PRINCETON PUBLIC SCHOOLS Princeton, New Jersey Comprehensive Annual Financial Report for Year ended June 30, 2013 Princeton Public Schools Comprehensive Annual Financial Report For the Year Ended June 30, 2013 Princeton Public Schools Princeton, New Jersey Prepared by Princeton Public Schools Business Office Stephanie Kennedy Business Administrator, Board Secretary Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal 1 Organizational Chart 8 Roster of Officials 9 Independent Auditors and Advisors 10 Certificate of Excellence 11 FINANCIAL SECTION Independent Auditors' Report 12 Required Supplementary Information - Part I Management's Discussion and Analysis 15 Basic Financial Statements Government-wide Financial Statements: A-I Statement of Net Position 23 A-2 Statement of Activities 24 Fund Financial Statements: Governmental Funds: B-1 Balance Sheet 25 B-2 Statement of Revenues, Expenditures, and Changes in Fund Balances 26 B-3 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 27 Enterprise Fund: B-4 Statement of Net Position 28 B-5 Statement of Revenues, Expenses and Changes in Fund Net Position 39 B-6 Statement of Cash Flows 30 Fiduciary Funds: B-7 Statement of Fiduciary Net Position 31 B-8 Statement of Changes in Fiduciary Net Position 32 Notes to the Basic Financial Statements 33 (i) Table of Contents (continued) Page FINANCIAL SECTION (continued) Required Supplementary Information - Part II Budgetary Comparison Schedules: C-l Budgetary Comparison Schedule - General Fund - Budgetary Basis 61 C-l a Combining Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual- Budgetary Basis - Not Applicable NIA C-l b Budgetary Comparison Schedule - Education Jobs Fund Program Budgetary Basis - Not Applicable NI A C-2 Budgetary Comparison Schedule - Special Revenue Fund - Budgetary Basis 69 Note to the Required Supplementary Information C-3 Budget to GAAP Reconciliation 70 Supplementary Information Special Revenue Fund: E-l Combining Schedule of Program Revenues and Expenditures - Budgetary Basis 71 E-2 Schedule of Preschool Education Aid Expenditures­ Budgetary Basis 75 Capital Projects Fund: F-l Summary Schedule of Project Revenues, Expenditures, Project Balance and Project Status - Budgetary Basis 76 F-2 Summary Schedule of Project Expenditures 82 Enterprise Fund: G-l Statement of Net Position N/A G-2 Statement of Revenues, Expenses, and Changes in Fund Net Position N/A G-3 Statement of Cash Flows N/A (ii) Table of Contents (continued) Page FINANCIAL SECTION (continued) Supplementary Information (continued) Fiduciary Funds: H-1 Combining Statement of Fiduciary Net Position 83 H-2 Combining Statement of Changes in Fiduciary Net Position 84 H -3 Schedule of Cash Receipts and Cash Disbursements - Student Activity Agency Food 85 H -4 Schedule of Cash Receipts and Cash Disbursements - 86 Payroll Agency Fund Long-Term Debt: 1-1 Schedule of Serial Bonds Payable 87 1-2 Schedule of Obligations Under Capital Leases - Not Applicable N/A 1-3 Budgetary Comparison Schedule - Debt Service Fund 88 STATISTICAL SECTION - Other Information (Unaudited) Financial Trends: J-1 Net Position by Component 89 J-2 Changes in Net Position 90 J-3 Fund Balances, Governmental Funds 92 J-4 Changes in Fund Balances - Governmental Funds 93 J-5 General Fund Other Local Revenues by Source 94 Revenue Capacity: J-6 Assessed Value and Actual Value of Taxable Property 95 J-7 Property Tax Rates - Direct and Overlapping Governments 96 J-8 Principal Property Tax Payers 98 J-9 Property Tax Levies and Collections 99 Debt Capacity: J-lO Ratios of Outstanding Debt by Type 101 J-11 Ratios of Net General Bonded Debt Outstanding 102 J -12 Ratios of Overlapping Governmental Activities Debt 103 J-13 Legal Debt Margin Information 104 Demographic and Economic Information: J -14 Demographic and Economic Statistics 105 J-15 Principal Employers 106 J-16 Full-Time Equivalent District Employees by FooctionlProgram 107 Operating Information: J-17 Operating Statistics 108 J-18 School Building Information 109 J-19 Schedule of Required Maintenance for School Facilities 110 J-20 Insurance Schedule 111 (iii) Table of Contents (continued) SINGLE AUDIT SECTION K-1 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards 113 K-2 Report on Compliance For Each Major Federal and State Program and Report on Internal Control Over Compliance 115 K-3 Schedule A - Schedule of Expenditures of Federal Awards- Supplementary Information 118 K-4 Schedule B - Schedule of Expenditures of State Financial 119 Assistance - Supplementary Information K-5 Notes to Schedules of Expenditures of Federal Awards and State Financial Assistance 120 K-6 Schedule of Findings and Questioned Costs 123 K-7 Summary Schedule of Prior Year Audit Findings 127 (iv) Introductory Section Stephanie Kennedy Business Administrator/Board Secretary 25 Valley Road, Princeton, New Jersey 08540 t 609.806.4204 f 609 .806.4225 October 16, 2013 Honorable President and Members of the Princeton Board of Education Princeton Public Schools County of Mercer Princeton, New Jersey Dear Board Members and Constituents: The Comprehensive Annual Financial Report (“CAFR”) of the Princeton Public Schools (hereinafter, the “District”) (formerly known as the Princeton Regional School District) as of and for the year which ended June 30, 2013, is hereby submitted. Responsibility for both the accuracy of the data and completeness and fairness of the presentation, including all disclosures, rests with the management of the Board of Education (“Board”). To the best of our knowledge and belief, the data presented in this report is accurate in all material respects and is reported in a manner designed to present fairly the financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information at June 30, 2013, and the respective changes in financial position and cash flows, where applicable, for the year then ended. All disclosures necessary to enable the reader to gain an understanding of the District’s financial activities have been included. The CAFR is presented in four sections: introductory, financial, statistical, and single audit. The introductory section includes this transmittal letter (designed to complement Management’s Discussion and Analysis and should be read in conjunction with it), the District’s organizational chart, a roster of officials, independent auditors and advisors and the certificate of excellence in financial reporting. The financial section includes Management’s Discussion and Analysis, basic financial statements, required supplementary information and supplementary information, as well as the auditors’ report therein. The statistical section includes selected financial and demographic information, generally presented on a multi-year basis and is unaudited. The District is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget Circular A-133, “Audits of States, Local Governments, and Nonprofit Organizations,” and the New Jersey OMB Circular 04-04, “Single Audit Policy for Recipients of Federal Grants, State Grants, and State Aid Payments.” Information related to this single audit, including the independent auditors’ reports on internal control and compliance with applicable laws and regulations and findings and questioned costs, is included in the single audit section of this report. 1 1. Reporting Entity and Its Services The Princeton Public Schools is an independent reporting entity within the criteria adopted by the Governmental Accounting Standards Board (GASB). All funds and the government-wide financial statements of the District are included in this report. The Princeton Board of Education and all its schools constitute the District's reporting entity. The District provides a full range of educational services appropriate to grade levels PK through 12. These include regular education as well as special education for handicapped students. The District sends its vocational students to county vocational schools, which are more suited to provide that type of educational program. The District completed the 2012-2013 fiscal year with an average daily enrollment of 3,415 students, which is 37 students more than the previous year's average daily enrollment. The following chart details the changes in the average daily student enrollment of the District over the last five years: Average Daily Enrollment Fiscal Student Percent Year Enrollment Change 2012-13 3,415 1.10% 2011-12 3,378 (0.09) 2010-11 3,381 1.23 2009-10 3,340 (0.95) 2008-09 3,372 0.87 2. Economic Condition and Outlook The municipalities within the Princeton Public Schools, Princeton Township and Princeton Borough, both went through a property re-evaluation in 2010. The property values in both communities more or less doubled. Apparently, the tax for some residents increased while other residents' taxes decreased. The impact of this re-evaluation did not affect the budget of the school district. The two communities consolidated as of January 1, 2013 and this consolidation caused shifts in tax for some residents as well. The economy in the Princeton communities is flat and home properties are somewhat holding their value. Most of the undeveloped