the District, you need to consider additional non-financial factors,

such as changes in the District’s property tax base and the performance of the students.

The government-wide financial statements of the District are divided into two categories:

• Governmental Activities - All of the District’s basic services are included here, such as instruction,administration and community services. Property taxes and state and federal subsidies andgrants finance most of these activities.

• Business-Type Activities - The District operates a food service operation and charges fees to staffand students to cover the costs of the food service operation.

Fund Level Financial Statements

The remaining statements are fund financial statements that focus on individual parts of theDistrict’s operations in more detail than the government-wide statements. The governmental fundsstatements tell how the District’s general services were financed in the short term as well as whatremains for future spending. Proprietary fund statements offer short- and long-term financialinformation about the activities that the District operates like a business. For this District, this is our FoodService Fund. Fiduciary fund statements provide information about financial relationships where theDistrict acts solely as a trustee or agent for the benefit of others.

• Governmental Funds - Most of the District’s activities are reported in governmental funds, whichfocus on the determination of financial position and change in financial position, not on incomedetermination. Governmental funds are reported using an accounting method called modifiedaccrual accounting, which measures cash and all other financial assets that can readily beconverted to cash. The governmental fund statements provide a detailed short-term view of theDistrict’s operations and the services it provides. Governmental fund information helps thereader determine whether there are more or fewer financial resources that can be spent in thenear future to finance the District’s programs. The relationship (or differences) betweengovernmental activities (reported in the Statement of Net Assets and the Statement of Activities)and governmental funds is reconciled in the financial statements.

(DainerProfessional Corporation WEST CHESTER AREA SCHOOL DISTRICT

Certified Public AccnastantS Management’s Discussion and AnalysisBusiness Consultants

June 30, 2005

Fund Level Financial Statements (Continued)

• Proprietary Funds - These funds are used to account for District activities that are similar tobusiness operations in the private sector; or where the reporting is on determining net income,financial position, changes in financial position, and a significant portion of funding through usercharges. When the District charges customers for services it provides - whether to outsidecustomers or to other units in the District - these services are generally reported in proprietaryfunds. The Food Service Fund is the District’s proprietary fund and is the same as the business-type activities we report in the government-wide statements.

• Fiduciary Funds - The District is the trustee, or fiduciary, for some scholarship funds. All of theDistrict’s fiduciary activities are reported in a separate Statement of Fiduciary Net Assets. Weexclude these activities from the District’s other financial statements because the District cannotuse these assets to finance its operations.

The financial statements also include notes that explain some of the information in the financialstatements and provide more detailed data.

FINANCIAL ANALYSIS OF THE DISTRICT - GOVERNMENT-WIDE STATEMENTS

The District’s total net assets were $23,702,309 at June 30, 2005. This represents an increase of$3,872,306 over last year. The following table presents condensed financial information for the netassets of the District as of June 30, 2005 and June 30, 2004.

Governmental Buniriens-TypnActivities Activities Total

2005 2004 2005 2004 2005 2004

current Aosets $ 111,347,616 $ 139,s98,8S1 $ 659,702 $ 853,885 $112,007,318 $140,452,736Capital Assets 242,437,895 186,837,772 74,139 76,015 242,512,034 186,913,787OtherAssnts 1,246,718 1,162,034 0 0 1,246.718 1,162,034

TOTAL ASSETS 355,032,22 327598,657 — ~oo L~Q?9 ~

current Liabilities 38,825,177 39,391,747 167,216 436,136 38,992,393 39,827,883Noncurrent Liabilities 293,071358 268,870,671 0 0 293,071,368 268,870,671

TOTAL LIABILITIES 331,896,545 308,262,418 167,216 436,136 332,063,761 308,698,554

Net Assets:Invested irs Capital Assets, Net of

Related Debt 4,537,401 2,523,412 74,139 76,015 4,611,540 2,599,427Unrestricted 18,598,283 16,812,827 492,486 417,749 19,090,769 17,230,576

TOTAL NET ASSETS $ 23,135,684 $ 19,336,239 $566,625 $ 493,764 $ 23,702,309 $ 19,830,003

The unrestricted net assets in the amount of $19,090,769 includes $12,916,389 set aside to fundcapital improvements, the replacement of and additions to public works and improvements, and fordeferred maintenance thereof, and $492,486 set aside for capital expenditures within the District’s foodservice program. The balance remaining in the unrestricted net assets is notdesignated for any specificpurpose.

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A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTBC Management’s Discussion and Analysis

June 30, 2005

The results of this year’s operations as a whole are reported in the Statement of Activities. Allexpenses are reported in the first column. Specific charges, grants, revenues and subsidies that directlyrelate to specific expense categories are represented to determine the final amount of the District’sactivities that are supported by other general revenues. The largest revenues are property taxes, localtaxes and the state basic education subsidy.

The following table presents condensed financial information for the Statement of Activities in adifferent format so that you can see our total revenues for the year. Compared to the prior year, theDistrict’s total revenues increased by $1 5,412,791 or 10.7%. Property taxes, which include current andinterim real estate taxes, increased by $10,091,273 or 10.6%. Other taxes increased by $1,434,819 or7.9%. Operating grants and contributions increased by $3,045,602 or 16.6%. Included in the change inoperating grants and contributions is the increase of $1,030,909 in the state subsidy for debt servicereimbursement on construction projects. Expenses increased by $11,044,406 017.6%. Major increasesby category include salaries, which increased by $3,633,846, employee benefits, which increased by$2,253,664, charter school tuition, which increased by $516,931, other tuition costs, which increased by$587,758, pupil transportation (excluding salary and benefits), which increased by $834,566, and interestexpense on debt which increased by $1,754,420. Included in the change in other tuition costs is anincrease of $302,039 in tuitions paid to approved private schools and PRRI5 for special educationchildren.

Governmental Business-TypeActivities Activities Total

2005 2004 2005 2004 2005 2004REVENUES:

Program Services:Charges for Services $ 503,167 $ 419,151 $2,254,398 $ 2,171,647 $ 2,757,565 $ 2,590,798Operating Grants and contributions 21,074,847 18,052,838 340,531 316,938 21,415,378 18,369,776

General Revenues:Property Taxes 105,637,259 95,545,986 0 0 105,637,259 95,545,986OtherTaxes 19,586,966 18,152,147 0 0 19,586,966 18,152,147Grants, Subsidies and

contributions Not Restricted 7,383,915 7,028,800 0 0 7,383,915 7,028,800other Revenue 2,990,821 2,681,932 16,462 5,136 3,007,283 2,688,058

TOTAL REVENUES 157,176,975 141,880,854 2,611,391 2,494,721 159,788,366 144,375,575

EXPENSES:Instruction 87,072,443 81,142,609 0 0 87,072,443 81,142,609Instructional Student Support 11,754,299 11,211,943 0 0 11,754,299 11,211,943Administrative and Firsancial Support 11,595,709 10,930,361 0 0 11,595,709 10,930,361Operation and Maintenance of

Plant Services 12,576,081 11,836,094 0 0 12,676,081 11,836,094PspilTransportation 10,510,995 9,573,711 0 0 10,510,995 9,673,711Student Activities 2,397,559 2,450,412 0 0 2,397,559 2,450,412community Services 72,822 73,510 0 0 72,822 73,510Interest on Long-Term Debt 10,630,001 8,875,581 0 0 10,530,001 8,875,581Unallocated Depreciation Expense 6,567,621 6,201,855 0 0 6,667,621 6,201,865Food Services 0 0 2,538,530 2,475,568 2,538,530 2,475,568

TOTAL EXPENSES 153,377,530 142,396,086 2,538,530 2,475,568 155,916,060 144,871,654

CHANGE IN NET A5SETS $ 3,799,445 $ (515,232) $ 72,861 $ 19,153 $ 3,872,305 $ (496,079)

(Dainer~ ______

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Pub~cAcc~ount:nts Management’s Discussion and Analysis

June 30, 2005

EXPENSES

The following table presents condensed financial information on the expenses of the District byfunction. The table illustrates both the gross and net costs of services. Unrestricted grants, subsidies andcontributions are deducted to reflect the amount needed to be funded by other revenue sources, Theamount needed to be funded by other revenue sources increased by $7,520,304 or 6.4% more than theprior year. The table for business-type activity reflects condensed financial activities of the food serviceprogram, the only business-type activity of the District.

Total NetCost of Cost of

Services Services2005 2004 2005 2004

Expenses - Governmental Activities:Instruction $ 87,072,443 $ 81,142,609 $ 73,265,513 $ 69,065,907Instructional Student Support 11,754,299 11,211,943 11,422,586 10,879,640Administrative and Financial Support 11,595,709 10,930,361 11,595,709 10,930,361Operation and Maintenance of Plant Services 12,676,081 11,836,094 10,687,037 10,864,275Pupil Transportation 10,510,995 9,673,711 5,173,533 4,692.008Student Activities 2,397,559 2,450,412 2,284,694 2,340,950Community Services 72,822 73,510 72,822 73,510Interest on Long-Term Debt 10,630,001 8,875,581 10,630,001 8,875.581Unallocated Depreciation Expense 6.667,621 6,201,865 6,667,621 6,201,865

TOTAL EXPENSES $153,377,530 $142,396,086 131,799,516 123,924,097

Less: Grants, Subsidies andContributions Not Restricted (7,383,915) (7,028.800)

AMOUNT NEEDED TO BE FUNDED BYOTHER REVENUE SOURCES $124,415,601 $116,895,297

Business-Type Activities

Total NetCost of Cost ofServices Services

2005 2004 2005 2004Expenses - Business-Type Activities:

Food Services $ 2,538,530 $ 2,475,568 $ (56,399) $ (13,017)

(Dainer~J~Comnpany ________________________

A Profnsstonal corporat on WEST CHESTER AREA SCHOOL DISTRICTCer~fle~1Pub~cAcc

1ountants Management’s Discussion and Analysis

June 30, 2005

The increase in expenditures from 2003-04 is due to increases in various categories. The increasein the Instruction and Support Services areas can be attributed mainly to increases in the costs of staffsalaries and benefits, as well as costs associated with charter school tuitions and special educationservices. Instruction and Instructional Support Services employee salaries increased by 5.01 %, or$2,899,678. This amount includes salary increases for the staff as well as the addition of new employees.The employee benefits program offered by the District to the Instruction and Instructional SupportServices personnel increased by 10.76% or $1,807,169. Charter School Tuitions increased by $516,931 or13.6% over the prior year. Special education costs, exclusive of salaries and benefits, have increased by$1,119,674 or 18.0% over the prior year. There was an increase in debt service in the amount of$2,736,714 or 19.74% over the prior year. The decrease in other financing uses represents a $892,674reduction in the contribution to the capital reserve fund.

Capital Projects Fund

At June. 30, 2005, the District reported a fund balance of $60,924,506 which is an decrease of$27,974,570 over June 30, 2004. The components of the change in fund balance include revenues fromnet debt proceeds in the amount of $34,000,000, interest income in the amount of $2,036,314,expenditures for capital projects in the amount of $60,429,110, capitalized interest in the amount of$1,545,460, and transfers to the capital reserve fund in the amount of $2,036,314.

Capital Reserve Fund

At June 30, 2005, the District reported a fund balance of $12,916,389 which is a decrease of$644,974 over June 30, 2004. During the year, the fund received transfers from the capital projects fundin the amount of $2,036,314 and the capital reserve fund transferred $1,638,988 to the general fund forthe purchase of technology equipment.

GENERAL FUND BUDGET

During the fiscal year, the Board of School Directors authorizes revisions to the original budget toaccommodate differences from the original budget to the actual expenditures of the District. Alladjustments are again confirmed at the time the annual audit is accepted. This is done after the end ofthe fiscal year in accordance with state law. A schedule showing the District’s original and final budgetamounts compared with amounts actually paid and received is provided in the financial statements.

To balance the budget, the District utilized its entire anticipated fund balance from the previousyear in the amount of $6,102,879. The differences in the 2004-05 expenses and revenues compared tothe budget resulted in an overall positive variance of $7,920,225. Total revenues exceeded budgetedamounts by $5,707,243, or 3.8% of budgeted revenue. The positive revenue budget variances bycategory include interim tax collections in the amount of $547,823, realty transfer taxes in the amount of$1,003,786, earned income taxes in the amount of $1,106,157, interest earnings in the amount of$521,829 and state subsidies in the amount of $1,663,083. Total expenditures were under budget by$2,166,228, or 1.4% of budgeted expenditures. The District’s amended budget included $1,962,372 inbudgetary reserve. The budgetary reserve includes amounts for funding operating contingencies, such asunpredictable change in the cost of goods and services and the occurrence of events which are vaguelyperceptible during the time of the budget process, but which, nonetheless, may require expenditures bythe District during the year of operation.

(Dainer -11-~J..&Compan”

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTcertsted pubtc Accountants Management’s Discussion and Analysis

June 30, 2005

CAPITAL ASSETS

At June 30, 2005, the District had $242,437,895 invested in a broad range of capital assets,including land, buildings and furniture and equipment. This amount represents a net increase (includingadditions, deletions and depreciation) of $55,600,123, or 29.8% from last year. The net increase isattributed to the renovation and expansion of secondary school facilities.

The following schedule depicts the change in capital assets for the period July 1, 2004 throughJune 30, 2005. During this period, the District had the following significant additions in capital assets.

Beginning EndingBalance Increases Decreases Balance

Governmental Activities:Capital Assets:

Land $ 23,323,507 $ 7,187,187 $ 0 $ 30,510,694Land Improvements 3,561,835 0 0 3,561,835Buildings 144,924,534 882,292 0 145,806,826Construction in Progress 75,030,894 60,429,110 10,551,314 124,908,690Furniture and Equipment 18,043,742 4,320,469 248,000 22,116,211

TOTAL CAPITAL ASSETS 264,884,512 72,819,058 10,799,314 326,904,256

Accumulated Depreciation for:Buildings 63,955,789 4,230,694 0 68,186,483Land Improvements 1,171,589 178,331 0 1,349,920Furniture and Equipment 12,919,362 2,258,596 248,000 14,929,958

TOTAL ACCUMULATEDDEPRECIATION 78,046,740 6,667,621 248,000 84,466,361

GOVERNMENTALACTIVITIES CAPITALASSETS, NET $ 186,837,772 $ 66,151,437 $ 10,551,314 $ 242,437,895

Business-Type Activities:Capital Assets:

Furniture and Equipment $ 244,665 $ 8,933 $ 0 $ 253,598

Accumulated Depreciation for:Furniture and Equipment 168,650 10,809 0 179,459

BUSINESS-TYPE ACTIVITIESCAPITAL ASSETS, NET $ 76,015 $ (1,876) $ 0 $ 74,139

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A Professional Corporation WEST CHESTER AREA SCHOOL DIST!~:icICer~fiedPubCcAccour,tants Management’s Discussion and Analysis

June 30, 2005

DEBTADMINISTRATION

As of June 30, 2005, the District had total outstanding bond principal of $298,825,000, anincrease of $25,611,564 over last year. New debt resulted from the issuance of General ObligationNotes, Series F & G of 2004 in the amount of $34,000,000, to be utilized for secondary schoolconstruction projects. In addition, to improve cash flow and to take advantage of lower interest rates,the District decided to refinance the General Obligation Bond Series A of 1998. Total outstanding debtat June 30, 2005 represents 95.5% of the District’s debt limit as determined by the formula included inLocal Government Unit Act. Based on a projection of future debt margins, the retirement of principal oncurrent issues and estimated future borrowing, we are certain that the District will not exceed its debtlimit.

Debt Service ScheduleJune 30, 2005

PrincipalOutstanding Maturities! Bonds PayableJuly 1, 2004 Refinancing Additions June 30, 2005

General Obligation Bonds,Seriesof 1996 $ 11,165,000 $ 790,000 $ 0 $ 10,375,000

General Obligation Bonds,Series A of 1998 14,235,000 10,225,000 0 4,010,000

General Obligation Note,Series B of 2000 11,514,000 717,000 0 10,797,000

General Obligation Bonds,Series of 2001 9,330,000 355,000 0 8,975,000

General Obligation Bonds,Refunding Series of 2001 9,650,000 395,000 0 9,255,000


General Obligation Bonds,SeriesAof2002 6,360,000 3,130,000 0 3,230,000

General Obligation Bonds,Series AA of 2002 16,260,000 195,000 0 16,065,000




General Obligation Note,Series of 2003 35,000,000 0 0 35,000,000

General Obligation Bonds,SeriesAof 2004 7,910,000 0 0 7,910,000


SUBTOTAL (CARRIEDFORWARD) 273,859,000 18,187,000 0 255,672,000

(Dainer -13-

WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants Management’s Discussion and Analysis

Business ConsultantsJune 30, 2005

DEBT ADMINISTRATION (Continued)

Debt Service ScheduleJune 30, 2005

PrincipalOutstanding Maturities! Bonds PayableJuly 1, 2004 Refinancing Additions June 30, 2005

SUBTOTAL (BROUGHTFORWARD) $ 273,859,000 $ 18,187,000 $ 0 $ 255,672,000

General Obligation Note,Series E of 2004 0 0 8,800,000 8,800,000

General Obligation Note,Series G of 2004 0 0 25,200,000 25,200,000

General Obligation Bonds,Series of 2005 0 0 10,000,000 10,000,000

TOTAL 273,859,000 18,187,000 44,000,000 299,672,000

Less Deferred Amounts:Issuance (Discounts) Premium 703,028 34,678 (46,090) 622,260Refunding Deferred Charge (1,348,592) (185,810) (306,478) (1,469,260)

LONG-TERM DEBT $ 273,213,436 $ 18,035,868 $ 43,647,432 $ 298,825,000

OTHER LONG-TERM LIABILITIES

Other obligations include accrued vacation pay and severance for specific employees of theDistrict. More detailed information about long-term liabilities is included in the notes to the financialstatements.

THE DISTRICT’S FUTURE

The District will experience minimal enrollment growth over the next five years. Over the last 15years, the District has renovated and expanded 8 elementary schools including Pennwood, East Bradford,Westtown-Thornbury, Fern Hill, Exton, East Goshen, Mary C. Howse, and Glen Acres; renovated theSpellman Administration Building; constructed Sarah W. Starkweather Elementary School; constructedthe new Peirce and Stetson Middle Schools; constructed the new warehouse; and completed numerousmaintenance projects throughout the District. The District also completed the infrastructure for theDistrict-Wide Area Network,

The District will need additional financing based on future approved and proposed projects listedon the November 2004 Capital Projects update. Major approved projects to be completed over the nextfew years include: the completion of the Bayard Rustin High School, the renovation and additions toHenderson High School, the construction of Henderson High School off-campus athletic fields, therenovations as well as the construction of a new gymnasium and athletic fields at East High School andrenovations to Fugett Middle School. In addition, proposed projects are included for the SpellmanAdministration Building and for the District’s facility maintenance program. Total project expendituresare estimated to be $114.4 million over the nextseven years.

(Dainer -14-~ ~panyA Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants , .

Business Consultants Management s Discussion and AnalysisJune 30, 2005

THE DISTRICT’S FUTURE (Continued)

As of the May 2005 financing update, the District will need an additional $32.0 million to financethe remainder of our active projects as well as our approved capital projects. The District plans to issuegeneral obligation bonds in the amount of $132.0 million during the month of November 2005.Included in this amount is $105.0 million to refund 100% of the Emmaus variable rate debt and $27.0million in new money which will be used to complete the majority of the existing active and proposedprojects.

STRATEGiCPLAN

In June 2002, the West Chester Area School District adopted a new strategic plan that has focusedour purpose and resources. A team of 27 visionary School Board members, administrators, teachers,parents, community members, senior citizens and business leaders assembled to create the following sixstrategies:

• We will develop and implement plans to accommodate change and provide an effective learningenvironment through careful facility planning.

• We will develop a system to recruit, retain, evaluate and develop high-quality staff.• We will complete the development of assessments to measure student mastery of local, state and

national standards and ensure instruction is aligned with those standards.• We will identify, teach and model the character traits and behaviors for everyone to become

responsible, respectful, contributing citizens in our diverse school community.We will effectively use technology throughout the District for communication, decision-makingand the teaching/learning process.

• We will develop a system to identify, communicate and report student needs among parents,caregivers and staff to ensure appropriate access to services and programs.

FINANCIAL MANAGEMENT

Our financial report is designed to provide our citizens, taxpayers, parents, students, investorsand creditors with a general overview of the District’s finances and to show the Board’s accountability forthe money it receives. If you have questions about this report or wish to request additional financialinformation, please contact Suzanne K. Moore, Director of Business Affairs at The West Chester AreaSchool District, 829 Paoli Pike, West Chester, PA 19380, (484) 266-1020.

(DainerA Professional CorporationCertified Public Accsantanls


Deferred Bond Issuance Costs

TOTAL ASSETS

1,246,718 0 1,246,718

$ 355,032,229 $ 733,841 $ 355,766,070

Current:LIABILITIES

Accounts Payable and Other Current LiabilitiesBonds and Notes Payable Due Within One YearDeferred RevenuesAccrued Interest

TOTAL CURRENT LIABILITIES

$ 26,892,9239,914,000

2,79 12,01 5,463

38,825,177

$ 142,266 $ 27,035,1890 9,914,000

24,950 27,7410 2,015,463

167,216 38,992,393

0 288,911,0004,160,368

293,071,368

TOTAL LIABILITIES

NET ASSETS

331,896,545 167,216 332,063,761

18,598,28323,135,684

74,139492,486566,625

4,611,54019,090,76923,702,309

-15-

WEST CHESTER AREA SCHOOL DISTRICTStatement of Net Assets

June 30, 2005

GovernmentalActivities

$ 135,399103,487,883

2,229,903620,365

2,912,0841,134,246

827,736111,347,616

ASSETSCurrent:

Cash and Cash EquivalentsInvestmentsDue from Other GovernmentsOther ReceivablesProperty Taxes Receivable, NetPrepaid ExpensesInventories

TOTAL CURRENT ASSETS

Capital:LandLand ImprovementsBuildingsConstruction in ProgressFurniture and EquipmentLess: Accumulated Depreciation

TOTAL CAPITAL ASSETS, NET OF DEPRECIATION

Other:

Business-TypeActivities Total

$ 87,172 $ 222,571542,904 104,030,787

18,637 2,248,54010,989 631,354

0 2,912,0840 1,134,2460 827,736

659,702 112,007,318

0 30,510,6940 3,561,8350 145,806,8260 124,908,690

253,598 22,369,809(179,459) (84,645,820)

74,139 242,512,034

30,510,6943,561,835

145,806,826124,908,69022,116,211

(84,466,361)242,437,895

Long-Term:Bonds and Notes Payable Due After One YearAccrued Severance and Compensated Absences

TOTAL LONG-TERM LIABILITIES

288,911,0004,160,368

293,071,36800

Invested in Capital Assets, Net of Related DebtLi nrestricted

TOTAL NET ASSETS

TOTAL LIABILITIES AND NET ASSETS

4,537,401

$ 355,032,229 $ 733,841 $ 355,766,070

The accompanying notes are an integral part of this statement.

amer -16-&Comp~_~

WEST CHESTER AREA SCHOOL DISTRIcTStatement of Activities

For the Year Ended June 30, 2005

Net lExpense) Revenue andProgram Revenues Changes in Net Assets

Operating CapitalCharges For Grants and Grants and Governmental Business-Type

FUNCTIONS/PROGRAMS Expenses Services Contribubons Contribubons Activities Activities Total

Governmental Activities:Instruction $ 87,072,443 $ (354,454) 5 (13,452,476) 5 0 $ (73,265,513) $ 0 $ (73,265,513)Instructional Student Support 11,754,299 0 (331,713) 0 (11,422,586) 0 (11,422,5861Administrative and Financial Support Services 11,595,709 0 0 (11,595,709) 0 (11,595,709)Operation and Maintenance of Plant Services 12,676,081 (35,848) 11,953,196) 0 (10,687,037) 0 (10,687,037)Pupil Transportation 10,510,995 0 (5,337,462) 0 (5,173,533) 0 (5,173,533)Student Activities 2,397,559 1112,865) 0 0 (2,284,694) 0 (2,284,694)Community Services 72,822 0 0 0 (72,822) 0 (72,822)Interact on Long-Term Oeht 10,630,001 0 0 0 (10,530,001) 0 (10,630,001)

Unallocated Depreciation Expense 6,667,621 0 0 0 (6,667,621) 0 (6,667,621)TOTAL GOVERNMENTAL ACTIVITIES t 53,377,530 (503,1 67) 121,074,847) 0 (131,799,516) 0 (131,799,516)

Business-Type Activities:Food Services 2,538,530 (2,254,398) (340,531) _______________ 0 56,399 56,399

TOTAL PRIMAEY GOVERNMENT $ 155,916,060 5 (2,757,565) S 121 ,415~78) 0 (131,799,516) 56,399 1131,743,1171

General Revenues.Taxes:

Property Taxes, Levied for General Purposes. Net 105,637,259 0 105,637,259Public Utility Realty, Earned Income and Realty Transfer Taxes,

Levied for General Purposes, Net 19,586,966 0 19,585,966Grants, Subsidies and Contributions Not Restricted 7,383,915 0 7,383,915Investment Earnings 2,971,882 16,462 2,986,344Miscellaneous Income — 18,939 0 18,939

TOTAL GENERAL REVENUES ANO SPECIAL ITEMS 135,598,961 16,462 135,615,423

CHANGE IN NET ASSETS 3,799,445 72,861 3,872,306

Net Assets - July 1, 2004 18,875,463 493,764 19,369,227Prior Period Adjustment 460,776 0 460,776

RESTATED NET ASSETS - JULY 1, 2004 19,336,239 493,764 19,830,003

NET ASSETS - JUNE 30, 2003 $23,135,684 5 566,625 $ 23,702,309


amner~ WEST CHESTER AREA SCHOOL DISTRICT

~ Balance SheetGovernmental_Funds

~unv3D, ZOOS

Capital Capital Debt TotalGeneral Projects Reserve Service Other Governmental

ASSETS Fund Fund Fund fund Funds Funds

Cash and Cash Equivalents $ 134,896 $ 0 $ 0 5 0 5 503 $ 135,399Investments 16,079,046 87,408,837 0 0 0 103,487,883Taxes Receivable, Net 2,912,084 0 0 0 0 2,9120B4Due from Other Funds 1,286,419 4,643,867 12,656,195 0 18,664 18,605,145Dun from Other Governments 2,229,903 0 0 0 0 2,229,903Other Receivables 360,171 0 260,194 0 0 620,365Prepaid Expenses 1.134,246 0 0 0 0 1,134,246Inventories 827,736 0 0 0 0 827,736

TOTALASSETS $ 24,964,501 $92,052,704 $ 12,916,389 $ 0 $19,167 $ 129,952,761

LIABILITIES AND FUND BALANCES

Labilities:Accounts Payable and Accrued Liabilities 5 7,787,760 $ 12,541,717 S 0 $ 0 1,447 5 20,330,924Due to Other Funds 83,867 18,586,481 0 0 0 18,670,348Payroll Accruals and Withholdings 6,496,797 0 0 0 0 6,495.797Deferred Revenue 2.308.887 0 0 0 0 2,308,887

TOTAL LIABILITIES 16,677,311 31,128,198 0 0 1,447 47,806,956

Fund BalancesUnreserved - Undesigneted 8,287,190 60,924,506 12,916,389 0 17,720 82145,805

TOTAL LIABILITIES ANDFUND BALANCES $ 24,964,501 $ 92,052,704 $ 12,916,389 $ 0 $ 19,167 $129,952,761

The accompanying notes ate an integral part of this statement.

(Dainer -18-& Company

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCerSEad Pubhc Accountants Reconciliation of the Governmental Funds Balance Sheet

to the Statement of Net AssetsJune 30, 2005

Total Fund Balances - Governmental Funds $ 82,145,805

Amounts reported for governmental activities in the statement ofnet assets are different because:

Capital assets used in governmental activities are not financialresources and, therefore, are not reported as assets ingovernmental funds. The cost of assets is $326,904,256, andthe accumulated depreciation is $84,466,361 242,437,895

Property taxes receivable will be collected this year, but are notavailable soon enough to pay for the current period’sexpenditures and, therefore, are deferred in the funds 2,306,097

Bond issuance costs are not financial resources and, therefore, arenot reported as assets in the governmental funds. Issuance costsare $1,246,718, net of accumulated amortization 1,246,718

Long-term liabilities, including bonds payable, are not due andpayable in the current period and, therefore, are not reported asliabilities in the funds. Long-term liabilities at year-end consist of:

Bonds Payable $ 298,825,000Accrued Interest on the Bonds 2,01 5,463Accrued Severance and Compensated Absences 4,160,368 (305,000,831)

TOTAL NET ASSETS - GOVERNMENTALACTIVITIES $ 23,135,684


amerCompanyur,o,,,,,,,,jc,,,,,,r,~ WEST CHESTER AREA SCHOOL DISTRICT

Bu,~,,,co~w,,,i, $343fifl7en~_9fR9feflue5Ex9fffl~JEurej~an es in Fund Bela nces

Governmental FundsFor the Year Ended June 30, 2005

Capital Capital Debt TotalGeneral Projects Reserve Service Other Governmental

Fund Fund Fund Fund Funds FundsRevenues,

Local Sources:Real Estate Taxes 5 105,409,236 $ 0 $ 0 $ 0 $ 0 $ 105,409,236Realty Transfer Tax 4,703,786 0 0 0 0 4,703,786Earned Income Taxes 14,738,657 0 0 0 0 14,738,657Other Taxes 144,523 0 0 0 0 144,523Earnings from Investments 935,568 2,036,314 0 0 0 2,971,882Other Local Revenues 1,721,174 0 0 0 112,864 1,834,038

State Sources 24,500,908 0 0 0 0 24,500,908Federal Sources 2,645,922 0 0 0 0 2,645,922

TOTAL REVENUES 154,799,774 2,036,314 0 - 0 112,864 156,948,952

Expenditures:Instruction 88,485,129 0 0 0 0 88,485,129Support Services 46,980,885 0 0 0 0 46,980,885Non-Instructional Services 2,365,009 0 0 0 116,669 2,4.81,678Facilities Acquisition, Construction, and Improvements 189,718 50,429,110 0 0 0 60,618,828Debt Service (Principal and Interest) 16,SI1,041 1,545,460 1,042,300 182,432 0 19,341,233

TOTAL EXPENDITURES 154,591,782 61,974,570 t,042,300 182,432 116,669 217,907,753

EXCESS (DEFICIENCY) OF REVENUESOVER EXPENDITURES 207,992 (59,938,256) (1,042.300) (182,432) (3,805) (60,958,801)

Other Financing Sources (Uses)Bond Proceeds 0 34,000,000 0 0 0 34,000,000Bond Proceeds - Refunding Bonds 0 0 0 9,953,910 0 9,953,910Payment to Refund Bond Escrow Agent 0 0 0 (9,771,478) 0 (9,771.478)Intertund Transfers In 1,638,988 0 2,036,314 0 0 3,675,302Interfund Transfers Out 0 (2,036,314) (1,638,988) 0 0 (3,E7S,302)Refunds of Prior Years Revenues 129,634) 0 0 ____________ 0 0 (29,634)

TOTAL OTHER FINANCING SOURCES (USES) 1,609,354 31,963,686 397,326 182,432 0 34,1 52,798

NOT CHANGE IN FUND BALANCES 1,817,346 (27,974,570) (644,974) 0 (3,805) 126,806,003)

Fund Balances - July 1,2004 6,469,844 88,899.078 13,561,363 0 21,525 108,951,608

FUND BALANCES - JUNE 30, 2005 5 8,287,190 $ 60,924,506 $12,916,389 $ C $17,720 $ 62,145,805

The accompanying notes are an integral part of thin statement.

‘Dainer -20-~J & Company

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants Reconciliation of the Governmental Funds

Business ConsultantsStatement of Revenues, Expenditures and Changes in Fund Balance

to the Statement of ActivitiesFor the Year Ended June 30, 2005

Total Net Change in Fund Balances - Governmental Funds $ (26,806,003)

Amounts reported for governmental activities in the statementof activities are different because:

Capital outlays are reported in governmental funds as expenditures. However, inthe statement of activities, the cost of those assets is allocated over their estimateduseful lives as depreciation expense. This is the amount by which capital outlays($62,267,744) exceed depreciation expense $6,667,621 in the period 55,600,123

Repayment of bond principal is an expenditure in the governmental funds,. but therepayment reduces long-term liabilities in the statement of net assets 18,035,868

Because some property taxes will not be collected for several months after theDistrict’s fiscal year ends, they are not considered ~avaiIable”revenues andare deferred in the governmental funds. Deferred tax revenues increased bythis amount this year 257,658

In the statement of activities, certain operating expenses - compensated absences(vacations) and special termination benefits (severance) - are measuredby the amounts earned during the year. In the governmental funds,however, expenditures for these items are measured by the amount offinancial resources used (essentially, the amounts actually paid). This year,vacation leave exceeded the amounts paid by $111,037 and severance usedexceeded the amounts earned by $329,904 218,867

Interest on long-term debt in the statement of activities differs from the amountreported in the governmental funds because interest is recognized as anexpenditure in the funds when it is due and, thus, requires the use of currentfinancial resources. In the statement of activities, however, interest expenseis recognized as it accrues, regardless of when it is due. The accrued intereston bonds payable decreased by $55,680 55,680

Debt issuance costs are reported as expenditures in the governmental funds when debtis first issued. In th’e statement of activities, these amounts are deferred and amortized.This is the amount by which issuance costs exceed amortization 84,684

Bond proceeds are reported as financing sources in governmental funds and, thus,contribute to the change in fund balances. In the statement of activities, however,issuing debt increases long-term liabilities in the statement of net assets and does notaffect the statement of activities. This amount represents total bond proceeds, netof deferral amounts associated with the issuance of the debt (43,647,432)

CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 3,799,445


(Dainer -21-~j &Comp~y~

A ProFessional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants

Business Consultants Statement of Net AssetsProprietary Funds

June 30, 2005

EnterpriseFund -

FoodASSETS Services

Current:Cash and Cash Equivalents $ 87,172Investments 542,904Due from Other Governments 18,637Other Receivables 10,989

TOTAL CURRENT ASSETS .

Non-Current:Furniture and Equipment 253,598Less: Accumulated Depreciation (179,459)

TOTAL NON-CURRENT ASSETS 74,139

TOTAL ASSETS $ 733,841

LIABILITIES

Current:Accounts Payable and Accrued Liabilities $ 142,266Deferred Revenue 24,950

TOTAL LIABILITIES 67,216

NET ASSETS

Invested in Capital Assets 74,139Unrestricted 492,486

TOTAL NET ASSETS 566,625

TOTAL LIABILITIES AND NET ASSETS $ ‘733,841


(Dainer -22-

Professional Corporatisn WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants Statement of Revenues Expenses and

Business Consultants Thanges in Fund Net Assets

~eta FundsFor the Year Ended June 30, 2005

EnterpriseFund -

FoodServices

Operating Revenues:Food Service Sales $2,254,398

Operating Expenses:Professional and Contract Services 2,501,043Depreciation 10,809Other Operating Costs 26,678

TOTAL OPERATING EXPENSES 2,538,530

OPERATING (LOSS) , 84132)

Non-Operating Revenues:Interest Income 16,462State Sources 53,268Federal Sources 287,263

TOTAL NON-OPERATING REVENUES 356,993

CHANGE IN NET ASSETS 72,861

Net Assets - July 1, 2004 493,764

NETASSETS-JUNE3O,2005 $ 566,625


(Dainer -23 -

~ &ComvanyAProfesslonol Corporation VVEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants Statement of Cash Flows

Business ConsultantsProprietary Funds


EnterpriseFund -

FoodServices

Cash Flows From Operating Activities:Cash Received from Users $ 2,269,406Cash Payments to Suppliers for Goods and Services (2,803,432)

NET CASH (USED) BY OPERATING ACTIVITIES ~

Cash Flows From Non-Capital Financing Activities:State Sources . 53,334Federal Sources 297,781

NET CASH PROVIDED BY NON-CAPITAL FINANCING ACTIVITIES

Cash Flows From Capital and Related Financing Activities:Acquisition of Capital Assets

Cash Flows From Investing Activities:Redemption of Investment Securities/Deposits to Investment Pools 183,628Interest on Investments 16,462

NET CASH PROVIDED BY INVESTING ACTIVITIES 200,090

NET INCREASE IN CASH AND CASH EQUIVALENTS 8,246

Cash and Cash Equivalents - July 1, 2004 78,926

CASH AND CASH EQUIVALENTS -JUNE 30, 2005 $ 87,172

Reconciliation of Operating (Loss) to Net Cash (Used) by Operating Activities:Operating (Loss) $ (284,132)Adjustments to Reconcile Operating (Loss) to Net Cash

(Used) by Operating Activities:Depreciation 10,809Changes in Assets and Liabilities:

Receivables 8,216Accrued Liabilities (268,919)

NET CASH (USED) BY OPERATING ACTIVITIES $ (534,026)


-24-

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants

Business Cxnsaltants Statement of FIduciary Net AssetsJune 30, 2005

Private-Purpose Agency

ASSETS Trusts Funds

Cash and Cash Equivalents $ 4,486 $ 524,808Due from Other Funds 372,204 65,203

TOTALASSETS $ 376,690 $ 590,011

LIABILITIES

Due to Other Funds $ 0 $ 372,204Accounts Payable 0 9,710Due to Student Groups 0 208,097

TOTAL LIABILITIES $ 0 $ 590,011

NET ASSETS

Reserved for Scholarships $ 376,690Unrestricted 0

TOTAL NET ASSETS $ 376,690


Impafly -25-

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants .

Business Consultants Statement of Changes in FiducIary Net AssetsFor the Year Ended June 30, 2005

Private-PurposeTrusts

Additions:Gifts and Contributions $ 697,871

Deductions:Grants 660,462

CHANGE IN NET ASSETS 37,409

Net Assets - July 1, 2004 339,281

NET ASSETS - JUNE 30, 2005 $ 376,690


(Dainer -26-‘~ &Comvany

A ProFessional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Pub~cAccountants Notes to Financial Statements

June 30, 2005

NOTE 1 - Summary of Significant Accounting Policies

The School District’s financial statements are prepared in accordance with U.S. generally acceptedaccounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible forestablishing GAAP for state and local governments through its pronouncements (Statements andInterpretations). Governments are also required to follow the pronouncements of the FinancialAccounting Standards Board (FASB) issued through November 30, 1989 (when applicable) that do notconflict with or contradict GASB pronouncements. Although the School District has the option to applyFASB pronouncements issued after that date to its business-type activities and enterprise funds, theSchool District has chosen not to do so. The more significant accounting policies established in GAAPand used by the School District are discussed below.

The School District adopted the provisions of Governmental Accounting Standards BoardStatement No. 34, Basic Financial Statements-and Management’s Discussion and Analysis-ForState andLocal Governments Statement No. 37, BasicFinancialStatements-and Management’sDiscussionandAnalysis-for State and Local Governments: Omnibusand Interpretation No. 6, RecognitionandMeasurementof CertainLiabilities andExpendituresin GovernmentalFundFinancialStatements,as ofJuly 1, 2001. Certain of the significant changes in the Statement include the following:

• The financial statements include:

+ Management Discussion and Analysis (MD&A) section providing an analysis of the SchoolDistrict’s overall financial position and results of operations.

+ Financial statements prepared using full accrual accounting for all of the School District’sactivities.

• A change in the fund financial statements to focus on the major funds.

These and other changes are reflected in the accompanying financial statements (including notes

to financial statements).

A. Reporting Entity

The School District is governed by an elected Board of Directors. U.S. generally acceptedaccounting principles require that the financial statements present the School District and its componentunits, entities forwhich the School District is considered to be financially accountable. Blendedcomponent units, although legally separate entities, are, in substance, part of the School District’soperations and so data from these units are required to be combined with data of the primary SchoolDistrict. Each discretely presented component unit, on the other hand, is required to be reported in aseparate column in the government-wide financial statements to emphasize it is legally separate fromthe School District. Based on the application of these principles, there are no component units presentedin the School District’s financial statements.

B. Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net assets and the statement ofchanges in net assets) report information on all of the nonfiduciaiy activities of the School District and itscomponent units. For the most part, the effect of interfund activity has been removed from thesestatements. Governmental activities, which normally are supported by taxes and intergovernmentalrevenues, are reported separately from business-type activities, which rely to a significant extent on feesand charges for support.

(Dainer -27-~‘J& Company

AProfesslonul CorporatIon WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants Pd + + . ‘ ci- + +

Business Consultants tNoLes 0 nanclat .. a emen sJune 30, 2005

NOTE 1 - Summary of Significant Accounting Policies (Continued)

B. Government-Wide and Fund Financial Statements (Continued)

The statement of activities demonstrates the degree to which the direct expenses of a givenfunction or segment are offset by program revenues. Direct expenses are those that are clearlyidentifiable with a specific function or segment. Program revenues include 1) charges to customers orapplicants who purchase, use, or directly benefit from goods, services, or privileges provided by a givenfunction or segment, and 2) grants and contributions thatare restricted to meeting the operational orcapital requirements of a particular function or segment. Taxes and other items not properly includedamong program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds, andfiduciary funds, even though the latter are excluded from the government-wide financial statements.Major individual governmental funds and major individual enterprise funds are reported as separatecolumns in the fund financial statements.

C. Measurement Focus, Basis of Accoun~ngand Financial Statement Presentation

The government-wide financial statements are reported using the economic resourcesmeasurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fundfinancial statements. Revenues are recorded when earned and expenses are recorded when a liability isincurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in theyear for which they are levied. Grants and similar items are recognized as revenue as soon as alleligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resourcesmeasurement focus and the modified accrual basis of accounting. Revenues are recognized as soon asthey are both measurable and available. Revenues are considered to be available when they arecollectible within the current period or soon enough thereafter to pay liabilities of the current period.For this purpose, the School District considers revenues to be available if they are collected within 60 daysof the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred,as under accrual accounting. However, debt service expenditures, as well as expenditures related tocompensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, franchise taxes, licenses and interest associated with the current fiscal period areall considered to be susceptible to accrual and so have been recognized as revenues of the current fiscalperiod. Only a portion of special assessments receivable due within the current fiscal period is consideredto be susceptible to accrual as revenue of the current period. All other revenue items are considered tobe measurable and available only when cash is received by the School District.

The School District reports the following major government funds:

General Fund - The General Fund is the School District’s primary operating fund. Itaccounts for all financial resources, except those required to be accounted for in anotherfund.

Capital Proiects Fund - The Capital Projects Fund is used to account for financial resourcesto be used for the acquisition or construction of major capital assets other than thosefinanced by enterprise operations.

(Dainer -28-~J\~Company ________________________

AProfessional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants 151 +

Business Consultants t~ocesLO nanclat La iemen sJune 30, 2005


C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued)

~ - The Capital Reserve Fund is used to account for proceeds of specificrevenue sources that are legally restricted to expenditures for future capital projects.

The School District reports the following major proprietary funds:

Food Service Fund - The Food Service Fund (an Enterprise Fund) is used to account for theoperations of the School District’s school cafeterias that are financed and operated in amanner similar to a private business enterprise where the intent of the governing body isthat the cost of providing goods or services to the school population on a continuing basiswill be recovered or financed primarily through user charges.

Additionally, the School District reports the following fund types:

Fiduciary Funds - Fiduciary Funds are used to account for assets held by the School Districtin a trustee capacity or as an agent for individuals, private organizations, or othergovernments. These include private-purpose trust funds and agency funds. Private-purpose trust funds account for resources, including both principal and earnings, whichmust be expended in accordance with a trust agreement, and are accounted for inessentially the same manner as proprietary funds. Agency funds are purely custodial andthus do not involve measurement of the results of operations.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989generally are followed in both the government-wide and proprietary fund financial statements to theextent that those standards do not conflict with or contradict guidance of the Governmental AccountingStandards Board. School districts also have the option of following subsequent private-sector guidancefor their business-type activities and enterprise funds, subject to this same limitation. The School Districthas elected not to follow subsequent private-sector guidance.

Amounts reported as program revenues include 1) charges to customers or applicants for goods,services or privileges provided, 2) operating grants and contributions, and 3) capital grants andcontributions, including special assessments, Internally dedicated resources are reported as generalrevenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from nonoperating items.Operating revenues and expenses generally result from providing services and producing and deliveringgoods in connection with a proprietary fund’s principal ongoing operations. The principal operatingrevenues of the Food Service Enterprise Fund are charges to customers for sales and services. Operatingexpenses for enterprise funds and internal service funds include the cost of sales and services,administrative expenses and depreciation on capital assets. All revenues and expenses not meeting thisdefinition are reported as nonoperating revenues and expenses.

For purposes of the statements of cash flows of proprietary funds, cash equivalents include allhighly liquid debt instruments with original maturities of three months or less.

When both restricted and unrestricted resources are available for use, it is the School District’spolicy to use restricted resources first, then unrestricted resources as they are needed.

~“Dainer -29-~J1& Company

AProfeunionul Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Pub~cAccountants Notes to Financial Statements

June 30, 2005


D. Assets, Liabilities and Net Assets or Egu~ty

Deposits and Investments

Under Section 440.1 of the Public School Code of 1949, as amended, the School District ispermitted to invest funds consistent with sound business practices in the following types of investments:

Obligations of (a) the United States of America or any of its agencies or instrumentalitiesbacked by the full faith and credit of the United States of America, (b) the Commonwealthof Pennsylvania or any of its agencies or instrumentalities backed by the full faith andcredit of the Commonwealth, or (c) any political subdivision of the Commonwealth ofPennsylvania or any of its agencies or instrumentalities backed by the full faith and creditof the political subdivision.

Deposits in savings accounts or time deposits or share accounts of institutions insured bythe Federal Deposit Insurance Corporation or the Federal Savings and Loan InsuranceCorporation to the extent that such accounts are so insured and, for any amounts abovethe insured maximum, provided thatapproved collateral as provided by law therefore shallbe pledged by the depository.

Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding atthe end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion ofinterfund loans) or ‘advances to/from other funds” (i.e., the non-current portion of interfund loans). Allother outstanding balances between funds are reported as ‘due to/from other funds.’ Any residualbalances outstanding between the governmental activities and business-type activities are reported inthe government-wide financial statements as “internal balances.”

Advances between funds, as reported in the fund financial statements, are offset by a fundbalance reserve account in applicable governmental funds to indicate that they are not available forappropriation and are not expendable available financial resources.

All trade and property tax receivables are shown net of any allowance for uncollectibles. There isno property tax receivable allowance at June 30, 2005.

Property taxes attach as an enforceable lien on property as of July 1. Taxes are levied on July 1and payable in the following periods:

Discount Period - July 1 to August 31 - 2% of Gross LevyFlat Period - September 1 to October 31Penalty Period - November ito Collection - 10% of Gross Levy

Inventories

All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories ofgovernmental funds are recorded as expenditures when consumed rather than when purchased.

Inventories in the governmental funds represent supplies received in June for the nextschool yearand are recorded as inventory in both government-wide and fund financial statements.

(Dainer~J & Company

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Pubflc Accountants Notes to Financial Statements

June 30, 2005


D. Assets, Liabilities and Net Assets or Eguity (Continued)

Inventories (Continued)

Inventories in the Food Service Fund consists of government-donated commodities which werevalued at estimated fair market value at donation, and purchased commodities and supplies, both valuedat cost using the first-in first-out (FIFO) method.

Capital Assets

Capital assets, which include property, plant and equipment, are reported in the applicablegovernmental or business-type activities columns in the government-wide financial statements. Capitalassets are defined by the School District as assets with an initial, individual cost of more than $5,000(amount not rounded) and an estimated useful life in excess of two years. Such assets are recorded athistorical cost or estimated historical cost if purchased or constructed. Donated capital assets arerecorded at estimated fair market value at the date of donation. The costs of normal maintenance andrepairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed.Interest incurred during construction is not capitalized.

Property, plant and equipment is depreciated using the straight-line method over the followingestimated useful lives:

Buildings 20-40 YearsLand Improvements 20 YearsFurniture and Equipment 3-10 Years

Compensated Absences

It is the School District’s policy to permit employees to accumulate earned but unused vacationand sick pay benefits. There is no liability for unpaid accumulated sick leave since the School Districtdoes not have a policy to pay any amounts when employees separate from service with the SchoolDistrict. Compensated absences are generally liquidated by the General Fund.

School District employees who are required to work on a twelve-month schedule are credited withvacation at rates which vary with length of service or job classification. Vacation must be taken in theyear subsequent to when it was earned. If separation of service occurs in the year subsequent toearning, then the unused balance of what was earned in the prior year is paid at separation. The liabilityat June 30 represents vacation earned at that date that will be taken in the subsequent year.

Accrued Severance Pay

Administrative, Instructional, Secretarial and Support personnel that have completed at leastfifteen years of credited School District service that retire under the normal PSERS guidelines, receiveseverance pay in the form of compensation. Administrative personnel receive $300 for each year ofservice in the District. Instructional personnel receive $200 for each year of service in the District.Secretarial and Support personnel receive $250 for each year of service in the District. Severance pay isgenerally liquidated by the General Fund.

(Dainer -31-~j~Compgy~~ _________________________

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCnrfified Pubfic Accountants Notes to Financial Statements

June 30, 2005

NOTE 1 - Summaryof Significant Accoyjj,~,çPolicies (Continued)

D. Assets, Liabilities and Net Assets or Equity (Continued)

Long-Term Obligations

In the government-wide financial statements and proprietary fund types in the fund financialstatements, long-term debt and other long-term obligations are reported as liabilities in the applicablegovernmental activities, business-type activities or proprietary fund type statement of net assets. Bondpremiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bondsusing the straight-line method which approximates the effective interest method. Bonds payable arereported net of the applicable bond premium or discount. Bond issuance costs are reported as deferredcharges and amortized over the term of the related debt.

In the fund financial statements, governmental fund types recognize bond premiums anddiscounts, as well as bond issuance costs, during the current period. The face amount of debt issued isreported as other financing sources. Premiums received on debt issuances are reported as otherfinancing sources while discounts on debt issuances are reported as other financing uses. Issuance costs,whether or not withheld from the actual debt proceeds received, are reported as debt serviceexpenditures.

Fund Equity

In the fund financial statements, governmental funds report reservations of fund balance foramounts that are not available for appropriation Or are legally restricted by outside parties for use for aspecific purpose. Designations of fund balance represent tentative management plans that are subjectto change.

NOTE 2 - Budgetary Information

Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. Anannual appropriated budget is adopted for the general fund. All annual appropriations lapse at fiscalyear end. Project-length financial plans are adopted for all capital projects funds.

The School District follows these procedures in establishing the budgetary data reflected in thefinancial statements:

1. The Business Manager submits to the School Board a proposed operating budget for thefiscal year commencing the following July 1. The operating budget includes proposedexpenditures and the means of financing them.

2. Public hearings are conducted at the School District offices to obtain taxpayer comments.

3. Prior to July 1, the budget is legally enacted through passage of an ordinance.

(Dainer -32-

~ WEST CHESTER AREA SCHOOL DISTRICTCertified Public Accountants Notes to Financial Statements

Business ConsultantsJune 30, 2005

NOTE 2 - Budgetary Information (Continued)

4. The Business Manager is authorized to transfer budgeted amounts between departmentswithin any fund; however, any revisions that alter the total expenditures of any fund must beapproved by the School Board.

5. Formal budgetary integration is employed as a management control device during the yearfor the general fund.

6. Budgeted amounts are as originally adopted, or as amended by the School Board.

NOTE 3 - Deposits and Investments

Deposits - At year end, the total carrying amount of the School District’s checking, savings andmoney market deposits was $751,865, and the corresponding bank balance was $1,515,762.

Custodial Credit Risk - Deposits - 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. The School District does not have a policy forcustodial credit risk. Of the bank balance, $100,000 was covered by federal depository insurance. Theremaining balances were uninsured and covered by collateral held by the institution’s trust departmenton a pooled basis not in the name of the School District.

Investments - The School District investments are categorized as either (1) insured and registeredor securities are held by the School District or its agent in the School District’s name, (2) uninsured andunregistered, with securities held by the counterparty’s trust department or agent in the School District’sname, or (3) uninsured and unregistered with securities held by the counterparty, or by its trustdepartment or agent but not in the School District’s name.

Investments - All funds in the Pennsylvania School District Liquid Asset Fund, Pennsylvania LocalGovernment InvestmentTrust, and Pennsylvania Treasurer’s Investment Program are invested inaccordance with Section 440.1 of the School Code. These funds operate and are authorized under theIntergovernmental Cooperation Act of 1972. Each school district owns a prorata share of eachinvestment or deposit which is held in the name of the Fund. Certificates of deposit or other fixed-terminvestments purchased by the School District through the Fund’s administrator are purchased in thename of the School District.

Custodial Credit Risk - Investments - For an investment, custodial credit risk is the risk that in theevent of the failure of the counterparty, the School District will not be able to recover the value of itsinvestments or collateral security that are in the possession of an outside party. The School District hasno investment subject to custodial credit risk.

ii)ainer~J~~Company __________________________

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertdied Pubhc Accountants Notes to Financial Statements

June 30, 2005

NOTE 3 - Deposits and Investments (Continued)

The School District’s investments at June 30, 2005 consisted of the following:

Pooled Investments:Pennsylvania School District Liquid Asset Fund:

General Fund Accounts 1,046,953

Pennsylvania Local Government Investment Trust:General Fund Accounts 558,386Capital Project Fund Account 83,739,440

TOTAL 84,297,826

Pennsylvania Treasurer’s Investment Program:General Fund Account 12,635,707Capital Project Fund Account 3,669,397Food Service Fund Account 542,904

TOTAL 16,848,008

Certificate of Deposit:General Fund Accounts 1,838,000

TOTAL POOLED INVESTMENTS $104,030,787

NOTE 4 - Taxes Receivable

Taxes receivable as of year end for the School District’s individual major funds and nonmajorfiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are asfollows:

Non majorand Other

General Funds Total

Real Estate Taxes $ 2,529,632 $ 0 $ 2,529,632Transfer Taxes 328,243 0 328,243Earned Income Taxes . 54,209 0 54,209Less: Allowance for Uncollectibles 0 0 0

NET TAXES RECEIVABLE $2,912,084 $ 0 $2,912,084

(Dainer~J &Company

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertdied Pubflc Accountants Notes to Financial Statements

June 30, 2005

NOTE 4 - Taxes Receivable (Continued)

Governmental funds report deferred revenue in connection with receivables for revenues that are notconsidered to be available to liquidate liabilities of the current period. Governmental funds also defer revenuerecognition in connection with resources that have been received, but notyet earned. At the end of the currentfiscal year, the various components of deferred revenue and unearned revenue reported in the governmentalfunds were as follows:

Delinquent Taxes Receivable $ 2,306,096Other Deferred Revenue 2,791

TOTAL $ 2,308,887

NOTE 5 - Capital Assets

Capital asset activity for the year ended June 30, 2005 was as follows:

Beginning EndingBa lance Increases Decreases Balance

Governmental Activities:Capital Assets:

Land $ 23,323,507 $ 7,187,187 $ 0 $ 30,510,694Land Improvements 3,561,835 0 0 3,561,835Buildings 144,924,534 882,292 0 145,806,826Construction in Progress 75,030,894 60,429,110 10,551,314 124,908,690Furniture and Equipment 18,043,742 4,320,469 248,000 22,116,211

TOTAL CAPITAL ASSETS 264,884,512 72,81 9,058 10,799,314 326,904,256

Accumulated Depreciation for:Buildings 63,955,789 4,230,694 0 68,186,483Land Improvements 1,171,589 178,331 0 1,349,920Furniture and Equipment 12,919,362 2,258,596 248,000 14,929,958

TOTAL ACCUMULATEDDEPRECIATION 78,046,740 6,667,621 248,000 84,466,361

GOVERNMENTALACTIVITIES CAPITALASSETS, NET $186,837,772 $ 66,151,437 $10,551,314 $ 242,437,895

Business-Type Activities:Capital Assets:

Furniture and Equipment $ 244,665 $ 8,933 $ 0 $ 253,598

Accumulated Depreciation for:Furniture and Equipment 168,650 10,809 0 179,459

BUSINESS-TYPE ACTIVITIESCAPITAL ASSETS, NET $ 76,015 $ (1,876) $ 0 $ 74,139

(Dainer& Company

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCerofied Pubfic Accountants Notes to Financial Statements

~02005

NOTE 5 - Capital Assets (Continued)

Depreciation expense was charged to functions/programs of the School District as follows:

Governmental Activities - Unallocated . $ 6,667,621Business-Type Activities 10,809

TOTAL DEPRECIATION EXPENSE $ 6,678,430

NOTE 6 - Construction Commitments

At June 30, 2005, the School District’s capital projects fund had outstanding constructioncommitments amounting to $48,370,083 for the completion of the construction of a new high schooland renovations to various schools.

NOTE 7 - Interfund Receivables, Payables and Transfers

The composition of interfund balances as of June 30, 2005 is as follows:

Interfund InterfundReceivables Payables

General Fund $ 1,286,419 $ 83,867

Capital Reserve Fund 12,656,195 0Capital Projects Fund 4,643,867 18,586,481Non-Major Governmental Funds 18,664 0Activity Fund 65,203 0

$18,670,348 $18,670,348

lnterfund transfers were as follows:

Transfer to Transfer fromOther Funds Other Funds

General Fund $ 1,638,988 $ 0Capital Reserve Fund 2,036,314 1,638,988Capital Projects Fund 0 2,036,314

$ 3,675,302 $ 3,675,302

Interfund transfers are made from the general fund to the capital reserve fund to provide fundsfor future capital expenses; the capital reserve fund makes transfers to the general fund for technologypurchases and the capital projects fund transfer interest earnings to the capital reserve fund.

(Dainer -36-“ &Comvawv

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified P,~bfbAccountants Notes to Financial Statements

June 30, 2005

NOTE 8 - Long-Term Debt

PrincipalOutstanding Maturities/ Bonds PayableJuly 1, 2004 ~jnanci~g Additions June 30, 2005

General Obligation Bonds,Series of 1996 $ 11,165,000 $ 790,000 $ 0 $ 10,375,000


General Obligation Note,Series B of 2000 11,514,000 717,000 0 10,797,000


General Obligation Bonds,Refunding Series of 2001 9,650,000 395,000 0 9,255,000


General Obligation Bonds,SeriesAof 2002 . 6,360,000 3,130,000 0 3,230,000

General Obligation Bonds,Series AA of 2002 16,260,000 1 95,000 0 16,065,000



General Obligation Bonds,Series A of 2004 7,910,000 0 0 7,910,000




General Obligation Note,Series E of 2004 0 0 8,800,000 8,800,000

General Obligation Note,Series G of 2004 0 0 25,200,000 25,200,000

General Obligation Bonds,Series of 2005 0 0 10,000,000 10,000,000

TOTAL 273,859,000 18,187,000 44,000,000 299,672,000

Less Deferred Amounts:Issuance (Discounts) Premium 703,028 34,678 (46,090) 622,260Refunding Deferred Charge (1,348,592) (185,810) (306,478) (1,469,260)

LONG-TERM DEBT $ 273,213,436 $ 18,035,868 $ 43,647,432 $ 298,825,000

(Dainer~ WEST CHESTER AREA SCHOOL DISTRICT

Certified Public Accountants Notes to Financial StatementsBusiness Consoltants

June 30, 2005

NOTE 8 - Long-Term Debt (Continued)Current

Outstanding- lr!ncipal

General Obligation Bonds, Series of 1996. Original principal amountof $13,070,000, maturing September 1, 2014, bearing interestfrom 4.15% to 5.1%. Interest is paid semi-annually on March 1and September 1 $ 10,375,000

General Obligation Bonds, Series A of 1998. Original principal amount of$17,000,000, maturing November 15, 2000 through November 15, 2009,bearing interest from 4.0% to 4.3%. Interest is paid semi-annuallyon May15 and November iS 4,010,000

General Obligation Note, Series B of 2000. Original principal amount of$13,461,000, maturing November 25, 2001 through November 25, 2015,bearing interest at a rate not to exceed 15%. Interest is paid monthly 10,797,000

General Obligation Bonds, Series of 2001. Original principal amount of$9,995,000, maturing May 15, 2003 through May 15, 2022, bearinginterest from 3.70% to 5.05%. Interest is paid semi-annually on May 15and November15 8,975,000

General Obligation Bonds, Refunding Series of 2001. Original principal amountof $10,680,000, maturing November 15, 2001 through November 15, 2020,bearing interest from 3.30% to 5.0%. Interest is paid semi-annually onMay 15 and November 15 9,255,000

General Obligation Bonds, Series of 2002. Original principal amount of$30,000,000, maturing April 15, 2004 through April 15, 2022, bearinginterest from 3% to 5%. Interest is paid semi-annually on April 15 andOctober 15 28,635,000

General Obligation Bonds, Series A of 2002. Original principal amount of$9,345,000, maturing December 1, 2003 through December 1, 2005, bearinginterestfrom 1.5% to2.1%. Interestispaidsemi-annuallyonJune landDecember 1 3,230,000

General Obligation Bonds, Series AA of 2002. Original principal amount of$16,265,000, maturing January 15, 2004 through January 15, 2011, bearinginterest from 2.1% to 5%. Interest is paid semi-annually on January 15 andJuly 15 16,065,000

General Obligation Bonds, Series of 2003. Original principal amount of$30,000,000, maturing March 15, 2005 through March 15, 2022, bearinginterest from 3.25% to 4.4%. Interest is paid semi-annually on September15and March 15 29,995,000

General Obligation Bonds, Series A of 2003. Original principal amount of$21,995,000, maturing November 15, 2003 through November 15, 2016,bearing interest from I % to 3.9%. Interest is paid semi-annually onMay 15 and November 15 20,230,000

General Obligation Bonds, Series AA of 2003. Original principal amount of$35,000,000, maturing August 15, 2004 through November 1 5, 2027bearing interest from 2.9% to 4.85%. Interest is paid semi-annually onFebruary 15 and August 15 34,995,000

SUBTOTAL (CARRIED FORWARD) 176,562,000

(Dainer -38-

~ WEST CHESTER AREA SCHOOL DISTRICTCertdi:d Pabhc Accountants Notes to Financial Statements

~02005

NOTE 8 - Long-Term Debt (Continued)Current

OutstandingPrincipal

SUBTOTAL (BROUGHT FORWARD) $176,562,000

General Obligation Note, Series of 2003. Original principal amount of$35,000,000, maturing February 1, 2004 through August 1, 2023, bearinginterest at a rate not to exceed 15.55%. Interest is paid monthly basedon weekly Municpal Swap Index, not to exceed 15.55%. The rate atJune 30, 2005 was 2.979% 35,000,000

General Obligation Bonds, Series A of 2004. Original principal amount of$7,910,000, maturing August 15, 2004through November15, 2016bearing interest from 2% to 3.75%. Interest is paid semi-annually onMay 15 and November15 7,910,000

General Obligation Note, Series of 2004. Original principal amount of$36,200,000, maturing July 1, 2004 through August 1, 2024, bearinginterest at a rate not to exceed 15.55%. Interest is paid monthly basedon weekly Municpal Swap Index, not to exceed 1 5.55%. The rate atJune 30, 2005 was 2.979% 36,200,000

General Obligation Note, Series E of 2004. Original principal amount of$8,800,000, maturing February 1, 2005 through August 1, 2017, bearinginterest at a rate not to exceed 15.55%. Interest is paid monthly basedon weekly Municpal Swap Index, not to exceed 15.55%. The rate atJune 30, 200S was 2.979% 8,800,000

General Obligation Note, Series G of 2004. Original principal amount of$25,200,000, maturing February 1, 2005 through August 1, 2023, bearinginterest at a rate not to exceed 15.55%. Interest is paid monthly basedon weekly Municpal Swap Index, not to exceed 15.55%. The rate atJune 30, 2005 was 2.979% 25,200,000

General Obligation Bonds, Series of 2005. Original principal amount of$10,000,000, maturing November 15, 2005 through November15, 2017,bearing interest from 2% to 3.7%, Interest is paid semi-annually onMay 15 and November15 10,000,000

TOTAL $ 299,672,000

(Dainer&Comvan’~i

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCer~fiedPubhc Accountants Notes to Financial Statements

June 30, 2005

NOTE 8 - Long-Term Debt (Continued)

The annual requirements to amortize all debts outstanding as of June 30, 2005, are as follows:

Year Ended Principal Interest Total

2006 $ 9,914,000 $ 11,054,156 $ 20,968,1562007 10,323,000 10,804,596 21,127,5962008 10,729,000 10,384,802 21,113,8022009 11,126,000 10,001,770 21,127,7702010 11,547,000 10,185,730 21,732,7302011-2015 64,062,000 40,350,144 104,412,1442016-2020 78,536,000 27,709,178 106,245,1782021-2025 88,060,000 12,484,338 100,544,3382026-2028 15,375,000 849,526 16,224,526

TOTAL MATURITIES 299,672,000 133,824,240 433,496,240

Deferred Amounts (847,000) 847,000 0

TOTAL $ 298,825,000 $ 134,671,240 $ 433,496,240

NOTE 9 - Changes in Other Long-Term Liabilities

Balance BalanceJuly 1, June 30,2004 Additions Reductions 2005

Accrued Compensated Absences $ 839,893 $ 111,037 $ 0 $ 950,930

Accrued Severance 3,539,342 0 329,904 3,209,438

TOTAL $ 4,379,235 $ 111,037 $ 329,904 $ 4,160,368

NOTE 10- Contingent Liabilities

Amounts received or receivable from grantor agencies are subject to audit and adjustment bygrantor agencies, principally the federal government. Any disallowed claims, including amounts alreadycollected, may constitute a liability of the applicable funds. The amount, if any, of expenditures whichmay be disallowed by the grantor cannot be determined at this time although the School District expectssuch amounts, if any, to be immaterial.

(Dainer -40-“ &Comvany

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Pubhc Accountants Notes to Financial Statements

June 30, 2005

NOTE 11 - Risk ~

The School District self-insures worker’s compensation through the School District’s InsuranceConsortium. The School District’s Insurance Consortium is an association consisting of school districts,intermediate units, and vocational-technical schools of the Commonwealth of Pennsylvania. The SchoolDistrict obtained a self-insurance exemption from the Commonwealth of Pennsylvania, Department ofLabor and Industry, Bureau of Worker’s Compensation, which allows the School District to self-insureworkers’ compensation.

Each year the School District is required to deposit funds into the central fund. The School Districtis then billed monthly for actual claims for the current year paid during the previous month up to thelevel of retention. After the level of retention is reached, claim payments are made from the centralfund. At the end of each fiscal year, reserves are established or adjusted on all outstanding claims.Funds in the central fund at the end of the fiscal year are not refunded.

Additionally, the School District self-insures group dental, vision and prescription coverage. TheSchool District has accrued a three-month value for potential claims under dental, vision and prescriptioncoverage.

NOTE 12 - Other Post-employment Benefits

The School District provides post-retirement health care benefits to Administrative, Instructional,Secretarial and Support personnel. Administrative personnel who retire under the normal PSERSguidelines are covered to age 70. The School District pays 100% of the premium for the followingcoverage: group medical, which includes medical/surgical, and major medical, vision and prescriptiondrug for the retiree and their dependents. In addition, the School District provides retirees with groupterm life insurance to age 70 in a principal amount equal to two or three times annual salary plus$15,000 and universal life insurance to age 70 in a principal amount equal to annual salary.

Instructional personnel who retire under the normal PSERS guidelines with at least 15 years ofservice and at least fifty years of age receive coverage to age 65. The School District will provide for100% of the following coverage: group medical, which includes medical/surgical, and major medical andprescription coverage for the retirees.

Secretarial and Support personnel who retire under the normal PSERS guidelines with at least 15years of service and at least fifty years of age receive coverage to age 65. The School District will providefor 100% of the following coverage: group medical, which includes medical/surgical and major medicalcoverage for the retirees.

The School District had an actuarial valuation performed. As of July 1, 1996, the actuarial presentvalue of expected future benefits was $9,546,579. This includes retirees, active employees eligible toretire, and active employees not yet eligible to retire. GASB statement No 45, effective July 1, 2007, willrequire the accrual of post employment benefits. Current standards under GASB Statement No. 12account for the benefits on a pay-as-you-go basis. Currently, there are 239 participants receivingbenefits. The total benefits paid on behalf of these participants were $1,299,126 for the year endedJune 30, 2005.

(Dainer -41-~j & Company

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Pabflc Accountants Notes to Financial Statements

~02005

NOTE 13 - Employee Retirement Systems and Pension Plans (Continued)

School districts in the Commonwealth of Pennsylvania participate in a state-administered pensionprogram. Under the program, contributions are made by each of three parties - the School District, thestate and the employee. All full-time employees of the School District, and part-time employees whomeet certain minimum employment requirements, participate in the program. The School District’scontributions for the year ended June 30, 2005 totaled $3,153,512. Total covered payroll was$74,637,822 and total payroll was $75,511,628 for the current year. The following is a summary of planbenefit and asset information:

Plan Description:

Name of Plan - The Public School Employees’ Retirement System of Pennsylvania (the System).

Type of Plan - Governmental cost sharing multiple-employer defined benefit plan.

Benefits - Retirement and disability, legislative mandated ad hoc cost-of-living adjustments, healthcare insurance premium assistance to qualified annuitants.

Authority - The Public School Employee’s Retirement Code (Act No. 96 of October 2, 1 975, asamended) (24 Pa. C.S. 8101-8535).

Annual Financial Report - The System issues a comprehensive annual financial report that includesfinancial statements and required supplementary information for the plan. A copy of the reportmay be obtained by writing to Public School Employees’ Retirement System, P.O. Box 125,Harrisburg, PA 17108-0123.

Funding Policy:

Authority - The contribution policy is established in the Public School Employees’ Retirement Codeand requires contributions by active members, employers, and the Commonwealth.

Contribution Rates - Members contribute from 5.25 to 7.50 percent of their qualifyingcompensation, depending on when their employment began.

Contributions required of employers are based upon an actuarial valuation. For the fiscal yearended June 30, 2005, the rate of employer contribution was 4.23 percent of covered payroll.

(Dainer -42-“~j & Company

A Professional Corporation WEST CHESTER AREA SCHOOL DISTRICTCertified Pabfic Accountants Notes to Financial Statements

June 30, 2005

NOTE 14 - Refinancing of Debt

On January 27, 2005, the School District issued $10,000,000 of non-electoral general obligationbonds. Upon issuance of the bonds, a portion of the proceeds were invested in U.S. GovernmentInvestments which are held in trust by an escrow agent and irrevocably pledged for the purpose ofdefeasing (paying and redeeming), solely from the principal and interest proceeds of such investments, aportion of the School District’s General Obligation Bonds, Series A of 1998. The bonds to be advancerefunded are the bonds scheduled to mature on November 15 of each of the years from 2009 to 2017,inclusive. The proceeds of the investments, together with interest to be earned thereon, will besufficient to pay interest and principal of the bond issue through the call dates of the outstanding bonds.The School District advance refunded the Series A of 1998 Bonds to reduce its total debt servicepayments by $663,265 and to realize an economic gain at settlement of $616,141.

Escrow accounts were established to provide for future debt service. The escrow account assetsand the liabilities for the above defeased debt are not included on the School District’s financialstatements.

A summary of defeased debt of the School District at June 30, 2005 is as follows:

OutstandingFinal Interest Principal at

Maturity Rates June 30, 2005General Obligation Bonds, Series A of 1998,

Maturing May 1 5, 2006 5/1 5/2006 4.30-4.90% $ 9,465,000

NOTE 1 5 - Prior Period Adiustment

Net assets in the statement of activities has been restated as of the beginning of the year to adjustfor an overaccrual of severance expense at June 30, 2004 of $460,776.

(Dainer~J\~Compan~



OriginalBudget

$ 124,066,28022,837,8252,188,426

149,092,531

$ 124,066,28022,837,8252,188,426

149,092,531

Variance withFinal Budget-

Positive

$ 127,652,944 $ 3,586,66424,500,908 1,663,0832,645,922 457,496

1 54,799,774 5,707,243

Expenditures:

EXCESS (DEFICIENCY) OF REVENUESOVER EXPENDITURES

Other Financing Sources (Uses):Interfund Transfers InRefunds of Prior Years ExpendituresBudgetary Reserve

TOTAL OTHER FINANCINGSOURCES (USES)

NET CHANGE IN FUND BALANCES

Fund Balance - July 1, 2004

(5,115,479) (5,703,107) 207,992 5,503,387

1,612,600 1,612,600 1,638,988 26,3880 (50,000) (29,634) 20,366

(2,600,000) (1,962,372) 0 1,962,372

(987,400) (399,772) 1,609,354 2,009,126

6,102,879 6,102,879 6,469,844 366,965

$ 0 $ 0 $ 8,287,190 $ 8,287,190

-43 -

WEST CHESTER AREA SCHOOL DISTRICTReguired Supplementary Information

Budgetary Comparison ScheduleGeneral Fund


Amended

Revenues:Local RevenuesState Program RevenuesFederal Program Revenues

TOTAL REVENUES

Budget Actual (Negative)

Regular Programs 64,479,800 64,368,422 64,368,350 72Special Programs 16,869,331 18,386,778 18,321,476 65,302Vocational Programs 3,718,613 3,585,527 3,581,274 4,253Other Instructional Programs 2,062,485 2,188,300 2,185,416 2,884Adult Education Programs 30,391 30,391 28,613 1,778Pupil Personnel Services 5,533,880 5,259,405 5,265,076 (5,671)Instructional Staff Services 4,978,671 4,825,289 4,825,610 (321)Administrative Services 8,225,478 8,484,6S4 8,474,290 10,364Pupil Health 1,864,170 1,702,097 1,697,682 4,415Business Services 1,396,872 1,211,282 1,211,178 104Operation and Maintenance of

Plant Services 13,206,385 12,672,002 12,664,535 7,467Student Transportation Services 10,423,078 10,522,283 10,512,659 9,624Central and Other Support Services 2,093,304 2,343,155 2,329,855 13,300Student Activities 2,362,901 2,313,033 2,292,187 20,846Community Services 85,480 85,099 72,822 12,277Facilities Acquisition and Construction 198,991 189,741 189,718 23Debt Service 16,678,180 16,628,180 16,571,041 57,139

TOTAL EXPENDITURES 154,208,010 154,795,638 154,591,782 203,856

(6,1 02,879) (6,1 02,879) 1,817,346 7,920,225

FUND BALANCE - JUNE 30, 2005

(damer - wcasd financial... · 2016. 1. 28. · (dainer &comvan’t a professional corporation...

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