Year Ended June 30, 2010 · 2010. 12. 29. · RAYMOND G. PREUSSER, CPA,P.C. Certified Public...

EDMESTON CENTRAL SCHOOL DISTRICT·

FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

Year Ended June 30, 2010

EDMESTON CENTRAL SCHOOL DISTRICT

Introduction:

Independent Auditors' Report

Management's Discussion and Analysis

Basic Financial Statements:

Statement of Net Assets Statement of Activities

TABLE OF CONTENTS

Reconciliation of Governmental Funds Balance Sheet to Statement of Ne! Assets

Reconciliation of Governmental Funds Revenues, Expenditures and Changes in Fund Equity to the Statement of Activities

Balance Sheet- Governmental Funds Statement of Revenues, Expenditures and Changes in Fund

Equity- Governmental Funds Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets

Notes to Basic Financial Statements

Required Supplemental Information:

Schedule of Revenues, Other Sources, Expenditures and Other Uses Compared to Budget-General Fund

Supplemental Information:

Schedule of Change From Original Budget to Revised Budget- General Fund Schedule of Use of Fund Balance as of the Beginning of Year-General Fund Schedule of Project Expenditures-Capital Projects Fund Schedule of Certain Revenues and Expenditures Compared to ST -3 Data Schedule of Investment in Capital Assets, Net of Related Debt

Report on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements performed in accordance with Government Auditing Standards

Management Letter

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3

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6 7 8

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33 33 34 35 36

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39-42

RAYMOND G. PREUSSER, CPA,P.C. Certified Public Accountants

P.O. Box 538 Claverack, New York 12513

Telephone: (518) 851-6650 Fax: (518) 851-6675

INDEPENDENT AUDITORS' REPORT

To the Board of Education of the Edmeston Central School District:

We have audited the accompanying financial statements of the governmental activities, each major fund, and the fiduciary funds of the Edmeston Central School District, as of and for the year ended June 30, 2010, which collectively comprise the District's basic financial statements as listed in the Table of Contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on the financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the fiduciary funds of the Edmeston Central School District as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated September 28, 20 lOon our consideration of Edmeston Central School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts . and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The Management's Discussion and Analysis and budgetary comparison information are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Edmeston Central School District's basic financial statements. The other supplementary information is not a required part of the basic financial statements but is supplementary information required by the New York State Education Department. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the other supplementary information. However, we did not audit the information and express no opinion on it.

verack, New York September 28, 20 I 0

INTRODUCTION

EDMESTON CENTRAL SCHOOL DISTRICT Management's Discussion and Analysis (MD&A)

June 30, 2010

The Edmeston Central School District offers readers of the District's financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2010. Please review it in conjunction with the District's financial statements and the accompanying notes to the financial statements.

FINANCIAL HIGHLIGHTS

>- Net assets decreased from $4,386,759 to $3,511,481 or 20% from last year due to the implementation of GASB #45 Accounting and Financial Reporting by Emp/oyers for Postemployment Benefits Other Than Pensions.

>- The District continued work on the voter approved $4.7 million EXCEL project during the year. The District expended $4,515,781 on the project during the fiscal year.

>- As of the close of this fiscal year, the District's governmental funds reported combined fund balances of ($3,646,074), a decrease of $4,350,133 in comparison with the prior year.

M2

OVERVIEW OF THE FINANCIAL STATEMENTS

This Management's Discussion and Analysis narrative (required supplemental information) is intended to serve as an introduction to the District's basic financial statements. The District's basic financial statements are comprised of three components: 1. Districtwide Financial Statements 2. Fund Financial Statements 3. Notes to the Financial Statements

In addition to these statements, this report also includes other supplemental information.

Our auditor has provided assurance in the independent auditor's report that the Basic Financial Statements are fairly stated. A different degree of assurance is being provided by the auditor regarding the supplemental information identified below. A user of this report should read the independent auditor's report carefully to asceltain the level of assurance being provided for each part in the financial statements.

Districtwide Financial Statements

!Financial Statementsl

Required Supplemental Information (Part A) Management's Discussion & Analysis (MD&A)

!Basic Financial Statement�

/Notes to the Basic Financial Statement�

Supplemental Information

Fund Financial Statements

General Fund Budget & Fund Balance Information

Capital Project Funds Schedule of Project Expenditures

General Fund Budget to Actual Schedule

M3

DISTRICTWIDE FINANCIAL STATEMENTS

The districtwide financial statements are designed to provide readers with a broad overview of the District's finances in a manner similar to a private-sector business.

The statement of net assets presents information on all of the District's assets and liabilities, with the difference between the two reported as net assets. Over time, increases and decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating.

The statement of activities presents information showing how the District's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. certain federal/state grants eamed but not yet received, unused vacation/sick leave, and proceeds from Revenue Anticipation Notes and related interest).

All of the District's services are reported in the districtwide financial statements as governmental activities, including general suppoti, instruction, pupil transportation, community services, and school lunch. Property taxes, sales tax, state/federal aid, and investment earnings finance most of these activities. Additionally, all capital and debt financing activities are l'epotied here.

DISTRICTWIDE FINANCIAL ANALYSIS

Edmeston Central School District's Net Assets June 30, 2010 and 2009

Current Assets $ Capital Assets

Total Assets

Current Liabilities Noncurrent Liabilities

Total Liabilities

Net Assets: Investment in capital assets, net of related debt Restricted for encumbrances Restricted for other specified purposes Restricted for subsequent year's expenditure Unrestricted (deficit)

Total Net Assets $

Governmental Activities

2010 2009

2,091,062 $ 2,010,655 15,603,390 11,301,281 17,694,452 13,311,936

6,602,120 2,043,515 7,580,851 6,881,662

14,182,971 8,925,177

3,701,608 3,682,700 117,813 81,371 585,394 462,300 127,885

(1,021,219) 160,388 3,511,481 $ 4,386,759

Variance Increase

(Decrease)

$ 80,407 4,302,109 4,382,516

4,558,605 699,189

5,257,794

18,908 36,442

123,094 127,885

(1,181,607) $ (875,278)

M4

Edmeston Central School District's Changes in Net Assets

For the Years Ended June 30, 2010 and 2009

Governmental Activities

2010 2009

Revenues: Program Revenues:

Charges for Services $ 183,864 $ 139,871 Operating Grants and Contributions 1,132,394 744,481

Total Program Revenues $ 1,316,258 $ 884,352

General Revenues: Real Property Taxes $ 1,789,015 $ 1,749,869 Other Tax Items 473,732 507,387 Use of Money and Property 18,970 23,541 Sale of Property and Compensation for Loss 28,049 3,064 Miscellaneous 116,298 52,877 State Sources 6,527,276 6,904,274

Total General Revenues 8,953,340 9,241,012

Expenses: Instruction 6,809,235 5,730,604 Support Services:

General Support 1,539,134 1,426,457 Pupil Transportation 991,646 733,635 Community Service 1,008 1,659 Debt Service-Interest 434,819 326,964 Depreciation-Unallocated 422,376 School Lunch 52,776 13,596

Total Expenses 9,828,618 8,655,291

Change in Net Assets $ (875,278) $ 585,721

Variance Increase

(Decrease)

$ 43,993 387,913

$ 431,906

$ 39,146 (33,655)

(4,571) 24,985 63,421

(376,998) (287,672)

1,078,631

112,677 258,011

(651) 107,855

(422,376) 39,180

1,173,327

$ (1,460,999)

M5

The following charts provide the percentage breakdown of all revenues by source and all expenses by function for the entire District:

0%

Districtwide Revenues by Source For the Year Ended June 30, 2010

REVENUE BY SOURCE

2%

mState/Federal Sources

III Use of Money and Property

D Property Tax

o Other

Districtwide Expenses by Function For the Year Ended June 30, 2010

EXPENSES BY FUNCTION

69%

Ill) General Support

II Instruction

D Pupil Transportation

DOther

II Debt Service-Interest

M6

FUND FINANCIAL STATEMENTS

The fund financial statements provide more detailed information about the District's funds, focusing on its most significant or "major" funds.

A fund is a grouping of related accounts, and is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. The District establishes other funds to control and manage money for particular purposes (such as repaying its long-term debts) or to show that it is properly using certain revenues (such as federal grants). All of the funds of the District can be divided into two categories; governmental fimds, and fiduciary funds.

c

>- Governmental funds: All of the District's services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds, and the balances left at year-end that are available for spending. They are reported using the modified accrual method of accounting, which measures cash and all other financial assets that can readily be converted into cash. The governmental fund statements provide a detailed short-term view of the District's operations and the services it provides. Governmental fimd information helps the reader detennine whether there are more or fewer financial resources available to be spent in the near future to finance the District's programs. Because this infonnation does not encompass the additionallong-tenn focus of the districtwide statements, additional information at the bottom of the governmental funds statements explains the relationship (or differences) betWeen them.

>- Fiduciary funds: The District is the trustee, or fiduciary, for assets that belong to others, such as the scholarship fund and the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The District excludes these activities from the districtwide financial statements because it cannot use these assets to finance its operations.

FUND FINANCIAL ANALYSIS (DISTRICT'S FUNDS)

The District's governmental funds (as presented on the balance sheet) reported a combined Fund Balance of ($3.6) million. The schedule below indicates the fund balance and the total change in fund balance by fund type as of June 30, 2010 and 2009.

Val'iance Fund Balance Fund Balance Increase

2010 2009 (Decrease)

General $ 1,162,024 $ 963,802 $ 198,222 School Lunch 7,387 17,082 ( 9,695)

Special Aid 26 22,905 (22,879) Capital (deficit) (4,815,511) (299,730) (4,515,781)

Totals $ (3,646,074) $ 704,059 $ (4,350,133)

M7

General Fund The tables that follow assist in illustrating the financial activities and balance of the general fund.

Variance

Increase Revenues: 2010 2009 (Decrease)

Taxes and Other Tax Items $ 2,262,747 $ 2,257,256 $ 5,491 Use of Money and Property 18,800 23,148 (4,348)

. StatelFederal Sources 6,975,218 6,904,274 70,944 Other 148,790 105,307 43,483

Totals $ 9,405,555 $ 9,289,985 $ 115,570

Variance

Increase Expenses: 2010 2009 (Decrease)

General Support $ 1,217,651 $ 1,243,199 $ (25,548) Instruction 4,775,346 4,599,746 175,600 Pupil Transportation 573,991 558,833 15,158 Communi ty Service 1,008 1,659 (651) EmployeeBenefits 1,548,150 1,573,772 (25,622)

Debt Service 1,067,729 1,008,806 58,923 Other 23,463 10,000 13,463

Totals $ 9,207,338 $ 8,996,015 $ 211 ,323

GENERAL FUND BUDGET INFORMATION

The District's budget is prepared in accordance with New York State law and is based on the modified accrual basis of accounting, utilizing cash receipts, disbursements, and encumbrances. The most significant budgeted fund is the General Fund.

The difference between the general fund's original budget and the final amended budget was $17,035. The adjustment was prior year encumbrances.

M8

CAPITAL ASSETS

The District's <;apital assets (net of accumulated depreciation) as of June 30, 2010 are as follows:

Asset Description

Land Construction in Progress Buildings and Improvements Machinery and Equipment Vehicles

Total

Amount

$ 486,572 4,874,239 9,437,798

169,933 634,848

$15.603.390

The total increase in the District's capital assets (net of accumulated depreciation) for the current fiscal year was $4,302,109. The most significant increase to capital assets was attributable to the capital project and the purchase of buses less depreciation expense.

DEBT

The District had debt including serial bonds·and bond anticipation notes outstanding in the amount of $12,327,543 as of June 30, 2010 an increase over the previous year of $4,708,962. The debt outstanding for the year ended June 30, 2010 is summarized as follows:

Debt Description

Bonds Bond Anticipation Notes

Total

Outstanding Balance

$ 7,027,543 5,300,000

$12.327.543

The District has a refunding bond outsianding, the proceeds of which are in escrow to fund other previously existing debt. The refunding was done as a result of a change in the manner in which the State was planning to pay building aid related to the existing debt.

Under current state statutes, the District's general obligation bonded debt issues are subject to a legal limitation based on 10% of the total full value of real property. At June 30, 2010,.the District's general obligation debt was approximately 61 % of its total debt limit. The District has a bond rating of A2.

M9

FACTORS BEARING ON THE DISTRICT'S FUTURE

At the time these financial statements were prepared and audited, the District was aware of existing circumstances that could significantly affect its financial health in the future.

One challenge facing the District is the state's economy and its effect on state aid funding levels. The economic slowdown could result in revenue forecasts having to be revised downward and could cause the District to scale down the educational program offerings or seek additional resources.

Another challenge is to maintain and upgrade the existing facilities. The future projects will create additional financial pressure on the entire community as a result of both short-term expenditure growth, and longer-term expenditure growth as the result of the additions and renovations to facilities that will result over time.

CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

It is the intent of this report to provide the District's citizens, taxpayers, customers, investors and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the funds it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the following:

Edmeston Central School District P.O. Box 5129

Edmeston, New York 13335


STATEMENT OF NET ASSETS

ASSETS

Current Assets:

Unrestricted cash Due from other governments State and federal aid receivable Due from fiduciary funds Inventories

Total Current Assets

Noncurrent Assets:

C�pital assets, net Total Noncurrent Assets

Total Assets

LIABILITIES Current Liabilities:

Accounts payable Accrued liabilities Due to other governments Bond anticipation notes payable Bonds payable Due to teachers' retirement system Due to employees' retirement system Deferred revenues Deferred revennes- planned balance

Total Current Liabilities

Long-Term Obligations:

Bonds payable Other postemployment benefits payable

Total Long-Term Obligations

Total Liabilities

NET ASSETS

Investment in capital assets, net of related debt Restricted for:

Encumbrances Capital Unemployment Employee benefits Retirement contributions

Unreserved- designated Unreserved- undesignated (deficit)

Total Net Assets

June 30, 2010

$

$

See auditors' report. See notes to financial statements. -1-

1 ,275,374 299,449 490,1 52 19,632

6,455 2,091,062

15,603,390 15,603,390

1 7,694,452

707 104,009

498 5,300,000

760,975 228,412 20,062

112,457 75,000

6,602,120

6,266,568 1 , 3 1 4,283 7,580,851

14,1 82,971

3,701,608

117,813 3,663

25,000 456,731 100,000 127,885

(1,021,219)

3,511,481

EDMESTON CENTRAL SCHOOL DISTRICT STATEMENT OF ACTIVITIES For Year Ended June 30, 2010

Pro8!arn Revenues

FUNCTIONSIPROGRAMS General support Instruction Pupil transportation Community services Employee benefits Debt service· interest Depreciation School lunch program

TQtal Functions and Programs

GENERAL REVENUES Real property taxes Other tax items Use of money and property Sale of property and compensation for loss Miscellaneous State sources

Total General Revenues

Change in Net Assets

Total Net Assets - Beginning of year

Total Net Assets - End of year

Expenses

$ 1,184,522 5,389,441

573,991 1 ,008

2,912,866 434,819 406, 151 242,078

$ 11,144,876

�xpenses Charges for Allocation Services

$ 354,612 $ 2,361,927 82,248

437,151

(2,845,923)

(406,151) 98,384 101,616

$ $ 1 83,864


Operating Grants

$ 859,885 19,496

66,943

186,070

$ 1 , 132,394

Net (Expense) Revenue and Changes in Net Assets

$ (1,539,134) (6,809,235)

(991,646) (1,008)

(434,819)

(52,776)

(9,828,618)

1 ,789,015 473,732

1 8,970 28,049

1 1 6,298 6,527,276

8,953,340

(875,278)

4,386,759

$ 3,51 1 ,481

EDMESTON CENTRAL SCHOOL DISTRlCT RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF

ASSETS Unrestricted cash Due from other govennnents State and federal aid receivable Due from other funds Due from fiduciary funds Inventories Capital assets (net)

Total Assets

NET ASSETS June 30, 2010

Total Long-tenn Reclassifications Govennnental Assets,

Funds Liabilities

$ 1,275,374 $ $ 299,449 490,152 238,217

6,455 15,603,390

$ 2,309,647 $ 15,603,390 $


and Eliminations

(238,217) 19,632

(218,585)

Statement of Net Assets

Totals

$ 1,275,374 299,449 490,152

19,632 6,455

15,603,390

$ 17,694,452

EDMESTON CENTRAL SCHOOL DISTRICT RECONCILIATION OF GOVERNMENTAL FUNDS REVENUES, EXPENDITURES, AND

CHANGES IN FUND EQUITY TO THE STATEMENT OF ACTNITIES

EVENUES eal property taxes ther tax items barges for services se of money and property ,Ie of property and compensation for loss

fiscellaneous :ate sources ,deral sources lies - school lunch

Total Revenues

XPENDITURESIEXPENSES eneral support struction ,pi! transportation JllUllmuty services nployee benefits ebt service-principal ebt service-interest )st of sales epreciation ,pital outlay

Total Expenditures

ICess (Deficiency) of Revenues Over Expenditures

THER SOURCES AND USES 'oceeds from debt ?erating transfers in ?erating transfers (out)

Total Other Sources (Uses)

,t Change for the Year

For Year Ended June 30, 2010 ��MMMMM __

Total Long-term Capital Govermnental Revenue, Related

Funds EXEenses Items

$ 1,789,015 $ $ 473,732

4,448 18,970

28,049 194,098

6,589,089 1,070,581

101,616

10,269,598

1,217,651 (33,129) 5,397,870 (8,429)

573,991 1,008

1,598,583 1,314,283 736,919 330,810 104,009 242,078

406,151 4,666,702 (4,666,702)

14,765,612 1,418,292 (4,302,109)

(4,496,014) (1,418,292) 4,302,109

145,881 23,463 (23,463)

(23,463) 23,463

145,881

$ (4,350,133} $ (1,418,292) $ 4,302,109


Long-term Debt

Transactions

$

(736,919)

(736,919)

736,919

(145,881)

(145,881)

$ 591,038

$

$

Statement of Activities

Totals

1,789,015 473,732

4,448 18,970

28,049 194,098

6,589,089 1,070,581

101,616

10,269,598

1,184,522 5,389,441

573,991 1,008

2,912,866

434,819 242,078 406,151

11,144,876

(875,278)

(875,278)

EDMESTON CENTRAL SCHOOL DISTRICT BALANCE SHEET- GOVERNMENTAL FUNDS

June 30, 2010

Special School General Aid Lunch

ASSETS Unrestricted cash $ 749,231 $ 5,134 $ 36,198 Due from other governments 299,449 State and federal aid receivable 298,601 1 80,859 10,692 Due from other funds 238,217 Inventories 6,455

Total Assets $ 1 ,585,498 $ 185,993 $ 53,345

LIABILITIES Accounts payable $ $ $ 707 Due to other funds 185,967 32,296 Due to other governments 498 Bond anticipation note payable Due to teachers' retirement system 228,412 Due to employees' retirement system 20,062 Deferred revenue· planned balance 75,000 Deferred revenue 100,000 12,457

Total Liabilities 423,474 1 85,967 45,958

FUND EQUITY Reserved for encumbrances 91,069 Reserved for unemployment 25,000 Reserved for retirement contributions 100,000 Reserved for employee benefits 456,73 1 Reserved for capital 3,663 Unreserved .designated 127,885 Unreserved - undesignated (deficit) 357,676 26 7,387

Total Fund Equity 1,162,024 26 7,387

Tolal Liabilities and Fund Equity $ 1,585,498 $ 185,993 $ 53,345


Total Capital Governmental

Projects Funds

$ 484,811 $ 1,275,374 299,449 490,152 238,217

6,455

$ 484,81 1 $ 2,309,647

$ $ 707 322 218,585

498 5,300,000 5,300,000

228,412 20,062 75,000

112,457

5,300,322 5,955,721

26,744 117,813 25,000

100,000 456,731

3,663 127,885

(4,842,255) (4,477,166)

(4,8 15,511) (3,646,074)

$ 484,811 $ 2,309,647

EDMESTON CENTRAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND EQUITY·

GOVERNMENTAL FUNDS For Year Ended June 30, 201O

��-------

Special School General Aid Lunch

,VENUES .eal property taxes $ 1,789,015 $ $ Ither tax items 473,732 �harges for services 4,448 fse of money and property 18,800 170 ale of property and compensation for loss 28,049 fiscellaneous Jl6,298 77,800 tate sources 6,527,276 53,853 7,960 ederal sources 447,942 454,529 168,JlO ales 101,616

Total Revenues 9,405,560 586,182 277,856

U'ENDITURES iimeral support 1,217,651 !Struction 4,775,346 622,524 upil transportation 573,991 ommunity services 1,008 mployee benefits 1,548,150 50,433 'eht service Principal 736,919 [nterest 330,810 ost of sales 242,078 apital outlay 5,040

Total Expenditures 9,183,875 622,524 297,551

cess (Deficiency) of Revenues Over Expenditures 221,685 (36,342) (19,695)

lHER SOURCES AND USES roceeds from debt perating transfers in 13,463 10,000 perating transfers (out) (23,463)

Total Other Sources (Uses) (23,463) 13,463 10,000

cess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 198,222 (22,879) (9,695)

nd Equity· (Deficit) Beginning of year 963,802 22,905 17,082

nd Equity· (Deficit) End of year $ 1,162,024 $ 26 $ 7,387

See auditors' report. See notes to financial statements. ·6·

Capital Projects

$ $

4,661,662

4,661,662

(4,661,662)

145,881

145,881

(4,515,781)

(299,730)

$ (4,815,5J1) $

Total Governmental

Funds

1,789,015 473,732

4,448 18,970

28,049 194,098

6,589,089 1,070,581

101,616 10,269,598

1,217,651 5,397,870

573,991 1,008

1,598,583

736,919 330,810 242,078

4,666,702

14,765,612

(4,496,014)

145,881 23,463

(23,463)

145,881

(4,350,133)

704,059

(3,646,074)


STATEMENT OF FIDUCIARY NET ASSETS- FIDUCIARY FUNDS

June 30, 2010

ASSETS Cash

Total Assets

LIABILITIES Due to governmental funds Extraclassroom activity balances Other liabilities

. Total Liabilities

NET ASSETS Reserved for scholarships

Private Purpose Trusts

$ 86,691 $

$ 86,691 $

$ $

$

$ 86,691

See auditors' report. See notes to fmancial statements.

-7-

Agency

67,811

67,811

19,632 47,596

583

67,811

EDMESTON CENTRAL SCHOOL DISTRlCT STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS- FIDUCIARY FUNDS

For Year Ended June 30, 2010

illDITIONS Interest Gifts & donations

Total Additions

JEDUCTIONS Scholarships and awards

Change in Net Assets

�et Assets - Beginning of year

�et Assets - End of year


$

$

Private PUll'ose Tmsts

466 17,835

18,301

16,900

1,401

85,290

86,691


NOTES TO FINANCIAL STATEMENTS

I. Summary of Significant Accounting Policies

The financial statements of Edmeston Central School District have been prepared in confonnity with generally accepted accounting principles (GAAP). Those principles are as prescribed by the Govermnental Accounting Standards Board (GASB), which is the accepted standard setting body for'establishing governmental accounting and financial reporting principles.

Sigoificant accounting principles and policies utilized by the District .are described below:

A. Reporting Entity

The Edmeston Central School District is governed by the laws of New York State. The District is an independent entity governed by an elected Board of Education consisting of 5 members. The President of the Board serves as the chief fiscal officer and the Superintendent is the chief executive officer. The Board is responsible for, and controls all activities related to public school education within the District. Board members have authority to make decisions, power to appoint management, and primary accountability for all fiscal matters.

The reporting entity of the District is based upon criteria set forth by GASB Statement 14, The Financial Reporting Entitv, as amended by GASB Statement 39, Component Units. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and sigoificance of their relationship with the primary govermnent are such that exclusion would cause the reporting entitYs financial statements to be misleading or incomplete.

The accompanying financial statements present the activities of-the District. The District is not a component unit of another reporting eutity. The decision to include a potential component unit in the School District's reporting entity is based on several criteria including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, the following is a brief review of certain entities included in the School District's reporting entity:

The Extrac1assroom Activity Funds

The Extraclassroom Activity Funds of the Edmeston Central School District represent funds of the students of the School District. The Board of Education exercises general oversight of these funds. The Extraclassroom Activity Funds are independent of the School District with respect to its financial transactions and the desigoation of student management. Separate audited financial statements (cash basis) of the Extraclassroom Activity Funds can be found at the School District's business office. The District accounts for assets held as an agent for various student organizations in an agency fund.

See auditors' report. -9-


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

I. Summary of Significant Accounting Policies (Continued)

B. Joint Venture

The Edmeston Central School District participates in the Otsego-Northern Catskills Board of Cooperative Educational Services (BOCES). A BOCES is a voluntary, cooperative association of school districts in a geographic area that share planning, services, and programs which provide educational and support activities.

BOCES are organized under Section 1950 of the Education Law. A BOCES Board is considered a corporate body. All BOCES property is held by the BOCES Board as a corporation (Section 1950(6)). In addition, BOCES Boards are considered municipal corporations to permit them to contract with other municipalities on a cooperative basis under Section 1I9-n(a) of the General Municipal Law.

A BOCES' budget is comprised of separate budgets for administrative, program, and capital costs. Each component schooi district's share of administrative and capital cost is determined by resident public school district enrollment as defined in Education Law, Section 1950(4)(b)(7).

There is no authority or process by which a school district can tenninate its status as a BOCES component. In addition, component school districts pay tuition or a service fee for programs in which their students participate. Members of a BOCES Board are nominated and elected by their component member boards in accordance with provisions of Section 1950 of the Education Law.

During the year ended June 30, 2010, the Edmeston Central School District was billed $1,514,811 for BOCES administrative and program costs. The District's share of BOCES Aid amounted to $661,880. Financial statements for the BOCES Aid are available from the BOCES administrative office.

C. Basis of Presentation

1. Districtwide Statements

The Districtwide Statement of Net Assets and the Statement of Activities present financial information about the District's governmental activities. These statements include the financial activities of the overall government in its entirety, except those that are fiduciary. Eliminations have been made to minimize the double counting of intemal transactions. Governmental activities generally are financed through taxes, State Aid, intergovernmental revenuesJ and other exchange and nonexchange transact�ons. Operating grants include operating-specific and discretionary (either operating or capital) grants, while the capital grants column reflects capital-specific grants.

See auditors' report -10-




C. Basis of Presentation (Continued)

1. Districtwide Statements (Continued)

The Statement of Activities presents a comparison between program expenses and revenues for each function of the District's governmental activities. Direct expenses are those that are specifically associated with and are clearly identifiable to a particular function. Program revenues include charges paid by the recipients of goods or services offered by the programs, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, 'are presented as general revenues. Indirect expenses, principally employee benefits, are allocated to functional areas in proportion to the payroll expended for those areas.

2. Fund Financial Statements

The fund statements provide information about the District's funds, including fiduciary funds. Separate statements for each fund category (governmental and fiduciary) are presented. The emphasis offund financial statements is on major governmental funds, each displayed in a separate column.

The District reports the following funds:

a. Major Governmental Funds

(I) General Fund- This is the District's primary operating fund. I! accounts for all financial transactions that are not required to be accounted for in another fund.

(2) Special Aid Fund- These funds account for the proceeds of specific revenue sources, such as federal and state grants, that are legally restricted to expenditnres for specified purposes and other activities whose funds are restricted as to use. These legal restrictions may be imposed either by governments that provide the funds, or by outside parties.

(3) School Lunch Fund- Used to account for transactions of the District'.lunch and breakfast programs.




I. Summary of Significaut Accounting Policies (Continued)

C. Basis of Presentation (Continued)

2. Fund Financial Statements (Continned)

a. Major Governmental Funds (Continued)

(4) Capital Projects Fund- This fund is used to account for the financial resources used for acquisition, construction, or major repair of capital facilities.

b. Fiduciary Funds

Fiduciary activities are those in which the District acts as trustee or agent for resources that belong to others. These activities are not included in the districtwide financial statements, because their resources do not belong to the District, and are not available to be used. There are two classes of fiduciary funds:

(I) Private Purpose Trust Funds- These funds are used to account for trust arrangements in which principal and income benefits annual third party awards and scholarships for students. Established criteria govern the use of the funds and members of the District or representatives of the donors may serve on committees to determine who benefits.

(2) Agency Funds- These funds are strictly custodial in nature and do not involve the measurement of results of operations. Assets are held by the District as agent for various student groups or extraclassroom activity funds and for payroll or employee withholding.

D. Measurement Focus and Basis of Accounting

The districtwide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis ,?f accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place. Nonexchange transactions, in which the District gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from grants and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.





D. Measurement Focus and Basis of Accounting (Continued)

The fund statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The District considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after the end of the fiscal year.

Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in govennnental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

E. Cash and Investments

The District's cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments with original maturities of three months or less from date of acquisition. New York State law governs the District's investment policies. Resources must be deposited in FDIC-insured commercial banks or trust companies located within the State. Permissible investments include obligations of the United States Treasury, United States Agencies, repurchase agreements and obligations of New York State or its localities. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and districts.

F. Property Taxes

Real property taxes are levied by the Board of Education no later than September I and become a lien on August 13. Taxes are collected during the period September I to October 31.

Uncollected real property taxes are subsequently enforced by the County of Otsego. The County pays an amount representing uncollected real property taxes transmitted to the County for enforcement to the District no later than the following April 1.

G. Restricted Resources

When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the District's policy concerning which to apply first varies with the intended use, and with the associated legal requirements, many of which are described elsewhere in these Notes.





H. Interfund Transactions

The operations o f the District include transactions between funds. These transactions may be temporary in nature, such as with interfund borrowings. The District typically loans resources between funds for the purpose of providing cash flow. These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include the transfer of expenditures and revenues to provide financing or other services.

In the districtwide statements, the amounts reported on the Statement of Net Assets for inierfund receivables and payables represent amounts due between different fund types (governmental activities and fiduciary funds). Eliminations have been made for all interfund receivables and payables between funds, with the exception of those due from or to the fiduciary funds.

The governmental funds report all interfund transactions as originally recorded. Interfund receivables and payables may be netted on the accompanying governmental funds balance sheet when it is the District's practice, to settle these amounts at a net balance based upon the right of legal offset.

Refer to Note IV for a detailed disclosure by individual fund for interfund receivables, payables, expenditures and revenues activity.

I. Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas. including computation of encumbrances. compensated absences, potential contingent liabilities and useful lives of long-lived assets.

J. Receivables

Accounts receivable are shown gross, with uncollectible amounts recognized under the direct write-off method. No allowance for uncollectible accounts has been provided since it is believed that such allowance would not be material.

K. Inventodes and Prepaid Items

Inventories of food in the School Lunch Fund are recorded at cost on a first-in, firstout basis or in the case of surplus food, at stated value which approximates market. Purchases of inventorial items in other funds are recorded as expenditures at the time of purchase, and are considered immaterial in amount. Prepaid items represent payments made by the District for which benefits extend beyond year end.




T. Summary of Significant Accounting Policies (Continued)

L. . Other Assets/ Restricted Assets

The District may issue Revenue Anticipation Notes (RAN) and Tax

Anticipation Notes (TAN), in anticipation of the receipt of revenues. These

notes are recorded as a liability ofthe fund that will actually receive the

proceeds from the issuance of the notes. The RAN's and TAN's represent

a liability that will be extinguished by the use of expendable, available

resources of the fund.

The District may issue budget notes up to an amount not to exceed 5% of

the amount of the annual budget during any fiscal year for expenditures for

which there is an insufficient or no provision made in the annual budget. The

budget note must be repaid no later than the close of the second fiscal year

succeeding the year in which the note was issued.

The District may issue Bond Anticipatiou Notes (BAN), in anticipation of

proceeds from the subsequent sale of bonds. These notes are recorded as

current liabilities of the funds that will actually receive the proceeds from the

issuance of bonds. State law requires that BAN's issued for capital purposes

be couverted to long-term financing within five years after the original issue date.

M. Capital Assets

Capital assets are reflected in the districtwide financial statements.

Capital assets are reported at historical cost or estimated historical costs,

based on appraisals conducted by independent third-party professionals.

Donated assets are reported at fair market value as of the date received.

Additions, improvements and other capital outlays that significantly

extend the useful life of an asset are capitalized. Other costs incurred

for repairs and maintenance are expensed as incurred.

Capital assets, except land, are depreciated on a straight-line basis

over their estimated useful lives. Capitalization thresholds and estimated

useful lives of capital assets reported in the districtwide statements are as follows:

Site Improvements

Buildings and Improvements

Furniture and Equipment

Vehicles

Capitalization Estimated

Threshold Useful Life

$ 1 ,000 20 $ 1,000 15-50

$ 1,000 5-20

$ 1 ,000 5-8

See auditors' report.

-15-




N. Compensated Absences

Compensated absences consist of unpaid accumulated annual sick leave, vacation, and sabbatical time.

Sick leave eligibility and accumulation is specified in negotiated labor contracts, and in individual employment contracts. Upon retirement, resignation or death, employees may contractually receive a payment based on unused accumulated sick leave.

District employees are granted vacation in varying amonnts, based primarily on length of service and service position. Some earned benefits may be forfeited if not taken within varying time periods.

Consistent with GASB Statement 16, Accounting for Compensated Absences, the liability has been calculated nsing the vested/termination method. The liability has been included in both the fund statements and the districtwide financial statements.

O. Accrued Liabilities and Long-Term Obligations

Payables, accrued liabilities and long-term obligations are reported in the districtwide financial statements. In the governmental funds, payables and accrued liabilities are paid in a timely manner and in full from current financial resources. Claims and judgments, and compensated absences that will be paid from governmental funds, are reported as a liability in the funds financial statements only to the extent that they are due for payment in the current year. Bonds and other long-term obligations that will be paid from governmental funds are recognized as a liability in the fund financial statements when due.

Long-term obligations represent the District's future obligations or future economic outflows. The liabilities reported as due in one year or due within more than one year are in the Statement of Net Assets.

P. Deferred Revenue

The statute provides the authority for the School District to levy taxes to be used to finance expenditures within the first 20 days of the succeeding fiscal year. Consequently, such amounts are recognized as revenue in the subsequent fiscal year rather than when measurable and available.

See auditors' report. -1 6-




Q. Other Benefits

In addition to providing pension benefits, the School District provides health insurance coverage and survivor benefits for retired employees and their survivors. Substantially all of the School District's employees may become eligible for these benefits if they reach normal retirement age while working for the School District. Health care benefits are provided through plans whose premiums are based on the benefits paid during the year. The cost of providing post·retirement benefits is shared between the School District and the retired employee. The School District recognizes the cost of providing health insurance by recording its share of insurance premiums (for retirees and their dependents) as an expenditure in the General Fund in the year paid.

R. Equity Classifications

I . Districtwide Statements

In the districtwide statements there are three classes of net assets:

Invested in capital assets, net related debt· consists of net capital assets (cost less accumulated depreciation) reduced by outstanding balances of

related debt obligations from the acquisition, constructions or improvements of those assets.

Restricted net assets· reports net assets when constraints placed on the assets are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation.

Unrestricted net assets· reports all other net assets that do not meet the definition of the above two classifications and are deemed to be available for general use by the District.

2. Funds Statements

Unreserved fund balance consists of two classifications. A designation of unreserved fund balance indicates the planned use of these resources in the subsequent year's budget. The undesignated portion reports remaining fund balance that has not been designated or reserved. NYS Real Property Tax Law 1 3 1 8 restricts the unreserved, undesignated fund balance of the General Fund to an amount not greater than 4% of the District's budget for the ensuing fiscal year.

See auditors' report. -1 7-


NOTES TO FINANCIAL STATEMENTS (CONTINUED )


R. Equity Classi.fications (Continued)

2. Funds Statements (Continued)

Fund balance reserves are created to satisfy legal restrictions, plan for future expenditures or relate to resources not available for general use or appropriation. The following reserve funds are available to school districts within the State of New York. These reserve funds are established through Board action or voter approval and a separate identity must be maintained for each reserve. Earnings on the invested resources become part of the respective reserve funds; however, separate bank accounts are not necessary for each reserve fund. Fund balance reserves currently in use by the District include the following;

1. Unemployment Insurance Reserve

This reserve is used to pay the cost of reimbursement to the State Unemployment Insurance Fund for payments made to claimants where the employer has elected to use the benefit reimbursement method. The reserve may be established by Board action and is funded by budgetary appropriations and such other funds as may be legally appropriated. Within sixty days after the end of any fiscal year, excess amounts may either be transferred to another reserve or the excess applied to the appropriations of the next succeeding fiscal year's budget. This reserve is accounted for in the General Fund.

2. Reserve for Encumbrances

This reserve represents the amount of outstanding encumbrances at the end of the fiscal year to be potentially expended in the subsequent year.

3. Capital Reserve

This reserve is used to pay the cost of any object or purpose for which bonds may be issued. The creation of a capital reserve fund requires authorization by a majority of the votcrs establishing the purpose of the reserve, the ultimate amount, its probable tenn and source of the funds. Expenditure may be made from the reserve only for a specific purpose further authorized by the voters. The form for the required legal notice for the vote on establishing and funding the reserve and the form of the proposition to be placed on the ballot are set forth in 3651 of the Education Law. This reserve is accounted for in the General Fund.

4. Employee Benefit Accrued Liability Reserve

This reserve is used to set aside funds for the payment of accrued employee benefits due an employee upon termination of the employee's service. This reserve may be established by a majority vote of the Board, and is funded by budgetary appropriations and such other reserves and funds that may be legally appropriated. This reserve is accounted for in the General Fund.

See auditorst report. -18-



I. Summary of SIgnificant Accounting Policies (Continued)

R. Equity Classifications (Continued)

5. Reserve for Employee Retirement Contributions

This reserve is used to reserve funds for future employee's retirement obligations. This reserve may be established by a majority vote of the Board, and is funded by budgetary appropriations and such other reserves and funds that may be legally appropriated.

S. Budgetary Procedures and Budgetary Accounting

1. Budget Policies

The budget policies are as follows:

a. The School District administration prepares a proposed budget for approval by the Board of Education for the General Fund.

b. The proposed appropriation budget for the General Fund is approved by the voters within the School District.

c. Appropriations are adopted at the program level.

d. Appropriations established by adoption of the budget constitute a limitation on expenditures (and encumbrances), which may be incurred. Appropriations lapse at the fiscal year end. Supplemental appropriations may occur subject to legal restrictions, if the Board approves them because of a need that exists which was not determined at the time the budget was adopted.

2. Budget Basis of Accounting

Budgets are adopted annually on a basis consistent with generally accepted accounting principles. Appropriations authorized for the current year are increased by the amount of encumbrances carried forward from the prior year.

The budget and actual comparison in the Schedule of Revenues and Expenditures-Budget aud Actual, reflects budgeted and actual amounts for the General Fund which is a legally authorized (appropriated) budget.

Special Aid Fund and School Lunch Fund have not been included in the comparison because they do not have legally authorized budgets.




I. Summary o f Significant Accounting Policies (Continued)

S. Budgetary Procedures and Budgetary Accounting (Continued)

3. Encumbrances

Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part ofthe governmental funds. Under this method, purchase orders, contracts and other commitments for the expenditure of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year end are presented as reservations offund balance and do not represent expenditures or liabilities. These commitments will be honored in the subsequent period. Related expenditures are recognized at the time as the liability is incurred or the commitment is paid.

T. New Accounting Standards

The District has adopted all current Statements of the Governmental Accounting Standards Board (GASB) that are applicable. At June 30, 20 I 0, the District implemented the following new standards issued by GASB:

1. GASB Statement 43, Financial Reporting for Postemployment Benefit Plans Other than Pension Plans

GASB Statement 43 establishes the uniform standards ofreporting for postemployment benefits (OPEB) for governmental entities. OPEB refers to benefits provided to retirees other than pensions, which includes healthcare benefits. The Statement provides standards for financial reporting ofIhe plan and disclosure of actuarial information about the funded status of the plan and the progress toward funding the postemployment liability will be implemented for the June 30, 201 0 financial statements.

2. GASB Statement 45. Accounting and Financial Reporting bv Emplovers for Pos/employment Benefits Other Than Pensions

GASB Statement 45 establishes standards for the accrual basis measurement and recognition of OPEB costs over a period that relates to when the service is provided to the employer, rather than recognizing those costs on a pay-asyouRgO basis. The Statement provides information about the actuarial accrued liabilities for OPEB and its funding status. The Statement will be implemented for the June 30, 2010 financial statements.

U. Future Changes ill Accounting Standards

GASB has issued Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions. which enhances the usefulness offund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. The District is currently studying the statement and plans on adoption ifand when required, which will be for the June 30, 2012 financial statements.




n. Explanation of Certain Differences Between Governmental Fund Statements and Distrietwlde Statements

Due to differences in the measurement focus and basis of accounting used in the govermnental fund statements and the districtwide statements, certain fmancial transactions are treated differently. The basic fmancial statements contain a full reconciliation of these items. The differences result primarily from the economic focus of the Statement of Activities, compared with the current financial resources focus of the govermnental funds.

I . Total Fund Balances of Govermnental Funds vs. Net Assets of Govermnental Activities:

Total fund balances of the District's govermnental funds differ from "net assets" of govermnental activities reported in the Statement of Net Assets. This difference primarily results from the additional long-term economic focus of the Statement of Net Assets versus the solely current fmancial resources focus of the govermnental fund balance sheets.

2. Statement of Revenues. Expenditures, and Changes in Fund Balance vs. Statement of Activities:

Differences between the Funds Statement of Revenues, Expenditures and Changes in Fund Balance and the Statement of Activities fall into one of three broad categories.

a. Long-tenm revenue differences:

Long-tenm revenue differences arise because govermnental funds report revenues only when they are considered "availableU, whereas the Statement of Activities reports revenues when earned. Differences in long-tenm expenses arise because govermnental funds report on a modified accrual basis, whereas the accrual basis of accounting is used on the Statement of Activities.

b. Capital related differences:

Capital related differences include the difference between proceeds for the sale of capital assets reported on govermnental fund statements and the gain or loss on the sale of assets as reported on the Statement of Activities, and the difference between recording an expenditure for the purchase of capital items in the govermnental fund statements and depreciation expense on those items as recorded in the Statement of Activities.




II. Explanation ofCerfain Differences Between Governmental Fund Statements and Districtwide Statements (Continued)

2. Statement of Revenues. Expenditures, and Changes in Fund Balance vs. Statement of Activities: (Continued)

c. Long-term debt transaction differences:

Long-term debt transaction differences occur because both interest and principal payments are recorded as expenditures in the governmental fund statements, whereas interest payments are recorded in the Statement of Activities as incurred, and principal payments are recorded as a reduction of liabilities in the Statement of Net Assets.

The costs of building and acquiring capital assets (land, buildings, and equipment) financed from governmental funds are reported as expenditures in the year they are incurred, and the assets do not appear on the Balance Sheet. However, the Statement of Net Assets includes those capital assets among the assets of the District as a whole, and their original costs are expensed annually over their useful lives.

Original cost of capital assets Accumulated depreciation

Capital assets, (net)

$ 19,734,385 4,130,995

$ 15,603,390

Long�term liabilities are reported in the Statement of Net Assets, but not in the governmental funds, because they are not due and payable in the current period. Balances at year-end were:

Bonds payable $ 7,027,543

When the purchase or construction of capital assets is financed through governmental funds, the resources expended for those assets are reported as expenditures in the years they are incurred. However, in the Statement of Activities, the cost ofihose assets is allocated over their estimated useful lives and reported as depreciation expense. Depreciation of$406, 151 was less than capital expenditures of$4,708,260 in the current year.

Repayment of bond principal of$736,919 is an expenditure in the governmental funds, but it reduces long-term liabilities in the Statement of Net Assets, and does not affect the Statement of Activities.

III. Cash and Investmenls

The Edmeston Central School District's investment policies are governed by State statutes. The Edmeston Central School District's monies must be deposited in FDIC· insured commercial banks or trust companies located within the State. The Treasurer is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations ofthe U.S. Treasury and U.S. Agencies, repurchase agreements, and obligations of New York State or its localities.

Collateral is required for demand and time deposits and certificates of deposit not covered by Federal Deposit Insurance. Obligations that may be pledged as collateral are: obligations oflhe United States and its agencies and obligations of the State and its municipalities and school districts.

See auditors' report. ·22·



III. Cash and Investments (Continued)

IV.

A. Deposits

Deposits and investments at year end were entirely covered by Federal Deposit Insurance or by collateral held by the School District's custodial bank in the School District's name.

B. Investment Pool

The School District participates in a multi-municipal cooperation investment pool agreement pursuant to New York State General Municipal Law Article 5-G, Section 1 19-0, whereby it holds a portion of the invesbnents in cooperation with other participants. At June 30, 2010, the School District held $63,046 in investments consisting of various investments in securities issued by the United States and its agencies. The investments are highly liquid and considered to be cash equivalents. The investment pool is categorically exempt from the New York State collateralization requirements.

Interfund Transaction

Interfund balances at June 30, 2010, are as follows:

Interfund Interfund Receivable Payable Revenues Expenditures

General Fund $ 238,217 $ $ $ 23,463 Special Aid Fund 185,967 13,463 School Lunch Fund 32,296 10,000 Capital Fund 322 Total governmental

activities 238,217 218,585 $ 23,463 $ 23,463

Fiduciary Agency Fund 19,632

Totals $ 238,217 $ 238,217

Interfund receivables and payables, other than between governmental activities and fiduciary funds, are eliminated on the Statement of Net Assets.



NOTES TO FINANCIAL STATEMENTS (CONTINUED) - - _. ____ • ____ A_A_A.

V. Capital Assets

A summary of changes in general fixed assets follows:

Balance Balance 7/112009 Additions Deletions 6/30/2010

Cagital assets that are not depreciated:

Land $ 486,572 $ $ $ 486,572 Construction in Progress 358,458 4,515,781 4,874,239

Total capital assets that ace not depreciated 845,030 4,515,781 5,360,81 1

Other capital assets:

Buildings and improvements 12,608,839 12,608,839 Machinery and equipment 983,221 23,034 378,768 627,487 Vehicles 1,090,705 169,445 122,902 1 , 137,248

Total other capital assets 14,682,765 192,479 501,670 14,373,574

Less accumulated depreciation:

Buildings and improvements 2,934,519 236,522 3,171,041 Machinery and equipment 801,556 34,766 378,768 457,554 Vehicles 490,439 134,863 122,902 502,400

Total accumulated depreciation 4,226,51 4 406, 151 501,670 4,130,995

Other capital assets, net 10,456,251 (213,672) 10,242,579

Total $ 1 1,301,281 $ 4,302,109 $ $ 15,603,390

Depreciation expense for the period was charged to governmental functions as follows:

VI. Pension Plans

General Support Instruction Transportation School Lunch Program

1. General Infonnation

$

$

8,252 255,849 133,527

8,523 406, 15 1

The Edmeston Central School District participates in the New York State and Local Employees' Retirement System (ERS), and the New York State Teachers' Retirement System (IRS). These systems are cost sharing multiple employer, public employee retirement systems, The systems offer a wide range of plans and benefits which are related to years of service and final average salary, vesting of retirement benefits, death and disability.

See auditors' report, -24·



VI. Pension Plans (Continued)

2. Plan Descriptions

a. Teachers' Retirement System (TRS)

As an employer, the School District makes contributions to the New York State Teachers' Retirement System (TRS), a cost sharing, multiple employer defmed benefit pension plan administered by the New York State Teachers' Retirement Board. The System provides retirement, disability, withdrawal and death benefits to plan members and beneficiaries as authorized by the Education Law and the Retirement and Social Security Law ofthe State of New York. The System issues a publicly available financial report that contains financial statements and required supplementary infonnation for the System. The report may be obtained by writing to the New York State Teachers' Retirement System, 1 0 Corporate Woods Drive, Albany, NY 1221 1-2395.

b. Employees' Retirement System (ERS)

The New York State and Local Employees' Retirement System provides retirement benefits as well as death and disability benefits. Obligations of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL). The System issues a publicly available financial report that includes fmancial statements and required supplementary infonnation. That report may be obtained by writing to the New York State and Local Retirement System, 1 1 0 State Street, Albany, NY 12236.

3. Funding Policies

For the Teachers' Retirement System, plan members who joined the system before July 27, 1976 are not required to make contributions. Those joining after July 26, 1976 who have less than 1 0 years of service or membership are required to contribute 3% of their salary. Employers are required to contribute at an actuarially determined rate. Rates applicable to the fiscal years ended June 30, 2010, 2009, and 2008 were 6.19%, 7.63%, and 8.73%. For the New York State and Local Employees' Retirement System, Chapter 126 of the laws of 2000 provide for the cessation of the 3% employee contribution for those Tier 3 and 4 members who, as of October 1 , 2001, have either 1 0 years of membership or credited service.

The required and actual contributions for the current year and two preceding years were:

Year ERS TRS 2010 $ 55,984 $ 233,357 2009 $ 63,436 $ 278,475 2008 $ 77,506 $ 260,175

The School District contributions made to the Systems were equal to 100% of the contribution required for each year.




VII. Short-Term Debt Obligations

Transactions in short-tenn debt for the year arc summarized below:

Interest Balance Maturity Rate 71112009

BAN 2010 1.79% $ 950,000

BAN 20lO 1.68%

BAN 20lO 2.17%

$ 950,000

Interest on short-tenn debt for the year was composed of:

Interest Paid

Less interest accrued in the prior year Plus interest accrued in the current year

Total expense

VIII. Long-Term Debt Obligations

Issued $ 600,000

3,000,000

1,700,000

$ 5,300,000

$ 1 8,451

90,967

$ lO9,41 8

Long-term liability balances and activity for the year arc summarized below:

1 . Long-Term Debt Interest

Interest Paid Less interest accrued in the prior year Plus interest accrued in the current year

Total expense

2. Changes

Balance 71112009

Serial Bonds $7,618,581

OPEB Obligations

$7,618,581

Additions Deletions

$ 145,881 $ 736,919

1,314,283 .

$ 1,460,164 $ 736,91 9

$ 3 12,359

13,042

$ 325,401

Balance 6/30120lO

$ 7,027,543

1,314,283

$ 8,341,826

Redeemed $ 950,000

$ 950,000

Amounts Due Within

One Year $ 760,975

In prior years, the District defeased certain general obligations and other bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future

debt service payments on the old bonds. Accordingly. the trust account assets and the liability for defeased bonds are not included in the Districtts financial statements.

3. Malurlty

a. The following is a summary ofthe debt issued:

Issue

PU!:Eose Date

Serial Bonds: Construction 2006

BOCES 2000

Construction 2002

Buses 2006

Buses 2007

Buses 2008

Buses 2009

Buses 2009

Buses 2010

Total

Final Interest

Maturi� Rate

2021

201 1

2019

2010

2012

2013

2013

2014

2015

3.90%

5.1�5.6%

2.5A.75%

4.20%

4.10%

3.18%

3.88%

3.42%


Outstanding

613012010

$ 4,51 0,000

65,000

1,930,000

25,546

67,336

79,652

1 50,266

53,861

145,882

$ 7,027,543

Balance 6/30120lO

$ 600,000 3,000,000

1,700,000

$ 5,300,000



VIII. Long-Term Debt Obligations (Continued)

3. Maturity (Continued)

b. The following is a summary of maturing principal debt service requirements:

Year Princi�al 201 1 $ 760,975 2012 690,426 2013 681,758 2014 680,208 2015 649, 176 2016 and thereafter 3,565,000

Total $ 7,027,543

IX. Post-Employment (Health Insurance) Benefits

Interest Total $ 283,858 $ 1 ,044,833

253,377 943,803 227,185 908,943 200,459 880,667 174,201 823,377 464,293 4,029,293

$ 1,603,373 $ 8,630,9 16

The District provides post�employrnent (health insurance, life insurance, etc.) coverage to retired employees in accordance with the provisions of various employment contracts, The benefit levels, employee contributions and employer contributions are governed by the District's contractual agreements.

The District implemented GASB Statement #45, Accounting and Financial Reporting by employers for Post-employment Benefits Other than Pensions, in the school year ended June 30, 2010. This required the District to calculate and record a net other post�employment benefit obligation at year-end. The net other post-employment benefit Obligation is basically the cumulative difference between the actuarially required contribution and the actual contributions made.

The District recognizes the cost of providing health insurance annually as expenditures in the General Fund of the funds financial statements as payments are made. For the year ended June 30, 2010 the District recognized $373,517 for its share of insurance premiums for currently enrolled retirees.

The District has obtained an actuarial valuation report as of January 1, 2009 which indicates that the total liability for other post-employment benefits is $1,3 14,283, which is reflected in the Statement of Net Assets.

The District currently pays for post�employment health care benefits on a pay�as-you-go basis. Once New Yark State Law allows for the establishment of a trust to fund and invest assets necessary to pay for the accumulated liability. the District will study the establishment of such a trust. These financial statements assume that pay-as-you-go funding will continue.



NOTES TO FINANCIAL STATEMENTS (CONTINUE]}

IX. Post-Employment (Health Insurance) Benefits (Continued)

1. Annual OPEB Cost and Net OPEn Obligation

The District's annual other post-employment benefit (OPES) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuariatly determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover riormal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the Distric�s net OPES obligation to HP:

Annual required contribution Interest on net OPEB obligation Adjustment to annllal required contributi.on

Annual OPEB cost (expense) Contributions made Increase in net OPES obligation

Net OPES obligation-beginning of year Net OPEB obligation-end of year

$ 1,687,800

1,687,800 373,517

1,3 14,283

$ 1,3 14,283

The District's annual OPES cost, the percentage of annual OPES cost contributed to the plan, and the net OPEB obligation for 2010:

Fiscal Year Ended

Annual OPEB Cost

Percentage of Annual OPEB Cost

Contributed Net OPEB Obligation

6/30no1O $ 1,687,800 22.1% $ 1,314,283

2. Funded Status and Funding Progress

As of January 1 , 2009, the most recent actuarial valuation date, the plan was 0% funded. The actuarial accrued liability for benefits was $19,510,200, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of$19,510,200_ The covered payroll (annual payroll of active employees covered by the plan) was $3,409,162, and the ratio of the VAAL to the covered payroll was 572.3%. Actuarial valuations of an ongoing plan involve estimates orthe value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to contiimal revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information in the notes to the financial statements, presents multi-year trend information about whether the actuarial value of pi all assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.




LX. Post-Employment (Health Insurance) Benefits (Continued)

3. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects

ofshorHerm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-tenn perspective of the calculations.

In the January 1 , 2009, actuarial valuation, the Projected Unit Credit Cost method was used. The actuarial assumptions included a 5% investment rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 5% initially, reduced by decrements to an ultimate rate of 4% after 5 years. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a 30-year period. The UAAL is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at June 30, 2010, was 29 years.

X. Commitments and Contingencies

A. Risl< Financing and Related Insurance

1. General Information

The Edmeston Central SellOol District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage fur the past two years.

2. Worker's Compensation Insurance

The School District participates in a risk sharing pool consortium run by the Otsego-Northern Catskills BOCES, to insure workers' compensation claims. This is a public entity risk pool created under Article 5, Workers' Compensation Law, to finance liability and risks related to Workers' Compensation claims.

3. Health Insurance

The School District participates in the Otsego-Northern Catskills Consortium. The Consortium's purpose is to provide health insurance coverage at a lower rate for member educational institutions due to a large participation pool.

B. Other Items

The School District has received grants, which are subject to audit by agencies of the State and Federal government. Such audits may result in disallowances and a request for a return of funds. Based on prior audits, the School District's administration balances disallowances, if any, will be immaterial.




XI. Other Disclosures

A. Summary of Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Assets

Total governmental fund balance (deficit) Capital assets, (net) Bonds payable Accrued interest OPEB payable Total net assets

$ (3,646,074) 15,603,390 (7,027,543)

(104,009) (1,314,283)

$ 3,51 1,481

D. Reconciliation of the Statement of Revenues. Expenditures and Changes in Fund Equity to the Statement of Activities

Net changes in fund balance· total governmental funds

Capital outlays are expenditures in governmental funds, but a�e capitalized in the Statement of Net Assets.

Depreciation is not recorded as an expenditure in the governmental funds, but is recorded in the Statement of Activities.

Repayments of Long-tenn Debt are recorded as expenditures in the governmental funds, but are recorded as payments of liabilities in the Statement of Net Assets.

Serial bonds are reported in the Governmental Funds as a source of financing, but as a Long-tenn liability in the Statement of Assets, and not as a revenue in the Statement of Activities.

Interest is recognized as an expense in governmental funds when paid, for governmental activities interest expense is recognized as it accrues. The increase in accrued interest during 200912010 results in more expense.

Recognition of other postemployment accnted costs.

Change in Net Assets-Governmental Activities

XII. Stewardship, Compliance and Accountability

$

$

The Capital Fund had a deficit fund balance of$4,815,51 1 . This will be eliminated when the District obtains pennanent financing for its current construction project.

XIII. Subsequent Events

On July 22, 2010, the School District issued bond anticipation notes totaling $5,285,000. The notes are to be used to cover expenditures in the Capital Project Fund for the 2010-201 1 school year.


(4,350, 133)

4,708,260

(406, 1 5 1)

736,919

( 145,881)

( 104,009)

(1,314,283)

(875,278)

EDMESTON CENTRAL SCHOOL DISTRICT SCHEDULE OF REVENUES COMPARED TO BUDGET- GENERAL FUND


REVENUES l...ocal Sources

Real property taxes Other tax items Charges for services Use of money and property Sale of property and

compensation for loss Miscellaneous

Total Local Sources

State Sources �ederal Sources

Total Revenues

Appropriated Reserves

Total Revenues and Appropriated Reserves

Original Budllet

$ 1,720,000 540,320

27,000 25,000

1 0,500 35,000

2,357,820

6,974,780 1 4,000

9,346,600

$ 9,346,600


Revised Budllet Actual

$ 1 ,789,634 $ 1 ,789,015 470,686 473,732

27,000 4,448 25,000 1 8,800

10,500 28,049 35,000 116,298

2,357,820 2,430,342

6,526,838 6,527,276 461,942 447,942

9,346,600 9,405,560

17,035

$ 9,363,635

Variance Favorable

(Unfavorable)

$ (619) 3,046

(22,552) (6,200)

1 7,549 81,298

72,522

438 ( 14,000)

$ 58,960


SCHEDULE OF EXPENDITURES, OTHER USES AND ENCUMBRANCES COMPARED TO BUDGET-

EXPENDITURES General Support

Board of education Central administration Finance Staff Central services Special items

Total General Support

Instruction Instruction, administration and improvement Teaching - regular school Programs for children with handicapping

conditions Occupational education Instructional media Pupil services

Total Instructional

Pupil Transportation Community Services Employee Benefits Debt Service

Principal Interest

Total Expenditures

OTHER FINANCING USES Operating transfers out

Total Expenditures and Other Financing Uses

Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses

GENERAL FUND


$

$

.--------

Original Revised Budget Bud!!et

1,850 $ 1,850 13 1,735 137,080 1 67,645 173,770 20,940 13,705

751,095 71 1 ,404 1 75,400 191,100

1,248,665 1,228,909

164,395 174,691 2,479,495 2,741,309

1,264,035 1 , 170,062 337,730 338,270 223,41 0 207,865 304,635 274,369

4,773,700 4,906,566

520,350 583,235 1,960 1,010

1,745,750 1 ,552,050

736,920 736,920 309,255 331,480

9,336,600 9,340, 170

1 0,000 23,465

9,346,600 $ 9,363,635


-32-

$

$

Variance Favorable

Actual Encumbrances (Unfavorable}

789 $ $ 1,061 136,846 220 14 172,398 1,372

13,700 5 702,924 2,908 5,572 190,994 106

1,217,651 3,128 8,130

174,383 308 2,679,068 57, 1 1 5 5,126

1,127,644 28,403 14,015 338,234 36 191,064 16,801 264,953 2,423 6,993

4,775,346 87,941 43,279

573,991 9,244 1,008 2

1,548,150 3,900

736,919 1 330,810 670

9,183,875 91,069 65,226

23,463 2

9,207,338 $ 91,069 $ 65,228

198,222

EDMESTON CENTRAL SCHOOL DISTRICT SCHEDULE OF CHANGE FROM ORIGINAL BUDGET TO REVISED BUDGET AND USE OF

UNRESERVED FUND BALANCE- GENERAL FUND

Original Budget

Additions: Prior year's encumbrances

Revised Budget

USE OF UNRESERVED FUND BALANCE

Unreserved Fund Balance -

As of the beginning of the year

Less: Designated fund balance used for

the levy of taxes - Original budget

Undesignated Fund Balance -As of the beginning of the year


$

$

$

$


9,346,600

17,035

9,363,635

484,467

484,467

Original Bud�et

PROJECT TITLE

Excel Project $ 4,700,000 $ Buses 145,881

Totals $ 4.845,881 $


SCHEDULE OF PROJECT EXPENDITURES- CAPITAL PROJECTS FUND


Expenditures Methods ofFinancin� Revised Prior Bud�et Years

5,300,000 $ 358,458 $ 145,881

5.445.881 $ 358,458 $

Current Year Total

4.515,781 $ 4.874,239 145.881 145.881

4,661,662 $ 5,020,120


-34-

Unexpended Proceeds of Local Balance Oblis:ations Sources

$ 425,761 $ $ 145.881

$ 425.761 $ 145,881 $

Fund Balance Total June 30. 2010

$ $ (4,874,239) 145.881

$ 145,881 $ (4.874,239)

EDMESTON CENTRAL SCHOOL DISTRICT SCHEDULE OF CERTAIN REVENUES AND EXPENDITURES COMPARED TO ST-3 DATA


.l.EVENUES Real Property Taxes NOll-Property Taxes State Aid Federal Aid Total Revenues

�XPENDITURES General Support Pupil Transportation Debt Service - Principal Debt Service - Interest Total Expenditures

<-Rounding

Code

A -1001 AT-1199 AT-3999 AT-4999 AT-5999

AT-1999 AT-5599 AT-9798.6 AT-9798.7 AT-9999


$ $ $ $ $

$ $ $ $ $

Audited ST-3 Amount Amount

1,789,015 $ 1,789,0 1 5 $

6,527,276 $ 6,527,276 447,942 $ 447,942

9,405,562 $ 9,405,560

1,217,651 $ 1,217,65 1 573,991 $ 573,99 1 736,919 $ 736,919 330,810 $ 330,810

9,207,338 $ 9,207,338

*


SCHEDULE OF INVESTMENT IN CAPITAL ASSETS, NET OF RELATED DEBT

FOR THE YEAR ENDED JUNE 30, 20 1 0

Capital assets, net $ 15 ,603,390

Deduct: Short-term portion of bonds payable Long-term portion of bonds payable Cash

$ 5,300,000

7,027,543

(425,76 1 )

Investment in capital assets, net of related debt


1 1,901,782

$ 3,701,608

RAYMOND G. PREUSSER, CPA, P.C. Certified Public Accountants

P.O. Box 538

Claverack, New York 125 1 3

Telephone: (518) 851-6650 Fax: (518) 85 1-6675

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT or FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS.

To the Board of Educ.lion of Edmeston Central School District:

We have audited the financial statements of the governmental activities, each major fund and the fiduciary funds of the Edmeston Central School District, as orand for the year ended June 30. 201 D, which collectively comprise the District's basic financial statements and have issued otlr report thereon datedSepternber 28. 2010. We conducted otiC audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards. issued by the Comptroller General of the United States.

[oternal Control Over Financial Reporting:

In planning and performing our audit, we considered Edmeston Central School District's internal control over financial reporting as a basis for designing auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Edmeston Central School District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness oflhe Edmeston Central School District's internal control over financial reporting.

A deficiency in internal control exists when the design or operation ofa control does not allow management or employees. in.the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control stich that there is a reasonable possibility that a material misstatement oflhe District's financial statements will not be prevented or detected and corrected on a timely basis.

See auditorsl report. -37-

Internal Control Over Financial Reporting: (Continued)

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

Compliance and Other Matters:

As part of obtaining reasonable assurance about whether Edmeston Central School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards .

We noted certain other matters that we reported to management in our accompanying management letter.

This report is intended solely for the information and use of the Board of Education, management, the audit committee, the New York State Education Department, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

�,,:�-�


RAYMOND G. PREUSSER, CPA, P.C.

To the Board of Education of Edmeston Central School District:

Certified Public Accountants P.O. Box 538

Claverack, New York 12513

Telephone: (518) 851·6650 Fax: (518) 851·6675

In planning and performing our audit of the fmaneial statements of the govermnental activities, each major fund, and the fiduciary funds of Edmeston Central School District as of and for the year ended June 30, 2010, in accordance with auditing standards generally accepted in the United States of America, we considered Edmeston Central School District's internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Edmeston Central School District's internal control. Accordingly, we do not express an opinion on the effectiveness of Edmeston Central School District's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected or corrected on a timely basis.

Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be significant deficiencies or material weaknesses, and, therefore, there can be no assurance that all such deficiencies have been identified. We did not identify any deficiencies in internal control that we consider to be material weaknesses.


During our audit, we noted certain matters involving the internal control and other

operational matters that are presented for your consideration. This letter does not affect our report dated September 28, 2010 on the fmaneial statements of Edmeston Central School

District. 'Ve will review the status of these comments during our next audit engagement. OUT

comments and recommendations, all of which have been discussed with appropriate members

of management, are intended to il1).prQve the internal control or result in other operating efficiencies.

We will be pleased to discuss these comments in further detail at your convenience, perfonn any

additional study of these matters, or assist you in implementing the recommendations. Our comments

are summarized as follows:

Other Matters:

Budget Transfers:

The matter of effecting budgetary transfers is of critical importance to the efficient

management of a district's fiscal affairs. It is important to note that such transfer authority

has its basis in Section 170.2 (1) of Commissionees Regulations. This authorization is limited to transfers between and within districtwide (ST-3) function unit appropriations

for teachers' salaries and ordinary contingent expenses.

Since the adopted budget is, at best, an estimated expenditure plan, it is not unusual

for conditions to arise whereby transfers between or among function/object categories

are required to maintain fiscal balance. Appropriately, Section 170.2 (1) of Commissioner's

Regulations provides for such transfers and permits the Board of Education to facilitate

the procedure by authorizing "the Chief School Officer to make transfers within the limits

as established by the Board."

During our audit, we noted that budget transfers were not always made on a timely

basis. Proper purchasing procedures require that funds cannot b e expended from codes

that do not have funds available. Therefore, transfers should occur to show that funds

are available to be spent.

Fund Balance Management:

Good budget administration includes an accurate prediction of year end surplus and the amount of unreserved Fund Balance. This infonnation is particularly valuable to the Board

of Education and administration when making fmal decisions about the upcoming Budget. The

amount of surplus available has a direct effect on the amount of taxes necessary to be levied.

We recommend that a Fund Balance Projection be started in January of each year. The

projection of Fund Balance would be repeated into the month of June, if necessary. The early

projection of Fund Balance is also needed to keep the expenditures in balance with the anticipated

revenues. The task of developing a projected Fund Balance is generally accomplished by the

Business Manager.

As a matter of good business practice, we reconunend the Board have a procedure concerning

Budget development which incorporates the requirement for a "first lookll at the Fund Balance early

in the Budget process, approximately by January or February of each year.


Fiscal Planning:

Due to the economic conditions facing all school districts, such as increasing benefit costs and State Aid cuts, we recommend that the District develop a three-year fiscal plan and update it annually based on current infonnation available.

Issues Related to Changing Environment:

It was noted that the District started the Business Office Procedures Manual, but has not completed it as of the audit date. The District operates in a complex or frequently changing compliance environment. The risk to the District is that as compliance regulations change, complexities place task burdens on the District employees. The complexity of the tasks increases the risk that the District could feel adverse consequences if it were to lose a key person i n the Business Office with no written procedures to he fonowed by a new employee.

We recommend that the District complete the document as soon as possible. These process documents should be reviewed for accuracy and completeness. Once prepared, employees should be required to maintain the documents in a manner that reflects any changes to the procedures.

Documentation ofInvoice Processing:

An important element of the auditor's function is to perfonn a proper evaluation of the existing system of internal control in order to detennine the degree of reliance which may be placed on the system in perfonning the various auditing procedures. As part of our audit of the School District's fmancial statements, we reviewed, evaluated and tested the controls with respect to purchasing.

During our audit, we noted that within the sample of transactions we tested:

1. Several instances where a purchase order/claim fonTIS were not signed authorizing the expenditure.

2. One instance where the invoice lacked supporting documentation for approval.

3. Several instances where purchase orders/claim fOnTIS were not issued.

We discussed these issues with management.


This communication is intended solely for the infonnation and use of the Board of

Education, management, the audit committee, the New York State Education Department, and

federal awarding agencies and pass-through entities and is not intended to be and should not

be used by anyone other than these specified parties.

We would like to acknowledge the Business Office personnel for their courtesies

received during the course of our audit.

RGP/srp

Very truly yours,

RAYMOND G. PREUSSER, CPA, P.C.


Year Ended June 30, 2010 · 2010. 12. 29. · RAYMOND G. PREUSSER, CPA,P.C. Certified Public...

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