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MERCER COUNTY SPECIAL

SERVICES SCHOOL DISTRICT

County of Mercer Board of Education

New Jersey

Comprehensive Annual Financial Report For the Year Ended

June 30, 2017

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Mercer County Special Services School District

Mercer County Special Services School District Hamilton

Mercer County, New Jersey

Comprehensive Annual Financial Report For the Year Ended June 30, 2017

Prepared by Business Office

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Table of Contents (continued)

INTRODUCTORY SECTION

Letter of Transmittal Organizational Chart Roster of Officials Independent Auditors and Advisors Certificate of Excellence in Financial Reporting

FINANCIAL SECTION

Independent Auditors' Report

Required Supplementary Information - Part I Management's Discussion and Analysis

Basic Financial Statements Government-wide Financial Statements:

A-1 Statement of Net Position A-2 Statement of Activities

Fund Financial Statements:

Governmental Funds:

Page

1 5 6 7 8

9

12

22 23

B-1 Balance Sheet 24 B-2 Statement of Revenues, Expenditures, and Changes in Fund Balances 25 B-3 Reconciliation of the Statement of Revenues, Expenditures and Changes

in Fund Balances of Governmental Funds to the Statement of Activities 26

Proprietary Funds: B-4 Statement of Net Position 27 B-5 Statement of Revenues, Expenses and Changes in

Net Position 28 B-6 Statement of Cash Flows 29

Fiduciary Funds: B-7 Statement of Fiduciary Net Position 30 B-8 Statement of Changes in Fiduciary Net Position 31

Notes to the Basic Financial Statements 32

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Table of Contents (continued) Page

FINANCIAL SECTION (continned)

Required Supplementary Information - Part II Schedule of the District's Proportionate Share of the Net Pension Liability- Public Employee's Retirement System (PERS) 66

Schedule of District Contributions - Public Employee's Retirement System (PERS) 67

Schedule of State's Proportionate Share of the Net Pension Liability Associated with the District- Teacher's Pension and Annuity Fund

(TPAF) 68

Required Supplementary Information - Part III Budgetary Comparison Schedules:

C-1 Budgetary Comparison Schedule - General Fund (Budgetary-Basis) 69 C-1 a Combining Schedule of Revenues, Expenditures, and Changes in

Fund Balance - Budget and Actual - (Budgetary-Basis) - Not Applicable NI A

C-1 b Community Development Block Grant - Budget and Actual -(Budgetary-Basis)-Not Applicable NIA

C-2 Budgetary Comparison Schedule - Special Revenue Fund (Budgetary-Basis) 72 Note to Required Supplementary Information

C-3 Budget to GAAP Reconciliation 73

Supplementary Information D School Based Budget Schedules - Not Applicable NI A

Special Revenue Fund: E-1 Combining Schedule of Program Revenues and Expenditures -

Budgetary Basis 7 4 E-2 Schedule of Preschool Education Program Aid Expenditures -

Budgetary Basis - Not Applicable NIA Capital Projects Fund:

F-1 Summary Schedule of Project Revenues, Expenditures, and Changes in Fund Balance 75

F-1 a- Schedule of Project Revenues, Expenditures, Project Balance and F-lf Project Status - Budgetary Basis 76 F-2 Summary Schedule of Project Expenditures -Not Applicable NIA

Enterprise Funds: G-1 Combining Statement of Net Position - Not Applicable NI A G-2 Combining Statement of Revenues, Expenses, and

Changes in Net Position - Not Applicable NI A G-3 Combining Statement of Cash Flows - Not Applicable NI A

ii

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Table of Contents (continued)

FINANCIAL SECTION (continued)

Supplementary Information (continued)

Fiduciary Funds:

Page

H-1 Combining Statement of Fiduciary Net Position 82 H-2 Combining Statement of Changes in Fiduciary Net Position - Not

Applicable NIA H-3 Schedule of Cash Receipts and Cash Disbursem*nts - Student Activity

Agency Fund 83 H-4 Schedule of Cash Receipts and Cash Disbursem*nts - Payroll Agency

Fund 84

Long-Term Debt: I-1 Schedule of Serial Bonds Payable - Not Applicable NIA I-2 Schedule of Obligations Under Capital Leases 85 I-3 Schedule of Revenues, Expenditures and Changes in Fund

Balance - Budget and Actual - Debt Service Fund- Not Applicable NIA

STATISTICAL SECTION (Unaudited) - Other Information

Financial Trends: J-1 Net Position by Component 86 J-2 Changes in Net Position 87 J-3 Fund Balances-Governmental Funds 90 J-4 Changes in Fund Balances, Governmental Funds 91 J-5 General Fund- Other Local Revenue by Source 92

Revenue Capacity: J-6 Assessed Value and Actual Value of Taxable Property NIA J-7 Direct and Overlapping Property Tax Rates NI A J-8 Principal Property Taxpayers (Current Year and Nine Years Ago) NIA J-9 Property Tax Levies and Collections NIA

Debt Capacity: J-10 Ratios of Outstanding Debt by Type NI A J-11 Ratios of General Bonded Debt Outstanding NI A J-12 Ratios of Overlapping Governmental Activities Debt NIA J-13 Legal Debt Margin Information NIA

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Table of Contents (continued)

STATISTICAL SECTION (Unaudited)- Other Information (continued)

Demographic and Economic Information: J-14 Demographic and Economic Statistics J-15 Principal Employers

Operating Information: J-16 Full-time Equivalent District Employees by Function/Program J-17 Operating Statistics J-18 School Building Information J-19 Schedule of Required Maintenance J-20 Insurance Schedule

SINGLE AUDIT SECTION

K-1 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

K-2 Report on Compliance For Each Major Federal and State Program and Report on Internal Control Over Compliance Required by the Uniform Guidance and New Jersey OMB 15-08

K-3 Schedule A- Schedule of Expenditures of Federal Awards -Supplementary Information

K-4 Schedule B - Schedule of Expenditures of State Financial Assistance - Supplementary Information

K-5 Notes to Schedules of Expenditures of Federal Awards and State Financial Assistance

K-6 Schedule of Findings and Questioned Costs - Part I - Summary of Auditor's Results

K-7 Schedule of Findings and Questioned Costs - Parts II and III -Schedule of Financial Statement Findings and Schedule of Federal and State Award Findings and Questioned Costs

K-8 Summary Schedule of Prior Year Audit Findings

iv

Page

93 NIA

94 95 96 97 98

99

101

104

105

106

109

111 113

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Introductory Section

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Kimberly J. Schneider, Ed. D. Superintendent

Honorable President and Members of the Board of Education

Mercer County SPECIAL SERVICES School District

Tanya Dawson Business Administrator/Board Secretary

November 30, 2017

Mercer County Special Services School District County of Mercer Hamilton, New Jersey 08690

Dear Board Members and Constituents:

The comprehensive annual financial report of the Mercer County Special Services School District ("District") for the fiscal year ended June 30, 2017, is hereby submitted. Responsibility for both the accuracy of the data and completeness and fairness of the presentation, including all disclosures, rests with the administration of the Board of Education. To the best of our knowledge and belief, the data presented in this report is accurate in all material aspects and is reported in a manner designed to present fairly the financial position and results of operations of the governmental-type activities, the business-type activities, each major fund of the District and the remaining aggregate fund information. All disclosures necessaty to enable the reader to gain an understanding of the District's financial activities have been included.

The comprehensive annual financial report is presented in four ( 4) 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 chatt, a list of principal officials and the Certificate of Excellence in Financial Rep01ting. The Financial section includes Management's Discussion and Analysis (immediately following the independent auditors' report) and the basic financial statements, footnotes and schedules, as well as the auditor's report thereon. 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 Title 2 U.S. Code of Federal regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) and the New Jersey OMB Circular 15-08, "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.

Administrative Offices· 1020 Old Trenton Road ·2°d Floor• Hamilton, NJ 08690 P. 609-631-2104 ·· f. 609-570-1154· E. tanya dawson@mcsssd,orq

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1) REPORTING ENTITY AND ITS SERVICES: Mercer County Special Services School District is an independent reporting entity within the criteria adopted by the Governmental Accounting Standards Board ("GASB"). All major funds of the District and the government­wide financial statements are included in this report. The Mercer County Special Services Board of Education and its schools constitute the District's repo1ting entity.

The District provides a full range of special needs educational services appropriate to grade levels pre-K through 12; servicing students up to the age of21 as per Individualized Education Plans (IEPs). The District completed the 2017 fiscal year with an average daily enrollment of 576.1 students, which is fifty-one (51) students less than the previous year's average daily enrollment. The following details the changes in the student enrollment of the District over the last ten (10) years.

Fiscal Year Ending

2016-2017 2015-2016 2014-2015 2013-2014 2012-2013 2011-2012 2010-2011 2009-2010 2008-2009 2007-2008

Average Daily Enrollment

Stndent Enrollment

576.1 627.0 682.6 675.6 667.5 688.7 699.7 747.6 783.9 766.5

2) MAJOR INITIATIVES/LONG RANGE PLANNING:

Percent Change (9.00)% (8.14)% 1.04% 1.21%

(3.08)% (1.57)% (6.41)% (4.63)%

2.27% (3.91)%

The District has reviewed input from local sending districts and has expanded program options to include an Early Childhood Behavioral Disabilities (BD) Program at the Joseph F. Cappello School. The District is committed. to providing specific professional development for the district's BD Program during the upcoming school year. Expanding of a partnership with a community advocacy group is another focus for the District that . will increase student access to after-school programing. Through recommendations of the District Curriculum Committee, another District initiative was to purchase additional technology, increase staff professional development, and purchase materials for piloting the Unique Learning System for the Autism population. The District is also further expanding professional development at the Early Childhood Level, with additional staff being trained in the Tools of the Mind Curriculum in an effort to expand self-regulation for learners. Finally, the district is increasing its effo1ts on staff professional development related to coping with trauma and managing behaviors.

The District focused effmts on educating the community regarding the services available for learners with significant modifications through the district's website.

The District's buildings range in age from 12 years to 33 years (built dates are detailed on the J-18 schedule). The District provides for the maintenance of the buildings in the annual budget. The District also continues to pursue long range planning initiatives. For example, the District engages in the analysis of program costs and enrollments necessary to properly forecast tuition costs and revenues. Numerous capital projects and facilities improvements have resulted from these budget and facilities planning activities.

The District continues to invest in network infrastructure upgrades at all schools, as well as, upgrading classroom HV AC units. Ongoing site improvements to the campus parking lots, playgrounds and sidewalks will continue.

2

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3) ECONOMY AND ECONOMIC OUTLOOK: Mercer County is home of a wide range of industries including education, health services, business services, leisure and hospitality. The highly skilled workforce includes those in the professional, scientific and technical services industries. The county's unemployment rate is 4.4%, which is 1.2 percentage points better than the national average of 5.6%. During the period 2012-2022 it is projected that Mercer County will add 19,550 jobs. The county's employment is projected to grow by 8.0%, while the statewide rate is expected to be 7.5%.

The District experienced a decrease in enrollment during the 2016-2017 school year. The District cannot accurately forecast future enrollment. While the district does not anticipate a significant change in enrollment for the 2017-2018 school year, the District is aware that requirements for controlling out of District placements from sending districts and the 2% cap on the sending district's tax levy increases have the potential to impact future enrollment.

For the 2016-17 school year, the Mercer County Special Services School District was able to sustain its budget through tuition revenues, the county tax levy, and out of county fees.

4) INTERNAL CONTROLS: The administration of the District is responsible for establishing and maintaining an internal control environment designed to ensure that the assets of the District are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles ("GAAP"). The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by the administration.

As a recipient of state and federal awards, the District is also responsible for ensuring that an adequate internal control environment is in place to ensure compliance with applicable laws and regulations. This internal control environment is also subject to periodic evaluation by the District management.

As part of the District's single audit described earlier, tests are made to determine the adequacy of the internal controls over compliance, including that portion related to federal awards and state financial assistance programs, as well as to determine that the District has complied with applicable laws and regulations.

5) BUDGETARY CONTROLS: In addition to internal controls, the District maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the Board of Chosen Freeholders of the County of Mercer. Annual appropriated budgets are adopted for the General Fund and the Special Revenue Fund. The legal level of budgetary control is established at line item accounts within each fund. Line item accounts are defined as the lowest (most specific) level of detail as established pursuant to the minimum chart of accounts referenced in N.J.A.C. 6A:23. Project-length budgets are approved for the capital improvements accounted for in the Capital Projects Fund. The final budget amount as amended for the fiscal year is reflected in the financial section. An encumbrance accounting system is used to record outstanding purchase commitments on a line item basis. Open encumbrances at year-end are either cancelled or are included as re-appropriations of fund balance in the subsequent year. Those amounts to be re­appropriated are reported as a portion of fund balance at June 30, 2017.

6) ACCOUNTING SYSTEM AND REPORTS: The District's accounting records reflect generally accepted accounting principles, as promulgated by the Governmental Accounting Standards Board ("GASB"). The accounting system of the District is organized on the basis of funds. These funds are explained in Notes to the Basic Financial Statements, Note 1.

3

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7) FINANCIAL INFORMATION AT FISCAL YEAR-END: As demonstrated by the various statements and schedules included in the Financial section of this report, the District continues to meet its responsibility for sound financial management. Financial summaries and detail should be reviewed in the Management's Discussion and Analysis for the fiscal year ended June 30, 2017.

8) OTHER INFORMATION: Independent Andit - State statutes require an annual audit by independent certified public accountants or registered municipal accountants. The accounting firm of Wiss & Company LLP was selected by the Board. In addition to meeting the requirements set forth in State statutes, the audit also was designed to meet the requirements of the Federal Uniform Guidance and New Jersey OMB Circular 15-08. The auditors' report on the basic financial statements and specific required supplementary information, other supplementary information and the combining and individual fund statements and schedules are included in the financial section of this report. The auditors' report related specifically to the single audit is included in the single audit section of this report.

Awards - The District had applied to the Association of School Business Officials (ASBO) International for the "Ce1tificate of Excellence in Financial Reporting" for its comprehensive annual financial report for the fiscal years ended June 30, 2012, June 30, 2013, June 30, 2014, June 30, 2015 and June 30, 2016 and was granted the award. In order to be awarded this certificate, the District published an easily readable and efficiently organized comprehensive annual financial report and satisfied both generally accepted accounting principles and applicable legal requirements.

We believe that our current comprehensive annual financial report continues to meet the Program's rigorous requirements, and we are submitting it to ASBO to determine its eligibility for the fiscal year 2016-2017 award.

9) ACKNOWLEDGEMENTS: We would like to express our appreciation to the members of the Mercer County Special Services School District Board of Education for their concern in providing fiscal accountability to the citizens and taxpayers of the County and District and thereby contributing their full support to the development and maintenance of our financial operation. The preparation of this report could not have been accomplished without the efficient and dedicated services of our Business Office staff.

TD/kz

Respectfully Submitted,

Dr. Kimberly J. Schneider Superintendent

Tanya Dawson School Business Administrator/ Board Secretary

4

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Mercer County Special Services School District

ATTORNEY BOARD OF AUDITOR EDUCATION

SUPERINTENDENT

~

HUMAN RESOURCES MANAGER BUSINESS ADMINISTRATOR ASSISTANT SUPERINTENDENT

~~ SUPERVISOR

ASSISTANT MANAGER OF BUSINESS TECHNOLOGY/ SUPERVISOR

ADMINISTRATOR BUILDINGS & GROUNDS

( MERC!!R HIGH SCHOOL ) • / "-- PRINCJPAt. I

COMPTROL.LER •

TECHNOLOGY CUSTOOIALJ I SUPERVISOR ' SPECIALIST MAINTENANCE

ACCOUNTS I SUPERVlSOR I

PAYABLE SPECIALIST

SUPPORT ( MERCER ELEMENTARY j

' TECHNICAN CUSTODIANS PRINCIPAL I

PURCHASING I I I SUPERVISOR SPECIALIST

SUPPORT I J I CLEANERS .JOSEPH F. CAPPELLO TECHNJCAH I

BENEFITS I PRINCIPAL I COORDINATOR '

I I SUPERVISOR

PAYROLL AUTISM/BEHAVIOR I SPECIALIST TEAM

I OFFICE OF STUO£NT SERVJC£S l

MCTS OPERATIONS COORDINATOR SPECIALIST

5

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Mercer County Special Services School District Mercer County, New Jersey

Roster of Officials

Members of the Board of Education

Camille Rainiero, President Russell White, Vice-President Samuel J. Floyd Lisa Vena Jan Lewis Sally Gillispie

June 30, 2017

Yasmin Hernandez-Manno, Interim Executive County Superintendent of Schools

Other Officials

Dr. Kimberly J. Schneider, Superintendent of Schools Tanya Dawson, School Business Administrator I Board Secretary David Miller, Treasurer of School Monies

Term Expires

2020 2018 2020 2021 2020 2019

Ex-Officio

6

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Mercer County Special Services School District Mercer County, New Jersey

Independent Auditors and Advisors

Independent Auditors Wiss and Company, LLP 354 Eisenhower Parkway

Livingston, New Jersey 07039

Attorney Walter R. Bliss, Jr. 321 W. State Street

Trenton, New Jersey 08618

Official Depositories New Jersey Cash Management

PNC Bank

7

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ASSOCIATION OF SCHOOL BUSINESS OFFICIALS INTERNATIONAL

The Certificate of Excellence in Financial Reporting is presented to

Mercer County Special Services School District

for its Comprehensive Annual Financial Report (CAFR) for the Fiscal Year Ended June 30, 2016.

The CAFR has been reviewed and met or exceeded

ASBO lnternational's Certificate of Excellence standards.

-~~ CERTltr,ICATE 11'0 EXCELLENCE m 11 IN FINANCIAL REPORTING

Anthony N. Dragona, Ed.D., RSBA President

John D. Musso, CAE, RSBA Executive Director

8

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Financial Section

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I A Partner to Grow With

Independent Auditors' Report

Honorable President and Members of the Board of Education

Mercer County Special Services School District Hamilton, New Jersey County of Mercer

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Mercer County Special Services School District, County of Mercer, New Jersey (the "District"), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

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

Auditors' Responsibility

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

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

14 Penn Plaza, Suite 1010 New York. NY 10122

212.594.8155

354 Eisenhower Parkway, Suite 1850 Livingston, NJ 07039

973.994.9400

9

5 Bartles Corner Road Flemington, NJ 08822

908.782.7300

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

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the District as of June 30, 2017, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

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

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The accompanying supplementary information such as the combining and individual fund financial statements, long-term debt schedules and the schedules of expenditures of federal awards and state financial assistance as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) and New Jersey OMB Circular 15-08, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid, respectively, and the other information, such as the introductory and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements.

10

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The combining and individual fund financial statements and long-term debt schedules and the schedules of expenditures for federal awards and state financial assistance are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and long-term debt schedules and the schedules of expenditures for federal awards and state financial assistance are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2017 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance.

November 30, 2017 Livingston, New Jersey

ed Public School Accountant No. 2429

u1~~¥o WISS & COMPANY, LLP

11

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Required Supplementary Information Part I

Management's Discussion and Analysis

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017

The discussion and analysis of Mercer County Special Services School District's financial performance provides an overview of the District's financial activities for the fiscal year ended June 30, 2017. The intent of this discussion and analysis is to look at the District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the District's financial performance.

Management's Discussion and Analysis (MD&A) is Required Supplementary Information specified in the Governmental Accounting Standards Board (GASB) Statement No. 34 - Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. Certain comparative information between the current year and the prior year is required to be presented in the MD&A.

Financial Highlights

Key financial highlights for 2016-2017 fiscal year include the following:

• The District's average daily enrollment decreased 8.1 % from 627 in 2016 to 576 in 2017.

• Revenues from tuition from other districts decreased in 2017 by $6,877,060 or 19.1%, partially due to a decrease in enrollment.

• The District's government-wide fund balance decreased $7,872,373 or 28.7% primarily · due to an increase in the District's net pension liability.

Using this Comprehensive Annual Financial Report (CAFR)

This CAFR consists of a series of basic financial statements and notes to those basic statements. These statements are organized so the reader can understand the Mercer County Special Services School District as a financial whole, an entire operating entity. The statements then proceed to provide an increasingly detailed look at specific financial activities. The three components that comprise the District's basic financial statements are: government-wide financial statements; fund financial statements; and notes to the basic financial statements. The CAFR also contains required and other supplementary information in addition to the basic financial statements themselves.

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Reporting the School District as a Whole

Government-wide Activities

The Statement of Net Position and Statement of Activities provide information about the activities of the whole District, presenting both an aggregate view of the District's finances and a longer­term view of those finances. Fund financial statements provide the next level of detail. For govermnental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. In the case of the Mercer County Special Services School District, the General Fund is by far the most significant fund.

While this document contains a number of funds used by the District to provide programs and activities, the view of the District as a whole looks at all financial transactions and asks the question, "How did we do financially during 2016/17?" The Statement of Net Position and the Statement of Activities helps answer this question. These statements include all assets, deferred inflows and outflows of resources and liabilities using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account, all of the current year's revenues and expenses regardless of when cash is received or paid.

These two statements report the District's net position and changes in that position. This change in net position is important because it tells the reader that, for the District as a whole, whether the financial position of the District has improved or diminished. The causes of this change may be the result of many factors, some financial, and some not. Non-financial factors include the District's County property tax base, current laws in New Jersey restricting districts' revenue growth, facility condition, required educational programs, student enrollment and other factors.

In the Statement of Net Position and the Statement of Activities, the District is divided into two distinct kinds of activities:

+ Governmental-Type Activities - All of the District's programs and services are reported here including, but not limited to, instruction, support services, operation and maintenance of plant facilities and extracurricular activities.

+ Business-Type Activities - These services are provided on a charge for goods or services basis to recover all the expense of the goods or services provided. Various enterprise funds are reported as business-type activities and are listed in the Notes to Basic Financial Statements, Note 1 C.

Reporting the School District's Most Significant Funds

Fund Financial Statements

The analysis of the District's major (all) funds is included in the 2016-17 Comprehensive Annual Financial Report as presented by the District. Fund financial statements provide detailed information about the District's major funds. All of the funds of the District can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. The fund financial statements are utilized for District financial decision making.

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Governmental Funds

The District's activities are mainly reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in the future years. These funds 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. The governmental fund statements provide a detailed short-term view of the District's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the financial statements.

The District maintains three individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the general fund, special revenue fund and capital projects fund, all of which are considered to be major funds.

The District adopts an annual appropriated budget for its general fund and special revenue fund. Budgetary comparison statements have been provided as required supplementary information for the general fund and special revenue fund to demonstrate compliance with this budget. The basic governmental fund financial statements are Schedules B-1, B-2 and B-3.

General Fund

The general fund is the chief operating fund of the District. At the end of the current fiscal year, unassigned fund balance of the general fund was $4,071,751, while total fund balance was $9,826,876. As a measure of the general fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 9.8% of the total general fund expenditures while total fund balance represents 23. 7% of that same amount.

During the current fiscal year, the fund balance of the District's general fund balance decreased by $4,269,591. The decline in fund balance is primarily related to adjusted certified tuition rates which resulted in a significant return of prior year's revenue to sending districts.

Special Revenue Fund

The special revenue fund is used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified purposes. The District expended $252,631 in state financial assistance, $25,791 in federal awards and $225, 174 from other sources.

Capital Projects Fund

The capital projects fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). During the current year, the District incurred budgetary basis expenditures of $125,078 which was comprised primarily of expenditures for the Mercer High School and Joseph F. Cappello School's boiler and chiller projects.

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Enterprise Funds

The District maintains eight (8) enterprise funds, which are proprietary fund types. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The District uses enterprise funds to account for the operations of its food service program, Mercer Cooperative Transportation System, NJ State Regional Day School at Hamilton, integrated preschool, clinic parent, community resources, special aides and Chuck's Place programs. The District considers all of its enterprise funds to be major funds. The basic enterprise fund financial statements are Schedules B-4, B-5 and B-6.

Fiduciary Funds

Fiduciary funds are used to account for resources held for the benefit of parties outside the governmental entity. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the District's own programs. The District uses trust funds to account for the activity in its private-purpose scholarship fund, AFLAC trust fund and unemployment compensation trust fund. The District uses agency funds to account for resources held for student activities and groups and payroll­related liabilities. The basic fiduciary fund financial statements are Schedules B-7 and B-8.

Notes to the Basic Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found on pages 32 through 65 of this report.

The School District as a Whole (Statements A-1 and A-2)

The Statement of Net Position provides the perspective of the District as a whole. Net position may serve as an indicator of a government's financial position. However, as noted earlier, net position is not the primary basis for decision making for each budget cycle. The District's financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the increase and decrease of compensated absences, the acquisition and disposal of capital assets, and the depreciation of capital assets.

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The following table provides a summary comparison of the District's net position for 2017 and 2016.

Net Position June 30, 2017 and 2016

Governmental Business-type

Activities Activities Total

2017 2016 2017 2016 2017 2016

Current and other assets $ 10,032,551 $ 15,472,975 $982,976 $1,171,241 $11,015,527 $16,644,216

Capital assets, net 36,064,734 37,098,492 247,648 275,629 36,312,382 37,374,121

Total assets 46,097,285 52,571,467 1,230,624 1,446,870 47,327,909 54,018,337

Deferred Outflow of Resources 10,251,260 4,528,211 10,251,260 4,528,211

Current liabilities and other 1,131,113 2,207,036 44,771 97,510 1,175,884 2,304,546

Net pension liability 34,707,976 26,497,421 34,707,976 26,497,421

Long-tem1 liabilities 1,938,171 1,806,449 1,938,171 1,806,449

Total liabilities 37,777,260 30,510,906 44,771 97,510 37,822,031 30,608,416

Deferred Inflows of Resources 211,366 519,987 211,366 519,987

Net position:

Net investment in capital assets 36,041,421 37,059,204 247,648 275,629 36,289,069 37,334,833

Restricted 3,811,962 3,094,454 3,811,962 3,094,454

Unrestricted (deficit) (21,493,464) {14,084,873) 938,205 1,073,731 (20,555,259) {13,011,142)

Total net position $ 18,359,919 $ 26,068,785 $ 1,185,853 $ 1,349,360 $ 19,545,772 $ 27,418,145

Current and other assets decreased $5,628,689 of which $4,049,416 is attributed to a decrease in cash and cash equivalents and $1,566,930 is attributable to a decrease in accounts receivable. This decrease in cash and cash equivalents is mostly a result of a decrease in tuition from sending districts and the decrease in accounts receivable is attributed to more timely tuition payments by certain school districts.

The decrease in Net Investment in Capital Assets is the result of current year depreciation expense exceeding current year capital asset additions.

The increase in current liabilities, as well as the deferred outflow, deferred inflow and net pension liability, are all a result of the effects of Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions and Governmental Accounting Standards Board Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment to GASE Statement No. 68.

Unrestricted net position in the governmental activities decreased $7,408,591 primarily due to a decrease in tuition revenue, in addition to the impact of Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions and Governmental Accounting Standards Board Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment to GASE Statement No. 68. See Note 6 to the financial statements for further information.

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The following table provides a comparison analysis of government-wide changes in net position from fiscal years 2017 and 2016.

Changes in Net Position

Years ended June 30, 2017 and 2016

Governmental Business-type

Activities Activities Total

2017 2016 2017 2016 2017 2016

Revenues:

Program revenues:

Charges for services $10,293,230 $10,696,063 $10,293,230 $10,696,063

Operating grants and contributions $ 503,596 $ 507,187 409,953 426,515 913,549 933,702

Capital grants and contributions 74,401 471,052 74,401 471,052

General revenues:

County Appropriation 2,932,020 2,874,529 2,932,020 2,874,529

Tuition - LEA's 29,034,534 35,911,594 29,034,534 35,911,594

Nonresident Fees 151,248 175,230 151,248 175,230

State and Federal Sources 11,912,493 8,809,936 11,912,493 8,809,936

Interest Earnings 22,126 10,481 16 19 22,142 10,500

Miscellaneous 326,528 421,701 326,528 421,701

Total revenues 44,956,946 49,181,710 10,703,199 11,122,597 55,660,145 60,304,307

Expenses:

Instructional services 30,915,809 28,627,147 2,174,408 2,039,883 33,090,217 30,667,030

Support services 21,750,003 19,264,165 7,926,073 8,339,223 29,676,076 27,603,388

Operation of non-instructional

services 766,225 776,917 766,225 776,917

Total expenses 52,665,812 47,891,312 10,866,706 11,156,023 63,532,518 59,047,335

Change in net position (7,708,866) 1,290,398 (163,507) (33,426) (7,872,373) 1,256,972

Net position- beginning 26,068,785 24,778,387 1,349,360 1,382,786 27,418,145 26,161,173

Net position - ending $ 18,359,919 $ 26,068,785 $ 1,185,853 $ 1,349,360 $ 19,545,772 $ 27,418,145

Governmental-type Activities

At June 30, 2017, Governmental-Type Activities net position accounted for 93.9% of the District's total net position.

The Governmental-Type Activities net position decreased $7,708,866 from $26,068,785 at June 30, 2016 to $18,359,919 at June 30, 2017, mostly as a result of the decline in tuition revenues, in addition to the impact of Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions and Governmental Accounting Standards Board Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment to GASE Statement No. 68.

In FY 2017, Governmental-Type Activities revenues were $44,956,946 or 80.8% of total revenues, of which the County Appropriation of $2,932,020 made up 5.3%, and Tuition from LEA's of $29,034,534 made up 52.2%.

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In FY 2017, the District's Governmental-Type Activities expenses were $52,665,812 compared to $47,891,312 for FY 2016, an increase of $4,774,500.

Business-type Activities

At June 30, 2017, Business-Type Activities net position accounted for 6.1% of the District's total net position.

Business-Type Activities net position decreased $163,507 from $1,349,360 at June 30, 2016 to $1,185,853 at June 30, 2017.

In FY 2017, Business-Type Activities revenues were $10,703,199.

Charges for Services and Operating Grants and Contributions for Business-Type Activities were $10,703,183 in FY 2017 compared to $11,122,578 in FY 2016, a 3.8% decrease. The decrease was attributed to a decrease of NJ State Regional Day School revenue in addition to a decrease in Mercer Cooperative Transportation System revenue.

Expenses for Business-Type Activities were $10,866,706 in FY 2017 compared to $11,156,023 in FY 2016, a 2.6% decrease. The decrease was related to a decrease in expenses for Mercer Cooperative Transportation System, offset by an increase in expenses related to the NJ State Regional Day School.

Financial Analysis of the District's Funds

The District uses funds to control and manage money for particular purposes. The Fund's basic financial statements allow the District to demonstrate its stewardship over and accountability for resources received from the County of Mercer, State of New Jersey and other entities. These statements also allow the reader to obtain more insight into the financial workings of the District, and assess further the District's overall financial health.

Governmental Funds (Schedules B-1 and B-2)

Governmental funds are accounted for using the modified accrual basis of accounting. The focus of the District's governmental funds is to provide information on near-term inflows, outflows, and balances of resources. Such information is essential in assessing the District's financing requirements.

As demonstrated by the various statements and schedules included in the financial section of this report, the District continues to meet its responsibility of sound financial management. The following schedules represent revenues and expenditures from a New Jersey budgetary viewpoint. The first schedule presents a summary of the revenues of the General Fund and Special Revenue Fund for the fiscal year ended June 30, 2017, and the amount and percentage of increases and decreases in relation to prior year revenues.

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Revenues Year Ended June 30, 2017

Increase Percent of Percent of (Decrease) (Decrease)

Revenue Amount Total from2016 Increase

Local sources $ 32,691,630 86.7% $ (6,926,640) (17.5%) State sources 4,425,921 11.8 512,305 13. l Federal sources 567,326 1.5 146,206 34.7 Total $ 37,684,877 100.0% $ (6,268,1292 (14.3%)

The decrease in local sources is mainly attributed to a decrease in tuition from LEA's. State sources increased as a result of an increase in the on-behalf TPAF pension, medical and non­contributory insurance contributions made by the State of New Jersey. Federal sources increased due to an increase in Medicaid reimbursem*nt.

The following schedule presents a summary of General Fund and Special Revenue Fund expenditures for the year ended June 30, 2017, and the amounts and percentage of increases in relation to prior year expenditures.

Expenditures

Current: Instruction Support services

Capital outlay Total

Expenditures Year Ended June 30, 2017

$

$

Amount

15,413,572 26,425,995

114,901 41,954,468

Percent of Total

36.7% 63.0 0.3

100.0%

$

$

Increase (Decrease)

From2016

(546,821) 988,493

10,069 451,741

Increase (Decrease)

From2016

(3.4%) 3.9 9.6

1.1%

Instruction, support services and capital outlay did not have significant fluctuations from the pnoryear.

General Fund Budgetary Highlights

The District's budget is prepared according to New Jersey law, and is based on accounting for certain transactions on a basis of cash receipts, disbursem*nts and encumbrances. The most significant budgeted fund is the General Fund.

Throughout the year, budget transfers were effectuated between budget accounts to re-align the FY 2017 budget to meet the District's needs. The final budgetary basis revenue estimate was

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$34,322,529, which was $73,485 less than the original budget estimate, attributed to a decrease in anticipated other tuition revenue offset by an increase in Medicaid reimbursem*nt.

The District received $4,173,290 in reimbursed TPAF Social Security Aid and TPAF Pension, Post-Retirement Medical and Non-contributory Insurance Contributions. These reimbursem*nts are reflected as revenue and expenditures in the General Fund Budgetary Comparison Schedule and have no corresponding budget amounts.

The final budgetary basis expenditure appropriations totaled $41,441,888, which was $73,485 less than the original budget estimate, due to the $73,485 reduction in appropriations related to tuition revenue reductions and Medicaid reimbursem*nt increases cited above.

A schedule showing the District's original and final budget compared with actual operating results is provided in Section C of the CAFR, entitled Budgetary Comparison Schedule. The District generally did better than had been budgeted in its General Fund since it practices conservative budgetary practices in which revenues are forecasted very conservatively and expenditures are budgeted with worst-case scenarios in mind.

The General Fund finished the fiscal year $1,314,538 worse than what was budgeted in terms of revenues and $4,164,306 better in terms of expenditures. Both the revenues and appropriations were adjusted for $4, 173,290 of non-budgeted amounts reflected in the comparison schedule for reimbursed TPAF social security contributions and on-behalfTPAF pension contributions.

Capital Assets

At the end of fiscal years 2017 and 2016, the District had $36,064,734 and $37,098,492, respectively invested in a broad range of governmental activities capital assets, including construction in progress, buildings, furniture, vehicles, computers, instructional equipment and other equipment. This amount is net of accumulated depreciation to date. Increases during the year represent additions to those categories, while decreases represent retirement of assets during the year, and depreciation of depreciable assets for the year. The table below shows the net book value of governmental activities capital assets at the end of2017 and 2016 fiscal years.

Capital Assets (Net of Depreciation)

2017 2016

Construction in Progress $ 1,516,835 $ 1,465,734 Site Improvements 85,494 98,941 Buildings and Building

Improvements 33,949,166 34,996,783 Machinery and

Equipment 513,239 537,034

Total $ 36,064,734 $ 37,098,492

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During the current fiscal year, $224,005 of capital assets were capitalized as additions, of which $143,417 represented ongoing projects. Increases in capital assets were offset by depreciation expense for the year.

The District also has business-type activities capital assets, net of accumulated depreciation at June 30, 2017 and 2016 in the amount of$247,648 and $275,629, respectively.

For more detailed information, please refer to Note 4 in the Notes to the Basic Financial Statements.

Debt Administration

At June 30, 2017, the District had $36,646,147 of outstanding long-term liabilities. Of this amount, $34,707,976 represents the District's net pension liability, $1,914,858 is for compensated absences and $23 ,313 is for capital leases. The District had no bonded indebtedness during the fiscal year. For more detailed information, refer to Note 5 of the basic financial statements.

Economic Factors and Next Year's Budget

For the 2016-17 school year, the Mercer County Special Services School District was able to sustain its budget through tuition revenues, the county tax levy, and out of county fees.

The 2016-17 budget was adopted on April 5, 2016. The District anticipates a slight decrease in enrollment for the 2017-18 fiscal year. The District cannot accurately forecast future enrollment. If the District were to experience a significant increase in enrollment with no appreciable increase in the County Tax Levy for future budgets, the District will be faced with the following alternatives: (a) limiting programs and services; (b) increasing tuition rates for the sending districts; or ( c) increasing other related fees.

Contacting the School District's Financial Management

This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need additional information, contact Dr. Kimberly J. Schneider, Superintendent at the Board of Education Mercer County Special Services School District, 1020 Old Trenton Road, Hamilton, New Jersey 08690. Also, please visit our website to learn more about our District at www.mcsssd.org.

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Basic Financial Statements

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Government-wide Financial Statements

The government-wide financial statements provide a financial overview of the District's operations. These financial statements present the financial position and operating results of all governmental activities and business-type activities as of and for the year ended June 30, 2017.

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A-1

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

ST A TEMENT OF NET POSITION

June 30, 2017

Governmental Business-type Activities Activities Total

Assets Cash and Cash Equivalents $ 2,799,835 $ 787,829 $ 3,587,664 Internal Balances 2,565,505 (2,565,505) Accounts Receivable 1,015,133 2,742,609 3,757,742 Inventories 18,043 18,043 Restricted assets:

Cash and Cash Equivalents 3,652,078 3,652,078 Capital Assets, Non-Depreciable 1,516,835 1,516,835 Capital Assets, Depreciable, Net 34,547,899 247,648 34,795,547 Total Assets 46,097,285 1,230,624 47,327,909

Deferred Outflows of Resources Pension deferrals 10,251,260 10,251,260

10,251,260 10,251,260

Liabilities Accounts Payable 1,126,517 42,970 1,169,487 Accrued Liabilities 4,596 265 4,861 Unearned Revenue 1,536 1,536 Net Pension Liability 34,707,976 34,707,976 Noncurrent Liabilities: Due Within One Year 47,123 47,123 Due Beyond One Year 1,891,048 1,891,048

Total Liabilities 37,777,260 44,771 37,822,031

Deferred Inflows of Resources Pension deferrals 211,366 211,366

211,366 211,366

Net Position Net Investment in Capital Assets 36,041,421 247,648 36,289,069 Restricted For:

Capital projects 159,884 159,884 Capital reserve 3,652,078 3,652,078

Unrestricted (deficit) (21,493,464) 938,205 (20,555,259) Total Net Position $ 18,359,919 $ 1,185,853 $ 19,545,772

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See accompanying notes to the basic financial statenients.

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Functions/Programs

Governmental Activities: Instruction:

Special Education School Sponsored/Other Instructional

Support Services: Student and Instruction Related Services General Administrative Services School Administrative Services Central Administrative Services Administrative Information Technology Plant Operations and Maintenance Pupil Transportation

Total Governmental Activities

Business-type Activities: Food Service Mercer Cooperative Transportation System NJ State Regional Day School Community Rescources Special Aides Clinic Parent Chuck's Place Integrated Preschool

Tota! Business-tyim Activities Total Primary Government

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

Expenses

30,845,335 70,474

13,442,373 360,252

1,998,859 1,577,339

674,279 3,658,509

38,392 52 665 812

547,927 6,559,252

514,635 89,383

3,026,594 398

67,394 61 123

10 866 706 $ 63 532,518 '

Genera! Revenues:

STATEMENT OF ACTIVITIES

YEAR ENDED JUNE 30, 2017

Charges For Services

125,741 6,559,252

411,558 92,420

3,026,594 6,825

70,840

10 293 230 10 293 230

Program Revenues Operating Grants and

Contributions

' 17,410

486, 186

503,596

409,953

409,953 913,549

County appropriation/taxes Tuition Nomesidenl Fees State and Federal Sources Interest Earnings Miscellaneous

Total General Revenues Change in Net Position

Net Position - Beginning Net Position - Ending

See accompanying 110/es /o the bask jlnanc/a/ s/olements.

Capital Grants and

Contributions

74,401

74,401

' 74,401

Net (Expenses) Revenues and Changes in Net Position

Governmental Activities

(30,827,925) (70,474)

(12,956,!87) (360,252)

(1,998,859) (1,577,339)

(674,279) (3,584,!08)

(38,392} (52,087 ,8 !5)

(52,087,815)

2,932,020 29,034,534

151,248 11,912,493

22,126 326 528

44 378 949 (7,708,866)

26,068 785 18,359 919

Business-type Activities

$ (12,233)

(103,077) 3,037

6,427 3,446

(61,123) !63 523

(163,523)

16

16 (163,507)

1,349 360 J,185 853

'

$

A-2

Total

(30,827,925) (70,474)

(12,956,187) (360,252)

(l,998,859) (1,577,339)

(674,279) (3,584,108)

(38,392} (52,087,8 l 5)

(12,233)

(\03,077) 3,037

6,427 3,446

(61,123) (163,523)

(52,251,338}

2,932,020 29,034,534

!51,248 11,912,493

22,142 326 528

44,378 965 (7,872,373}

27 418 145 19 545,772

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Fund Financial Statements

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Governmental Funds

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Assets Cash and Cash Equivalents Interfund Receivable Accounts Receivable:

State Federal Other

Restricted Cash and Cash Equivalents Total Assets

Liabilities and Fund Balances Liabilities:

Interfund Payable Accounts Payable Accrued Liabilities

Total Liabilities

Fund Balances: Restricted for:

Capital Reserve Capital Projects

Assigned to: Designated for Subsequent

Years' Expenditures Other Purposes

Unassigned Total Fund Balances

Total Liabilities and Fund Balances

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT GOVERNMENTAL FUNDS

$

$

$

BALANCE SHEET

June 30, 20I7

General Fund

2,799,835 3,186,990

5I,072

168,310 3,652,078 9,858,285

26,813 4,596

31,409

3,652,078

1,980,527 122,520

4,071,75I 9,826,876 9,858 285

$

$

$

Ma' or Funds Special

Revenue Fund

54,122 12,602 55,9I9

I22,643

108,261 14,382

122,643

122,643

$

$

$

Capital Projects

Fund

Amounts reported for governmental activities in the statement of net position (A-1) are different because:

Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. The cost of the assets is $57,699,060 and the accumulated depreciation is $21,634,326 (See Note 4).

Deferred pension costs in governmental activities are not financial resources and arc therefore not reported in the funds.

Net pension liability is not due and payable in the current period and therefore is not reported as a liability in the funds.

Accrued pension contributions for the June 30, 2017 plan year end are not paid with current economic resources and are therefore not reported as a liability in the funds, but are included in accounts payable in the government-wide statement of net position.

Long-tenn liabilities, including compensated absences and capital leases are not due and payable in the current period and therefore are not reported as liabilities in the Fund (See Note 5),

Net Position of Governmental Activities

See acco1npanying notes to the basic financial statements.

$

636,430

36,678

673,108 $

513,224

513,224

159,884

159,884 673,108

$

B-1

Total Governmental

Funds

2,799,835 3,I86,990

74I,624 12,602

260,907 3,652 078

I0,654,036

62I,485 41,195

4 596 667,276

3,652,078 159,884

I,980,527 122,520

4,07I,751 9,986,760

36,064,734

10,039,894

(34,707,976)

(I,085,322)

{1,938,171)

18,359,919

24

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B-2 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

Year ended June 30, 2017

Ma'orFunds Special Capital Total

General Revenue Projects Governmental Fund Fund Fund Funds

Revenues: Local Sources:

County Appropriation/Tax Levy $ 2,932,020 $ 2,932,020 Tuition from Other Districts 25,647,128 25,647,128 Other Tuition 3,387,406 3,387,406 Non-Resident Fees 151,248 151,248 Interest 22,126 22,126 Miscellaneous 326,528 $ 225,174 $ 40 619 592,321

Total - Local Sources 32,466,456 225,174 40,619 32,732,249

State Sources 4,173,290 252,631 33,782 4,459,703 Federal Sources 541,535 25,791 567,326

Total Revenues 37,181,281 503,596 74,401 37,759,278

Expenditures: Current: Instruction:

Special Education Instruction 15,352,985 17,4!0 15,370,395 School Sponsored 43,177 43,177

Support Services: Student and Instruction Related Services 6,513,419 486,186 6,999,605 General Administration 262,703 262,703 School Administration 1,018,627 1,018,627 Central Services 806,137 806,137 Administrative Information Technology 421,727 421,727 Plant Operations and Maintenance 2,533,285 2,533,285 Pupil Transportation 36,712 36,712 Unallocated Benefits 10,173,909 I0,173,909 On-behalfTPAF Benefits 4,173,290 4,173,290

Capital Outlay 114,901 125 078 239,979 Total Expenditures 41,450,872 503,596 125 078 42,079,546

Net change in fund balances (4,269,591) (50,677) (4,320,268)

Fund Balance, July 1 14,096,467 210 561 14,307,028 Fund Balance, June 30 $ 9,826,876 $ $ 159 884 $ 9,986,760

The reconcilation of the fund balances of the governmental funds to the net position of the governmental activities in the statement of activities is presented in an accompanying schedule (B-3).

See accompanying notes to the basic financial statenients. 25

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT GOVERNMENTAL FUNDS

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES

Year ended June 30, 2017

Total Net Change in Fund Balances - Governmental Funds (from B-2)

Amounts reported for governmental activities in the Statement of Activities (A-2) are different because:

Capital outlays are reported in governmental funds as expenditures. However, on the Statement of Activities, the cost of those assets is allocated

over their estimated useful lives as depreciation expense. This is the amount by which depreciation expense exceeded capital additions in the current fiscal year.

Depreciation Expense Capital Additions

Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.

Pension expense

In the Statement of Activities, certain operating expenses, e.g., compensated absences (vacation and sick pay) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are reported in the amount of financial resources used (paid). When the earned amount exceeds the paid amount, the difference is a reduction in the reconciliation; when the paid amount exceeds the earned amount, the difference is an reduction to the reconciliation.

Repayment of capital lease principal are expenditures in the governmental funds, but the repayment reduces long~tcrm liabilities in the statement of net position and is not reported

in the statement of activities.

Change in Net Position of Goverrunental Activities

See accompanying notes to the basic financial statements.

$ (1,257,763) 224 005

B-3

$ ( 4,320,268)

(1,033,758)

(2,223, 118)

(147,697)

15,975

$ (7,708,866)

26

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Proprietary Funds

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Assets Current Assets:

Cash and Cash Equivalents Accounts Receivable:

SW< Federal 0th~

Inventories Total Current Assets

Capital Assets Site Improvements Equipment Building and Building Improvements Accumulated Depreciation

Total Capital Assets, Net Total Assets

Liabilities Current: lnterfund Payable Accounts Payable Accrued Liability Unearned Revenue

Total Current Liabilities

Net Position Net Investment in Capital Assets Unrestricted

Total Net Position

B-4 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

ENTERPRISE FUNDS

COMBINING STATEMENT OF NET POSITION

June30,2017

Ma·orEnt rise Funds Mercer NJ State

Food Cooperative Regional Day Service Transportation School at Integrated Clinic Community Special Chuck's F=d Sxstem Hamilton Preschool Parent Resources Aides Place Totals

$ 8,901 $ 66,488 $ 240,358 $ 64,505 $ 389,676 $ 17,901 $ 787,829

460 460 35,548 35,548 12,082 $ 538,569 111,575 17,019 $ 2,027,356 2,706,601 16,688 1,355 18,043 73,679 538,569 178,063 240,358 64,505 406,695 2,027,356 19,256 3,548,481

13,100 13,100 200,360 50,666 10,400 46,754 9,699 317,879

298,823 298,823 (194,742) (131,521) (10,400) (41,302) (4,189~ Q82.I54)

5,618 231,068 5 452 5,510 247,648 79,297 538,569 409;131 240,3?~. §_4,505 412,147 2,027,356 24.766 3,796,,_129

538,569 2,026,936 2,565,505 35,209 7,341 420 42,970

265 265 1,536 1,536

36,745 538,569 265 7,341 2,027,356 2,610,276

5,618 231,068 5,452 5,510 247,648 36,934 177,798 240,358 64,505 399,354 19,256 938,205

$ - 42.552 -$ ----r 408,86"6 $ --240,358-$ 64305 $ -404,806 ------r- $ ~- $ 1,185,853

See accompanying notes to the basic financial statements. 27

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Operating Revenues: Local Sources

Daily Sales - Reimbursable Programs $ Daily Sales - Non-Reimbursable Programs Special event income Transportation Fees Non-Resident Fees Miscellaneous Tuition

Total Operating Revenues

Operating Expenses: Salaries Employee Benefits Purchased Professionalffechnical Services Contracted Services Other Purchased Services Insurance Miscellaneous Purchased Services Supplies and Materials Energy T e!ephone/Communlcations/Postage Travel Cost of Sales - Program Cost of Sales - Non-program Miscellaneous E:icpenditures Admin & Supervision Oili~ Depreciation Expense

Total Operating Expenses

Operating (Loss) Income

Nonoperating Revenues: Local Sources:

Interest on Investments State Sources:

State School Lunch Program Federal Sources:

National School Lunch Program National School Breakfast Program Food Donation Program

Total Nonoperating Revenues Change in Net Position

Total Net Position - Beginning Total Net Position - Ending $

MERCER COUNTY SPECJAL SERVICES SCHOOL DJSTRlCT ENTERPRISE FUNDS

COMBrNING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

Year ended June 30, 2017

Ma"orEnt rise Funds Mercer NJ State

Food Cooperative Regional Day Setvice Transportation School at Integrated Clinic

Fund S);'.stem Hamilton Preschool P_arent

63,036 6.834

55,871 $ 6,559,252

$ 4.255 $ 6,825 $

407,303 125,741 6,559,252 411,558 6,825

162,491 227,352 254,817 $ 41,596 42,543 42,974 71,000 17,620

1,826 4,000 24,360 6,277,213

46,803 4,378 6,150 1,844

24,422 1,310 48,649 398 526 61,530 812 5,718 9,252

246,383 2,038

685 21,315 12,438 2 551 16,434 1,907

547,927 6.559,252 514,635 61,123 398

(422,186) (103,077) (61,123) 6,427

16

4,982

250,340 118,731

35,900 409,969 (12,217) (103,077) (61,123) 6,427

54,769 511,943 301,481 58,078 42,552 $ $ 408 866 $ 240.358 $ 64,505 $

See accompanying notes to the basic financial statements.

B-5

Community Special Chuck's B_esources Aides Place Totals

$ 63,036 6,834

55,871 6,559.252

4,255 92,420 $ 3,026,594 $ 70,840 3.]96,679

407,303 92,420 3,026,594 70,840 10,293,230

80,174 1,919,591 2,686,021 283 1,106,028 1,280,448

5,826 6,301,573

46,803 10,528

1,844 2,877 63,813 141,469

62,056 95 15,877

1,226 1,226 246,383

2,038 975 1,219 2,879

21,315 12,438

4,728 2,362 27,982 89383 3,026,594 67,394 10,866.706

3,037 3,446 (573,476)

16

4,982

250,340 118,731

35,900 409,969

3,037 3,446 (163,507)

401.769 21320 1349,360 404,806 $ ___ $_ - 24,766 $ 1,185,853

28

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Cash Flows From Operating Activities: Receipts from Customers Payments to Employees Payments for Emplayee Benefits Payments to Suppliers Net Cash (Used In) I Provided By Operating Activities

Cash Flows From Noocapita1 Financing Activities: Cash Received From State and Federal Reimbursem*nts (Repayments) Advances (to) from other funds Net Cash Provided By (Used In) Noncapital Financing Activities

Cash Flows From Investing Activities: Interest Income Net Cash Provided By lnvestin.11; Activities

Net (Decrease) Increase in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning ofY ear Cash and Cash Equivalents, End of Year

Reconciliation of Operating (Loss) Income To Net Cash (Used In) Provided By Operating Activities:

Operating (Loss) Income Adjustments To Reconcile Operating (Loss) Income To

Net Cash (Used In) Provided By Operating Activities: Depreciation Changes in Assets and Liabilities;

Decrease (Increase) in Accounts Receivable (Increase) Decrease in Inventory (Decrease) Increase in Accounts Payable

Net Cash (Used In) I Provided By Operating Activities

Noncash Noncapital Finaneing Activities

$

Food Service F~d

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT ENTERPRlSE FUNDS

COMBINING STATEMENT OF CASH FLOWS

Year ended June 30, 2017

Major En!Cf1)rise Funds M~= NJ State

Cooperative Re¢onal Day Transportation School at Integrated

System Hamilton Preschool Clinic Parent

Community Resources

Special Aides

Chuck's Place ToraJ

B-6

125,741 s 6,549,546 $ 604,864 $ 6,825 $ 106,354 s 2,592,427 $ 72,187 s 10,057,944 (162,491) (227,352) (254,817) $ (41,596) (75,870) (i,922,806) (2,684,932) (42,543) (42,974) (71,000) (17,620) (283) (1,106,028) (1,280,448)

(383,173) (6,288,926) (172,345) (398) (4,198) (64,467) (6,913.507) (4§i_Mfil_ --- __ (9,70§)___ J_Q£,ZQ2 (5_~_,1ill __ 6,427 26,()_Q_3_ (4~§,407) 7,720 (820,943)

446,431 446,431 9 706 (40,214) 436 407 405,899

446,431 9706 (40,214) 436 407 852,330

16 16 16 16

(16,019) 66,488 (59,216) 6,427 26,003 7,720 31,403 24,_2JQ_ i_2_~ ___ 58,078 J_§~,§ZL 10,1~1 756,426

8,901___ s -~--- 6§,~8 s 24(),J_& $ ____94,505 __ L 389,§_7§_ s s 17,901 $ 787,829

(422,186) (103,077) (61,123) 6,427 3,037 3,446 (573,476)

2,551 16,434 1,907 4,728 2,362 27,982

612 $ (9,706) 193,306 13,934 $ (434,167) 1,347 (234,674) 11,778 565 12,343

(55,:p._]_l__ _)9 -_ 4)_()1:_ (~.240) (53,1!8) (462,46§)_ $ (9,706) $ 10§,102 $ (59,:!J_© $ --- 6,427 $ 26,00}__ s (4}_§,407) s 7,720 $ (8i03i43)

The District received $36,278 of food commodities from the U.S. Department of Agriculture for the year ended June 30, 2017.

See accompanyi11g notes ta the basic financial statements. 29

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Fiduciary Funds

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Assets Cash and Cash Equivalents Total Assets

Liabilities

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT FIDUCIARY FUNDS

STATEMENT OF FIDUCIARY NET POSITION

June 30, 2017

Private - Purpose AFLAC Unemployment Scholarship Trust Compensation

Fund Fund Trust Fund

$ 14,514 $ 52 $ 174,893 14,514 52 174,893

Payroll Deductions and Withholdings Payable To Student Groups Total Liabilities

Net Position Held in Trust for Scholarships and Other Purposes $ 14,514 $ 52 Held in Trust for Unemployment

Claims and Other Purposes $ 174,893

See accompanying notes to the basic financial statements.

B-7

Agency Funds

$ 263,109 $ 263,109

$ 224,221 38,888

$ 263,109

30

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B-8 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

FIDUCIARY FUNDS

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

Year ended June 30, 2017

Private-Purpose Unemployment Scholarship AFLAC Compensation

Fund Trust Fund Trust Fund Additions Interest Income $ 231 Employee Contributions $ 20,542 45,474 Other Contributions $ 3,895

Total Additions 3,895 20,542 45,705

Deductions Scholarship Payments 4,974 Medical Reimbursem*nts 20,548 Unemployment Benefit Payments 42,323

Total Deductions 4,974 20,548 42,323

Change in Net Position (1,079) (6) 3,382

Net Position - Beginning of Year 15,593 58 171,511 Net Position - End of Year $ 14,514 $ 52 $ 174,893

See accompanying notes to the basic financial statements. 31

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies

The financial statements of the Mercer County Special Services School District (the "District") have been prepared in confonnity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the District's accounting policies are disclosed below.

The District is an instrumentality of the State ofNew Jersey, established to function as an educational institution. The Board consists of appointed officials and is responsible for the fiscal control of the District. The Board is comprised of six members appointed to three year terms as well as the Executive County Superintendent of Schools. The purpose of the School District is to provide programs adapted to each student's unique needs and abilities, in grades pre-K through 12. Focusing on students' capabilities, the District provides specialized academic instructional recreational activities combined with the specialized therapeutic interventions needed to assure that each child reaches their full potential. By carefully structuring each student's program on an individual basis, the District strives to have each student become a productive, self-sufficient member of the community. The Mercer County Special Services School District has an approximate enrollment at June 30, 2017 of 568 students.

A. Reporting Entity

The financial reporting entity consists of (a) the primary government, (b) organizations for which the primary government is financially accountable and ( c) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete.

The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization's governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government. A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it.

The District, as the primary government for financial reporting entity purposes, has oversight responsibility and control over all activities related to the Mercer County Special Services School District in Hamilton, New Jersey. The District receives funding from county, state, and federal government sources and must comply with the requirements of these funding source entities. The District is a component unit of Mercer County, however, the County reports its financial statements

32

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

on a regulatory-basis of accounting which does not recognize or report component units.

The District has no component units that are required to be included within the reporting entity, as set forth in Section 2100 of the GASB Codification of Governmental Accounting and Financial Reporting Standards.

B. Government-Wide and Fund Financial Statements

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

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes, county appropriations and other items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and the major individual enterprise funds are reported as separate columns in the fund financial statements. The New Jersey Department of Education requires that all funds be reported as major to promote consistency among the school districts in the State of New Jersey.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

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

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon

33

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers all revenues, to be available if they are collected within sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, expenditures related to compensated absences are recorded only when payment is due.

County taxes and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year. All other revenue items are considered to be measurable and available only when the District receives cash.

The District has reported the following major governmental fimds:

General Fund: The general fimd is the general operating fimd of the District and is used to account for all financial resources except those required to be accounted for in another fimd. Included are certain expenditures for vehicles and movable instructional or non-instructional equipment, which are classified in the capital outlay sub-fimd.

Special Revenue Fund: The District maintains one special revenue fimd which includes the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes, other than debt service or capital projects.

Capital Projects Fund: The capital projects fimd is used to account for and report financial resources that are restricted, committed or assigned to expenditures for capital outlays, including the acquisition or construction of major capital facilities and other capital assets (other than those financed by proprietary fimds ). The financial resources are derived from approved county fimds.

The District reports several major enterprise fimds, which are utilized to account for operations that are financed and operated in a manner similar to private business enterprises. The stated intent is that the cost (i.e., expenses including depreciation and indirect costs) of providing goods or services to the students or other entities on a continuing basis are financed or recovered primarily through user charges. The major enterprise funds include the following fimds:

Food Service Fund: The food service enterprise fimd accounts for all revenues and expenses pertaining to the food service operations of the District.

Mercer Cooperative Transportation Systems - The Mercer cooperative transportation systems fimd accounts for the financial transactions related to the transportation of students into the District as well as transportation to other Districts.

34

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

NJ State Regional Day School - The NJ State regional day school fund accounts for the financial transactions related to educational services provided to State students.

Integrated Preschool - The integrated preschool fund accounts for the financial transactions related to varied integrated preschool services in the connnunity.

Community Resources - The community resources fund accounts for the financial transactions related to various related therapy services provided to other school districts.

Special Aides - The special aides fund accounts for the financial transactions related to special one-on-one aides for students.

Clinical Parent Program - The clinical parent program fund accounts for the financial transactions related to the therapy and related services of non-classified preschool children who exhibit delays in the areas of speech/language, fine motor, gross motor, and readiness skills.

Chuck's Place - The Chuck's Place fund accounts for the financial transactions related to the workforce training and education provided to the school district's students.

Additionally, the District reports the following fiduciary fund types:

Fiduciary Funds of the District include the unemployment compensation, private-purpose scholarship and AFLAC trust funds and agency funds. The trust funds are reported using the economic resources measurement focus. Agency funds are purely custodial (assets equal liabilities) and thus do not involve measurements of results of operations. The following is a description of the fiduciary funds of the District.

Trust and Agency Funds: The trust and agency funds are used to account for assets held by the District on beh,alf of outside parties, including other governments, or on behalf of other funds within the District.

Trust Funds: The unemployment compensation, private-purpose scholarship and AFLAC trust funds are accounted for using the economic resources measurement focus. The unemployment compensation fund is used to account for contributions from the District and employees and interest earned on the balance as well as payments to the State for reimbursem*nt of unemployment claims. The private-purpose scholarship trust fund is utilized to provide scholarships to students and to account for the related transactions. The AFLAC trust fund is utilized to account for contributions from employees and payment of medical reimbursem*nts for employees.

35

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

Agency Funds (Payroll and Student Activity Fund): Agency funds are used to account for the assets that the District holds on behalf of others as their agent. Agency funds are custodial in nature and do not involve measurement of results of operations.

As a general rule the effect of inter-fund activity has been eliminated from the govermnent-wide financial statements.

Amounts reported as program revenues include (1) fees charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Enterprise funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and delivering goods in connection with an enterprise fund's principal ongoing operations. The principal operating revenues of the District's enterprise funds are charges for sales of food, tuition and reimbursem*nts for services provided to other entities. Operating expenses for the enterprise fund include the cost of sales, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Unearned revenue arises when resources are received by the District before it has legal claim to them, as when federal or state assistance is received prior to the incurrence of qualifying expenditures. In subsequent periods, when revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for unearned revenue is removed from the statement of net position and balance sheet and revenue is recognized.

Ad Valorem (Property) taxes are susceptible to accrual as, under New Jersey State Statute, a County is required to remit to the school district the entire balance of taxes in the amount certified prior to the end of the school year. The District records the entire approved tax levy as revenue (accrued) at the start of the fiscal year, since the revenue is both measurable and available.

The County Board of Taxation is responsible for the assessment of properties. Assessments are certified and taxes are levied on January 1; taxes are due February 1, May 1, August 1 and November 1. Unpaid taxes are considered delinquent the following January 1 and are then subject to lien.

36

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

D. Budgets/Budgetary Control

Annual appropriated budgets are prepared in the spring of each year for the general and special revenue funds. The budgets are submitted to the County Office for approval and are approved by the Board of School Estimate. Budgets are prepared using the modified accrual basis of accounting, except the Special Revenue Fund. The legal level of budgetary control is established at line item accounts within each fund. Line item accounts are defined as the lowest (most specific) level of detail as established pursuant to the minimum chart of accounts referenced in NJ.AC. 6A:23.

All budget amendments I transfers must be approved by Board resolution. All budget amounts presented in the accompanying required supplementary information reflect the original budget and the amended budget (which have been adjusted for legally-authorized revisions of the annual budgets during the year). The over-expenditures in the general fund are due to the inclusion of the non­budgeted on behalf payments made by the State of New Jersey as District expenditures. These amounts are offset by related revenues and as such do not represent over-expenditures.

Formal budgetary integration into the accounting system is employed as a management control device during the year. For governmental funds, there are no substantial differences between the budgetary basis of accounting and accounting principles generally accepted in the United States of America with the exception of the special revenue fund as noted below. Encumbrance accounting is also employed as an extension of formal budgetary integration in the governmental fund types. Unencumbered appropriations lapse at fiscal year-end.

The accounting records of the special revenue fund are maintained on the grant accounting budgetary basis. The grant accounting budgetary basis differs from GAAP in that the grant accounting budgetary basis recognizes encumbrances as expenditures and also recognizes the related revenues, whereas the GAAP basis does not. Sufficient supplemental records are maintained to allow for the presentation of GAAP basis financial reports.

E. Cash and Cash Equivalents

Cash and cash equivalents include petty cash, amounts on deposit, money market accounts, and short-term investments and certificates of deposit with original maturities of three months or less.

F. Tuition Receivable/Payable

Tuition charges were established by the District based on estimated costs. The charges are subject to adjustment when the final costs are determined. These adjustments are recorded upon certification by the State Department of Education, which is two years following the contract year. The cumulative adjustments through June 30, 2017 which have not been recorded, are not determinable.

37

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

G. Interfund Receivables/Payables

lnterfund receivables/payables represent amounts that are owed, other than charges for goods or services rendered to/from a particular fund in the District and that are due within one year.

H. Inventories

Enterprise fund inventories are valued at cost, which approximates market using the first-in, first-out (FIFO) method. The District uses the consumption method to account for inventories. At June 30, 2017, the unused U.S.D.A. Food Donation Program Commodities of $1,536 are reported as unearned revenue.

I. Capital Assets

Capital assets, which include land, construction in progress, site improvements, buildings and improvements and machinery and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $2,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost through estimation procedures performed by an independent appraisal company. Donated capital assets are valued at their estimated fair market value on the date of donation. The costs of normal repairs and maintenance that do not add to the value of the asset or materially extend the assets lives are not capitalized.

Capital assets, being depreciated, of the District are depreciated using the straight line method. The following estimated useful lives are used to compute depreciation:

School Buildings Building Improvements Electrical/Plumbing Light Vehicles Heavy Vehicles Office and Computer Equipment Instructional Equipment Grounds Equipment Proprietary Fund Equipment Software

Years

40 20 20 10 15 10 10 15 12 5

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

J. Compensated Absences

A liability for compensated absences that are attributable to services already rendered and that are not contingent on a specific event that is outside the control of the employer and employee is accrued as employees earn the rights to the benefits. The District uses the "vesting method" for estimating its accrued sick and vacation leave liability.

District employees are granted vacation and sick leave in varying amounts under the District's personnel policies and collective bargaining agreements. In the event of termination, an employee is reimbursed for accumulated vacation. Sick leave benefits provide for ordinary sick pay and begin vesting with the employee after one year of service.

Upon retirement, employees shall be paid by the District for the unused sick time in accordance with the District's agreements with the various employee unions. Under terms of association agreements, employees earn vacation and sick leave in amounts varying with tenure and classification by the District for the unused sick leave in accordance with the District's agreements with the various employee unions.

The liability for vested compensated absences of the District is recorded in the government-wide financial statements and includes salary related payments.

As of June 30, 2017, a liability existed for compensated absences in the government-wide financial statements in the amount of $1,914,858 and no liability existed for compensated absences in the proprietary fund types.

K. Unearned Revenue

Unearned revenue in the enterprise fund represents the unused portion of U.S.D.A. commodities on hand at June 30, 2017.

L. Deferred Outflows/Inflows of Resources

In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. Currently, the District has one item that qualifies for reporting in this category, deferred amounts related to pensions. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources,

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

represents an acquisition of net position that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. The District has one item that qualifies for reporting in this category, deferred amounts related to pensions.

M. Long-Term Obligations

In the government-wide financial statements and enterprise fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or enterprise fund type statement of net position.

Bonds are authorized in accordance with State law by the Board of Chosen Freeholders of the County through bond ordinances. All bonds are retired in serial installments within the statutory period of usefulness. The bonds are issued by the Mercer County Improvement Authority and are general obligation bonds. As of January I, 2008, the County Government of Mercer assumed the outstanding debt service.

N. Fund Balances

GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions ("GASB 54") established fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Under GASB 54, fund balances in the governmental funds financial statements are reported under the modified accrual basis of accounting and classified into the following five categories, as defined below:

!) Nonspendable - includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Assets included in this fund balance category include prepaid assets, inventories, long-term receivables, and corpus of any permanent funds.

2) Restricted - includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation.

3) Committed - includes amounts that can be used only for the specific purposes imposed by a formal action of the government's highest level of decision-making authority. The District's highest level of decision-making authority is the Board of Education (the "Board") and formal action is taken by resolution of the Board at publicly held meetings. Once committed, amounts cannot be used for other purposes unless the Board revises or changes the specified use by taking the same action (resolution) taken to originally commit these funds.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

4) Assigned - amounts intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. Intent is expressed by either the Board or Business Administrator, to whom the Board has delegated the authority to assign amounts to be used for specific purposes, including the encumbering of funds.

5) Unassigned - includes all spendable amounts not contained in the other classifications in the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed or assigned to specific purposes within the general fund. The general fund is the only fund that reports a positive unassigned fund balance amount. In the other governmental funds, if expenditures incurred for specific purposes exceed the amounts restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance.

When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then unrestricted resources as they are needed. For the unrestricted fund balance, the District first spends committed funds, then assigned funds, and finally, unassigned funds.

Of the $9,826,876 of fund balance in the General Fund, $122,520 of encumbrances is assigned to other purposes, $3 ,652,078 has been restricted in the capital reserve account, $1,980,527 has been classified as assigned fund balance designated for subsequent year expenditures, and the remaining $4,071,751 is classified as unassigned.

0. Net Position

Net position represents the difference between assets, deferred inflows of resources, deferred outflows of resources and liabilities in the government-wide financial statements. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net positions are reported as restricted in the government-wide financial statements when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, or laws or regulations of other governments.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

P. Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates.

Q. On-Behalf Payments

Revenues and expenditures of the general fund include payments made by the State of New Jersey for social security contributions and post-retirement medical contributions for certified teachers and other members of the New Jersey Teachers Pension and Annuity Fund. Additionally, revenues and expenses related to on-behalf pension contributions in the government-wide financial statements have been increased by $7,197,668 to adjust for the full accrual basis incurred by the State of New Jersey during the most recent measurement period. The amounts are not required to be included in the District's annual budget.

R Recently Issued and Adopted Accounting Principles

The GASB issued Statement 77, Tax Abatement Disclosures in August 2015. This Statement is intended to improve financial reporting by requiring disclosure of tax abatement information about a reporting government's own tax abatement agreements and those that are entered into by other governments and that reduce the reporting government's tax revenues. The requirements of this Statement are effective for financial statements for reporting periods beginning after December 31, 2015. As the District is not a taxing government, the Statement did not result in a change in the District's assets, revenues or fund balance. No additional disclosures are required for this school district since it is at the county level.

S. Recently Issued Accounting Pronouncements

GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions ("GASB 75"). Tbis Statement replaces the requirements of Statement 45 and the primary objective of this Statement is to improve accounting and reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local government employers about financial support for OPEB that is provided by other entities. The requirements of this Statement are effective for financial statements for reporting periods beginning after June 30, 2017. Management has not yet determined the impact of the Statement on the financial statements.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

1. Summary of Significant Accounting Policies (continued)

T. Subsequent Events

Management has reviewed and evaluated all events and transactions that occurred from June 30, 2017 through November 30, 2017, the date that the financial statements were issued for possible disclosure and recognition in the financial statements, and no items have come to the attention of the District that would require disclosure.

2. Reconciliation of Government-Wide and Fund Financial Statements

Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net position

The govermnental fund balance sheet includes a reconciliation between fund balance - total govermnental funds and net position - govermnental activities as reported in the govermnent-wide statement of net position. One element of that reconciliation explains that long-term liabilities, including compensated absences and capital leases are not due and payable in the current period and therefore are not reported in the funds.

The details of this $1,938,171 difference are as follows:

Compensated absences $ 1,914,858 23,313 Capital leases

Net adjustment to reduce fund balance-total governmental funds to arrive at net position- governmental activities $ 1,938,171

=========

3. Deposits and Investments

Investments are stated at fair value in accordance with Governmental Accounting Standards Board (GASB) Statement No. 31, "Accounting and Financial Reporting for Certain Investments are and for External Investment Pools" and Statement No. 72 "Fair Value Measurement and Application." The Board classifies certificates of deposit, which have original maturity dates of more than three months but less than twelve months from the date of purchase, as investments and are stated at cost. All other investments are stated at fair value.

New Jersey school districts are limited as to the types of investments and types of financial institutions they may invest in. New Jersey statute 18A:20-37 provides a list of permissible investments that may be purchased by New Jersey school districts. Additionally, the District has adopted a cash management plan that requires it to deposit public funds in public depositories protected from loss under the provisions of the Govermnental Unit Deposit Protection Act

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

3. Deposits and Investments (continued)

("GUDPA"). GUDPA was enacted in 1970 to protect Government Units from a loss of funds on deposit with a failed banking institution in New Jersey.

N.J.S.A. 17:9-41 et. seq. establishes the requirements for the security of deposits of governmental units. The statute requires that no governmental unit shall deposit public funds in a public depository unless such funds are secured in accordance with the Act. Public depositories include savings and loan institutions, banks (both state and national banks) and savings banks, the deposits of which are federally insured. All public depositories must pledge collateral, having a market value at least equal to five percent of the average daily balance of collected public funds, to secure the deposits of governmental units. If a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories, is available to pay the full amount of their deposits to the governmental units.

Deposits

New Jersey statutes require that school districts deposit public funds in public depositories located in New Jersey that are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, or by any other agency of the United States that insures deposits made in public depositories. School districts are also permitted to deposit public funds in the State of New Jersey Cash Management Fund and New Jersey Asset and Rebate Management Fund.

New Jersey statutes require public depositories to maintain collateral for deposits of public funds that exceed depository insurance limits as follows:

The market value of the collateral must equal at least 5% of the average daily balance of collected public funds on deposit.

In addition to the above collateral requirement, if the public funds deposited exceed 75% of the capital funds of the depository, the depository must provide collateral having a market value at least equal to 100% of the amount exceeding 75%.

All collateral must be deposited with the Federal Reserve Bank of New York, the Federal Reserve Bank of Philadelphia, the Federal Home Loan Bank of New York, or a banking institution that is a member of the Federal Reserve System and has capital funds of not less than $25,000,000.

Operating cash accounts are held in the District's name by commercial banking institutions. At June 30, 2017, the District's carrying amount of deposits was $4,017,555 and the bank balance was $4,626,507. Of the bank balance, $250,000 of the District's cash deposits on June 30, 2017 was

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

3. Deposits and Investments (continued)

secured by federal depository insurance. The New Jersey Governmental Unit Deposit Protection Act (GUDPA) covered the bank balance of$4,028,041. $348,466 held in the District's agency accounts are not covered by GUDP A.

Pursuant to GASB Statement No. 40, "Deposit and Investment Risk Disclosures" ("GASB 40"), the District's operating cash accounts are profiled in order to determine exposure, if any, to Custodial Credit Risk (risk that in the event of failure of the counterparty the District would not be able to recover the value of its deposits and investments). Deposits are considered to be exposed to Custodial Credit Risk if they are: uncollateralized (securities not pledged to the depositor), collateralized with securities held by the pledging financial institution, or collateralized with securities held by the financial institution's trust department or agent but not in the government's name.

The District does not have a policy for the management of custodial credit risk, other than depositing all of its funds in banks covered by GUDPA. At least five percent of the District's deposits were fully collateralized by funds held by the financial institution, but not in the name of the District. Due to the nature of GUDPA, further information is not available regarding the full amount that is collateralized.

Investments

New Jersey statutes permit the Board to purchase the following types of investments:

a. Bonds and other obligations of the United States or obligations guaranteed by the United States.

b. Bonds of any Federal Intermediate Credit Bank, Federal Home Loan Bank, Federal National Mortgage Agency or of any United States Bank which have a maturity date not greater than twelve months from the date of purchase.

c. State of New Jersey Cash Management Fund and New Jersey Asset and Rebate Management Fund.

Custodial Credit Risk: The District does not have a policy for custodial credit risk other than to maintain a safekeeping account for the securities at a financial institution.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

3. Deposits and Investments (continued)

Credit Risk: The District does not have an investment policy regarding the management of credit risk. GASB 40 requires that disclosure be made as to the credit rating of all debt security investments except for obligations of the U.S. government or investments guaranteed by the U.S. government.

Concentration of Credit Risk: The District places no limit on the amount the District may invest in any one issuer. At June 30, 2017, the District had no investments, other than in the New Jersey Cash Management Fund.

Interest Rate Risk: The District does not have a policy to limit interest rate risk. The District did not have any funds held as investments during the year ended June 30, 2017, other than in the New Jersey Cash Management Fund.

New Jersey Cash Management Fund

In order to maximize liquidity, the District utilizes the New Jersey Cash Management Fund ("NJCMF") as an investment. The NJCMF is administered by the State of New Jersey, Department of the Treasury and issues a separate report that can be obtained directly from the Department of the Treasury. It invests pooled monies from various State and non-State agencies in primarily short-term investments. The fair value of the District's portion in the pool is the same as the fair value of the pool shares. These investments include: U.S. Treasuries, short-term Commercial Paper, U.S. Agency Bonds, Corporate Bonds, and Certificates of Deposit. Agencies that participate in the NJCMF typically earn returns that mirror short-term investments rates. Monies can be freely added or withdrawn from the NJCMF on a daily basis without penalty. At June 30, 2017, the District's balance was $3,674,755 and is classified as cash equivalents due to its short-term nature.

All investments in the Fund are governed by the regulations of the Investment Council, which prescribes specific standards designed to ensure the quality of investments and to minimize the risks related to investments. In all the years of the Division of Investment's existence, the Division has never suffered a default of principal or interest on any short-term security held by it due to the bankruptcy of a securities issuer; nevertheless, the possibility always exists, and for this reason a reserve is being accumulated as additional protection for the "Other-than-State" participants. In addition to the Council regulations, the Division sets further standards for specific investments and monitors the credit of all eligible securities issuers on a regular basis.

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Mercer County Special Services School District

4. Capital Assets

Notes to the Basic Financial Statements Year ended June 30, 2017

The following schedule is a sununarization of the governmental activities changes in capital assets for the year ended June 30, 2017:

Beginning Ending Balance Increases Decreases Balance

Governmental activities:

Capital assets, not being depreciated: Construction in progress $ 1,465,734 $ 143,417 $ (92,316) $ 1,516,835

Total capital assets, not being depreciated 1,465,734 143,417 (92,316) 1,516,835

Capital assets, being depreciated: Site improvements 491,523 491,523 Buildings & building improvements 54,341,093 92,316 54,433,409 Machinery and equipment 1,176,705 80 588 1,257,293

Total capital assets, being depreciated 56,009,321 172,904 56,182,225

Less accumulated depreciation for: Site improvements (392,582) (13,447) (406,029) Buildings & building improvements (19,344,310) (1,139,933) (20,484,243) Machinery and equipment (639,671) (104,383) (744,054)

Total accumulated depreciation (20,376,563) (1,257,763) (21,634,326)

Total capital assets, being depreciated, net 35,632,758 (1,084,859) 34,547,899 Governmental activities capital assets, net $37,098,492 $ (941,442) $ (92,316) $36,064,734

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

Special education instruction $ 703,187

School sponsored instruction 1,975

Student and instruction related services 320,229

School administrative services 46,602

General administrative services 12,019

Central services 36,880

Administrative information technology 19,294

Plant operations and maintenance 115,897

Pupil transportation 1,680

$ 1,257,763

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

4. Capital Assets (continued)

The following schedule is a summarization of business-type activities changes in capital assets for the year ended June 30, 2017:

Business-type activities:

Capital assets being depreciated:

Site Improvements

Equipment

Building and Building Improvements

Less accumulated depreciation

Total business-type activities

Capital assets, net

5. Long-Term Liabilities

Beginning

Balance Increases

Ending

Balance

$ 13,100

317,879

298,823

(354,173) $

13,100

317,879

298,823

--~~~ ~-~(2=7~,9~8~1) --~(=38=2~. 1=54~)

$

$ 275 629 $ 127 981) .1!$""==~"'24;,,7"'6""4"'=8

During the year ended June 30, 2017, the following changes occurred in long-term liabilities:

Beginning Ending Due Within

Balance Additions Reductions Balance One Year

Governmental activities:

Compensated absences payable $ 1,767,161 $ 365,315 $ 217,618 $ 1,914,858 $ 30,784

Capital leases 39,288 15,975 23,313 16,339

Subtotal 1,806,449 365,315 233,593 1,938,171 47,123

Net pension liability 26,497,421 8,210,555 34,707,976

Total governmental activities

long-term liabilities $ 28,303,870 $ 8,575,870 $ 233,593 $ 36,646, 147 $ 47,123

The District expects to liquidate the compensated absences, the net pension liability and capital leases payable with payments made from the District's general fund.

Bonds Payable and Bonds Authorized but Not Issued

As of June 30, 2017, the District had no bonds payable and no authorized but not issued bonds.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

5. Long-Term Liabilities (continued)

Capital Leases

The District has commitments to lease various machinery and equipment under capital leases that expire in fiscal year 2019. These items are included in machinery and equipment in the District's capital assets. The gross amount of assets acquired under capital leases, included in Equipment, totals $80,451. Total capital lease payments, including interest, made during the year ended June 30, 2017 were $16,874. Future minimum lease payments are as follows:

Fiscal Year Ending 2018 2019

Total minimum lease payments Less amount representing interest Present value of net minimum lease payments

6. Pension Plans

Description of Systems

$

$

Amount 16,874 7,135

24,009 696

23,313

Substantially all of the District's employees participate in one of the following contributory defined benefit public employee retirement systems which have been established by State statute: the Teachers' Pension and Annuity Fund (TPAF) or the Public Employees' Retirement System (PERS). These systems are sponsored and administered by the State of New Jersey. The Teachers' Pension and Annuity Fund Retirement System is considered a cost-sharing multiple­employer plan, with a special funding situation, as under current statute, all employer contributions are made by the State of New Jersey on behalf of the District and the system's other related non-contributing employers. The Public Employees' Retirement System is considered a cost-sharing multiple-employer plan.

Teachers' Pension and Annuity Fund

The Teachers' Pension and Annuity Fund was established in January 1955 under the provisions ofN.J.S.A. 18A:66 to provide coverage including post-retirement health care to substantially all full time public school employees in the State. Membership is mandatory for such employees and vesting occurs after 10 years of service for pension benefits and 25 years for health care coverage. Age eligibility and benefit provisions were affected by Chapters 92 and 103, P.L. 2007, Chapter 89, P.L. 2008, Chapter 1, P.L. 2010, and Chapter 78, P.L. 2011. Members are classified into one of five tiers dependent upon the date of their enrollment. Tier 1, 2 and 3 members are eligible to retire at age 60, 60, and 62, respectively with an annual benefit generally determined to be l/55th of

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

the average annual compensation for the highest three fiscal years' compensation for each year of membership during years of credited service. Tier 4 and 5 members are eligible to retire at age 62 and 65, respectively, with an annual benefit generally determined to be l/60th of the average annual compensation for the highest five fiscal years' compensation for each year of membership during years of credited service. Anyone who retires early and is under their respective tier's retirement age receives retirement benefits as calculated in the above mentioned formulas but at a reduced rate in accordance with applicable New Jersey Statute based upon their tier.

Public Employee's Retirement System

The Public Employees' Retirement System was established in January 1955 under the provisions ofN.J.S.A. 43:15A to provide coverage including post-retirement health care to substantially all full time employees of the State or any county, municipality, school Board or public agency provided the employee is not a member of another State-administered retirement system. Age eligibility and benefit provisions were affected by Chapters 92 and 103, P.L. 2007, Chapter 89, P.L. 2008, Chapter 1, P.L. 2010, and Chapter 78, P.L. 2011. Members are classified into one of five tiers dependent upon the date of their enrollment. Tier 1, 2 and 3 members are eligible to retire at age 60, 60, and 62, respectively with an annual benefit generally determined to be l/55th of the average annual compensation for the highest three fiscal years' compensation for each year of membership during years of credited service. Tier 4 and 5 members are eligible to retire at age 62 and 65, respectively with an annual benefit generally determined to be l/60th of the average annual compensation for the highest five fiscal years' compensation for each year of membership during years of credited service. Anyone who retires early and is under their respective tier's retirement age receives retirement benefits as calculated in the above mentioned formulas but at a reduced rate in accordance with applicable New Jersey Statute based upon their tier.

The State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, issued publicly available financial reports that include the financial statements and required supplementary information for TP AF and PERS. The financial reports may be obtained by writing to the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey 08625-0295.

Funding Policy

The contribution policy is set by New Jersey State Statutes and contributions are required by active members and contributing members. Plan member and employer contributions may be amended by State of New Jersey legislation. Under the provisions of Chapter 78, P.L. 2011, employee contribution rates for TP AF and PERS increased from 5.5% to 6.5% of employees' annual compensation. An additional increase is to be phased in annually through July 2018 that will bring the total pension contribution rate to 7.5% of employees' annual compensation. Employers are

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

required to contribute at an actuarially determined rate in both the TP AF and PERS. The actuarially determined contribution includes funding for noncontributory death benefits and post­retirement medical premiums. Under current statute the Board is a non-contributing employer of the TPAF.

During the year ended June 30, 2017, the State of New Jersey contributed $3,102,851 to the TP AF for on-behalf pension and post-retirement medical benefits on behalf of the District. Also, in accordance with N.J.S.A. 18A:66-66 the State of New Jersey reimbursed the District $1,070,439 during the year ended June 30, 2017 for the employer's share of social security contributions for TP AF members as calculated on their base salaries.

The District's actuarially determined contributions to PERS for each of the years ended June 30, 2017, 2016 and 2015 were $1,041,089, $1,014,820, and $961,925, respectively.

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of PERS and additions to/deductions from PERS fiduciary net position have been determined on the same basis as they are reported by PERS. For the purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Public Employee 's Retirement System (PERS)

At June 30, 2017, the District reported a liability of $34,707,976 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation July 1, 2015, which was rolled forward to June 30, 2016. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts, actuarially determined. At June 30, 2016, the District's proportion was 0.1171888494 percent, which was a decrease of 0.0008502874 from its proportion measured as of June 30, 2015.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

For the year ended June 30, 2017, the District recognized full accrual pension expense of $3,264,207 in the government-wide financial statements. At June 30, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to PERS from the following sources:

Diffurences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings

on pension plan investments Changes in proportion and diffurences between

District contributions and proportionate share of contributions

District contnbutions subsequent to the measurement date

Deferred Deferred Outflows Inflows

of Resources of Resources $ 645,463 $

7,189,639

1,323,447

7,389 211,366

1,085,322 $ 10,251,260 $ 211,366

$1,085,322 is reported as deferred outflows of resources related to pensions resulting from school district contributions subsequent to the measurement date. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended June 30:

2018 $ 2,012,634

2019 2,012,637

2020 2,341,732

2021 1,968,534

2022 619,035

$ 8,954,572

52

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans ( continned)

Actuarial Assumptions

The total pension liability for the June 30, 2016 measurement date was determined by an actuarial valuation as of July 1, 2015, which was rolled forward to June 30, 2016. This actuarial valuation used the following actuarial assumptions, applied to all periods included in the measurement:

Inflation rate Salary increases

Through 2026

Thereafter

Investment rate of return

3.08%

1.65 - 4.15% based on age

2.65 - 5.15% based on age

7.65%

The actuarial assumptions used in the July 1, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2011 to June 30, 2014. It is likely that future experience will not exactly conform to these assumptions. To the extent that actual experience deviates from these assumptions, the emerging liabilities may be higher or lower than anticipated. The more the experience deviates, the larger the impact on future financial statements.

Mortality Rates

Pre-retirement mortality rates were based on the RP-2000 Preretirement Mortality Table for male and female active participants. For State employees, mortality tables are set back 4 years for males and females. For local employees, mortality tables are set back 2 years for males and 7 years for females. In addition, the tales provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary's modified MP-2014 projection scale. Post-retirement mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (setback 1 year for males and females) for service retirements and beneficiaries of former members and a one-year static projection based on mortality improvement Scale AA. In addition, the tables for service retirements and beneficiaries of formers members provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary's modified MP-2014 projection scale. Disability retirement rates used to value disables retirees were based on the RP-2000 Disabled Mortality Table (set back 3 years for males and set forward 1 year for females).

53

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

Long-Term Rate of Return

In accordance with State statute, the long-term expected rate of return on plan investments (7.65% at June 30, 2016) is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in PERS's target asset allocation as of June 30, 2016 are summarized in the following table:

Target Long-Tenn Expected Asset Class Allocation Real Rate of Return

Cash 5,00% 0.87% U.S. Treasuries 1.50% 1.74% Investment Grade Credit 8.00% 1.79% Mortgages 2.00% 1.67% High Yield Bonds 2.00% 4.56% Inflation-Indexed Bonds 1.50% 3.44% Broad US Equities 26.00% 8.53% Developed Foreign Markets 13.25% 6.83% Emerging Market Equities 6.50% 9.95% Private Equity 9.00% 12.40% Hedge Funds I Absolute Return 12.50% 4.68% Real Estate (Property) 2.00% 6.91% Commodities 0.50% 5.45% Global Debt ex US 5.00% -0.25% REIT 5.25% 5.63%

100.00%

Discount rate

The discount rate used to measure the total pension liability was 3.98% as of June 30, 2016. This single blended discount rate was based on the long-term expected rate of return on pension plan investments of 7.65%, and a municipal bond rate of 2.85% as of June 30, 2016 based on the Bond Buyer GO 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA! Aa or higher. The projection of cash flows used to

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the contribution rate in the most recent fiscal year. The State employer contributed 30% of the actuarially determined contributions and the local employers contributed 100% of their actuarially determined contributions. Based on those assumptions, the plan's fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2034. Therefore, the long-term expected rated of return on plan investments was applied to projected benefit payments through 2034 and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability.

Sensitivity of the District's proportionate share of the net pension liability to changes in the discount rate

The following presents the District's proportionate share of the net pension liability as of June 30, 2016 calculated using the discount rate as disclosed above as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is !-percentage-point lower (2.98 percent) or !-percentage-point higher (4.98 percent) than the current rate:

At1% At Current At1% Decrease Discount Rate Increase (2.98%) (3.98%) (4.98%)

District's proportionate share of the net pension liability $ 42,530,573 $ 34,707,976 $ 28,249,744

Pension Plan Fiduciary Net Position

Detailed information about the pension plan's fiduciary net position is available in the separately issued financial report for the State of New Jersey Public Employees Retirement System.

Additional Information

Collective balances of the Local Group at June 30, 2016 are as follows:

Collective deferred outflows of resources Collective deferred inflows of resources Collective net pension liability

District's Proportion

$ $

$

8,685,338,380 870, 133,595

29,617,131,759

0.1171888494%

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

Collective pension expense for the Local Group for the measurement period ended June 30, 2015 is $2,830, 763,540.

The average of the expected remaining service lives of all employees that are provided with pension through the pension plan (active and inactive employees) determined at July 1, 2015 (the beginning of the measurement period ended June 30, 2016) is 5.57 years and 5.72 years for the period ended June 30, 2015.

Teachers Pensions and Annuity Fund (TPAF)

The employer contributions for local participating employers are legally required to be funded by the State in accordance with N.J.S.A. 18:66-33. Therefore, these local participating employers are considered to be in a special funding situation as defined by GASB Statement No. 68 and the State is treated as a nonemployer contributing entity. Since the local participating employers do not contribute directly to the plan (except for employer specific financed amounts), there is no net pension liability or deferred outflows or inflows to report in the financial statements of the local participating employers. However, the notes to the financial statements of the local participating employers must disclose the portion of the nonemployer contributing entities' total proportionate share of the net pension liability that is associated with the local participating employer. The State's proportionate share of the TPAF net pension liability associated with the District as of June 30, 2016 was $118,308,555. The District's proportionate share was $0.

The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2015, which was rolled forward to June 30, 2016. The State's proportionate share of the net pension liability associated with the District was based on a projection of the State's long-term contributions to the pension plan associated with the District relative to the projected contributions by the State associated with all participating school districts, actuarially determined. At June 30, 2016, the State's proportionate share of the TPAF net pension liability associated with the District was 0.1503928033 percent, which was a decrease of 0.0040893384 from its proportion measured as of June 30, 2015.

For the year ended June 30, 2016, the District recognized on-behalf pension expense and revenue in the government wide financial statements of $7,197,668 for contributions incurred by the State.

56

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

Actuarial assumptions

The actuarial valuation used the following actuarial assumptions, applied to all periods included in the measurement:

Mortality Rates

Inflation rate Salary increases

2012-2021

Thereafter

Investment rate of return

2.50%

Varies based on experience

Varies based on experience

7.65%

Pre-retirement, post-retirement and disables mortality rates were based on the experience of TP AF members reflecting mortality improvement on a generational basis based on a 60-year average of Social Security data from 1953 to 2013.

The actuarial assumptions used in the July 1, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2012 to June 30, 2015.

Long-Term Expected Rate of Return

In accordance with State statute, the long-term expected rate of return on plan investments (7.65% at June 30, 2016) is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expecting future real rates of return by the target asset allocation percentage and by adding expected inflation.

57

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

Best estimates of arithmetic rates of return for each major asset class included in TP AF' s target asset allocation as of June 30, 2016 are summarized in the following table;

Target Long-Term Expected Asset Class Allocation Real Rate ofRetnm

US Cash 5.00% 0.39% US Government Bonds 1.50% 1.28% US Credit Bonds 13.00% 2.76% US Mortgages 2.00% 2.38% US Inflation-Indexed Bonds 1.50% 1.41% US High Yield Bonds 2.00% 4.70% US Equity Market 26.00% 5.14% Foreign-Developed Equity 13.25% 5.91% Emerging Market Equities 6.50% 8.16% Private Real Estate Property 5.25% 3.64% Timber 1.00% 3.86% Farmland 1.00% 4.39% Private Equity 9.00% 8.97% Commodities 0.50% 2.87% Hedge Funds - MultiStrategy 5.00% 3.70% Hedge Funds - Equity Hedge 3.75% 4.72% Hedge Funds - Distressed 3.75% 3.49%

100.00%

Discount Rate

The discount rate used to measure the total pension liability was 3.22% as of June 30, 2016. This single blended discount rate was based on the long-term rate of return on pension plan investments of 7.65%, and a municipal bond rate of 2.85% as of June 30, 2016 based on the Bond Buyer GO 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/ Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the contribution rate in the most recent fiscal year. The State contributed 30% of the actuarially determined contributions. Based on those assumptions, the plan's fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2029. Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2029, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

6. Pension Plans (continued)

Sensitivity of the State's proportionate share of the net pension liability associated with the District to changes in the discount rate

The following presents the State's proportionate share of the net pension liability associated with the District as of June 30, 2016 calculated using the discount rate as disclosed above as well as what the State's proportionate share of the net pension liability associated with the District would be if it were calculated using a discount rate that is I-percentage point lower or 1-percentage­point higher than the current rate:

State's proportionate share of the net pension liability associated with the District

Pension plan fiduciary net position

Decrease (2.22%)

Dis count Rate (3.22%)

$ 141,286,584 $ 118,308,555 $

Increase (4.22%)

99,543,809

Detailed information about the pension plan's fiduciary net position is available in the separately issued TP AF financial report.

Additional Information

Collective balances of the Local Group at June 30, 2016 are as follows:

Collective deferred outflows of resources Collective deferred inflows of resources Collective net pension liability

State's proportionate share associated with the District

$ $ $

17,440,003,201 195,027,919

78,666,367,052

0.1503928033%

Collective pension expense of the Local Group for the plan for the measurement period ended June 30, 2016 is $5,915,082,656.

The average of the expected remaining service lives of all employees that are provided with pension through the pension plan (active and inactive employees) determined at July 1, 2015 (the beginning of the measurement period ended June 30, 2016) is 8.3 years.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

7. Post-Retirement Benefits

Plan Description

The District contributes to the New Jersey School Employees Health Benefits Program ("SEHBP"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the State of New Jersey Division of Pension and Benefits. SEHBP provide medical, prescription drug, mental health/substance abuse and Medicare Part B reimbursem*nt to retirees and their covered dependents. The School Employees Health Benefits Program Act is found in New Jersey Statutes Annotated, Title 52, Article 17.25 et.seq. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code. The State of New Jersey Division of Pension and Benefits issues a publicly available financial report that includes financial statements and required supplementary information for SEHBP. That report may be obtained by writing to Division of Pension and Benefits, PO Box 295, Trenton, NJ 08625-0295.

Funding Policy

P.L. 1987, Chapter 384 of Public Laws 1987 and Chapter 6 of Public Laws 1990 required TPAF and PERS, respectively, to fund post-retirement medical benefits for those State employees who retire after accumulating 25 years of credited service or on a disability retirement. P.L. 2007, c.103 amended the law to eliminate the funding of post-retirement medical benefits through the TPAF and PERS. It created separate funds outside of the pension plans for the funding and payment of post­retirement medical benefits for retired State employees and retired educational employees. As of June 30, 2016, there were 110,512 retirees eligible for post-retirement medical benefits, and the State contributed $1.3 7 billion on their behalf. The cost of these benefits is funded through contributions by the State in accordance with P.L. 1994, c.62. Funding of post-retirement medical premiums changed from a pre-funding basis to a pay-as-you-go basis beginning in fiscal year 1994.

The State is also responsible for the cost attributable to P.L. 1992, c. 126, which provides free health benefits to members of PERS and the Alternate Benefit Program who retired from a board of education or county college with 25 years of service. The State paid $231.2 million toward Chapter 126 benefits for 20,045 eligible retired members in fiscal year 2016.

The State will set the contribution rate based on the annual required contribution of the employers (ARC), an amount actuarially determined in accordance with parameters of GASB 45. The ARC represents the level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) of the plan over a period not to exceed thirty years. The State's contributions to the SEHBP Fund for TPAF retirees' post­retirement benefits on behalf of the District for the years ended June 30, 2017, 2016 and 2015 were $1,409,465, $1,433,754, and $1,325,859, and, respectively, which equaled the required contributions

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

7. Post-Retirement Benefits (continued)

for each year. The State's contributions to the SEHBP Fund for PERS retirees' post-retirement benefits on behalf of the District was not determined or made available by the State of New Jersey.

8. Risk Management

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters.

Property and Liability Insurance

The District maintains insurance coverage for property, liability, student accident and employee health and surety bonds and does not retain risk of loss. There have been no significant reductions in insurance coverage from the prior year and no settlements have exceeded insurance coverage over the past three years. A complete schedule of insurance coverage can be found in the Statistical Section of this Comprehensive Annual Financial Report.

New Jersey Unemployment Compensation Insurance

The District has elected to fund its New Jersey Unemployment Compensation Insurance under the "Benefit Reimbursem*nt Method." Under this plan, the District is required to reimburse the New Jersey Unemployment Trust Fund for benefits paid to its former employees and charged to its account with the State. The District is billed quarterly for amounts due to the State.

The following is a summary of District contributions, employee contributions, reimbursem*nts to the State for benefits paid and the ending balance of the District's unemployment trust fund for the past three years:

Amount Employee Interest on Paid or Ending

Fiscal Year Contributions Investments Accrued Balance

2016-17 $45,474 $231 $42,323 $174,893 2015-16 45,287 102 61,771 171,511 2014-15 49,003 30 40,858 187,893

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

8. Risk Management (continued}

Joint Insurance Pool

The District is a member of the Burlington County Insurance Pool Joint Insurance Fund.

The Fund provides the District with the following coverage:

Property, Inland Marine and Automobile Physical Damage Boiler and Machinery Crime Cyber Liability General and Automobile Liability Workers' Compensation Educators' Legal Liability Pollution Legal Liability

Annual contributions to the Fund are determined by the Fund's Board of Trustees. The District is jointly and personally liable for claims insured by the Fund and its members during the period of its membership, including liability for supplemental assessments, if necessary. The Fund's Board of Trustees may authorize refunds to its members in any fund year for which contributions exceed the amount necessary to fund all obligations for that year.

All interfunds are expected to be liquidated within one year.

9. Deferred Compensation

The District offers its employees a choice of various deferred compensation plans created in accordance with Internal Revenue Code Sections 403(b) and 457(b). The plans, which are administered by various insurance companies, permit participants to defer a portion of their salary until future years. Amounts deferred under the plans are not available to employees until termination, retirement, death or unforeseeable emergency.

Participants' rights under the plan are equal to those of general creditors in an amount equal to the fair market value of the deferred account of each participant. The District has no liability for losses under the plan. Since the District does not hold the assets in a trustee capacity, the related assets are not included in the District's Fiduciary Fund Financial Statements.

The plan members' contributions to the deferred compensation plans for the years ended June 30, 2017, 2016 and 2015 were $1,085,945, $1,221,096, and $1,243,748, respectively. The District does not contribute to these plans on behalf of plan members.

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

10. Interfund Receivables and Payables

The total interfund accounts receivables and payables for the District are as follows at June 30, 2017:

Fund

General Fund Special Revenue Fund Capital Projects Fund Special' Aides Enterprise Fund Cooperative Transportation Enterprise Fund

lnterfund Receivable

$ 3,186,990

$ 3,186,990

Interfund Payable

$108,261 513,224

2,026,936 538,569

$ 3,186,990

The interfund receivable of$3,186,990 in the General Fund is offset with an interfund payable in the Special Revenue Fund for $108,261, the Capital Projects Fund for $513,224, the Special Aides Enterprise Fund for $2,026,936, and the Cooperative Transportation Enterprise Fund for $538,569, which represents funds advanced to these funds to cover temporary pooled cash flow shortages. All interfund balances are expected to be repaid within one year.

11. Economic Dependency

The District receives a substantial amount of its support from federal, state and county governments. A significant reduction in the level of support, if this were to occur, could have an effect on the District's programs and activities.

12. Contingent Liabilities

The District is also involved in several claims and lawsuits incidental to its operations. In the opinion of the administration and legal counsel, the ultimate resolution of these matters will not have a material adverse effect on the financial position of the District. In addition, the District is currently in a dispute with another New Jersey school district regarding use of one-on-one aides. Based on a recent Administrative Law Judge ruling, which was upheld by the Commissioner of Education, the District believes the outstanding accounts receivable balance is collectible, however, it has not been received to the date of the financial statements.

The District participates in numerous state and federal grant programs, which are governed by various rules and regulations of the grantor agencies; therefore, to the extent that the District has not complied with the rules and regulations governing the grants, refunds of any money received may be required and the collectability of any related receivable at June 30, 2017 may be impaired. In addition, the District is receiving funding from the New Jersey Schools

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

12. Contingent Liabilities (continued)

Development Authority (NJSDA), in connection with capital projects. The costs associated wit.h the funding received from the NJSDA are subject to a final review of eligible costs and compliance by the New Jersey Department of Education and the NJSDA. To the extent that the District has not complied with the rules and regulations governing the NJSDA funds or has not met the final eligible costs requirements, refunds of any money received may be required and the collectability of any related receivable at June 30, 2017 may be impaired.

In the opinion of the District, there are no significant contingent liabilities relating to compliance with the rules and regulations or final eligible cost requirements governing the respective grants or funding; therefore, no provisions have been recorded in the accompanying basic financial statements for such contingencies.

13. Capital Reserve Account

A capital reserve account was established by the District for the accumulation of funds for use as capital outlay expenditures in subsequent fiscal years. The capital reserve account is maintained in the general fund and its activity is included in the general fund annual budget.

Funds placed in the capital reserve account are restricted to capital projects in the District's approved Long Range Facilities Plan (LRFP). Upon submission of the LRFP to the Department, a district may increase the balance in the capital reserve by appropriating funds in the annual general fund budget certified for taxes or by transfers by Board resolution at year end (June 1 and June 30) of any unanticipated revenue or unexpended line item appropriation amounts, or both. Pursuant to NJ.AC. 6A:23A-5.l(d)7, the balance in the account cannot at any time exceed the local support costs of uncompleted capital projects in its approved LRFP.

The activity of the capital reserve for the July 1, 2016 to June 30, 2017 fiscal year is as follows:

Beginning balance, July 1, 2016 Decreased by:

Appropriated 16-17 capital projects Increased by:

June 2017 resolution Unspent proceeds returned to Capital Reserve Interest earnings

Ending balance, June 3 0, 2017

$ 2,883,893

(610,000)

800,000 566,136

12,049 $ 3,652,078

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Mercer County Special Services School District

Notes to the Basic Financial Statements Year ended June 30, 2017

13. Capital Reserve Account (continued)

Of the balance of $3,652,078 at June 30, 2017, $341,500 has been appropriated in the 2017-18 approved budget. At June 30, 2017, the amount deposited in the capital reserve account does not exceed the District's local share reported in its Long-Range Facility Plan.

14. Commitments

The District has contractual commitments at June 30, 2017 to various vendors, which are recorded in the general fund as fund balance assigned to other purposes in the amount of $122,520.

The District also has $112,275 of encumbrances outstanding at June 30, 2017 for various construction contracts recorded in the capital projects fund as restricted for capital projects, however this has not been shown as assigned to other purposes. However, these commitments are not shown as fund balance assigned to other purposes because that would result in an unassigned deficit in the capital projects fund balance, which is not permissible under GASB 54.

15. Restricted Assets

The District has $3,652,078 of capital reserve funds that are classified as restricted assets on the statement of net position because they are restricted by the New Jersey Department of Education to be utilized for future capital projects that have been approved in the District's Long-Range Facility Plan.

16. Calculation of Excess Surplus

Special service school districts are subject to an excess surplus calculation in accordance with N.J.S.A. 18A:46-31, as amended. This calculation will be performed by the Department of Education during the tuition rate certification process.

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Required Supplementary Information Part II

(PDF) MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT€¦· · 2017-11-30Mercer County Special Services School District Mercer County Special Services School District Hamilton Mercer - PDFSLIDE.NET (82)

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Contractually required contribution

Contributions in relation to the contractually required contribution

Contribution deficiency (excess)

District's covered-employee payroll

Contributions as a percentage of covered-employee payroll

$

'

1Q1l___

1,085,322 $

{1,085,322)

$

7,885,994 ' 13,76%

2016 2015

1,041,089 $ 1,014,820

(1,041,089) (1,014,820)

$

7,945,602 $ 7,926,175

13.10% 12.80%

Mercer County Special Services School District Required Supplementary lnformatlon

Schedule of District Contributions Public Employee's Retirement System

Last Ten Ftscal Years

Year Ended June 30, 2014 2013 2012

' 961,925 ' 894,329 $ 900,516

(961,925) (894,329) (900,516)

$ ' ' $ 7,907,079 $ 8,012,451 ' 8,033,594

12.17% 11.16% 11.21%

2011 2010 2009 ~

$ 1,014,658 $ 1,013,517 $ 784,473 $ 680,516

(1,014,658) (1,013,517) (784,473) (680,516)

' ' ' '

' 8,055,127 ' 8,441,389 $ 9,139,961 ' 8,548,448

12,60% 12.01% 8.58% 7.96%

67

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Mercer County Special Services School District Required Supplementary Information

Schedule of the State's Proportionate Share of the Net Pension Liability Associated With the District Teachers' Pension and Annuity Fund

State's proportion of the net pension liability (asset) associated with the Dislrict­Local Group

District's proportionate share of the net pension liability (asset)

State's proportionate share of the net pension liability (asset) associated with the District

Total proportionate share of the net pension liability (asset) associated with the District

Plan fiduciary net position as a percentage of the total pension liability

Last Ten Fiscal Years~

2015

0.1617187713%

$

$ 86,433,420

$ 86,433,420

33.64%

The amounts presented for each fiscal year were determined as of the previous fiscal year-end.

Covered payroll information is not presented since the Teachers' Pension and Annuity Fund is a special funding situation in which the District does not make contributions to this plan.

Year Ended June 30, 2016

0.1544821417%

$

$ 97,639,310

$ 97,639,310

28.71%

* This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, governments should present information for those years for which information is available.

Notes to Required Supplementarv Information·

Benefrt Changes

None

Changes of Assumptions

The discount rate changed from 4.13% as of June 30, 2015 to 3.22% as of June 30, 2016.

2017

0.1503928033%

$

$ 118,308,555

$ 118,308,555

22.33%

68

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Required Supplementary Information Part III

Budgetary Comparison

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C-1 P. I of3

MERCER COUNTI' SPECIAL SERVICES SCHOOL DISTRICT GENERAL FUND

BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS)

Year ended June 30, 20!7

Variance Original Budget Final Final To Bud~et Transfers

REVENUES: Budget Actual Actual

Local Sources: County Tax Levy 2,932,020 2,932,020 2,932,020 Tuition From LEA's 27,367,819 27,367,819 25,647,128 (!,720,69!} Other Tuition 3,495,675 (97,548) 3,398,127 3,387,406 (10,72!) Non-Resident Fees !50,000 150,000 151,248 1,248 Interest Earned 3,000 3,000 10,077 7,077 Interest Earned on Capital Reserve Funds l,000 l,000 12,049 11,049 Unrestricted Miscellaneous Revenues 271,500 271 500 326 528 55 028

Total LQCal Sources 34,221,014 (97,548) 34,!23,466 32,466,456 (1,657,0!CI)

State Sources: On-BehalfTPAF Pension Contributions {Non-Budgeted) !,691,574 l,691,574 TPAF Pcnsion P(I.';\ Retirement Medical (On-behalf - Non-Budgeted) l,409,465 1,409,465 TP AF Non-contributory Insurance (On-behalf - Non-Budgeted) l,8!2 1,8!2 Reimbursed TPAF Social Security 1 070 439 1 070 439

Total State Sources 4,173,290 4,173,290

Federal Sources: Medicaid Reimbumimcnt !75 000 24,063 199,063 541535 342 472

Total Federal Sources 175,000 !99,063 541,535 342,472

Total Revenues 34,396,0!4 (73,485) 34,322,529 37,lHl,28! 2,858,752

EXPENDITURES: Current Expense:

Spcdal Education - !mtruclion: Behavioral Disabilities:

Salaries of Teachers 919,008 (I0,484) 908,524 K62,219 46,305 Other Salaries for Instruction 35 l, 770 72,039 423,809 344,497 79,312 Other Purchased Services 5,750 5,750 5,750 General Supplies 25,000 3,613 28,613 26,463 2,150 Textbooks l,000 l,000 !,000 Other Objeds 4 350 387 4 737 4,694 43

Total Behavioral Disabilities l,301,!28 7!,305 l,372,433 l,243,623 128,8\0

Multiple Disabilities: Salariell ofTcachcrs 3,527,835 177,226 3,705,06! 3,680,530 24,53! Other Salaries for Instruction !,625,303 58,797 1,684,IOO 1,630,657 53,443 Other Purchased Services 6,350 58,900 65,250 65,241 9 General Supplies l34,88K (3,498) 131,390 ll5,872 15,5!8 Textbooks 4,812 (600) 4,2!2 !,179 3,033 Other Objects 6 250 200 6450 6,427 23

Total Multiple Di~abilitics 5,305,438 291,025 5,596,463 5,499,906 96,557

Autism: Salaries ofTeachcrs 2,836,081 (!4!,939) 2,694, 142 2,612,936 81,206 Other Salaries for Instruction 2,015,861 (!72,!24) l,843,737 l,698,286 145,451 General Supplies 28,250 1,270 29,520 26,450 3,070 Tc.,.tbooks 1,500 1,500 l,500 Other Objects 3,600 199) 3,40] 3 400 I

Total Autism 4,885,292 (312,992) 4,572,300 4,341,072 231,228

Preschool DisabilitiCll - Full-Time: Salaries ofTeachers 429,444 (36,910) 392,534 389,762 2,772 Other Salaries for Instruction 29a,9s5 (28,685) 270,300 238,467 3!,833 General Supplies !5,000 !5,000 5,446 9,554 Other Objects 20-0 20-0 20-0

Total Preschool Disabilities Full-Time 743,629 (65,595) 678,034 633,675 44,359

E:<tended School Year: Salaries ofTeachcrs l,462,500 120,080 1,582,SKO 1,582,580 Salaries of Supervisors of Instruction 155,000 (38,969) l!6,03J ll6,03l Other Salaries for Instruction 740,430 (49,952) 690,478 690,478 Other Pnrchascd Services 175,800 {70,588): !05,2!2 105,212

Total Extended School Year 2,533,730 (39,429) 2,494,30! 2,494,301

Cognitive - Severe: Salaries of Teachers 630,732 {272) 630,460 594, 722 35, 738 Other Salaries for Instruction 576,203 (l,582) 574,621 529,648 44,973 Genera! Supplies 16,450 634 !7,084 !4,884 2,200 Textbooks 50-0 500 50-0 Other Objects !,100 55 l 155 l 154 I

Total Cognitive - Severe 1,224,985 (l,!65) 1,223,820 1,140,408 83,4!2

Total Special Education - Instruction 15,994,202 (56,851) !5,937,35] !5,352,985 584,366

School-Sponsored Co Curriculum Instruction: Salaries 35,650 35,650 25,623 l0,027 Supplies and Materials 19,290 19,290 17,554 !,736 Other Objects 430 430 430

Total School-Sponsored Co-Curr. - Instruction 55 370 55,370 43 !77 12 193 Total Instruction 16,049,572 {56,85!) 15,992,721 15,396,!62 596,559

"

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C-1 P. 2 of3

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT GENERAL FUND

BUDGETARY COMPARJSON SCHEDULE {BUDGETARY BASIS)

Year ended June 30, 20!7

Variance Original Budget Final Final To Budget Transfers

EXPENDITURES (CONTINUED): Bud1::9 Actual """I

Undistributed Expenditures Health Scivices:

Salaries 529,188 529,!88 510,436 18,752 Purchased Professional and Technical Services 64,700 64,700 63,500 1,200 Other Purchased Services l,770 1,770 l,573 107 Supplies and Materials 22 050 22 050 IS 357 3,693

Total Health Services 617,708 6!7,708 593,866 23,842

Other Support Serv. - Students - Related Services: Salaries 4,273,668 lS,612 4,289,280 4,205,01! 84,269 Purchased Professional - Educational Services 170,000 (44) 169,956 92,313 77,643 Supplies and Materials 26 51){) 26 500 !6 614 9,886

Total Other Support Serv. - Students - Related Services 4,470,168 15,568 4,485,736 4,313,938 !7!,798

Child Study Team: Salaries of Other Professional Staff l,059,217 l,059,2!7 1,049,663 9,554 Supplies and Materials 1 750 I 750 839 911

Total Child Study Team 1,060,967 l,060,967 1,050,502 10,465

!mp. of!nstruct. Serv./Other Supp. Serv. - Instruct. Staff: Salaries of Other Professional Staff 209,185 (29,070) l80,l l5 !33,670 46,445 Salaries of Secretarial and Clerical Assistants 197,487 (6,039) 191,448 l76,!4S lS,300 Other Purcha.lcd Services 88,600 7,869 96,469 74,449 22,020 Supplies and Materials 6,300 6,300 5,394 906 Other Objects 8 750 l 830 6 920 ! 483 5 437

Total fn1>. of Instruct Scrv./Other Supp. Serv. - Instruct. Staff 510,322 (29,070) 481,252 39!,144 90,!08

Educational Media Services/Schoo! Library: Salaries 122,6!7 122,617 1 !9,351 3,266 Supplies and Materials 4,950 4 950 3,785 I 165

Total Educational Media Services/School Library 127,567 !27,567 123, \36 4,43!

Instructional StaffTraining Services: Other Salaries 30-0 550 850 850 Other Purchased Professional and Technical Services 18,000 (!,150) 16,850 12,821 4,029 Other Purchased Services 15,800 839 16,639 14,827 l,812 Supplies and Materials !2 980 239 !2 741 12 335 406

Tota! Instructional StaffTraining Services 47,080 47,080 40,833 6,247

Support Services - General Administration: Salaries 93,134 {l,983) 9l,l51 86,550 4,60! Unused Vac. Payment To Tem1inatcd/Rctired Staff 1,983 l,983 1,982 I Legal Services 81,0(){l 81,000 28,6!2 52,388 Audit Fees 57,000 3,000 60,000 60,000 Architectural/Engineering Services l0,000 (3,000) 7,000 7,000 Other Purchased Professional Services 7,500 7,500 4,040 3,460 Communications/Telephone 56,500 56,500 37,295 19,205 BOE Other Purchased Services 4,0(){l 4,000 4,000 Miscellanc'OUS Purchased Services 37,750 37,750 32,361 5,389 General Supplies 2,500 2,500 2,107 393 Judgments Against School District 3,500 3,500 3,500 Miscellaneous E.xpcndltures 3,750 3,750 3,435 315 BOE Membership Dues and Fees lO 000 10 000 6,321 3 679

Total Support Services - General Administration 366,634 366,634 262, 703 103,93 l

Support Services - Schoo! Administration: Salaries of Prineipals/Assistant Principals 331,755 (!8,681) 313,074 289,945 23,129 Salaries of Other Professional Staff 345,494 33,808 379,302 352,563 26,739 Salaries of Secretarial and Clerical Assistants 329,254 329,254 302,023 27,231 Unused Vacation Payment to Tenn/Ret Staff 13,943 !3,943 13,942 I Other Purchased Services 36,700 36,700 23,980 !2,720 Supplies and Materials 34,580 34,580 30,l42 4,438 Other O~iccts I 00-0 10000 6 032 3 968

Total Support Services - School Administration l,OB?,783 29,070 l,116,853 l,018,627 98,226

Support Services - Central Services: Salaries 820,560 820,560 742,985 17,515 Purchased Teclmical Services 49,000 49,000 45,044 3,956 Miscellaneous Purchased Services l2,7(){l 12,700 6,678 6,022 Supplies and Materials 13,500 13,500 3,526 9,974 Interest on Current Loruis 899 899 899 Misce!IEl!l"oos Expenditures 12 500 (899} ll,60l 7,005 4,596

Total Suppon Services - Central Services 908,260 908,260 R06,!37 102,!23

Support Services -Admin. Info. Tech. Services: Salaries 260,086 260,086 236,023 24,063 Purchased Professional Services 13,500 !3,500 5,106 8,394 Other Purchased Services 1,000 l,000 '"' 411 Supplies and Materials 75,0(){l 24,063 99,063 94,447 4,6!6 Other Objects 90,000 90 (){l0 85 562 4 438

Total Support Services -A<hnin. Info. Tech. Services 439,SB6 24,063 463,649 42!,727 41,922

Required Maintenam:e for School Facilities: Cleaning, Repair and Maintenance Services 85 l lO SS 110 85 I lO

Required Maintenance for School Facilities 85,1 !O 85,l 10 85,l!O

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT GENERAL FUND

EXPENDITURES (CONTINUED): Custodial Services:

Salaries Unused Vacation Payment lo Term/Re\ Staff Purchased Professional and Technical Services Cleaning, Repair and Maintenance Services Other Purchased Propeny SefVices Insurance Miscellaneous Purchased Services General Supplies Energy (Natura! Gas) Energy (Electricity) Other Objects

Total Custodial Services

Student Transponation Services: Cleaning, Repair and Maintenance Services contracted &rviccs (Other Than Bet Home & School}- Vendors Miscellaneous Purchased Services -Transpmtation Transportation Supplies

Total Student Transportation Services

Special Programs - Instruction - Employee Ben.mis: Social Security Benefits Health Benefits

Tota! Special Programs - Instruction - Employee Benefits

Unallocated Benefits - Employee Benefits: Social Security Contributioos TPAF Contribution - ER!P Other Retirement Contributions - PERS Unemployment Compensation Workmen's Compensation Health Benefits Tuition Reimbursemont 0~1er Employee Benefits Unused Vacation Payment to Temi/Ret Staff

Total Unallocated Benefits - Employc>e Benefits

On-behalf payments: On-Beha!fTPAF Pension Contributions (Non-Bu~eted) TP AF Pension Post Retirement Medical (On-behalf- Non-Budgeted) TPAF Non-<:ontributory Insurance (On-behalf- Non-Budgeted) Reimbursed TPAF Social Security

Total On-~halfContributioos Total Undistributed Ex~nditures Total Expendituwi - Current Expense

CAPITAL OUTLAY Interest Deposit To Capital Reserve

Equipment: Multiple Disabilities Autism Preschool Disabilities - Part Time Maintenance Undist. Ex~nd. -Admin. Info. Technology Services Undist. Expend. - Lease

Total Equipment

Facilities Acquisition and Construction Services: Archite<.:tural!Engineering Services Construction Services

Total Facilities Acquisition and Constmction Services

Total Expenditures - Capital Outla)'

Total Expenditures (Th:ficicnc1•)/Excess of Re~ues (Under)/Ovcr

Expenditures

Fund Balances, July l Fund Balances, June 30

Recapitulntion of Fund Bnlance: Restricted Fund Balance;

Capital Reserve Assigned to:

Designated for Subsequent Years E.'\penditures Encumbrances

Unassigned Fund BalMce Fund Balance per Governmental Funds (GAAP and budgetary basis)

BUDGETARY COMPARISON SCHEDULE (BUDGET ARY BASIS)

Year ended June 30, 2017

Original Budget

!,154,315 500

6!,000 390,454

60,500 181,735

1,600 226,887 222,000 922,000

l 000 3,221,99!

17,800 !8,000 7,500

43,300

180,382 781,563 96!,945

6!5,000 47,500

1,!97,000 35,000

l,100,000 7,390,450

54,000 317,000 50 000

l0,805,950

24,754 37! 40 803,943

l 000

l5,430 2,500 2,500

35,000 29,000 16 000

!00,430

35,700 574 300 610000

711 430

41,5!5,373

(7,l 19,359)

14 096,467 6 977 l08

Budget Trans furs

62,980 (4,000)

(22,747)

(32,233) (4,000)

2,500

(2,500)

21,590 (79,709) (58,l !9)

m (429)

{2!,248) (700)

(63,!32)

2!,955 64 980

1,854

(\6 634) (73,485)

I l,448 (!1,423)

25

(73,485)

Final Budget

1,154,315 500

61,000 453,434

56,500 !58,988

1,600 194,654 2!8,000 922,000

'000 3,22!,99!

2,500 17,800 18,000 5,000

43,300

201,972 70L854 903,826

615,428 47,071

l,197,000 13,752

1,099,300 7,327,318

54,000 338,955 ! 14 980

l0,807,804

24, 737 737

! 000

!5,430 2,500 2,500

46,448 17,577 !5 975

100,430

35,700 574 300 6!0000

71! 430

4! 441 888

(7,!19,359)

14 096 467 6 977 l08

Actual

1,021,496

53,!30 263,418

41,313 !57,039

255 144,422 140,512 625,940

'50 2,448,175

16,5!4 18,000 2 198

36,712

201,972 701 854 903,826

548,557 46,545

l,067,548

l,045,7R8 6,075,951

45,322 325,392 !14,980

9,270,083

l,69!,574 1,409,465

1,812 l 070A39 4 113 290

25,939 809 41,335,97!

42,93! !2,l3l l5 975 71,037

18,339 25 525 43 S64

ll4 90!

4! 450,872

(4,269,59!)

14 096 467 9 826,876

3,652,078

1,980,527 122,520

4 071 751 9,826 876

C-1 P. 3 of3

Variance Firui!To Actual

132,819 500

7,870 190,016

15,!87 1,949 1,345

50,232 77,488

296,060 350

773,816

2,500 1,286

2 802 6,588

66,871 526

129,452 13,752 53,5!2

l,25!,367 S,678

13,563

1,537,721

(l,691,574) (1,409,465)

(l,812) (l,070,439) 4 173,290

(1,202 072) (605 5!3)

l,000

15,430 2,500 2,500 3,517 5,446

29,393

17,36! 548,775 566 !36

596 529

{8,984)

2,849,768

2 H49 768

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C-2 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

BUDGETARY COMPARISON SCHEDULE BUDGETARY BASIS

SPECIAL REVENUE FUND

Year ended June 30, 2017

Variance Original Budget Final Final To Budget Transfers Budget Actual Actual

Revenues: State Sources $ 170,655 $ 129,315 $ 299,970 $ 252,631 $ (47,339) Federal Sources 33,000 21,862 54,862 25,791 (29,071) Other Sources 223,674 223,674 223,674

Total Revenues 427,329 151,177 578,506 502,096 (76,410)

Expenditures: Instruction:

Other Salaries 33,000 7,496 40,496 17,410 23,086 Total Instruction 33,000 7,496 40,496 17,410 23,086

Support Services: Salaries 394,329 19,150 413,479 377,869 35,610 Personal Services - Employee Benefits 95,561 95,561 87,009 8,552 Communications 4,119 4,119 4,119 Travel 6,358 6,358 3,015 3,343 Supplies & Materials 15,722 15,722 10,520 5,202 Miscellaneous Expenditures 2,771 2,771 2, 154 617

Total Support Services 394,329 143,681 538,010 484,686 53,324

Total Expenditures 427,329 151,177 578,506 502,096 76,410

Excess/(Deficiency) of Revenues Over/(Under) Expenditures and Other Financing Uses $ $ $ $ $

72

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C-3 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

NOTE TO REQUIRED SUPPLEMENTARY INFORMATION

BUDGET-TO-GAAP RECONCILIATION

Year ended June 30, 2017

Explanation of Differences between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures

SOURCES/INFLOWS OF RESOURCES Actual amounts (budgetary) "revenues" from

the Budgetary Comparison Schedules (C-2)

Difference - budget to GAAP: Grant accounting budgetary basis differs from

GAAP in that encumbrances are recognized as expenditures, and the related revenue is

recognized. Prior Year Encumbrances

Total revenues as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances -

Governmental Funds (B-2)

USES/OUTFLOWS OF RESOURCES Actual amounts (budgetary basis) "total outflows"

from the Budgetary Comparison Schedule (C-2)

Difference - budget to GAAP: Encumbrances for supplies and equipment ordered

but not received are reported in the year the order is placed for budgetary purposes, but in the year

the supplies are received for financial reporting purposes. Prior Year Encumbrances

Total expenditures as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances -

Governmental Funds (B-2)

$

$

$

$

Special Revenue Fund

502,096

1,500

503,596

502,096

1,500

503,596

73

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Supplementary Information

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Special Revenue Fund

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E-1

74

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Capital Projects Fund

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F-1 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

CAPITAL PROJECTS FUND

SUMMARY SCHEDULE OF PROJECT REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

Revenues: County Sources

Expenditures:

Construction Services Total expenditures

Excess of revenues over expenditures

Fund Balance, July 1 Fund Balance, June 30

(BUDGETARY BASIS)

Year ended June 30, 2017

Reconciliation to GAAP Financial statements

Fund Balance, June 30, 2017 - Budgetary - Basis GAAP Basis Revenues Not Recognized - SDA Awards GAAP Basis Revenues Not Recognized - County/Local Fund Balance, June 30, 2017 - GAAP basis

$

Current Year

406,740

125,078 125,078

281,662

569,134 $ 850,796 ======

$ 850,796 (106,590) (584,322)

$ 159,884 ======

75

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

CAPITAL PROJECTS FUND

SCHEDULE OF PROJECT REVENUES, EXPENDITURES, PROJECT BALANCE, AND PROJECT STATUS - BUDGETARY BASIS

Revenues and Other Financing Sources: County Sources

Total Revenues

(BUDGETARY BASIS)

Mercer High School and Joseph Cappello HV AC Controls and Mercer High School Dryvit Replacement

Year ended June 30, 2017

Prior Current Periods Year

$ 1,533,000 $ (108,260) 1,533,000 (108,260)

Expenditures and Other Financing Sources: Architectural services Construction Services Land Improvements

Total Expenditures

Excess/(Deficiency) of Revenues Overl(Under) Expenditures

Additional Project Information: Project Number Grant Date/Letter of Notification Bond Authorization (Referendum) Date Bonds Authorized Bonds Issued Original Authorized Cost Additional Authorized Cost Revised Authorized Cost

Percentage Increase over Original Authorized Cost

Percentage Completion Original Target Completion Date Revised Target Completion Date

$

$

1,084,506 230,293

1,314,799

218,201

3103-055-02-0690 various

NIA NIA NIA

950,500 582,500

1,424,740

6lo/o 92.56%

November 2011 June 2018

3,941

3,941

$ (112,201)

$

$

Totals

1,424,740 1,424,740

1,088,447 230,293

1,318,740

106,000

$

$

F-la

Revised Authorized

Cost

1,424,740 1,424,740

1,362,212 170,788

1,533,000

(108,260)

76

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

CAPlT AL PROJECTS FUND

SCHEDULE OF PROJECT REVENUES, EXPENDITURES, PROJECT BALANCE, AND PROJECT STATUS - BUDGETARY BASIS

Revenues and Other Financing Sources: State Sources Transfer from Capital Reserve

Total Revenues

Expenditures and Other Financing Sources: Architectural services Construction Services Land Improvements

Total Expenditures

Excess/(Deficiency) of Revenues Over/(Under) Expenditures

Additional Project Information: Project Number Grant Date/Letter of Notification Bond Authorization (Referendum) Date Bonds Authorized Bonds Issued Original Authorized Cost Additional Authorized Cost Revised Authorized Cost

Percentage Increase over Original Authorized Cost

Percentage Completion Original Target Completion Date Revised Target Completion Date

(BUDGETARY BASIS)

Mercer High School: Boiler and Chiller

$

$

Year ended June 30, 2017

Prior Periods

3 I0,570 465,855 776,425

55,210 573,784

628,994

I47,43l

3 I 03-055-I4-I 002 June 27, 20I4

NIA NIA NIA

$

$

$ 776,425

776,425

NIA 87 .97'Yo

November 2015 January 2018

Current Year

54,059

54,059

(54,059)

Totals

$ 3I0,570 465,855 776,425

55,210 627,843

683,053

$ 93,372

F-Ib

Revised Authorized

Cost

$ 3I0,570 465,855 776,425

55,210 72I,2I5

776,425

$

77

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

CAP IT AL PROJECTS FUND

SCHEDULE OF PROJECT REVENUES, EXPENDITURES, PROJECT BALANCE, AND PROJECT STATUS -BUDGETARY BASIS

Revenues and Other Pinancing Sources: State Sources Transfer from Capital Reserve

Total Revenues

Expenditures and Other Financing Sources: Architectural Services Construction Services Land Improvements

Total Expenditures

Excess/(Deficiency) of Revenues Over/(Under) Expenditures

Additional Project Information: Project Number Grant Date/Letter of Notification Bond Authorization (Referendum) Date Bonds Authorized Bonds Issued Original Authorized Cost Additional Authorized Cost Revised Authorized Cost

Percentage Increase over Original Authorized Cost

Percentage Completion Original Target Completion Date Revised Target Completion Date

(BUDGETARY BASIS)

Joseph F. Cappello School: Boiler and Chiller

Year ended June 30, 2017

$

$

Prior Periods

432,450 648,675

1,081,125

67,139 8!0,484

877,623

203,502

3 !03-050-14-1001 June 27, 2014

NIA NIA NIA

$ 1,081,125

1,081, 125

NIA 83.99o/o

November 2015 January 2018

$

$

Current Year

30,400

30,400

(30,400)

Totals

$ 432,450 648,675

1,081,125

67,139 840,884

908,023

$ 173,102

F-lc

Revised Authorized

Cost

$ 432,450 648,675

1,081,125

67,139 1,013,986

1,081,125

$

78

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRJCT

CAPITAL PROJECTS FUND

SCHEDULE OF PROJECT REVENUES, EXPENDITURES, PROJECT BALANCE, AND PROJECT STATUS -BUDGETARY BASIS

(BUDGETARY BASIS)

Mercer 1-Iigh School: Gym Partition Doors Motor/Refacing

Revenues and Other Financing Sources: County Sources

Total Revenues

Expenditures and Other Financing Sources: Construction Services

Total Expenditures

Excess/(Deficiency) of Revenues Over/(Under) Expenditures

Additional Project Infonnation: Project Number Grant Date/Letter of Notification Bond Authorization (Referendum) Date Bonds Authorized Bonds Issued Original Authorized Cost Additional Authorized Cost Revised Authorized Cost

Percentage Increase over Original Authorized Cost

Percentage Completion Original Target Completion Date Revised Target Completion Date

Year ended June 30, 2017

Prior Current Periods Year

$ _____ _ $ 160,000 160,000

18,339 18,339

$ $ 14I,661

NIA NIA NIA NIA NIA

$ I60,000

160,000

NIA 11.46%1

June 2018 NIA

Totals

$ 160,000 I60,000

18,339 I8,339

$ I4I,661

F-ld

Revised Authorized

Cost

$ I60,000 160,000

I60,000 160,000

$

79

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

CAPITAL PROJECTS FUND

SCHEDULE OF PROJECT REVENUES, EXPENDITURES, PROJECT BALANCE, AND PROJECT STATUS -BUDGETARY BASIS

Revenues and Other Financing Sources: County Sources

Total Revenues

Expenditures and Other Financing Sources: Construction Services

Total Expenditures

Excess/(Deficiency) of Revenues Over/(lJnder) Expenditures

Additional Project Information: Project Number Grant Date/Letter of Notification Bond Authorization (Referendum) Date Bonds Authorized Bonds Issued Original Authorized Cost Additional Authorized Cost Revised Authorized Cost

Percentage Increase over Original Authorized Cost

Percentage Completion Original Target Completion Date Revised Target Completion Date

(BUDGETARY BASIS)

Joseph F. Capello School: Fire Alann System

Year ended June 30, 2017

Prior Periods

$ _____ _

$

$

NIA NIA NIA NIA NIA

I 80,000

I80,000

NIA 10.19%1

August 20I8 NIA

$

$

Current Year

I80,000 I80,000

I8,339 I 8,339

I6I,66I

Totals

$ I80,000 I80,000

I 8,339 I8,339

$ I6I,66I

F-Ie

Revised Authorized

Cost

$ I80,000 I80,000

I80,000 I80,000

$

80

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

CAPITAL PROJECTS FUND

SCHEDULE OF PROJECT REVENUES, EXPENDITURES, PROJECT BALANCE, AND PROJECT STATUS -BUDGETARY BASIS

Revenues and Other Financing Sources: County Sources

Total Revenues

Expenditures and Other Financing Sources: Construction Services

Total Expenditures

Excess/(Deficiency) of Revenues Over/(Under) Expenditures

Additional Project Infonnation: Project Number Grant Date/Letter of Notification Bond Authorization (Referendum) Date Bonds Authorized Bonds Issued Original Authorized Cost Additional Authorized Cost Revised Authorized Cost

Percentage Increase over Original Authorized Cost

Percentage Completion Original Target Completion Date Revised Target Completion Date

(BUDGETARY BASIS)

Mercer Elementary School: Site Work

Year ended June 30, 2017

Prior Current Periods Year Totals

$ ______ _ $ 175,000 $ 175,000 175,000 175,000

$ $ 175,000 $ I75,000

NIA NIA NIA NIA NIA

$ 175,000

I75,000

NIA 0.00%

June 2018 NIA

F-lf

Revised Authorized

Cost

$ I75,000 !75,000

I75,000 175,000

$

81

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Fiduciary Funds

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H-1 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRJCT

TRUST AND AGENCY FUNDS

COMBINING STATEMENT OF FIDUCIARY NET POSITION

June 30, 2017

Trust Private Agency Purpose Unemployment Total Student Total

Scholarship AFLAC Compensation Trust Activity Payroll Agency

Assets: Cash and Cash Equivalents $ 14,514 $ 52 $ 174,893 $ 189,459 $ 38,888 $ 224,221 $ 263,109 Total Assets 14,514 52 174,893 189,459 $ 38,888 $ 224,221 $ 263,109

Liabilities: Payroll Deductions and Withholdings $ 224,221 $ 224,221 Due to Student Groups $ 38,888 38,888

Total Liabilities $ 38,888 $ 224,221 $ 263,109

Net Position: Held in Trust for Unemployment Claims 174,893 174,893 Held in Trust for Scholarships and Other Purposes 14,514 52 14,566

Total Net Position $ 14,514 $ 52 $ 174,893 $ 189,459

82

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Capello High School Elementary Total

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT STUDENT ACTIVITY AGENCY FUND

SCHEDULE OF CASH RECEIPTS AND CASH DISBURsem*nTS

Year ended June 30, 2017

Balance July 1, Cash Cash 2016 Receipts Disbursem*nts

$ 1,453 $ 2,832 $ 1,150 5,714 40,925 28,733

13,779 9,150 5,082 $ 20,946 $ 52,907 $ 34,965

H-3

Balance June 30,

2017

$ 3,135 17,906 17,847

$ 38,888

83

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT PAYROLL AGENCY FUND

SCHEDULE OF CASH RECEIPTS AND CASH DISBURsem*nTS

Year ended June 30, 2017

Balance July 1, Cash Cash 2016 Receipts Disbursem*nts

Assets Cash and Cash Equivalents $ 218,270 $ 31,180,003 $ 31,174,052 Total Assets $ 218,270 $ 31,180,003 $ 31,174,052

Liabilities Payroll Deductions and

Withholdings $ 218,270 $ 31,180,003 $ 31,174,052 Total Liabilities $ 218,270 $ 31,180,003 $ 31,174,052

H-4

Balance June 30,

2017

$ 224,221 $ 224,221

$ 224,221 $ 224,221

84

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Long-Term Debt

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Description

Tractor Ford Truck

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT LONG-TERM DEBT

SCHEDULE OF OBL!GA TIONS UNDER CAPITAL LEASES

Year ended June 30, 2017

Amount of Balance Date of Term of Interest Original July Lease Lease Rate Issue 1,2016

12/3/2013 4 years 2.243% $ 46,363 $ 18,841 1/15/2015 4 years 2.330% 34,089 20,447

$ 39,288

l-2

Balance June

Retired 30, 2017

$ 9,316 $ 9,525 6,659 13,788

$ 15,975 $ 23,313

85

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Statistical Section (Unaudited)

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Statistical Section Unaudited

Contents

Financial Trends

These schedules contain trend information to help the reader understand how the district's financial performance and well being have changed over time.

Demographic and Economic Information

These schedules offer demographic and economic indicators to help the reader understand the environment within which the district's fmancial activities take place.

Operating Information

These schedules contain service and infrastructure data to help the reader understand how the information in the district's financial report relates to the services the district provides and the activities it performs.

Revenue Capacity These schedules contain information to help the reader assess the district's most significant local revenue source, the property tax. These schedules are not applicable to Mercer County Special Services School District as property taxes are not a revenue source for the district.

Debt Capacity

These schedules present information to help the reader assess the affordability of the district's current levels of outstanding debt and the district's ability to issue additional debt in the future. These schedules are not applicable to Mercer County Special Services School District as the district does not hold any debt.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports (CAFR) for the relevant year.

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Government Activities: Net Investment in Capital Assets Restricted Unrestricted (deficit)

$

2008

38,326,912 $ 1,726,193 1,608,031

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT NET POSITION BY COMPONENT

2009

41,004,526 $ 2,356,854 2,843,187

LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING)

UNAUDITED

As of June 30, 2010 lQll

40,373,584 $ 39,417,476 $ 499,821 750,824

3,894,508 5,812,175

2012

38,822,787 1,151,066 6!649.120

2013

$ 38,046,878 1,551,784 5,513,720

Total Government Activities Net Position $ 41,66J,J36 $ 46,204,567 $ 44._7_i?_7,913 $ 45,2_§_9.475 $ __ ~622,91L__1 45,_112,382

Business-Type Activities: Net Investment in Capital Assets Restricted Unrestricted

Total Business-Type Activities Net Position

Government-Wide: Net Investment in Capital Assets Restricted Unrestricted (deficit)

Total Government-Wide Net Position

Source: CAFR Schedule A-1 and District records.

$ 1,159,833 $ 10,852

2 262,860 $ 3,433,545 $

$ 39,486,745 $ 1,737,045 3,870,891

$ 45,094,681 $

107,121 $ 285,595 $ 372,482 $ 206,854

1,997,726 2,311,234 2,167,994 2,311,701 $ 2,596,829 $ 2,540,476 $

41,111,647 $ 40,659,179 $ 39,789,958 $ 2,563,708 499,821 750,824 4,840,913 6J05,742 7,980,169

48,516,268 $ 47,364,742 $ 48,520,9?:_1 $

GASB 63 was implemented in the 2013 fiscal year, which required the reclassification of balances previously reported as net assets to net position.

GASB 68 was implemented in the 2015 fiscal year, which required a restatement ofbeginning net position in the amountof$22,684,628. This amount is not reflected in the June 30, 2014 net position above.

362,945 $ 341,717

2,083,546 1,544,319 2,446,491 $ 1,886,036

39,185,732 $ 38,388,595 1,151,066 1,551,784 8,732,666 7,058,039

_12,069,464 _J_ 46,99§,_ill

J-1

l.Qli 2015 2016 2017

$ 37,556,142 $ 37,242,158 $ 37,059,204 $ 36,041,421 2,393,633 2,851,151 3,094,454 3,811,962 4,028,166 {15,314,922} [14.084,873} {21,493,464}

$ 43,977,941 __ ,_24,778,387 $ 26,068,785 $ _18,359,919

$ 309,756 $ 285,403 $ 275,629 $ 247,648

1,188,070 1,097,383 1,073,731 938,205 $ 1,497,826 $ 1,382,786 $ 1,349,360 s 1,185,853

$ 37,865,898 $ 37,527,561 $ 37,334,833 $ 36,289,069 2,393,633 2,851,151 3,094,454 3,811,962 5,216,236 {14,217,539] {13,011,142} {20)555,259}

$ 4:_?_.475,767 $ 26,161,173 -- $ 2},41 __ ~_.145 s 19,545,772

86

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J.2 p 1

MERCER COUNTI SPECIAL SERVICES SCHOOL O!STRICT CHANGES IN NET POSmON

LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING)

UNAUDITED

Year ended June 30. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Expenses: Govemmontal Activities:

Instruction: Special Education $ 18.998,691 $ 19,014,032 $ 24,841.406 $ 23,108,085 $ 23.177.728 $ 23,457.196 $ 23,079,131 $ 26)57,918 s 211.568,929 $ 30,845,335 Oilier Special Education 923,038 142,124 50,!07 44,458 51.177 53,306 68,613 58,218 70,474

SuppOrt Services: Student and Instruction Related s~TVices 7,735,774 8,000,395 l 1,074,334 10,695,312 9,831565 !0.565,290 10,152,663 l J,682.237 11,904,674 13.442,373 General Administration 339,293 40L045 497,896 449.249 335,027 344,767 345,575 330,894 376,694 360.252 School Administrative Services U68,139 1,281.183 1,631,985 l,417.875 1,462.521 1,724,486 1,735,91! 1,952,0)9 l,703,450 1.998,859 Central Administrative Services 623,804 660,076 1,058,708 883,952 842,546 l,044,154 J,237,868 1,268,737 1,377.548 1,577,339 Administrative Information T cclioology 512,777 484,963 455,442 429,035 438.483 467,688 491,039 538,884 537.750 674,279 Plant Operations and Maint=IDCC 2,473.666 2,439,231 2,999,265 2.943,122 2,829,359 2.661,520 2,966,3!6 3,311.854 3.337,049 3,658,509 Pupil Transportation 37,751 25.706 29,498 68.936 19,774 16,594 71.917 21,366 27.000 38,392

Tota.I Governmental Activities Expenses 44,65l.186 44,413,247 42,588.534 4ll.045,673 38,981.461 40.332,872 40,133,726 45 332,582 47.891.312 52.665,812

Business-T ypc Activities: Target Evaluation T cam Project Adults 6,403 2,159 45,289 Food Service 403,871 423,8ll 423,955 472,240 466,037 492,515 535,018 546,225 565.59! 547,927 Mercer County Cooperative Transportation System 8,832,061 8,518,210 8,410,047 6,577,813 6,047,738 5,674,532 6,741,427 6,767.252 6,915.392 6,559,252 NJ State Regional Day School at Hamilton 2,018,921 2,242,112 2,237,440 2.257,360 2.207,36! 2521,195 2,41!,332 1,476,116 441.799 514.635 Integrated Prcsckiol 498.761. 217.889 196.322 160, 782 231,902 62.298 60,707 59,982 62, 176 61,123 Capital Academy 20,671 Assisted AuAf!lentative Technology 73,911 42,!58 47,036 34.813 24,685 20.936 Respite 506 Clinic Parent 22,296 37,904 26.566 7,728 9,956 2.811 492 398 Community Resources 372,160 274,074 80,279 148,491 172,061 51,703 71,098 89,383 Chuck's 82,129 72,387 65,123 64,742 68.271 77.560 67,394 Special Aides 1,912,584 1,737,379 1,743,632 2,085,488 2,370,250 3.026,205 3,021,915 3,026,594 Social Skills 1,350 Emernency Treatment Services 28,788

Total Business-Type Activitics E.xpcnses I 1.833,929 11,446.339 13.718.444 11,634,494 10.900.587 l l.078.306 12.365.493 f I.998,565 11,156.023 10,866,706 Total District Expenses _1 _ 56,485.li5 $ ___ 55,859_,5~ 56.306..978 $ __ 5!.680_,J§l_________!_ 49,882.048 ·-'--51.411,_l_l!_~ 52.499,219 s . __ 57.331.147 -" 59.047.335 $ 63.53l5!8

"

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Prop;ram Revenues: Gowrnmental Activities:

Charges for Services: Special Education

Operating Grants and Contributions: Si=ial Education Student and Instruction Related Services Unallocated Benefits

Capital Grants and Contributions Total Governmental Activities Program Revenues

Business-Type Activities: Chari;:es for Services:

Project Adults Food Service Mercer County COOPerativc Transportation Svstem NJ State Regional Dav School at Hamilton Integrated Preschool Assisted Au;')Tlentative Technology Respite Clinic Parent Community Resources Chuck's Place Special Aides

Operating Grants and Contributions; Food Savice

Total Business-Type Activities Prow;un Revenues

Total District Program Revenues

Net (Expensc)!Revenue: Governmental Activities Business· Type Activities

Total District-wide Net (Expcnse)!Revenue

2008 2009

2,586,453 5 2.626.585

995,847 852,079 1,078,503 978,777 3,256,617 2,722.819

7,917.420 7.180,260

12,278 110,448 103,951

8.805.282 8,518.210 2,106.183 2,215.156

333,062 360,026 24,649 36.233

275,440 303,823 11.667,342 11.537.399

19.584,762 18,717.659

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT CHANGES IN NET POSmON

LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING)

UNAUDITED

Y car ended June 30. 2010 2011 2012

692.465 ' 502,352 5 22Q813 l,050.167 893.492 683,905

38.274 252.101 1.742,632 1.434.118 1.156.819

42,974 88.637 97.432 85.117

8,410,047 6,578,015 6,047,738 2,143.476 2,113.580 2,093.495

206,289 328.626 266,112 36,752 24,354 25.665

506 49,360 29,350 32,570

358.427 243,104 99,021 83.197 73.605

1,912,584 1,737,379 l.,737,884

294,311 342,975 345.345 13.543.363 11,578.012 10,806,552

15,285.995 ' l_3,Q_l2.l30 L 11.963.371

5

!_

2013 20!4 2015

218,546 ' 25.382 5 23,102 672,866 485,675 493,949

296.667 553 644 305,709 1.188.079 l,064,70! 822,760

76,413 110,074 126,761 S.674,330 6,741.427 6.767,252 2,087.454 2.186,!12 1,418,563

18,775 17.400 9,300 ll7,655 72,150 42,238 72,967 70,445 74.829

2,086,195 2,369,543 3,026,205

384,041 410.132 418.364 10.517.830 ll.977.283 lJ.883.512

lJ~705,909 5 13.041_,9_H_ $ _12.706.27,Z_

2016

5 26.329 480.858

471,052 978.239

124,727 6,915.391

472,627

9.075 75.838 76,489

3,021,915

426.515 ll.l22.577

$ l:Z,10Q816

5

s

2017

J-2 P2

17,410 486,186

74.401 577 .. 997

125.741 6.559,252

411,558

6,825 92,420 70,840

3,026,594

409.953 10.703,183

11.281.180

(36,733,766) $ (37,232,987) s (40.845,902) $ (38,6JI.555) $ (37.824.642) $ (39,144,793) $ (39,069,025) $ (44,509,822) $ (46,913,073) $ (52,087.815) (166.587) 91.060 (175.081) (56.482) (94.035) (560.476) (388..210) (1!5.053) (33.446) 063.523)

(36.900)_53)$-- (37.14[927}_-,--- {11.020.983) _$ {3jl_,_\igg:-037) S ---{3V)_li"]77) $ ------09,7-Q5,269)-$ __ (39.457,P_j_)__$ __ _(_44,62<8'i5) -,--{46,946,519) $ (52.251.338)

"

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General Revenues and Other Changes in Net Assets: Governmental Activities:

Cowrty Appropriation Ta.xes Tuition -LEAs Nonresident Fees Interest Earned on Investments Miscellaneous Income Federal and State Aid Not Restricted Special Items:

Capiral Asset Inventory Adjustment Long-Term Debt Assumed by County of Mercer Cancellation ofNct Position

Transfers Total Governmental Activities

Business-Type Activities: Interest Earned on Investments Special Items:

Refund of Prior Year Revenue Cancellation of Net Position

Transfers Total Business-Type Activities Total Government-wide

Changes in Net Position: Governmental Activities Business-Type Activities

Total District

Source: CAFR Schedules A-2 and District records

s

2008 2009

5.492,269 $ 3,460,178 32,612.,267 34,214,361

573,370 183,847 !74,48 l 44,522 442,903 502,805

25,000,000 (34.481)

- (41.207) 64,295.290 38,330,025

2.567 292

(10,314) (182,823)

41,207 2.567 (151.638)

64,297,857 $ 38,\78..387

MERCER COUNTI SPEClAL SERVICES SCHOOL DISTRICT CHANGES IN NET POSITTON

LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING)

UNAUDITED

Y car ended June 30, 20\0 20ll 2012

2,870,529 ' 2,870,529 ' 2,870,529 33,538,814 33,595,981 32,065,344

175,880 170,0\3 !83,485 21,885 14,235 7,821

306,151 355,192 287,643 2,955,850 2,818,167 3,052,318

39,869,109 39,824,117 38.467,!40

'" 127 SJ

'" 127 SI 39J;69.457 39,824,244 38,467,191

2013 2014 2015

s 2.870,529 s 2,874,529 s 2,874,529 30,503,693 31,490,169 36,911,372

174.791 156,155 178,474 13.924 5,053 3,782

323.430 327,583 319,247 3,747,835 3,081,095 7,707,492

37,634.202 37,934,584 47,994,896

21 13

21 13 37.634,223 37.934,584 47~994.909

2016

' 2,874,529 35,911,594

175.,230 l0,481

421.701 8,809,936

48,203,471

19

10 48,203.490

'

2017

1-2

"

2,932,020 29,034,534

151.248 22.126

326,528 ll,912,493

44,378,949

J6

16 44,378,965

27.561,524 $ 1,097,038 $ (976,793) $ 1,212,562 $ 642,498 $ (l,5!0,591) $ (l,134,441) $ 3.485,074 $ 1,290,398 $ (7.708,866) (164,020} {60,578) {174,733) (56,355) (93,984) (560,455) (388,210) (1]5,040) (33,427) (163,507)

27,397,504 $ i,036,460 $ iU5l,Si§)_S _lJ_56207 _$_ -~,514 __ $_ ('.Z,071,046) -~-- (l,~.i~ $ __ 3,370034 $ 1,256,971 $ (7,872.373)

GASB 63 was implemented in the 2013 fiscal year, which required the roclassification of balances previously rep0rtcd as net assets to net position,

"

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General Fund: Reserved Unreserved Restricted Assigned Unassigned

Total General Fund

All Other Governmental Funds: Restricted

Total AH Other Governmental Funds

$

$

$ $

Source: CAFR Schedule 8-1 and District records.

2008

884,719 4,111,789

4,996,508

34,481 34,481

GASB # 54 was implemented in the 2011 fiscal year, which required the presentation of fund balances to be reported in different classifications from those presented in prior years (See footnote 1.N. in the basic financial statements). Prior years have not been restated above and are not required to be.

2009

$ 828,766 6,282,263

$ 7,111,029

$

MERCER COUNTY SPECIAL SER VICES SCHOOL DISTRICT FUND BALANCES, GOVERN}..ffiNT AL FUNDS

LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING)

UNAUDITED

As of June 30, 2010 2011

~ ----'.20_!3 __

$ 610,612 6,008,461

$ 750,824 $ 1,151.066 $ 1,551,784 1,359,823 3,736,862 5,417,142 6,560,006 5,130,643 2,419,207

$ 6,619,073 $ 8,670,653 $ 10,018,571 $ 9,388,133

$ $ $

J-3

--- ---2014 2015 2016 2017

$ 2,393,633 $ 2,079,965 $ 2,883,893 $ 3,652,078 735,595 873,790 6,509,359 2,103,047

5,343,814 8,692,433 4,703,215 4.071,751 $ 8,473,042 $ 11,646,188 $ 14,096,467 $ 9,826,876

$ 771,186 $ 210,561 $ 159,884 $_ $ ?71,186 $ 210,561 $ 159,884

90

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J-4 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS

LAST 1EN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUN"TING)

UNAUDITED

Year ended June 30, 2008 2009 2610 2011 2012 2013 2014 2015 2016 2017

Revenues: County Appropriationffaxes $ 5,492,269 $ 3,460,178 $ 2,870,529 ' 2,908,803 $ 3,122,630 ' 3,167,196 $ 3,428,173 $ 2,955,736 ' 2,874,529 ' 2,932,020 Tuition - LEA's 32,612,267 34,214,361 33,538,834 33,595,981 32,065,344 30,503,693 31,490,169 36,911,372 35,911,594 29,034,534 Nonresident Fees 573,370 183,848 175,860 170,013 183,485 174,791 156,155 178,474 175,230 151,248 Interest Earned on Investment 174,481 44,522 21,885 14,.235 7,821 13,924 5,053 3, 782 10.481 22,126 Miscellaneous 442,903 502,805 306,151 355,192 287,643 323,430 327,583 319,247 421,701 326,528 State Sources 4,024,581 3,464,359 3,574,464 3,269,005 3,322,120 4,039,891 3,221,612 3,735,607 4,291,762 4,459,703 Federal Sources 402,035 265,853 487,560 434,942 343,865 367,458 146,866 674,46! 421,120 567,326 Other Sources 904,351 823,463 636,458 5!0.064 291,051 231,898 223,674 223,235 317,641 265,793

Total Revenues 44,626,257 42.,959,389 41,611,741 4L,258,235 39,623.959 38,822.,281 38,999,285 45,001,914 44,424,058 37,759,278

Expenditures: Current:

Special Education Instruction 15,129,911 16,312,545 16,044,545 14,975,700 15,049,479 15,164,909 15,ll l.l 17 15,477,872 15,921,752 15,370,395 Other Special Instruction 914,056 66,691 36,001 31,495 37,908 39,796 45,603 38,641 43, 177

Support Services and Undistributed Costs: Student and Instruction Related Services 7,646,203 7,944,634 7,886,748 7,592,858 7,028,694 7,091,331 6,919,887 6,959,270 7,001,739 6,999,605 General Administration 305,866 376,457 343,876 317,327 296,246 292,161 294,708 261,845 301,874 262,703 School Administration 1,090,139 1,221,402 1,162,056 1,006,393 990,978 1,130,417 1,157,838 1,129,048 980,913 1,018,627 Central Services 618,247 648,128 734,441 613,412 594,996 685,844 829,811 747,070 792.,047 806, 137 Administrative Information Technology 475,089 44-7,088 358,615 332,388 344,075 338,370 362,991 363,751 355,388 421,727 Plant Operations and Maintenance 2,309,094 2,318,292 2,478,416 2,460,992 2,401,436 2,155,718 2,474,912 2,527,708 2,451,927 2,533,285 Pupil Transportation 37,751 25,706 28,391 32,795 35,745 32,548 33,637 35,873 40,804 36,712 Unallocated Benefits 11,160,252 11,081,761 12,569,952 11,599,852 11,065,267 12,154,781 11,918,838 12,592,500 13,512,810 14,347,199

Debt Service: Interest on Lease Purchase Agreements 1,090,434 Lease Purchase Agreements - Principal 2,320,000

Capital Outlay 188,980 360,957 496.657 273 632 437,630 368,732 770,841 951,131 1,136,509 239,979 Total Expenditures 43,286,022 40.803,661 42,103,697 39,241.350 38 276,041 39,452,719 39,914,376 41,091,671 42,534,404 42 079.546

Excess/(Deficiency) of Revenues Over/(Under) Expenditures 1,340,235 2,155,728 (491,956) 2,016,885 1,347,918 (630,438) (915,091) 3,910.243 1,889,654 (4,320,268)

Other Financing Sources/(Uses): Transfers In 1,114,530 Transfers Out (41,207) (1,114.530) Cancelled Excess Fund Balance (34,481) Capital Lease Proceeds 34,696 34.089

Total Other Financing Sources/(Uses) 75,688) 34,696 {1,080,441) Net Change in Fund Balances ' 1,340.235 s 2,080,040 $ (491.956) $ 2.05l,S81 $ 1,347,918 __ s _(~30.438) s (915,091) ' 2.829,802 ' 1,889,654 ' {4.320,268)

Source: District CAFR Records and Schedule B-2.

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1-5 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT GENERAL FUND - OTHER LOCAL REVENUE BY SOURCE

LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING)

UNAUDITED

YEAR ENDED JUNE 30, 2008 2009 2010 2011 2012 2013 2014 2015 2016 -2017

Tuition - LEA's $ 32,842,337 $ 34,214,361 $ 33,538,835 $ 33,595,981 $ 32,065,344 $ 30,503,693 $ 31,490,169 $ 36,911,372 $ 35,911,594 $ 29,034,534 Nonresident Fees 573,371 183,848 175,860 170,013 183,485 174,791 156,155 178,474 175,230 151,248 Interest Earned on Investments 174,481 44,522 21,885 14,235 7,821 13,924 5,053 3,782 10,481 22,126 County Appropriation 5,492,269 3,460,178 2,870,529 2,870,529 2,870,529 2,870,529 2,874,529 2,874,529 2,874,529 2,932,020 Rentals 258,100 267,317 257,011 290,000 Miscellaneous 184,803 306,151 87,875 30,632 33,430 327,583 319,247 421,701 326,528 Total $ 39,525,361 _J :3?_J02,909 $ 36,?J3,260 $ ____17,005,950 $ 35,41'.l-.822 $ 33,8~6,_'.3_§] $ 34_,§?3.489 $ 40,287,404 $ 39,39'.3.535 $ 32,466.456

Source: District records.

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Year

2008

2009

2010

2011

2012

2013

2014

2015 2016 2017

Source:

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT DEMOGRAPHIC AND ECONOMIC STATISTICS

LAST TEN FISCAL YEARS UNAUDITED

Per

Capita

J-14

Personal Personal Unemployment

Population • Income b Income c Rate d

364,571 $ 19,672,615,731 $ 53,961 4.90%

366,222 19,024, 134,234 51,947 7.80%

366,511 19,240,361,456 52,496 7.80%

367,063 19,984,745,035 54,445 7.70%

368,303 20,519,633,342 55,714 7.80%

370,414 21,078,779,084 56,906 6.70%

371,537 20,699,812,418 55,714 5.70%

371,398 21,134,774,588 56,906 4.70% 371,023 22,215,002, 125 59,875 4.30%

Not Available Not Available 63,247 Not Available

US Bureau of the Census, Population Division, provided by the NJ Dept of Labor and Workforce Development

" Personal income has been estimated based upon the County population and per capita personal income presented.

d

Per capita personal income by municipality estimated based upon the 2010 Census published by the US Bureau of Economic Analysis.

New Jersey Department of Labor and Workforce Development, labor Planning and Analysis

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Function/Program

Instruction: Special Education Other Instruction

Support Services:

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT FULL-TIME EQUIVALENT DISTRICT EMPLOYEES BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS UNAUDITED

2008 2009 2010 2011 2012 2013 2014

89.0 90.2 75.2 90.1 91.1 250.8 234.9 26.2 18.8 24.6 19.7 20.6 3.4

Student and Instruction Related Services 283.6 234.6 240.0 250.0 250.4 76.5 73.4 General Administration 2.0 3.0 3.0 4.0 4.0 1.0 1.0 School Administrative Services 15.0 12.0 16.0 15.9 20.5 14.0 13.0 Other Administrative Services 4.0 8.9 6.0 5.0 5.0 4.0 3.5 Central Services 12.0 48.0 32.0 35.6 31.5 32.0 29.6

Total 431.8 415.5 396.8 420.3 423.l 381.7 355.4

Source: District Personnel Records

2015 2016

234.5 232.7

76.8 76.6 1.0 1.0

14.0 13.0 3.5 3.6

34.0 33.8 363.8 360.7

Note: For the 2013 fiscal year, the District was able to more accurately calculate the number of employees charged to each function/program. In addition, the District no longer included Regional Day School and Special Aides employees in the count as had been done in past years. Prior year employee counts have not been restated.

J-16

2017

220.8

74.9 1.0

13.0 3.5

32.5 345.7

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Fiscal Operating Year Enrollment Expenditures a

2008 766.50 $ 38,846,385 $

2009 783.90 38,746,815

2010 747.60 39,878,829

2011 699.70 38,967,718

2012 688.70 37,838,411

2013 667.50 39,083,987

2014 675.60 39, 143,535

2015 682.60 40,140,540

2016 627.04 41,397,895

2017 579.09 41,839,567

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT OPERATING STATISTICS LAST TEN FISCAL YEARS

UNAUDITED

Average Pupil/ Daily

Cost Per Percentage Teaching Teacher Enrollment Pupil Change Staff' Ratio (ADE)'

50,680 1.68% 89 8.61 766.50

49,428 -2.47% 90 8.71 783.90

53,342 7.92% 75 9.97 747.60

55,692 4.40% 90 7.77 699.70

54,942 -1.35% 91 7.56 688.70

58,553 6.57% 251 2.66 667.50

57,939 -1.05% 235 2.88 675.60

58,805 1.50% 235 2.90 682.60

66,021 12.27% 233 2.69 627.04

72,251 9.44% 221 2.62 576.09

Source: District records

Note: Enrollment based on annual October District count.

a Operating expenditures equal total expenditures less debt service and capital outlay. b Teaching staff includes only full-time equivalents of certificated staff. c Average daily enrollment and average daily attendance are obtained from the School Register Sununary (SRS).

J-17

Average Percentage Daily Change in Student

Attendance Average Daily Attendance (ADA)' Enrollment Percentage

705.60 -3.91% 92.05%

714.80 2.27% 91.19%

682.30 -4.63% 91.27%

652.00 -6.41% 93.18%

635.10 -1.57% 92.22%

617.90 -3.08% 92.57%

606.90 1.21% 89.83%

616.70 1.04% 90.35%

562.59 -8.14% 89.72%

518.39 -8.13% 89.98%

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J-18 MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT

SCHOOL BUILDING INFORMATION LAST TEN FISCAL YEARS

UNAUDITED

District/Building 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Elementary: Joseph F. Cappello (1993)

Square Feet 73,745 73,745 73,745 73,745 73,745 73,745 73,745 73,745 73,745 73,745 Capacity (Students) 262 262 262 262 262 262 262 262 262 262 Enrollment 170 193 161 141 141 125 139 128 114 88

Mercer Elementary (2005) Square Feet 88,421 88,421 88,421 88,421 88,421 88,421 88,421 88,421 88,421 88,421 Capacity (Students) 265 265 265 265 265 265 265 265 265 265 Enrollment 246 261 262 242 208 205 186 213 219 201

High School: Mercer JR/SR (1987)

Square Feet 86,858 86,858 86,858 86,858 86,858 86,858 86,858 86,858 86,858 86,858 Capacity (Students) 318 318 318 318 318 318 318 318 318 318 Enrollment 292 273 273 271 279 278 265 279 275 263

Other: Regional Day School (1984)

Square Feet 25,411 25,411 25,411 25,411 25,411 25,411 25,411 25,411 25,411 25,411 Capacity (Students) 60 60 60 60 60 60 60 60 60 60 Enrollment 47 50 48 47 42 46 45 32 12 9

Number of Schools atJune 30, 2017 Elementary= 2 Senior High School = 1 Other= 1

Source: District records, ASSA Note: Increases in square footage and capacity are the result of additions.

Enrollment is based on the annual October district count.

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2008 $ 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total School Facilities $

Source: District records.

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT SCHEDULE OF REQUIRED MAINTENANCE

LAST TEN FISCAL YEARS UNAUDITED

JR/SR Joseph C. Mercer Alfred High School Cappelo Elementary Reed

23,970 $ 18,657 $ 13,846 $ 11,367 19,069 16,530 28,840 6,866 28,770 24,667 31,867 8,182 25,471 22,472 25,368 9,822 26,841 21,091 25,288 9,822 24,841 21,091 25,288 9,822 24,841 21,091 25,288 7,918 21,778 21,091 20,399 11,529 27,904 17,022 30,177 10,019 24,841 25,159 25,288 9,822

248,326 $ 208,871 $ 251,649 $ 95,169

J-19

Total

$ 67,840 71,305 93,486 83,133 83,042 81,042 79,138 74,797 85,122 85,110

$ 804,015

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MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRICT INSURANCE SCHEDULE

JUNE30,2017 UNAUDITED

Burlington County Insurance Pool Joint Insurance Fund: Property, Inland Marine and Automobile Physical Damages Boiler and Machinery Crime General and Automobile Liability Workers' Compensation Educator's Legal Liability Pollution Legal Liability

Mold Cyber Liability Violent Malicious Acts Disaster Management Services

Source: District records

$

Coverage

175,000,000 125,000,000

500,000 20,000,000

Statutory 20,000,000

3,000,000

1,000,000 1,000,000 2,000,000

J-20

Deductible

$ 500 1,000

500

25,000 100,000 25,000 15,000 15,000

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Single Audit Section

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I A Partner to Grow With

K-1

Report on Internal Control Over Financial Reporting and Report on Compliance and Other Matters Based on an Audit of Financial Statements Performed

in Accordance with Government Auditing Standards

Independent Auditors' Report

Honorable President and Members of the Board of Education

Mercer County Special Services School District Hamilton, New Jersey County of Mercer

We have audited, in accordance with the auditing standards generally accepted in the United States of America; audit requirements as prescribed by the Office of School Finance, Department of Education, State of New Jersey; and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Mercer County Special Services School District, in the County of Mercer, New Jersey (the "District") as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated November 30, 2017.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circ*mstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control.

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

14 Penn Plaza, Suite 1010 New York, NY 10122

212.594.8155

354 Eisenhower Parkway, Suite 1850 Livingston, NJ 07039

973.994.9400

99

5 Bartles Corner Road Flemington, NJ 08822

908.782.7300

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

Compliance and Other Matters

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

Purpose of this Report

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

November 30, 2017 Livingston, New Jersey

t;_f~ hael J. Andriola Public School Accountant

No. 2429

w~cf"~ WISS & COMP ANY, LLP

100

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K-2 A Partner to Grow With

Report on Compliance For Each Major Federal and State Program and Report on Internal Control Over Compliance Required by the

Uniform Guidance and New Jersey OMB 15-08

Independent Auditors' Report

Honorable President and Members of the Board of Education

Mercer County Special Services School District Hamilton, New Jersey County of Mercer

Report on Compliance for Each Major Federal and State Program

We have audited the Mercer County Special Services School District's, in the County of Mercer, New Jersey (the "District") compliance with the types of compliance requirements described in the OMB Compliance Supplement and the New Jersey State Aid/Grant Compliance Supplement that could have a direct and material effect on each of the District's major federal and state programs for the year ended June 30, 2017. The District's major federal and state programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs.

Management's Responsibility

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

Auditors' Responsibility

Our responsibility is to express an opinion on compliance for each of the District's major federal and state programs based on an audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the audit requirements as prescribed by the Office of School Finance, Department of Education, State of New Jersey; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (Uniform Guidance); and New Jersey OMB's Circular 15-08, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid. Those standards, the Uniform Guidance and New Jersey OMB Circular 15-08 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal and state program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in the circ*mstances.

14 Penn Plaza, Suite 1010 New York, NY 10122

212.594.8155

354 Eisenhower Parkway, Suite 1850 Livingston, NJ 07039

973.994.9400

101

5 Bartles Corner Road Flemington, NJ 08822

908.782.7300

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

Opinion on Each Major Federal and State Program

In our opinion, the District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal and state programs for the year ended June 30, 2017.

Report on Internal Control Over Compliance

Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal and state program to determine the auditing procedures that are appropriate in the circ*mstances for the purpose of expressing an opinion on compliance for each major federal and state program and to test and report on internal control over compliance in accordance with the Uniform Guidance and New Jersey OMB Circular 15-08, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance.

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

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

102

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Purpose of this Report

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance and New Jersey OMB Circular 15-08. Accordingly, this report is not suitable for any other purpose.

November 30, 2017 Livingston, New Jersey

4i~E Licensed Public School Accountant

No. 2429

ul~ cf" &'It!~ -WISS & COMPANY, LLP

103

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Fodctnl Gron\ofl'Pnss-Throup,h Grontor/Prop,nun Title

U.S. DoJ>Drtmont of Health and Human Service> - p,..,od • ThrouEh State Oepar1mOl'lt of Education: General Fund:

Mcdioa.id Assi""""'" l'roiu'om - SEMI !'rqU'aM ARRA - Medicaid Assislnlloo Projml!ll - SEMJ PrOll"'m

Tola! 0"11=1 Fund

U.S. Department of Labor - Paued -Throui:h N.J. Doputnient of Labor: Wofkforco lnvCSlm"11l Al"3 -Out.Qf·Sch<>ol Youth Wookforec !nv .. tmont Al"3 - Out--0!'-S<hool Youth

Total S!>""iol Revenue Fund

fuilmnj<0 Fund U.S. Depnrtmeotof Aeri•ulture:

Pn;•od-Thro"l(h S1>.<c Dc"Partmcnl of Al!rioultu= Clu1d Nulrition Cluster. School B"""1d'nsl Pro)!I8m

Sclmol Breo.kf..t ProJU'!Ull No1ionol School Llll'loh Prol'f'Ull NotioOlll School Lunch Pro!U""' Food Do:oation Prol'flU'l (NC} Food Donution Proim= (NC)

Total Child Nutrition ClUSl<:r and E>llOl>'ri•o Fund Toto!Fod=!Aw:rrds

NC - ooncosh =""diturcs

Fedora!

'"""" A_,

CffiA ldentiliootion N=-. N=-.

93.778 1705NJSMAP ' 93.778 1705NJ5MAP

17.258 AA267951555A34 17.258 AA283321655A34

J0.553 17lNJ304N1099 10.553 16l6JNJ304NJG9 10.555 171N1304N1099 10.555 16161NJ304Nl09 10.555 171NJ3tl4Nl099 10.555 16161Nl304Nl09

,_, Schedule A

MERCER COUNTY SPECIAL SERVICES SCHOOL DISTRJCT

SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS

Ya:ircndod Juni: 30,2017

""""""" a.i..noc. JUl'le 30. 2016 Ropoymont Blll011ce,June30. 2017 A-' GrontPcriod """""" (Accounts """'° C.•o Budj\o~ ofPrim-Yoar's (Accounts Uooarned Duo To Amo~ '"" '" Revenue R=ivoblo) Grontor R=ived fa,,.,,,ditlll"es Adiwrtm""ts Bll1011=< Receivable) R"""""" """'"

517,472 07/01116 0613(11!7 ' 517.472 ' (517.472) 24.063 07/0J/16 06130/17 24.063 G4063l

541.535 f54L535)

35.000 10/01/15 ]O/:ll/16 ' (6,320) 18,563 (12.243) 35,000 11/01/16 10/:ll/17 "' 03.548) ' (\2.602)

(6,.120) 19.509 (25,791) (!2.602)

127,366 07101115 06130116 (23.017) 23.017 1!8,731 07/0J/16 ()6130117 106,851 (118.731) (11.880) 250,340 07/0J/16 06130/17 226.672 (250,.140) (23.668) 259.522 07/0J/15 06130116 (48.116) 48.116 36,278 07/01116 06130/17 36.278 (34,742) ' 1.536 32,593 07IOJ/l5 06130117 ' 1.158 (1,158)

1.158 (71.133) 440.934 (404,971) (35548) ~ 1.158 ' (77.453_) ' ' 1.001.978 ' 1972,297) ' -'-- (48,\,51)} __ ~

11M <t•:.:ompony;,.g no/a 10.f&/1«iu/., of =P<ndil"""' o/f<.,J..,,/ a,..,,..i, ,,,.J >">I< financial """1<m<< arc an U.i<gral part 0///1;., _,,/,oJu/o. '"

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! >

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1. General

Mercer County Special Services School District

Notes to Schedules of Expenditures of Federal Awards and State Financial Assistance

Year ended June 30, 2017

K-5 p.1 (continued)

The accompanying schedules of expenditures of federal awards and state financial assistance present the activity of all expenditures of federal awards and state financial assistance programs of the District. The Board of Education is defined in Note 1 to the board's basic financial statements. All federal awards and state financial assistance received directly from federal and state agencies, as well as federal awards and state financial assistance passed through other government agencies, are included on the schedules of expenditures of federal awards and state financial assistance".

2. Basis of Accounting

The accompanying schedules of expenditures of federal awards and state financial assistance are presented on the budgetary basis of accounting with the exception of programs recorded in the enterprise fund, which are presented using the accrual basis of accounting and those recorded in the special revenue fund, which are presented using the budgetary basis of accounting. These bases of accounting are described in Note 1 to the District's basic financial statements. The information in these schedules arc presented in accordance with the requirements of 2 CFR 200-Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and New Jersey OMB Circular 15-08, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid Therefore, some amounts presented in these schedules may differ from amounts presented, or used in the preparation of, the basic financial statements.

3. Relationship to Basic Financial Statements

Amounts reported in the accompanying schedules agree with amounts reported in the District's basic financial statements. The basic financial statements present the general fund and special revenue fund on a GAAP basis. Budgetary comparison statements or schedules (RSI) are presented for the general fund and special revenue fund to demonstrate finance-related legal compliance in which certain revenue is permitted by law or grant agreement to be recognized in the audit year, whereas for GAAP reporting, revenue is not recognized until the subsequent year or when expenditures have been made.

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K-5 p.2

(continued)

Mercer County Special Services School District

Notes to Schedules of Expenditures of Federal Awards and State Financial Assistance

Year ended June 30, 2017

3. Relationship to Basic Financial Statements (continued)

The general fund is presented in the accompanying schedules on the modified accrual basis of accounting with the exception of the revenue recognition of the last two state aid payments in the current year, which is mandated pursuant to N.J.S.A. 18A:22-44.2. For GAAP purposes, those payments are not recognized until the subsequent year due to the state deferral and recording of the last two state aid payments in the subsequent year. The special revenue fund is presented in the accompanying schedules on the grant accounting budgetary basis, which recognizes encumbrances as expenditures and also recognizes the related revenues, whereas the GAAP basis does not. The special revenue fund also recognizes the last state aid payment in the current budget year, consistent with N.J.S.A. 18A:22-44.2.

The net adjustment to reconcile from the budgetary basis to the GAAP basis is $1,500 for the special revenue fund. See note to required supplementary information for a reconciliation of the budgetary basis to the modified accrual basis of accounting for the general and special revenue funds (C-3). Federal and State award revenues are reported in the District's basic financial statements on a GAAP basis as follows:

General Fund Special Revenue Fund Capital Projects Fund Food Service Enterprise Fund Total award revenues

Federal

$ 541,535 25,791

404,971 $972,297

State

$4, 173,290 252,631

33,782 4,982

$ 4,464,685

4. Relationship to Federal and State Financial Reports

Total

$ 4,714,825 278,422

33,782 409,953

$ 5,436,982

Amounts reported in the accompanying schedules agree with the amounts reported in the related federal and state financial reports.

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5. Other

Mercer County Special Services School District

Notes to Schedules of Expenditures of Federal Awards and State Financial Assistance

June 30, 2017

K-5 p.3

Revenues and expenditures reported under the Food Donation Program represent current year value received and current year distributions respectively. TP AF Social Security contributions represent the amount reimbursed by the State for the employer's share of social security for TPAF members for the year ended June 30, 2017.

The post retirement pension and medical benefits received on-behalf of the District for the year ended June 30, 2017 amounted to $3,102,851. Since on-behalf post retirement pension, non-contributory and medical benefits are paid by the State directly, these expenditures are not subject to a single audit in accordance with New Jersey OMB Circular 15-08, however they are reported on the Schedule of Expenditures of State Financial Assistance, as directed by the funding agency.

6. Indirect Costs

The District did not use the 10% de minimis indirect cost rate.

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Mercer County Special Services School District

Schedule of Findings and Questioned Costs (continued)

Year ended June 30, 2017

Part I - Summary of Auditors' Results (continued)

Financial Statements

Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP:

Internal control over financial reporting:

Material weakness( es) identified?

Significant deficiency(ies) identified?

Noncompliance material to financial statements noted?

Federal Awards

Internal control over major federal programs:

Umnodified

Yes x

Yes x

Yes x

Yes x

K-6 p. 1

No

None Reported

No

No Material weakness( es) identified?

Significant deficiency(ies) identified? Yes x None Reported

Type of auditors' report issued on compliance for major federal programs:

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)?

Identification of major federal programs:

Yes

Umnodified

x No

CFDA Nnmber(s) FAIN Nnmber Name of Federal Program or Cluster

10.553/10.555 171NJ304Nl 099

Dollar threshold used to distinguish between Type A and Type B programs:

Child Nutrition Cluster

$750,000

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Mercer County Special Services School District

Schedule of Findings and Questioned Costs (continued)

Year ended June 30, 2017

Part I - Summary of Auditors' Results (continued)

Auditee qualified as low-risk auditee? X Yes

State Awards

Internal control over major state programs:

Material weakness( es) identified? Yes x No

K-6 p.2

No

None Significant deficiency(ies) identified? Yes reported ---x

Type of auditors' report issued on compliance for major state programs:

Any audit findings disclosed that are required to be reported in accordance with NJ OMB Circular 15-087

Identification of major state programs:

Unmodified

Yes x No

GMIS/Program Number Name of State Program or Cluster

495-034-5094-003 Reimbursed TP AF Social Security Contributions

Dollar threshold used to distinguish between Type A and Type B programs:

Auditee qualified as low-risk auditee? x

$750,000

Yes No

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Mercer County Special Services School District

Schedule of Findings and Questioned Costs (continued)

Year ended June 30, 2017

Part II - Schedule of Financial Statement Findings

No compliance or internal control over financial reporting findings noted that are required to be reported under Government Auditing Standards.

K-7 p. 1

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Mercer County Special Services School District

Schedule of Findings and Questioned Costs (continued)

Year ended June 30, 2017

Part III - Schedule of Federal and State Financial Assistance Findings and Questioned Costs

K-7 p.2

This section identifies the significant deficiencies, material weaknesses, and instances of noncompliance, including questioned costs, related to the audit of major federal and state programs, as required by 2 CPR 200 Section 516(a) and New Jersey Treasury Circular OMB 15-08, respectively.

Federal Award Programs

No compliance or internal control findings noted that are required to be reported in accordance with 2 CPR 200 Section 516(a).

State Award Programs

No compliance or internal control findings noted that are required to· be reported in accordance with New Jersey Treasury Circular OMB 15-08.

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None.

Mercer County Special Services School District

Summary Schedule of Prior Year Audit Findings

Year ended June 30, 2017

K-8

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