Shaler Area School District

Financial Statements and Required Supplementary and Supplementary Information

Year Ended June 30, 2019 with Independent Auditor’s Reports

Pursuing the profession while promoting the public good© www.md‐cpas.com

SHALER AREA SCHOOL DISTRICT

YEAR ENDED JUNE 30, 2019

TABLE OF CONTENTS

Independent Auditor's Report

Management’s Discussion and Analysis	i

Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position	1

Statement of Activities	2

Fund Financial Statements:

Balance Sheet - Governmental Funds	3

Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position	4

Statement of Revenues, Expenditures, and Changes in Fund Balance -Governmental Funds	5

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement
of Activities	6

Statement of Net Position - Proprietary Fund	7

Statement of Revenues, Expenses, and Changes in Net Position -
Proprietary Fund	8

Statement of Cash Flows - Proprietary Fund	9

Statement of Net Position – Fiduciary Funds	11

Statement of Changes in Net Position – Fiduciary Funds	12

SHALER AREA SCHOOL DISTRICT

YEAR ENDED JUNE 30, 2019

TABLE OF CONTENTS

(Continued)

Notes to Financial Statements	13

Required Supplementary Information:

Statement of Revenues, Expenditures, and Changes in Fund Balance -
Budget and Actual - General Fund	57

Schedule of the School District’s Proportionate Share of PSERS’ Net Pension Liability and Schedule of School District Contributions to the
PSERS Pension Plan	62

Schedule of the School District’s Proportionate Share of PSERS Net OPEB Liability and Schedule of School District Contributions to the PSERS
Premium Assistance	63

Schedule of Changes in the School District’s Total OPEB Liability for its
Retiree Plan	64

Notes to Required Supplementary Schedules	65

Supplementary Information:

Schedule of Expenditures of Federal Awards	69

Notes to Schedule of Expenditures of Federal Awards	70

Independent Auditor’s Reports Required by the Uniform Guidance:

Independent Auditor’s 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	71

SHALER AREA SCHOOL DISTRICT

YEAR ENDED JUNE 30, 2019

TABLE OF CONTENTS

(Continued)

Independent Auditor’s Report on Compliance for Each Major Program and
on Internal Control over Compliance Required by the Uniform Guidance	73

Schedule of Findings and Questioned Costs	76

Summary Schedule of Prior Audit Findings	77

Independent Auditor’s Report

Board of Directors	Report on the Financial Statements Shaler Area School District
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Shaler Area School District (School District), as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the School District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Pursuing the profession while promoting the public good© www.md‐cpas.com

Pittsburgh | Harrisburg | Butler State College | Erie | Lancaster

Board of Directors
Shaler Area School District Independent Auditor’s Report Page 2

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the School District, as of June 30, 2019, and the respective changes in its financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison, pension information, and other postemployment benefits information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.	We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School District’s basic financial statements.	The supplementary information as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.

The supplementary information as listed in the table of contents and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements.

Board of Directors
Shaler Area School District Independent Auditor’s Report Page 3

Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information as listed in the table of contents and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated January 24, 2020 on our consideration of the School District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely 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 effectiveness of the School District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District’s internal control over financial reporting and compliance.

Pittsburgh, Pennsylvania January 24, 2020

Shaler Area School District Management’s Discussion and Analysis June 30, 2019

The Management’s Discussion and Analysis (MD&A) of Shaler Area School District’s (School District) financial performance provides an overall review of the School District’s financial activities for the fiscal year ended June 30, 2019.	The intent of this MD&A is to look at the School District’s financial performance as a whole.	Readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District’s financial performance.

The MD&A is an element of the reporting model adopted by the Government Accounting Standards Board (GASB) in their Statement No. 34, “Basic Financial Statements - and Management’s Discussion and Analysis - for the State and Local Governments.”	Certain comparative information between the current year and the prior year is required to be presented in the MD&A.

Financial Highlights

The School District realized more favorable results than originally estimated as the School District budgeted for a loss of $2.8 million.	At year-end, the total General Fund balance decreased $0.2M from the previous year’s $11.5 million to $11.3 million.

Several practices had been implemented to aid the School District to operate in a fiscally prudent manner during 2016/2017, and will continue through the future fiscal years, along with additional procedures as needed.	Rising Public School Employees’ Retirement System (PSERS) costs, debt service increases, capital improvements, and flat level funding from state and federal resources are opposing forces that will be competing for financial resources in the next several years.

In summary, the 2018/2019 financial results are due to a number of items, including a strict enforcement of curtailing expenditures as in the previous three years.	As a result of the budget restrictions, there has been savings in equipment, and repairs and rentals.	In addition, the results show large savings in benefits.	The reduction of benefits included medical coverage as a result of lower rates than budgeted in addition to unemployment, workers compensation and postemployment benefits. Large reductions from budget were also recognized in the areas of transportation costs and property insurance. Overall on the revenue side, the School District experienced higher than anticipated receipts due to a number of factors.	The School District’s largest revenue source by far is derived locally at 65% of the total actual revenue.     Within the local revenue, current real estate taxes make up the largest portion, in which the School District collected $45.5 million, or 52.6% of total General Fund revenue.	Current real estate and earned income taxes along with deed transfers were higher than budgeted.     Investment income also increased during the year.

Notably, State revenue showed an increase in the State for the School District’s debt reimbursement and minimal increases in the Basic and Special Education subsidies, along with additional applied for specialty grants. Monies received from the Commonwealth of Pennsylvania make up 33% of the School District’s total revenue.	Revenue received from federal sources, earmarked for certain programs, were higher than budget by $320K due to unknown funding potential within the budget timeline.

Overall expenditures for the General Fund were approximately $0.8M less than the original budget.

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Employee benefits accounted for the largest portion of the favorable results.	Benefits decreased $499K, which is mostly attributable to medical and Social Security and other expenditures.	The required School District’s percentage cost of PSERS increased from 33.43% of payroll to 34.29% for fiscal year 2019.

The School District continued to experience a positive cash flow as it relates to its variable rate debt service issues (swaps), which assisted in lowering the overall cost of debt service obligations of the School District and added to the Debt Service Fund of the School District.

During June 2019, The School District issued Series 2019 General Obligation Bonds in the amount of $12,750,000 to be used for various capital improvements and for improvements to various School District facilities and to implement a guaranteed energy savings program pursuant to Act 57 of 1998.

In the fiscal year 2020 budgeting process, the Board of Directors did not adjust the property tax millage, it remains at 23.53 mills.

Using the Financial Statements

The Annual Audit Report consists of a financial section and a single audit section, which is issued to comply with federal guidelines as required by Government Auditing Standards and the Uniform Guidance.	Within the financial section are the MD&A (this section) and a series of financial statements and notes to those statements.	These statements are organized so that the reader can understand the School District as an entire operating entity.	The statements then proceed to provide an increasingly detailed look at specific financial activities.

The first two statements are government-wide financial statements - the statement of net position and the statement of activities.	These provide both long-term and short-term information about the School District’s overall financial status.

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

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

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

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Figure A-1 Required Components of
Shaler Area School District’s Financial Report

	Management’s Discussion and Analysis

			
	Basic Financial Statements
		Required Supplementary Information

				
Government-Wide Financial Statements
		Fund Financial Statements
		Notes to the Financial Statements

Figure A-2 summarizes the major features of the School District’s financial statements, including the portion of the School District they cover and the types of information they contain.	The remainder of this overview section of the MD&A explains the structure and contents of each of the statements.

Figure A-2
Major Features of Shaler Area School District’s Government-Wide and Fund Financial Statements

Government-Wide Statements

	Fund Statements	
Governmental Funds     Proprietary Funds	Fiduciary Funds

Scope
	Entire School District
(except fiduciary funds)
	The activities of the School District that are not proprietary or
fiduciary, such as education, administration, and community services
	Activities the School District operates similar to private business - food services
	Instances in which the School District is the trustee or agent to someone else’s resources
	
Required financial statements
	Statement of net position; statement of activities
	Balance sheet; statement of revenues, expendi-tures, and changes in fund balance
	Statement of net position; statement of revenues, expenses and changes in net position; statement of cash flows
	Statement of fiduciary net position; statement of changes in fiduciary net position
	
Accounting basis and measurement focus
	Accrual accounting and economic resources
	Modified accrual accounting and
	Accrual accounting and economic resources
	Accrual accounting and economic resources

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	focus
	current financial resources focus
	focus
	focus
	
Type of asset/liability information
	All assets and liabilities, both financial and capital, and short-term and long-term
	Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included
	All assets and liabilities, both financial and capital, and short-term and long-term
	All assets and liabilities, both short-term and long-term
	
Type of inflow/outflow information
	All revenues and expenses during the year, regardless of when cash is received or paid
	Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter
	All revenues and expenses during the year, regardless of when cash is received or paid
	All revenues and expenses during the year, regardless of when cash is received or paid

Overview of Financial Statements

Government-Wide Financial Statements

The government-wide financial statements report information about the School District as a whole using accounting methods similar to those used by private-sector companies.	The statement of net position includes all of the School District’s assets and liabilities.	All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid.

The two government-wide financial statements report the School District’s net position and how they have changed.

Net position, the difference between the School District’s assets and liabilities, is only one way to measure the School District’s financial health or position.

Over time, increases or decreases in the School District’s net position are an indication of whether its financial health is improving or deteriorating, respectively.

To assess the overall health of the School District, you need to consider additional non-financial factors, such as changes in the School District’s property tax base and the performance of the students.

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

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

Business-type activities - The School District operates a food service operation and charges fees to staff, students, and visitors to help it cover the costs of the food service operation.

Fund Financial Statements

The School District’s fund financial statements, which begin with page 3, provide detailed information about the most significant funds - not the School District as a whole.	Some funds are required by state law and bond requirements.

Governmental funds - Most of the School District’s activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination.	They are reported using an accounting method called modified accrual, which measures cash and all other financial assets that can readily be converted to cash.	The governmental fund statements provide a detailed short-term view of the School District’s operations and the services it provides.	Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the School District’s programs.     The relationship (or differences) between governmental activities (reported in the statement of net position and the statement of activities) and govern-mental funds is reconciled in the financial statements.

Proprietary funds - These funds are used to account for the School District activities that are similar to business operations in the private sector; or where the reporting is on determining net income, financial position, changes in financial position, and a significant portion of funding through user charges.	When the School District charges customers for services it provides - whether to outside customers or to other units in the School District - these services are generally reported in proprietary funds.	The Food Service Fund is the School District’s proprietary fund and is the same as the business-type activities we report in the government-wide financial statements, but provide more detail and additional information, such as cash flows.

Fiduciary funds - The School District is the trustee, or fiduciary, for some scholarship funds.	All of the School District’s fiduciary activities are reported in a separate statement of fiduciary net position on page 11.	We exclude these activities from the School District’s other financial statements, because the School District cannot use these assets to finance its operations.

Financial Analysis of the School District as a Whole

The School District’s total net position was a deficit $(132,273,434) at June 30, 2019 and a deficit $(131,283,746) at June 30, 2018.

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Table A-1
Year Ended June 30, 2019 Net Position

Governmental Activities
Assets

Business-Type
Activities	Total

Current and other assets Capital assets (net)

Total Assets

Deferred Outflows of Resources

Deferred charge on refunding

Deferred outflows of resources for pension Deferred outflows of resources for OPEBS Deferred outflows of resources for derivative

Total Deferred Outflows of Resources

Liabilities

Current and other liabilities Long-term liabilities:
Due within one year

Due in more than one year

Total Liabilities

Deferred Inflows of Resources

Deferred inflows of resources for pension Deferred inflows of resources for OPEBS

Total Deferred Inflows of Resources

Net Position

$	47,271,895	$ 73,842,329

121,114,224

1,142,292 16,269,826 2,196,152 1,196,328

20,804,598

12,054,282

4,733,503 249,619,057

266,406,842

4,264,000 3,678,186

7,942,186

393,583 23,087

416,670

----

-

259,898

--

259,898

--

-

$      47,665,478 73,865,416

121,530,894

1,142,292 16,269,826 2,196,152 1,196,328

20,804,598

12,314,180

4,733,503 249,619,057

266,666,740

4,264,000 3,678,186

7,942,186

Net investment in capital assets Restricted
Unrestricted

Total Net Position

(25,755,190) 809,170
(107,484,186)

$ (132,430,206)	$

23,087 -133,685

156,772

(25,732,103) 809,170
(107,350,501)

$ (132,273,434)

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Year Ended June 30, 2018 Net Position

Governmental Activities
Assets

Business-Type
Activities	Total

Current and other assets Capital assets (net)

Total Assets

Deferred Outflows of Resources

Deferred charge on refunding

Deferred outflows of resources for pension Deferred outflows of resources for OPEBS Deferred outflows of resources for derivative

Total Deferred Outflows of Resources

Liabilities

Current and other liabilities Long-term liabilities:
Due within one year

Due in more than one year

Total Liabilities

Deferred Inflows of Resources

Deferred inflows of resources for pension Deferred inflows of resources for OPEBS

Total Deferred Inflows of Resources

Net Position

$	36,037,150	$ 73,759,539

109,796,689

1,514,243 21,226,198 1,870,800 1,036,844

25,648,085

12,302,315

4,861,311 243,470,809

260,634,435

4,243,000 2,089,241

6,332,241

421,362 80,840

502,202

----

-

264,046

--

264,046

--

-

$      36,458,512 73,840,379

110,298,891

1,514,243 21,226,198 1,870,800 1,036,844

25,648,085

12,566,361

4,861,311 243,470,809

260,898,481

4,243,000 2,089,241

6,332,241

Net investment in capital assets Restricted
Unrestricted

Total Net Position

(28,763,188) 3,327,053
(106,085,767)

$ (131,521,902)	$

80,840 -157,316

238,156

(28,682,348) 3,327,053
(105,928,451)

$ (131,283,746)

The results of this year’s operations as a whole are reported in the statement of activities on page 2. All expenses are reported in the first column.	Specific charges, grants, revenues, and subsidies that directly relate to specific expense categories are represented to determine the final amount of the School District’s activities that are supported by other general revenues.	The two largest general

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revenues are the Basic Education Subsidy provided by the State of Pennsylvania and the local taxes (property and earned income) assessed to community taxpayers.

Table A-2 takes the information from that statement, rearranges it slightly, so you can see our total revenues for the year.

Table A-2
Year Ended June 30, 2019 Changes in Net Position

Revenues:
Program revenues:

Governmental Activities

Business-Type
Activities	Total

Charges for services
Operating grants and contributions Capital grants and contributions
General revenues: Property taxes Other taxes
Grants, subsidies/contributions, unrestricted
Investment earnings Miscellanous income

$		206,259	$ 15,777,219
457,708

46,489,368 6,177,244

13,550,936 1,754,323 388,138

934,882 966,918 -

--

-4,631 -

$         1,141,141 16,744,137 457,708

46,489,368 6,177,244

13,550,936 1,758,954 388,138

Total revenues

Expenses: Instruction
Instructional student support

Administrative and financial support services Operation of plant and maintenance services Pupil transportation
Student activities Community services Unallocated expenses Food services

Total expenses

84,801,195

53,163,311 6,469,651 6,708,726 8,156,244 4,758,160 2,129,721 102,841 4,220,845 -

85,709,499

1,906,431

--------
1,987,815

1,987,815

86,707,626

53,163,311 6,469,651 6,708,726 8,156,244 4,758,160 2,129,721 102,841 4,220,845 1,987,815

87,697,314

Change in Net Position	$	(908,304)	$	(81,384)	$	(989,688)

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Year Ended June 30, 2018 Changes in Net Position

Revenues:
Program revenues:

Governmental Activities

Business-Type
Activities	Total

Charges for services
Operating grants and contributions Capital grants and contributions
General revenues: Property taxes Other taxes
Grants, subsidies/contributions, unrestricted
Investment earnings Miscellanous income

$            183,720 15,334,012 685,007

45,700,408 5,954,348

13,392,623 1,029,851 153,987

$            949,133 1,042,277
-

--

-2,828 -

$         1,132,853 16,376,289 685,007

45,700,408 5,954,348

13,392,623 1,032,679 153,987

Total revenues

Expenses: Instruction
Instructional student support

Administrative and financial support services Operation of plant and maintenance services Pupil transportation
Student activities Community services Unallocated expenses Food services

Total expenses

82,433,956

50,350,251 6,517,005 6,852,924 7,366,717 4,628,868 2,120,686 123,581 5,793,632 -

83,753,664

1,994,238

--------
2,006,677

2,006,677

84,428,194

50,350,251 6,517,005 6,852,924 7,366,717 4,628,868 2,120,686 123,581 5,793,632 2,006,677

85,760,341

Change in Net Position	$	(1,319,708)	$	(12,439)	$	(1,332,147)

Table A-3 shows the School District’s largest functions - instructional programs, instructional student support, administrative, operation and maintenance of plant, pupil transportation, student activities, community services, interest on debt, as well as each program’s net cost (total cost less revenues generated by the activities).	This table also shows the net costs offset by the other unrestricted grants, subsidies, and contributions to show the remaining financial needs supported by local taxes and other miscellaneous revenues.

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Table A-3
Year Ended June 30, 2019 Governmental Activities

Total Cost of Services
Functions/Programs:

Net Cost of Services

Instruction
Instructional student support
Administrative and financial support services Operation of plant and maintenance services Pupil transportation
Student activities Community services Unallocated expenses

$       53,163,311 6,469,651 6,708,726 8,156,244 4,758,160 2,129,721 102,841 4,220,845

$       41,515,078 5,654,298 6,029,705 7,549,153 2,844,106 1,878,249 34,587 3,763,137

Total governmental activities	$	85,709,499	69,268,313

Less:

Grants, subsidies, and contributions not restricted	13,550,936

Total Needs from Local Taxes and

Other Revenues	$	55,717,377

Table A-4 reflects the activities of the food service program, the only business-type activities of the School District.

Table A-4
Year Ended June 30, 2019 Business-Type Activities

Total Cost of Services
Functions/Programs:

Net Cost of Services

Food Services	$	1,987,815	$	86,015

Total business-type activities	$	1,987,815	86,015

Less:

Grants, subsidies, and contributions not restricted

Total Needs from Other Revenues	$	86,015

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The statement of revenues, expenses, and changes in fund net position for this proprietary fund shown on page 8 will further detail the actual results of operations.

Fund Financial Statements

School District Funds

At June 30, 2019, the School District’s General Fund reported a fund balance of $11.3M, which is a decrease of approximately $0.2M over the prior year.

In addition to the General Fund, the School District has an active Construction, Renovation, and Repair Fund, which is part of its governmental activities.	The Construction, Renovation, and Repair Fund is used for emergency capital expenditures only.     At year-end, this fund had a balance of $380K.

The School District also has a new construction fund that was funded from the Series of 2016 bonds for various major construction additions and renovation projects.	The fund balance as of June 30, 2019 in that fund is $0.7M.

The School District also has a new construction fund that was funded from the Series of 2019 bonds for various major construction additions and renovation projects.	The fund balance as of June 30, 2019 in that fund is $14.0M.

General Fund Budget

During the fiscal year, the administration recommended that the Board of Directors authorize revisions to the original budget to accommodate actual expenditures.	These budget transfers reallocate unencumbered funds designated for one purpose to another part of the budget to be used for a different purpose.

Capital Assets and Debt Administration

Capital Assets

At June 30, 2019, the School District had net capital assets of $73,842,329 invested in a broad range of capital assets, including land, buildings, construction in progress, furniture, and equipment. This amount represents a net decrease (including additions, deletions, and depreciation) of $82,790 or approximately (4%) from last year.

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Table A-5 Governmental Activities
Capital Assets - Net of Depreciation

	2019	                               	2018	

Land
Construction in Progress Land Improvements
Buildings and Building Improvements Furniture and Equipment

$ 1,553,540 25,636,431 2,838,001 42,980,775 833,582

$ 1,553,540 23,185,604 3,075,589 44,843,322 1,101,484

Debt Administration

As of July 1, 2018, the School District included in its long-term liabilities $84,194,112 for general obligation bonds.	During the year 2018/2019, the School District made principal payments of $3,865,000 while recording accretion of interest on capital appreciation bonds in the amount of $1,773,601, and there was insurance of debt of $12,750,000 resulting in an ending balance of $94,852,713.

Table A-6 Outstanding Debt

General Obligation Bonds/Notes

Bonds - Series of 1997A Bonds - Series 2006 Bonds - Series of 2015 Bonds - Series of 2016B Bonds - Series of 2016C Bonds - Series of 2016D Bonds - Series of 2019 Notes - PNC 2014 Notes - Series of 2016A Notes - Series of 2016

As of 06/30/19

$13,326,141 21,201,572 9,960,000 20,875,000 14,030,000 2,710,000 12,750,000 $ 8,825,000 3,220,000 1,633,636

As of 06/30/18

$16,349,105 20,150,007 9,965,000 20,980,000 14,035,000 2,715,000
-$ 8,915,000
3,685,000 1,760,407

Other obligations include net pension and OPEB liabilities, accrued vacation pay and sick leave for specific employees of the School District and several capital leases for duplicating equipment and instructional equipment.	More detailed information about our long-term liabilities is included in the notes to financial statements.

Bond Rating

Standard & Poor’s (S&P) Rating

S&P Global Ratings maintained consistent with the previous fiscal year. The School District maintains an “A+” rating with a stable outlook on the School District’s Pennsylvania general obligation (GO) bonds.

xii

Future Concerns and Next Year’s Budget

There has been much discussion on the projected rate hike in the employer’s contribution of the Public School Employees’ Retirement System (PSERS), especially as it relates to the exponential growth over the past years and going into the future.	The 2018/2019 employer contribution rate to PSERS was 33.43%.	The employer contribution rate applied to salary and wages for fiscal year 2019/2020 will be 34.29%

Steps must be taken at the state level and the School District level to mitigate and manage the continual increase in rates.	If not addressed, this will have a significant impact on the fiscal structure of all school districts and the Commonwealth of Pennsylvania.

The School District is experiencing a decline in enrollment, and studies show this trend to continue in future years.	This decline will have a direct impact on staffing needs, building footprint, and other costs associated with the School District.

The School District must be aware of the special education needs of the School District and its impact on future budgets, especially with respect to the personnel costs and placement of students in private centers outside of the School District, as well as extended school year programs.

The School District will receive $2,040,755 in the state property tax reduction allocation, which is similar to the previous year’s allocation.	This translates into a $7,159 reduction in assessed valuation, which represents an approximate $168 credit on each homestead property tax bill.	It is important to note this is a revenue neutral program for the School District whereby all proceeds received by the School District are allocated to the qualified homestead properties.	There are approximately 12,000 qualified homestead properties in the School District.	It is important to note that the gaming revenue is not guaranteed and may be different amounts from year to year.

A portion of Act 1 legislation enacted in 2006 requires school districts to limit tax increases to a level set by an inflation index established by the Pennsylvania Department of Education, unless the tax increase is approved by voters in a referendum or the school district obtains, from the Department of Education or a court of common pleas, certain referendum exceptions.	The School District must adhere to this limit.	Since this index is established using several economic indices, the index for fiscal year 2019/2020 is expected to be 3.1%, which limits school districts in their ability to raise millage for ongoing budgetary commitments.	In addition, the Pennsylvania legislature in 2011 narrowed the list of cost exceptions a school district can request to the Pennsylvania Department of Education to three areas: Pennsylvania school employees’ retirement costs; special education; and debt service.	The Board of Directors has voted to not raise taxes beyond the Act 1 index for 2019/2020, as they have done in previous years.

Developing a Fiscally Astute Organization

The administration will continue to focus on cultivating an organization that inspires fiscal responsibility and incorporates operational efficiencies.	In addition, close scrutiny to expenditures and discovering new and innovative additional revenue streams will be essential in attaining fiscal health.

xiii

The lack of state and federal funding for education for the 2018/2019 school year is a situation that continues.

The comparison of revenue and expenditures categories is as follows:

Table A-7

Budgeted Revenues 2020/2019

Actual Revenues 2018/2019

Local State
Federal/Other

64.8%                                             65.64% 32.4%                                             33.10% 2.8%                                                  1.3%

Budgeted Expenditures 2019/2020

Actual Expenditures 2018/2019

Instruction Support Services
Noninstructional/Other Fund Transfers/Debt

59.6%                                               60.8% 30.1%                                               28.7% 1.9%                                                  1.9% 8.4%                                                  8.6%

Contacting the School District Financial Management

Our financial report is designed to provide our citizens, taxpayers, parents, students, investors, and creditors with a general overview of the School District’s finances and to show the Board of Directors’ accountability for the money it receives.	If you have questions about this report or wish to request additional information, please contact Sherri L. Ludwig, Director of Business Affairs at Shaler Area School District, 1800 Mt. Royal Boulevard, Glenshaw, PA, 15116, 412-492-1200, Ext. 2807.

xiv

SHALER AREA SCHOOL DISTRICT

STATEMENT OF NET POSITION

JUNE 30, 2019

Governmental Activities
Assets

Business-Type
Activities	Total

Cash and cash equivalents Restricted cash and cash equivalents Taxes receivable, net Intergovernmental receivables Other receivables
Inventory
Derivative investment
Long term prepayments, net of amortization Capital assets:
Non-depreciable
Depreciable, net of accumulated depreciation

$	16,220,797	$ 15,002,543
8,283,791 6,089,723 11,293
-30,112
1,633,636

27,189,971 46,652,358

187,924 --
121,005 39,313 45,341 -
-

-23,087

$      16,408,721 15,002,543 8,283,791 6,210,728 50,606
45,341 30,112 1,633,636

27,189,971 46,675,445

Total Assets

Deferred Outflows of Resources

Deferred charge on refunding

Deferred outflows of resources for pension Deferred outflows of resources for OPEB Deferred outflows of resources for derivative

Total Deferred Outflows of Resources Liabilities
Accounts payable and other current liabilities Accrued salaries and benefits
Internal balances Accrued interest payable Unearned revenue Other current liabilities Non-current liabilities:
Due within one year

Due in more than one year

Total Liabilities

Deferred Inflows of Resources

Deferred inflows of resources for pension Deferred inflows of resources for OPEB

Total Deferred Inflows of Resources Net Position
Net investment in capital assets Restricted
Unrestricted

Total Net Position

121,114,224

1,142,292 16,269,826 2,196,152 1,196,328

20,804,598

2,509,006 8,627,584 36,832 854,320
-26,540

4,733,503 249,619,057

266,406,842

4,264,000 3,678,186

7,942,186

(25,755,190) 809,170
(107,484,186)

$ (132,430,206)	$

416,670

----

-

237,423 -
(36,832) -
59,307 -

--

259,898

--

-

23,087 -133,685

156,772

121,530,894

1,142,292 16,269,826 2,196,152 1,196,328

20,804,598

2,746,429 8,627,584 -
854,320 59,307 26,540

4,733,503 249,619,057

266,666,740

4,264,000 3,678,186

7,942,186

(25,732,103) 809,170
(107,350,501)

$ (132,273,434)

The accompanying notes are an integral part of these financial statements.

1

SHALER AREA SCHOOL DISTRICT STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2019

Program Revenues	Net (Expense) Revenue and Change in Net Position Operating                        Capital

Charges for

Functions/Programs	Expenses	Services

Grants and

Contributions

Grants and

Contributions

Governmental

Activities

Business-Type

Activities	Total

Governmental Activities: Instruction
Instructional student support

Administrative and financial support services Operation of plant and maintenance services Pupil transportation
Student activities Community services
Unallocated expenses - excluding direct expenses reported as a function above:
Interest on long-term debt

$       53,163,311 6,469,651 6,708,726 8,156,244 4,758,160 2,129,721 102,841

4,220,845

$     206,259 ------

-

$ 11,441,974         $ 815,353 679,021 607,091
1,914,054 251,472 68,254

-

-------

457,708

$     (41,515,078)        $ (5,654,298) (6,029,705) (7,549,153) (2,844,106) (1,878,249)
(34,587)

(3,763,137)

-	$       (41,515,078) -                    (5,654,298) -                    (6,029,705) -                    (7,549,153) -                    (2,844,106) -                    (1,878,249) -                          (34,587)

-	(3,763,137)

Total governmental activities

Business-Type Activities:

Food service

85,709,499

1,987,815

206,259

934,882

15,777,219

966,918

457,708

-

(69,268,313)

-

-

(86,015)

(69,268,313)

(86,015)

Total Primary Government	$	87,697,314	$ 1,141,141	$ 16,744,137	$	457,708	(69,268,313)	(86,015)	(69,354,328)

General revenues: Taxes:
Property taxes, levied for general purposes, net of uncollectibles Earned income taxes
Other taxes levied for general purposes

Grant subsidies and contributions not restricted Investment income
Miscellaneous income (expense)

Total general revenues

Change in Net Position

Net Position:

Beginning of year

46,489,368 5,532,042 645,202 13,550,936 1,754,323 388,138

68,360,009

(908,304)

(131,521,902)

----
4,631 -

4,631

(81,384)

238,156

46,489,368 5,532,042 645,202 13,550,936 1,758,954 388,138

68,364,640

(989,688)

(131,283,746)

End of year	$ (132,430,206)	$	156,772	$ (132,273,434)

The accompanying notes are an integral part of these financial statements.

2

SHALER AREA SCHOOL DISTRICT

BALANCE SHEET GOVERNMENTAL FUNDS

JUNE 30, 2019

General Fund
Assets

Capital Projects

Other Governmental
Funds	Total

Cash and cash equivalents Taxes receivable, net
Due from other governments Due from other funds
Other receivables

Total Assets

Liabilities, Deferred Inflows of Resources, and Fund Balance

$ 13,504,845 8,283,791 6,089,723 270,673 11,293

$ 28,160,325

$ 16,909,325	$ -
-30,729 -

$ 16,940,054	$

809,170 ----

809,170

$ 31,223,340 8,283,791 6,089,723 301,402 11,293

$ 45,909,549

Liabilities: Accounts payable
Accrued salaries and benefits Other current liabilities
Due to other funds

$          964,855 8,627,584 26,540
67,561

$      1,544,151	$ -
-270,673

-	$	2,509,006 -                8,627,584 -                      26,540 -                    338,234

Total Liabilities

Deferred Inflows of Resources: Unavailable revenue - real estate taxes

Fund Balance: Restricted Committed Assigned Unassigned

Total Fund Balance

Total Liabilities, Deferred Inflows of Resources, and Fund Balance

9,686,540

7,164,508

--
5,526,235 5,783,042

11,309,277

$ 28,160,325

1,814,824

-

14,741,892 383,338
--

15,125,230

$ 16,940,054	$

-

-

809,170 ---

809,170

809,170

11,501,364

7,164,508

15,551,062 383,338 5,526,235 5,783,042

27,243,677

$ 45,909,549

The accompanying notes are an integral part of these financial statements.

3

SHALER AREA SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION

YEAR ENDED JUNE 30, 2019

Total Fund Balance - Governmental Funds	$	27,243,677

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds.

Property taxes receivable received after 60 days are not considered available soon enough to pay for the current year's expenditures and, therefore, are reported as unavailable in the funds.

The net investment in joint venture is not an available resource and, therefore, is not reported in the funds.

Derivative investments are not available resources and, therefore, are not reported in governmental funds.

The actuarially accrued other post-employment benefit (OPEB) liability, net pension liability, and deferred inflows and outflows of resources for pension for the School District's employees are not recorded on the fund financial statements.

73,842,329

7,164,508

1,633,636

30,112

(124,617,088)

Long-term liabilities are not due and payable in the current year and, therefore, are not reported as liabilities in the funds. Also, governmental funds report the effect of deferred charge on refunding when debt is first issued, whereas this amount is a deferred outflow and amortized in the statement of activities. Long-term liabilities at year-end consist of:

Bonds payable Notes payable
Deferred refunding loss Accrued interest payable Capital leases
Unamortized discount/premium Compensated absences

$ (94,852,713) (13,678,636)
1,142,292 (854,320) (238,304)
(8,345,686)
(900,013)	(117,727,380)

Total Net Position - Governmental Activities	$ (132,430,206)

The accompanying notes are an integral part of these financial statements.

4

SHALER AREA SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS

YEAR ENDED JUNE 30, 2019

Other General	Capital	Governmental

Revenues: Local sources State sources
Federal sources

Total revenues

Expenditures: Current:
Instruction Support services
Operation of non-instructional services Capital outlay
Debt service:

Principal and interest

Total expenditures

Excess (Deficiency) of Revenues over Expenditures

Other Financing Sources (Uses): Proceeds from bond issue Bond premium
Refund of prior year's expenditures Refund of prior year's revenues Transfers in
Transfers out

Total other financing sources (uses)

Net Change in Fund Balance

Fund Balance: Beginning of year

End of year

Fund

$        54,858,725 27,825,040 1,040,225

83,723,990

49,958,864 24,930,476 1,980,827 -

197,942

77,068,109

6,655,881

--
259,626 (7,704)
-(7,111,634)

(6,859,712)

(203,831)

11,513,108

$	11,309,277

Projects

$	65,980	$

65,980

107,285

3,014,686

3,121,971

(3,055,991)

12,750,000 2,359,825

15,109,825

12,053,834

3,071,396

$	15,125,230	$

Funds

315,614	$ -
-

315,614

--
11,447 -

7,238,930

7,250,377

(6,934,763)

----
7,111,634 -

7,111,634

176,871

632,299

809,170	$

Total

55,240,319 27,825,040 1,040,225

84,105,584

49,958,864 25,037,761 1,992,274 3,014,686

7,436,872

87,440,457

(3,334,873)

12,750,000 2,359,825 259,626
(7,704) 7,111,634
(7,111,634)

15,361,747

12,026,874

15,216,803

27,243,677

The accompanying notes are an integral part of these financial statements.

5

SHALER AREA SCHOOL DISTRICT

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

YEAR ENDED JUNE 30, 2019

Net Change in Fund Balance - Governmental Funds

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

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current year:

Capital asset additions Less: depreciation expense

Some taxes and state grants will not be collected for several months until after the School District's year-end; they are not considered "available" revenues in the governmental funds. The unavailable revenue changed by this amount during the year.

The change in net investment in joint venture is not reported as revenue (expense) in the governmental funds.

The issuance of long-term obligations (e.g., bonds, leases, loans) provides current financial resources to governmental funds, while the repayment of the principal of long-term obligations consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term obligations and related items.

Interest on long-term obligations in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, interest expense is recognized as the interest accrues, regardless of when it is due. The difference between interest accrued in the statement of activities over the amount due is shown here.

In the statement of activities, certain operating expenses (compensated absences, other postemployment benefits, and pension benefits) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used. This amount represents the difference between the amount earned versus the amount used.

Change in Net Position of Governmental Activities

$	 2,629,683 (2,546,893)

$	12,026,874

82,790

(370,323)

814,012

(11,816,684)

(77,114)

(1,567,859)

$	(908,304)

The accompanying notes are an integral part of these financial statements.

6

SHALER AREA SCHOOL DISTRICT

STATEMENT OF NET POSITION PROPRIETARY FUND

JUNE 30, 2019

Enterprise Fund Food Service
Assets

Current assets:

Cash and cash equivalents Due from other funds
Due from other governments Other receivables Inventories

Total current assets

Non-current assets:

Furniture and equipment, net

Total Assets

Liabilities and Net Position

Liabilities: Accounts payable
Unearned revenue

Total Liabilities

Net Position:

Net investment in capital assets Unrestricted

Total Net Position

Total Liabilities and Net Position

$             187,924 36,832
121,005 39,313 45,341

430,415

23,087 $	453,502

$             237,423 59,307

296,730

23,087 133,685

156,772

$	453,502

The accompanying notes are an integral part of these financial statements.

7

SHALER AREA SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUND

YEAR ENDED JUNE 30, 2019

Enterprise Fund Food Service

Operating Revenues:

Food service revenue	$	934,882

Operating Expenses: Other purchased services Supplies
Depreciation

Total operating expenses

Net Operating Loss

Non-Operating Revenues: Earnings on investments Local sources
State sources Federal sources
Gain (loss) on disposal of capital assets

Total non-operating revenues

Change in Net Position

Net Position: Beginning of year

End of year

1,820,577 109,485 9,223

1,939,285

(1,004,403)

4,631

75,612 891,306
(48,530)

923,019

(81,384)

238,156

 $	156,772 

The accompanying notes are an integral part of these financial statements.

8

SHALER AREA SCHOOL DISTRICT

STATEMENT OF CASH FLOWS PROPRIETARY FUND

YEAR ENDED JUNE 30, 2019

Cash Flows From Operating Activities: Receipts from users
Payments to suppliers

Net cash provided by (used in) operating activities

Cash Flows From Noncapital Financing Activities: Local sources
State sources Federal sources

Net cash provided by (used in) financing activities

Cash Flows From Investing Activities: Interest income

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents: Beginning of year

Enterprise Fund Food Service

$		942,269 (1,806,560)

(864,291)

22,662 74,353 771,423

868,438

4,631

8,778

179,146

End of year	$	187,924

(Continued)

The accompanying notes are an integral part of these financial statements.

9

SHALER AREA SCHOOL DISTRICT

STATEMENT OF CASH FLOWS PROPRIETARY FUND

YEAR ENDED JUNE 30, 2019 (Continued)

Reconciliation of Net Operating Loss to Net Cash Provided by (Used in) Operating Activities:
Net operating loss

Adjustments to reconcile net operating loss to

net cash provided by (used in) operating activities: Donated commodities expense
Depreciation

Change in assets and liabilities: Due from other funds
Other receivables Inventories Accounts payable Unearned revenues

Net cash provided by (used in) operating activities

$	(1,004,403)

101,604 9,223

(9,523) 12,364
(6,240) 28,138
4,546

$	(864,291)

(Concluded)

Non-Cash Financing Transaction:

The Food Service Fund received donated commodities from the U.S. Department of Agriculture in the amount of $105,944 during the year.

The accompanying notes are an integral part of these financial statements.

10

SHALER AREA SCHOOL DISTRICT

STATEMENT OF NET POSITION FIDUCIARY FUNDS

JUNE 30, 2019

Private Purpose

Trust Fund	Agency Fund Assets

Cash and cash equivalents	$	256,356	$	465,450

Liabilities

Accounts payable Other current liabilities

Total Liabilities

45,215                                      --                         465,450

45,215	465,450

Net Position

Restricted for scholarships	$	211,141	$	-

The accompanying notes are an integral part of these financial statements.

11

SHALER AREA SCHOOL DISTRICT

STATEMENT OF CHANGES IN NET POSITION FIDUCIARY FUNDS

YEAR ENDED JUNE 30, 2019

Private Purpose

Additions:

Gifts and contributions Investment earnings

Total additions

Trust Fund

$                 37,533 2,414

39,947

Deductions: Scholarships awarded

Change in Net Position

Net Position: Beginning of year

46,089

(6,142)

217,283

End of year	$	211,141

The accompanying notes are an integral part of these financial statements.

12

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

1.	Summary of Significant Accounting Policies

Shaler Area School District (School District), located in Allegheny County, Pennsylvania, provides public education, kindergarten through twelfth grade, to the residents of the Boroughs of Etna and Millvale and the Townships of Reserve and Shaler.

The financial statements are prepared in accordance with the accounting system and procedures prescribed for school districts by the Commonwealth of Pennsylvania, Department of Education, which conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The following is a summary of the significant accounting policies:

Reporting Entity

The School District is a public school system operating under the authority of the Pennsylvania School Code of 1949 and is governed by an elected nine-member Board of Directors (Board). The criteria set forth by the Governmental Accounting Standards Board (GASB) are followed by the School District to determine which governmental organizations should be included or excluded from the reporting entity. Criteria for inclusion of any entity (component unit) into a primary governmental unit’s financial statements include but are not limited to legal standing, fiscal dependency, imposition of will, financial benefit or burden, and appointment of a voting majority of the governing Board. The School District presently has no component units that meet the above criteria.

Government-Wide Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the School District.	Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

The statement of net position presents the financial condition of the governmental and business-type activities of the School District at year-end.	The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.	Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted

13

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not considered program-related revenues are reported as general revenues.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements.

Fund Financial Statements

The School District segregates transactions related to certain School District functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the School District at this more detailed level.	The focus of governmental fund financial statements is on major funds.	Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. The fiduciary fund is reported by type. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements.

Measurement Focus, Basis of Accounting, and Financial Statement Presentation

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

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.	Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School District considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.	However, debt service expenditures, as well as expenditures related to pensions, other post-employment benefits, compensated absences and claims and judgments, are recorded only when payment is due. General capital asset acquisitions are

14

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

reported as expenditures in governmental funds.	Issuance of long-term debt and acquisitions under capital leases are reported as other financing sources.

State and federal grants and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period.

Deferred inflows of resources reported on the governmental funds balance sheet arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. In subsequent periods, when both revenue recognition criteria are met, the unavailable revenue is removed as a deferred inflow of resources and the revenue is recognized.

Unearned revenues arise when resources are received by the School District before it has legal claim to them, such as when intergovernmental funds are received prior to the occurrence of qualifying expenditures. During subsequent periods, when the School District has a legal claim to the resources, the unearned revenue is removed as a liability and the revenue is recognized.

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the School District’s Food Service Fund are charges to customers for the sale of food. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets.	All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Fund Accounting

The School District uses funds to maintain its financial records during the fiscal year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. Funds are classified into three categories: governmental, proprietary, and fiduciary. Each category, in turn, is divided into separate "fund types" as follows:

15

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Governmental Funds:

The School District reports the following major governmental funds:

The General Fund is the School District’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The Capital Projects Fund accounts for the acquisition and construction of the government’s major capital facilities or equipment, other than those financed by proprietary funds.

Additionally, the School District reports the following other governmental funds:

The Debt Service Fund accounts for the resources accumulated and payments made for principal and interest on long-term obligation debt of the governmental funds.

Proprietary Funds:

The School District reports the following nonmajor proprietary fund:

The Food Service Fund is authorized under Section 504 of the Public School Code of 1949 to account for all revenues and expenses pertaining to cafeteria operations and is presented as a major fund. The Food Service Fund is utilized to account for operations that are financed and operated in a manner similar to private business enterprises where the stated intent is that the costs of providing goods or services to the students on a continuing basis are financed or recovered primarily through user charges and government subsidies.

Fiduciary Funds:

Fiduciary funds are used to report assets held in a trustee or agency capacity for others and are therefore not available to support School District programs. The reporting focus is on net position and changes in net position. The School District's fiduciary funds are presented in the fiduciary fund financial statements by type (pension, private purpose, or agency).

The Private Purpose Trust Fund is used to account for resources contributed to the School District for scholarships. The various scholarship funds are considered private purpose trust funds.

16

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

The School District’s Agency Fund is used to account for assets held by the School District in a trustee capacity for student activities. They are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.

Budgets and Budgetary Accounting

The Board approves, prior to the beginning of each fiscal year, an annual budget on the modified accrual basis for the General Fund, as required by state law.

The School District follows these procedures for establishment of its annual budget:

1. Prior to May of the preceding fiscal year, the School District prepares a budget for the next succeeding fiscal year beginning July 1. The operating budget includes proposed expenditures and the means of financing them.

2. At least 20 days prior to the date set for budget adoption, the budget is made available for public inspection.

3. A meeting of the Board is then called for the purpose of adopting the proposed budget. This meeting may only be held after 10 days of public notification.

4. Prior to July 1, the budget is legally enacted through passage of a resolution by the Board.

5. The budget must be filed with the Commonwealth of Pennsylvania, Department of Education by July 15 of the fiscal year or within 30 days of adoption.

The Public School Code allows the Board to authorize budget transfer amendments between functions and objects during the year. The budget data reflected in the required supplementary information includes the effect of such approved budget transfer amendments and, for comparative purposes, the actual results have also been presented. The level of budgetary control is at the object level within each function and fund. Function is defined as a program area such as instructional services, and object is defined as the nature of the expenditure such as salaries or supplies.

Annual appropriations lapse at year-end. No supplemental appropriations were required during the current fiscal year.

17

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Budgetary control for other governmental funds is maintained through enforcement of the related grant provisions or through provisions of various debt agreements.

Deposits and Investments

For the purposes of the statement of cash flows, the School District’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition and pooled funds investments subject to daily withdrawal.

Investments are stated at fair value except that treasury and agency obligations that have a remaining maturity at the time of purchase of one year or less are shown at amortized cost. The School District categorizes its fair value measurements within the fair value hierarchy. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to/from other funds.” Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as “internal balances.”

All tax receivables are shown net of an allowance for uncollectible amounts.

Property taxes are levied as of July 1 on property values assessed as of the same date. The billings are considered past due on November 1, and penalties and interest are assessed.

Inventory and Prepaid Items

Textbooks and library books are recorded as instructional expenditures of the General Fund when purchased and recorded as capital assets in the government-wide financial statements.

Inventories of the Food Service Fund, consisting of food and paper supplies, are carried at cost using the first-in, first-out method. Federal donated commodities are valued at their fair market value as determined by the U.S. Department of Agriculture at the date of donation.

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

Capital Assets

Capital assets, which include property, plant, and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements.	Capital assets are defined by the School District as assets with an initial, individual cost of more than $5,000. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets, as applicable. Donated capital assets are recorded at estimated acquisition value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.

Property, plant, and equipment of the School District are depreciated using the straight-line method over the following estimated useful lives:

	Assets	          	Years	

Buildings	30 - 50 Building improvements                       20 Vehicles                                              5 - 10 Office equipment                              3 - 20 Computer equipment                       5 - 10 Food service equipment                   6 - 12 Text and library books                      5 - 10

Compensated Absences

The School District accrues for certain accumulated employee benefits, such as unpaid vacation, sick pay, and retirement lump sum payments. The amount of the accrual is based on the vacation, sick, and retirement lump-sum payments, which are expected to be paid to employees upon their termination or retirement from the School District.	The entire

19

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

accumulated employee benefits liability is reported on the government-wide financial statements.

For governmental funds, the current portion of unpaid accumulated employee benefits is the amount of early retirement and severance pay expected to be paid using expendable available resources within the next fiscal year.

Long-Term Obligations

In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts are deferred and amortized over the life of the related bonds. Bonds are reported net of the applicable bond premium or discount.

The governmental fund financial statements recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures in the year incurred.

Postemployment Benefits

In	the	government-wide	financial	statements,	long-term	liabilities	related	to postemployment benefits, including pensions, health insurance, and life insurance, are calculated based on actuarial valuations as described in Notes 9, 10, and 11.

Refunding Transactions

In accordance with applicable guidance, the excess of the reacquisition price over the net carrying amount of refunded debt is recorded as a deferred outflow of resources on the statements of net position and amortized as a component of interest expense over the shorter of the term of the refunding issue or the refunded bonds.

Deferred Inflows and Outflows of Resources Related to Pensions and Other Post-Employment Benefits (OPEB)

In conjunction with pension and OPEB accounting requirements, differences between expected and actual experience, changes in assumptions, the effect of the change in the

20

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

School District’s proportion, the net difference between expected and actual investment earnings, and payments made to the plans subsequent to the measurement date are recorded as a deferred inflow or outflow of resources related to pensions or OPEBs on the government-wide financial statements. These amounts are determined based on actuarial valuation performed for each plan. Notes 9 through 11 presents additional information about the School District’s pension and OPEB plans.

Fund Balance

In the fund financial statements, governmental funds report fund balance in categories based on the level of restriction placed upon the funds. These levels are as follows:

 Nonspendable – This category represents funds that are not in spendable form and includes such items as prepaid expenditures and long-term interfund advances.

 Restricted – This category represents funds that are limited in use due to constraints on purpose and circumstances of spending that are legally enforceable by outside parties. Fund balance is restricted at June 30, 2019 for future capital projects and purchases of the School District through bond indentures.

 Committed – This category represents funds that are limited in use due to constraints on purpose and circumstances of spending imposed by the Board. Such commitment is made via a Board resolution and must be made prior to the end of the fiscal year. Removal of this commitment requires a Board resolution. Fund balance was committed at June 30, 2019 within the Capital Reserve Fund for future capital needs of the School District.

 Assigned – This category represents intentions of the Board to use the funds for specific purposes.	Such assignment is made by the Director of Finance and Operations, but approval is obtained from the Board for all such assignments. Fund balance is assigned in the amount of $1.7 million for future retirement costs, and $3.9 million for the fiscal year 2020 budget.

 Unassigned – This category represents all other funds not otherwise defined.

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

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Net Position

The government-wide and proprietary fund financial statements are required to report three components of net position:

Net investment in capital assets - The net investment in capital assets component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position. If there are significant unspent related debt proceeds or deferred inflows of resources at the end of the reporting period, the portion of the debt or deferred inflows of resources attributable to the unspent amount is not included in the calculation of net investment in capital assets. Instead, that portion of the debt or deferred inflow of resources is included in the same net position component (restricted or unrestricted) as the unspent amount.

Restricted - The restricted component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Generally, a liability relates to restricted assets if the asset results from a resource flow that also results in the recognition of a liability or if the liability will be liquidated with the restricted assets reported. As of June 30, 2019, net position was restricted for future capital purchases and projects.

Unrestricted - The unrestricted component of net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted components of net position.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Adoption of Accounting Pronouncements

The following Governmental Accounting Standards Board (GASB) statements were adopted for the year ended June 30, 2019:	Statement Nos. 83 (Certain Asset Retirement Obligations) and 88 (Certain Debt Disclosures related to Debt, including Direct Borrowings and Direct Placements). These statements had no significant impact on the School District’s financial statements for the year ended June 30, 2019.

Pending Pronouncements

GASB has issued several standards that will become effective in future years, including Statement Nos. 84 (Fiduciary Activities), 87 (Leases), 89 (Accounting for Interest Costs before the End of a Construction Period), 90 (Majority Equity Interests—an amendment of GASB Statements No. 14 and No. 61), and 91 (Conduit Debt Obligations). Management has not yet determined the impact of these statements on the School District’s financial statements.

2.	Cash and Cash Equivalents

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

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

Deposits in savings accounts or time deposits or share accounts of institutions insured by Federal Deposit Insurance Corporation to the extent that such accounts are so insured and, for any amounts above the insured maximum, provided that approved collateral, as provided by law, is pledged by the depository.

In March 2016, Act 10 was passed which expanded the scope of investment options available to school districts including repurchase agreements, commercial paper, negotiable certificates of deposit, and banker’s acceptances. The School District elected

23

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

to maintain its current investment policy due to the additional risk and oversight associated with the expanded investment options under Act 10.

The deposit and investment policy of the School District adheres to state statutes and prudent business practices. Deposits of the governmental funds are either maintained in demand deposits or savings accounts, certificates of deposit, or cash equivalents held by a Trustee of the School District. There were no deposits or investments made during the year which violated either the state statutes or the policy of the School District.

The following is a description of the School District’s deposit and investment risks:

Credit Risk. The risk that an issuer or other counterparty to an investment will not fulfill its obligations is called credit risk. The majority of the School District’s investments are held in U.S. Government Obligations and are therefore not exposed to this type of risk. These include investments in Pennsylvania School District Liquid Asset Fund (PSDLAF) and the Pennsylvania Local Government Investment Trust (PLGIT) (described below), which have received AAA ratings from Standard & Poor’s.

Investments

PSDLAF and PLGIT were established as a common law trust organized under laws of the Commonwealth of Pennsylvania (Commonwealth).	Shares of the funds are offered to certain Pennsylvania school districts, intermediate units, area vocational-technical schools, and municipalities. The purpose of these funds is to enable such governmental units to pool available funds for investment in instruments authorized by Section 440.1 of the Pennsylvania Public School Code of 1949, as amended. The School District's deposits in these pooled funds are not subject to direct custodial credit risk because they are not evidenced by securities that exist in physical or book entry form. These investments are reflected as cash and cash equivalents on the balance sheet and the statement of net position. The fair value of the School District’s position in the external investment pools is the same as the value of the pool shares, and the funds measure their assets (for financial reporting purposes) at amortized cost, and maintain a stable net asset value of $1 per share. All investments in an external investment pool that is not SEC-registered are subject to oversight by the Commonwealth. The School District can withdraw funds from the external investment pools. However, there are certain limitations placed on the following withdrawals: for PLIGT-Class accounts, there is a one-day holding period; for PLGIT/PLUS-Class accounts, there is a 30-day holding period for each deposit and a penalty for early withdrawals; for PLGIT/I-Class there is a limit of two redemptions or exchanges per month.

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

The PSDLAF funds have weekly liquidity and are fully collateralized by a Federal Home Loan Bank letter of credit.

The School District’s pooled investment funds consist mainly of the above-noted PSDLAF and PLGIT accounts. The School District’s PSDLAF and PLGIT investments have a maturity of less than 90 days. The School District's investments at June 30, 2019 consisted of:

Fair Value	Book Value

Pooled investment funds: PSDLAF
PLGIT
Bank of New York Mellon Pooled Funds Other

$       28,476,296 3,393,256 809,170 125,215
$	32,803,937

$      27,807,349 3,393,256 809,170 123,295
$	32,133,070

As of June 30, 2019, all investments had a maturity of less than one year.

As further described in Note 12, the School District also has derivative instruments that are accounted for as investments. Investment risks related to these investments are described in that note.

3.	Real Estate Taxes

Real estate taxes are levied each July 1 on the assessed value listed as of the prior January 1 for all real estate located in the School District. These taxes are billed and collected by each municipality served by the School District. Taxes paid through August 31st are given a 2% discount. Amounts paid after October 31st are assessed a 10% penalty. An outside service collects delinquent real estate taxes and handles the property liens. The lien filing date for the levy is July 1 of the following year.

The tax rate assessed for the year ended June 30, 2019 was 23.53 mills. General Fund property taxes receivables have been reported net of an allowance for doubtful accounts of approximately $2.4 million at June 30, 2019.

There is an appeal process through which a taxpayer may contest the assessed value of their property. This process could result in the reduction of future assessed values and consequently a loss of tax revenues. There are outstanding appeals at June 30, 2019, the

25

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

results of which have yet to be determined.	The revenue recorded in the financial statements reflects the estimated amount of net real estate tax revenue for the year.

4.	Capital Assets

A summary of changes in capital assets during fiscal year 2019 for governmental activities is as follows:

Governmental Activities:
Capital assets, not being depreciated:

Balance at
	July 1, 2018	 	Additions	

Deletions/
	Transfers	

Balance at
 June 30, 2019 

Land	$	1,553,540	$	-	$	-	$	1,553,540

Construction in progress

Total capital assets, not being depreciated

Capital assets, being depreciated: Site improvements
Building and improvements Furniture and equipment

Total capital assets, being depreciated

Less: accumulated depreciation for: Site improvements
Building and improvements Furniture and equipment

Total accumulated depreciation Capital assets being depreciated, net
Governmental activities capital assets, net

	23,185,604 

	24,739,144 

11,579,718 99,341,183
	5,612,198 

	116,533,099 

(8,504,129) (54,497,861)
	(4,510,714) 

	(67,512,704) 

	49,020,395 

 $	73,759,539 

	2,450,827  	- 

	2,450,827  	- 

5,590                                -22,660                                -
	150,606  	- 

	178,856  	- 

(243,178)                              -(1,885,207)                              -
	(418,508)  	- 

	(2,546,893)  	- 

	(2,368,037)  	- 

 $	82,790   $	- 

	25,636,431 

	27,189,971 

11,585,308 99,363,843
	5,762,804 

	116,711,955 

(8,747,307) (56,383,068)
	(4,929,222) 

	(70,059,597) 

	46,652,358 

 $	73,842,329 

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

A summary of changes in capital assets during fiscal year 2019 for business-type activities is as follows:

Balance at July 1, 2018

Business-Type Activities:

Balance at Additions	Deletions	June 30, 2019

Capital assets, being depreciated: Machinery and equipment

Less: accumulated depreciation for: Machinery and equipment

Business-type activities capital assets, net

$	620,789	$

(539,949)

$	80,840	$

-

(9,223)

(9,223)

$	(305,736)	$

257,206

$	(48,530)	$

315,053

(291,966)

23,087

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

Governmental Activities: Instructional services:
Regular instruction Support services:
Pupil personnel Administration
Operation of plant and maintenance services Non-instructional services:

$	2,074,635

84,703 74,604 110,554

Student activities

Business-type Activities: Food service

	202,397 

 $	2,546,893 

 $	9,223 

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

5.	Long-Term Obligations

Changes in Long-Term Obligations

Changes in the School District’s long-term liabilities for the year ended June 30, 2019 were as follows:

Bonds Payable: Series of 1997 A Series of 2006 Series of 2015 Series of 2016B Series of 2016C Series of 2016D Series of 2019

Unamortized discount Unamortized premium

Net bonds payable

GO Notes:

Beattie Loan 2016

Series of 2013 - Direct Borrowing Series of 2016A

Total GO Notes

Capital Leases Derivative Investments Employee Benefits:
Net PSERS pension liability Net PSERS OPEB liability Net local OPEB liability Compensated absences

Net Employee Benefits

Balance at	Balance at	Amounts Due

	July 1, 2018	 	Additions	 	Accretion      	Deletions	      June 30, 2019   Within One Year 

$      16,349,105       $                              $      722,036       $ (3,745,000)      $      13,326,141       $         3,745,000 20,150,007                                            1,051,565                                -               21,201,572                                   -9,965,000                                                            -                     (5,000)                9,960,000                          5,000 20,980,000                                                            -                 (105,000)              20,875,000                      100,000 14,035,000                                                            -                     (5,000)              14,030,000                          5,000 2,715,000                                                            -                     (5,000)                2,710,000                          5,000
	-  	12,750,000  	-  	-  	12,750,000  	5,000 

	84,194,112  	12,750,000  	1,773,601  	(3,865,000)  	94,852,713  	3,865,000 

(106,318)	-	29,586	(76,732)	-

	6,919,493  	2,359,825  	-  	(856,900)  	8,422,418  	- 

	91,007,287  	15,109,825  	1,773,601  	(4,692,314)  	103,198,399  	3,865,000 

1,760,407                                                            -                 (126,771)                1,633,636                      132,939 8,915,000                                                            -                   (90,000)                8,825,000                        95,000
	3,685,000  	 	-  	(465,000)  	3,220,000  	475,000 

	14,360,407  	 	-  	(681,771)  	13,678,636  	702,939 

429,683                                                            -                 (191,379)                    238,304                        61,771 1,820,744                                                            -                 (624,416)                1,196,328                                   -

126,484,000	-	(3,399,000)	123,085,000	-5,218,000                 128,000	-                                -                  5,346,000	-8,039,481	-	(1,329,601)                6,709,880	-
	972,518  	39,650  	-  	(112,155)  	900,013  	103,793 

	140,713,999  	167,650  	-  	(4,840,756)  	136,040,893  	103,793 

Total Long Term Obligations	$ 248,332,120	$ 15,277,475	$ 1,773,601	$ (11,030,636)	$ 254,352,560	$	4,733,503

Additions to the General Obligation Bond Series of 1997 A and Series 2006 are the increase in accreted value for fiscal year 2019.

General obligation bonds and notes are described below; other long-term obligations noted above are detailed further in Notes 7, 9, 10, 11, and 12.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

The Series A of 1997 General Obligation Bonds (1997 Bonds) were issued at a par value of $27,560,000 for the purpose of financing various capital projects of the School District. The 1997 Bonds were composed of the capital appreciation bonds. The yield on the 1997 Bonds ranges from 4.00% to 5.65% and are due through November 15, 2022.

The School District issued Series 2006 General Obligation Bonds (2006 Bonds) in the amount of $36,415,169, to finance various capital projects of the School District. The 2006 Bonds were composed of Current Interest Bonds and Capital Appreciation Bonds. The Current Interest Bonds have been paid off. The Capital Appreciation Bonds yield ranges from 5.04% to 5.19% and are due through September 1, 2034.

The School District issued Series 2013 General Obligation Variable Rate Notes (2013 Notes) in the amount of $9,700,000 as discussed in the swap agreement discussed in Note 12. Interest on the variable rate notes is paid at the lesser of the maximum rate or the percentage of the "11-Bond Municipal Bond Index" most recently published by the bond buyer and is reset weekly. The 2013 Notes are due through September 1, 2025.

The School District issued Series 2015 General Obligation Bonds (2015 Bonds) in the amount of $10,000,000 to be used for various capital improvements to the School District. The 2015 Bonds bear interest at rates ranging from 0.6% to 3.25% and are due through September 1, 2032.

As described in Note 7, the School District issued the Series of 2016 General Obligation Note (2016 Note) in the amount of $2,023,543 to refund the prior bond issue related to funding capital improvements to the A.W. Beattie Career Center. The 2016 Note bears interest at rates ranging from 0.5% to 5.0% and is due in full on October 15, 2028.

In June 2016, the School District issued the Refunding Series 2016 General Obligation Notes (2016A Notes) in the amount of $4,135,000, and also issued the Refunding Series B (2016B Bonds), C (2016C Bonds), and D (2016D Bonds) of 2016 General Obligation Bonds in the amounts of $21,090,000, $14,0040,000, and $2,720,000, respectively. The 2016A Notes were issued to advance refund a portion of the Series A of 1997 of General Obligation Bonds. The 2016B Bonds were issued to currently refund a portion of the Series of 2006 General Obligation Bonds. The 2016C Bonds were issued to finance costs of the Rogers Elementary School renovation project.	The 2016D Bonds were pay costs of the Titan Stadium Project. The 2016A Note bears interest at rates of 2.0% to 3.0%. The 2016B Bonds bear interest at rates ranging from 2.0% to 5.0%. The 2016C Bonds bear interest at rates ranging from 2.0% to 5.0%. The 2016D Bonds bear interest at rates ranging from 2.0% to

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

5.0%.	These issuances are due through September 1, 2025, 2028, 2036, and 2036, respectively.

The School District issued Series 2019 General Obligation Bonds (2019 Bonds) in the amount of $12,750,000 to be used for various capital improvements and for improvements to various School District facilities and to implement a guaranteed energy savings program pursuant to Act 57 of 1998. The 2019 Bonds bear interest at rates ranging from 3.0% to 5.0% and are due through September 1, 2038.

Annual debt service requirements to maturity are as follows. The General Fund pays the below debt service through a transfer to the Debt Service Fund.	Interest rates on the variable rate 2013 Notes were based on rates in effect at June 30, 2019:

Fiscal Year Ending June 30,

General Obligation Bonds Principal                     Interest

General Obligation Notes
Principal	Interest	Total

2020 2021 2022 2023 2024
2025-2029 2030-2034 2035-2039
Totals

Accretion to date

$         1,233,800 1,162,271 1,105,796 1,052,355 540,000 25,434,224 15,665,187 29,418,914 75,612,547

19,240,166

$	94,852,713

$        5,241,262 5,499,322 5,553,338 5,604,311 2,779,796 13,544,904 30,008,039 8,591,154 76,822,126

(19,240,166)

$	57,581,960

$         702,939 719,791 746,644 774,181 4,296,719 5,633,362 805,000
-13,678,636

-

$ 13,678,636

$         350,450 329,439 307,665 282,562 261,537 291,519 92,475
-1,915,647

-

$	1,915,647

$         7,528,451 7,710,823 7,713,443 7,713,409 7,878,052 44,904,009 46,570,701 38,010,068 168,028,956

-

$ 168,028,956

6.	Leases and Commitments

Operating Lease

During July 2019, the School District entered into a new five-year operating lease for copiers.	This lease is considered, for accounting purposes, to be an operating lease. Payments of $4,110 are due monthly through June 2024.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Future minimum payments for this lease are as follows:

	Fiscal Year	      	Amount	

2020	$	49,320 2021                                   49,320 2022                                   49,320 2023                                   49,320 2024                                   49,320

$	246,600

7.	Joint Venture

The School District is a participant with eight other member school districts in a joint venture for the operation of the A.W. Beattie Career Center (Center). The Center was created for the operation of certain vocational and alternative educational programs for the benefit of the member school districts. On dissolution of the Center, its net position will be distributed to the member school districts based upon the total payments made by each member school district since July 1, 1990, divided by the total payments of all member school districts since that time. The Center is governed by an eighteen-member Joint Committee composed of two appointees from each member school district. No member of the Jointure exercises specific control over the fiscal policies or operations of the Center.

The School District is obligated to remit its proportionate share of the Center’s operating budget based on its percentage of proportional enrollment for the operational, alternative high school, and substitute service budgets and proportional assessed value for the administrative budget. The School District’s combined proportionate share of funding for the year ended June 30, 2019 was approximately $1,493,000 for ongoing operations.

The School District is also responsible for its proportionate share of general obligation bonds that paid for renovations of the Center in 2008 that were refinanced in 2016. The repayment of the principal and interest on these bonds was funded proportionately by the member school districts, with the scheduled payments to be made to the Center based upon general obligation notes issued by each member school district establishing yearly amounts to be paid to the Center. At June 30, 2019, the School District’s liability for this note was $1,633,636, and approximately $190,000 was paid for debt service during the year, as further described in Note 5. The School District’s share of the capital improvements

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

to the Center is reported as long-term prepayment, net of amortization, on the government-wide financial statements of the School District.

Other than for the capital project described above, the School District’s proportionate share of capital assets of the Center has not been determined, and excess operating results are retained by the Center for future periods. The School District has no equity interest in the Center as of June 30, 2019, and it is considered a non-equity joint venture of the School District. Accordingly, the School District’s net investment and share of operating results are not included in the School District’s financial statements.

The most recent available Center unassigned governmental fund type fund balance at June 30, 2018 is $1,840,598. Complete financial statements for the Center can be obtained from the administrative offices at 9600 Babcock Boulevard, Allison Park, PA, 15101.

8.	Health Consortium

The School District is one of sixty members of the Allegheny County Schools Health Insurance Consortium (Consortium). The Consortium is a public entity risk pool which affords health care coverage for members' employees on a pooled basis.	The School District pays premiums to the Consortium based upon rates established by the trustees of the Consortium. The Consortium establishes rates with the objective of satisfying current costs and claims of covered health care services, as well as maintaining working capital requirements and a Premium Stabilization Fund for periods when actual costs of coverage exceed premiums collected from members. At the end of each fiscal year, actual claims experience is compared with premiums paid. The difference results in either a retroactive refund or charge. Included in the retroactive refund/charge is a calculation for the reserve needed to cover expenses incurred but not yet reported by health providers.	Any retroactive charge may be paid from the Premium Stabilization Fund, up to ten percent of total premiums paid. The remainder may be charged to the schools. At June 30, 2019, the Consortium's net position available for benefits approximated $62.1 million. The School District’s share of this amount is approximately $2.0 million. The Consortium also maintains a portion of the Premium Stabilization Fund to cover potential future catastrophic losses. Independent insurance coverage for catastrophic losses is not maintained by the Consortium or the School District.

The School District paid premiums during the year of approximately $8.7 million. The Consortium's agreement permits participants to withdraw from the Consortium under specified terms. In such an event, the withdrawing member is entitled to or responsible for

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

a proportionate share of the Consortium fund balance or deficit as determined on the date of withdrawal.

9.	Public School Employees’ Retirement System (PSERS)

Plan Description

PSERS administers a governmental cost-sharing, multi-employer defined benefit pension plan (Pension Plan) and a governmental cost-sharing, multi-employer defined benefit Health Insurance Premium Assistance Program (Premium Assistance), an OPEB plan, to public school employees of the Commonwealth. PSERS issues a publicly available financial report that can be obtained at www.psers.pa.gov.

Employees eligible for PSERS benefits include all full-time public school employees, part-time hourly public school employees who render at least 500 hours of service in the school year, and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania.

Retirees can participate in the Premium Assistance if they satisfy the following criteria: 	Have 24 ½ or more years of service, or
	Are a disability retiree, or
     Have 15 or more years of service and retired after reaching superannuation age, and      Participate in the PSERS Health Options Program or an employer-sponsored health
insurance program.

Summary of Significant Accounting Policies

For purposes of measuring the net pension liability, the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to pensions or OPEBs, pension expense, and OPEB expense, information about the fiduciary net position of PSERS and additions to/deductions from PSERS’ fiduciary net position have been determined on the same basis as they are reported by PSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Detailed information about PSERS’ fiduciary net position related to pension and OPEBs is available in the PSERS Comprehensive Annual Financial Report, which can be found on the PSERS website at www.psers.pa.gov.

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NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

The net pension liability and the net OPEB liability are recorded as governmental activities expected to be paid from the General Fund.

Benefits Provided – Pension Plan

Members are eligible for monthly retirement benefits upon reaching (a) age 62 with at least one year of credited service; (b) age 60 with 30 or more years of credited service; or (c) 35 or more years of service regardless of age. Act 120 of 2010 (Act 120) preserves the benefits of existing members and introduced benefit reductions for individuals who become new members on or after July 1, 2011.	Act 120 created two new membership classes: Membership Class T-E (Class T-E) and Membership Class T-F (Class T-F). To qualify for normal retirement, Class T-E and Class T-F members must work until age 65 with a minimum of three years of service or attain a total combination of age and service that is equal to or greater than 92 with a minimum of 35 years of service. Benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service. For members whose membership started prior to July 1, 2011, after completion of five years of service, a member’s right to the defined benefits is vested and early retirement benefits may be elected. For Class T-E and T-F members, the right to benefits is vested after ten years of service.

Participants are eligible for disability retirement benefits after completion of five years of credited service.	Such benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service, but not less than one-third of such salary nor greater than the benefit the member would have had at normal retirement age. Members over normal retirement age may apply for disability benefits.

Death benefits are payable upon the death of an active member who has reached age 62 with at least one year of credited service (age 65 with at least three years of credited service for Class T-E and Class T-F members) or who has at least five years of credited service (ten years for Class T-E and Class T-F members).	Such benefits are actuarially equivalent to the benefit that would have been effective if the member had retired on the day before death.

Benefits Provided – Premium Assistance

Effective January 1, 2002, under the provisions of Act 9 of 2001, participating eligible annuitants are entitled to receive Premium Assistance payments equal to the lesser of $100

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

per month or their eligible out-of-pocket monthly health insurance premium. As of June 30, 2018, there were no assumed future benefit increases to participating eligible retirees.

Member Contributions

The following illustrates the member’s contribution as a percent of the member’s qualifying compensation:

	Active members who joined PSERS prior to July 22, 1983: o Membership Class T-C	5.25%
o Membership Class T-D	6.50%

	Members who joined PSERS on or after July 22, 1983, and who were active or inactive as of July 1, 2001:
o Membership Class T-C       6.25% o Membership Class T-D       7.50%

	Members who joined PSERS after June 30, 2001, and before July 1, 2011: o Membership Class T-D	7.50%

	Members who joined PSERS after June 30, 2011: o Membership Class T-E*	7.50%
o Membership Class T-F** 10.30%

*	Shared risk program could cause future contribution rates to fluctuate between 7.50% and 9.50%.
** Shared risk program could cause future contribution rates to fluctuate between 10.30% and 12.30%.

Effective with Act 5, which was enacted on June 12, 2017, vested Class T-E and Class T-F members can now withdraw their accumulated contributions and interest from the Members’ Savings Account upon their retirement.

Employer Contributions

The School District’s contractually required PSERS contribution rate for fiscal year ended June 30, 2019 was 33.43% of covered payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

accrued liability. This rate is composed of a 32.60% rate for the Pension Plan and a 0.83% rate for the Premium Assistance.

The combined rate for the fiscal year ended June 30, 2019 was an increase from the fiscal year ended June 30, 2018 combined rate of 32.57%. The combined contribution rate will increase to 34.29% in fiscal year 2020 and is projected to grow to 36.30% by fiscal year 2024.

The School District remits contributions to PSERS on a quarterly basis. Approximately $4.5 million was owed to PSERS as of June 30, 2019, which represents the School District’s required contribution for the end-of-year payroll. The School District’s contributions which were recognized by PSERS for the year ended June 30, 2019 were as follows:

Pension Plan Premium Assistance

Total

$          11,922,826 303,557

$	12,226,383

In accordance with Act 29, the Commonwealth reimburses school districts for approximately one-half of contributions made to PSERS.	The School District recorded reimbursements from the Commonwealth approximating $6.3 million during the current year. Because the Commonwealth payments are received as a reimbursement, and are not made directly to PSERS, they do not qualify as a special funding situation.

Proportionate Share

The School District’s proportion of PSERS’ net pension liability and PSERS’ net OPEB liability were calculated utilizing the School District’s one-year reported covered payroll as it relates to PSERS’ total one-year reported covered payroll. At June 30, 2018 (measurement date), the School District’s proportion was 0.2564%, which was an increase of 0.0003% from its proportion measured as of June 30, 2017.

10. Net Pension Liability, Pension Expense, and Deferred Outflows and Inflows of Resources Related to Pensions

At June 30, 2019, the School District reported a liability of $123,085,000 for its proportionate share of PSERS’ net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

was determined by rolling forward PSERS’ total pension liability as of June 30, 2017 to June 30, 2018.

For the year ended June 30, 2019, the School District recognized pension expense of $13,501,198.

At June 30, 2019, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows
	of Resources	

Deferred Inflows
	of Resources	

Differences between expected and actual experience
Changes in assumptions
Net difference between projected and actual earnings on pension plan investments
Changes in proportion
School District contributions subsequent to the measurement date

$	 991,000	$ 2,293,000

603,000 460,000

	11,922,826 

1,905,000

2,359,000

Total	$	16,269,826	$	4,264,000

$11,922,826 reported as deferred outflows of resources resulting from the School District’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30: 

2020 2021 2022 2023

$           1,769,000 225,000
(1,440,000)
	(471,000)

Total	$	83,000

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Actuarial Assumptions

The following methods and assumptions were used in the actuarial valuation for the June 30, 2018 measurement date:

	Actuarial cost method – Entry Age Normal – level % of pay 	Investment return – 7.25%, includes inflation at 2.75%
	Salary growth – Effective average of 5.00%, comprised of 2.75% for inflation and 2.25% for real wage growth and merit or seniority increases
	Mortality rates were based on the RP-2014 Mortality Tables for males and females, adjusted to reflect PSERS’ experience and projected using a modified version of the MP-2015 Mortality Improvement Scale.
	Experience study – July 1, 2010 through June 30, 2015

Changes in Assumptions

There were no changes in assumptions for the June 30, 2018 valuation.

Changes in Benefit Terms

There were no changes in benefit terms for the June 30, 2018 valuation.

Pension Plan Investments

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

The pension plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the PSERS Board. Plan assets are managed with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table:

	Asset Class	

Global public entity Fixed income Commodities Absolute return Risk parity Infrastructure/MLPs Real estate
Alternative investments Cash
Financing (LIBOR)

Target

	Allocation	

20.0% 36.0% 8.0% 10.0% 10.0% 8.0% 10.0% 15.0% 3.0%
	-20.0%

	100.0%

Long-Term Expected

 Real Rate of Return 

5.2% 2.2% 3.2% 3.5% 3.9% 5.2% 4.2% 6.7% 0.4% 0.9%

For PSERS’ year ended June 30, 2018, the annual money-weighted rate of return on the pension plan investments, net of pension plan investment expenses, was 9.30%.

Discount Rate

The discount rate used to measure the total pension liability was 7.25%. The projection of cash flows used to determine the discount rate assumed that the contributions from plan members will be made at the current contribution rate and that the contributions from employers will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the School District’s Proportionate Share of PSERS’ Net Pension Liability to Changes in the Discount Rate

The following presents the School District’s proportionate share of PSERS’ net pension liability calculated using the discount rates described above, as well as what the School

39

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

District’s proportionate share of PSERS’ net pension liability would be if it were calculated using a discount rate that is one-percentage-point lower or one-percentage-point higher than the current rate:

1% Decrease
	(6.25%)	

Current Discount
 Rate (7.25%) 

1% Increase
	(8.25%)	

School District's proportionate share
of PSERS' net pension liability	$ 152,573,000	$ 123,085,000	$	98,152,000

11. Net OPEB Liability, OPEB Expense, and Deferred Outflows and Inflows of Resources Related to OPEB

The School District maintains two separate OPEB plans – the Premium Assistance previously described in Note 9 and the School District’s retiree plan (retiree plan) described below. At June 30, 2019, the School District reported a net OPEB liability composed of the following:

School District's proportionate share of PSERS' net OPEB liability
School District's total OPEB liability for its retiree plan

$	5,346,000

	6,709,880 

Net OPEB liability	$	12,055,880

PSERS’ net OPEB liability was measured as of June 30, 2018 and the total OPEB liability used to calculate PSERS’ net OPEB liability was determined by rolling forward PSERS’ total OPEB liability as of June 30, 2017 to June 30, 2018. The School District’s retiree plan’s total OPEB liability was measured as of June 30, 2018 and the total OPEB liability used to calculate the retiree plan’s total OPEB liability was determined by rolling forward the retiree plan’s total OPEB liability as of June 30, 2018 to June 30, 2019.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

For the year ended June 30, 2019, the School District recognized OPEB expense as follows:

OPEB expense related to PSERS Premium Assistance
OPEB expense related to School District's retiree plan

Total OPEB expense

$	250,884

520,440

$	771,324

At June 30, 2019, the School District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

 Deferred Outflows of Resources:	

Differences between expected and actual experience
Changes in assumptions
Net difference between projected and actual earnings on OPEB plan investments
Changes in proportion
School District contributions subsequent to the measurement date

PSERS Premium
	Assistance	

$             33,000 85,000

9,000 5,000

	303,557 

School District's
	Retiree Plan	

$           515,077 839,743

--

	405,775 

Total Deferred Outflows of
	Resources	

$           548,077 924,743

9,000 5,000

	709,332 

Total	$	435,557	$	1,760,595	$	2,196,152

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

PSERS Premium
Deferred Inflows of Resources:	       	Assistance	

School District's
 Retiree Plan	

Total Deferred Inflows of
	Resources	

Differences between expected and actual experience
Changes in assumptions
Net difference between projected and actual earnings on OPEB plan investments
Changes in proportion

$		$ 203,000

	20,000 

1,540,684 1,914,502

$      1,540,684 2,117,502

	20,000 

Total	$	223,000	$	3,455,186	$	3,678,186

$709,332 reported as deferred outflows of resources resulting from the School District’s contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ending June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

 Year Ending June 30, 

2020 2021 2022 2023 2024
2025 and beyond

	PSERS Plan	

$	(21,000) (21,000) (21,000) (23,000) (24,000)
	19,000 

	Local Plan	

$	(166,060) (166,060) (166,060) (166,060) (166,060)
	(1,270,066)

	Total	

$	(187,060) (187,060) (187,060) (189,060) (190,060)
	(1,251,066)

Total	$	(91,000)	$	(2,100,366)	$	(2,191,366)

Additional Required Disclosures for PSERS Premium Assistance

Actuarial Assumptions

The following methods and assumptions were used in the actuarial valuation for the June 30, 2018 measurement date:

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

	Actuarial cost method – Entry Age Normal – level % of pay
	Investment return – 2.98% - S&P 20-year Municipal Bond Rate
	Salary increases – Effective average of 5.00%, comprised of 2.75% for inflation and 2.25% for real wage growth and merit or seniority increases
	Premium Assistance reimbursement is capped at $1,200 per year
	Assumed healthcare cost trends were applied to retirees with less than $1,200 in Premium Assistance per year
	Mortality rates were based on the RP-2014 Mortality Tables for males and females, adjusted to reflect PSERS’ experience and projected using a modified version of the MP-2015 Mortality Improvement Scale
	Experience study – July 1, 2010 through June 30, 2015 	Participation rate –
o Eligible retirees will elect to participate pre-age 65 at 50% o Eligible retirees will elect to participate post-age 65 at 70%.

Changes in Assumptions

The discount rate decreased from 3.13% to 2.98% for the June 30, 2018 valuation. Changes in Benefit Terms

There were no changes in benefit terms for the June 30, 2018 valuation.

OPEB Plan Investments

Investments consist primarily of short-term assets designed to protect the principal of the plan assets. The expected rate of return on OPEB plan investments was determined using the OPEB asset allocation policy and best estimates of geometric real rates of return for each asset class.

The OPEB plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the PSERS Board. Employer contribution rates are established to provide reserves in the Health Insurance Account that are sufficient for the payment of the Premium Assistance for each succeeding year. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table:

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

	Asset Class	

Cash
US Core Fixed Income Non-US Developed Fixed

Target

	Allocation	

5.9% 92.8%
	1.3%

	100.0%

Long-Term Expected

 Real Rate of Return 

0.03% 1.2% 0.04%

For PSERS’ year ended June 30, 2018, the annual money-weighted rate of return on the Premium Assistance plan investments, net of plan investment expenses, was 1.63%.

Discount Rate

The discount rate used to measure the total OPEB liability was 2.98%. Under the Premium Assistance plan’s funding policy, contributions are structured for short-term funding of the Premium Assistance.	The funding policy sets contribution rates necessary to assure solvency of the Premium Assistance through the third fiscal year after the actuarial valuation date. The Premium Assistance account is funded to establish reserves that are sufficient for the payment of the Premium Assistance benefits for each succeeding year. Due to the short-term funding policy, the OPEB plan’s fiduciary net position was not projected to be sufficient to meet projected future benefit payments; therefore, the plan is considered a “pay-as-you-go” plan. A discount rate of 2.98%, which represents the S&P 20-year Municipal Bond Rate at June 30, 2018, was applied to all projected benefit payments to measure the total OPEB liability.

Sensitivity of the School District’s Proportionate Share of PSERS’ Net OPEB Liability to Changes in the Discount Rate

The following presents the School District’s proportionate share of PSERS’ net OPEB liability calculated using the discount rates described above, as well as what the School District’s proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is one-percentage-point lower or one-percentage-point higher than the current rate:

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

1% Decrease (1.98%)

Current Discount Rate (2.98%)

1% Increase (3.98%)

School District's proportionate share

of PSERS' net OPEB liability	$	6,080,000	$	5,346,000	$	4,737,000

Sensitivity of the School District’s Proportionate Share of PSERS’ Net OPEB Liability to Changes in the Healthcare Cost Trend Rates

Healthcare cost trend rates were applied to retirees receiving less than $1,200 in annual Premium Assistance. As of June 30, 2018, retirees’ Premium Assistance benefits are not subject to future healthcare cost increases. The annual Premium Assistance reimbursement for qualifying retirees is capped at a maximum of $1,200. The actual number of retirees receiving less than the $1,200 per year cap is a small percentage of the total population and has a minimal impact on the healthcare cost trends as depicted below.

The following presents the School District’s proportionate share of PSERS’ net OPEB liability calculated using current healthcare cost trend rates as well as what the School District’s proportionate share of the net OPEB liability would be if it were calculated using a healthcare cost trend rate that is one-percentage-point lower or one-percentage-point higher than the current rate:

	1% Decrease	  Current Trend  	1% Increase	

School District's proportionate share

of PSERS' net OPEB liability	$	5,345,000	$	5,346,000	$	5,347,000

Additional Required Disclosures for the School District’s Retiree Plan

Plan Description

The School District administers a single-employer defined benefit healthcare plan to provide additional postemployment benefits to eligible retirees (the Supplemental Health Plan). The School District has not accumulated assets for the retiree plan in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75; benefits are paid on a pay-as-you-go basis.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

The plan provides medical, and in some cases, dental and vision, for three groups of employees: teachers; administrators; and support staff.	Support staff can be further divided into clerical, maintenance and secretarial categories.	Provided they meet the eligibility criteria, full-time employees of all three groups are eligible for post-retirement medical, dental and vision coverage.	All part-time employees are not eligible for post-retirement medical, dental, or vision coverage.	Also, bus drivers and food service workers are contracted out and, therefore, are not eligible. The plan does not issue a publicly available financial report.

Funding Policy

The eligibility and the benefits for each group is as follows:

Medical Benefits

Medical benefits are provided through the ACSHIC and are administered by Highmark. There are two plans: A Preferred Provider Organization (PPO) and an Exclusive Provider Organization (EPO). The PPO program is referred to as Community Blue Flex PPO and the EPO is referred to as Community Blue Flex EPO. There is no retirement incentive currently in place. However, the District has established a pattern of periodically offering incentives. A summary of past incentives is as follows.

Employees who retired in the 2006 and 2008 fiscal year

	Retirees with individual coverage - the School District shall pay the monthly premium cost for post-retirement medical coverage in the EPO plan less any premium assistance (i.e., $100/month) available through PSERS.	For those employees electing to enroll in the PPO plan, the retiree must pay any applicable premium assistance through PSERS plus the difference between the cost of the EPO and the PPO plans.
	Retirees with other coverages- the School District shall provide $900 per month for post-retirement medical coverage in the EPO or PPO plan. The retiree is responsible for paying the difference between the applicable premium and the $900.
	Post-retirement medical coverage is provided to age 65 or a nine-year period, whichever occurs first.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Employees who retired in the 2011 fiscal year

	Retirees with individual coverage - retirees must contribute an amount equal to the sum of the $100 PSERS allowance plus the amount that active employees are required to contribute which differs by classification (i.e. teacher, administrator, custodian, clerical, etc.).
	The required contributions for individual and parent/child in the teachers' tier are as follows for the year ended June 30, 2019: $558 for EPO individual coverage, and $597 for the PPO individual coverage; current employee contribution rates are $72 for EPO individual coverage, and $102 for the PPO individual coverage; and PSERS premium assistance is $100 under both tiers.
	Retirees with all other coverages - the School District shall provide $900 per month for post-retirement medical coverage. The retiree is responsible for paying the difference between the applicable premium and the $900.
	The required contributions for a retiree with husband/wife coverage is as follows. $1,515 for EPO family coverage, and $1,622 for the PPO family coverage; the retirement incentive is $900.
	Post-retirement medical coverage is provided to age 65 or a nine-year period, whichever occurs first. For support personnel who retired during the 2011 fiscal year, post-retirement medical coverage is provided to age 65 or a five-year period, whichever occurs first.

Employees who Terminated School Service by June 30, 2015 and Retired under PSERS by December 1, 2015

	Retirees with individual coverage must contribute the same amount as current employees plus the $100 PSERS allowance. See the table below for the contribution amounts for the various retiree classifications.
	Retirees with all other coverage tiers - the School District shall provide $900 per month for post-retirement medical coverage in the PPO or EPO plans. The retiree is responsible for paying the difference between the applicable premium and the $900.
	For employees who retired during this window, post-retirement medical coverage is provided to age 65 or a nine-year period, whichever occurs first.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Below shows the required contributions for active employees during the 2018/2019 fiscal year:

Single	Other

Administrative	$	72	$	140 Secretaries/Paraprofessionals                                            72                                          100 SAEA Professional (EPO)                                                      72                                          140 SAEA Professional (PPO)                                                   102                                          190 Custodial and Maintenance                   1.75% of base wage                3.0% of base wage

Therefore, any retiree with individual coverage who retired under this incentive would have to contribute the applicable amount shown above plus the $100 PSERS allowance.

Any retiree with a tier other than single would have to contribute the difference between the applicable premium rate and the $900 monthly allowance.

Dental/Vision

Retirees are also eligible for dental and/or vision benefits. However, retirees are required to contribute 100% of the costs. Support retirees are offered COBRA. Provided they make the required contributions, dental and vision benefits are provided for the lifetime of the retiree.

Life Insurance

Teachers who retired prior to August 15, 2007 are provided with a $1,000 life insurance payable upon death. Teachers who retire on or after August 15, 2007 are not provided with post-retirement life insurance.

Administrators who retired prior to July 1, 2008 are provided with a $5,000 life insurance benefit payable upon death. To be eligible for this benefit, administrators must have been employed by the School District for at least 10 years.

Secretaries who were hired prior to July 1, 2008 are provided with $5,000 of life insurance payable upon death. Secretaries who were hired on or after July 1, 2008 are not eligible for post-retirement life insurance coverage.

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SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Custodians are provided with $5,000 life insurance payable upon death provided they retire under normal retirement.

OPEB Liability

At June 30, 2019, the following employees were covered by the benefit terms:

Inactive employees currently receiving

benefit payments	24

Active employees	              497 

521

Actuarial Assumptions

The total OPEB liability was determined by an actuarial evaluation performed as of July 1, 2018 and rolled forward to the measurement date of June 30, 2019, using the following actuarial assumptions, applied to all periods included in the measurement:

	Actuarial cost method – Entry Age Normal
	Discount rate – 3.87% – Based on the Bond Buyers 20-year Bond Index
	Salary and inflation increases – 2.50% salary increase, and 3.0% inflation rate
	Assumed healthcare cost trends – 6.75%; Long-term trend rate of 4.75%; Terminal trend year of 2028
	Mortality rates – RPH-2014 Total Dataset Mortality Table projected using Scale MP-2018

Changes in Assumptions

The discount rate changed from 3.58% in the prior year to 3.87% in the current year valuation. Updated the medical trend rates. Mortality improvement scale was updated to MP-2018. Assume a retirement incentive would be offered every 5 years.

Changes in Benefit Terms

No changes noted.

49

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Changes in the Total OPEB Liability

The changes in the total OPEB liability for the School District’s retiree plan for the year ended June 30, 2019 were as follows:

Total OPEB liability, July 1, 2018 Changes for the year:
Service cost
Interest on the total OPEB liability Changes of benefit terms Differences between expected
and actual experience Changes in assumptions Benefit payments

$	8,039,481

398,687 287,813 -

554,698 (1,908,605)
	(662,194)

Total OPEB liability, June 30, 2019	$	6,709,880

Sensitivity of the School District’s Total OPEB Liability to Changes in the Discount Rate

The following presents the School District’s total OPEB liability calculated using the discount rate described above, as well as what the School District’s total OPEB liability would be if it were calculated using a discount rate that is one-percentage-point lower or one-percentage-point higher than the current rate:

1% Decrease
	2.87%	

Current Discount
	3.87%	

1% Increase
	4.87%	

School District's total OPEB liability	$	7,040,420	$	6,709,880	$	6,375,666

50

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Sensitivity of the School District’s Total OPEB Liability to Changes in the Healthcare Cost Trend Rates

The following presents the School District’s total OPEB liability calculated using current healthcare cost trend rates as well as what the School District’s total OPEB liability would be if it were calculated using a healthcare cost trend rate that is one-percentage-point lower or one-percentage-point higher than the current rate:

	1% Decrease	  Current Trend  	1% Increase	

School District's total OPEB liability	$	6,211,020	$	6,709,880	$	7,291,341

12. Derivative Instruments

Fixed/Variable Swap

During fiscal year 2004, the School District entered into a swaption contract. The swaption gave the counterparty the option to make the School District enter into a “pay-fixed, receive-variable” interest rate swap. When the option was exercised by the counterparty, the School District refunded the existing Series A of 2001 Bonds and issued the Series 2004 Variable Rate Bonds, which were later refunded by the Series of 2013 Variable Rate Notes (2013 Notes). The intention of the Fixed/Variable Swap was to effectively change the School District’s variable interest rate on the Series 2004 Bonds to a synthetic fixed rate. The School District receives 68% of 1-month LIBOR plus .25%. The School District then pays a fixed rate of 3.955%. The interest payments are calculated based on a notional amount that approximates the principal outstanding on the 2013 Notes, which was $8,915,000 at June 30, 2019. The swap expires on September 1, 2025, consistent with the last principal payment on the 2013 Notes.

51

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Interest Rate Swaps – Floating Rate to Floating Rate

The School District has entered into three interest rate swap contracts as described below:

Transaction Date Effective Date
Maturity Date

1997 Swap

September 1, 2005 September 23, 2005
November 15, 2022

2006 Swap

June 11, 2009 July 1, 2009
September 1, 2034

2006A Swap

June 11, 2009 July 1, 2009
September 1, 2028

Initial Notional Amount	$	16,178,811	$	15,018,216	$	25,295,000

Terms

Bank Counterparty Rating

School District pays SIFMA and receives 61.55% of three-month LIBOR plus 0.3%

A-

School District pays SIFMA and receives 61.45% of three-month LIBOR plus 0.3%

BBB+

School District pays SIFMA and receives 61.60% of three-month LIBOR plus 0.3%

BBB+

Fair Value of Derivative Instruments

The mark to market value is calculated using a combination of the present value of the potential net cash flows between the two parties, calculated using relevant mid-market data inputs and based on the assumption of no unusual market conditions or forced liquidation, and an option pricing model.

The School District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted market prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

The floating rate swaps are valued using significant other observable inputs (Level 2 inputs). This fixed/variable swap is valued using significant unobservable inputs (Level 3 inputs).

52

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

Below are the changes in fair value of the swaps during the year:

Effective Instrument	Hedge

June 30, 2018 Fair Value

Current year value change

June 30, 2019 Fair Value

1997B Swap 2006 Swap 2006A Swap

Fixed / Variable Swap

No	$	61,000	$ No                                (727,700)
No	(117,200)

$	(783,900)	$

Yes	$	1,036,844	$

(25,206)	$ 597,594 241,624

814,012	$

159,484	$

35,794 (130,106)
124,424

30,112

1,196,328

The 1997B, 2006, and 2006A Basis Swaps are considered ineffective hedging derivatives, whereby the change in fair market value will be considered a derivative investment gain or loss recognized in the statement of activities each year.

As the Fixed/Variable Swap is considered an effective hedge, the aggregate change in fair market value during the year is offset by a change to deferred outflows on the statement of net position, with no impact to the current year statement of activities.

Risks

Through the use of derivative instruments such as swaps and interest rate swaps, the School District is exposed to a variety of risks, including credit risk, interest rate risk, termination risk, market-access risk, basis risk, and liquidity/remarketing risk.

	Credit risk is the risk that the counterparty will not fulfill its obligations. As of June 30, 2019, the Fixed/Variable, 2006 Swaps had a negative fair market values to the School District and, as such, the School District had no credit risk exposure related to these transactions; however, the 1997B interest rate swap and Fixed/Variable 2006A Swap were not subject to credit risk, as both had a positive fair market value. In the event that the counterparty’s rating is downgraded to a certain level (and based on the fair value of the swap at the time of the downgrade) the counterparty would be required to post collateral to support its obligations under the swap.

53

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

	Interest rate risk is the risk that changes in interest rates will adversely affect the fair values of the School District’s financial instruments or the School District’s cash flows. All of the swaps are highly sensitive to changes in interest rates; changes in the variable rate will have a material effect on the swaps’ fair market value.

	Basis risk is the risk that arises when variable interest rates on a derivative and an associated bond or other interest-paying financial instrument are based on different indexes. The School District is subject to basis risk because the interest index on the variable rate arm of the swap is based on a different index than the swap. Although expected to correlate, the relationships between different indexes vary and that variance could adversely affect the School District’s calculated payments, and, as a result, cost savings or synthetic interest rates may not be realized.

	Termination risk is the risk that a derivative’s unscheduled end will affect the School District’s asset/liability strategy or will present the School District with potentially significant	unscheduled	termination	payments	to	the	counterparty.	The counterparty to the transaction does not have the ability to voluntarily terminate the swap; however, the School District is exposed to termination risk in the event that the counterparty defaults.

	Liquidity/Remarketing risk is the risk that if the remarketing of the variable rate debt failed, the liquidity provider would step in and own those bonds that had been tendered but failed to be remarketed. At that point, the bonds would be considered “bank bonds” and the School District would have to pay the bank rate on such bonds and pay off the bonds in a much shorter period of time. This bank rate is sometimes much higher than the prime rate.	Additionally, there is risk that the liquidity provider is unable to perform this service and the bonds would then need to be repurchased by the School District.

54

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

13. Interfund Receivables, Payables, and Transfers

Interfund receivables and payables and transfers at June 30, 2019 are summarized below:

Fund

General Fund Capital Projects
Other governmental funds Proprietary Fund

Due From

 Other Funds 

$       270,673 30,729
-
	36,832 

Due to

 Other Funds 

$         67,561 270,673
-
	- 

Total	$	338,234	$	338,234

Fund

General Fund Capital Projects
Other governmental funds Proprietary Fund

 Transfers in 

$                   --
7,111,634
	- 

 Transfers out 

$ 7,111,634 --
	- 

Total	$ 7,111,634	$ 7,111,634

Transactions between funds which are not expected to be repaid are accounted for as transfers. In those cases when repayment is expected within the next fiscal year, the transactions are accounted for through the various due from and due to accounts. When repayment is not expected to be made with the next fiscal year, the transactions are accounted for through advances receivable and advances payable. The transfer from the General Fund to the Debt Service Fund is to fund debt service expenditures occurring during the fiscal year.

14. Contingencies and Commitments

Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the state. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds.	The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the School District expects such amounts, if any, to be immaterial.

55

SHALER AREA SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

The School District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; error and omission; and natural disasters for which the School District carries commercial insurance.	Management believes the insurance coverage is sufficient to cover the School District against potential losses.	There have been no significant changes in insurance coverage since the prior fiscal year.

At June 30, 2019, the School District has construction commitments relating to the school renovations for approximately $3.9 million.

15. Subsequent Event

During July 2019, the School District entered into a capital lease for Apple iPads for $260,362.	Payments of principal and interest totaling $65,090 are due annually commencing August 15, 2019 through August 15, 2022. Interest on the lease is 1.99%.

56

REQUIRED SUPPLEMENTARY INFORMATION

SHALER AREA SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND

YEAR ENDED JUNE 30, 2019

Revenues and Other Financing Sources: Revenues:
Local sources:
Current real estate taxes Public utility realty taxes Local services taxes Earned income taxes Real estate transfer taxes Delinquencies on taxes Earnings on investments
Revenue from student activities Federal revenue from IUs Rentals
Contributions and donations from private sources Tuition
Revenue from community activities Miscellaneous revenue

Budget Original

$     44,570,777	$ 54,000 22,500
5,273,400 516,608 1,514,145 90,405 56,500 986,000 30,000 5,000
-50,000
318,000

Final

44,570,777 54,000 22,500 5,273,400 516,608 1,514,145 90,405 56,500 986,000 30,000 5,000
-50,000
318,000

Actual

$	45,488,141 51,694 23,032
5,532,042 570,476 1,371,550 558,717 53,663 890,635 90,000 29,963 13,908 48,688 136,216

Variance with Final Budget

$	917,364 (2,306)
532 258,642 53,868
(142,595) 468,312
(2,837) (95,365)
60,000 24,963 13,908
(1,312) (181,784)

Total local sources

State sources:

Basic instructional subsidy Tuition
Subsidies for special education programs Transportation
Rentals and sinking fund payments Health services
State property tax reduction Social Security payments State retirement revenue Ready to learn grant

Total state sources

Federal sources: Title I
Title II Title III Title IV
Medical Assistance - Title XIX Medical Assistance - Access

Total federal sources

Other financing sources:

Refund of prior year's expenditures Proceeds from capital lease

Total other financing sources

Total revenues and other financing sources

53,487,335

11,535,415 52,500 3,501,775 1,806,700 300,000 85,000 2,041,241 1,480,367 6,469,109 706,471

27,978,578

330,000 140,000 -
--
250,000

720,000

--

-

82,185,913

53,487,335

11,535,415 52,500 3,501,775 1,806,700 300,000 85,000 2,041,241 1,480,367 6,469,109 706,471

27,978,578

330,000 140,000 -
--
250,000

720,000

--

-

82,185,913

54,858,725

11,509,695 23,681 3,429,810 1,682,911 457,708 78,298 2,041,241 1,476,567 6,331,080 739,029

27,825,040

610,972 123,629 1,284 41,525 10,029 252,786

1,040,225

259,626 -

259,626

83,983,616

1,371,390

(25,720) (28,819) (71,965) (123,789)
157,708 (6,702)

(3,800) (138,029)
32,558

(153,538)

280,972 (16,371)
1,284 41,525 10,029 2,786

320,225

259,626

259,626

1,797,703

(Continued)

See accompanying notes to required supplementary schedules.

57

SHALER AREA SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND

YEAR ENDED JUNE 30, 2019 (Continued)

Expenditures and Other Financing Uses: Instruction:
Regular programs: Salaries
Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Property Other

Total regular programs

Special programs: Salaries
Employee benefits

Purchased professional and technical services Other purchased services
Supplies Property

Total special programs

Vocational education: Salaries
Employee benefits

Other purchased services

Total vocational education

Other instructional programs: Salaries
Employee benefits

Other purchased services Supplies

Total other instructional programs

Non-public school:

Purchased professional and technical services

Total instruction

Budget Original

20,082,473 13,699,524 50,000 76,642 1,358,025 1,066,741 312,364

36,645,769

5,497,609 3,787,149 674,500 1,913,700 101,500 22,000

11,999,458

59,522 28,203 1,500,000

1,587,725

799,201 492,734 140,000 12,500

1,444,435

51,677,387

Final

20,082,473 13,699,524 50,000 76,642 1,358,025 1,066,741 312,364
-

36,645,769

5,497,609 3,787,149 699,500 1,888,700 105,900 32,000

12,015,158

59,522 28,203 1,500,000

1,587,725

799,201 492,734 140,000 12,500

1,444,435

-

51,693,087

Actual

19,352,306 12,143,588 8,648 34,331 1,629,071 1,009,912 318,912 204

34,496,972

5,883,632 4,158,677 877,195 1,549,871 50,247 24,916

12,548,787

59,522 25,130 1,492,432

1,577,084

737,578 449,967 136,647 1,064

1,325,256

10,765

49,958,864

Variance with Final Budget

730,167 1,555,936 41,352 42,311
(271,046) 56,829
(6,548) (204)

2,148,797

(386,023) (371,528) (177,695) 338,829
55,653 7,084

(533,629)

-3,073 7,568

10,641

61,623 42,767 3,353 11,436

119,179

(10,765)

1,734,223

(Continued)

See accompanying notes to required supplementary schedules.

58

SHALER AREA SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND

YEAR ENDED JUNE 30, 2019 (Continued)

Expenditures and Other Financing Uses: Support services:
Pupil personnel: Salaries
Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Other

Total pupil personnel

Instructional staff: Salaries
Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Property

Total instructional staff

Administration: Salaries
Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Property Other

Total administration

Pupil health: Salaries
Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Property

Total pupil health

Budget Original

1,591,310 1,071,366 60,000 4,200 18,500 43,500 4,000

2,792,876

586,568 292,204 13,800 4,000 6,410 148,900 8,800

1,060,682

2,064,165 1,312,660 376,000 42,730 121,920 25,500 5,000 34,300

3,982,275

570,487 356,910 294,500 1,500

12,330 1,500

1,237,227

Final

1,591,310 1,071,366 60,000 4,200 18,500 27,800 4,000

2,777,176

586,568 292,204 13,800 4,000 6,410 148,900 8,800

1,060,682

2,064,165 1,314,060 376,000 42,730 121,920 25,500 5,000 32,900

3,982,275

570,487 356,910 294,500 1,500
-12,330 1,500

1,237,227

Actual

2,094,890 1,329,408 61,382

15,164 18,922 2,182

3,521,948

893,978 538,211 206,254

7,680 144,229 7,631

1,797,983

2,141,276 1,350,254 246,857 41,488 73,849 16,709

13,720

3,884,153

559,729 357,411 137,288 587
36 9,966

1,065,017

Variance with Final Budget

(503,580) (258,042) (1,382)
4,200 3,336 8,878 1,818

(744,772)

(307,410) (246,007) (192,454)
4,000 (1,270) 4,671 1,169

(737,301)

(77,111) (36,194)
129,143 1,242 48,071 8,791 5,000 19,180

98,122

10,758 (501)
157,212 913
(36) 2,364 1,500

172,210

(Continued)

See accompanying notes to required supplementary schedules.

59

SHALER AREA SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND

YEAR ENDED JUNE 30, 2019 (Continued)

Expenditures and Other Financing Uses: Business:
Salaries

Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Other

Total business

Operation and maintenance of plant services: Salaries
Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Property Other

Total operation and maintenance of plant services

Student transportation services: Salaries
Employee benefits

Purchased professional and technical services Other purchased services
Supplies

Total student transportation services

Central: Salaries
Employee benefits

Purchased professional and technical services Other purchased services
Supplies Property Other

Total central

Other support services: Other purchased services

Total support services

Budget Original

416,180 277,279 35,000 110,618 7,450 17,500 1,000

865,027

3,033,071 1,907,773 137,450 1,557,406 248,465 678,305 150,049 1,599

7,714,118

37,974 21,707 56,000 4,756,500 25,000

4,897,181

848,524 557,212 32,100 15,400 263,184 10,000 2,070

1,728,490

65,000

24,342,876

Final

416,180 277,279 35,000 110,618 7,450 17,500 1,000

865,027

3,033,070 1,907,773 124,171 638,272 248,465 1,602,474 157,019 2,874

7,714,118

37,974 21,707 56,000 4,756,500 25,000

4,897,181

848,524 561,212 32,100 15,400 263,184 10,000 2,070

1,732,490

65,000

24,331,176

Actual

405,643 271,784 37,910 65,639 5,719 39,837 1,245

827,777

2,954,559 1,899,934 177,493 620,648 259,993 1,516,252 108,471 3,004

7,540,354

26,906 17,987 63,688 4,619,921 28,535

4,757,037

668,081 430,999 48,498 13,121 307,887 4,236 369

1,473,191

63,016

24,930,476

Variance with Final Budget

10,537 5,495
(2,910) 44,979
1,731 (22,337)
(245)

37,250

78,511 7,839
(53,322) 17,624 (11,528) 86,222 48,548
(130)

173,764

11,068 3,720
(7,688) 136,579
(3,535)

140,144

180,443 130,213
(16,398) 2,279
(44,703) 5,764 1,701

259,299

1,984

(599,300)

(Continued)

See accompanying notes to required supplementary schedules.

60

SHALER AREA SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND

YEAR ENDED JUNE 30, 2019 (Continued)

Expenditures and Other Financing Uses: Noninstructional services:
Student activities: Salaries
Employee benefits

Purchased professional and technical services Purchased property services
Other purchased services Supplies
Property Other

Total student activities

Community services: Salaries
Employee benefits

Other purchased services Supplies
Other

Total community services

Total noninstructional services

Facilities Acquisition, Construction, and Improvement Services:
Purchased professional and technical services Purchased property services

Total facilities acquisition, construction, and improvement services

Debt service: Interest
Redemption of principal

Total debt service

Total expenditures

Other financing uses:

Refund of prior year revenues Debt Service prior year refunds Fund transfers

Total other financing uses

Total expenditures and other financing uses

Budget Original

1,033,468 114,427 41,700 27,250 254,175 93,775 13,675 21,750

1,600,220

5,550

2,200 10,000 15,000

34,750

1,634,970

10,000 10,000

20,000

208,158

208,158

77,883,391

44,184

7,040,100

7,084,284

84,967,675

Final

1,033,468 110,427 41,700 27,250 254,175 93,775 13,675 21,750

1,596,220

5,550 -2,200
10,000 15,000

34,750

1,630,970

10,000 10,000

20,000

4,184 208,158

212,342

77,887,575

35,000 5,000 7,040,100

7,080,100

84,967,675

Actual

986,294 433,370 49,244 13,624 234,910 99,328 12,384 50,229

1,879,383

60,134 15,385 524 12,758 11,460

101,444

1,980,827

4,546 193,396

197,942

77,068,109

7,704

7,111,634

7,119,338

84,187,447

Variance with Final Budget

47,174 (322,943)
(7,544) 13,626 19,265
(5,553) 1,291
(28,479)

(283,163)

(54,584) (15,385)
1,676 (2,758) 3,540

(66,694)

(349,857)

10,000 10,000

20,000

(362) 14,762

14,400

819,466

27,296 -
(71,534)

(44,238)

775,228

Net Change in Fund Balance	$	(2,781,762)	$	(2,781,762)	$	(203,831)	$	2,572,931

(Concluded)

See accompanying notes to required supplementary schedules.

61

SHALER AREA SCHOOL DISTRICT

SCHEDULE OF THE SCHOOL DISTRICT'S PROPORTIONATE SHARE OF PSERS' NET PENSION LIABILITY

Last 10 Fiscal Years1

2019	2018	2017	2016	2015

School District's proportion of PSERS' net pension liability	0.2564%	0.2561%	0.2574%	0.2689%	0.2681%

School District's proportionate share of PSERS' net pension liability

School District's covered payroll

$	123,085,000	$

$	34,529,290	$

126,484,000	$

34,099,755	$

127,559,000	$

33,658,468	$

116,475,000	$

34,193,549	$

106,116,000

34,216,000

School District's proportionate share of PSERS' net pension liability as a percentage of its covered payroll

PSERS' plan fiduciary net position as a percentage of PSERS' total pension liability

356.4655%

54.00%

370.9235%

51.84%

378.9804%

50.14%

340.6344%

54.36%

310.1356%

57.24%

1 The amounts presented for each fiscal year were determined as of the measurement date, which is June 30 of the immediately preceding fiscal year. This schedule is intended to illustrate information for 10 years. However, until a full 10-year trend is compiled, the School District is presenting information for those years only for which information is available.

SCHEDULE OF SCHOOL DISTRICT CONTRIBUTIONS TO THE PSERS PENSION PLAN

Last 10 Fiscal Years2

2019	2018	2017	2016	2015

Contractually required employer contribution Contributions recognized by PSERS

Difference between contractually required employer contribution and contributions recognized by PSERS

School District's covered payroll

$	11,922,826	$ 11,922,826

$	-	$

$	36,410,597	$

11,200,198	$ 11,200,198

$

35,027,423	$

9,890,554	$ 9,890,554

-	$

34,099,755	$

8,309,361	$ 8,309,361

-	$

33,658,468	$

6,977,855 6,977,855

34,193,549

Contributions as a percentage of covered payroll	32.75%	31.98%	29.00%	24.69%	20.41%

2 The amounts presented for each fiscal year were determined as of the fiscal year-end date. This schedule is intended to illustrate information for 10 years. However, until a full 10-year trend is compiled, the School District is presenting information for those years only for which information is available.

See accompanying notes to required supplementary schedules.

62

SHALER AREA SCHOOL DISTRICT

SCHEDULE OF THE SCHOOL DISTRICT'S PROPORTIONATE SHARE OF PSERS' NET OPEB LIABILITY

Last 10 Fiscal Years1

2019	2018

School District's proportion of PSERS' net OPEB liability	0.2567%	0.2561%

School District's proportionate share of PSERS' net OPEB liability

School District's covered payroll

$	5,346,000	$

$	34,529,290	$

5,218,000

34,098,592

School District's proportionate share of PSERS' net OPEB liability as a percentage of its covered payroll

PSERS' plan fiduciary net position as a percentage of PSERS' total OPEB liability

15.4825%

5.5600%

15.3027%

5.7300%

1 The amounts presented for each fiscal year were determined as of the measurement date, which is June 30 of the immediately preceding fiscal year. This schedule is intended to illustrate information for 10 years. However, until a full 10-year trend is compiled, the School District is presenting information for those years only for which information is available.

SCHEDULE OF SCHOOL DISTRICT CONTRIBUTIONS TO THE PSERS PREMIUM ASSISTANCE

Last 10 Fiscal Years2

2019	2018

Contractually required employer contribution Contributions recognized by PSERS

Difference between contractually required employer contribution and contributions recognized by PSERS

School District's covered payroll

$	303,557	$ 303,557

$	$

$	36,410,597	$

292,884 292,884

-

35,027,423

Contributions as a percentage of covered payroll	0.8337%	0.8362%

2 The amounts presented for each fiscal year were determined as of the fiscal year-end date. This schedule is intended to illustrate information for 10 years. However, until a full 10-year trend is compiled, the School District is presenting information for those years only for which information is available.

See accompanying notes to required supplementary schedules.

63

SHALER AREA SCHOOL DISTRICT

SCHEDULE OF CHANGES IN THE SCHOOL DISTRICT'S TOTAL OPEB LIABILITY FOR ITS RETIREE PLAN

Last 10 Fiscal Years1

Total OPEB Liability: Service cost Interest
Changes of benefit terms

Differences between actual and expected experience Changes of assumptions
Benefit payments

Net Changes in Total OPEB Liability

2019

$	398,687	$ 287,813
-554,698
(1,908,605) (662,194)

(1,329,601)

2018

392,747 236,784 -
-(164,108) (734,156)

(268,733)

Total OPEB Liability - Beginning	8,039,481	8,308,214

Total OPEB Liability - Ending	$	6,709,880	$	8,039,481

1 The amounts presented for each fiscal year were determined as of the fiscal year-end date. This schedule is intended to illustrate information for 10 years. However, until a full 10-year trend is compiled, the School District is presenting information for those years only for which information is available.

See accompanying notes to required supplementary schedules.

64

SHALER AREA SCHOOL DISTRICT

NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

YEAR ENDED JUNE 30, 2019

1.	Budgetary Information

The Shaler Area School District (School District) is required by state law to adopt an annual budget for the General Fund. The budget is presented on the modified accrual basis of accounting, which is consistent with accounting principles generally accepted in the United States of America.

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

1. Prior to May of the preceding fiscal year, the School District prepares a budget for the next succeeding fiscal year beginning July 1. The operating budget includes proposed expenditures and the means of financing them.

2. A meeting of the Board of Directors (Board) is then called for the purpose of adopting the proposed budget after 30 days’ public notice of the meeting has been given.

3. Prior to July 1, the budget is legally enacted through passage of a resolution by the Board.

4. The budget must be filed with the Pennsylvania Department of Education by July 31 of the fiscal year.

The Public School Code allows the School Board to authorize budget transfer amendments during the year, but only during the last nine months of the fiscal year. The School Board approved various budget transfers throughout the school year. There were no supplemental budgetary appropriations made.

The School District expenditures may not legally exceed the revised budget amounts by amounts in total for the fund unless funds are received in excess of the budgeted State allocation levels. Accordingly, the legal level of budgetary control is at the object level within each function and fund. During fiscal year 2019, expenditures were budgeted at $77.9 million, while actual expenditures were $77 million.

65

SHALER AREA SCHOOL DISTRICT

NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

YEAR ENDED JUNE 30, 2019

2.	Factors and Trends in Actuarial Assumptions Used Under GASB Statement No. 68 for the PSERS Pension Plan

Actuarial Date/ Measurement Date
	
6/30/2018
	
6/30/2017
	
6/30/2016
	
6/30/2015
	
6/30/2014
	
6/30/2013
	
School District Fiscal Year
	
6/30/2019
	
6/30/2018
	
6/30/2017
	
6/30/2016
	
6/30/2015
	
6/30/2014
	
Discount Rate
	7.25%
	7.25%
	7.25%
	7.50%
	7.50%
	N/A
	
Salary Increases
	5.00%
	5.00%
	5.00%
	5.50%
	5.50%
	N/A

Mortality
	RP-2014, Scale
MP-2015
	RP-2014, Scale
MP-2015
	RP-2014, Scale
MP-2015
	
RP-2000
	
RP-2000
	
N/A

Changes in Benefits

None
	Vested Class T-E and T-F members can withdraw their accumulated contributions and interest

None

None

None

N/A
	
Actuarially Calculated Contribution Rate from Actuarial Date Shown Above

33.36%

32.60%

31.74%

29.20%

25.00%

20.50%
	
Fiscal Year in Which Actuarially Calculated Contribution Rate
Is Applied

6/30/2020

6/30/2019

6/30/2018

6/30/2017

6/30/2016

6/30/2015

N/A – Years pre-date required implementation date of GASB Statement No. 68; thus, actuarial valuation assumptions for these years are not presented.

66

SHALER AREA SCHOOL DISTRICT

NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

YEAR ENDED JUNE 30, 2019

3.	Factors and Trends in Actuarial Assumptions Used Under GASB Statement No. 75 for the PSERS Premium Assistance (OPEBs)

Actuarial Date/ Measurement Date
	
6/30/2018
	
6/30/2017
	
6/30/2016
	
6/30/2015
	
6/30/2014
	
6/30/2013
	
School District Fiscal Year
	
6/30/2019
	
6/30/2018
	
6/30/2017
	
6/30/2016
	
6/30/2015
	
6/30/2014
	
Discount Rate
	2.98%
	3.13%
	N/A
	N/A
	N/A
	N/A
	
Salary Increases
	5.00%
	5.00%
	N/A
	N/A
	N/A
	N/A

Mortality
	RP-2014, Scale
MP-2015
	RP-2014, Scale
MP-2015
	
N/A
	
N/A
	
N/A
	
N/A

Changes in Benefits

None
	Vested Class T-E and T-F members can withdraw their accumulated contributions and interest

N/A

N/A

N/A

N/A
	
Actuarially Calculated Contribution Rate from Actuarial Date Shown Above

0.84%

0.83%

0.83%

N/A

N/A

N/A
	
Fiscal Year in Which Actuarially Calculated Contribution Rate
Is Applied

6/30/2020

6/30/2019

6/30/2018

N/A

N/A

N/A

N/A – Years pre-date required implementation date of GASB Statement No. 75; thus, actuarial valuation assumptions for these years are not presented.

67

SHALER AREA SCHOOL DISTRICT

NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

YEAR ENDED JUNE 30, 2019

4.	Factors and Trends in Actuarial Assumptions Used Under GASB Statement No. 75 for the Retiree OPEB Plan

The retiree plan is not administered through a trust and assets are not accumulated in a trust to pay related benefits.

Actuarial Date
	6/30/2018
	6/30/2016

Measurement Date

School District Fiscal Year
	
6/30/2019

6/30/2019
	
6/30/2018

6/30/2018

6/30/2017

6/30/2016

6/30/2015

6/30/2014
	
Discount Rate
	3.87%
	3.58%
	N/A
	N/A
	N/A
	N/A
	
Salary Increases
	2.50%
	2.50%
	N/A
	N/A
	N/A
	N/A
	
Mortality
	MP-2018
	MP-2016
	N/A
	N/A
	N/A
	N/A
	
Assumed Healthcare Trend Rates
	
6.75%
	
7.00%
	
N/A
	
N/A
	
N/A
	
N/A

N/A – Years pre-date required implementation date of GASB Statement No. 75; thus, actuarial valuation assumptions for these years are not presented.

68

SUPPLEMENTARY INFORMATION

SHALER AREA SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2019

Federal CFDA
Federal Grantor / Pass-Through Grantor / Project Title	Number

Pass-Through Grantor's Number/ Grant Number

Grant Period Beginning/ Ending Dates

Program or Award Amount

Total Received for the Year

Accrued (Deferred) Revenue at July 1, 2018

Revenue
Recognized	Expenditures

Accrued (Deferred) Revenue at June 30, 2019

Amounts Passed Through to Subrecipients

U.S. Department of Education

Passed Through the Pennsylvania Department of Education: Title I Grants to Local Educational Agencies
Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies

Total Title I Grants to Local Educational Agencies

Supporting Effective Instruction State Grants Supporting Effective Instruction State Grants

Total Supporting Effective Instruction State Grants

Student Support and Academic Enrichment Program Student Support and Academic Enrichment Program

Total Student Support and Academic Enrichment Program

Passed Through the Allegheny County Intermediate Unit: Special Education Cluster:
Special Education Grants to States Special Education Preschool Grants Special Education Grants to States

Total Special Education Cluster

English Language Acquisition Grants

84.010	013-170379 84.010	013-180379 84.010	013-190379

84.367                      020-180379 84.367                      020-190379

84.424                      144-180379 84.424                      144-190379

84.027	RA-062-18-0-003 84.173                     131-19-0-003 84.027	RA-062-19-0-003

84.365	n/a

7/26/16-9/30/17	$ 8/15/17-9/30/18 8/21/18-9/30/19

8/15/17-9/30/18 8/21/18-9/30/19

8/15/17-9/30/18 8/21/18-9/30/19

7/1/17-6/30/18 7/1/18-9/30/19 7/1/18-9/30/19

7/1/18-6/30/19

628,032 575,251 570,299

133,242 123,629

13,013 41,525

948,700 5,928 884,706

1,284

$	40,673	$ 40,216
285,170

366,059

-86,922

86,922

-41,525

41,525

948,700 5,928
-

954,628

1,284

40,673	$ 160,865
-

160,865

56,741 -

56,741

8,365 -

8,365

948,700 --

948,700

-

-	$ -
570,299

570,299

-123,629

123,629

-41,525

41,525

-5,928
884,706

890,634

1,284

-	$ -
570,299

570,299

-123,629

123,629

-41,525

41,525

-5,928
884,706

890,634

1,284

-        $	-120,649	-285,129	-

405,778	-

56,741                                         -36,707                                         -

93,448	-

8,365                                        --                                         -

8,365	-

-                                         --                                         -
884,706	-

884,706	-

-	-

Total U.S. Department of Education

U.S. Department of Health and Human Services

Passed Through Pennsylvania Department of Human Services:

Medicaid Cluster - Medical Assistance Program	93.778

Total U.S. Department of Health and Human Services

U.S. Department of Agriculture

Passed Through Pennsylvania Department of Education: Child Nutrition Cluster:
School Breakfast Program                                                                                     10.553 School Breakfast Program                                                                                     10.553

Total 10.553

National School Lunch Program                                                                           10.555 National School Lunch Program                                                                           10.555

Total 10.555

Passed through the Pennsylvania Department of Agriculture:

National School Lunch Program	10.555

Total CFDA 10.555

Total Child Nutrition Cluster

Total U.S. Department of Agriculture

Total Expenditures of Federal Awards

N/A	N/A

N/A                          7/1/17-6/30/18 N/A                          7/1/18-9/30/19

N/A                          7/1/17-6/30/18 N/A                          7/1/18-9/30/19

N/A	7/1/18-9/30/19

N/A

N/A N/A

N/A N/A

138,564

1,450,418

10,029

10,029

17,633 116,733

134,366

76,986 560,071

637,057

105,944

743,001

877,367

877,367

$	2,337,814	$

1,174,671

-

-

17,633 -

17,633

76,986 -

76,986

(11,669)

65,317

82,950

82,950

1,257,621

1,627,371

10,029

10,029

-139,283

139,283

-650,419

650,419

101,604

752,023

891,306

891,306

$      2,528,706

1,627,371

10,029

10,029

-139,283

139,283

-650,419

650,419

101,604

752,023

891,306

891,306

$      2,528,706	$

1,392,297	-

-	-

-	-

-                                         -22,550                                        -

22,550	-

-                                         -90,348                                        -

90,348	-

(16,009)	-

74,339	-

96,889	-

96,889	-

1,489,186       $	-

See accompanying notes to schedule of expenditures of federal awards.

69

SHALER AREA SCHOOL DISTRICT

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

YEAR ENDED JUNE 30, 2019

Basis of Presentation

The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of the Shaler Area School District (School District) under programs of the federal government for the year ended June 30, 2019. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the School District, it is not intended to and does not present the financial position, changes in net position, or cash flows of the School District.

Summary of Significant Accounting Policies

The accompanying Schedule is presented using the modified accrual basis of accounting. Expenditures are recognized following the cost principles contained in the Uniform Guidance. The School District has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.

70

Shaler Area School District

Independent Auditor’s Reports Required by the Uniform Guidance

Year Ended June 30, 2019

Independent Auditor’s 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

Board of Directors                             We have audited, in accordance with the auditing standards Shaler Area School District              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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Shaler Area School District (School District), as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the School District’s basic financial statements, and have issued our report thereon dated January 24, 2020.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the School District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances 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 School District’s internal control.	Accordingly, we do not express an opinion on the effectiveness of the 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 a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Pursuing the profession while promoting the public good©	Pittsburgh | Harrisburg | Butler

www.md‐cpas.com                                                                                                State College | Erie | Lancaster 71

Board of Directors
Shaler Area School District
Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters

Compliance and Other Matters

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

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Pittsburgh, Pennsylvania January 24, 2020

72

Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance

Board of Directors	Report on Compliance for Each Major Federal Program Shaler Area School District
We have audited Shaler Area School District’s (School District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the School District’s major federal programs for the year ended June 30, 2019. The School District’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of the School District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the School District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the School District’s compliance.

Pursuing the profession while promoting the public good©	Pittsburgh | Harrisburg | Butler

www.md‐cpas.com                                                                                                State College | Erie | Lancaster 73

Board of Directors
Shaler Area School District
Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance

Opinion on Each Major Federal Program

In our opinion, the School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2019.

Report on Internal Control over Compliance

Management of the School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the School District’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on the internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the School District’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

74

Board of Directors
Shaler Area School District
Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Pittsburgh, Pennsylvania January 24, 2020

75

SHALER AREA SCHOOL DISTRICT

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

YEAR ENDED JUNE 30, 2019

I.	Summary of Audit Results

1. Type of auditor’s report issued:	Unmodified, prepared in accordance with Generally Accepted Accounting Principles

2. Internal control over financial reporting:

Material weakness(es) identified?	yes	no
Significant deficiencies identified that are not considered to be material weakness(es)? yes	none reported

3. Noncompliance material to financial statements noted?	yes	no

4. Internal control over major programs:

Material weakness(es) identified?	yes	no
Significant deficiencies identified that are not considered to be material weakness(es)? yes	none reported

5. Type of auditor’s report issued on compliance for major programs: Unmodified

6. Any audit findings disclosed that are required to be reported in accordance with 2 CFR Section 200.516(a)?	yes	no

7. Major Programs:

CFDA Number(s) 84.027, 84.173 84.367

Name of Federal Program or Cluster Special Education Cluster (IDEA)
Supporting Effective Instruction State Grants

8. Dollar threshold used to distinguish between type A and type B programs: $750,000

9. Auditee qualified as low-risk auditee?	yes	no

II. Findings related to the financial statements which are required to be reported in accordance with GAGAS.
No matters were reported.

III. Findings and questioned costs for federal awards

No matters were reported.

76

SHALER AREA SCHOOL DISTRICT

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS

YEAR ENDED JUNE 30, 2019

FINDING: 2018-001 Financial Reporting System

Statement of Condition: During the audit process, several material adjustments were made to the Shaler Area School District’s (School District) records related to year-end closing. Adjustments were required to: 1.) adjust local, state, and federal receivables and revenues; 2.) adjust capital funds accounts payable; and 3.) record Debt Service Fund activity in the accounting records.

Criteria: An entity should have procedures in place to identify any significant adjustments necessary to their external financial statements, including the posting of all adjustments necessary to present financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP).

Status: No similar conditions in the current year. Adjusting entries were posted by Management prior to the start of the audit or information was provided during the audit for material adjustments.

77