comprehensive annual financial report - state

Comprehensive Annual

Financial Report

of the Hunterdon County Educational Services Commission

County of Hunterdon

Lebanon, New Jersey

For the Fiscal Year Ended June 30, 2014

Prepared by

Hunterdon County Educational Services Commission Business Office

TABLE OF CONTENTS INTRODUCTORY SECTION PAGE Letter of Transmittal 1-4 Organizational Chart N/A Roster of Officials 5-6

Consultants and Advisors 7 FINANCIAL SECTION Independent Auditor's Report 8-10 REQUIRED SUPPLEMENTARY INFORMATION – Part I 11

Management’s Discussion and Analysis (Unaudited) 12-19 BASIC FINANCIAL STATEMENTS 20 A. Commission-Wide Financial Statements 21

A-1 Statement of Net Position 22 A-2 Statement of Activities 23 B. Major Fund Financial Statements 24 Governmental Funds: B-1 Balance Sheet 25-26 B-2 Statement of Revenues, Expenditures, and Changes in Fund Balance 27 B-3 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 28 Other Funds: 29 Propriety Funds: B-4 Statement of Net Position 30 B-5 Statement of Revenues, Expenses, and Changes in Net Position 31 B-6 Statement of Cash Flows 32 Fiduciary Funds: B-7 Statement of Fiduciary Net Position 33 B-8 Statement of Changes in Fiduciary Net Position N/A Notes to the Financial Statements 34-59

TABLE OF CONTENTS (CONTINUED)

PAGE REQUIRED SUPPLEMENTARY INFORMATION - PART II 60 C. Budgetary Comparison Schedules 61 C-1 General Fund 62-67 C-1a Education Jobs Fund Program – Budget and Actual N/A C-2 Special Revenue Fund 68 C-3 Budget to GAAP Reconciliation 69 OTHER SUPPLEMENTARY INFORMATION 70 D. School Level Schedules N/A E. Special Revenue Fund 71 E-1 Combining Schedule of Revenues and Expenditures - Budgetary Basis 72-73 E-2 Preschool Education Aid Schedule of Expenditures - Budgetary Basis N/A F. Capital Projects Fund 74 G. Proprietary Funds 75 Enterprise Fund: G-1 Combining Statement of Net Position 76 G-2 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 77 G-3 Combining Statement of Cash Flows 78 H. Fiduciary Fund 79 H-1 Combining Statement of Fiduciary Net Position 80 H-2 Combining Statement of Changes in Fiduciary Net Position N/A H-3 Schedule of Receipts and Disbursements - Student Activity Agency Fund N/A H-4 Schedule of Receipts and Disbursements - Payroll Agency Fund 81

I. Long-Term Liabilities 82 I-1 Schedule of Serial Bonds N/A I-2 Schedule of Obligations Under Capital Leases 83 I-3 Budgetary Comparison Schedule - Debt Service Fund 84

TABLE OF CONTENTS (CONTINUED) PAGE STATISTICAL SECTION – UNAUDITED Financial Trends J-1 Net Position by Component 85 J-2 Changes in Net Position 86-87 J-3 Fund Balances – Governmental Funds 88 J-4 Changes in Fund Balances – Governmental Funds 89 J-5 General Fund Other Local Revenue by Source 90 Revenue Capacity J-6 Assessed Value and Estimated Actual Value of Taxable Property N/A J-7 Direct and Overlapping Property Tax Rates N/A J-8 Principal Property Taxpayers – Current Year and Ten Years Ago N/A J-9 Property Tax Levies and Collections N/A Debt Capacity J-10 Ratios of Outstanding Debt by Type N/A J-11 Ratios of Net Bonded Debt Outstanding N/A J-12 Direct and Overlapping Governmental Activities Debt N/A J-13 Legal Debt Margin Information N/A Demographic and Economic Information J-14 Demographic and Economic Statistics N/A J-15 Principal Employers – Current Year and Nine Years Ago N/A Operating Information J-16 Full-Time Equivalent Commission Employees by Function/Program 91 J-17 Operating Statistics 92 J-18 School Building Information 93 J-19 Schedule of Required Maintenance 94 J-20 Insurance Schedule 95-97

TABLE OF CONTENTS (CONTINUED) PAGE SINGLE AUDIT SECTION K-1 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards 98-99 K-2 Independent Auditor’s Report on Compliance with Requirements Applicable to Each Major Federal and State Financial Assistance Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 100-101 K-3 Schedule of Expenditures of Federal Awards, Schedule A 102 K-4 Schedule of Expenditures of State Financial Assistance, Schedule B 103 K-5 Notes to the Schedules of Expenditures of Federal Awards and State Financial Assistance 104-105 K-6 Schedule of Findings and Questioned Costs 106-107 K-7 Schedule of Prior Year Audit Findings 108

INTRODUCTORY SECTION

Hunterdon County Educational Services Commission Academy at Tewksbury

51 Sawmill Road Lebanon, NJ 08833

Phone: 908-806-2729 Fax: 908-439-2270

December 24, 2014 Honorable President and Members of the Representative Assembly/Board of Directors Hunterdon County Educational Services Commission 51 Sawmill Road Lebanon, NJ 08833

Dear Board Members:

The comprehensive annual financial report of the Hunterdon County Educational Services Commission for the fiscal year ended June 30, 2014 is hereby submitted. Responsibility for both the accuracy of the data and completeness and fairness of the presentation, including all disclosures, rests with the management of the Representative Assembly/Board of Directors. To the best of our knowledge and belief, the data presented in this report is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups of the Commission. All disclosures necessary to enable the reader to gain an understanding of the Commission’s financial activities have been included.

The comprehensive annual financial report is presented in four sections: introductory, financial, statistical, and single audit. The introductory section includes this transmittal letter and a list of principal officials. The financial section includes the basic financial statements 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. The Commission is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget Circular A-133, “Audits of States, Local Governments and Non-Profit Organizations,” and the State Treasury Circular Letter 04-04 OMB, “Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid”. Information related to this single audit, including the auditor’s report on the internal control structure and compliance with applicable laws and regulations and findings and recommendations are included in the single audit section of this report.

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1) REPORTING ENTITY AND ITS SERVICES: Hunterdon County Educational Services Commission is an independent reporting entity within the criteria adopted by the GASB as established by GASB Statement No. 14. All funds and account groups of the Commission are included in this report. The Hunterdon County Educational Services Commission and its’ schools constitute the Commission’s reporting entity.

The Commission was established on July 1, 1980 to provide governance for the countywide Hunterdon County Adult Education Program. Prior to 1980, the Adult Education Program was governed by a five member Advisory Committee appointed by the three high school districts, and the County Superintendent of Schools. The Local Educational Agency responsible for the Hunterdon County Adult Education Program from its inception in 1969 and prior to the establishment of the ESC had been the North Hunterdon Regional High School District.

The Commission’s membership grew from a five-member organization during 1988 to 34 members in 2003. Expansion in membership brought increased expectations for services. To meet the demand, the Commission applied to the State Board of Education for an expansion of its charter to provide services beyond Adult Education. The State Board granted that permission at its meeting on December 6, 1989. Subsequently, cooperative purchasing and cooperative transportation, special education services, staff development, grant writing, computer services, Teen Arts, alternative education, school district management, nonpublic instructional and nursing services and technology services have been added as programs provided to schools, agencies and municipalities.

2) ECONOMIC CONDITION AND OUTLOOK: The Hunterdon County Educational Services Commission has been expanding and diversifying over the years. This expansion and diversification, in addition to ongoing improvement of established programs and services, are expected to continue in order to help school districts maximize their assets, share services, and expand their educational options.

3) INTERNAL ACCOUNTING CONTROLS: Management of the Commission is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Commission 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 U.S. 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 likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.

As a recipient of funds from Hunterdon County school districts, the Commission also is responsible for ensuring that an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to those programs. This internal control structure is also subject to periodic evaluation by the Commission management.

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

4) BUDGETARY CONTROLS: In addition to internal accounting controls, the Commission maintains budgetary controls. The objective of those budgetary controls is to ensure compliance with legal provisions embodied in the annual budget. Annual appropriated budgets are adopted for the general fund and the special revenue fund. The final budget amount as amended for the fiscal year is reflected in the financial section.

5) ACCOUNTING SYSTEM AND REPORTS: The Commission’s accounting records reflect U.S. generally accepted accounting principals, as promulgated by the Governmental Accounting Standards Board (GASB). The accounting system of the Commission is organized on the basis of funds and account groups. These funds and account groups are explained in “Notes to the Financial Statements”, Note 1.

6) FINANCIAL INFORMATION AT FISCAL YEAR-END: As demonstrated by the various statements and schedules included in the financial section of this report, the Commission continues meeting its responsibility for sound financial management. You should review in detail the management’s discussion and analysis for the fiscal year ended June 30, 2014, for Financial Summaries.

7) CASH MANAGEMENT: The investment policy of the Commission is guided in large part by state statute as detailed in “Notes to the Financial Statements”, Note 2. The Commission has adopted a cash management plan, which requires it to deposit public funds in public depositories protected from loss under the provisions of the Governmental Unit Deposit Protection Act (GUDPA). GUDPA was enacted in 1970 to protect Governmental Units from a loss of funds on deposit with a failed banking institution in New Jersey. The law requires governmental units to deposit public funds only in public depositories located in New Jersey, where funds are secured in accordance with the Act.

8) RISK MANAGEMENT: The Commission carries various forms of insurance, including but not limited to general liability, automobile liability, workers’ compensation, errors and omission, automotive comprehensive and collision, hazard and theft on property and contents, and fidelity bonds.

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HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSION LEBANON, NEW JERSEY ROSTER OF OFFICIALS June 30, 2013

Term Members of the Commission Expires Charles Miller, President – East Amwell Township 1/31/2015 William Moebus, Vice President - Holland Township 1/31/2015 Linda Adams, Alexandria Township 1/31/2015 Dr. Ronald Bolandi, Bedminster 1/31/2015 Dr. Edward Keegan, Bethlehem 1/31/2015 Maria Eppolite, Bloomsbury 1/31/2015 Dr. James Gamble, Califon 1/31/2015 Judy Burd, Clinton Borough / Glen Gardner 1/31/2015 Megan Verderamo, Clinton Township 1/31/2015 Tom Bruhl, Delaware Township 1/31/2015 William Martin, Delaware Valley Regional High School 1/31/2015 Greg Nolan, Flemington / Raritan 1/31/2015 George Burdick, Franklin Township (Hunterdon). 1/31/2015 Edward Potosnak, III, Franklin Township (Somerset) 1/31/2015 Teresa Pearson, Frenchtown 1/31/2015 OPEN, Hamilton Township 1/31/2015 OPEN, Hampton 1/31/2015 Gus Bordi, Hackettstown 1/31/2015 Dr. Gregory Hobaugh, High Bridge 1/31/2015

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HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSION LEBANON, NEW JERSEY ROSTER OF OFFICIALS (CONTINUED) June 30, 2013

Term Members of the Commission Expires Claire Curry, Hunterdon Central Regional High School 1/31/2015 Dr. Kimberly Metz, Hunterdon County Polytech 1/31/2015 Lance Riggio, Kingwood 1/31/2015 OPEN, Lambertville 1/31/2015 Dr. Robert Sutter, Lebanon Borough 1/31/2015 Jason Kornegay, Lebanon Township 1/31/2015 Teresa Kane, Milford 1/31/2015 John Melick, North Hunterdon / Voorhees Regional 1/31/2015 Cheryl Filler, Readington Township 1/31/2015 Dr. Louis Muenker, South Hunterdon Regional High School 1/31/2015 Dianne Walker-Torkelson, Stockton 1/31/2015 Lisa Marelli, Tewksbury 1/31/2015 Gerald Truehart, Trenton 1/31/2015 Jeff Bender, Union Township 1/31/2015 John Dupuis, West Amwell Township 1/31/2015 Other Officials Marie B. Kisch, Superintendent Corinne Steinmetz, Board Secretary/Business Administrator

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HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSION LEBANON, NEW JERSEY CONSULTANTS AND ADVISORS Audit Firm Suplee, Clooney & Co., CPA’s 308 East Broad Street Westfield, New Jersey 07090 Attorney

Comegno Law Group 521 Pleasant Valley Avenue

Moorestown, NJ 08057 Official Depository TD Bank

87 Beaver Avenue Clinton, NJ 08809

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FINANCIAL SECTION

INDEPENDENT AUDITOR’S REPORT Honorable President and Members of the Board of Directors

Hunterdon County Educational Services Commission County of Hunterdon Lebanon, New Jersey 08833 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 Hunterdon County Educational Services Commission, County of Hunterdon, New Jersey as of and for the year ended June 30, 2014, 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. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, audit requirements prescribed by the Division of Finance, Department of Education, State of New Jersey, the provisions of U.S. Office of Management and Budget (OMB) Circular A-133 “Audits of States, Local Governments and Non-Profit Organizations”. Those standards and provisions require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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.

SCC SUP LEE, CLOONE Y & COMP A NY C E R T I F I E D P U B L I C A C C O U N T A N T S 308 East Broad Street, Westf ield, New Jersey 07090-2122 Telephone 908-789-9300 Fax 908-789-8535 E-mail in [email protected]

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SUPLEE, CLOONEY & COMPANY We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion 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 Hunterdon County Educational Services Commission, County of Hunterdon, New Jersey as of June 30, 2014, 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 the Management’s Discussion and Analysis and budgetary comparison information in Exhibit C-1 through C-3 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 Hunterdon County Educational Services Commission basic financial statements. The accompanying supplementary information schedules such as the combining and individual fund financial statements and the Schedules of Expenditures of Federal Awards and State Financial Assistance, as listed in the table of contents, as required by U.S. Office of Management and Budget Circular A-133, “Audits of States, Local Governments and Nonprofit Organization” and the State of New Jersey, Department of Education, Division of Finance, are presented for purposes of additional analysis and are not a required part of the basic financial statements.

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REQUIRED SUPPLEMENTARY INFORMATION – PART I

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MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

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HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSION LEBANON, NEW JERSEY

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

UNAUDITED The discussion and analysis of Hunterdon County Educational Services Commission’s (HCESC) financial performance provides an overall review of the Commission’s financial activities for the fiscal year ended June 30, 2014. The intent of this discussion and analysis is to look at the Commission’s financial performance as a whole; readers should also review the basic financial statements and notes to enhance their understanding of the Commission’s financial performance. The Management’s Discussion and Analysis (MD&A) is an element of Required Supplementary Information specified in the Governmental Accounting Standards Board’s (GASB) Statement No. 34 -Basic Financial Statements and Management’s Discussion and Analysis of State and Local Governments issued in June 1999. Certain comparative information between the current year (2013-2014) and the prior year (2012-2013) is required to be presented in the MD&A. Financial Highlights Key financial highlights for 2014 are as follows:

• In total, net position increased $1,055,766 which represents a 13 percent increase from 2013. • Program specific revenues in the form of charges for service and operating grants and

contributions accounted for $17,353,059 or 99 percent of total revenues of $17,887,939. General revenues accounted for $104,835 in revenue or less than 1 percent of all revenues.

• The Commission had $16,402,128 in operating expenses. • Among governmental funds, the General Fund had $3,638,918 in revenues, $3,276,062 in

expenditures and other financing uses of $6,113. The General Fund’s fund balance increased by $356,743 from 2013.

• Among proprietary funds, the Enterprise Fund had $12,001,321 in revenues, $11,056,134 in

expenditures and other financing uses of $542,497. The Enterprise Fund’s fund balance increased by $402,691 from 2013.

Using this Comprehensive Annual Financial Report (CAFR) This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand HCESC as a financial whole, an entire operating entity. The statements then proceed to provide an increasingly detailed look at specific financial activities. The Statement of Net Position and Statement of Activities provide information about the activities of the whole Commission, presenting both an aggregate view of the Commission’s finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Commission’s most significant funds with all other non-major funds presented in total in one column. In the case of HCESC, the Proprietary Fund is the most significant fund.

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UNAUDITED Reporting the Commission as a Whole Statement of Net Position and the Statement of Activities While this document contains the large number of funds used by the Commission to provide programs and activities, the view of the Commission as a whole looks at all financial transactions and asks the question, “How did we do financially during 2014?” The Statement of Net Position and the Statement of Activities answers this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by most private-sector businesses. 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 Commission’s net position and changes in that position. This change in net position is important because it tells the reader that, for the Commission as a whole, the financial position of the Commission has improved or diminished. The causes of this change may be the result of many factors, some financial and some not. In the Statement of Net Position and the Statement of Activities, the Commission is divided into two distinct kinds of activities:

• Government activities – All of the Commission’s programs and services are reported here including instruction, support services, operation and maintenance of plant facilities, pupil transportation and extracurricular activities.

• Business-Type Activity – This service is provided on a charge for goods or services basis to

recover all the expenses of the goods or services provided. All of the enterprise funds are reported as business activities.

Reporting the Commission’s Most Significant Funds Fund Financial Statements Fund Financial reports provide detailed information about the Commission’s funds. The Commission uses many funds to account for a multitude of financial transactions. The Commission’s governmental funds are the General Fund, Special Revenue Fund and Debt Service Fund.

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UNAUDITED Governmental Funds

The Commission’s activities are 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 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 Commission’s general government operations and the basic services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance 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. Enterprise Fund The enterprise fund uses the same basis of accounting as business-type activities; therefore these statements are essentially the same. The Commission as a Whole

Recall that the Statement of Net Position provides the perspective of the Commission as a whole. Table 1 provides a summary of the School District’s net position for 2014 with a comparison of net position with the school year ending 2013.

Table 1

Net Position (Exhibit A-1)

Assets

2014

2013

Current and Other Assets $ 4,798,076 $ 4,459,862

Capital Assets

7,018,743

6,796,597

Total Assets $ 11,816,818 $ 11,256,459

Liabilities

Long-Term Liabilities $ 2,252,654 $ 2,679,501

Other Liabilities

106,505

175,065

Total Liabilities $ 2,359,159 $ 2,854,566

Net Position

Net investment in capital assets $ 5,581,096 $ 4,867,095

Unrestricted

3,876,563

3,534,798

Total Net Position $ 9,457,659 $ 8,401,893

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UNAUDITED The Commission’s combined net position was $9,457,659 on June 30, 2014. This was an increase of 12 percent from the prior year.

Table 2 shows changes in net position for fiscal year 2014 with comparable data for the fiscal year 2013.

Table 2

Changes in Net Position (Exhibit A-2)

Revenues

2014

2013

Program Revenues:

Charges for Services $ 15,053,769 $ 15,573,389

Operating Grants and Contributions

2,299,290

2,145,592

General Revenues:

Other

104,835

168,958

Total Revenues

17,457,894

17,887,939

Program Expenses

Instruction

2,440,509

2,256,584

Support Services:

Pupils and Instructional Staff

1,494,474

1,313,318

General and School Administration

745,614

721,802

Plant Operations and Maintenance

562,738

506,958

Pupil Transportation

2,098

3,306

Interest on Long-term Debt

52,759

64,083

Special Schools

47,802

56,023

Business Type Activities

11,056,134

11,447,293

Total Expenses

16,402,128

16,369,368

Increase/(Decrease) in Net Position $ 1,055,766 $ 1,518,571 Government Activities The Commission’s total revenues were $17,457,894 for the year ended June 30, 2014. General revenues totaled less than 1 percent of total revenues. Operating grants and contributions accounted for 13 percent of revenue. Program specific revenues in the form of charges for service accounted for 86 percent of total revenue.

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UNAUDITED Business-Type Activities Revenues for the Commission’s business-type activities were comprised of charges for services. These services include but are not limited to transportation, extraordinary services, computer services, cooperative purchasing and the food service program. Following are some of our major business-type activity results. Overall business-type revenues exceeded expenditures by $402,691.

• Charges for services represent $11,954,767 of revenue. This represents amounts paid by individuals for various program services. Operating grants and contributions amounted to $46,554.

Governmental Activities The Statement of Activities shows the cost of program services and the changes for services and grants offsetting those services. Table 3 shows the total cost of services and the net cost of services. The net cost shows the financial burden that was placed on the Commission by each of these functions.

Table 3

Total Cost of

Total Cost of

Net Cost of

Net Cost of

Services 2014

Services 2013

Services 2014

Services 2013

Instruction $ 2,440,509 $ 2,256,584 $ (1,757,384) $ (2,048,157)

Support Services:

Pupils and Instructional Staff

1,494,474

1,313,318

478,845

468,693

General and School Administration 745,614

721,802

653,088

601,451

Plant Operation and Maintenance 562,738

506,958

517,050

447,672

Pupil Transportation

2,098

3,306

2,098

3,306

Debt Service

52,759

64,083

52,758

64,083

Special Schools

47,802

56,023

47,802

56,023

Business Type Activities

11,056,134

11,447,293

(945,188)

(942,683)

Total Expenses $ 16,402,128 $ 16,369,368 $ (950,931) $ (1,349,614)

Instruction expenses include activities directly dealing with the teaching of pupils and the interaction between teacher and student, including extracurricular activities. Pupils and instructional staff include the activities involved with assisting staff with the content and process of teaching to students, including curriculum and staff development. General administration, school administration, and business include expenses associated with administrative and financial supervision of the Commission. Operation and maintenance of facilities include expenses associated with the upkeep of the physical plant, utilities, and property/liability insurance coverage. Pupil transportation includes activities involved with the conveyance of students to and from school, as well as to and from school activities, as provided by State law.

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UNAUDITED The Commission’s Funds All governmental funds (i.e., general fund, special revenue fund and debt service fund presented in the fund-based statements) are accounted for using the modified accrual basis of accounting. Total revenues amounted to $5,456,572 and expenditures were $5,642,327. As demonstrated by the various statements and schedules included in the financial section of this report, the Commission continues to meet its responsibility for sound financial management. The following schedules present a summary of the revenues of the governmental funds for the fiscal year ended June 30, 2014.

TABLE 4 REVENUES OF THE GOVERNMENTAL FUNDS (EXHIBIT B-2)

Percent

Inc/(Dec)

Percent Revenue

Amount

of Total

FY 2013

Inc/(Dec)

Local Sources $ 4,370,536

80.10% $ (114,829)

-2.56%

State Sources

555,257

10.18%

21,278

3.98% Federal Sources

530,780

9.73%

165,344

45.25%

Total $ 5,456,572

100.00% $ 71,793

1.33% The following schedule represents a summary of general fund, special revenue and debt service fund expenditures for the fiscal year ended June 30, 2014.

TABLE 5 EXPENDITURES OF THE GOVERNMENTAL FUNDS (EXHIBIT B-2)

Percent

Inc/(Dec)

Percent Expenditures

Amount

of Total

FY 2013

Inc/(Dec)

Current: Instruction $ 1,883,652

33.38% $ 218,265

13.11%

Undistributed

3,146,702

55.77%

175,412

5.90% Capital Outlay

15,561

0.28%

10,336

100.00%

Debt Service

548,610

9.72%

14,699

2.75% Special Schools

47,802

0.85%

(8,221)

-14.67%

Total $ 5,642,327

100.00% $ 410,491

7.85%

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UNAUDITED

Capital Assets At the end of the fiscal year 2014, the Commission had $5,704,816 invested in land, building, machinery and equipment. Table 6 shows fiscal year 2014 balances compared to 2013.

TABLE 6

CAPITAL ASSETS (NET OF DEPRECIATION)

June 30

June 30

Capital Assets (Net of Depreciation )

2014

2013

Sites $ 647,800 $ 647,800

Site Improvements

734,700

804,379

Building and Building Improvements

4,287,097

4,405,169

Machinery and Equipment

35,219

939,249

Total $ 5,704,816 $ 6,796,597 Overall capital assets decreased $1,091,781 from fiscal year 2013 to fiscal year 2014. This was mainly due to deletions. Debt Administration At the end of the fiscal year 2014, the Commission had $2,252,654 of outstanding long-term debt. Table 7 shows fiscal year 2014 balances compared to 2013.

TABLE 7 OUTSTANDING DEBT

June 30

June 30

2014

2013

Governmental Funds Capital Leases $ 1,437,647 $ 1,929,502

Compensated Absences

Business Type Funds Capital Leases

815,007

749,999

Total $ 2,252,654 $ 2,679,501 Contacting the Commission’s Financial Management Office This financial report is designed to provide our citizens, investors, and creditors with a general overview of the Commission’s finances and to show the Commission’s accountability for the money it receives. If you have any questions about this report or need additional information, contact Ms. Marie B. Kisch, Superintendent, Hunterdon County Educational Services Commission, 51 Sawmill Road, Lebanon, NJ 08833.

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BASIC FINANCIAL STATEMENTS

The basic financial statements provide a financial overview of the Commission’s operations. These financial statements present the financial position and operating results of all funds as of

June 30, 2014.

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COMMISSION-WIDE FINANCIAL STATEMENTS

The Statement of Net Position and the Statement of Activities display information about the Commission. These statements include the financial activities of the overall Commission,

except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type

activities of the Commission.

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EXHIBIT "A-1"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONSTATEMENT OF NET POSTION

JUNE 30, 2014

GOVERNMENTAL BUSINESS-TYPEACTIVITIES ACTIVITIES TOTAL

ASSETS:

Cash and cash equivalents $1,993,940.16 $1,591,778.33 $3,585,718.49Receivables, net 245,326.03 948,138.30 1,193,464.33Interfund receivable 3,680.79 15,212.08 18,892.87Capital assets: Land 647,800.00 647,800.00 Other capital assets, net of depreciation 5,057,016.36 1,313,926.42 6,370,942.78 Total Assets 7,947,763.34 3,869,055.13 11,816,818.47

LIABILITIES:

Accounts payable 46,920.88 2,565.25 49,486.13Interfund payables 9,099.24 9,099.24Unearned revenue 35,236.24 1,003.06 36,239.30Accrued interest on bonds 11,680.88 11,680.88Noncurrent liabilities: Due within one year: Capital leases payable 508,036.35 333,879.90 841,916.25 Due beyond one year: Capital leases payable 929,610.51 481,127.11 1,410,737.62 Total liabilities 1,531,484.86 827,674.56 2,359,159.42

NET POSITION:

Net investment in capital assets 4,267,169.50 1,313,926.42 5,581,095.92Unassigned 2,149,108.98 1,727,454.15 3,876,563.13

Total net position $6,416,278.48 $3,041,380.57 $9,457,659.05

The accompanying Notes to the Financial Statements are an integral part of this statement.

22

EXH

IBIT

"A-2

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23

MAJOR FUND FINANCIAL STATEMENTS

The individual fund financial statements and schedules present more detailed information for the individual fund in a format that segregates information by the fund type.

24

EXHIBIT "B-1"SHEET #1

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONBALANCE SHEET

GOVERNMENTAL FUNDS JUNE 30, 2014

SPECIAL TOTALGENERAL REVENUE GOVERNMENTAL

FUND FUND FUNDS

ASSETS:

Cash and cash equivalents $ 1,993,540.16 $ $ 1,993,540.16 Petty Cash 400.00 400.00 Due from other funds 80,173.71 80,173.71 Receivables from other governments 124,519.30 120,806.73 245,326.03

Total assets $ 2,198,633.17 $ 120,806.73 $ 2,319,439.90

LIABILITIES AND FUND BALANCES:

Liabilities: Accounts payable $ 5,990.68 $ 40,930.20 $ 46,920.88 Interfund payables 6,112.84 70,380.08 76,492.92 Unearned revenue 25,739.79 9,496.45 35,236.24

Total liabilities 37,843.31 120,806.73 158,650.04

Fund balances: Unassigned: General fund Unassigned 2,160,789.86 2,160,789.86

Total fund balances 2,160,789.86 2,160,789.86

Total liabilities and fund balances $ 2,198,633.17 $ 120,806.73


25

EXHIBIT "B-1"SHEET #2

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONBALANCE SHEET

GOVERNMENTAL FUNDS JUNE 30, 2014

Total fund balances (brought forward) $2,160,789.86

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 funds. Cost of assets $8,550,501.50 Accumulated depreciation (2,845,685.14)

5,704,816.36

Long term liabilities, including bonds payable, and other related amounts that are not due and payable in the current period and therefore are not reported as liabilities in the funds. Capital leases (1,437,646.86)

(1,437,646.86)

Certain liabilities are not due and payable in the current period and therefore, are not reported in the governmental funds. Accrued interest payable (11,680.88)

(11,680.88)

Net position of governmental activities $6,416,278.48


26

EXHIBIT "B-2"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDSFOR THE FISCAL YEAR ENDED JUNE 30, 2014

SPECIAL DEBT TOTALGENERAL REVENUE SERVICE GOVERNMENTAL

FUND FUND FUND FUNDSREVENUES: Local sources: Tuition $3,099,001.41 $3,099,001.41 Miscellaneous 104,835.20 $1,166,698.96 1,271,534.16

Total revenues - local sources 3,203,836.61 1,166,698.96 4,370,535.57

State sources 435,081.15 120,175.87 555,257.02Federal sources 530,779.78 530,779.78

Total revenues 3,638,917.76 1,817,654.61 5,456,572.37

EXPENDITURES: Current expense: Special instruction 975,354.16 877,102.91 1,852,457.07 Other Instruction 31,195.00 31,195.00 Support services: Student & instruction related services 370,995.57 940,551.70 1,311,547.27 General administrative services 52,901.32 52,901.32 School administrative services 387,658.42 387,658.42 Central services 53,146.24 53,146.24 Administration information technology 21,694.00 21,694.00 Plant operations and maintenance 457,412.21 457,412.21 Pupil transportation 2,098.31 2,098.31 Allocated benefits 26,789.94 26,789.94 Unallocated benefits 833,453.92 833,453.92 Debt Service: Principal $491,855.17 491,855.17 Interest 56,754.75 56,754.75 Capital outlay 15,560.98 15,560.98 Special schools 47,802.35 47,802.35

Total expenditures 3,276,062.42 1,817,654.61 548,609.92 5,642,326.95

Excess (deficiency) of revenues over (under) expenditures 362,855.34 (548,609.92) (185,754.58)

Other financing sources (uses): Transfers in/(out) (6,112.84) 548,609.92 542,497.08

Total other financing sources (uses) (6,112.84) 548,609.92 542,497.08

Net change in fund balances 356,742.50 356,742.50

Fund balances, July 1, 2013 1,804,047.36 -0- 1,804,047.36

Fund balances, June 30, 2014 $2,160,789.86 $-0- $-0- $2,160,789.86


27

EXHIBIT "B-3"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONRECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIES

FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Total net change in fund balances - governmental funds (from B-2) $356,742.50

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

Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceededdepreciation in the period

Depreciation expense (199,519.02) Capital outlays $15,560.98 Less: Capital outlays not capitalized (15,560.98)

Repayment of long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position and isnot reported in the statement of activities.

Payment of capital lease payable 491,855.17

In the statement of activities, interest on long-term debt is accrued, regardless ofwhen due In governmental funds, interest is reported when due. The accrued interestis an addition in the reconciliation. 3,996.32

Change in net position of governmental activities $653,074.97


28

OTHER FUNDS

29

EXHIBIT "B-4"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONSTATEMENT OF NET POSITION

PROPRIETARY FUNDSJUNE 30, 2014

NON-MAJOR FUND MAJOR FUNDFOOD ENTERPRISE TOTAL

SERVICE FUND ENTERPRISEASSETS:

Current assets: Cash and cash equivalents $1,590,775.27 $1,590,775.27 Cash on hand with fiscal agents 1,003.06 1,003.06 Accounts receivable - other 939,039.06 939,039.06 Interfund receivable 15,212.08 15,212.08 Intergovernmental receivables State $139.97 139.97 Federal 8,959.27 8,959.27

Total current assets 9,099.24 2,546,029.47 2,555,128.71

Noncurrent assets: Furniture, machinery & equipment 9,073,124.20 9,073,124.20 Less accumulated depreciation (7,759,197.78) (7,759,197.78)

Total noncurrent assets 1,313,926.42 1,313,926.42

Total assets 9,099.24 3,859,955.89 3,869,055.13

LIABILITIES:Current liabilities: Accounts payable 2,565.25 2,565.25 Interfund payable 9,099.24 9,099.24 Deferred revenue 1,003.06 1,003.06 Capital leases payable 815,007.01 815,007.01

Total current liabilities 9,099.24 818,575.32 827,674.56


NET POSITION: Net investment in capital assets 1,313,926.42 1,313,926.42 Unrestricted 1,727,454.15 1,727,454.15

Total net position $3,041,380.57 $3,041,380.57


30

EXHIBIT "B-5"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONSTATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

PROPRIETARY FUNDSFOR THE FISCAL YEAR ENDED JUNE 30, 2014


SERVICE FUND ENTERPRISEOPERATING REVENUES: Charges for services: Transportation $7,594,170.45 $7,594,170.45 Extraordinary services 3,569,957.72 3,569,957.72 Technology services 602,931.71 602,931.71 Purchasing 181,790.57 181,790.57 Sales $5,916.65 5,916.65

Total operating revenues 5,916.65 11,948,850.45 11,954,767.10

OPERATING EXPENSES: Transportation 6,938,306.12 6,938,306.12 Extraordinary services 3,205,216.72 3,205,216.72 Technology services 500,820.84 500,820.84 Purchasing 148,725.37 148,725.37 Depreciation 204,480.68 204,480.68 Cost of sales 58,583.87 58,583.87

Total operating expenses 58,583.87 10,997,549.73 11,056,133.60

Operating income/(loss) (52,667.22) 951,300.72 898,633.50

NONOPERATING REVENUES (EXPENSES): State Sources: State School Lunch Program 600.79 600.79 Federal Sources: National School Lunch Program 28,642.22 28,642.22 National School Breakfast Program 17,311.37 17,311.37 Transfer in/out 6,112.84 (548,609.92) (542,497.08)

Total nonoperating revenues 52,667.22 (548,609.92) (495,942.70)

Income/(loss) before contributions and transfers 402,690.80 402,690.80

Operating TransfersCapital Contributions: General FundTotal Capital Contributions and Operating Transfers

Change in net assets 402,690.80 402,690.80

Total net position - beginning 2,638,689.77 2,638,689.77

Total net position - ending $3,041,380.57 $3,041,380.57


31

EXHIBIT "B-6"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONSTATEMENT OF CASH FLOWS

PROPRIETARY FUNDSFOR THE FISCAL YEAR ENDED JUNE 30, 2014


SERVICE FUND ENTERPRISECash flows from operating activities: Receipts from customers $5,916.65 $11,777,887.39 $11,783,804.04 Payments to suppliers (58,583.87) (10,794,151.40) (10,852,735.27)

Net cash provided by (used for) operating activities) (52,667.22) 983,735.99 931,068.77

Cash flows from noncapital financing activities:State sources 547.81 547.81Federal sources 41,134.20 41,134.20Interfund activity 4,872.37 (10,985.21) (6,112.84)Operating subsidies and transfers to other funds 6,112.84 (548,609.92) (542,497.08)

Net cash provided by noncapital financing activities 52,667.22 (559,595.13) (506,927.91)

Cash flows from investing activities: Purchases of capital assets (626,145.45) (626,145.45)

Net cash provided by (used for) investing activities (626,145.45) (626,145.45)

Cash flows from financing activities: Repayment of capital lease principal (292,046.86) (292,046.86)

Net cash provided by (used for) financing activities 65,008.14 65,008.14

Net increase in cash and cash equivalents (136,996.45) (136,996.45)

Cash and cash equivalents, July 1, 2013 1,727,771.72 1,727,771.72

Cash and cash equivalents, June 30, 2014 $1,590,775.27 $1,590,775.27

Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) ($52,667.22) $951,300.72 $898,633.50 Adjustments to reconciling operating income (loss) to net cash provided by (used for) operating activities: Depreciation 204,480.68 204,480.68 Change in assets and liabilities: (Increase)/decrease in accounts receivable - other (170,963.06) (170,963.06) Increase (decrease) in accounts payable (1,082.35) (1,082.35)

32,435.27 32,435.27

Net cash provided by (used for) operating activities ($52,667.22) $983,735.99 $931,068.77


32

EXHIBIT "B-7"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONSTATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDSFOR THE FISCAL YEAR ENDED JUNE 30, 2014

AGENCY FUNDS

ASSETS: Cash and cash equivalents $485,379.77

Total Assets $485,379.77

LIABILITIES: Interfund payable $9,793.63 Summer payroll 228,741.83 Payroll deductions and withholdings 246,844.31

Total Liabilities $485,379.77


33

Hunterdon County Education Services Commission Notes to the Financial Statements

June 30, 2014

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Hunterdon County Educational Services Commission have been prepared in conformity with U.S. generally accepted accounting principles (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 Commission's accounting policies are described below. Reporting Entity The Hunterdon County Educational Services Commission is an independent public body organized under the Education Laws of the State of New Jersey. Each member Commission annually elects a representative to sit on the Commissions Representative Assembly. Annually, the Representative Assembly elects not fewer than 15 of its members to sit on the Commission’s Board of Directors. The Commission’s Board of Directors is responsible for the fiscal control of the Commission. A Superintendent is appointed by the Commission and is responsible for the administrative control of the Commission. The primary criterion for including activities within the Commission's reporting entity, are set forth in Statement No. 39 of the Governmental Accounting Standards Board entitled “Determining Whether Certain Organizations are Component Units” (GASB 39) as codified in Section 2100 of the GASB Codification of Governmental Accounting and Financial Reporting Standards. Organizations that are legally separate, tax-exempt entities and that meet all of the following criteria should be discretely presented as component units. These criteria are: 1. The economic resources received or held by the separate organization are

entirely or almost entirely for the direct benefit of the primary government.

2. The primary government, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources of the organization.

3. The economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government.

The combined financial statements include all funds of the Commission over which the Board exercises operating control. There were no additional entities required to be included in the reporting entity under the criteria as described above, in the current fiscal year. Furthermore, the Commission is not includable in any other reporting entity on the basis of such criteria.

34

Hunterdon County Educational Services Commission Notes to the Financial Statements

June 30, 2014

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation, Basis of Accounting

The Commission’s basic financial statements consist of Commission-wide statements, including a Statement of Net Position and a Statement of Activities, and fund financial statements which provide a more detailed level of financial information. Basis of Presentation

Commission-Wide Statements: The Statement of Net Assets and the Statement of Activities display information about the Commission as a whole. These statements include the financial activities of the overall Commission, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. These statements distinguish generally between the governmental and business-type activity of the Commission. Governmental activities generally are financed through intergovernmental revenues and other non-exchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The Statement of Net Position presents the financial condition of the governmental and business-type activity of the Commission at fiscal year end. The Statement of Activities presents a comparison between direct expenses and program revenues for the business-type activity of the Commission and for each function of the Commission’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) fees and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirement of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of direct expenses with program revenues identifies the extent to which each governmental function or business segment is self-financing or draws from the general revenues of the Commission.

Fund Financial Statements: During the fiscal year, the Commission segregates transactions related to certain Commission functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. The fund financial statements provide information about the Commission’s funds, including its fiduciary funds. Separate statements for each fund category - governmental, proprietary, and fiduciary - are presented. The New Jersey Department of Education (NJDOE) has elected to require New Jersey Commissions to treat each governmental fund as a major fund in accordance with the option noted in GASB No. 34, paragraph 76. The NJDOE believes that the presentation of all funds as major is important for public interest and to promote consistency among Commission financial reporting models.

35


June 30, 2014

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Governmental Fund Types

General Fund - The general fund is the general operating fund of the Commission. It is used to account for all financial resources except those required to be accounted for in another fund. Included are certain expenditures for vehicles and movable instructional or noninstructional equipment which are classified in the capital outlay subfund.

As required by the New Jersey State Department of Education, the Commission includes budgeted Capital outlay in this fund. Generally accepted accounting principles as they pertain to governmental entities state that general fund resources may be used to directly finance capital outlays for long-lived improvements as long as the resources in such cases are derived exclusively from unrestricted revenues. Resources for budgeted capital outlay purposes are normally derived from State of New Jersey Aid and appropriated fund balance. Expenditures are those that result in the acquisition of or additions to fixed assets for land, existing buildings, improvements of grounds, construction of buildings, additions to or remodeling of buildings and the purchase of built-in equipment. These resources can be transferred from and to current expense by commission resolution.

Special Revenue Fund - The special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. The term “proceeds of specific revenue sources” establishes that one of more specific restricted or committed revenues should be the foundation for a special revenue fund.

Capital Projects Fund - Capital project funds are used to account for and report financial resources that are restricted, committed or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Capital projects funds exclude those types of capital related outflows financed by proprietary funds or for assets that will be held in trust for individuals, private organizations, or other governments.

Debt Service Fund - Debt service funds are used to account for and

report financial resources that are restricted, committed, or assigned to expenditure for principal and interest.

36


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Proprietary Fund

Enterprise Fund - The enterprise fund accounts for all revenues and expenses pertaining to the Commission’s program operations for transportation, extraordinary services, computer services, cooperative purchasing and food service. These funds 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 on a continuing basis are financed or recovered primarily through user charges.

Fiduciary Fund Types

Agency Funds – The agency funds are used to account for assets held by the Commission on behalf of others and are custodial in nature. The agency funds included in this category are as follows:

Payroll and Summer Payroll Accounts (Agency) - These are agency funds used to account for the assets that the Commission holds on behalf of others as their agent. Agency funds are custodial in nature and do not involve measurement of results of operations.

37


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Accounting – Measurement Focus

Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements.

Commission-Wide, Proprietary, and Fiduciary Fund Financial Statements: The Commission-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Differences in the accrual and modified accrual basis of accounting arise in the recognition of revenue, the recording of unearned revenue, and in the presentation of expenses versus expenditures. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.

Governmental Fund Financial Statements: Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. “Measurable” means the amount of the transactions can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

All governmental and business type activities and enterprise funds of the Commission follow FASB Statements and Interpretations issued on or before November 30, 1989, Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements.

38


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Budgets/Budgetary Control

Annual appropriated budgets are prepared in the spring of each year for the general, special revenue, and debt service funds. Budgets are prepared using the modified accrual basis of accounting. 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. 6:20-2A.2(m)1. All budget amendments and transfers must be approved by Commission resolution.

All budget amounts presented in the accompanying 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).

Appropriations, except remaining project appropriations, encumbrances, and unexpended grant appropriations, lapse at the end of each fiscal year. The capital projects fund presents the remaining project appropriations compared to current year 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 generally accepted accounting principles 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 records.

39


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Encumbrance Accounting

Under encumbrance accounting, purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve a portion of the applicable appropriation. Open encumbrances in governmental funds other than the special revenue fund are reported as assigned fund balances at fiscal year end as they do not constitute expenditures or liabilities but rather commitments related to unperformed contracts for goods and services.

Open encumbrances in the special revenue fund and capital projects fund for which the Commission has received advances are reflected in the balance sheet as unearned revenues at fiscal year end.

The encumbered appropriation authority carries over into the next fiscal year. An entry will be made at the beginning of the next fiscal year to increase the appropriation reflected in the certified budget by the outstanding encumbrance amount as of the current fiscal year end. Interfunds Interfund receivables and payables arise from transactions between particular funds and are considered short term in duration. The Interfund transactions are recorded by all funds affected in the period in which the transactions are executed and are part of the Commission’s available spendable resources. Inventories and Prepaid Expenses Inventories of materials and supplies held for consumption in the governmental funds are recorded as expenditures at the time of purchase and year end balances are not reported in the financial statements. Prepaid expenses, which benefit future period other than those recorded in the enterprise fund, are recorded as an expenditure in the year of purchase.

40


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets

The Commission has an established formal system of accounting for its capital assets. Purchased or constructed capital assets are reported at cost. Donated capital assets are valued at their estimated fair market value on the date received. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized.

Capital assets are depreciated in the Commission-wide statements using the straight-line method over the following estimated useful lives:

EstimatedAsset Class Useful LivesSchool Buildings 50Building Improvements 20Electrical/Plumbing 30Vehicles 8Office and Computer Equipment 5-10Instructional Equipment 10Grounds Equipment 15 Compensated Absences

The Commission accounts for compensated absences (e.g., unused vacation, sick leave) as directed by Governmental Accounting Standards Board Statement No. 16 (GASB 16), “Accounting for Compensated Absences.” A liability for compensated absences attributable to services already rendered and 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.

Commission employees are granted varying amounts of vacation and sick leave in accordance with the Commission’s personnel policy. The Commission’s policy permits employees to accumulate unused sick leave and carry forward the full amount to subsequent years. Upon retirement all accrued time lapses unless otherwise specified in accordance with the Commission’s agreements with the various employee unions.

For the Commission-wide statements, the current portion is the amount estimated to be used in the following year. In accordance with GAAP, for the governmental funds, in the fund financial statements, all of the compensated absences are considered long-term and therefore, are not a fund liability and represents a reconciling item between the fund level and Commission-wide presentations.

41


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accrued Salaries and Wages

Certain Commission employees, who provide service to the Commission over the ten month academic year, have the option to have their salaries evenly disbursed during the entire twelve-month year. New Jersey statutes require that these earned but not distributed amounts be retained in a separate bank account. As of June 30, 2014, the amount earned by these employees but not yet distributed was $228,741.83.

Unearned Revenue Unearned revenue in the special revenue and capital projects funds represents funds which have been received but not yet earned. A corresponding accounts receivable has also been established for any open encumbrances at year end which is allowable under generally accepted accounting principles. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported on the Commission-wide financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources, are reported as obligations of the funds. However, contractually required pension contributions and compensated absences that are paid from governmental funds are reported as liabilities on the fund financial statements only to the extent that they are due for payment during the current year. Bonds are recognized as a liability on the fund financial statements when due. Net Position GASB 63 provides guidance for reporting net position in the statement of financial position and related disclosures. In compliance with GASB 63, the Statement of Net Assets has been renamed the Statement of Net Position. Net Position represents the difference between assets and liabilities. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any borrowing used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the Commission or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The Commission’s policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net positions are available.

42


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fund Balance The Commission implemented GASB Statement 54, “Fund Balance Reporting and Governmental Fund Type Definitions”. This statement modifies fund balance reporting and clarifies fund type definitions. This new Statement aims to enhance the usefulness of fund balance information by providing clearer fund balance clarifications that can be applied more consistently. Under the new standard, in the fund financial statements, governmental funds report the following classifications of fund balance: Nonspendable – includes amounts that cannot be spent because they are either not spendable in form or are legally or contractually required to be maintained intact. Restricted – includes amounts restricted by external sources (creditors, laws of other governments, etc.) or by constitutional provision or enabling legislation. The Commission reports the Capital Reserve, Emergency Reserve, Maintenance Reserve and Excess Surplus as Restricted Fund Balance. Committed – includes amounts that can only be used for specific purposes. Committed fund balance is reported pursuant to resolutions passed by the Board of Education, the Commission’s highest level of decision making authority. Commitments may be modified or rescinded only through resolutions approved by the Board of Education. The Commission reports amounts Designated for Subsequent Year’s Expenditures as Committed Fund Balance. Assigned – includes amounts that the Commission intends to use for a specific purpose, but do not meet the definition of restricted or committed fund balance. Under the Commission’s policy, amounts may be assigned by the Business Administrator. The Commission reports Year End Encumbrances as Assigned Fund Balance.

Unassigned – includes amounts that have not been assigned to other funds or restricted, committed or assigned to a specific purpose within the General Fund. The Commission reports all amounts that meet the unrestricted General Fund Balance Policy described below as unassigned: When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the Commission considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balance are available, the Commission considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed.

43


June 30, 2014

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Balance (Continued) The general fund is the only fund that will report a negative unassigned fund balance. For all other governmental funds the amount of a residual deficit would be classified as unassigned. Revenues – Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On the modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the Commission, available means within sixty days of the fiscal year end. Non-exchange transactions, in which the Commission receives value without directly giving equal value in return, include grants, entitlements, and donations. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the fiscal year when use is first permitted; matching requirements, in which the Commission must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the Commission on a reimbursement basis. On the modified accrual basis, revenue from nonexchange transactions must also be available before it can be recognized. Under the modified accrual basis, the following revenue sources are considered both measurable and available at fiscal year end: interest, and tuition. Operating Revenues and Expenses

Operating revenues are those revenues that are generated directly from the primary activity of the enterprise fund. For the Commission, these revenues are program revenues in the Enterprise Funds. Operating expenses are necessary costs incurred to provide the service that is the primary activity of the enterprise fund.

44


June 30, 2014 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Allocation of Indirect Expenses

The Commission reports all direct expenses by function in the Statement of Activities. Direct expenses are those that are clearly identifiable with a function. Indirect expenses are allocated to functions but are reported separately in the Statement of Activities. Employee benefits, including the employer’s share of social security, workers compensation, and medical and dental benefits, were allocated based on salaries of the program. Depreciation expense, where practicable, is specifically identified by function and is included in the indirect expense column of the Statement of Activities. Depreciation expense that could not be attributed to a specific function is considered an indirect expense and is reported separately on the Statement of Activities. Extraordinary and Special Items Extraordinary items are transactions or events that are unusual in nature and infrequent of occurrence. Special items are transactions or events that are within control of management and are either unusual in nature or infrequent in occurrence. Neither of these types of transactions occurred during the fiscal year. Management Estimates The preparation of financial statements in conformity with GAAP requires management to make assumptions that affect the amounts reported as revenue and expenditures/expenses during the reporting period. These estimates may differ from actual results.

Recent Accounting Pronouncements

On July 1 2013, the District implemented GASB Statement No. 65, Items Previously Reported as Assets and Liabilities (“GASB No. 65”). This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The provisions of this Statement improve financial reporting by clarifying the appropriate use of the financial statement elements deferred outflows of resources and deferred inflows of resources to ensure consistency in financial reporting.

45


June 30, 2014 NOTE 2: CASH AND CASH EQUIVALENTS AND INVESTMENTS

The Commission considers petty cash, change funds, cash in banks, deposits in the government money market account, and short-term investments with original maturities of three months or less as cash and cash equivalents. Investments are stated at cost, which approximates market.

Deposits

New Jersey statutes permit the deposit of public funds in public depositories which are located in New Jersey and which meet the requirements of the Governmental Unit Deposit Protection Act (GUDPA). GUDPA requires a bank that accepts public funds to be a public depository. A public depository is defined as a state bank, a national bank, or a savings bank, which is located in the State of New Jersey, the deposits of which are insured by the Federal Deposit Insurance Corporation. The statutes also require public depositories to maintain collateral for deposits of public funds that exceed certain insurance limits. All collateral must be deposited with the Federal Reserve Bank or a Banking Institution that is a member of the Federal Reserve System, and has capital funds of not less than $25,000,000.00. Under (GUDPA), 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 the deposits to the governmental unit. The Hunterdon County Educational Services Commission had the following cash and cash equivalents at June 30, 2014:

Bank

Reconciling Items

Reconciled

Fund Type

Balance

Additions

Deletions

Balance

Governmental

$2,379,580.15

$226,424.15

$612,464.14

$1,993,540.16

Proprietary

1,591,779.23

1,591,779.23

Fiduciary

536,146.26

5,347.63

56,114.12

485,379.77

$4,507,505.64

$231,771.78

$668,578.26

$4,070,699.16 Custodial Credit Risk – Deposits – Custodial credit risk is the risk that in the event of a bank failure, the deposits may not be returned. The Commission does not have a specific deposit policy for custodial credit risk other than those policies that adhere to the requirements of statute. As of June 30, 2014, based upon the coverage provided by FDIC and NJGUDPA, no amount of the bank balance was exposed to custodial credit risk. Of the cash on balance in the bank, $473,434.40 was covered by Federal Depository Insurance and $4,034,071.24 was covered by NJGUDPA.

46


June 30, 2014 NOTE 2: CASH AND CASH EQUIVALENTS AND INVESTMENTS (CONTINUED)

Investments The purchase of investments by the Commission is strictly limited by the express authority of the N.J.S.A. 18A:20-37 Education, Administration of Commissions. Permitted investments include any of the following type of securities:

1. Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America;

2. Government money market mutual funds which are purchased from an

investment company or investment trust which is registered with the Securities and Exchange Commission under the “Investment Company Act of 1940,” 15 U.S.C. 80a-1 et seq., and operated in accordance with 17 C.F.R. § 270.2a-7 and which portfolio is limited to U.S. Government securities that meet the definition of an eligible security pursuant to 17 C.F.R. § 270.2a-7 and repurchase agreements that are collateralized by such U.S. Government securities in which direct investment may be made pursuant to paragraphs (1) and (3) of N.J.S.A. 18A:20-37. These funds are also required to be rated by a nationally recognized statistical rating organization.

3. Any obligation that a federal agency or a federal instrumentality has

issued in accordance with an act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligation bears a fixed rate of interest not dependent on any index or other external factor.

4. Bonds or other obligations of the Local Unit or bonds or other obligations

of Commissions of which the Local Unit is a part or within which the Commission is located.

5. Bonds or other obligations, having a maturity date not more than 397

days from date of purchase, approved by the Division of Investment of the Department of Treasury for investment by Commissions.

6. Local government investment pools that are fully invested in U.S.

Government securities that meet the definition of eligible security pursuant to 17 C.F.R. § 270a-7 and repurchase agreements that are collateralized by such U.S. Government securities in which direct investment may be made pursuant to paragraphs (1) and (3) of N.J.S.A. 18A:20-37. This type of investment is also required to be rated in the highest category by a nationally recognized statistical rating organization.

47


June 30, 2014 NOTE 2: CASH AND CASH EQUIVALENTS AND INVESTMENTS (CONTINUED)

Investments (Continued) 7. Deposits with the State of New Jersey Cash Management Fund

established pursuant to section 1 of P.L. 1977, c.281 (C. 52:18A-90.4); or 8. Agreements for the repurchase of fully collateralized securities if:

a. the underlying securities are permitted investments pursuant to paragraphs (1) and (3) of this subsection;

b. the custody of collateral is transferred to a third party;

c. the maturity of the agreement is not more than 30 days;

d. the underlying securities are purchased through a public

depository as defined in section 1 of P.L. 1970, c.236 (C. 17:19-41); and;

e. a master repurchase agreement providing for the custody and

security of collateral is executed.

As of June 30, 2014, the Commission had no investments. Based upon the limitations set forth by New Jersey Statutes 40A:5-15.1 and existing investment practices, the Commission is generally not exposed to credit risks and interest rate risks for its investments, nor is it exposed to foreign currency risk for its deposits and investments.

48


June 30, 2014

NOTE 3: CHANGE IN CAPITAL ASSETS Capital asset activity for the year ended June 30, 2014 was as follows:

Beginning

Ending

Balance

Additions

Retirements

Balance

Governmental Activities

Capital assets not being depreciated: Land $ 647,800.00 $ $ $ 647,800.00

Total Capital assets not being depreciated

647,800.00

647,800.00

Land Improvements

1,352,572.00

1,352,572.00 Building and Building Improvements

6,214,314.00

6,214,314.00

Machinery and Equipment

335,815.50

335,815.50

Totals as historical cost

7,902,701.50

7,902,701.50

Total Gross assets (Memo only) $ 8,550,501.50 $ $ $ 8,550,501.50

Less: Accumulated Depreciation for: Land Improvements $ (548,193.11) $ (69,678.60) $

$ (617,871.71)

Building and Building Improvements

(1,809,144.74)

(118,071.97)

(1,927,216.71) Furniture and Equipment

(288,828.27)

(11,768.45)

(300,596.72)

Total depreciation

(2,646,166.12)

(199,519.02)

(2,845,685.14) Total Capital assets being depreciated

net of accumulated depreciation

5,256,535.38

(199,519.02)

5,057,016.36

Governmental activities capital assets, net $ 5,904,335.38 $ (199,519.02) $ $ 5,704,816.36

Business-type activities: Equipment $ 9,742,708.94 $ 626,145.45 $ 1,295,730.19 $ 9,073,124.20

Less: Accumulated Depreciation

(8,850,447.29)

(204,480.68)

(1,295,730.19)

(7,759,197.78)

Proprietary fund capital assets, net $ 892,261.65 $ 421,664.77 $ $ 1,313,926.42

49


June 30, 2014

NOTE 3: CHANGE IN CAPITAL ASSETS

Depreciation Expense was charged to governmental expenses as follows:

Instruction:

Special $ (113,725.84)

Support Services:

Student and Instruction Related Services (27,932.66)

General Administrative Services

(17,956.71)

School Administrative Services

(17,956.71)

Plant Operations and Maintenance

(21,947.09)

$ (199,519.02)

50


June 30, 2014 NOTE 4: LONG-TERM LIABILITIES

On December 28, 2006, the Commission closed a refinancing with the single-investor Lessor Commerce Commercial Leasing in the amount of $15,496,000.00 representing the refinancing of the 1994 Certificates of Participation Lease (“COPS”), the 2000 COPS, the 2001 COPS and Tewksbury Mortgage as well as all of the single-investor school bus lease purchases with Blue Bird that were held by the LaSalle National Bank and Ford Motor Credit.

The following is a summary of changes in liabilities that effect other long-term obligations for the year ended June 30, 2014:

Governmental Fund:

Capital

Leases

Sub-Total

Balance June 30, 2013 $ 1,929,502.03 $ 1,929,502.03

Deletions

491,855.17

491,855.17

Balance June 30, 2014 $ 1,437,646.86 $ 1,437,646.86

Amounts due within

one year $ 508,036.35

Proprietary Fund:

Capital

Leases

Sub-Total

Balance June 30, 2013 $ 749,998.87 $ 749,998.87

Additions

357,055.00

357,055.00

1,107,053.87

1,107,053.87

Deletions

292,046.86

292,046.86

Balance June 30, 2014 $ 815,007.01 $ 815,007.01

Amounts due within

one year $ 333,879.90

51


June 30, 2014 NOTE 4: LONG-TERM LIABILITIES (CONTINUED) Capital Leases

The annual requirements to amortize all debt outstanding as of June 30, 2014, with interest payments on issued debt, are as follows:

Fiscal Year Ended

Governmental Fund

Proprietary Fund

June 30,

Principal

Interest

Principal

Interest

Total

2015 $ 508,036.35 $ 40,573.57 $ 260,691.89 $ 12,300.55 $ 821,602.36 2016

524,749.84

23,860.08

99,550.63

4,544.80

652,705.35

2017

404,860.67

6,596.77

101,797.66

2,297.77

515,552.87

$ 1,437,646.86 $ 71,030.42 $ 462,040.18 $ 19,143.12 $ 1,989,860.58

52


June 30, 2014 NOTE 5: PENSION PLANS

Description of Plans - All required employees of the Commission are covered by either the Public Employees’ Retirement System or the Teachers’ Pension and Annuity Fund which have been established by state statute and are administered by the New Jersey Division of Pension and Benefits (Division). According to the State of New Jersey Administrative Code, all obligations of both Systems will be assumed by the State of New Jersey should the Systems terminate. The Division issues a publicly available financial report that includes the financial statements and required supplementary information for the Public Employees Retirement System and the Teachers’ Pension and Annuity Fund. These reports may be obtained by writing to the Division of Pensions and Benefits, PO Box 295, Trenton, New Jersey, 08625.

Teachers’ Pension and Annuity Fund (TPAF) - The Teachers’ Pension and Annuity Fund was established as of January 1, 1955, under the provisions of N.J.S.A. 18A:66 to provide retirement benefits, death, disability and medical benefits to certain qualified members. The Teachers’ Pension and Annuity Fund is considered a cost-sharing multiple-employer 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 Commission and the system’s other related non-contributing employers. Membership is mandatory for substantially all teachers or members of the professional staff certified by the State Board of Examiners, and employees of the Department of Education who have titles that are unclassified, professional and certified.

Public Employees’ Retirement System (PERS) - The Public Employees’ Retirement System (PERS) was established as of January 1, 1955 under the provision of N.J.S.A. 43:15A to provide retirement, death, disability and medical benefits to certain qualified members. The Public Employees’ Retirement System is a cost-sharing multiple-employer plan. Membership is mandatory for substantially all full-time employees of the State of New Jersey or any county, municipality, Commission, or public agency, provided the employee is not required to be a member of another state-administered retirement system or other state or local jurisdiction.

Defined Contribution Retirement Program (DCRP) The Defined Contribution Retirement Program (DCRP) was established under the provision of Chapter 92, P.L. 2007 and Chapter 103, P.L. 2007 to provide coverage to elected and certain appointed officials, effective July 1, 2007. Membership is mandatory for such individuals with vesting occurring after one year of membership.

53


June 30, 2014 NOTE 5: PENSION PLANS (CONTINUED)

Significant Legislation Effective June 28, 2011, P.L. 2011, c. 78 enacted certain changes in the operations and benefit provisions of the TPAF and the PERS systems. Pension Plan Design Changes Effective June 28, 2011, P.L. 2011, c. 78, new members of TPAF and PERS, hired on or after June 28, 2011, will need 30 years of creditable service and have attained the age of 65 for receipt of the early retirement benefit without a reduction of 1/4 of 1% for each month that the member is under age 65. New members will be eligible for a service retirement benefit at age 65. Funding Changes Under the new legislation, the methodology for calculating the unfunded accrued liability payment portion of the employer’s annual pension contribution to the PERS, and TPAF. The unfunded actuarial accrued liability (UAAL) will be amortized for each plan over an open-ended 30 year period and paid in level dollars. Beginning with the July 1, 2019 actuarial valuation (July 1, 2018 for PFRS), the UAAL will be amortized over a closed 30 year period until the remaining period reaches 20, when the amortization period will revert to an open-ended 20 year period. COLA Suspension The payment of automatic cost-of-living adjustment to current and future retirees and beneficiaries are suspended until reactivated as permitted by this law.

Vesting and Benefit Provisions The vesting and benefit provisions of PERS are set by N.J.S.A. 43:15A and 43.3B, and N.J.S.A. 18A:6C for TPAF. All benefits vest after ten years of service, except for post-retirement healthcare benefits that vest after 25 years of service.

Members are always fully vested for their own contributions and, after three years of service credit, become vested for 2% of related interest earned on the contributions. In the case of death before retirement, members’ beneficiaries are entitled to full interest credited to the members’ accounts.

54


June 30, 2014

NOTE 5: PENSION PLANS (CONTINUED) Contribution Requirements The contribution policy is set by N.J.S.A. 43:15A and N.J.S.A. 18:66, and requires contributions by active members and contributing employers. Plan member and employer contributions may be amended by State of New Jersey legislation.

Effective June 28, 2011, P.L. 2011, c. 78 provides for increases in the employee contribution rates: from 5.5% to 6.5% plus an additional 1% phased-in over 7 years beginning in the first year, meaning after 12 months, after the law’s effective date for TPAF and PERS.

Employers are required to contribute at an actuarially determined rate in both

TPAF and PERS. The actuarially determined contribution includes funding for cost-of-living adjustments, noncontributory death benefits, and post-retirement medical premiums. Under current statute the Commission is a non-contributing employer of TPAF (i.e. the State of new Jersey makes the employer contribution on behalf of public school districts.

Three-Year Trend Information for PERS

Year Annual Pension Percentage of Net Pension

June 30, Cost (APC) APC Contributed Obligation

2014 $721,222.00 100.00% $721,222.00

2013 $644,455.00 100.00% $644,455.00

2012 $711,646.00 100.00% $711,646.00

Three-Year Trend Information for TPAF (Paid on-behalf of the District)

Year Annual Pension Percentage of Net Pension

June 30, Cost (APC) APC Contributed Obligation

2014 $98,440.00 100.00% $98,440.00

2013 $158,578.00 100.00% $158,578.00

2012 $71,972.00 100.00% $71,972.00

During the fiscal years ended June 30, 2014, 2013, and 2012, the State of New Jersey contributed $98,440.00, $158,578.00, and $71,972.00, respectively to the TPAF pension system on behalf of the Commission. Also, in accordance with N.J.S.A. 18A:66-66, during the years ended June 30, 2014, 2013 and 2012, the State of New Jersey reimbursed the Commission $175,237.15, $189,063.81 and $175,551.68 respectively for the employer’s share of social security contributions for TPAF members, as calculated on their base salaries.

55


June 30, 2014 NOTE 6: OTHER POST-RETIREMENT BENEFITS

For eligible retired employees, the School District participates in the State Health Benefits Program (SHBP), a cost-sharing, multiple-employer defined benefit post-employment healthcare plan administered by the State of New Jersey Division of Pensions and Benefits. SHBP was established in 1961 under N.J.S.A. 52:14-17.25 et seq., to provide health benefits to State employees, retirees, and their dependents. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code. SHBP provides medical, prescription drugs, mental health/substance abuse, and Medicare Part B reimbursement to retirees and their covered dependents. The State Health Benefits Commission is the executive body established by statute to be responsible for the operation of the SHBP. The State of New Jersey Division of Pensions and Benefits issues a publicly available financial report that includes financial statements and required supplementary information for the SHBP. That report may be obtained by writing to: State of New Jersey Division of Pensions and Benefits, P.O. Box 295, Trenton, NJ 08625-0295. Chapter 384 of Public Laws 1987 and Chapter 6 of Public Laws 1990 required Teachers’ Pensions and Annuity Fund (TPAF) and the Public Employees’ Retirement System (PERS), respectively, to fund post-retirement medical benefits for those State employees who retire after accumulating 25 years of credited service or on state disability retirement. P.L. 2007, Chapter 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 post-retirement medical benefits for retired State employees and retired educational employees. As of June 30, 2013, there were 100,134 retirees eligible for post-retirement medical benefits, and the State contributed $1.07 billion on their behalf. The cost of these benefits is funded through contributions by the State in accordance with Chapter 62, P.L. 1994. 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 Chapter 126, P.L. 1992, 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 $173.8 million toward Chapter 126 benefits for 17,356 eligible retired members in Fiscal Year 2013.

56


June 30, 2014 NOTE 6: OTHER POST-RETIREMENT BENEFITS (CONTINUED)

The State will set the contribution rate based on the annual required contribution of the employers (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover 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 State Health Benefits Program Fund for TPAF retirees’ post-retirement benefits on behalf of the Commission for the years ended June 30, 2014, 2013 and 2012 were $161,404, $179,313 and $144,682, respectively, which equaled the required contributions for each year. The State’s contributions to the State Health Benefits Program Fund for PERS retirees’ post-retirement benefits on behalf of the Commission was not determined or made available by the State of New Jersey.

NOTE 7: LITIGATION

The Commission’s attorney’s letter advises that there is no litigation, pending litigation, claims, contingent liabilities, unasserted claims or assessments or statutory violations which involve the Commission and which might materially affect the Commission’s financial position.

NOTE 8: CONTINGENCIES

The Commission receives financial assistance from the State of New Jersey and the U.S. Government in the form of grants. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditure of the funds for eligible purposes. The State and Federal grants received and expended in the 2013-2014 fiscal year were subject to the U.S. OMB A-133 and New Jersey OMB Circular 04-04 which mandates that grant revenues and expenditures be audited in conjunction with the Commission’s annual audit. Findings and questioned costs, if any, relative to federal and state financial assistance programs will be discussed in the Single Audit Section, Schedule of Findings and Questioned Costs. In addition, all grants and cost reimbursements are subject to financial and compliance audits by the grantors. Further, the School Child Nutrition Program is a recipient of federal reimbursements and is subject to certain related federal regulations. These federal reimbursements are subject to subsequent audit and interpretation by the New Jersey Department of Education. The Commission’s management does not believe such an audit would result in material amounts of disallowed costs.

57


June 30, 2014 NOTE 9: RISK MANAGEMENT

The Commission 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 Commission maintains coverage through the New Jersey School Boards Association Insurance Group for property, liability, and student accident and surety bonds. A complete schedule of insurance coverage can be found in the Statistical Section of this Comprehensive Annual Financial Report.

NOTE 10: INTERFUND RECEIVABLES AND PAYABLES The following interfund balances remained on the balance sheet at June 30, 2014:

INTERFUND

INTERFUND

FUND

RECEIVABLE

PAYABLE

General Fund $ 80,173.71 $ 6,112.84

Special Revenue Fund

70,380.08

Proprietary Fund

6,112.84

Agency

9,793.63

$ 86,286.55 $ 86,286.55

All balances resulted from the time lag between the dates that short-term

loans were disbursed and payments between funds were made.

NOTE 11: FUND BALANCE APPROPRIATED

General Fund – All of the $2,160,789.86 in General Fund Balance at June 30, 2014 is unassigned.

NOTE 12: DEFERRED COMPENSATION

The Commission offers its employees a choice of the deferred compensation plans created in accordance with Internal Revenue Code Section 403(b) and 457. The plans 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. Since the Commission does not have any property or rights to the plan assets and no fiduciary relationship exists between the Commission and the deferred compensation plan, the plan assets are not included in the Commission’s financial statements as of June 30, 2014.

58


June 30, 2014 NOTE 13: SUBSEQUENT EVENTS

The Commission has evaluated subsequent events occurring after the financial statement date through December 24, 2014 which is the date the financial statements were available to be issued. The Commission has determined that there are no material subsequent events needed to be disclosed.

59

REQUIRED SUPPLEMENTARY INFORMATION – PART II

60

BUDGETARY COMPARISON SCHEDULES

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68

EXHIBIT "C-3"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONBUDGETARY COMPARISON SCHEDULE

BUDGET TO GAAP RECONCILIATIONNOTE TO RSI

FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Note A - Explanation of difference between budgetary inflows and outflows and GAAP Revenues and Expenditures

SPECIAL GENERAL REVENUE

FUND FUND

Sources/inflows of resources

Actual amounts (budgetary basis) "revenue" from the budgetary comparison schedule $3,638,917.76 $1,817,654.61

Difference - budget to GAAP:

Grant accounting budgetary basis differs from GAAP in that encumbrances are recognized as expenditures, and the related revenue is recognized. N/A N/A

The last State aid payment of the current year is recognized as revenue for budgetary purposes and differs from GAAP which does not recognize this revenue until the subsequent year when the State recognizes the related expense (GASB 33) N/A N/A

The last State aid payment of the prior year is recognized as revenue under GAAP when the State recognizes the related expense (GASB 33). (This revenue was recognized during the previous fiscal year for budgetary purposes.) N/A N/A

Total revenues as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $3,638,917.76 $1,817,654.61

Uses/outflows of resources

Actual amounts (budgetary basis) "total expenditures" from the budgetary comparison schedule. $3,276,062.42 $1,817,654.61

Encumbrances for supplies and equipment ordered butnot received are reported in the year the order is placed forbudgetary purposes, but in the year the supplies are receivedfor financial reporting purposes. N/A N/A

Total expenditures as reported on the statement of revenues,expenditures, and changes in fund balances - governmental funds $3,276,062.42 $1,817,654.61

69

OTHER SUPPLEMENTARY INFORMATION

70

SPECIAL REVENUE FUND DETAIL STATEMENTS

Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. The term “proceeds of specific revenue sources” establishes that one or more specific restricted or committed revenues should be the foundation for a special

revenue fund.

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ies)

17,6

50.5

81,

547.

161,

043.

35

Sup

plie

s an

d M

ater

ials

36,5

18.2

320

,934

.98

E

nerg

y40

2.11

M

isce

llane

ous

Expe

nditu

res

428.

38 T

otal

Sup

port

Serv

ices

251,

342.

176,

782.

9323

,111

.56

38,4

67.2

317

3,75

3.08

Tota

l Exp

endi

ture

s$4

89,7

33.0

0$4

1,04

6.78

$26,

680.

00$4

0,00

2.39

$38,

467.

23$1

74,5

53.0

8

Exce

ss (D

efic

ienc

y) o

f Rev

enue

s O

ver (

Und

er)

Exp

endi

ture

s an

d O

ther

Fin

anci

ng S

ourc

es (U

ses)

72

EXH

IBIT

"E-1

"SH

EET

#2

HU

NTE

RD

ON

CO

UN

TY E

DU

CAT

ION

AL S

ERVI

CES

CO

MM

ISSI

ON

SPEC

IAL

REV

ENU

E FU

ND

CO

MBI

NIN

G S

CH

EDU

LE O

F PR

OG

RAM

REV

ENU

ES A

ND

EXP

END

ITU

RES

- BU

DG

ETAR

Y BA

SIS

FOR

TH

E FI

SCAL

YEA

R E

ND

ED J

UN

E 30

, 201

4

NO

NPU

BLIC

LITE

RAC

Y N

ON

PUBL

ICG

.A.F

.S.

T.A.

N.F

TEXT

BOO

KS4N

JC

H19

2/19

3TO

TAL

Rev

enue

s: S

tate

Aid

$120

,175

.87

$120

,175

.87

Fed

eral

Aid

530,

779.

78 L

ocal

Sou

rces

$112

,336

.81

$349

,282

.96

$100

,587

.37

$324

,789

.12

1,16

6,69

8.96

T

otal

Rev

enue

s11

2,33

6.81

349,

282.

9610

0,58

7.37

120,

175.

8732

4,78

9.12

1,81

7,65

4.61

Expe

nditu

res:

Ins

truct

ion:

Sal

arie

s 76

,589

.28

184,

124.

1595

,990

.30

82,7

70.8

570

4,54

8.97

Pur

chas

ed P

rofe

ssio

nal a

nd T

echn

ical

Ser

vice

s5,

120.

00

Gen

eral

Sup

plie

s97

3.75

9,45

0.57

7,39

8.81

2,19

2.32

66,8

46.5

7

Tex

tboo

ks10

0,58

7.37

100,

587.

37

Tot

al In

stru

ctio

n77

,563

.03

193,

574.

7210

0,58

7.37

103,

389.

1184

,963

.17

877,

102.

91

Sup

port

Serv

ices

:

Sala

ries

24,5

09.9

282

,723

.54

6,46

9.14

107,

323.

5237

9,50

6.12

Per

sona

l Ser

vice

s - E

mpl

oyee

Ben

efits

7,85

2.42

19,5

34.5

95,

442.

6222

,177

.28

110,

591.

54

P

urch

ased

Pro

fess

iona

l and

Tec

hnic

al S

ervi

ces

935.

311,

097.

31

Pur

chas

ed P

rofe

ssio

nal -

Edu

catio

nal S

ervi

ces

40.0

010

3,05

6.99

303,

802.

54

O

ther

Pur

chas

ed S

ervi

ces

(400

-500

Ser

ies)

2,41

1.44

52,2

05.7

24,

875.

005,

636.

4785

,369

.72

S

uppl

ies

and

Mat

eria

ls1,

204.

3967

9.70

59,3

37.3

0

Ener

gy40

2.11

Mis

cella

neou

s Ex

pend

iture

s16

.68

445.

06

Tot

al S

uppo

rt Se

rvic

es34

,773

.78

155,

708.

2416

,786

.76

239,

825.

9594

0,55

1.70

Tota

l Exp

endi

ture

s$1

12,3

36.8

1$3

49,2

82.9

6$1

00,5

87.3

7$1

20,1

75.8

7$3

24,7

89.1

2$1

,817

,654

.61

Exce

ss (D

efic

ienc

y) o

f Rev

enue

s O

ver (

Und

er)

Exp

endi

ture

s an

d O

ther

Fin

anci

ng S

ourc

es (U

ses)

73

CAPITAL PROJECTS FUND DETAIL STATEMENTS – N/A

Capital project funds are 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 capital facilities and other capital assets. Capital project funds exclude those types of capital related outflows financed by proprietary funds or for assets that will be held in

trust for individuals, private organizations, or other governments.

74

PROPRIETARY FUND DETAIL STATEMENTS

Proprietary funds are used to account for operations that are financed and operated in a manner similar to private business enterprises – where the intent of the Commission’s board is that the

costs of providing goods or services be financed through user charges.

75

EXHIBIT "G-1"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONCOMBINING STATEMENT OF NET POSITION

PROPRIETARY FUNDS - ENTERPRISE FUNDSJUNE 30, 2014

NON-MAJOR FUND MAJOR FUNDFOOD ENTERPRISE

SERVICE FUND TOTALASSETS:

Current assets: Cash and cash equivalents $1,590,775.27 $1,590,775.27 Cash on hand with fiscal agents $1,003.06 1,003.06 Accounts receivable - other 939,039.06 939,039.06 Interfund Receivable 15,212.08 15,212.08 Intergovernmental Receivables: State $139.97 139.97 Federal 8,959.27 8,959.27

Total current assets 9,099.24 2,546,029.47 2,555,128.71

Noncurrent assets: Furniture, machinery and equipment 9,073,124.20 9,073,124.20 Less accumulated depreciation (7,759,197.78) (7,759,197.78)

Total noncurrent assets 1,313,926.42 1,313,926.42

Total assets 9,099.24 3,859,955.89 3,869,055.13

LIABILITIES:

Current liabilities: Accounts payable 2,565.25 2,565.25 Interfund payable 9,099.24 9,099.24 Unearned revenue 1,003.06 1,003.06 Capital leases payable 815,007.01 815,007.01

Total current liabilities 9,099.24 818,575.32 827,674.56


NET POSITION:

Net investment in capital assets 1,313,926.42 1,313,926.42 Unrestricted 1,727,454.15 1,727,454.15

Total net position $3,041,380.57 $3,041,380.57

76

EXHIBIT "G-2"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONCOMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION

PROPRIETARY FUNDS - ENTERPRISE FUNDSFOR THE FISCAL YEAR ENDED JUNE 30, 2014


SERVICE FUND TOTALOPERATING REVENUES: Charges for services: Transportation $7,594,170.45 $7,594,170.45 Extraordinary services 3,569,957.72 3,569,957.72 Technology services 602,931.71 602,931.71 Purchasing 181,790.57 181,790.57 Sales $5,916.65 5,916.65

Total operating revenues 5,916.65 11,948,850.45 11,954,767.10

OPERATING EXPENSES: Transportation 6,938,306.12 6,938,306.12 Extraordinary services 3,205,216.72 3,205,216.72 Technology services 500,820.84 500,820.84 Purchasing 148,725.37 148,725.37 Depreciation 204,480.68 204,480.68 Cost of sales 58,583.87 58,583.87

Total operating expenses 58,583.87 10,997,549.73 11,056,133.60

Operating income (loss) (52,667.22) 951,300.72 898,633.50

NONOPERATING REVENUES (EXPENSES): State Sources: State School Lunch Program 600.79 600.79 Federal Sources: National School Lunch Program 28,642.22 28,642.22 National School Breakfast Program 17,311.37 17,311.37 Transfer in/out 6,112.84 (548,609.92) (542,497.08)

Total nonoperating revenues 52,667.22 (548,609.92) (495,942.70)

Net income 402,690.80 402,690.80

Income before contributions and transfers 402,690.80 402,690.80

Change in net position 402,690.80 402,690.80

Total net position - July 1, 2013 2,638,689.77 2,638,689.77

Total net position - June 30, 2014 $3,041,380.57 $3,041,380.57

77

EXHIBIT "G-3"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONCOMBINING STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS - ENTERPRISE FUNDSFOR THE FISCAL YEAR ENDED JUNE 30, 2014


SERVICE FUND TOTALCash flows from operating activities: Receipts from customers $5,916.65 $11,777,887.39 $11,783,804.04 Payments to suppliers (58,583.87) (10,794,151.40) (10,852,735.27)

Net cash provided by (used for) operating activities) (52,667.22) 983,735.99 931,068.77

Cash flows from noncapital financing activities:State sources 547.81 547.81Federal sources 41,134.20 41,134.20Interfund activity 4,872.37 (10,985.21) (6,112.84)Operating subsidies and transfers to other funds 6,112.84 (548,609.92) (542,497.08)

Net cash provided by noncapital financing activities: 52,667.22 (559,595.13) (506,927.91)

Cash flows from investing activities: Purchases of capital assets (626,145.45) (626,145.45)

Net cash provided by (used for) investing activities (626,145.45) (626,145.45)

Cash flows from financing activities: Proceeds from the issuance of capital leases 357,055.00 357,055.00 Repayment of capital lease principal (292,046.86) (292,046.86)

Net cash provided by (used for) financing activities 65,008.14 65,008.14

Net increase in cash and cash equivalents (136,996.45) (136,996.45)

Cash and cash equivalents, July 1, 2013 1,727,771.72 1,727,771.72

Cash and cash equivalents, June 30, 2014 $1,590,775.27 $1,590,775.27

Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) ($52,667.22) $951,300.72 $898,633.50 Adjustments to reconciling operating income (loss) to net cash provided by (used for) operating activities: Depreciation 204,480.68 204,480.68 Change in assets and liabilities: (Increase)/decrease in accounts receivable - other (170,963.06) (170,963.06) Increase (decrease) in accounts payable (1,082.35) (1,082.35)

32,435.27 32,435.27

Net cash provided by (used for) operating activities ($52,667.22) $983,735.99 $931,068.77

78

FIDUCIARY FUND DETAIL STATEMENTS

Fiduciary Funds are used to account for funds received by the Commission for a specific purpose:

Agency Funds are used to account for assets held by the Commission as an agent for another party:

Payroll Fund: This agency fund is used to account for the payroll transactions of the school Commission.

79

EXHIBIT "H-1"

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONCOMBINING STATEMENT OF FIDUCIARY NET POSITION

TRUST AND AGENCY FUNDSJUNE 30, 2014

PAYROLLAGENCY TOTALS

ASSETS:

Cash and cash equivalents $485,379.77 $485,379.77

Total assets $485,379.77 $485,379.77

LIABILITIES:

Interfunds payable $9,793.63 $9,793.63 Summer payroll 228,741.83 228,741.83 Payroll deductions and withholdings 246,844.31 246,844.31

Total liabilities $485,379.77 $485,379.77

80

EXH

IBIT

"H-4

"

HU

NTE

RD

ON

CO

UN

TY E

DU

CAT

ION

AL S

ERVI

CES

CO

MM

ISSI

ON

PAYR

OLL

AG

ENC

Y FU

ND

SSC

HED

ULE

OF

REC

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S AN

D D

ISBU

RSE

MEN

TSFO

R T

HE

FISC

AL Y

EAR

EN

DED

JU

NE

30, 2

014

BALA

NC

EBA

LAN

CE

JULY

1, 2

013

ADD

ITIO

NS

DED

UC

TIO

NS

JUN

E 30

, 201

4

ASSE

TS:

Cas

h an

d ca

sh e

quiv

alen

ts$1

47,4

91.8

5$1

0,85

4,35

5.61

$10,

516,

467.

69$4

85,3

79.7

7

Tota

l ass

ets

$147

,491

.85

$10,

854,

355.

61$1

0,51

6,46

7.69

$485

,379

.77

LIAB

ILIT

IES:

Pay

roll

dedu

ctio

ns a

nd w

ithho

ldin

gs$1

12,7

62.6

8$3

,981

,587

.08

$3,8

47,5

05.4

5$2

46,8

44.3

1 N

et p

ayro

ll S

umm

er p

ayro

ll23

,885

.56

204,

856.

2722

8,74

1.83

Int

erfu

nds

paya

ble

10,8

43.6

16,

667,

912.

266,

668,

962.

249,

793.

63

Tota

l lia

bilit

ies

$147

,491

.85

$10,

854,

355.

61$1

0,51

6,46

7.69

$485

,379

.77

81

LONG-TERM LIABILITIES SCHEDULES

The long-term liabilities schedules are used to reflect the outstanding principal balances of the long-term liabilities of the Commission. This includes obligations under serial bonds and capital

leases.

82

EXH

IBIT

"I-2

"

HU

NTE

RD

ON

CO

UN

TY E

DU

CA

TIO

NA

L S

ER

VIC

ES

CO

MM

ISS

ION

SC

HE

DU

LE O

F O

BLI

GA

TIO

NS

UN

DE

R C

AP

ITA

L L

EA

SE

SA

S O

F JU

NE

30,

201

4

INTE

RE

ST

AM

OU

NT

AM

OU

NT

DA

TE O

FTE

RM

OF

RA

TE

OU

TSTA

ND

ING

OU

TSTA

ND

ING

SE

RIE

SLE

AS

ELE

AS

EP

RIN

CIP

AL

INTE

RE

ST

PA

YAB

LEJU

NE

30,

201

3D

EC

RE

AS

EJU

NE

30,

201

4

Gro

und

leas

e se

cure

d by

W

est A

mw

ell/T

ewks

bury

Pro

perti

es12

/28/

0611

Yea

rs$4

,660

,000

.00

$1,2

65,7

17.2

03.

250%

$1,9

29,5

02.0

3$4

91,8

55.1

7$1

,437

,646

.86

AM

OU

NT

OF

OR

IGIN

AL

LEA

SE

83

EX

HIB

IT "I

-3"

HU

NTE

RD

ON

CO

UN

TY E

DU

CA

TIO

NA

L S

ER

VIC

ES

CO

MM

ISS

ION

BU

DG

ETA

RY

CO

MP

AR

ISO

N S

CH

ED

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DE

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SE

RV

ICE

FU

ND

FOR

TH

E F

ISC

AL

YE

AR

EN

DE

D J

UN

E 3

0, 2

014

2014

OR

IGIN

AL

BU

DG

ET

FIN

AL

VA

RIA

NC

EB

UD

GE

TTR

AN

SFE

RB

UD

GE

TA

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AL

FIN

AL

TO A

CTU

AL

EX

PE

ND

ITU

RE

S:

R

egul

ar d

ebt s

ervi

ce:

Int

eres

t for

Com

m. A

ppro

ved-

leas

e pu

rch.

$70,

326.

00($

13,5

71.2

5)$5

6,75

4.75

$56,

754.

75

P

rinci

pal -

Com

m. A

ppro

ved-

leas

e pu

rch.

463,

585.

0028

,270

.17

491,

855.

1749

1,85

5.17

Tot

al re

gula

r deb

t ser

vice

-exp

endi

ture

s53

3,91

1.00

14,6

98.9

254

8,60

9.92

548,

609.

92

Exc

ess

(def

icie

ncy)

of r

even

ues

ove

r (un

der)

exp

endi

ture

s(5

33,9

11.0

0)(1

4,69

8.92

)(5

48,6

09.9

2)(5

48,6

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2)

Oth

er fi

nanc

ing

sour

ces:

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nsfe

rs in

/(out

)$5

33,9

11.0

0$1

4,69

8.92

$548

,609

.92

$548

,609

.92

Fund

bal

ance

, Jul

y 1

Fund

bal

ance

, Jun

e 30

84

STATISTICAL SECTION (UNAUDITED)

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONSTATISTICAL SECTION

Contents Page

Financial Trends:

These schedules contain trend information to help the reader understand howthe district's financial performance and well being have changed over time. J-1 to J-5

Revenue Capacity:

These schedules contain information to help the reader assess the district'smost significant local revenue source, the property tax. N/A

Debt Capacity:

These schedules present information to help the reader assess the affordabilityof the district's current levels of outstanding debt and the district's ability to issueadditional debt in the future. N/A

Demographic and Economic Information:

These schedules offer demographic and economic indicators to help the readerunderstand the environment within which the district's financial activities take place. N/A

Operating Information:

These schedules contain service and infrastructure data to help the reader understandhow the information in the district's financial report relates to the services the districtprovides and the activities it performs. J-16 to J-20

Sources

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

EXH

IBIT

"J-1

"

HU

NTE

RD

ON

CO

UN

TY E

DU

CA

TIO

NA

L S

ER

VIC

ES

CO

MM

ISS

ION

NE

T P

OS

ITIO

N B

Y C

OM

PO

NE

NT

UN

AU

DIT

ED

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Gov

ernm

enta

l act

iviti

esN

et in

vest

men

t in

capi

tal a

sset

s$4

,267

,169

.50

$3,9

74,8

33.3

5$3

,604

,519

.75

$3,3

37,6

96.6

9$3

,029

,365

.65

$2,8

39,0

84.7

9$2

,652

,426

.35

$1,7

82,3

31.6

4$7

70,5

91.1

8$2

,731

,086

.23

Res

trict

ed20

3,38

8.45

1,77

4,21

6.09

611,

785.

00U

nres

trict

ed2,

149,

108.

981,

788,

370.

161,

054,

613.

951,

063,

533.

5888

9,19

9.19

370,

871.

321,

434,

529.

131,

046,

672.

6874

4,90

7.10

466,

077.

27To

tal g

over

nmen

tal a

ctiv

ities

net

pos

ition

$6,4

16,2

78.4

8$5

,763

,203

.51

$4,6

59,1

33.7

0$4

,401

,230

.27

$3,9

18,5

64.8

4$3

,209

,956

.11

$4,0

86,9

55.4

8$3

,032

,392

.77

$3,2

89,7

14.3

7$3

,808

,948

.50

Bus

ines

s-ty

pe a

ctiv

ities

Net

inve

stm

ent i

n ca

pita

l ass

ets

$1,3

13,9

26.4

2$8

92,2

61.6

5$1

,117

,617

.82

$1,2

39,6

71.6

9$1

90,9

77.1

1U

nres

trict

ed1,

727,

454.

151,

746,

428.

121,

106,

570.

3229

7,07

4.88

$1,9

29,5

24.0

5$1

,776

,097

.24

$1,1

97,0

28.1

0$6

68,4

71.4

614

3,76

3.32

($11

6,05

6.57

)To

tal b

usin

ess-

type

act

iviti

es n

et p

ositi

on$3

,041

,380

.57

$2,6

38,6

89.7

7$2

,224

,188

.14

$1,5

36,7

46.5

7$1

,929

,524

.05

$1,7

76,0

97.2

4$1

,197

,028

.10

$668

,471

.46

$334

,740

.43

($11

6,05

6.57

)

Dis

trict

-wid

eN

et in

vest

men

t in

capi

tal a

sset

s$5

,581

,095

.92

$4,8

67,0

95.0

0$4

,722

,137

.57

$4,5

77,3

68.3

8$3

,029

,365

.65

$2,8

39,0

84.7

9$2

,652

,426

.35

$1,7

82,3

31.6

4$9

61,5

68.2

9$2

,731

,086

.23

Res

trict

ed20

3,38

8.45

1,77

4,21

6.09

611,

785.

00U

nres

trict

ed3,

876,

563.

133,

534,

798.

282,

161,

184.

271,

360,

608.

462,

818,

723.

242,

146,

968.

562,

631,

557.

231,

715,

144.

1488

8,67

0.42

350,

020.

70To

tal d

istri

ct n

et p

ositi

on$9

,457

,659

.05

$8,4

01,8

93.2

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$5,9

37,9

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4$5

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$4,9

86,0

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$3,7

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.80

$3,6

92,8

91.9

3

Sou

rce:

CA

FR S

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ule

A-1

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EXH

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ON

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CAT

ION

AL S

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CES

CO

MM

ISSI

ON

CH

ANG

ES IN

NET

PO

SITI

ON

UN

AUD

ITED

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

EXPE

NSE

SG

over

nmen

tal a

ctiv

ities

Inst

ruct

ion

Reg

ular

$101

,080

.86

$786

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$835

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Spec

ial e

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tion

$2,3

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2,06

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$3,3

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O

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48,3

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4,75

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Supp

ort s

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Hea

lth s

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248,

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Stud

ent a

nd in

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late

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G

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4,50

0.88

51

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Sc

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inis

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rvic

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8,62

0.25

49

8,83

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52

9,89

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53

1,46

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51

1,95

5.14

59

4,87

2.17

59

4,71

6.86

55

6,84

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50

7,22

5.80

62

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C

entra

l ser

vice

s10

1,05

5.47

13

1,09

6.62

15

5,70

2.16

22

8,73

3.11

18

9,27

8.06

20

3,47

5.42

26

4,03

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16

4,37

7.81

40

9,98

3.22

77

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Ad

min

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info

rmat

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tech

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15,6

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14,7

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63,4

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Pl

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and

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562,

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Food

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Stud

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621,

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709,

604.

69

719,

744.

73

5,67

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9,68

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Inte

rest

on

long

-term

deb

t52

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64,0

82.7

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13

0,84

8.66

15

2,79

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17

3,70

1.70

58

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Una

lloca

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tion

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13

Spec

ial s

choo

ls47

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56,0

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64,3

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Tota

l gov

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xpen

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5,34

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4.48

4,92

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4.43

4,94

4,81

1.41

5,46

0,48

1.22

5,98

1,42

2.37

7,65

2,09

9.37

8,23

0,83

7.06

8,35

2,50

6.85

9,25

3,68

0.91

9,84

5,68

9.24

Busi

ness

-type

act

iviti

es:

Trip

sTr

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orta

tion

7,14

2,78

6.80

8,22

0,13

1.93

9,72

7,18

5.70

10,4

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1

11,1

78,5

16.9

1

11,5

60,6

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2

12,3

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12,6

13,7

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11,5

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Extra

ordi

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ser

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205,

216.

72

2,

618,

587.

65

2,

268,

228.

62

53

8,11

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51

9,94

4.03

34

0,62

4.50

64

0,96

7.12

34

4,36

7.40

46

0,47

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45

4,53

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Ad

ult e

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116,

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162,

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33

Com

pute

r ser

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41

6,73

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54

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56

9,13

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93

2,49

3.93

1,

294,

178.

51

98

5,37

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1,

298,

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31

G

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n ta

lent

s28

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Food

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58,5

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58

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6

10

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11,5

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24,0

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27

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M

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Tota

l bus

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pe a

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11,0

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0

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12

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To

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PRO

GR

AM R

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Gov

ernm

enta

l act

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es:

Cha

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for s

ervi

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$3,0

99,0

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1$3

,231

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.48

$2,6

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$4,1

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$4,5

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Ope

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and

con

tribu

tions

2,25

2,73

5.76

2,09

7,79

0.38

1,92

8,05

7.12

1,95

8,50

5.77

1,85

2,97

8.29

1,95

8,88

2.72

1,94

3,26

8.64

1,76

2,74

6.98

1,69

8,92

2.82

1,43

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Tota

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venu

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2,73

8.64

6,11

8,22

6.09

6,47

8,18

7.76

6,78

1,50

1.36

8,23

0,25

0.37

9,22

1,14

9.89

86

EXH

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CAT

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AL S

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CES

CO

MM

ISSI

ON

CH

ANG

ES IN

NET

PO

SITI

ON

UN

AUD

ITED

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Cha

rges

for s

ervi

ces:

Trip

sTr

ansp

orta

tion

$7,5

94,1

70.4

5$8

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.89

$10,

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0,76

6,34

1.96

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2,56

3,72

0.66

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2,66

6,19

7.04

$12,

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129.

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0,44

7.60

Extra

ordi

nary

ser

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s3,

569,

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00

2,

384,

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62

2,11

1.11

72

1,06

0.94

55

1,97

0.78

79

5,49

4.38

37

2,08

2.15

79

5,12

4.09

52

3,93

0.54

Ad

ult e

duca

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84,3

11.0

4

13

0,74

2.40

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1,62

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C

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39

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23,5

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63,5

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11

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79

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Food

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181,

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0,67

5.63

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15

2,51

4.42

15

7,59

5.69

18

3,66

1.27

14

5,88

5.50

16

7,31

6.87

To

tal b

usin

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type

act

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NET

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5,74

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act

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2,68

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1,

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73

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2,82

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6,83

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$950

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FUN

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UN

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ED

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Gen

eral

fund

Res

erve

d$6

11,7

85.0

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d$2

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Sou

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2011

2010

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2007

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Rev

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sTu

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$3,0

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Func

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94

EXHIBIT "J-20"SHEET #1

HUNTERDON COUNTY EDUCATIONAL SERVICES COMMISSIONINSURANCE SCHEDULE

JUNE 30, 2014UNAUDITED

COVERAGE

Article I - PropertyBlanket Real and Personal Property $350,000,000 per occurrenceBlanket Extra Expense $50,000,000Blanket Valuable Papers and Records $10,000,000Demolition and Increased Cost of Construction $10,000,000 per occurrenceLoss of Rents Not CoveredLoss of Business Income/Tuition $3,500,000Builders' Risk Not CoveredFire Department Service Charge $10,000Arson Reward $10,000Pollutant Cleanup and Removal $250,000Fine Arts Not CoveredSublimits: Special Flood Hazard Area Flood Zones $10,000,000

Accounts Receivable $250,000 per occurrenceAll Other Flood Zones $50,000,000

Earthquake $50,000,000

Terrorism $1,000,000

Deductibles: Real & Personal $5,000 per occurrenceExtra Expense $5,000 per occurrenceValuable Papers $5,000 per occurrenceZones Prefix A & V $500,000 per building

Flood Deductions: $500,000 per building contentsAll Other Flood Zones $10,000 per member/per occurrence

Article II - Electronic Data Processing

Blanket Hardware/Software $400,000 per occurrenceBlanket Extra Expense IncludedCoverage Extensions Transit $25,000

Loss of Income $10,000Terrorism Included in Property

Deductibles $1,000 per occurrenceSpecial Flood Hazard Area Flood Deductible $500,000 per occurrenceAll Other Flood Zones Flood Deductible $10,000 per building contents

per occurrence/NJSBAIG annual aggregate




95




` COVERAGE

Article III - Boiler & Machinery

Combined Single Limit per Accident for Property Damage and Business In $100,000,000

Sublimits: Property Damage IncludedOff Premises Property Damage $100,000Business Income IncludedExtra Expense $10,000,000Service Interruption $10,000,000Perishable Goods $500,000Data Restoration $100,000Contingent Business Income $100,000Demolition $1,000,000Ordinance or Law $1,000,000Expediting Expenses $500,000Hazardous Substances $500,000Newly Acquired Locations (60 days notice) $250,000Terrorism Included

Deductibles: $5,000 per Accident for Property Damage12 Hours per Accident for Business Interruption/Extra ExpenseService Interruption Waiting Period 24 hoursNewly Acquired Locations Waiting Period 60 Days

Article IV - Crime

Limits Deductibles per OccurrenceInsuring Agreement 1 - Public Employee Dishonesty $1,000,000 $1,000

with Faithful PerformanceInsuring Agreement 2 - Theft, Disappearance and $50,000 $500

Destruction - Loss of Money & Securities On or Off PremisesInsuring Agreement 3 - Theft, Disappearance and $50,000 $500

Destruction - Money Orders & Counterfeit Paper CurrencyInsuring Agreement 4 - Forgery or Alteration $1,000,000 $1,000Insuring Agreement 5 - Computer Fraud $1,000,000 $1,000Public Officials Bond: Board Secretary/Business Administrator $200,000 $1,000

Article V - Comprehensive General Liability

Bodily Injury and Property Damage $16,000,000 Combined Single Limit forBodily Injury & Property Damage

Bodily Injury from Products and Completed Operations $16,000,000 annual aggregateSexual Abuse $16,000,000 per occurrence

$17,000,000 annual NJSBAIG aggregate

Personal Injury and Advertising Injury $16,000,000 per occurrence/ annual aggregate

Employee Benefits Liability $16,000,000 per occurrence/ annual aggregateEmployee Benefits Liability Deductible $1,000 each claimPremises Medical Payments $10,000 each accident

$5,000 limit per person

Terrorism $1,000,000 per occurrence/ annualNJSBAIG aggregate

96




COVERAGE

Article VI - AutomobileLiabilitySymbol 1 Any AutoCombined Single Limit for Bodily Injury and Property Damage $16,000,000 per accidentSymbol 6 Uninsured/Underinsured Motorists - Private Passenger Auto $1,000,000 per accidentSymbol 6 Uninsured/Underinsured Motorists - All Other Vehicles $15,000 Bodily Injury Per Person

$30,000 Bodily Injury Per Accident$5,000 Property Damage Per Accident

Symbol 5 Personal Injury Protection (including pedestrians) $250,000Medical Payments $10,000 Private passenger vehicles

$5,000 all other vehiclesTerrorism $1,000,000 per occurrence/

NJSBAIG annual aggregate

Physical Damage (Scheduled vehicles only)Symbol 7 Comprehensive $1,000 deductible

Collision $1,000 deductibleHired Car Physical Da$75,000 Limit $1,000 deductibleReplacement Cost Not covered

Garage Keepers Included

97

SINGLE AUDIT SECTION

EXHIBIT “K-1"

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF BASIC FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Honorable President and Members of the Board of Directors

Hunterdon County Educational Services Commission County of Hunterdon Lebanon, New Jersey 08833

We have audited, in accordance with the auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Hunterdon County Educational Services Commission (the "District") as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the District’s financial statements, and have issued our report thereon dated December 24, 2014. Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District’s control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Hunterdon Hills’s School District’s internal control.

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

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.


98

EXHIBIT “K-2"

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL

FINANCIAL ASSISTANCE PROGRAMS AND ON INTER0NAL CONTROL OVER COMPLIANCE IN

ACCORDANCE WITH U.S. OMB CIRCULAR A-133

Honorable President and Members of the Board of Directors

Hunterdon County Educational Services Commission County of Hunterdon Lebanon, New Jersey 08833 Report on Compliance for Each Major Federal Program

We have audited the Hunterdon County Educational Services Commission compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Hunterdon County Educational Services Commission major federal programs for the year ended June 30, 2014. The District’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of the Hunterdon County Educational Services Commission major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards, OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Hunterdon County Educational Services Commission compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for

each major federal. However, our audit does not provide a legal determination of the Hunterdon County Educational Services Commission compliance.


100

EXH

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103

EXHIBIT “K-5” Hunterdon County Educational Services Commission

Notes to the Schedules of Expenditures of Federal Awards and State Financial Assistance

Year Ended June 30, 2014

NOTE 1: GENERAL

The accompanying schedules of expenditures of federal awards and state financial assistance include federal and state activity of the Hunterdon County Educational Services Commission. The Commission is defined in Note 1 to the Commission’s basic financial statements. All federal and state awards received directly from the federal and state agencies, as well as federal awards and state financial assistance passed through other government agencies is included on the schedule of expenditures of federal awards and state financials assistance.

NOTE 2: BASIS OF ACCOUNTING

The accompanying schedules of expenditures of awards and federal awards and state financial assistance are presented on the budgetary basis of accounting with the exceptions of programs recorded in the food service fund, which are presented using the accrual basis of accounting. These bases of accounting are described in Note 1 of the Commission’s basic financial statements. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.

NOTE 3: RELATIONSHIP TO BASIC FINANCIAL STATEMENTS

The basic financial statements present the general fund and special revenue fund on a GAAP basis. Budgetary comparison statements or schedule (RSI) are presented for the general fund and special revenue fund to demonstrate finance-regulated 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. The General fund is presented in the accompanying schedules on the modified accrual basis. 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 revenue, whereas GAAP basis does not.

104

Hunterdon County Educational Services Commission Notes to the Schedules of Expenditures of Federal Awards

and State Financial Assistance Year Ended June 30, 2014

NOTE 3: RELATIONSHIP TO BASIC FINANCIAL STATEMENTS (CONTINUED)

The net adjustment to reconcile from the budgetary basis to the GAAP basis is -$-0- for the general fund and $-0- for the special revenue fund. See the notes to the required supplementary information for a reconciliation of the budgetary basis to the modified accrual basis of accounting for the general and special revenue funds. Federal awards and state financial assistance revenues are reported in the Commission’s basic financial statements on a GAAP basis as follows:

Federal State Total

General Fund $175,237.15 $175,237.15Special Revenue Fund $530,779.78 120,175.87 650,955.65Food Service Fund 45,953.59 600.79 46,554.38

Total Awards and Financial Assistance $576,733.37 $296,013.81 $872,747.18

NOTE 4: RELATIONSHIP TO FEDERAL AND STATE FINANCIAL REPORTS

Amounts reported in the accompanying schedules agree with the amounts reported in the related federal and state financial reports.

NOTE 5: OTHER

The amount reported as TPAF pension contributions represents the amount paid by the state on behalf of the commission for the year ended June 30, 2014. TPAF Social Security contributions represent the amount reimbursed by the state for the employer’s share of Social Security contributions for TPAF members for the year ended June 30, 2014.

NOTE 6: ON-BEHALF PROGRAMS NOT SUBJECT TO STATE SINGLE AUDIT

On-behalf State Programs for TPAF Pension and Post-Retirement Medical Benefits Contributions are not subject to a state single audit, and therefore, are excluded from major program determination. The Schedule of State Financial Assistance provides a reconciliation of state financial assistance reported in the Commission’s basic financial statements and the amounts subject to state single audit and major program determination.

105


Schedule of Findings and Questioned Costs For the Fiscal Year Ended June 30, 2014

Section I – Summary of Auditor’s Results Financial Statements (1) Type of Auditor’s Report Issued: Unmodified (2) Internal Control Over Financial Reporting:

(a) Material weakness identified? No

(b) Significant deficiencies identified that are not considered to be material weaknesses? No

(3) Noncompliance material to basic financial statements noted? No Federal Program(s) (1) Internal Control Over Major Federal Programs:

(a) Material weakness(es) identified? No

(b) Significant deficiencies identified that are not considered to be material weaknesses? No (2) Type of Auditor’s Report issued on compliance for major federal program(s)? Unmodified (3) Any audit findings disclosed that are required to be reported in accordance with Circular OMB A-133 and listed in Section III of this schedule? No (4) Identification of Major Federal Program(s): Program C.F.D.A. # Adult Basic Education 84.002

(5) Program Threshold Determination: Type A Federal Program Threshold > $300,000.00 Type B Federal Program Threshold <= $300,000.00 (6) Auditee qualified as a low-risk auditee under OMB Circular A-133? No

State Program(s) – Not Applicable

106

Hunterdon County Educational Services Commission Schedule of Findings and Questioned Costs

For the Fiscal Year Ended June 30, 2014 Section II – Financial Statement Audit – Reported Findings Under Government Auditing Standards Internal Control Findings None Reported Compliance Findings None Reported Section III – Findings and Questioned Costs Relative to Major Federal and State Programs Federal Programs – None Reported State Programs – None Reported

107


Schedule of Prior Year Audit Findings

Not Applicable

108

comprehensive annual financial report - state

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