You are a CPA in charge of auditing a midsize school district. You recognize that the risk of financial failure is dependent as much on factors not reported in the basic financial statements as on factors that are reported. Accordingly, you conduct a comprehensive analysis of the district.
Some of your findings are summarized below. For each, indicate how it might affect the ability of the district to service its outstanding debt and provide the services that its constituents expect.
1. Owing to an influx of new high-tech firms into a nearby community (which is not within the jurisdiction of the school district), the population within the district is increasing by approximately 8 percent per year. Most of the new arrivals are young engineers and other professionals.
2. A developer is constructing a senior citizens' retirement village within the jurisdiction of the school district. The village is expected to increase both the district's population and its land value by approximately 4 percent.
3. During the year the district changed the pay date of its employees. Previously employees were paid on the last day of the month; now they will be paid on the first day of the following month.
4. The district's largest taxpayer, representing 10 percent of its property tax revenues, manufactures blue jeans and other clothing made of denim.
5. The district's superintendent recently resigned in the wake of charges that he falsified student scores on statewide achievement tests.
6. School district elections are hotly contested. The present school board is composed of three members who are committed to ''traditional'' educational methods and four who are considered ''progressives.'' Board meetings are almost always contentious.
7. Voters of the county in which the school district is located recently approved the largest general obligation bond issue in the county's history.
8. One of two candidates for governor of the state in which the school district is located is a strong advocate of a school voucher plan. The plan would provide financial assistance to students who elect to at tend private schools.