Single Audit Report 2009-2010

8/7/2019 Single Audit Report 2009-2010

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REPORT ONNORTHWESTERN LEHIGH SCHOOL DISTRICTSINGLE AUDIT REPORT

FISCAL YEAR ENDED JUNE 30, 2010


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NORTHWESTERN LEHIGH SCHOOL DISTRICTSingle Audit Report

For the Fiscal Year Ended June 30, 2010TABLE OF CONTENTS

Page (s)Introductory SectionTransmittal Letter .............................................................................................................................. 1Letter to Governance/Management ............................................................................................. 2 - 5Report Distribution List. ..................................................................................................................... 6

Financial SectionIndependent Auditor's Report ...................................................................................................... 7 - 8Management's Discussion and Analysis .................................................................................. 9 - 16

Basic Financial StatementsDistrict-wide Financial Statements:

Statement of NetAssets .................................................................................................... 17Statement of Activities ....................................................................................................... 18

Fund Financial Statements:Balance Sheet - Governmental Funds ............................................................................. 19Reconciliation of the Governmental Funds Balance Sheetto the Statement of Net Assets ..................................................................................... 20Statement of Revenues, Expenditures, and Changes in FundBalances - Governmental Funds .................................................................................. 21Reconciliation of the Govemmental Funds Statement of Revenues,Expenditures, and Changes in Fund Balance to the Statementof Activities .............................................................................................................. 22 - 23Statement of Net Assets - Proprietary Funds .................................................................. 24Statement of Revenues, Expenses, and Changes inNet Assets - Proprietary Funds .................................................................................... 25Statement of Cash Flows - Proprietary Funds .......................................................... 26 - 27Statement of Net Assets - Fiduciary Funds ..................................................................... 28

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For the Fiscal Year Ended June 30, 2010TABLE OF CONTENTS (continued)

Page (s)Statement of Changes in Net Assets - Fiduciary Funds ..................................................... 29Statement of Revenues, Expenditures, and Changes in FundBalance - Budget and Actual- General Fund .............................................................. 30

Notes to Basic Financial Statements .................................................................................... 31- 65Required Supplemental Information

Schedule of Funding Progress .............................................................................................. 66Supplemental Information:

Combining Balance Sheet - All Non-Major Governmental Funds .................................. 67Combining Statement of Revenues, Expenditures, and ChangesIn Fund Balances - All Non-Major Governmental Funds ........................................... 68Combining Statement of Fiduciary Net Assets - Private PurposeTrust Funds .................................................................................................................... 69Combining Statement of Changes in Fiduciary Net Assets -Private Purpose Trust Funds ........................................................................................ 69Combining Statement of Net Assets - All Enterprise Funds ........................................... 70Combining Statement of Revenues, Expenses, and Changes inNet Assets - All Enterprise Funds................................................................................. 71Combining Statement of Cash Flows - All Enterprise Funds ..................................... 72 73

Combining Balance Sheet - All Agency Funds ................................................................ 74Combining Statement of Changes in Assets and Liabilities -All Agency Funds ........................................................................................................... 75Combining Balance Sheet - All Capital Project Funds .................................................... 76Combining Statement of Revenues, Expenditures, and Changes inFund Balances - All Capital Project Funds ................................................................. 77General Fund - Schedule on Tax Collectors' Receipts ................................................... 78General Fund - Statement of Revenues, Expenditures, andChanges in Fund Balance ..................................................................................... 79 - 82

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Page (5)Food Service Fund - Statement of Revenues, Expenses, andChanges in Net Assets .................................................................................................. 83Food Service Fund - Statement of Net Assets ................................................................ 84Tiger Concession Fund - Statement of Revenues, Expenses, andChanges in Net Assets ................................................................................................... 85Payroll Fund - Statement of Receipts and Disbursements ............................................. 86Capital Reserve Fund - Statement of Revenues and Expenditures .............................. 862008 A Construction Fund -33 - Statement of Revenue and Expenditures .................. 872009 Construction Fund - Statement of Revenues and Expenditures........................... 882009 Bond Fund - Statement of Revenues and Expenditures ...................................... 892010 Bond Fund - Statement of Revenues and Expenditures ...................................... 89

General Long-Term Debt:Schedule on General Obligation Bonds - Series of 2001 ............................................... 90Schedule on General Obligation Bonds- Series of 2003 ................................................ 90Schedule on General Obligation Bonds - Series A of 2007 ........................................... 91Schedule on General Obligation Notes - Series A of 2007 ............................................ 92Schedule on General Obligation Bonds - Series of 2008 .............................................. 93Schedule on General Obligation Bonds - Series A of 2008 ........................................... 94Schedule on General Obligation Bonds - Series of 2009 .............................................. 95Schedule on General Obligation Bonds - Series of 2010 .............................................. 96

Single Audit SectionSchedule of Expenditures of Federal Awards ................................................................................ 97Notes to the Schedule of Expenditures of Federal Awards ........................................................... 98

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Independent Auditor's Report on Internal Control over Financial Reportingand on Compliance and Other Matters based on an Audit of Financial

Page (s)

Statements Performed in accordance with Government Auditing Standards ..................99 - 100Independent Auditor's Report on Compliance with Requirements that couldhave a Direct and Material Effect on each Major Program and on InternalControl over Compliance in accordance with OMB Circular A-133 ...............................101 - 102

Schedule of Findings and Questioned Costs .................................................................. 103 - 104

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I N TRODUCTORY SECT ION


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G O R M A N & ASSOCIATES, P.e.CERTIFIED PUBLIC ACCOUNTANTSra ,

Members of the BoardNorthwestern Lehigh School District6493 Route 309New Tripoli, PA 18066-9409

Members ofAmerican Insti tute of Certified Public AccouPennsylvania Insti tute o f Certified Public AccouFlorida Institute of Certified Public Accou

We have perforrned the Single Audit of the Northwestern Lehigh School District for the fiscal year endedJune 30, 2010, and have enclosed the Single Audit reporting package.The Single Audit was done to fulfill the requirernents of OMB Circular A-133, which entailed:

1. An audit of the basic financial staternents, and our opinion thereon;2. A review of cornpliance and on internal control over financial reporting based on an audit ofthe financial statements performed in accordance with Governmental Auditing Standards,and our report thereon;3. An examination of the Schedule of Expenditures of Federal Awards, and our report thereon;and,4. An opinion on compliance with requirements applicable to each major program and a reviewof internal control over compliance in accordance with OMB Circular A-133, and our report

thereon.As part of our report, we have enclosed our management letter.

Respectfully submitted,

December 21, 2010

1825 Franklin StreetNorthampton, Pennsylvania 18067 - 1573tele} 610/ 262/ 1280 fax} 610/262/ 1756www.gormanandassociates.org -1-


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GORMAN & ASSOCIATES, P.e., Cmmen Pm " Aceou", , , , ,

Board of School DirectorsDr. Mary Anne Wright, SuperintendentNorthwestern Lehigh School District6493 Route 309New Tripoli, PA 18066-9409

Members ofAmerican Institute of Certified Public Accoun, Pennsylvania Institute of Certified Publk Accoun! Florida Institute of Certified Pu.blk Accou

We have audited the financial statements of the governmental activities, business-type activities, eachmajor fund, and the aggregate remaining fund information of the Northwestern Lehigh School District forthe year ended June 30, 2010, and have issued our report thereon dated December 21,2010.As stated in our engagement letter, our responsibility, as described by professional standards, is toexpress opinions about whether your financial statements are fairly presented, in all material respects, inconformity with the U.S. generally accepted accounting principles. Our audit of the financial statementsdoes not relieve you or management of your responsibilities, including having compensating controls inplace to ensure our preparation of your financial statements and note disclosures are not materiallymisstated.We performed the audit according to the planned scope and timing previously communicated to you in ourmeeting about planning matter on September 10, 2010.Management is responsible for the selection and use of appropriate accounting policies. The significantaccounting policies used by the Northwestern Lehigh School District are described in the notes to thefinancial statements. No new accounting policies were adopted during this past year and the existingpolicies were properly applied. We did not discover any transactions entered into by the District thatlacked authoritative guidance or consensus. In addition, there are no significant transactions affecting thefinancial statements that have been recognized incorrectly in the wrong year.

Accounting estimates, which are part of the significant accounting policies, are an integral part of thefinancial statements and are based on management's knowledge and experience about past and currentevents and assumptions about future events. Certain accounting estimates are particularly sensitivebecause of their significance to the financial statements and because of the possibility that future eventsmay differ significantly from those expected. The most sensitive estimates affecting the financialstatements were depreciation taken on capital assets based upon the estimated useful life of each assetand calculated on the straight-line basis of depreciation, and the Actuary's Report on Other PostEmployment Benefits. We have evaluated the factors and assumptions used to develop these estimatesand have determined the estimates to be reasonable in relation to the financial statements taken as awhole.We wish to inform you that the disclosures in your financial statements are neutral, consistent, and clear.From time to time, certain disclosures are more sensitive than others due to their significance to financialstatement users. The most sensitive disclosures involve capital assets and long-term debt.We have requested certain representations from management that are included in the managementrepresentation letter provided to us on December 21,2010. We advise the governing body to request thisletter from management for their review. In conjunction with their representations, we wish to inform youwe did not encounter any significant difficulties in dealing with management and had no disagreementswith your management. To our knowledge, management did not find a need to converse with any otherindependent accountant on any related accounting or auditing issue.

1825 Franklin StreetNorthampton, Pennsylvania 18067 - 1573tele} 610/ 262/ 1280 fax} 610/262/1756www.gormanandassociates.org -2-


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Board of School Directors' Dr. Mary Anne Wright, SuperintendentIn addition, the representation letter provided to us, by management, confirmed there were no uncorrectedmisstatements. Management has recorded all of our adjusting journal entries, and has agreed to theconversion entries necessary to convert governmental funds and proprietary funds to governmentalactivities and business-type activities, respectively.In accordance with auditing standards, generally accepted in the United States of America, we haveacquired a sufficient understanding of the District and its environment, including its internal control, toassess the risk of material misstatements of the financial statements whether due to error or fraud, and todesign the nature, tirning, and extent of further audit procedures that were necessary to express anopinion on the 2009-10 basic financial statements.Our consideration of the District's internal control components was not designed for the purpose ofmaking detailed recommendations and would not necessarily disclose all Significant deficiencies withinthe components. Our audit procedures have been appropriately adjusted to compensate for anyobserved significant deficiencies. The following three paragraphs define the three different types ofdeficiencies that can occur:

A control deficiency in internal control exists when the design or operation of a controldoes not allow management or employees, in the normal course of performing theirassigned functions, to prevent, or detect and correct misstatements on a timely basis.A significant deficiency is a deficiency, or combination of deficiencies, in internal controlthat is less severe than a material weakness, yet important enough to merit attention bythose charged with governance.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'sfinancial statements will not be prevented or detected and corrected on a timely basis.

As the primary purpose of our audit is to form an opinion on the basic financial statements, you willappreciate that reliance must be placed on adequate methods of internal control as your principalsafeguard against errors and fraud which audit procedures may not disclose. The objective of internalcontrol over financial reporting is to provide reasonable, but not absolute, assurance that assets aresafeguarded against loss from unauthorized use and that financial records are reliable for preparingfinancial statements in accordance with generally accepted accounting principles and for maintaining theaccountability for assets. The concept of reasonable assurance recognizes that the cost of internal controlshould not exceed the related benefits; to operationalize this concept, management is required toformulate estimates and judgments of the cosVbenefit ratios of alternative controls.There are inherent limitations that should be recognized in considering the potential effectiveness ofinternal control over financial reporting. Errors can result from misunderstanding of instructions, mistakesof judgment, carelessness, fatigue, and other personnel factors. Control procedures whose effectivenessdepends upon the segregation of duties can be circumvented by collusion or by management. What'smore, any projection of internal control evaluations to future periods is subject to the risk that theprocedures may become inadequate because of changes in conditions or due to the deterioration of thedegree of compliance with control procedures.As an adjunct to our audit, we remained alert throughout for opportunities to enhance internal controls andoperating efficiency. These matters were discussed with management as the audit progressed and havesubsequently been reviewed in detail to formulate practical recommendations. We wish to thank your stafffor their courtesies and cooperation, which facilitated the efficient performance of audit procedures. Theremainder of this letter will explain any internal control deficiencies discovered during the audit, otherauditor recommendations, and other information pertinent to the District.

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Board of School Directors' Dr. Mary Anne Wright, SuperintendentA control deficiency is determined to be considered a material weakness or significant deficiency basedupon the magnitude of the problem as it pertains to a particular opinion unit. In other words, what isconsidered a significant deficiency in one fund may only be a control deficiency in another fund of greatersize.The following section in this governancelmanagement letter is separated by categories based onimportance, with any material weaknesses or significant deficiencies listed in the beginning:CONTROL DEFICIENCIES

Control Activities and Monitoring Components of Internal ControlsDue to the retirement of your former business manager and an additional staff person, the business officewas understaffed during a period of time this past fiscal year, including the period involved in the year-endclosing process. As a result of this temporary problem, we came across a number of issues during thisyear's audit that have not occurred in the past. We want you to know we have made all appropriateadjustments to your records to correct any problems we encountered. Although we expect these issues tobe corrected in the future, we are reporting them to you in accordance with our standards, as follows:

1. Payroll.:... During our review of payroll expenditures, we had difficulty in proving out payrollexpenditures. We discovered a special pay pertaining to the settlement of teacher contractsthat was not posted into the general ledger computer system. In addition, the payroll liabilityaccounts were incorrect and required adjustments by us to reflect the correct year-endbalance.2. Cash - During our review of bank reconciliations, we discovered transactions recorded on thebank statements were not recorded onto the books of the general fund at year end. Thereconciliations of these bank accounts did not agree with the recorded cash balances. Forexample, there was a deposit recorded to cash twice, checks were recorded against the cashaccount that should have been part of the accounts payable account, and wire transfersbetween bank accounts were not recorded.3. Interfund receivable and payable accounts were not reconciled and added to the problem inreconciling cash.4. Food Service Fund - During our review of the food service fund, we discovered a few journalentries that were posted incorrectly. As with the other issues, the limited staff preventedsomeone from reviewing the work of other personnel.

RECOMMENDA T/ONSAthletic Fund - Game ReceiptsAlthough the District appears to have good controls associated with athletic events in past years, we arerecommending an additional procedure to enhance the game sheets. Presently, the athletic director putsthe beginning and ending ticket stubs from the roll, before and after each event on the game sheet. Bydoing this, the difference between the beginning ticket number and the ending ticket number is supposedto reflect the number of tickets sold.We are recommending the actual tickets sold and counted at each event should be maintained by theathletic office and put into a lunch bag for each event. The bag should be marked on the outside with thedate and name of the event, along with the number of tickets sold that are stored inside the bag.


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

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

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

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


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F INANC I A L SECT ION


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G O R M A N & ASSOCIATES, P.C.CERTIFIED PUBLIC ACCOUNTANTS

fa ,Board of School DirectorsNorthwestern Lehigh School District6493 Route 309New Tripoli, PA 18066-9409

INDEPENDENT AUDITOR'S REPORT

Members ofAmerican Institute of Certified Public AccouPennsylvania Institute of Certified Public AccouFlorida Institute of Certified Public Accou

We have audited the accompanying financial statements of the govemmental activities, the business-typeactivities, each major fund, and the aggregate remaining fund information of the Northwestern LehighSchool District as of and for the year ended June 30,2010, which collectively comprise the District's basicfinancial statements, as listed in the table of contents. These financial statements are the responsibility ofthe District's management. Our responsibility is to express opinions on these financial statements basedon our audit.We conducted our audit in accordance with auditing standards, generally accepted in the United States ofAmerica, 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 andperform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principlesused and Significant estimates made, by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinions.In our opinion, the financial statements referred to above present fairly, in all material respects, therespective financial position of the governmental activities, the business-type activities, each major fund,and the aggregate remaining fund information of the Northwestem Lehigh School District as of June 30,2010, and the respective changes in financial position and cash flows, where applicable, thereof, and thebudgetary comparison of the general fund for the year then ended in conformity with accountingprinciples, generally accepted in the United States of America.In accordance with Government Auditing Standards, we have also issued our report dated December 21,2010, on our consideration of the Northwestern Lehigh School District's internal control over financialreporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, andgrant agreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results of that testing, and not to providean opinion on the internal control over financial reporting or on compliance. That report is an integral partof an audit performed in accordance with Govemment Auditing Standards and should be considered inassessing the results of our audit.Management's Discussion and Analysis, on pages 9 to 16, and the Schedule of Funding Progress onpage 66, are not a required part of the basic financial statements, but are supplementary informationrequired by accounting principles generally accepted in the United States of America. We have appliedcertain limited procedures, which consisted principally of inquiries of management regarding the methodsof measurement and presentation of the required supplementary information. However, we did not auditthe information and express no opinion on it.

1825 Franklin StreetNorthampton, Pennsylvania 18067 -1573tele} 610/ 262/ 1280 fax} 610/262/1756www.gormanandassociates.org -7-


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NORTHWESTERN LEHIGH SCHOOL DISTRICTManagement's Discussion and AnalysisFigure A-1 shows how the required parts of the Financial Section are arranged and relate to one another:

Government-wideStatements\.

FigureA-1Required Components ofNorthwestern Lehigh School District'sFinancial Report

ManagementDiscussionand AnalysisA( '\

Basic RequiredFinancial SupplementaryStatements Information

FundStatements./Y

Notes toTheFinancialStatements

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NORTHWESTERN LEHIGH SCHOOL DISTRICTManagement's Discussion and AnalysisFigure A-2 summarizes the major features of the District's financial statements, including the portion of theDistrict's financial operations they cover and the types of information they contain. The remainder of thisoverview section of management's discussion and analysis explains the structure and contents of each ofthe statements.

FigureA-2Major Features of Northwestern Lehigh School District'sGovernment-wide and Fund Financial Statements

FUND STATEMENTSi ' - " - " - " - ' - - ' - " - ' - ' - ' - ! - " - G ' o v e r n ' m e i 1 i ~ - - ' ! Governmental Proprietary Fiduciary, . ,L ___________ L ' . ' ! I c ! E 3 _ t ~ ~ E 3 f ! 1 E 3 ~ J ! l _ L ____ -"'_ut:lc!s__. ____ ____i = _ u r 1 c ! ~ ____ ___ f . l J . ' " ! ~ . ! ' __ _Scope i Entire District The activities of the Activities the Instances in! (except fiduciary Districtthat are not District operates which thei funds) proprietary or fiduciary, similar to private District is the, such as education, business - Food trustee or agentadministration and Services and to someonecommunity services Tiger else's

Concessions resources-ScholarshipFunds andL ___________L_______ .__ ._,,_._. ________ . ____. ____ .______ . _ , l \ , g E 3 ~ ~ y f . l J . ' " ! ~ . ! ' _ Required ! Statement of ! Balance Sheet Statement of Statement offinancial i Net Assets ' Net Assets Fiduciary Nets t a t emen t s ; i Statement of Assets;i Statement of: Activities Revenues,Expenditures, andChanges in FundBalance

Statement ofRevenues,Expenses andChanges in NetAssetsStatement of

Statement ofChanges inFiduciary NetAssets

L ___________ ,_____________ .. ___ ._. _______ , _ < : ; _ C l ~ i ! E I Q ' . ' ! s ______ . _______ _i Accounting basis i Accrual i Modified accrual i Accrual i Accrual! and ! accounting and ! accounting and current ! accounting and ! accounting andi measurement i economic i financial resources i economic i economic! focus ' resources focus ! focus ! resources focus ! resources! I I I. 1 i i i ocus:typeof------;-Aii-assets-and--roi1iyasseisexpeciea--;-Aliassetsanil-TAil-assets-and'-! asset/liability liabilities, both i to be used up and liabilities, both ! liabilities, bothi information financial and i liabilities that come financial and i financial andi capital, and i due during the year or capital, and i capital short-; short-term and [soon thereafter, no short-term and [term and long-L __ .___ ._._.__ ._ , _ I Q ~ . 9 . : t E 3 ~ f ! 1 _____ L c : . C l p i ! C I ! C l l l . ! ' E 3 ~ ~ i n g l . ~ ~ . e . 9 . _ JCl.n.g:JE3!f!1 _____ U E 3 ~ f ! 1 ______ .i Type of inflow- ! All revenues and Revenues for which All revenues and! All revenuesoutflow i expenses during cash is received during expenses during i and expensesinformation ! year, regardless or soon after the end year, regardless ! during year,[ of when cash is of the year; of when cash is [regardless of! received or paid expenditures when received or paid ! when cash is,i goods or services i received orhave been received i paidand payment is dueduring the year orC . _ . _ ._ ...._ _ ._ ......._ ._.i.. ._ ._ . _ . . . . .__ .____ . ~ ( ) S l ' " ! 1 h E 3 r E 3 ~ f ' - e . ~ ____ . _._._._ ... _._ ._._._ .._L . ____ _ _ _ _ _

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NORTHWESTERN LEHIGH SCHOOL DISTRICTManagement's Discussion and AnalysisOVERVIEWOF FINANCIAL STA TEMENTSGovernment-wide StatementsThe governrnent-wide statements report information about the District as a whole using accountingmethods similar to those used by private-sector companies. The focus of the Statement of Net Assets (the"unrestricted net assets") is designed to be similar to a bottom line for the District and its governmental andbusiness-type activities. This statement combines and consolidates governmental fund's current financialresources (short-term spendable resources) with capital assets and long-term obligations.The Statement of Activities is focused on both the gross and net cost of various activities, which areprovided by the governmenfs general tax and other revenues. This is intended to summarize and simplifythe user's analysis of the cost of various governmental services and/or subsidies to various business-typeactivities.The two government-wide statements report the Districfs net assets and how they have changed. Netassets, the difference between the Districfs assets and liabilities, are one way to measure the Districfsfinancial health or position. Over time, increases or decreases in the Districfs net assets are an indicationof whether its financial health is improving or deteriorating, respectively.The government-wide financial statements of the District are divided into two categories.

Governmental activities - All of the Districfs basic services are included here, such as instruction,administration and community services. Property taxes, state and federal subsidies, and grantsfinance most of these activities. Business-type activities - The District conducts food service and stadium concession (TigerConcessions) operations and charges fees to staff, students and visitors to cover the costs.

Fund StatementsThe Districfs fund statements provide detailed information about the most significant funds - not theDistrict as a whole. Some funds are required by state law and by bond requirements.

Governmental Funds - Most of the Districfs activities are reported in governmental funds, which. focus on the determination of financial position and change in financial position, not on incomedetermination. They are reported using an accounting method called modified accrual accounting,.which measures cash and all other financial assets that can readily be converted to cash. Thegovernmental fund statements provide a detailed short-term view of the Districfs operations and theservices it provides. Governmental fund information helps the reader determine whether there aremore or less financial resources that can be spent in the near future to finance the Districfsprograms. The relationship (or differences) between governmental activities (reported in theStatement of Net Assets and the Statement of Activities) and governmental funds is reconciled in thefinancial statements. Governmental funds include the General Fund, Capital Reserve Fund, CapitalProjects Funds and the Debt Services Fund.Proprietary Funds - These funds are used to account for the Districfs activities that are similar tobusiness operations in the private sector, or where the reporting is on determining net income,financial position, or changes in financial position. These funds have a significant portion of fundingthrough user charges. When the District charges customers for services, these services aregenerally reported in proprietary funds. The Food Service and Tiger Concessions Funds are theDistrict's proprietary funds and are the same as the business-type activities reported in thegovernment-wide statements, but provide additional detail and information, such as cash flows.

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NORTHWESTERN LEHIGH SCHOOL DISTRICTManagement's Discussion and AnalysisGovernment-wide StatementsStatement ofNet AssetsThe following table reflects the Condensed Statement of Net Assets.

2010Govern- BusillE!S&rrental Type

Activities Activities Total (1)Current &arer_ $ 18,888,457 $ 85,873 $ 18,932,064Non-Current _ 64,618,647 243,321 64,861,968

Total Assets $ 83,507,104 $ 329,194 $ 83,794,032Current Uroilities 5,481,303 78,716 5,517,753Non-Current Uabilities 54,292,036 6,277 54,296,315

Total Uabilities 59,773,341 64,993 59,816,066N e t ~ s : Invested in Ga;>tal_,netof related debt 13,745,795 243,321 13,989,116

Restrtcted 221,186 - 221,186Unrestrtded 9,766,782 860 9,767,682

Total NetAssets 23733,763 244,201 23,977,964Total Uabilities and NetAssets $ 83,507,104 $ 329,194 $ 83,794,032

Govern-rrentalActivities

$ 17,934,47854,015,615$ 71,850,083

4,913,61247,270,32252,183,934

13,060,276365,710

6,320,17319,786,159

$ 71,950,083

2009Business-TypeActivities Total (1)

$ 81,343 $ 18,002,769286,283 54,281,898$ 347,626 $ 72,284,667

43,519 4,944,0794,153 47,274,47547,672 52,218,554

286,283 13,326,559- 365,71033,671 6,353,644299,954 20,086,113

$ 347,626 $ 72,264,667(1) Internal balances are eliminated in the total column as they do not represent assets or liabilities ofthe total District.

Most of the District's net assets are invested in capital assets (buildings, land and equipment). TheDistrict's restricted net assets are for capital projects, retirement of long-term debt and other restrictions.The remaining unrestricted net assets are a combination of reserved, designated and undesignatedamounts. The reserved and designated balances are amounts set-aside to fund the next year'sappropriations, future PSERS and GASB #45 obligations, future medical rate increases, capital projects,and buses as planned by the District.The Changes in Net Assets takes the information from the Statement of Activities and rearranges it slightlyto present the total revenues and expenses and increases (decreases) in net assets for the year.

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NORTHWESTERN LEHIGH SCHOOL DISTRICTManagement's Discussion and AnalysisStatement ofActivitiesThe following table reflects the revenues and expenses for the current period,

2010Govern- Business- Governmental Type mental

REVENUES Activities Activities Total ActivitiesProgram revenues:Charges for services $ 129,894 $ 596,908 726,802 $ 88,859Operating grants & contributions 5,403,303 279,037 5,682,340 4,525,119Capital grants & contributions 565,356 - 565,356 642,728General revenues: -Property taxes 21,361,065 - 21,361,065 20,665,813Other taxes 2,235,024 - 2,235,024 2,393,833Grants, subsidies & contributions, 5,492,801 5,492,801 5,979,894

not restricted 444,367 - 444,367 645,408Investment earnings 208,193 580 208,773 85,818Other - -Gain (Loss) on sale of capital assets (297) - (297) (2,205)Extraordinary items - - - -

TOTAL REVENUES 35,839,706 876,525 36,716,231 35,025,267EXPENSESInstruction 18,094,450 - 18,094,450 17,343,247Instructional student support 2,242,811 - 2,242,811 2,357,861Admin, & Fin'l support services 2,731,512 - 2,731,512 2,791,748Oper, & Maint, of plant svcs, 3,611,293 - 3,611,293 3,731,320Pupil Transportation 2,017,450 - 2,017,450 2,286,075Student activities 556,015 - 556,015 801,323Community services 5,000 - 5,000 5,727Debt Service 2,019,785 - 2,019,785 1,766,460Unallocated depreciation expense 583,786 - 583,786 589,178Proprietary Funds - 942,278 942,278 -TOTAL EXPENSES 31,862,102 942,278 32,804,380 31,672,939Income (Loss) Before Contributions 3,977,604 (65,753) 3,911,851 3,352,328Transfers In (Out) (10,000) 10,000 - (10,000)Change in Net Assets 3,967,604 (55,753) 3,911,851 3,342,328Total Net Assets - Beginning 19,766,159 299,954 20,066,113, 16,423,831Total Net Assets - Ending $ 23,733,763 $ 244,201 $ 23,977,964 $ 19,766,159

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2009Business-

TypeActivities Total

$ 668,021 756,880251,392 4,771,821- 642,728-- 20,665,813- 2,393,8335,979,894- 645,408616 86,434- -

(3,642) (5,847)- -916,387 35,936,964

- 17,343,247- 2,357,861- 2,791,748- 3,731,320- 2,286,075- 801,323- 5,727- 1,766,460- 589,178934,597 934,597934,597 32,607,536(18,210) 3,334,11810,000 -(8,210) 3,334,118

308,164 16,731,995$ 299,954 $ 20,066,113


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THE DISTRICT FUNDSGovernmental Funds

NORTHWESTERN LEHIGH SCHOOL DISTRICTManagement's Discussion and Analysis

As of June 30, 2010, the governmental funds reported a combined fund balance of $14,931,895, whichincreased from the prior year of $848,009 (or - 6.0%). The increase in the combined govemmental fundbalance is the net effect of the increase in the General Fund with a decrease in the Capital Projects Fund(construction fund). The fund balance of the Capital Projects Fund decreased to $4,189,871, whichdecreased from prior year by $2,724,826 (or 39.4%), as of June 30, 2010. As of June 30,2010, the CapitalReserve Fund balance was $1,629,227. The General Fund experienced an $3,407,593 net increase in fundbalance.CAPITAL ASSETS AND DEBT ADMINISTRATIONCapital assetsAs of June 30,2010, the District had $64,167,656 invested in a broad range of capital assets includingland, buildings, fumiture and equipment, which represents a net increase (additions less retirements anddepreciation) of $10,478,660 or 19.5 % from the end of last year. Detailed information regarding capitalasset activity is included in the notes to the basic financial statements (Note 5).Debt outstandingAs of June 30, 2010, the District had $55,380,000 in debt (bonds and notes) outstanding compared to$48,205,000 as of June 30, 2009. This represents an increase of $7,715,000 or 14.9%. Other obligationsinclude accrued vacation pay and sick leave for specific employees of the District.More detailed information regarding our long-term liabilities is included in the notes to the basic financialstatements (Note 5).ECONOMIC CONSIDERA TlONSThe District expects minimal growth in real estate assessed value due to the economic conditions ofreduced sales of existing properties and delays in new construction. The District expects decreasedearned income tax revenues. The District has committed to certain additions, renovations, alterations andimprovements to District facilities including the high school, middle school, transportation andmaintenance, and the District administrative offices.Beginning January 1, 2009 the District entered into contract negotiations with the professional employees.On April 21,2010, the association and the School signed a Collective Bargaining Agreement that expiresJune 30, 2012.During 2009-2010 the District stayed within the adjusted ECIISAWW and did not utilize any exceptions.

CONTACTING THE DISTRICT FINANCIAL MANAGEMENTOur financial report is designed to provide our citizens, taxpayers, parents, students, investors andcreditors with a general overview of the District's finances and to show the Board's accountability for themoney the District receives. If you have questions about this report or wish to request additional financialinformation, please contact Leslie Frisbie, BUSiness Administrator, at Northwestern Lehigh School District,6493 Route 309, New Tripoli, PA 18066, (610) 298-8661.

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BAS IC F INANC I A L STATEMENTS


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Northwestern Lehigh School Distr ictStatementof Net AssetsAs of June 30, 2010

PRIMARY GOVERNMENTGOVERNMENTAL BUSINESSTYPEACTIVITIES ACTIVITIES TOTAL

ASSETSCURRENT ASSETS:Cash and cash equivalents $ 17,071,594 $ 56,950 $ 17,128,544InvestmentsReceivables, net 664,194 664,194Internal Balances 42,124 142 (1)Due from Component UnitDue From Other Governments 600,136 11,662 611,798Other Receivables 203,196 1,838 205,034Inventories 222,522 11,632 234,154Prepaid Expenses 84,691 3,649 88,340

Other Current AssetsTOTAL CURRENT ASSETS 18,888,457 85,873 18,932,064------------- ------------- -------------NONCURRENT ASSETSRestricted Cash and Cash Equivalents 22,037 22,037Land 406,148 406,148Site Improvements (net of depreciation) 300,621 300,621Building and Bldg. Improvements (net of depreciation) 19,790,341 79,968 19,870,309Furniture and Equipment (net of depreciation) 1,020,937 163,353 1,184,290Construction in Progress 42,406,288 42,406,288Bond Issue Costs (net of amortization) 672,275 672,275

TOTAL NONCURRENT ASSETS 64,618,647 243,321 64,861,968TOTAL ASSETS $ 83,507,104 $ 329,194 $ 83,794,032

LIABILITIESCURRENT LIABILITIES:Internal Balances $ 142 $ 42,124 $ (1)Due to other governments 197,905 197,905Due to Primary GovernmentAccounts Payable 739,062 6,865 745,927Warrants Payable 30,312 30,312Current Portion of Long-Term Obligations 1,970,665 1,970,665Accrued Salaries and Benefits 1,988,648 15,751 2,004,399PayroH Deductions and WithholdingsDeferred Revenue 49,494 13,976 63,470Other Current Liabilities 505,075 505,075TOTAL CURRENT LIABILITIES 5,481,303 78,716 5,517,753NONCURRENT LIABILITIES:Bonds and Notes Payable 53,145,686 53,145,686Extended !erm Financing Agreements PayableLease Purchase ObligationsLong-Term Portion of Compensated Absences 617,351 2,124 619,475Other Retirement Benefits 94,598 4,153 98,751Net OPES Obligation 434,403 434,403

TOTAL LIABILITIES 59,773,341 84,993 59,816,068NET ASSETSInvested in capital assets, net of related debt 13,745,795 243,321 13,989,116RESTRICTED FOR:Retirement of Long-Term DebtCapital ProjectsOther Restrictions 221,186 221,186

Unrestricted (deficit) 9,766,782 880 9,767,662TOTAL NET ASSETS 23,733,763 244,201 23,977,964TOTAL LIABILITIES AND NET ASSETS $ 83,507,104 $ 329,194 $ 83,794,032

The Accompanying Notes are an integral part of these financial statements.(1) Internal balances represent the amount owed to or from the two types of activities within the Primary Government. Since internal balances do notrepresent assets or liabilities of the total Primary Government, their balances are eliminated in the "total" column (GASB Statement No. 34, para. 58).

17


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Northwestern Lehigh School DistrictBalance SheetGovernmental FundsAs of June 30, 2010

NON-MAJOR TOTALCAPITAL CAPITAL GOVERNMENTAL GOVERNMENTALGENERAL RESERVE PROJECT FUNDS FUNDSASSETS

Cash and cash equivalents $ 11,027,202 $ 1,471,841 $ 4,592,715 $ 1,874 $ 17,093,632InvestmentsTaxes Receivable, net 704,565 704,565Due from other funds 47,388 340,000 182,614 570,002Due from Other Governments 600,136 600,136Due from Component UnitOther Receivables 197,933 197,933InventoriesPrepaid E xpenditures 84,691 84,691Other Current Assets

TOTAL ASSETS $ 12,661,915 $ 1,811,841 $ 4,775,329 $ 1,874 $ 19,250,959LIABILITIES AND FUND BALANCESLIABILITIES:

Due to Other Funds $ 340,142 $ 182,614 $ $ $ 522,756Due to Other Governments 197,905 197,905Accounts Payable 153,607 585,458 739,065Warrants Payable 30,312 30,312Current Portion of Long-Term Debt 75,665 75,665Accrued Salaries and Benefits 1,988,648 1,988,648Payroll Deductions and Withholdings 102 102Deferred Revenues 754,059 754,059Other Current Liabilities 10,552 10,552

TOTAL LIABILITIES 3,550,992 182,614 585,458 4,319,064- -- -- -- -- -- -- - -- -- -- -- -- - ------------ ------------ ------------FUND BALANCES:Standard Fund Balance Reserves 84,691 84,691Specific Fund Balance Reserves 760,000 760,000Unreserved-Designated Fund Balances 4,030,104 4,030,104Unreserved-Undesignated Fund Balances -- General Fund 4,236,128 4,236,128- Capital Reserve Fund 1,629,227 1,629,227- Debt Service Fund 1,874 1,874

- Capital Projects Fund 4,189,871 4,189,871TOTAL FUND BALANCES 9,110,923 1,629,227 4,189,871 1,874 14,931,895TOTAL LIABILITIES AND FUND BALANCES $ 12,661,915 $ 1,811,841 $ 4,775,329 $ 1,874 $ 19,250,959

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

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Northwestern Lehigh School DistrictReconciliation of the Governmental Funds Balance Sheet

to the Statement of Net AssetsAs of June 30, 2010

TOTAL FUND BALANCES - GOVERNMENTAL FUNDS

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

Capital assets used in governmental activities are not financialresources and therefore are not reported as assets in governmentalfunds. The cost of the assets is $77,889,205 and the accumulateddepreciation is $13,964,870.

Additional receivables established that do not meet the availabilitycriteria reflected in the fund financial statements. This amountrepresents the difference between the prior year receivables andthe current year receivables established under the accrual basis ofaccounting.

Property taxes receivable will be collected this year, but are notavailable soon enough to pay for the current period's expendituresand therefore are deferred in the funds.

The governmental funds follow the purchase method of inventory;therefore no inventory is reflected on the balance sheet. However,the statement of net assets uses the consumption method ofinventory.

Long-term liabilities, including bonds payable, are not due andpayable in the current period and therefore are not reported asliabilities in the funds. Long-term liabilities at year end consist of:Bonds payableAccrued interest on the bondsAccounts PayableCompensated absencesOther Retirement Benefits

Net OPEB Obligation

TOTAL NET ASSETS - GOVERNMENTAL ACTIVITIES

$ (54,368,411)(494,421 )(617,351 )(94,598)(434,403)


-20-

$ 14,931,895

63,924,335

664,195

222,522

(56,009,184)

$ 23,733,763


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Northwestern Lehigh School DistrictStatement of Revenues, Expenditures, and Changes in Fund Balances

Governmental FundsFor the Year Ended June 30, 2010

REVENUESLocal SourcesState SourcesFederal Sources

TOTAL REVENUESEXPENDITURESInstructionSupport ServicesOperation of Non-Instructional ServicesCapital Outlay

Debt ServiceTOTAL EXPENDITURES

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURESOTHER FINANCING SOURCES (USES),

Bond ProceedsRefunding Bond ProceedsBond PremiumInterfund Transfers InSale/Compensation for Fixed AssetsPayment to bond refunding escrow agentRefunds of Prior Year ReceiptsOperating Transfers Out

TOTAL OTHER FINANCING SOURCES (USES)SPECIAUEXTRAORDINARY ITEMSSpecial Items

Extraordinary ItemsNET CHANGE IN FUND BALANCESFUND BALANCES BEGINNING

FUND BALANCES ENDING


CAPITAL CAPITALGENERAL RESERVE PROJECT

$ 24,692,834 $ 23,068 $ 170,82110,154,173988,13935,835,146 23,068 170,821------------ - - - - - - - - - - - - -----------17,974,105 7,82310,039,389 8,449 67,934635,72328,499 191,251 11,319,8903,403,51232,081,228 199,700 11,395,647

3,753,918 (176,632) (11,224,826)

8,500,000

340,000 4,886,1993,675

(350,000) (4,886,199)(346,325) 340,000 8,500,000

3,407,593 163,368 (2,724,826)5,703,330 1,465,859 6,914,697

$ 9,110,923 $ 1,629,227 $ 4,189,871

21

NONMAJOR TOTALGOVERNMENTAL GOVERNMENTAL

FUNDS FUNDS$ 50,000 $ 24,936,72310,154,173988,139

50,000 36,079,035- -- -- -- -- -- - - -- -- -- -- -- -17,981,928163,934 10,279,706635,72311,539,640155,000 3,558,512

318,934 43,995,509(268,934) (7,916,474)

8,500,00011,315,000 11,315,00050,629 50,6295,226,1993,675(11,094,821) (11,094,821)(5,236,199)

270,808 8,764,483

1,874 848,00914,083,886

$ 1,874 $ 14,931,895


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Northwestern Lehigh School DistrictReconciliation of the Governmental Funds

Statement of Revenues, Expenditures, and Changes in Fund Balanceto the Statement of ActivitiesFor the Year Ended June 30, 2010

NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDSAmounts reported for governmental activities in the statement of

activities are different because:

Governmental funds report capital outlays as expenditures. However, in thestatement of activities, the cost of those assets is allocated over theirestimated useful lives as depreciat ion expense. This is the amount bywhich capital outlays exceeded depreciation in the current period.

Depreciation expense $less - capital outlays

Some of the capital assets acquired this year were financed with capitalleases. The amount financed by the leases is reported in the governmentalfunds as a source of financing. On the other hand, the capital leases arenot revenues in the statement of activities, but rather constitute long-termliabilities.

In the statement of activities, only the gain on the sale of the capital assetsis reported, whereas in the governmental funds, the proceeds from the saleincrease financial resources. Thus, the change in net assets differs fromthe change in fund balance by the cost of fixed assets sold.Because some property taxes will not be collected for several months afterthe District's fiscal year ends, they are not considered as "available"revenues in the governmental funds. Deferred revenues decreased by thisamount this year.Repayment of bond principal is an expenditure in the governmental funds,but the repayment reduces long-term liabilities in the statement of netassets.

In the statement of activities, certain operating expenses--compensatedabsences (vacations) and special termination benefits (early retirement)-are measured by the amounts earned during the year. In the governmentalfunds; however, expenditures for these items are measured by the amountof financial resources used. This amount represents the difference betweenthe amount earned versus the amount used.SUB-TOTAL IN CHANGES BETWEEN BASIS OF ACCOUNTING

-22-

845,25711,370,030

$ 848,009

10,524,773

(297)

(19,364)

1,625,000

(113,066)12,865,055


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Northwestern Lehigh School DistrictReconciliation of the Governmental Funds

Statement of Revenues, Expenditures, and Changes in Fund Balanceto the Statement of Activities

For the Year Ended June 30, 2010

SUB-TOTAL IN CHANGES BETWEEN BASIS OF ACCOUNTING(CONT'D) $ 12,865,055

Interest on long-term debt in the statement of activities differs from theamount reported in the governmental funds because interest is recognizedas an expenditure in the funds when it is due, and thus requires the use ofcurrent financial resources. In the statement of activities, interest expenseis recognized as the interest accrues, regardless of when it is due. Thiswould include accumulated interest accreted on capital appreciation bonds.The additional interest accrued in the statement of activities over theamount due is shown here.

In the statement of activities, certain operating revenues are recognizedwhen earned versus the revenues using the modified accrual basis ofaccounting in the fund statements that are recognized when the funds areavailable. As such, the amount shown here represents the differencebetween earned revenues and revenues that are earned, but not available.Bond and Note proceeds provide current financial resources togovernmental funds, but issuing debt increases long-term liabilities in thestatement of assets. Refunding bond issues becomes a use of currentfinancial resources in governmental funds, but refundings represent thedifference between bond proceeds and refunding payments made to payingagents.

The governmental funds use the purchase method of inventory, where allitems purchased are charged to expenditures. However, the statement ofactivities is reflected on the consumption method of recording inventory typeitems; therefore, this adjustment reflects the inventory difference.

CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES


-23-

(86,272)

(223,344)

(8,584,126)

(3,709)$ 3,967,604


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Northwestern Lehigh School DistrictStatement of Net Assets

Proprietary Funds

ASSETSCURRENT ASSETS:Cash and cash equivalentsInvestmentsDue from other fundsDue From Other GovernmentsOther ReceivablesInventoriesPrepaid expensesOther Current Assets

TOTAL CURRENT ASSETSNON-CURRENT ASSETS:

Building & Bldg. Improvements (net)Machinery & Equipment (net)Other Long-Term Receivables

TOTAL NON-CURRENT ASSETSTOTAL ASSETS

LIABILITIESCURRENT LIABILITIES:

As of June 30, 2010

$

FOODSERVICE

6,9142,73411,6621,83811,6323,649

38,429-----------79,968159,875

239,843$ 278,272

NON-MAJORFUNDS

$ 50,036142

50,178-----------3,4783,478

$ 53,656

TOTAL

$ 56,9502,87611,6621,83811,6323,649

88,607-----------79,968163,353

243,321$ 331,928

Due to Other Funds $ 42,124 $ 2,734 $ 44,858Due to Other GovernmentsAccounts PayableCurrent Portion of Long-Term DebtAccrued Salaries and BenefitsPayroll Deductions and WithholdingsDeferred Revenue

TOTAL CURRENT LIABILITIESNON-CURRENT LIABILITIES:

Long-Term Portion of Compensated AbsencesOther Retirement Benefits

TOTAL NON-CURRENT LIABILITIESTOTAL LIABILITIES

NET ASSETSInvested in capital assets, with no related debtRestricted for Legal PurposesUnrestricted

TOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETS

6,86515,75112,676 1,30070,551 10,899- - - - - - - - - - - -----------

2,1244,1536,277

76,828 10,899----------- -----------239,843(38,399) 42,757201,444 42,757

$ 278,272 $ 53,656


-24-

6,86515,75113,97681,450-----------2,1244,1536,277

87,727-----------239,843

4,358244,201

$ 331,928


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

Proprietary FundsFo r the Year Ended June 30, 2010

FOOD NON-MAJORSERVICE FUNDSOPERATING REVENUES:

Food Service Revenue $ 566,537 $ 13,175Charges for ServicesOther Operating Revenues 11,531 5,665

TOTAL OPERATING REVENUES 578,068 18,840----------- -----------

OPERATING EXPENSES:Salaries 302,970 2,432Em ployae benefits 103,916 302Purchased Professional and Technical ServicesPurchased Property Service 23,353 10,476Other Purchased Services 2,632Supplies 451,631 11,921Depreciation 32,260 108Dues and FeesClaims and JudgmentsOther Operating Expenses 277

TOTAL OPERATING EXPENSES 917,039 25,239OPERATING INCOME (LOSS) (338,971) (6,399)

---.------- -----------

NON-OPERATING REVENUES {EXPENl!E lEarnings on investments 183 397Contributions and DonationsGain/Loss on Sale of Fixed AssetsState Sources 41,167 142Federal Sources 235,558Interest Expenses

TOTAL NON-OPERATING REVENUES (EXPENSES) 276,908 539INCOME (LOSS) BEFORE CONTRIBUTIONS (62,063) (5,860)

Capital contributions 2,170Transfers in (out) 10,000

CHANGES IN NET ASSETS (49,893) (5,860)TOTAL NET ASSETS - BEGINNING 251,337 48,617

TOTAL NET ASSETS - ENDING $ 201,444 $ 42,757


-25-

TOTAL$ 579,712

17,196596,908- - - - - - - - - - -305,402104,21833,8292,632

463,55232,368

277942,278

(345,370)-.---------

580

41,309235,558277,447(67,923)

2,17010,000

(55,753)299,954

$ 244,201


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Northwestern Lehigh School DistrictStatement of Cash Flows

Proprietary FundsAs of June 30, 2010

CASH FLOWS FROM OPERATING ACTIVITIESCash Received from UsersCash Received from Assessments made to Other FundsCash Received from Earnings on InvestmentsCash Received from Other Operating RevenueCash Payments to Employees for ServicesCash Payments for Insurance ClaimsCash Payments to Suppliers for Goods and ServicesCash Payments to Other Operating Expenses

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIESCASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIESLocal SourcesState SourcesFederal SourcesNotes and Loans ReceivedInterest Paid on Notes/Loans

Operating Transfers In (Out)NET CASH PROVIDED BY (USED FOR) NON-CAPITAL FINANCING ACTIVITIES

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIESFacilities Acquisition/Const.llmprovement Svcs.Capital ContributionsGain/Loss on Sale of Fixed Assets (Proceeds)

NET CASH PROVIDED BY (USED FOR) CAPITAL AND RELATED FINANCING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIESEarnings on InvestmentsPurchase of Investment Securities/Deposits to Investment PoolsWithdrawals from Investment PoolsProceeds from Sale and Maturity of Investment Securities

NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIESNET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTSCASH AND CASH EQUIVALENTS - BEGINNING OF YEARCASH AND CASH EQUIVALENTS - END OF YEAR

-26-

FOODSERVICE

$ 560,701

12,965(405,062)(386,986)

(277)(218,659)------------

40,944171,900

10,000222,844- - - - - - - - - - - -(5,820)2,170

(3,650)- - - - - - - - - - - -183

183

7186,196

$ 6,914

NON-MAJORFUNDS TOTAL

$ 13,033 $ 573,734

5,665 18,630(2,734) (407,796)

(13,851 ) (400,837)(277)

2,113 (216,546)- -- -- -- -- -- - - -- -- -- -- -- -142 41,086

171,900

10,000142 222,986- - - - - - - - - - - - ------------

(3,586) (9,406)2,170

(3,586) (7,236)------------ ------------397 580

397 580(934) (216)

50,970 57,166

$ 50,036 $ 56,950


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Northwestern Lehigh School DistrictStatementof Cash FlowsProprietary FundsAs of June 30, 2010

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

OPERATING INCOME (LOSS)

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASHPROVIDED BY (USED FOR) OPERATING ACTIVITIESDepreciation and Net AmortizationProvision for Uncollectible AccountsDonated Commodities Used

CHANGE IN ASSETS AND LIABILITIES:(Increase) Decrease in Accounts Receivable(Increase) Decrease in Advances from Other Funds(Increase) Decrease in Inventories(Increase) Decrease in Prepaid Expenses(Increase) Decrease in Other Current AssetsIncrease (Decrease) in Accounts PayableIncrease (Decrease) in Accrued Salaries and BenefitsIncrease (Decrease) in Advances to Other FundsIncrease (Decrease) in Deferred Revenue

TOTAL ADJUSTMENTS

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

The Accompanying Notes are an integral part of these financial statements.-27-

FOODSERVICE

$ (338,971)

32,26059,365

(1,452)(2,639)1,580(311)(245)1,82429,072858

120,312$ (218,659)

NON-MAJORFUNDS

$ (6,399)

$

108

(142)

5,8422,734(30)8,5122,113 $

TOTAL(345,370)

32,36859,365

(1,452)(2,781)1,580(311)5,5971,824

31,806828

128,824(216,546)


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ASSETSCash and cash equivalentsInvestmentsDue from Other FundsOther ReceivablesPrepaid ExpensesOther Current Assets

TOTAL ASSETS

LIABILITIESAccounts PayableIntergovernmental PayableDue to Other FundsDue to Student ClubsOther Current Liabilities

TOTAL LIABILITIES

NET ASSETSRestrictedUnrestricted

TOTAL NET ASSETS

Northwestern Lehigh School DistrictStatement of Net AssetsFiduciary FundsAs of June 30, 2010

PENSION ANDPRIVATE OTHER EMPLOYEEPURPOSE BENEFITTRUST TRUST$ 131,626 $

$ 131,626 $

$ - $ -

131,626$ 131,626 $


-2S-

AGENCYFUNDS$ 121,088

$ 121,088

$ 8,449

5,264106,916

459121,088

$


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Northwestern Lehigh School DistrictStatementof Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual-General Fund

REVENUESLocal SourcesState SourcesFederal Sources

TOTAL REVENUESEXPENDITURES

Regular InstructionSpecial ProgramsVocational ProgramsOther Instructional ProgramsNon-Public School ProgramsAdult Education ProgramsCommunity/Junior College Ed. ProgramsPupil Personnel ServicesInstructional Staff ServicesAdministrative ServicesPupil HealthBusiness ServicesOperation & Maintenance of Plant ServicesStudent Transportation ServicesCentral Support ServicesOther Support ServicesStudent ActivitiesCommunity ServicesFacilities, Acquisition and ConstructionDebt Service

TOTAL EXPENDITURESExcess (deficiency) of revenues over expendituresOTHER FINANCING SOURCES (USES)Proceeds From Extended Term Financing

Interfund Transfers InSale/Compensation for Fixed AssetsFund Transfers OutBudgetary Reserve

TOTAL OTHER FINANCING SOURCES (USES)Special ItemsExtraordinary Items

NET CHANGE IN FUND BALANCEFUND BALANCE - JULY 1, 2009

FUND BALANCE -JUNE 30, 2010

Forthe Year Ended June 30, 2010

ACTUALBUDGETED AMOUNTS (BUDGETARYORIGINAL FINAL BASISl

$ 24,585,867 $ 24,585,867 $ 24,692,83410,650,780 10,650,780 10,154,173232,000 232,000 988,13935,468,647 35,468,647 35,835,146

~ - - - - - - - - - - - - - - - - ~ ~ - - - ------------12,964,002 13,313,562 12,393,2814,475,161 4,538,125 4,242,765996,339 998,644 998,643

14,150 14,200 4,70732,361 32,3616,810 8,670 6,353284,662 298,332 295,9951,232,770 1,233,645 1,144,128800,057 838,096 776,969

1,857,194 1,877,869 1,709,674258,172 261,415 250,426557,675 623,317 606,015

3,642,152 3,750,487 3,300,0042,059,079 2,063,079 1,807,043436,327 455,892 408,181

35,000 36,950 36,949686,755 686,904 630,7236,084 6,084 5,000

28,500 28,4993,865,258 3,704,909 3,403,512

34,177,647 34,771,041 32,081,2281,291,000 697,606 3,753,918----------- ----------- ~ - ~ - - - - - - - - -

3,675(821,000) (697,606) (350,000)(470,000)

(1,291,000) (697,606) (346,325)

3,407,5935,283,976 5,283,976 5,703,330

$ 5,283,976 $ 5,283,916 $ 9,110,923

The Accompanying Notes are an integral part of these financial statements.-30-

VARIANCE WITHFINAL BUDGET

POSITIVE(NEGATIVEl

$ 106,967(496,607)756,139366,499-----------920,281295,360

19,4932,3172,33789,517

61,127168,19510,989

17,302450,483256,036

47,711156,1811,084

1301,3972,689,8133,056,312-----------

3,675347,606351,281

3,407,593419,354

$ 3,826,941

BUDGETTDGAAP

DIFFERENCE$

$

ACTUALAMOUNTSGAAPBASIS

$ 24,692,83410,154,173988,139

$

35,835,146

12,393,2814,242,765998,6434,70732,3616,353

295,9951,144,128776,9691,709,674250,426606,015

3,300,0041,807,043408,181

36,949630,7235,000

28,4993,403,51232,081,228

3,753,918

3,675(350,000)(346,325)

3,407,5935,703,3309,110,923


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Northwestern Lehigh School DistrictNotes To Basic Financial StatementsFiscal Year Ended June 30,2010Note 1 Description of the School Distr ict and Reporting EntitySchool District

The Northwestern Lehigh School District is located in New Tripoli, Pennsylvania. The District tax baseconsists of the Townships of Heidelberg, Lowhill, Lynn, and Weisenberg.The Northwestern Lehigh School District is a unit established, organized, and empowered by theCommonwealth of Pennsylvania for the express purpose of carrying out, on the local level, theCommonwealth's obligation to public education, as established by the constitution of the Commonwealthand by the School Law Code of the same (Article II; Act 150, July 8, 1968).As specified under the School Law Code of the Commonwealth of Pennsylvania, this and all other schooldistricts of the state "shall be and hereby are vested as, bodies corporate, with all necessary powers tocarry out the provisions of this act" (Article II, Section 211).Board ofSchool DirectorsThe public school system of the Commonwealth shall be administered by a board of school directors, tobe elected or appointed, as hereinafter provided. At each election of school directors, each qualified votershall be entitled to cast one vote for each school director to be elected.The Northwestern Lehigh School District is governed by a board of nine School Directors who areresidents of the School District and who are elected every two years, on a staggered basis, for a four-yearterm.The Board of School Directors has the power and duty to establish, equip, furnish, and maintain asufficient number of elementary, secondary, and other schools necessary to educate every person,residing in such district, between the ages of six and twenty-one years, who may attend.In order to establish, enlarge, equip, furnish, operate, and maintain any schools herein provided, or to payany school indebtedness which the school district is required to pay, or to pay any indebtedness that mayat any time hereafter be created by the school district, the board of school directors are vested with all thenecessary authority and power annually to levy and collect the necessary taxes required and granted bythe legislature, in addition to the annual State appropriation, and are vested with all necessary power andauthority to comply with and carry out any or all of the provisions of the Public School Code of 1949.AdministrationThe Superintendent of SChools shall be the executive officer of the Board of School Directors and, in thatcapacity shall administer the School District in conformity with Board policies and the School Laws ofPennsylvania. The Superintendent shall be directly responsible to, and therefore appointed by, the Boardof School Directors. The Superintendent shall be responsible for the overall administration, supervision,and operation of the School District.The Director of Business and Fiscal Affairs, recommended by the Superintendent and appointed by theBoard of School Directors, shall supervise and coordinate all business aspects of the School District. Inthis capacity, he or she shall be responsible to insure that all work accomplished by him/her, or by personsunder his/her supervision, is in the best interests of the Northwestern Lehigh School District. The Directorof Business and Fiscal Affairs is directly responsible to the Superintendent.

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Reporting Entity

Northwestern Lehigh School DistrictNotes To Basic Financial StatementsFiscal Year Ended June 30, 2010

A reporting entity is comprised of the primary government, component units, and other organizations thatare included to insure that the financial statements of the School District are not misleading. The primarygovernment consists of all funds, departments, boards, and agencies that are not legally separate from theSchool District. For Northwestern Lehigh School District, this includes general operations, food service,and student related activities of the School District.Northwestern Lehigh School District is a municipal Corporation governed by an elected nine-memberboard. As required by accounting principles, generally accepted in the United States of America, thesefinancial statements are to present Northwestern Lehigh School District (the primary government) andorganizations for which the primary government is financially accountable. The School District isfinancially accountable for an organization if the School District appoints a voting majority of theorganization's governing board and (1) the School District is able to significantly influence the programs orservices performed or provided by the organization; or (2) the School District is legally entitled to or canotherwise access the organization's resources; the School District is legally obligated or has otherwiseassurned the responsibility to finance the deficits of, or provide financial support to, the organization; or theSchool District is Qbligated for the debt of the organization. Component units may also includeorganizations that are financially dependent on the School District in that the School District approved thebudget, the issuance of debt, or the levying of taxes. Based upon the above criteria, the NorthwesternLehigh Education Foundation is not considered to be a component unit of the School District.Joint VenturesLehigh Career and Technical InstituteThe School District is a participating member of the Lehigh Career and Technical Institute (LCTI). TheLCTI is run by a joint committee consisting of members from each participating district. No participatingdistrict apPoints a majority of the joint committee. The board of directors of each participating district mustapprove the LCTI's annual operating budget. Each participating district pays a pro-rata share of the LCTI'soperating costs based on the number of students attending the LCTI for each district. The District's shareof the LCTI's operating costs for 2009-10 was $998,643.On dissolution of the Lehigh Career and Technical Institute, the net assets of LCTI will be shared on a prorata basis of each participating district's current market value of taxable real property as certified by thePennsylvania State Tax Equalization Board. However, the District does not have an equity interest inLCTI as defined by GASB Statement No. 14, except for a residual interest in the net assets of LCTI upondissolution that should not be reported on the basic financial statements. Cornplete financial statements forthe LCTI can be obtained from the LCTI's administrative office at 2300 Main Street, Schnecksville, PA.Lehigh-Carbon Community CollegeThe District is a participating member of the Lehigh-Carbon Community College (LCCC). The LCCC isrun by a Board of Trustees elected by the partiCipating member districts' boards of directors. Noparticipating district appoints a rnajority of the Board of Trustees. A vote of two-thirds of all memberdistricts shall be required for approval of the LCCC's annual operating budget. The amount of the annualoperating costs of the LCCC shall be apportioned among the member districts on the basis of the numberof full-time equivalent students enrolled in LCCC and residing in the respective geographical areas of eachof the member districts. The District's share of LCCC's operating costs for 2009-10 was $295,995.

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On dissolution of the Lehigh-Carbon Community College, the net assets of LCCC will be shared on a prorata basis of each member district's current market value of taxable real property as certified by thePennsylvania State Tax Equalization Board.However, the District does not have an equity interest in LCCC as defined by GASB Statement No. 14,except for a residual interest in the net assets of LCCC upon dissolution that should not be reported on thebasic financial statements. Complete financial statements for the LCCC can be obtained from the LCCC'sadministrative office at 2300 Main Street Schnecksville, PA.Jointly Governed OrganizationsThe School District is a participating member of the Carbon-Lehigh Intermediate Unit (CLlU). The CLiU isrun by a jOint committee consisting of members from each participating district. No participating districtappoints a majority of the joint committee. The boards of directors of the participating districts mustapprove the CLlU's annual operating budget. However, the CLiU is self-sustaining by providing servicesfor fees to participating districts. The District has no on-going financial interest or responsibility in theCLiU. The CLiU contracts with participating districts to supply special education services, computerservices, and acts as a conduit for certain federal programs.Note 2 - Summary of significant accounting policiesThe financial statements of the District have been prepared in accordance with generally acceptedaccounting principles (GAAP) as applied to governmental units. The Governmental Accounting StandardsBoard (GASB) is the standard-setting body for governmental accounting and financial reporting. On June15, 1987, the GASB issued a codification of the existing Governmental Accounting and FinancialReporting Standards which, along with subsequent GASB pronouncements (Statements andInterpretations), constitutes GAAP for governmental units. The School District also applies FinancialAccounting Standards Board (FASB) statements and interpretations issued on or before November 30,1989, to its business-type activities and to its proprietary funds, provided they do not conflict with orcontradict GASB pronouncements. The more significant of these accounting policies are described belowand, where appropriate, subsequent pronouncements will be referenced.A. Basis of PresentationThe School District's basic financial statements consist of government-wide statements, including astatement of net assets, a statement of activities, and fund financial statements which provide a rnoredetailed level of financial information.Government-wide Financial Statements The statement of net assets and the statement of activitiesdisplay information about the School District as a whole. These statements include the financial activitiesof the primary government, except for fiduciary funds. The statements distinguish between those activitiesof the School District that are governmental and those that are considered business-type activities. Thestatement of net assets presents the financial condition of the governmental and business-type activities ofthe School District at year-end. The statement of activities presents a comparison between directexpenses and program revenues for each program or function of the School District's governmentalactivities and for two bUSiness-type activities of the School District. Direct expenses are those that arespecifically associated with a service, program or department and therefore clearly identifiable to aparticular program. Program revenues include charges paid by the recipient of the goods or servicesoffered by the program, grants, and contributions that are restricted to meeting the operational or capitalrequirements of a particular program, interest earned on grants that is required to be used to support aparticular program. Revenues which are not classified as program revenues are presented as generalrevenues of the School District, with certain limited exceptions. The comparison of direct expenses with

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Northwestern Lehigh School DistrictNotes To Basic Financial StatementsFiscal Year Ended June 30,2010program revenues identifies the extent to which each business activity or governmental function is selffinancing or draws from the general revenues of the School District.Fund Financial Statements During the year, the School District segregates transactions related tocertain School District functions or activities in separate funds in order to aid financial management and todemonstrate legal compliance. Fund financial statements are designed to present financial information ofthe School District at this more detailed level. The focus of govemmental and enterprise fund financialstatements is on major funds. Each major fund is presented in a separate column. Non-major funds areaggregated and presented in a single column. The fiduciary funds are reported by type.B. Fund Account ingThe School District uses funds to maintain its financial records during the year. A fund is defined as afiscal and accounting entity with a self balanCing set of accounts. There are three categories of funds:governrnental, proprietary and fiduciary.Governmental Funds Governmental funds are those through which most governmental functionstypically are financed. Governmental fund reporting focuses on the sources, uses and balances of currentfinancial resources. Expendable assets are assigned to the various governmental funds according to thepurposes for which they mayor must be used. Current liabilities are assigned to the fund from which theywill be paid. The difference between governmental fund assets and liabilities is reported as fund balance.The following are the School District's major governmental funds:

General FundThe General Fund is the general operating fund of the School District. It is used to account for allfinancial resources, except those required to be accounted for in another fund.Special Revenue FundsThe District has established a Capital Reserve Fund in accordance with the PA School Laws. Thisfund is used to account for the proceeds of specific revenue sources as outlined by school laws thatare legally restricted to expenditures for specified purposes.

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

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

2008A Construction Fund - 33This fund received the proceeds of $9,750,000 of General Obligation Bonds - Series A of 2008 tofund certain capital projects. .2009 Construction Fund

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Northwestern Lehigh School DistrictNotes To Basic Financial StatementsFiscal Year Ended June 30,2010Revenues - Exchange and Non-Exchange Transactions. Revenue resulting from exchangetransactions, in which each party gives and receives essentially equal value, is recorded on the accrualbasis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal yearin which the resources are measurable and become available. Available means that the resources will becollected within the current fiscal year or are expected to be collected soon enough thereafter to be usedto pay liabilities of the current fiscal year.Non-exchange transactions, in which the School District receives value without directly giving equal valuein retum, include property taxes, grants, entitlements and donations. Revenue from property taxes isrecognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements anddonations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibilityrequirements include timing requirements, which specify the year when the resources are required to beused or the fiscal year when use is first permitted, matching requirements, in which the School Districtmust provide local resources to be used for a specified purpose, and expenditure requirements, in whichthe resources are provided to the School District on a reimbursement basis. On a modified accrual basis,revenue from non-exchange transactions must also be available before it can be recognized.E. Budgetary ProcessAn operating budget is adopted prior to the beginning of each year for the General Fund on the modifiedaccrual basis of accounting. The General Fund is the only fund for which a budget is legally required.In accordance with Act 1 of 2006, the Board shall annually, but not later than the first business meeting ofJanuary, decide the budget option to be used for the following fiscal year. The Board shall approve eitherthe Accelerated Budget Process Option or the Board Resolution Option.Accelerated Budget Process OptionUnder this option, a preliminary budget must be prepared 150 days pnor to the primary election. Underthis Option, the preliminary budget must be available for public inspection at least 110 days prior to theprimary election. The Board shall give public notice of its intent to adopt the preliminary budget at least 10days prior to the adoption. The adoption must occur at least 90 days prior to the primary election.If the preliminary budget exceeds the increase authorized by the Index, an application for an exceptionmay be filed with either a Court of Common Pleas with jurisdiction or PDE and made available for publicinspection. The Board may opt to forego applying for an exception by submitting a referendum questionseeking voter approval for a tax increase, in accordance with Act 1.The final budget shall include any necessary changes from the adopted preliminary budget. Any reductionrequired as the result of the failure of referendum shall be clearly stated. The final budget shall be madeavailable for public inspection at least 20 days pnor to final adoption. The Board shall annually adopt thefinal budget by a majority vote of all members of the Board prior to June 30.Board Resolution OptionUnder the Board Resolution Option, the Board shall adopt a resolution that it will not raise the rate of anytax for the following fiscal year by more than the Index. Such resolution shall be adopted no later than 110days prior to the primary election. At least 30 days prior to adoption of the final budget the Board shallprepare a proposed budget. The proposed budget shall be available for public inspection at least 20 daysprior to adoption of the budget. The Board shall give public notice of its intent to adopt at least 10 daysprior to adoption of the proposed budget. The Board shall annually adopt the final budget by a majorityvote of all members of the Board by June 30.Legal budgetary control is maintained at the sub-function/major object level. The PA School Code allowsthe School Board to make budgetary transfers between major function and major object codes only withinthe last nine months of the fiscal year, unless there is a two-thirds majority of the Board approving the

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Receivables and Payables


Activities between funds that are representative of lending/borrowing arrangements outstanding at the endof the fiscal year are referred to as "due to/from other funds". Any residual balances outstanding betweenthe governmental activities and business-type activities are reported in the government-wide financialstatements as "internal balances".Advances between funds, as reported in the fund financial statements, are offset by a fund balancereserve account in applicable governmental funds to indicate that they are not available for appropriationand are not expendable available financial resources.Property Tax LevyProperty taxes, which were levied during the fiscal year ended June 30, 2010, are recognized as revenuein the fund financial statements when received by the District during the fiscal year and also estimated tobe received by the District within sixty (60) days after the fiscal year ended.Property taxes that were levied during the current fiscal year, which are not estimated to be received withinsixty (60) days after the fiscal year-end, are recorded as receivable and deferred revenue in the fundfinancial statements.In the government-wide financial statements, all property taxes levied during the fiscal year are recognizedas revenue, net of estimated uncollectible amount.InventoriesOn government-wide financial statements, inventories are presented at the lower of cost or market on afirst-in, first-out basis, and are expensed when used. A physical inventory taken at June 30, 2010, shows$222,522 in the governmental activities column and $11,632 in the business-type activities column of thegovernment-wide statement of net assets.Inventory type items in governmental funds utilize the purchase method; that is, they are charged toexpenditures when purchased. There is no inventory shown as of June 30, 2010; therefore, there is nooffsetting reservation of fund balance.Inventory type items in Proprietary Funds use the consumption method, in which items are purchased forinventory and charged to expenses when used. The District has the following Proprietary Funds: (1) FoodService Fund and (2) Tiger Concession Fund. Inventory within these funds consists of donatedcommodities, which are valued at U.SD.A.'s approximate costs, supplies, and purchased food.Inventories on hand at June 30, 2010, consist of:

Purchased FoodPurchased SuppliesDonated CommoditiesTOTAL

Prepaid Expenses

$

$

4,4564,1812,995

11,632

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

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Investments

Northwestern Lehigh School DistrictNotes To Basic Financial StatementsFiscal Year Ended June 30,2010

Permitted investments for Pennsylvania School Districts are defined in the Public School Code of 1949 as:5. United States Treasury Bills;6. Short-term obligations of the United States Government or its agencies or instrumentalities;7. Deposits in savings accounts or time deposits or share accounts of institutions insured by theF.D.I.C; and,B. Obligations of the United States of America or any of its agencies or instrumentalities, theCommonwealth of Pennsylvania or any of its agencies or instrumentalities or any politicalsubdivision of the Commonwealth of Pennsylvania or any of its agencies or instrumentalities.

As of June 30,2010, the District had the following investments:

InvestmentPa. Local Government Investment TrustPA School District Liquid Asset FundTOTAL

Interest Rate Risk

Maturities Fair Value$ 22.042

31$ 22,073

The District does not have a formal investment policy that limits investment maturities as a means ofmanaging its expos

Documents

Single Audit Report 2009-2010