independent single audit report 2008-2009

8/9/2019 Independent Single Audit Report 2008-2009

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REPORT ONNORTHWESTERN LEHIGH SCHOOL DISTRICT

SINGLE AUDIT REPORT

FISCAL YEAR ENDED JUNE 30, 2009


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NORTHWESTERN LEHIGH SCHOOL DISTRICT

Single Audit Report

For the Fiscal Year Ended June 30, 2009

TABLE OF CONTENTS

Page (s)

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Introductory Section

Transmittal Letter ........................................................................................................................... 1

Letter to Governance/Management...........................................................................................2 - 6

Report Distribution List ................................................................................................................... 7

Financial Section

Independent Auditor's Report....................................................................................................8 - 9

Management's Discussion and Analysis .............................................................................. 10 17

Basic Financial Statements

District-wide Financial Statements:

Statement of Net Assets ................................................................................................. 18

Statement of Activities..................................................................................................... 19

Fund Financial Statements:

Balance Sheet - Governmental Funds ........................................................................... 20

Reconciliation of the Governmental Funds Balance Sheetto the Statement of Net Assets................................................................................... 21

Statement of Revenues, Expenditures, and Changes in FundBalances - Governmental Funds................................................................................ 22

Reconciliation of the Governmental Funds Statement of Revenues,Expenditures, and Changes in Fund Balance to the Statementof Activities ...........................................................................................................23 - 24

Statement of Net Assets - Proprietary Funds................................................................. 25

Statement of Revenues, Expenses, and Changes inNet Assets - Proprietary Funds .................................................................................. 26

Statement of Cash Flows - Proprietary Funds ........................................................27 - 28

Statement of Net Assets - Fiduciary Funds.................................................................... 29


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TABLE OF CONTENTS (continued)

Page (s)

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Statement of Changes in Net Assets - Fiduciary Funds .................................................... 30

Statement of Revenues, Expenditures, and Changes in FundBalance - Budget and Actual - General Fund ............................................................ 31

Notes to Basic Financial Statements..................................................................................32 65

Required Supplemental Information

Schedule of Funding Progress ........................................................................................... 66

Supplemental Information:

Combining Statement of Fiduciary Net Assets - Private PurposeTrust Funds .................................................................................................................67

Combining Statement of Changes in Fiduciary Net Assets -Private Purpose Trust Funds...................................................................................... 67

Combining Statement of Net Assets - All Enterprise Funds .......................................... 68

Combining Statement of Revenues, Expenses, and Changes inNet Assets - All Enterprise Funds............................................................................... 69

Combining Statement of Cash Flows - All Enterprise Funds.................................70 71

Combining Balance Sheet - All Agency Funds .............................................................. 72

Combining Statement of Changes in Assets and Liabilities -All Agency Funds ........................................................................................................ 73

Combining Balance Sheet - All Capital Project Funds................................................... 74

Combining Statement of Revenues, Expenditures, and Changes inFund Balances All Capital Project Funds................................................................ 75

General Fund - Schedule on Tax Collectors' Receipts .................................................. 76

General Fund - Statement of Revenues, Expenditures, andChanges in Fund Balance ...................................................................................77 - 80

Food Service Fund - Statement of Revenues, Expenses, andChanges in Net Assets................................................................................................ 81

Food Service Fund - Statement of Net Assets............................................................... 82


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TABLE OF CONTENTS (continued)

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Tiger Concession Fund - Statement of Revenues, Expenses, andChanges in Net Assets................................................................................................. 83

Payroll Fund - Statement of Receipts and Disbursements............................................ 84

Capital Reserve Fund - Statement of Revenues and Expenditures.............................. 84

2004 Construction Fund - Statement of Revenues and Expenditures.......................... 85

2008 Construction Fund 32 Statement of Revenues and Expenditures................. 85

2008 Construction Fund 35 Statement of Revenues and Expenditures................. 86

2008 A Construction Fund -33 Statement of Revenue and Expenditures ................. 87

General Long-Term Debt:

Schedule on General Obligation Bonds - Series of 2001 .............................................. 88

Schedule on General Obligation Bonds- Series of 2003 ............................................... 88

Schedule on General Obligation Bonds - Series of 2005 .............................................. 89

Schedule on General Obligation Bonds Series A of 2007.......................................... 90

Schedule on General Obligation Notes Series A of 2007........................................... 91

Schedule on General Obligation Bonds Series of 2008 ............................................. 92

Schedule on General Obligation Bonds Series A of 2008.......................................... 93

Single Audit Section

Schedule of Expenditures of Federal Awards .............................................................................. 94

Notes to the Schedule of Expenditures of Federal Awards ......................................................... 95

Independent Auditors Report on Internal Control over Financial Reportingand on Compliance and Other Matters based on an Audit of FinancialStatements Performed in accordance with Government Auditing Standards.................... 96 - 97

Independent Auditors Report on Compliance with RequirementsApplicable to each Major Program and on Internal Control overCompliance in accordance with OMB Circular A-133 ...................................................... 98 99

Schedule of Findings and Questioned Costs ................................................................ 100 - 101


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I N T R O D U C T O R Y S E C T I O N


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Board of School Directors Mrs. Susanne H. Meixsell, Superintendent

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In addition, the representation letter provided to us, by management, confirmed there were no uncorrectedmisstatements. Management has recorded all of our adjusting journal entries, and has agreed to theconversion entries necessary to convert governmental funds and proprietary funds to governmentalactivities and business-type activities, respectively.

In accordance with auditing standards, generally accepted in the United States of America, we haveacquired a sufficient understanding of the District and its environment, including its internal control, toassess the risk of material misstatements of the financial statements whether due to error or fraud, and todesign the nature, timing, and extent of further audit procedures that were necessary to express anopinion on the 2008-09 basic financial statements.

Our consideration of the Districts internal control components was not designed for the purpose ofmaking detailed recommendations and would not necessarily disclose all significant deficiencies withinthe components. Our audit procedures have been appropriately adjusted to compensate for anyobserved significant deficiencies. The following three paragraphs define the three different types ofdeficiencies that can occur:

A control deficiency 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 misstatements on a timely basis.

A significant deficiency is a control deficiency, or combination of control deficiencies, thatadversely affects the entitys ability to initiate, authorize, record, process, or reportfinancial data reliably, in accordance with generally accepted accounting principles, suchthat there is more than a remote likelihood that a misstatement of the entitys financialstatements, that is more than inconsequential, will not be prevented or detected by theentitys internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies,that results in more than a remote likelihood that a material misstatement of the financialstatements will not be prevented or detected by the entitys internal control.

As the primary purpose of our audit is to form an opinion on the basic financial statements, you willappreciate that reliance must be placed on adequate methods of internal control as your principalsafeguard against errors and fraud which audit procedures may not disclose. The objective of internalcontrol over financial reporting is to provide reasonable, but not absolute, assurance that assets aresafeguarded against loss from unauthorized use and that financial records are reliable for preparingfinancial statements in accordance with generally accepted accounting principles and for maintaining theaccountability for assets. The concept of reasonable assurance recognizes that the cost of internal controlshould not exceed the related benefits; to operationalize this concept, management is required toformulate estimates and judgments of the cost/benefit ratios of alternative controls.

There are inherent limitations that should be recognized in considering the potential effectiveness ofinternal control over financial reporting. Errors can result from misunderstanding of instructions, mistakesof judgment, carelessness, fatigue, and other personnel factors. Control procedures whose effectivenessdepends upon the segregation of duties can be circumvented by collusion or by management. What'smore, any projection of internal control evaluations to future periods is subject to the risk that theprocedures may become inadequate because of changes in conditions or due to the deterioration of thedegree of compliance with control procedures.

As an adjunct to our audit, we remained alert throughout for opportunities to enhance internal controls andoperating efficiency. These matters were discussed with management as the audit progressed and havesubsequently been reviewed in detail to formulate practical recommendations. We wish to thank your stafffor their courtesies and cooperation, which facilitated the efficient performance of audit procedures. Theremainder of this letter will explain any internal control deficiencies discovered during the audit, otherauditor recommendations, and other information pertinent to the District.


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A control deficiency is determined to be considered a material weakness or significant deficiency basedupon the magnitude of the problem as it pertains to a particular opinion unit. In other words, what isconsidered a significant deficiency in one fund may only be a control deficiency in another fund of greatersize.

The following section in this governance/management letter is separated by categories based onimportance, with any material weaknesses or significant deficiencies listed in the beginning:

CONTROL DEFICIENCIES

Federal Grants

Our review of federal grant transactions indicated that a Title III grant payment had been posted as anoffset of the related expenditure instead of being recorded as federal grant revenue.

In accordance with the requirements of OMB Circular A-133, we recommend all grant monies received berecorded as federal grant revenues. Grant expenditures and revenues should not be offset, but recordedseparately in accounts aggregating transactions from like funding sources. Conformity with this process isespecially essential for recording activity associated with Recovery Act funds.

Student Play Receipts

During our review of student activity receipts, we discovered postings relating to student plays held in thespring did not have supporting documentation for receipts collected at these events, since the District didnot utilize tickets for admission. Utilization of tickets to support admission to events would provide supportthat the amount of recorded receipts were in agreement with the number of tickets sold.

We recommend the District utilize tickets for admission to all events to provide support for the amount ofrecorded receipts. Reconciling the number of tickets sold to the amount of deposited receipts would

demonstrate compliance with appropriate internal controls.

RECOMMENDATIONS

Tiger Concession Fund

During our testing of expenses in the Tiger Concession Fund, we discovered construction expenses hadbeen charged to inappropriate account codes.

We would like to recommend that all construction expenses be evaluated to determine if the amountsmeet the capitalization thresholds. Expenses meeting capitalization limits should be recorded to capitalassets while expenses under the threshold should be charged to appropriate expense accounts.

OTHER INFORMATION

GASB Statement No. 53 Derivatives

During the 2008 calendar year, the Governmental Accounting Standards Board issued the latestaccounting principle standard for all governments to follow. GASB Statement No. 53 is associated withthe proper accounting and reporting of derivative instruments. The only derivative instruments to beacquired, in the Commonwealth of Pennsylvania, by governments are derivatives pertaining to debt; i.e.interest rate swaps, forward swaptions, constant maturity basis swaps, and etc.


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Governments who use this type of financial instrument are now required to record the fair value of thederivative onto the government-wide financial statements reflected as an asset or liability. The recordingof the net change in fair value depends on the effectiveness of the hedge. These types of financialinstruments can potentially save governments money, but are as risky as adjustable rate mortgagesversus fixed rate mortgages. If the District would like further clarification of this accounting standard, wewill be happy to discuss it with you. The effective date for this standard is the 2009-10 fiscal year.

GASB Statement No. 54 Fund Balance Reporting

In February 2009, the Governmental Accounting Standards Board issued Statement No. 54 redefining thevarious components of fund balance that is used in governmental funds (General Fund, Capital ReserveFund, Athletic Fund, Capital Project Fund, and Debt Service Funds). This standard goes into effect for the2010-11 fiscal year.

The new categories of fund balance are:

NonspendableRestricted

CommittedAssignedUnassigned

The Nonspendablefund balance classification includes amounts that cannot be spent because they areeither (a) not in spendable form or (b) legally or contractually required to be maintained intact. The not inspendable form includes items not expected to be converted into cash, for example, inventories andprepaid amounts. The corpus (principal) of a permanent fund is an example of an amount that is legally orcontractually required to be maintained intact.

The Restrictedfund balance classification occurs when constraints placed on the use of resources areeither:

a. Externally imposed by creditors (such as debt covenants), grantors, contributors, or laws and

regulations of other governments; or

b. Imposed by law through constitutional provisions or enabling legislation. Enabling legislationauthorizes the government to mandate payment of resources from external providers andincludes a legally enforceable requirement that those resources be used for the specificpurpose stipulated in the legislation.

The Committedfund balance classification is used for specific purposes pursuant to constraints imposedby formal action of the governments highest level of decision-making authority. Those committedamounts cannot be used for any other purpose unless the government removes or changes the specifieduse by taking the same type of action (legislation, ordinance, or resolution). The formal action of thegovernments highest level of decision-making authority that commits fund balance to a specific purposeshould occur prior to the end of the reporting period, but the amount, if any, subject to the constraint, maybe determined in the subsequent period.

The Assigned fund balance classification involves amounts that are constrained by the governmentsintent to be used for specific purposes, but are neither restricted nor committed. Intent should beexpressed by (a) the governing body itself or (b) a body (a budget or finance committee) or official to whichthe governing body has delegated the authority to assign amounts to be used for specific purposes. Theauthority to create an assigned amount does not require formal action of the governing body.

Assigned fund balance includes (a) all remaining amounts (except for negative balances) that are reportedin governmental funds, other than the general fund, that are not classified as nonspendable and areneither restricted nor committed and (b) amounts in the general fund that are intended to be used for aspecific purpose.


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REPORT DISTRIBUTION LIST

The Northwestern Lehigh School District has distributed copies of the Single Audit Act Package to thefollowing:

ONE COPY TO: BUREAU OF THE CENSUS(Electronically Submitted) DATA PREPARATION DIVISION

ONE COPY TO: COMMONWEALTH OF PENNSYLVANIA(Electronically Submitted) OFFICE OF THE BUDGET/BUREAU OF AUDITS

ONE COPY TO : CARBON-LEHIGH INTERMEDIATE UNIT #214210 INDEPENDENCE DRIVESCHNECKSVILLE, PA 18078


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F I N A N C I A L S E C T I O N


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NORTHWESTERN LEHIGH SCHOOL DISTRICTNew Tripoli, Pennsylvania

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)Required Supplementary Information (RSI)

(UNAUDITED)For the Year Ended June 30, 2009

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The Northwestern Lehigh School Districts (the District) discussion and analysis is designed to (a) assistthe reader in focusing on significant financial issues, (b) provide an overview of the Districts financialactivity, (c) identify changes in the Districts financial position (its ability to address the next andsubsequent years challenges), (d) identify any material deviations from the financial plan (the approvedbudget), and (e) identify individual fund issues or concerns. Readers should also review the financialstatements and notes to enhance their understanding of the Districts financial performance.

FINANCIAL HIGHLIGHTS

As of June 30, 2009, the Districts net assets equal $20,066,113, for an increase of $ 3,334,118(or 19.9%).

The governmental net assets equal $19,766,159, for an increase of $3,342,328 (or 20.4%).

The business-type net assets equal $299,954, for an decrease of $8,210 (or - 2.7%).

USING THIS ANNUAL REPORT

This annual report consists of a series of financial statements and notes to those statements. Thesestatements are organized so the reader can understand Northwestern Lehigh School District as a financialwhole, an entire operating entity, and the major individual funds. The statements then proceed to providean increasingly detailed look at specific financial activities.

The first two statements are government-wide financial statements: the Statement of Net Assets and theStatement of Activities. These provide both long-term and short-term information about the Districts

overall financial status.

The remaining statements are fund financial statements that focus on individual parts of the Districtsoperations in more detail than the government-wide statements. The governmental funds statements tellhow general District services were financed in the short-term as well as what remains for future spending.Proprietary fund statements offer short-term and long-term financial information about the activities that theDistrict operates like a business. For the District these are our Food Service Fund and Tiger ConcessionsFund. Fiduciary fund statements provide information about financial relationships where the District actssolely as a trustee or agent for the benefit of others, to whom the resources belong.

The financial statements also include notes that explain some of the information in the financialstatements.


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NORTHWESTERN LEHIGH SCHOOL DISTRICTManagement's Discussion and Analysis

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Figure A-1 shows how the required parts of the Financial Section are arranged and relate to one another:

Figure A-1Required Components of

Northwestern Lehigh School DistrictsFinancial Report

ManagementDiscussion

and Analysis

Basic

FinancialStatements

Required

SupplementaryInformation

Government-wide

StatementsFund

Statements

Notes toThe

FinancialStatements


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Figure A-2 summarizes the major features of the Districts financial statements, including the portion of theDistricts financial operations they cover and the types of information they contain. The remainder of thisoverview section of managements discussion and analysis explains the structure and contents of each ofthe statements.

Figure A-2

Major Features of Northwestern Lehigh School DistrictsGovernment-wide and Fund Financial Statements

FUND STATEMENTS

Government-wide Statements

GovernmentalFunds

ProprietaryFunds

FiduciaryFunds

Scope Entire District(except fiduciaryfunds)

The activities of theDistrict that are notproprietary or fiduciary,such as education,administration andcommunity services

Activities theDistrict operatessimilar to privatebusiness - FoodServices andTiger

Concessions

Instances inwhich theDistrict is thetrustee or agentto someoneelses

resources-ScholarshipFunds andAgency Funds

Requiredfinancialstatements

Statement ofNet Assets

Statement ofActivities

Balance Sheet

Statement ofRevenues,Expenditures, andChanges in FundBalance

Statement ofNet Assets

Statement ofRevenues,Expenses andChanges in NetAssets

Statement ofCash Flows

Statement ofFiduciary NetAssets

Statement ofChanges inFiduciary NetAssets

Accounting basisandmeasurementfocus

Accrualaccounting andeconomicresources focus

Modified accrualaccounting and currentfinancial resourcesfocus

Accrualaccounting andeconomicresources focus

Accrualaccounting andeconomicresourcesfocus

Type ofasset/liabilityinformation

All assets andliabilities, bothfinancial andcapital, andshort-term and

long-term

Only assets expectedto be used up andliabilities that comedue during the year orsoon thereafter, no

capital assets included

All assets andliabilities, bothfinancial andcapital, andshort-term and

long-term

All assets andliabilities, bothfinancial andcapital short-term and long-

termType of inflow-outflowinformation

All revenues andexpenses duringyear, regardlessof when cash isreceived or paid

Revenues for whichcash is received duringor soon after the endof the year;expenditures whengoods or serviceshave been receivedand payment is dueduring the year orsoon thereafter

All revenues andexpenses duringyear, regardlessof when cash isreceived or paid

All revenuesand expensesduring year,regardless ofwhen cash isreceived orpaid


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OVERVIEW OF FINANCIAL STATEMENTS


The government-wide statements report information about the District as a whole using accountingmethods similar to those used by private-sector companies. The focus of the Statement of Net Assets (the

unrestricted net assets) is designed to be similar to a bottom line for the District and its governmental andbusiness-type activities. This statement combines and consolidates governmental funds current financialresources (short-term spendable resources) with capital assets and long-term obligations.

The Statement of Activities is focused on both the gross and net cost of various activities, which areprovided by the governments general tax and other revenues. This is intended to summarize and simplifythe users analysis of the cost of various governmental services and/or subsidies to various business-typeactivities.

The two government-wide statements report the Districts net assets and how they have changed. Netassets, the difference between the Districts assets and liabilities, are one way to measure the Districtsfinancial health or position. Over time, increases or decreases in the Districts net assets are an indicationof whether its financial health is improving or deteriorating, respectively.

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

Governmental activities - All of the Districts basic services are included here, such as instruction,administration and community services. Property taxes, state and federal subsidies, and grantsfinance most of these activities.

Business-type activities - The District conducts food service and stadium concession (TigerConcessions) operations and charges fees to staff, students and visitors to cover the costs.

Fund Statements

The Districts fund statements provide detailed information about the most significant funds - not the

District as a whole. Some funds are required by state law and by bond requirements.

Governmental Funds - Most of the Districts activities are reported in governmental funds, whichfocus on the determination of financial position and change in financial position, not on incomedetermination. They are reported using an accounting method called modified accrual accounting,which measures cash and all other financial assets that can readily be converted to cash. Thegovernmental fund statements provide a detailed short-term view of the Districts operations and theservices it provides. Governmental fund information helps the reader determine whether there aremore or less financial resources that can be spent in the near future to finance the Districtsprograms. The relationship (or differences) between governmental activities (reported in theStatement of Net Assets and the Statement of Activities) and governmental funds is reconciled in thefinancial statements. Governmental funds include the General Fund, Capital Reserve Fund, CapitalProjects Funds and the Debt Services Fund.

Proprietary Funds - These funds are used to account for the Districts activities that are similar tobusiness operations in the private sector, or where the reporting is on determining net income,financial position, or changes in financial position. These funds have a significant portion of fundingthrough user charges. When the District charges customers for services, these services aregenerally reported in proprietary funds. The Food Service and Tiger Concessions Funds are theDistricts proprietary funds and are the same as the business-type activities reported in thegovernment-wide statements, but provide additional detail and information, such as cash flows.


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Fiduciary Funds - The District is the trustee, or fiduciary, for some scholarship funds. Agency fundsare used to account for assets held by the District as an agent for individuals, private organizations,other governmental entities and/or other funds. All of the Districts fiduciary activities are reported ina separate Statements of Fiduciary Net Assets. We exclude these activities from the Districts otherfund statements because the District cannot use these assets to finance its operations.

OVERALL FINANCIAL HIGHLIGHTS

Governmental Activities

General Fund The District received $232,946 more in General Fund revenue and other financingsources than originally budgeted. Positive variances in local revenue sources were primarilyattributable to unanticipated receipts of interim real estate taxes and delinquent real estate taxcollections. In total, there were net positive budget variances in total expenditures and otherfinancing uses amounting to $1,339,491. The District budgeted for an anticipated legislatedincrease in the retirement contribution rate which did not occur. Additionally, anticipated increases infuel oil and diesel costs did not materialize and contributed to the total positive expenditure variance.As of June 30, 2009, the District has designated $1,755,000 of fund balance for proposed futurePSERS contributions and increases in medical insurance. The Board authorized a specific fund

balance reserve of $1,381,403 for GASB #45 other post employment benefits. As of June 30, 2009,the District has an unreserved-undesignated fund balance of $2,532,904.

Capital Reserve Fund The 2008-09 fiscal year operations included an interfund transfer from theGeneral Fund in the amount of $627,136. The transfer provided for the future purchase of schoolbuses and capital improvements throughout the District facilities

Capital Projects Funds The District borrowed $9,750,000 of Non-Grandfathered debt. Thesefunds were used to partially finance renovations to the high school, middle school, transportation andmaintenance facility, as well as the District administrative offices. These projects are expected toconclude in the 2010-2011 school year.

Business-Type Activities

Food Service Fund The Food Service operations experienced net loss of $11,512 during the 2008-2009 fiscal year, which included capital contributions of $14,690 and depreciation expense of$32,542. Lunch and ala carte prices were increased in the 2008-2009 fiscal year to provideadditional revenue to support operations.


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Statement of Net Assets

The following table reflects the Condensed Statement of Net Assets.

Govern- Business- Govern- Business-mental Type mental Type

Activities Activities Total (1) Activities Activities Total (1)

Current & Other Assets 17,934,478$ 81,343$ 18,002,769$ 21,152,430$ 67,605$ 21,194,111$

Non-Current Assets 54,015,615 266,283 54,281,898 42,702,766 302,466 43,005,232

Total Assets 71,950,093$ 347,626$ 72,284,667$ 63,855,196$ 370,071$ 64,199,343$

Current Liabilities 4,913,612 43,519 4,944,079 7,307,215 57,754 7,339,045

Non-Current Liabilities 47,270,322 4,153 47,274,475 40,124,150 4,153 40,128,303

Total Liabilities 52,183,934 47,672 52,218,554 47,431,365 61,907 47,467,348

Net Assets:

Invested in Capital Assets,

net of related debt 13,060,276 266,283 13,326,559 11,273,746 302,466 11,576,212

Restricted 385,710 - 385,710 69,017 - 69,017

Unrestricted 6,320,173 33,671 6,353,844 5,081,068 5,698 5,086,766

Total Net Assets 19,766,159 299,954 20,066,113 16,423,831 308,164 16,731,995

Total Liabilities and Net Assets 71,950,093$ 347,626$ 72,284,667$ 63,855,196$ 370,071$ 64,199,343$

2009 2008

(1) Internal balances are eliminated in the total column as they do not represent assets or liabilities of

the total District.

Most of the Districts net assets are invested in capital assets (buildings, land and equipment). TheDistricts restricted net assets are for capital projects, retirement of long-term debt and other restrictions.

The remaining unrestricted net assets are a combination of reserved, designated and undesignatedamounts. The reserved and designated balances are amounts set-aside to fund the next yearsappropriations, future PSERS and GASB #45 obligations, future medical rate increases, capital projects,and buses as planned by the District.

The Changes in Net Assets takes the information from the Statement of Activities and rearranges it slightlyto present the total revenues and expenses and increases (decreases) in net assets for the year.


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Statement of Activities

The following table reflects the revenues and expenses for the current period.

Govern- Business- Govern- Business-

mental Type mental Type

REVENUES Activities Activities Total Activities Activities Total

Program revenues:

Charges for services 88,859$ 668,021$ 756,880 109,794$ 707,963$ 817,757Operating grants & contributions 4,525,119 251,392 4,771,821 4,930,604 235,612 5,166,216Capital grants & contributions 642,728 - 642,728 419,351 - 419,351

General revenues: -Property taxes 20,665,813 - 20,665,813 19,217,069 - 19,217,069Other taxes 2,393,833 - 2,393,833 2,654,574 - 2,654,574Grants, subsidies & contributions, 5,979,894 5,979,894 5,162,852 5,162,852

not restricted 645,408 - 645,408 - - -Investment earnings 85,818 616 86,434 1,199,678 806 1,200,484Other - - 71,596 - 71,596Gain (Loss) on sale of capital assets (2,205) (3,642) (5,847) 4,000 - 4,000Extraordinary items - - - - - -

TOTAL REVENUES 35,025,267 916,387 35,936,964 33,769,518 944,381 34,713,899

EXPENSESInstruction 17,343,247 - 17,343,247 17,706,139 - 17,706,139Instructional student support 2,357,861 - 2,357,861 2,189,817 - 2,189,817Admin. & Fin'l support services 2,791,748 - 2,791,748 2,840,171 - 2,840,171Oper. & Maint. of plant svcs. 3,731,320 - 3,731,320 3,131,402 - 3,131,402Pupil Transportation 2,286,075 - 2,286,075 2,110,620 - 2,110,620Student activities 801,323 - 801,323 648,596 - 648,596Community services 5,727 - 5,727 5,000 - 5,000Debt Service 1,766,460 - 1,766,460 1,595,591 - 1,595,591Unallocated depreciation expense 589,178 - 589,178 581,196 - 581,196

Proprietary Funds - 934,597 934,597 - 957,788 957,788

TOTAL EXPENSES 31,672,939 934,597 32,607,536 30,808,532 957,788 31,766,320

Income (Loss) Before Contributions 3,352,328 (18,210) 3,334,118 2,960,986 (13,407) 2,947,579Transfers In (Out) (10,000) 10,000 - (42,932) 42,932 -

Change in Net Assets 3,342,328 (8,210) 3,334,118 2,918,054 29,525 2,947,579

Total Net Assets - Beginning 16,423,831 308,164 16,731,995 13,505,777 278,639 13,784,416

Total Net Assets - Ending 19,766,159$ 299,954$ 20,066,113$ 16,423,831$ 308,164$ 16,731,995$

20082009


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THE DISTRICT FUNDS

Governmental Funds

As of June 30, 2009, the governmental funds reported a combined fund balance of $14,083,886, which

decreased from the prior year of $1,023,088 (or - 6.8%). The decrease in the combined governmental fundbalance is primarily attributable to a completion of construction projects. As of June 30, 2009, the CapitalProjects fund balance decreased to $6,914,697 as of June 30, 2009. As of June 30, 2009, the CapitalReserve fund balance was $1,465,859. The General Fund experienced an $809,568 net increase in fundbalance.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital assets

As of June 30, 2009, the District had $53,688,996 invested in a broad range of capital assets includingland, buildings, furniture and equipment, which represents a net increase (additions less retirements anddepreciation) of $11,142,057 or 26.2% from the end of last year. Detailed information regarding capitalasset activity is included in the notes to the basic financial statements. (Note 5).

Debt outstanding

As of June 30, 2009, the District had $48,205,000 in debt (bonds and notes) outstanding compared to$40,685,538 as of June 30, 2008. This represents an increase of $7,519,462 or 18.5%. Other obligationsinclude accrued vacation pay and sick leave for specific employees of the District.

More detailed information regarding our long-term liabilities is included in the notes to the basic financialstatements. (Note 5).

ECONOMIC CONSIDERATIONS

The District expects minimal growth in real estate assessed value due to the economic conditions of

reduced sales of existing properties and delays in new construction. The District expects decreasedearned income tax revenues. The District has committed to certain additions, renovations, alterations andimprovements to District facilities including the high school, middle school, transportation andmaintenance, and the District administrative offices. The District will be refinancing the July 2009borrowing of an additional $9.175 million by December 2009, to finance the costs of these projects.

Beginning January 1, 2009 the District entered into contract negotiations with the professional employees.As of June 30, 2009, the association and the School board continued to meet on development of a newcontract.

During 2008-2009 and 2009-2010 the District stayed within the adjusted ECI/SAWW and did not utilizeany exceptions. However, it may be necessary for the District to exceed the identified ECI/SAWW for the

2010-2011 year through the utilization of allowable exceptions.

CONTACTING THE DISTRICT FINANCIAL MANAGEMENT

Our financial report is designed to provide our citizens, taxpayers, parents, students, investors andcreditors with a general overview of the Districts finances and to show the Boards accountability for themoney the District receives. If you have questions about this report or wish to request additional financialinformation, please contact Catherine A. Linde, Business Administrator, at Northwestern Lehigh SchoolDistrict, 6493 Route 309, New Tripoli, PA 18066, (610) 298-8661.


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B A S I C F I N A N C I A L S T A T E M E N T S


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GOVERNMENTAL BUSINESS-TYPEACTIVITIES ACTIVITIES TOTAL

ASSETS

CURRENT ASSETS:Cash and cash equivalents 11,850,373$ 57,166$ 11,907,539$Investments 4,000,000 - 4,000,000Receivables, net 683,558 - 683,558Internal Balances 13,052 - - (1)

Due from Component Unit - - -Due From Other Governments 896,145 8,330 904,475Other Receivables 228,934 481 229,415Inventories 226,231 12,028 238,259Prepaid Expenses 34,023 3,338 37,361

Other Current Assets 2,162 - 2,162

TOTAL CURRENT ASSETS 17,934,478 81,343 18,002,769- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NON-CURRENT ASSETSRestricted Cash and Cash Equivalents 8,000 - 8,000Land 406,148 - 406,148

Site Improvements (net of depreciation) 292,449 - 292,449Building and Bldg. Improvements (net of depreciation) 20,343,416 86,365 20,429,781Furniture and Equipment (net of depreciation) 1,252,661 179,918 1,432,579Construction in Progress 31,128,039 - 31,128,039

Bond Issue Costs (net of amortization) 584,902 - 584,902

TOTAL NON-CURRENT ASSETS 54,015,615 266,283 54,281,898

TOTAL ASSETS 71,950,093$ 347,626$ 72,284,667$

LIABILITIESCURRENT LIABILITIES:

Internal Balances -$ 13,052$ -$ (1)

Due to other governments 258,998 909 259,907Due to Primary Government - - -Accounts Payable 540,338 359 540,697Judgment Payable - - -

Current Portion of Long-Term Obligations 1,774,530 - 1,774,530Accrued Salaries and Benefits 1,736,709 16,051 1,752,760Payroll Deductions and Withholdings 42,141 - 42,141Deferred Revenue 10,543 13,148 23,691

Other Current Liabilities 550,353 - 550,353

TOTAL CURRENT LIABILITIES 4,913,612 43,519 4,944,079NON-CURRENT LIABILITIES:

Bonds and Notes Payable 46,237,036 - 46,237,036Extended Term Financing Agreements Payable - - -Lease Purchase Obligations - - -Long-Term Portion of Compensated Absences 698,708 - 698,708Other Retirement Benefits 104,527 4,153 108,680

Net OPEB Obligation 230,051 - 230,051

TOTAL LIABILITIES 52,183,934 47,672 52,218,554

NET ASSETS

Invested in capital assets, net of related debt 13,060,276 266,283 13,326,559RESTRICTED FOR:

Retirement of Long-Term Debt - - -Capital Projects - - -Other Restrictions 385,710 - 385,710

Unrestricted (deficit) 6,320,173 33,671 6,353,844

TOTAL NET ASSETS 19,766,159 299,954 20,066,113

TOTAL LIABILITIES AND NET ASSETS 71,950,093$ 347,626$ 72,284,667$

The Accompanying Notes are an integral part of these financial statements.

(1) Internal balances represent the amount owed to or from the two types of activities within the Primary Government. Since internal balances do not

represent assets or liabilities of the total Primary Government, their balances are eliminated in the "total" column (GASB Statement No. 34, para. 58).

PRIMARY GOVERNMENT

Northwestern Lehigh School DistrictStatement of Net Assets

As of June 30, 2009


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TOTAL FUND BALANCES - GOVERNMENTAL FUNDS 14,083,886$

Amounts reported for governmental activities in the statement

of net assets are different because:

Capital assets used in governmental activities are not financial

resources and therefore are not reported as assets in governmental

funds. The cost of the assets is $66,549,103 and the accumulated

depreciation is $13,126,390. 53,422,713

Additional receivables established that do not meet the availability

criteria reflected in the fund financial statements. This amount

represents the difference between the prior year receivables and

the current year receivables established under the accrual basis of

accounting. 223,344

Property taxes receivable will be collected this year, but are not

available soon enough to pay for the current period's expenditures

and therefore are deferred in the funds. 683,558

The governmental funds follow the purchase method of inventory;

therefore no inventory is reflected on the balance sheet. However,

the statement of net assets uses the consumption method of

inventory. 226,231

Long-term liabilities, including bonds payable, are not due and

payable in the current period and therefore are not reported as

liabilities in the funds. Long-term liabilities at year end consist of:

Bonds payable (47,277,134)$

Accrued interest on the bonds (540,299)

Accounts Payable (22,854)

Compensated absences (698,708)

Other Retirement Benefits (104,527)

Net OPEB Obligation (230,051) (48,873,573)

TOTAL NET ASSETS - GOVERNMENTAL ACTIVITIES 19,766,159$


Northwestern Lehigh School District

Reconciliation of the Governmental Funds Balance Sheet

to the Statement of Net Assets

As of June 30, 2009


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NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS (1,023,088)$

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

Governmental funds report capital outlays as expenditures. However, in the

statement of activities, the cost of those assets is allocated over theirestimated useful lives as depreciation expense. This is the amount by

which capital outlays exceeded depreciation in the current period.

Depreciation expense $ 884,117

less - capital outlays 12,064,564 11,180,447

Some of the capital assets acquired this year were financed with capitalleases. The amount financed by the leases is reported in the governmental

funds as a source of financing. On the other hand, the capital leases are

not revenues in the statement of activities, but rather constitute long-termliabilities. -

In the statement of activities, only the gain on the sale of the capital assets

is reported, whereas in the governmental funds, the proceeds from the saleincrease financial resources. Thus, the change in net assets differs from

the change in fund balance by the cost of fixed assets sold. (2,205)

Because some property taxes will not be collected for several months afterthe District's fiscal year ends, they are not considered as "available"revenues in the governmental funds. Deferred revenues decreased by thisamount this year. 149,073

Repayment of bond principal is an expenditure in the governmental funds,but the repayment reduces long-term liabilities in the statement of net

assets. 2,230,538

In the statement of activities, certain operating expenses--compensatedabsences (vacations) and special termination benefits (early retirement)--

are measured by the amounts earned during the year. In the governmental

funds; however, expenditures for these items are measured by the amountof financial resources used. This amount represents the difference betweenthe amount earned versus the amount used. 398,157

SUB-TOTAL IN CHANGES BETWEEN BASIS OF ACCOUNTING 12,932,922

For the Year Ended June 30, 2009


Reconciliation of the Governmental Funds

Statement of Revenues, Expenditures, and Changes in Fund Balance

to the Statement of Activities


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SUB-TOTAL IN CHANGES BETWEEN BASIS OF ACCOUNTING

(CONT'D) 12,932,922$

Interest on long-term debt in the statement of activities differs from theamount reported in the governmental funds because interest is recognizedas an expenditure in the funds when it is due, and thus requires the use of

current financial resources. In the statement of activities, interest expenseis recognized as the interest accrues, regardless of when it is due. This

would include accumulated interest accreted on capital appreciation bonds.The additional interest accrued in the statement of activities over theamount due is shown here. (20,341)

In the statement of activities, certain operating revenues are recognized

when earned versus the revenues using the modified accrual basis ofaccounting in the fund statements that are recognized when the funds areavailable. As such, the amount shown here represents the difference

between earned revenues and revenues that are earned, but not available. 223,344

Bond and Note proceeds provide current financial resources togovernmental funds, but issuing debt increases long-term liabilities in the

statement of assets. Refunding bond issues becomes a use of currentfinancial resources in governmental funds, but refundings represent the

difference between bond proceeds and refunding payments made to payingagents. (9,750,000)

The governmental funds use the purchase method of inventory, where allitems purchased are charged to expenditures. However, the statement of

activities is reflected on the consumption method of recording inventory typeitems; therefore, this adjustment reflects the inventory difference. (43,597)

CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 3,342,328$


to the Statement of Activities



Reconciliation of the Governmental Funds

Statement of Revenues, Expenditures, and Changes in Fund Balance


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FOOD NON-MAJOR

SERVICE FUNDS TOTAL

ASSETSCURRENT ASSETS:

Cash and cash equivalents 6,196$ 50,970$ 57,166$Investments - - -Due from other funds 95 - 95Due From Other Governments 8,330 - 8,330Other Receivables 386 - 386Inventories 12,028 - 12,028Prepaid expenses 3,338 - 3,338

Other Current Assets - - -

TOTAL CURRENT ASSETS 30,373 50,970 81,343- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NON-CURRENT ASSETS:

Building & Bldg. Improvements (net) 86,365 - 86,365Machinery & Equipment (net) 179,918 - 179,918

Other Long-Term Receivables - - -

TOTAL NON-CURRENT ASSETS 266,283 - 266,283

TOTAL ASSETS 296,656$ 50,970$ 347,626$

LIABILITIES

CURRENT LIABILITIES:

Due to Other Funds 13,052$ -$ 13,052$Due to Other Governments - 909 909Accounts Payable 245 114 359Current Portion of Long-Term Debt - - -

Accrued Salaries and Benefits 16,051 - 16,051Payroll Deductions and Withholdings - - -

Deferred Revenue 11,818 1,330 13,148

TOTAL CURRENT LIABILITIES 41,166 2,353 43,519- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NON-CURRENT LIABILITIES:Long-Term Portion of Compensated Absences - - -

Other Retirement Benefits 4,153 - 4,153

TOTAL NON-CURRENT LIABILITIES 4,153 - 4,153

TOTAL LIABILITIES 45,319 2,353 47,672- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NET ASSETS

Invested in capital assets, with no related debt 266,283 - 266,283

Restricted for Legal Purposes - - -

Unrestricted (14,946) 48,617 33,671

TOTAL NET ASSETS 251,337 48,617 299,954

TOTAL LIABILITIES AND NET ASSETS 296,656$ 50,970$ 347,626$




Proprietary Funds

As of June 30, 2009


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FOOD NON-MAJOR SERVICE FUNDS TOTAL

OPERATING REVENUES:Food Service Revenue 632,998$ 11,708$ 644,706$Charges for Services - - -

Other Operating Revenues 17,330 5,985 23,315

TOTAL OPERATING REVENUES 650,328 17,693 668,021- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

OPERATING EXPENSES: Salaries 290,395 1,940 292,335Employee benefits 92,014 240 92,254Purchased Professional and Technical Services - - -Purchased Property Service 32,899 3,790 36,689Other Purchased Services 4,114 614 4,728

Supplies 462,708 8,383 471,091Depreciation 32,542 - 32,542Dues and Fees - - -Claims and Judgments - - -

Other Operating Expenses 4,958 - 4,958

TOTAL OPERATING EXPENSES 919,630 14,967 934,597

OPERATING INCOME (LOSS) (269,302) 2,726 (266,576)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NON-OPERATING REVENUES (EXPENSES)Earnings on investments 154 462 616Contributions and Donations - - -Gain/Loss on Sale of Fixed Assets (3,642) - (3,642)

State Sources 42,533 114 42,647Federal Sources 204,055 - 204,055

Interest Expenses - - -

TOTAL NON-OPERATING REVENUES (EXPENSES) 243,100 576 243,676

INCOME (LOSS) BEFORE CONTRIBUTIONS (26,202) 3,302 (22,900)

Capital contributions 4,690 - 4,690

Transfers in (out) 10,000 - 10,000

CHANGES IN NET ASSETS (11,512) 3,302 (8,210)

TOTAL NET ASSETS - BEGINNING 262,849 45,315 308,164

TOTAL NET ASSETS - ENDING 251,337$ 48,617$ 299,954$


Northwestern Lehigh School DistrictStatement of Revenues, Expenses, and Changes in Net Assets

Proprietary FundsFor the Year Ended June 30, 2009


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RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

FOOD NONSERVICE F

OPERATING INCOME (LOSS) (269,302)$ $ - - - - - - - - - - - - - - - -

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASHPROVIDED BY (USED FOR) OPERATING ACTIVITIES

Depreciation and Net Amortization 32,542Provision for Uncollectible Accounts -Donated Commodities Used 42,711

CHANGE IN ASSETS AND LIABILITIES:(Increase) Decrease in Accounts Receivable (73)(Increase) Decrease in Advances from Other Funds (95)(Increase) Decrease in Inventories (613)

(Increase) Decrease in Prepaid Expenses -(Increase) Decrease in Other Current Assets -Increase (Decrease) in Accounts Payable 65Increase (Decrease) in Accrued Salaries and Benefits (4,501)Increase (Decrease) in Advances to Other Funds (12,872)

Increase (Decrease) in Deferred Revenue 2,060

TOTAL ADJUSTMENTS 59,224

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (210,078)$ $


Northwestern Lehigh School DistrictStatement of Cash Flows

Proprietary FundsAs of June 30, 2009


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PENSION AND

PRIVATE OTHER EMPLOYEE

PURPOSE BENEFIT AGENCYTRUST TRUST FUNDS

ASSETS

Cash and cash equivalents 14,722$ -$ 122,409$

Investments 113,000 - -

Due from Other Funds - - 359

Other Receivables 1,033 - 624

Prepaid Expenses - - -

Other Current Assets - - -

TOTAL ASSETS128,755$ -$ 123,392$

LIABILITIES

Accounts Payable -$ -$ 26,832$

Intergovernmental Payable -

Due to Other Funds - - 6,181

Due to Student Clubs - - 89,894

Other Current Liabilities - - 485

TOTAL LIABILITIES - - 123,392

NET ASSETS

Restricted - - -

Unrestricted 128,755 - -

TOTAL NET ASSETS 128,755$ -$ -$




Fiduciary Funds

As of June 30, 2009


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PENSION ANDOTHER

PRIVATE- EMPLOYEE

PURPOSE BENEFITTRUST FUND TRUST FUNDS

ADDITIONSContributions 10,894$ -$Transfers from other funds 9 -Investment Earnings: Interest and Dividends 3,604 -Net increase (decrease) in fair value of investments - -

Less investment expense - -

TOTAL ADDITIONS 14,507 -

- - - - - - - - - - - - - - - - - - - - - - - - -

DEDUCTIONS

Transfers to other funds 9 -Administrative charges -

Scholarships 15,750 -

TOTAL DEDUCTIONS 15,759 -

CHANGE IN NET ASSETS (1,252) -

NET ASSETS - BEGINNING OF YEAR 130,007 -

NET ASSETS - END OF YEAR 128,755$ -$



Statement of Changes in Net Assets

Fiduciary Funds



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Northwestern Lehigh School DistrictNotes To Basic Financial Statements

Fiscal Year Ended June 30, 2009

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Note 1 - Description of the School District and Reporting Entity

School District

The Northwestern Lehigh School District is located in New Tripoli, Pennsylvania. The District tax base

consists of the Townships of Heidelberg, Lowhill, Lynn, and Weisenberg.

The Northwestern Lehigh School District is a unit established, organized, and empowered by theCommonwealth of Pennsylvania for the express purpose of carrying out, on the local level, theCommonwealths obligation to public education, as established by the constitution of the Commonwealthand by the School Law Code of the same (Article II; Act 150, July 8, 1968).

As specified under the School Law Code of the Commonwealth of Pennsylvania, this and all other schooldistricts of the state "shall be and hereby are vested as, bodies corporate, with all necessary powers tocarry out the provisions of this act" (Article II, Section 211).

Board of School Directors

The public school system of the Commonwealth shall be administered by a board of school directors, tobe elected or appointed, as hereinafter provided. At each election of school directors, each qualified votershall be entitled to cast one vote for each school director to be elected.

The Northwestern Lehigh School District is governed by a board of nine School Directors who areresidents of the School District and who are elected every two years, on a staggered basis, for a four-yearterm.

The Board of School Directors has the power and duty to establish, equip, furnish, and maintain asufficient number of elementary, secondary, and other schools necessary to educate every person,residing in such district, between the ages of six and twenty-one years, who may attend.

In order to establish, enlarge, equip, furnish, operate, and maintain any schools herein provided, or to payany school indebtedness which the school district is required to pay, or to pay any indebtedness that mayat any time hereafter be created by the school district, the board of school directors are vested with all thenecessary authority and power annually to levy and collect the necessary taxes required and granted bythe legislature, in addition to the annual State appropriation, and are vested with all necessary power andauthority to comply with and carry out any or all of the provisions of the Public School Code of 1949.

Administration

The Superintendent of Schools shall be the executive officer of the Board of School Directors and, in thatcapacity shall administer the School District in conformity with Board policies and the School Laws ofPennsylvania. The Superintendent shall be directly responsible to, and therefore appointed by, the Boardof School Directors. The Superintendent shall be responsible for the overall administration, supervision,

and operation of the School District.

The Director of Business and Fiscal Affairs, recommended by the Superintendent and appointed by theBoard of School Directors, shall supervise and coordinate all business aspects of the School District. Inthis capacity, he or she shall be responsible to insure that all work accomplished by him/her, or by personsunder his/her supervision, is in the best interests of the Northwestern Lehigh School District. The Directorof Business and Fiscal Affairs is directly responsible to the Superintendent.


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Reporting Entity

A reporting entity is comprised of the primary government, component units, and other organizations thatare included to insure that the financial statements of the School District are not misleading. The primarygovernment consists of all funds, departments, boards, and agencies that are not legally separate from the

School District. For Northwestern Lehigh School District, this includes general operations, food service,and student related activities of the School District.

Northwestern Lehigh School District is a municipal Corporation governed by an elected nine-memberboard. As required by accounting principles, generally accepted in the United States of America, thesefinancial statements are to present Northwestern Lehigh School District (the primary government) andorganizations for which the primary government is financially accountable. The School District isfinancially accountable for an organization if the School District appoints a voting majority of theorganization's governing board and (1) the School District is able to significantly influence the programs orservices performed or provided by the organization; or (2) the School District is legally entitled to or canotherwise access the organization's resources; the School District is legally obligated or has otherwiseassumed the responsibility to finance the deficits of, or provide financial support to, the organization; or the

School District is obligated for the debt of the organization. Component units may also includeorganizations that are financially dependent on the School District in that the School District approved thebudget, the issuance of debt, or the levying of taxes. Based upon the above criteria, the NorthwesternLehigh Education Foundation is not considered to be a component unit of the School District.

Joint Ventures

Lehigh Career and Technical Institute

The School District is a participating member of the Lehigh Career and Technical Institute (LCTI). TheLCTI is run by a joint committee consisting of members from each participating district. No participatingdistrict appoints a majority of the joint committee. The board of directors of each participating district mustapprove the LCTI's annual operating budget. Each participating district pays a pro-rata share of the LCTI's

operating costs based on the number of students attending the LCTI for each district. The District's shareof the LCTI's operating costs for 2008-09 was $867,258.

On dissolution of the Lehigh Career and Technical Institute, the net assets of LCTI will be shared on a pro-rata basis of each participating district's current market value of taxable real property as certified by thePennsylvania State Tax Equalization Board. However, the District does not have an equity interest inLCTI as defined by GASB Statement No. 14, except for a residual interest in the net assets of LCTI upondissolution that should not be reported on the basic financial statements. Complete financial statements forthe LCTI can be obtained from the LCTI's administrative office at 2300 Main Street, Schnecksville, PA.

Lehigh-Carbon Community College

The District is a participating member of the Lehigh-Carbon Community College (LCCC). The LCCC isrun by a Board of Trustees elected by the participating member districts' boards of directors. Noparticipating district appoints a majority of the Board of Trustees. A vote of two-thirds of all memberdistricts shall be required for approval of the LCCC's annual operating budget. The amount of the annualoperating costs of the LCCC shall be apportioned among the member districts on the basis of the numberof full-time equivalent students enrolled in LCCC and residing in the respective geographical areas of eachof the member districts. The District's share of LCCC's operating costs for 2008-09 was $273,932.


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On dissolution of the Lehigh-Carbon Community College, the net assets of LCCC will be shared on a pro-rata basis of each member district's current market value of taxable real property as certified by thePennsylvania State Tax Equalization Board.

However, the District does not have an equity interest in LCCC as defined by GASB Statement No. 14,

except for a residual interest in the net assets of LCCC upon dissolution that should not be reported on thebasic financial statements. Complete financial statements for the LCCC can be obtained from the LCCC'sadministrative office at 2300 Main Street Schnecksville, PA.

Jointly Governed Organizations

The School District is a participating member of the Carbon-Lehigh Intermediate Unit (CLIU). The CLIU isrun by a joint committee consisting of members from each participating district. No participating districtappoints a majority of the joint committee. The boards of directors of the participating districts mustapprove the CLIU's annual operating budget. However, the CLIU is self-sustaining by providing servicesfor fees to participating districts. The District has no on-going financial interest or responsibility in theCLIU. The CLIU contracts with participating districts to supply special education services, computer

services, and acts as a conduit for certain federal programs.

Note 2 - Summary of significant accounting policies

The financial statements of the District have been prepared in accordance with generally acceptedaccounting principles (GAAP) as applied to governmental units. The Governmental Accounting StandardsBoard (GASB) is the standard-setting body for governmental accounting and financial reporting. On June15, 1987, the GASB issued a codification of the existing Governmental Accounting and FinancialReporting Standards which, along with subsequent GASB pronouncements (Statements andInterpretations), constitutes GAAP for governmental units. The School District also applies FinancialAccounting Standards Board (FASB) statements and interpretations issued on or before November 30,1989, to its business-type activities and to its proprietary funds, provided they do not conflict with orcontradict GASB pronouncements. The more significant of these accounting policies are described below

and, where appropriate, subsequent pronouncements will be referenced.

A. Basis of Presentation

The School District's basic financial statements consist of government-wide statements, including astatement of net assets, a statement of activities, and fund financial statements which provide a moredetailed level of financial information.

Government-wide Financial Statements The statement of net assets and the statement of activitiesdisplay information about the School District as a whole. These statements include the financial activitiesof the primary government, except for fiduciary funds. The statements distinguish between those activitiesof the School District that are governmental and those that are considered business-type activities. Thestatement of net assets presents the financial condition of the governmental and business-type activities ofthe School District at year-end. The statement of activities presents a comparison between directexpenses and program revenues for each program or function of the School District's governmentalactivities and for two business-type activities of the School District. Direct expenses are those that arespecifically associated with a service, program or department and therefore clearly identifiable to aparticular program. Program revenues include charges paid by the recipient of the goods or servicesoffered by the program, grants, and contributions that are restricted to meeting the operational or capitalrequirements of a particular program interest earned on grants that is required to be used to support aparticular program. Revenues which are not classified as program revenues are presented as generalrevenues of the School District, with certain limited exceptions. The comparison of direct expenses with


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program revenues identifies the extent to which each business activity or governmental function is self-financing or draws from the general revenues of the School District.

Fund Financial Statements During the year, the School District segregates transactions related tocertain School District functions or activities in separate funds in order to aid financial management and to

demonstrate legal compliance. Fund financial statements are designed to present financial information ofthe School District at this more detailed level. The focus of governmental and enterprise fund financialstatements is on major funds. Each major fund is presented in a separate column. Non-major funds areaggregated and presented in a single column. The fiduciary funds are reported by type.

B. Fund Accounting

The School District uses funds to maintain its financial records during the year. A fund is defined as afiscal and accounting entity with a self balancing set of accounts. There are three categories of funds:governmental, proprietary and fiduciary.

Governmental Funds Governmental funds are those through which most governmental functions

typically are financed. Governmental fund reporting focuses on the sources, uses and balances of currentfinancial resources. Expendable assets are assigned to the various governmental funds according to thepurposes for which they may or must be used. Current liabilities are assigned to the fund from which theywill be paid. The difference between governmental fund assets and liabilities is reported as fund balance.The following are the School District's major governmental funds:

General Fund

The General Fund is the general operating fund of the School District. It is used to account for allfinancial resources, except those required to be accounted for in another fund.

Special Revenue Funds

The District has established a Capital Reserve Fund in accordance with the PA School Laws. Thisfund is used to account for the proceeds of specific revenue sources as outlined by school laws thatare legally restricted to expenditures for specified purposes.

Capital Reserve Fund

This fund was created in accordance with Section 1432 of the Municipal Code. As such, the PADepartment of Education has decided this fund should be classified as a major fund regardless ofwhether or not GASBs major fund criteria are met.

Capital Project Funds

Capital Project Funds are used to account for financial resources to be used for the acquisition orconstruction of major capital equipment and facilities (other than those financed by the proprietaryfund). The District has two Capital Project Funds with outstanding funds.

2004 Construction Fund

This fund received the proceeds of $3,000,000 from the issuance of General Obligation NoteSeries A of 2004 ($500,000) and General Obligation Note Series B of 2004 ($2,500,000).


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The purpose of this fund is to make renovations, alterations, and improvements to facilitiesincluding the addition to the Middle School and certain capital equipment purchases. Thisfund was fully expended this past fiscal year.

2008 Construction Fund 32

This fund received the proceeds on the $9,000,000 General Obligation Bonds Series of 2008 tofund certain capital projects. This fund was fully expended this past fiscal year.

2008 Construction Fund 35

This fund received the proceeds of $8,500,000 of General Obligation Notes Series A of 2007 tofund certain capital projects. This fund was fully expended this past fiscal year.

2008A Construction Fund 33

This fund received the proceeds of $9,750,000 of General Obligation Bonds Series A of 2008 to

fund certain capital projects.

Proprietary Funds Proprietary funds focus on the determination of changes in net assets, financialposition and cash flows and are classified as enterprise funds

Enterprise FundsEnterprise funds may be used to account for any activity for which a fee ischarged to external users for goods or services. The School District's major enterprise fund is:

Food Service Fund -This fund accounts for the financial transactions related to the food serviceoperations of the School District.

Fiduciary Funds Fiduciary funds reporting focuses on net assets and changes in net assets. Thefiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-

purpose trust funds and agency funds. Trust funds are used to account for assets held by the SchoolDistrict under a trust agreement for individuals, private organizations, or other governments and aretherefore not available to support the School District's own programs. The School District's only trust fundis a private purpose trust. Agency funds are custodial in nature (assets equal liabilities) and do not involvemeasurement of results of operations.

C. Measurement Focus

Government-wide Financial Statements The government-wide financial statements are prepared usingthe economic resources measurement focus. All assets and all liabilities associated with the operation ofthe School District are included on the statement of net assets.

Fund Financial Statements All governmental funds are accounted for using a flow of current financialresources measurement focus. With this measurement focus, only current assets and current liabilitiesgenerally are included on the balance sheet. The statement of revenues, expenditures and changes in fundbalances reports on the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures andother financing uses) of current financial resources. This approach differs from the manner in which thegovernmental activities of the government-wide financial statements are prepared. Governmental fundfinancial statements therefore include reconciliations with brief explanations to better identify the relationshipbetween the government-wide statements and the statements for governmental funds.


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Like the government-wide statements, all enterprise funds are accounted for on a flow of economicresources measurement focus. All assets and all liabilities associated with the operation of these fundsare included on the statement of net assets. The statement of revenues, expenses and changes in fundnet assets presents increases (i.e., revenues) and decreases (i.e., expenses) in net total assets. Thestatement of cash flows provides information about how the School District finances and meets the cash

flow needs of its enterprise activities.

D. Basis of Accounting

Basis of accounting determines when transactions are recorded in the financial records and reported onthe financial statements. Government-wide financial statements are prepared using the accrual basis ofaccounting. Government funds use the modified accrual basis of accounting. Proprietary and fiduciaryfunds also use the accrual basis of accounting. Differences in the accrual and the modified accrual basisof accounting arise in the recognition of revenue, the recording of deferred revenue, and in thepresentation of expenses versus expenditures.

Revenues - Exchange and Non-Exchange Transactions. Revenue resulting from exchange

transactions, in which each party gives and receives essentially equal value, is recorded on the accrualbasis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal yearin which the resources are measurable and become available. Available means that the resources will becollected within the current fiscal year or are expected to be collected soon enough thereafter to be usedto pay liabilities of the current fiscal year.

Non-exchange transactions, in which the School District receives value without directly giving equal valuein return, include property taxes, grants, entitlements and donations. Revenue from property taxes isrecognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements anddonations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibilityrequirements include timing requirements, which specify the year when the resources are required to beused or the fiscal year when use is first permitted, matching requirements, in which the School Districtmust provide local resources to be used for a specified purpose, and expenditure requirements, in which

the resources are provided to the School District on a reimbursement basis. On a modified accrual basis,revenue from non-exchange transactions must also be available before it can be recognized.

E. Budgetary Process

An operating budget is adopted prior to the beginning of each year for the General Fund on the modifiedaccrual basis of accounting. The General Fund is the only fund for which a budget is legally required.

In accordance with Act 1 of 2006, the Board shall annually, but not later than the first business meeting ofJanuary, decide the budget option to be used for the following fiscal year. The Board shall approve eitherthe Accelerated Budget Process Option or the Board Resolution Option.

Accelerated Budget Process Option

Under this option, a preliminary budget must be prepared 150 days prior to the primary election. Underthis Option, the preliminary budget must be available for public inspection at least 110 days prior to theprimary election. The Board shall give public notice of its intent to adopt the preliminary budget at least 10days prior to the adoption. The adoption must occur at least 90 days prior to the primary election.

If the preliminary budget exceeds the increase authorized by the Index, an application for an exceptionmay be filed with either a Court of Common Pleas with jurisdiction or PDE and made available for publicinspection. The Board may opt to forego applying for an exception by submitting a referendum questionseeking voter approval for a tax increase, in accordance with Act 1.


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The final budget shall include any necessary changes from the adopted preliminary budget. Any reductionrequired as the result of the failure of referendum shall be clearly stated. The final budget shall be madeavailable for public inspection at least 20 days prior to final adoption. The Board shall annually adopt thefinal budget by a majority vote of all members of the Board prior to June 30.

Board Resolution Option

Under the Board Resolution Option, the Board shall adopt a resolution that it will not raise the rate of anytax for the following fiscal year by more than the Index. Such resolution shall be adopted no later than 110days prior to the primary election. At least 30 days prior to adoption of the final budget the Board shallprepare a proposed budget. The proposed budget shall be available for public inspection at least 20 daysprior to adoption of the budget. The Board shall give public notice of its intent to adopt at least 10 daysprior to adoption of the proposed budget. The Board shall annually adopt the final budget by a majorityvote of all members of the Board by June 30.

Legal budgetary control is maintained at the sub-function/major object level. The PA School Code allowsthe School Board to make budgetary transfers between major function and major object codes only withinthe last nine months of the fiscal year, unless there is a two-thirds majority of the Board approving the

transfer. Appropriations lapse at the end of the fiscal period. Budgetary information reflected in thefinancial statements is presented at or below the level of budgetary control and includes the effect ofapproved budget amendments.

The amounts reported as the original budgeted amounts in the budgetary statements reflect the amountsin the PDE 2028 when the original appropriations were adopted. The amounts reported as the finalbudgeted amounts in the budgetary statements reflect the amounts after all 2008-09 budget transfers.

Encumbrances

Any encumbrances outstanding at year-end do not represent GAAP expenditures or liabilities butrepresent accounting controls. The General Fund Budget is maintained on the modified accrual basis ofaccounting, except that budgetary basis expenditures include any encumbrances issued for goods or

services not received at year-end and not terminated.The actual results of operations are presented in accordance with GAAP and the Districts accountingpolicies do not recognize encumbrances as expenditures until the period in which the goods or servicesare actually received and a liability is incurred. Any encumbrances are presented as a reservation forencumbrances on the balance sheet of the General Fund. If budgetary encumbrances exist at year-end,they are included in the fund financial statements to reflect actual revenues and expenditures on abudgetary basis consistent with the Districts legally adopted budget.

F. Changes in Accounting Principles

During this past fiscal year, the District was required to implement the provisions of GASB StatementNo. 45 on Other Post Employment Benefits. The Net OPEB Obligation and disclosures are morefully explained in Note 5.

G. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect certain reported amounts anddisclosures. Accordingly, actual results could differ from those estimates.

H. Assets, Liabilities, and Net Assets

Cash and Cash Equivalents


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For purposes of the Statement of Cash Flows, the Proprietary Fund type considers all highly liquidinvestments with a maturity of three months or less, when purchased, to be cash equivalents.

Investments

In accordance with GASB Statement 31, investments are stated at fair value, except:

a) Non-participating interest earning investment contracts are recorded at amortized cost;

b) Money market investments and participating interest earning investment contracts that maturewithin one year of acquisition are recorded at amortized cost; and,

c) Investments held in 2a7-like pools (Pennsylvania School District Liquid Asset Fund) arerecorded at the pools share price.

Receivables and Payables

Activities between funds that are representative of lending/borrowing arrangements outstanding at the end

of the fiscal year are referred to as "due to/from other funds". Any residual balances outstanding betweenthe governmental activities and business-type activities are reported in the government-wide financialstatements as "internal balances".

Advances between funds, as reported in the fund financial statements, are offset by a fund balancereserve account in applicable governmental funds to indicate that they are not available for appropriationand are not expendable available financial resources.

Property Tax Levy

Property taxes, which were levied during the fiscal year ended June 30, 2009, are recognized as revenuein the fund financial statements when received by the District during the fiscal year and also estimated tobe received by the District within sixty (60) days after the fiscal year ended.

Property taxes that were levied during the current fiscal year, which are not estimated to be received withinsixty (60) days after the fiscal year-end, are recorded as receivable and deferred revenue in the fundfinancial statements.

In the government-wide financial statements, all property taxes levied during the fiscal year are recognizedas revenue, net of estimated uncollectible amount.

InventoriesOn government-wide financial statements, inventories are presented at the lower of cost or market on afirst-in, first-out basis, and are expensed when used. A physical inventory taken at June 30, 2009, shows$226,231 in the governmental activities column and $12,028 in the business-type activities column of thegovernment-wide statement of net assets.

Inventory type items in governmental funds utilize the purchase method; that is, they are charged toexpenditures when purchased. There is no inventory shown as of June 30, 2009; therefore, there is nooffsetting reservation of fund balance.

Inventory type items in Proprietary Funds use the consumption method, in which items are purchased forinventory and charged to expenses when used. The District has the following Proprietary Funds: (1) FoodService Fund and (2) Tiger Concession Fund. Inventory within these funds consists of donatedcommodities, which are valued at U.S.D.A.'s approximate costs, supplies, and purchased food.Inventories on hand at June 30, 2009, consist of:


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Purchased Food 7,109$Purchased Supplies 3,108Donated Commodities 1,811

TOTAL 12,028$

Prepaid Expenses

In both the government-wide and fund financial statements, prepaid expenses are recorded as assets inthe specific governmental fund in which future benefits will be derived.

Capital Assets

General capital assets are those assets not specifically related to activities reported in the proprietaryfunds. These assets generally result from expenditures in the governmental funds. These assets arereported in th

independent single audit report 2008-2009

Documents