PRELIMINARY OFFICIAL STATEMENT DATED APRIL 14, 2014 $66,500,000 (1) Wenatchee School District No Chelan County, Washington

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1 PRELIMINARY OFFICIAL STATEMENT DATED APRIL 14, 2014 This is a Preliminary Official Statement, subject to correction and change. The District has authorized the distribution of the Preliminary Official Statement to prospective purchasers and others. Upon the sale of the Bonds, the District will complete and deliver an Official Statement substantially in this form. $66,500,000 (1) Wenatchee School District No. 246 Chelan County, Washington Unlimited Tax General Obligation Bonds, 2014 DATED: Date of Delivery (estimated to be May 20, 2014) DUE: December 1, as shown on the inside cover MOODY S RATINGS Underlying, Aa3; Washington State School District Credit Enhancement Program, Aa1 (see Ratings and Appendix D Washington State School District Credit Enhancement Program herein). NOT BANK QUALIFIED BOOK-ENTRY ONLY Wenatchee School District No. 246, Chelan County, Washington (the District ) will issue its Unlimited Tax General Obligation Bonds, 2014 (the Bonds ) in fully registered form under a book-entry only system in denominations of $5,000, or integral multiples thereof within a maturity ( Authorized Denominations ) and will be initially registered in the name of Cede & Co., as the nominee of The Depository Trust Company ( DTC ). DTC will act as initial securities depository for the Bonds. The owners of any beneficial interest in the Bonds (the Beneficial Owners ) will not receive certificates representing their interest in the Bonds purchased. See Description of the Bonds Bond Registrar and Registration Features and Appendix B Book-Entry Transfer System herein. PRINCIPAL AND INTEREST PAYMENTS Interest on the Bonds will be payable semiannually on June 1 and December 1 of each year, beginning on December 1, 2014, to their stated dates of maturity or earlier redemption. Principal of the Bonds is payable upon the stated maturity dates as set forth in the maturity schedule as shown on the inside cover. The Chelan County Treasurer, as ex officio treasurer of the District (the Treasurer ), has appointed the fiscal agent of the State of Washington (the State ), currently The Bank of New York Mellon, as the initial authenticating agent, paying agent and registrar for the Bonds (the Bond Registrar ). Principal of and interest on the Bonds will be payable by the Bond Registrar. For so long as the Bonds remain in a book-entry only transfer system, the Bond Registrar will remit such payments only to DTC, which in turn is obligated to remit such principal and interest to its participants for subsequent disbursement the Beneficial Owners of the Bonds. Principal of and interest on the Bonds will be payable to the persons in whose names such Bonds are registered, at the address appearing upon the registration books on the 15 th day of the month preceding an interest payment date. See Description of Bonds Principal Amount, Date, Interest Rates and Maturities and Bond Registrar and Registration Features and Appendix B Book-Entry Transfer System herein. PURPOSE The Bonds are being issued to finance the costs of capital improvements to the District s educational facilities. See Purpose and Use of Proceeds - Purpose herein. MATURITY SCHEDULE LOCATED ON INSIDE COVER REDEMPTION The Bonds are subject to redemption prior to their stated maturity dates. See Description of the Bonds Redemption Provisions. SECURITY The Bonds constitute valid and legally binding general obligations of the District. The District has irrevocably pledged that, for as long as any of the Bonds are outstanding, the District will levy taxes annually without limitation as to rate or amount on all taxable property within the District in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds. The full faith, credit and resources of the District are irrevocably pledged for the annual levy and collection of such taxes and for the prompt payment of such principal and interest. The Bonds do not constitute a debt or indebtedness of Chelan County (the County ), the State, or any political subdivision thereof other than the District. See Security for the Bonds herein. Payment of principal of and interest on the Bonds when due is guaranteed by the full faith, credit, and taxing power of the STATE OF WASHINGTON under the provisions of the Washington State School District Credit Enhancement Program. See Appendix D attached hereto and titled WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM. TAX EXEMPTION In the opinion of Foster Pepper PLLC, Spokane, Washington ( Bond Counsel ), under existing federal law and assuming compliance by the District with applicable requirements of the Internal Revenue Code of 1986, as amended (the Code ), that must be satisfied subsequent to the issue date of the Bonds, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. However, while interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by certain S corporations may be subject to tax, and interest on the Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. Receipt of interest on the Bonds may have other federal tax consequences for certain taxpayers. See the captions Tax Exemption and Certain Other Federal Tax Consequences herein. DELIVERY The Bonds are offered for sale to Piper Jaffray & Co. (the Underwriter ) subject to the final approving legal opinion of Bond Counsel. The form of Bond Counsel s opinion is attached hereto as Appendix A. It is expected that the Bonds will be available for delivery to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about May 20, 2014 (the Date of Delivery ). (1) Preliminary, subject to change. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

2 PRELIMINARY OFFICIAL STATEMENT DATED APRIL 14, 2014 $66,500,000 (1) Wenatchee School District No. 246 Chelan County, Washington Unlimited Tax General Obligation Bonds, 2014 DATED: Date of Delivery (estimated to be May 20, 2014) DUE: December 1, as shown below MATURITY SCHEDULE Due December 1 Amounts (1) Rates Yields Prices 2016 $ 325, , , , , , ,645, ,890, ,150, ,425, ,720, ,035, ,370, ,725, ,100, ,505, ,930, ,385,000 Interest CUSIP (1) Preliminary, subject to change.

3 Wenatchee School District No Sunset Avenue Wenatchee, Washington (509) (1) Laura Jaecks Dr. Walter S. Newman Jesus Hernandez Robert Sealby Jennifer Talbot Board of Directors President Vice President Member Member Member Brian L. Flones Jon DeJong Les Vandervort Chet Harum Jodi Smith Payne Lisa Turner School Administrative Staff Superintendent Assistant Superintendent, Organizational Development Chief Financial Officer Executive Director, Student/Support Services Assistant Superintendent, Learning & Teaching Director of Human Resources Deanna Walter David Griffiths, C.P.A. Chelan County Officials Assessor Treasurer and ex officio Treasurer of the District Bond Counsel Foster Pepper PLLC Spokane, Washington Financial Advisor D.A. Davidson & Co. Seattle, Washington Bond Registrar The Bank of New York Mellon Dallas, Texas (current fiscal agent of the State) (1) This inactive textual reference to the District s website is contact information provided only for convenience. The reference is not a hyperlink and, by this reference, the District s website is not incorporated into this Official Statement. i

4 This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is unlawful to make such an offer. No dealer, salesperson or other person has been authorized by the District, the Financial Advisor or Underwriter to give any information or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon. The District makes no representation regarding the accuracy or completeness of the information provided in Appendix B Book Entry Transfer System, which has been provided by DTC, or in Appendix D Washington State School District Credit Enhancement Program, which has been provided by the State. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of the provisions. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the District since the date hereof. The CUSIP numbers herein are provided by CUSIP Global Services (CGS), which is managed on behalf of the American Bankers Association by Standard and Poor s, a division of The McGraw-Hill Companies, Inc. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers are provided for convenience of reference only. CUSIP numbers are subject to change. Neither the District nor the Underwriter take any responsibility for the accuracy of such CUSIP numbers. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Preliminary Official Statement has been deemed final by the District, pursuant to Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, except for information which is permitted to be excluded from this Preliminary Official Statement under said Rule 15c2-12. The Bonds have not been registered under the Securities Act of 1933, as amended, and the Bond Resolution has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualification of the Bonds in accordance with applicable provisions of securities laws of the States in which the Bonds have been registered or qualified and the exemption from the registration or qualification in other states cannot be regarded as a recommendation thereof. Neither these states nor any of their agencies have passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time without prior notice to any person. ii

5 Table of Contents Page Description of the Bonds... 1 Principal Amount, Date, Interest Rates and Maturities... 1 Redemption Provisions... 1 Purchase... 2 Effect of Redemption... 2 Failure to Pay Bonds... 2 Refunding or Defeasance... 2 Bond Registrar and Registration Features... 3 Authorization for Issuance... 3 Purpose and Use of Proceeds... 4 Purpose... 4 Sources and Uses of s... 4 Security for the Bonds... 4 General... 4 Washington State School District Credit Enhancement Program... 4 Bonded Indebtedness... 5 General Obligation Debt Limitation... 5 General Obligation Debt Capacity... 6 Outstanding Long-Term Debt... 6 Short Term Borrowing... 6 Projected Unlimited Tax General Obligation Debt Service Requirements... 7 Net Direct and Overlapping Debt Summary... 8 Overlapping Debt Calculation... 8 Debt Payment Record... 8 Future Financings... 9 District ing Sources... 9 General... 9 Federal ing... 9 State ing... 9 Local ing Assessed Value Tax Collection Procedure Tax Liens and Foreclosure Tax Collection Record Overlapping Taxing Districts Major Taxpayers The District Description The Board of Directors Staff and Labor Relations Enrollment Financial Factors Accounting Policies Financial Reporting Auditing Statement of Revenues, Expenditures and Changes in General Balance Statement of Revenues, Expenditures and Changes in Debt Service Balance Budgetary Process Investment Policy Pension System Contribution Rates (in percentage) ed Status on an Actuarial Value Basis Other Post-Employment Benefits Membership in PEBB Plan (As of June 30, 2013) Initiatives and Referenda Tax Exemption Certain Other Federal Tax Consequences Continuing Disclosure Ratings Legal and Underwriting Approval of Counsel Litigation Conflicts of Interest Official Statement Financial Advisor Underwriting Concluding Statement Form of Bond Counsel Opinion... Appendix A Book-Entry Transfer System... Appendix B Financial Statements... Appendix C Washington State School District Credit Enhancement Program... Appendix D iii

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7 OFFICIAL STATEMENT Wenatchee School District No. 246 Chelan County, Washington $66,500,000 (1) Unlimited Tax General Obligation Bonds, 2014 The District, a municipal corporation duly organized and existing under and by virtue of the laws of the State, furnishes this Official Statement in connection with the offering of the Bonds, dated the Date of Delivery. This Official Statement, which includes the cover page, the inside cover page and appendices, provides information concerning the District and the Bonds. Certain statements contained in this Official Statement do not reflect historical facts, but are forecasts and forward-looking statements. No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, words such as estimated, projected, anticipate, expect, intend, plan, believe and similar expressions are intended to identify forward-looking statements. All projections, assumptions and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. Description of the Bonds Principal Amount, Date, Interest Rates and Maturities The Bonds will be issued in the aggregate principal amount of $66,500,000 (1) and will be dated and bear interest from the Date of Delivery. The Bonds will mature on the dates and in the principal amounts and will bear interest, payable semiannually, until the maturity or earlier redemption of the Bonds at the rates set forth on the inside cover page of this Official Statement. Interest on the Bonds will be computed on the basis of a 360- day year consisting of twelve 30-day months. Redemption Provisions Optional Redemption. The Bonds maturing on or before December 1, 2023 (1), are not subject to optional redemption prior to maturity. The Bonds maturing on or after December 1, 2024 (1) are subject to redemption at the option of the District, in whole or in part on any date on or after June 1, 2024 (1), at a price equal to the stated principal amount to be redeemed plus accrued interest, if any, to the date of redemption. Selection of Bonds for Redemption. If fewer than all of the outstanding Bonds are to be redeemed at the option of the District, the District will select the maturities to be redeemed. For as long as the Bonds are in book-entry only form, if fewer than all of the Bonds of a maturity are called for redemption, the selection of Bonds within a maturity to be redeemed will be made by DTC in accordance with its operational procedures then in effect. See Appendix B attached hereto. If the Bonds are no longer held in book-entry only form, then the Bond Registrar would select Bonds for redemption randomly within a maturity in such manner as the Bond Registrar determines. Partial Redemption. All or a portion of the principal amount of any Bond that is to be redeemed may be redeemed in any Authorized Denomination. If less than all of the outstanding principal amount of any Bond is redeemed, upon surrender of that Bond to the Bond Registrar, there will be issued to the person in whose name a Bond is registered (the Registered Owner ), without charge a new Bond (or Bonds, at the option of the Registered Owner) of the same maturity and interest rate in any Authorized Denomination in the aggregate principal amount remaining unredeemed. (1) Preliminary, subject to change

8 Notice of Redemption (Book-Entry). So long as the Bonds are in book-entry only form, notice of any redemption of Bonds will be given as required by the operational arrangements of DTC referenced in the Blanket Issuer Letter of Representations, dated February 1, 1998 (the Letter of Representations ), between the District and DTC. The District reserves the right to provide conditional notice and to rescind any optional redemption notice as provided in the Bond Resolution (defined herein). Notice of Redemption (No Book-Entry). During any period in which the Bonds are not in book-entry only form, unless waived by any Registered Owner of the Bonds to be redeemed, official notice of any redemption of Bonds will be given by the Bond Registrar on behalf of the District by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 20 days and not more than 60 days prior to the date fixed for redemption, to the Registered Owners of the Bonds to be redeemed at the address shown on the books or records maintained by the Bond Registrar for the purpose of identifying ownership of the Bonds (the Bond Register ) on the date the Bond Registrar sends the notice, and such requirement will be satisfied when notice has been mailed as so provided, whether or not it is actually received by the Registered Owner or Beneficial Owner. The District reserves the right to provide conditional notice and to rescind any optional redemption notice as provided in the Bond Resolution. Purchase The District reserves the right to purchase any or all of the Bonds offered to the District at any time at any price acceptable to the District plus accrued interest to the date of purchase. Effect of Redemption Interest on each Bond called for redemption will cease to accrue on the date fixed for redemption, unless either the notice of optional redemption is rescinded, or money sufficient to effect such redemption is not on deposit in the District s Debt Service or in a trust account established to refund or defease the Bond. Failure to Pay Bonds If the principal of any Bond is not paid when the Bond is properly presented at its maturity or date fixed for redemption, as applicable, the District will be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or date fixed for redemption until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the District s Debt Service, or in a trust account established to refund or defease the Bond, and the Bond has been called for payment by giving notice of that call to the Registered Owner. Refunding or Defeasance The District may issue refunding bonds pursuant to State law or use money available from any other lawful source to carry out a refunding or defeasance plan, which may include (a) paying when due the principal of and interest on any or all of the Bonds (the defeased Bonds ); (b) redeeming the defeased Bonds prior to their maturity; and (c) paying the costs of the refunding or defeasance. If the District sets aside in a special trust fund or escrow account irrevocably pledged to that redemption or defeasance (the trust account ) money and/or government obligations (as defined by chapter RCW, as now in effect or hereafter amended) maturing at a time or times and bearing interest in amounts sufficient to redeem, refund or defease the defeased Bonds in accordance with their terms, then all right and interest of the owners of the defeased Bonds in the covenants of the Bond Resolution and in the funds and accounts obligated to the payment of the defeased Bonds will cease and become void. Thereafter, the owners of defeased Bonds will have the right to receive payment of the principal of and interest on the defeased Bonds solely from the trust account and the defeased Bonds will be deemed no longer outstanding. In that event, the District may apply money remaining in any fund or account (other than the trust account) established for the payment or redemption of the defeased Bonds to any lawful purpose. Unless otherwise specified by the District in a refunding or defeasance plan, notice of refunding or defeasance will be given, and selection of Bonds for any partial refunding or defeasance will be conducted, in the manner prescribed in the Bond Resolution for the redemption of Bonds. As currently defined in RCW (4), government obligations means (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America and bank certificates of deposit secured by such obligations; (b) bonds, debentures, notes, 2

9 participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-Import Bank of the United States, federal land banks or the Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, to the extent insured or guaranteed as permitted under any other provision of State law. Bond Registrar and Registration Features Book-Entry System. The Bonds will be issued as fully registered bonds and, when issued, will be initially registered in the name of Cede & Co., as the nominee of DTC. DTC will act as initial securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in Authorized Denominations. So long as the Bonds are in book-entry only form, principal of and interest on the Bonds will be payable as required by the operational arrangements of DTC referenced in the Letter of Representations. The Beneficial Owners will not receive certificates representing their interest in the Bonds (see Appendix B attached hereto). No Book-Entry System. During any period in which the Bonds are not in book-entry only form, principal of and interest on the Bonds will be payable by the Bond Registrar (or such other fiscal agency or agencies as the Treasurer may from time to time designate). Interest on the Bonds will be payable check mailed to the Registered Owners, at the addresses appearing on the Bond Register on the 15 th day of the month preceding an interest payment date or by electronic transfer on the interest payment date. The District is not required to make electronic transfers except to a Registered Owner of the Bonds pursuant to a request in writing (and at the sole expense of that Registered Owner) received at least 15 days before an interest payment date. Principal of the Bonds will be payable upon presentation and surrender of the Bond by the Registered Owner to the Bond Registrar. Procedure in the Event of Revisions of Book-Entry System. If (i) DTC resigns as the securities depository and the District does not appoint a substitute securities depository, or (ii) the District terminates the services of DTC, the District will execute, authenticate and deliver at no cost to the Beneficial Owners of the Bonds or their nominees, Bonds in fully registered form, in Authorized Denominations. Transfer and Exchange of Bonds. The Bonds will be subject to transfer and exchange as provided in the Bond Resolution. Authorization for Issuance The Bonds are issued pursuant to Resolution No (the Bond Resolution ), to be adopted by the District s Board of Directors (the Board ) on April 22, 2014, and the authority of the Washington Constitution and chapters 28A.530, and of the Revised Code of Washington ( RCW ). A ballot measure was approved by a favorable vote at an election held in the District on February 11, 2014, which authorized the District to issue $66,500,000 of unlimited tax general obligation bonds (the Bond Authorization ). The Bonds represent the first and only series of bonds to be issued under the Bond Authorization. Final election results were as follows: Number of Votes Percentage Yes 6, % No 2, % Authorization of any general obligation bond issue requires that 40 percent of the number of those voting in the last general election must cast a ballot, and 60 percent of those voting must approve the issue. Passage of the Bond Authorization has been certified by the Chelan County Auditor. The ballot measure for the Bonds states that the Bonds will mature within 20 years. 3

10 Purpose Purpose and Use of Proceeds The proceeds from the sale of the Bonds will be used to (i) remodel and expand Lincoln Elementary School; (ii) construct and equip a new Washington Elementary School; (iii) remodel the Special Education/Early Childhood Learning Center adjacent to Washington Elementary School; (iv) make safety improvements and remodel the gymnasium at Pioneer Middle School; (v) make safety improvements at Mission View Elementary School; and (vi) pay costs of issuing, selling and delivering the Bonds. Sources and Uses of s The proceeds of the Bonds are estimated to be applied as follows: Estimated Sources and Uses of s Sources of s (1) Par Amount of Bonds $ 66,500,000 (2) Original Issue Discount Original Issue Premium Total Sources of s $ Uses of s (1) Project Requirements $ s Available for Debt Service Underwriting and Costs of Issuance Total Uses of s $ (1) Amounts will be provided in the final Official Statement. (2) Preliminary, subject to change. Security for the Bonds General The Bonds are general obligations of the District. For so long as the Bonds are outstanding, the District has irrevocably pledged to levy taxes annually without limitation as to rate or amount on all of the taxable property within the District in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds, and the full faith, credit and resources of the District are pledged irrevocably for the annual levy and collection of those taxes and the prompt payment of that principal and interest (see District ing Sources herein). The taxes, when collected, are required to be applied solely for the purpose of payment of principal of and interest on the Bonds and for no other purpose until the Bonds have been fully paid, satisfied and discharged. The District may, subject to applicable laws, apply other money legally available to make payments with respect to the Bonds and thereby reduce the amount of future tax levies for such purpose. The Bonds do not constitute a debt or indebtedness of the County, the State, or any political subdivision thereof, other than the District. Washington State School District Credit Enhancement Program Payment of principal of and interest on the Bonds when due is guaranteed by the full faith, credit, and taxing power of the STATE OF WASHINGTON under the provisions of the Washington State School District Credit Enhancement Program, as described in Appendix D attached hereto. 4

11 General Obligation Debt Limitation Bonded Indebtedness The power of the District to contract debt of any kind is controlled and limited by State law. All debt must be set forth in accordance with detailed budget procedures and paid for out of identifiable receipts and revenues. The budget must be balanced for each fiscal year. It is unlawful for an officer or employee of the District to incur liabilities in excess of budgetary appropriations. Authorization of Total Debt. A school district may incur a total indebtedness, including voter-approved debt, not to exceed five percent of the assessed value of taxable property (the Bond Assessed Value ), which includes all real and personal property (as described within District ing Sources Assessed Value herein), within the school district. Following issuance of the Bonds, the District will have $84,330,000 (preliminary, subject to change) of voter approved debt outstanding which represents 2.49 percent of the District s 2014 collection year Bond Assessed Value of $3,392,391,792. Authorization of Voted Debt. Any election to authorize such debt must have a voter turnout of at least 40 percent of those who voted in the last State general election and, of those voting, 60 percent must vote in the affirmative. The Bonds met all voter approval criteria (see Description of the Bonds - Authorization for Issuance herein). Authorization of Non-voted Debt. Washington municipal corporations, including the District, are authorized under State law to borrow money and issue short-term obligations, the proceeds of which may be used for any lawful purpose. Short-term obligations may be issued in anticipation of the receipt of revenues, taxes, or grants or the sale of bonds. These short-term obligations will be repaid out of money derived from the source or sources in anticipation of which they were issued or from any money legally available for this purpose. RCW 28A authorizes school districts, including the District, to incur long-term indebtedness without a vote of the people through the issuance of bonds payable out of the District s ordinary revenues. Such bonds may be issued to acquire real or personal property or make structural changes and additions to school facilities, including energy conservation improvements. School districts also are authorized to incur debt by purchasing real or personal property pursuant to conditional sales (installment purchase) contracts and financing leases. In an emergency, school districts may authorize indebtedness outside the current budget. All expenditures for emergency purposes will be paid by warrants from any available money in the fund properly chargeable with such expenditures. If there is insufficient money on hand in the fund, the warrants become registered interestbearing warrants. In adopting the budget for any fiscal year, the school district s board of directors will appropriate funds to retire any outstanding registered warrants issued since the adoption of the last preceding budget. The amount of all non-voted debt (including short-term obligations, conditional sales contracts, warrants and bonds) may not exceed 3/8 of one percent of the Bond Assessed Value. The District currently does not have any non-voted debt outstanding. 5

12 General Obligation Debt Capacity Bond Assessed Value (2014 Collection Year) $ 3,392,391,792 Total Debt: General Obligation Debt Capacity (5% of Bond Assessed Value) $ 169,619,589 Less: Outstanding Voter Approved Debt (includes this issue) (1) (84,330,000) Less: Outstanding Non-Voter Approved Debt 0 Cash and Investments in Debt Service (2) 1,592,048 Remaining Debt Capacity $ 86,881,637 Non-Voter Approved Debt: Debt Capacity (3/8 of 1% of Bond Assessed Value) $ 12,721,469 Less: Outstanding Non-Voter Approved Debt 0 Remaining Debt Capacity $ 12,721,469 (1) Includes the Bonds and the outstanding unlimited tax general obligation bonds as of the Date of Delivery. Preliminary, subject to change. (2) Debt Service balance is as of February 28, Outstanding Long-Term Debt Dated Date of Amount Amount Unlimited Tax General Obligation Bonds Date Maturity Issued Outstanding (1) UTGO Ref., /16/10 12/01/21 $ 21,650,000 $ 17,830,000 UTGO, 2014 (the Bonds) (2) 05/20/14 12/01/33 66,500,000 66,500,000 Total Long-term debt outstanding: $ 84,330,000 (1) As of the Date of Delivery. (2) Preliminary, subject to change. Source: Wenatchee School District No Short Term Borrowing The District does not currently have any outstanding short term borrowing commitments. 6

13 Projected Unlimited Tax General Obligation Debt Service Requirements Cal. Outstanding Debt (1) The Bonds (2) Total Debt Year Principal Interest Principal Interest Service 2014 $ 1,765,000 $ 745,700 $ 0 $ 1,696,000 $ 4,206, ,880, , ,196,650 5,767, ,000, , ,000 3,196,650 6,139, ,135, , ,000 3,190,150 6,196, ,275, , ,000 3,183,550 6,304, ,425, , ,000 3,171,850 6,416, ,580, , ,000 3,158,200 6,530, ,770, , ,000 3,142,450 6,645, ,645,000 3,118,650 6,763, ,890,000 2,972,850 6,862, ,150,000 2,817,250 6,967, ,425,000 2,609,750 7,034, ,720,000 2,388,500 7,108, ,035,000 2,152,500 7,187, ,370,000 1,900,750 7,270, ,725,000 1,632,250 7,357, ,100,000 1,346,000 7,446, ,505,000 1,041,000 7,546, ,930, ,750 7,645, ,385, ,250 7,754,250 $ 17,830,000 $ 3,821,650 $ 66,500,000 $ 47,000,000 $ 135,151,650 (1) Outstanding unlimited tax general obligation Bonds. Information excludes principal and interest payments made through the Date of Delivery. (2) Principal and interest is provided for illustrative purposes only. The amounts and structure are preliminary, subject to change. Note: The numbers may not add due to rounding. 7

14 Net Direct and Overlapping Debt Summary Overlapping taxing districts are those local governments whose boundaries overlap all or a portion of the District s boundaries. See District ing Sources - Overlapping Taxing Districts herein. Overlapping Debt Calculation (As of February 28, 2014) 2014 Outstanding Estimated Assessed Percent General Obligation Overlapping Value Overlapping Debt Debt City of Wenatchee $ 2,142,462, % $ 9,837,677 $ 9,837,677 Fire District No. 1 1,426,000, % 325, ,439 Chelan County 8,602,216, % 14,465,000 5,790,833 Port of Chelan 8,602,216, % 5,689,157 2,277,564 Hospital District No. 1 1,993,802,326 1% 14,055, Total: $ 44,371,834 $ 18,225,682 Source: Chelan County Assessor and Treasurer and individual taxing districts. The following table summarizes information regarding the District s direct debt (including the Bonds) and the estimated portion of the debt of overlapping taxing districts allocated to the District s residents. Bond Assessed Value (2014 Collection Year) $ 3,392,391,792 Estimated 2013 Population 43,274 Debt Information Direct Debt (includes this issue) (1) $ 84,330,000 Less: Cash and Investments in Debt Service (as of 2/28/13) (1,592,048) Net Direct Debt $ 82,737,952 Estimated Net Overlapping Debt (as detailed above) 18,225,682 Total Net Direct and Overlapping Debt $ 100,963,634 Bonded Debt Ratios Net Direct Debt to Bond Assessed Value 2.44% Net Direct and Net Overlapping Debt to Bond Assessed Value 2.98% Per Capita Bond Assessed Value $ 78,393 Per Capita Net Direct Debt $ 1,912 Per Capita Total Net Direct and Net Overlapping Debt $ 2,333 (1) Includes the Bonds and outstanding unlimited tax general obligations (see Outstanding Long-Term Debt herein) as of the Date of Delivery. Debt Payment Record The District has promptly met principal and interest payments on outstanding bonds and other indebtedness when due. Additionally, no refunding bonds have been issued for the purpose of preventing an impending default. 8

15 Future Financings Other than the Bonds, the District has no authorized but unissued bonds outstanding. The District expects to submit a bond issue in the approximate amount of $30 million to District voters within the next three years, for safety and instructional improvements to Wenatchee High School and HVAC improvements to Foothills Middle School. District ing Sources General The District s primary sources of revenue for the General are state funds, local property taxes and federal funds. Of these sources, State funding represents 70.7 percent of the District s operating revenues for the General, local receipts represents 17.2 percent and federal funding represents 11.9 percent, for the fiscal year ending August 31, In addition, the District may receive income from other miscellaneous sources. These additional revenues comprise less than 1 percent of total funding. Federal ing The District receives money from federal funding for a variety of programs. Principal of and interest on the Bonds are payable from excess property tax levies unlimited as to rate or amount. Consequently, changes in federal funding due to programmatic alterations, loss of funding due to federal sequestration, or any other reason, is not expected to impair the security for the Bonds. State ing General. The Washington Basic Education Act of 1977 (the Act ) provides for the full funding of what the Act refers to as basic education, or the regular program, and of vocational education, according to statutory formulas, and for operational costs for transportation, the purchase of transportation equipment, and programs for the handicapped by the State. Legislation passed in 1979 recognized the State s responsibility to fund bilingual and remediation programs. The Washington State Legislature (the Legislature ), at its discretion, may provide funds for other special programs, including, but not limited to, vocational-technical institutes, gifted education and others. State funding is based primarily on average full-time equivalent student enrollment. At each regular session in an odd-numbered year, the Legislature is required to appropriate monies to the Office of the Superintendent of Public Instruction ( OSPI ) (i) from the State General for the current use of the common schools during the ensuing biennium, and (ii) from the Student Achievement and the Education Construction for the support of the Student Achievement Act during the ensuing biennium. Basic Education Allocation. The basic education allocation distribution formula is reviewed biennially by OSPI and the governor of the State (the Governor ). Pursuant to RCW 28A , the Governor shall, and OSPI may, recommend to the Legislature a formula based on a ratio of students to staff. Once the Legislature adopts a formula it is used for the distribution of a basic education allocation for each annual average full time equivalent student enrolled in a common school. In the event the Legislature rejects the distribution formula recommended by the Governor, without adopting a new distribution formula, the distribution formula for the previous school year will remain in effect. In the event of an unforeseen emergency, in the nature of either an unavoidable cost to a district or unexpected variation in anticipated revenues to a district, OSPI is authorized, for not to exceed two years, to make such an adjustment in the allocation of funds. An objective of the basic education allocation formula is to equalize educational opportunities among the State s public school districts. In addition to the basic education allocation, eligible school districts have received local assistance funds from the State under the Local Effort Assistance Program ( LEA ). The LEA was originally implemented in 1989 and seeks to equalize the tax burden by providing matching state funds to districts with low property values and high levy rates. Eligible school districts are those school districts with an assessed value (for excess levy purposes) per pupil lower than the State average. For calendar year 2014, the District is potentially eligible for approximately $3,717,944 in LEA funds. 9

16 Beginning in 2001 portions of the state property tax and state lottery revenues were dedicated to the Student Achievement, per Initiative 728 ( I-728 ). I-728 directed that, beginning in 2004, school districts receive Student Achievement allocations in the amount of $450 per full-time-equivalent (FTE) student, with the amount to increase by designated amounts in proceeding years. The 2003 Legislature revised the per-pupil payments to a lower amount, to increase in subsequent years. In payments were again reduced from planned per-pupil allocations of $ and $ in school years and , respectively, to $ and $ The I-728 payments have been eliminated since the school year. Passed by voters in November 2000, Initiative 732 ( I-732 ) required the State to provide annual cost-of-living increases for Washington s public school employees. In 2003 and again in 2009 through 2015, the Legislature suspended the inflation increases in I-732. McCleary et al. v State Ruling. In 2007, a coalition of parents, students, school districts, teachers unions and other nonprofit organizations, filed a lawsuit alleging that the State s approach to funding local school districts does not satisfy the State s obligation under Article IX of the Washington State Constitution, which provides that it is the paramount duty of the State to make ample provision for education. On February 24, 2010, a King County Superior Court judge entered its Final Judgment in McCleary et al. v. State (Cause No SEA), ruling that the State is currently failing to fulfill this constitutional duty and ordered the Legislature to address the issue. The State appealed to the Washington State Supreme Court, and on January 5, 2012, the Court agreed with the decision of the King County Superior Court and held that the State is currently failing to fulfill this constitutional duty to fully fund education. The Supreme Court, however, deferred to the Legislature's chosen means to discharge that constitutional duty under the 2017/2018 time schedule under recent legislation. The Court reserved jurisdiction to enforce its constitutional ruling. The District cannot predict what the Legislature will do in response to this case, or what effect (if any) this case or subsequent events may have on the District s finances. The State s largest General expenditures are for education, social and health services and corrections. Approximately 45.2 percent of the State s General budget for is for supporting public schools. The State s General has experienced revenue shortfalls, resulting in reduced funding for public schools during the and bienniums. The State s biennial budget for public schools was reduced by approximately 11.6 percent from the maintenance level budget (estimated cost of providing currently authorized services). In response to the Supreme Court s McCleary decision, the Legislature increased funding in the State operating budget, adopted on June 28, 2013, for K-12 public schools by $1.6 billion compared to the biennium funding. This represented an increase of 11.4 percent. The Legislature focused enhancements on (1) fully funding school districts costs for pupil transportation; (2) enhancing full-day kindergarten; (3) reducing K-1 class size; (4) increasing allocations for maintenance, supplies, and operating costs; and (5) increasing Learning Assistance Program funding for under-achieving students by 63 percent. The District cannot predict what the Legislature will continue to do in response to the McCleary decision, or what effect (if any) the McCleary decision or subsequent events may have on the District s finances. Local ing Local property taxes, the most significant local revenue source, provide money that enhances the State-funded basic education allocation. Pursuant to RCW and Article VII, Section 2(a) of the State Constitution and upon voter approval, school districts in the State are authorized to levy excess property taxes for various purposes including maintenance and operation ( M&O Levies ), capital projects ( Capital Projects Levies ), the repayment of bonds issued to finance the construction, modernization and remodeling of school district facilities ( Bond Levies ) and for transportation vehicle purposes ( Transportation Vehicle Levies ). Historically, each of these excess property tax levies were required to be approved by 60 percent of those voting and the number of votes must equal or exceed 40 percent of those voting in the last general election. Beginning in 2008, the voter approval requirement for M&O, Capital Projects Levies and Transportation Vehicle Levies became a simple majority. For Bond Levies, the voter approval requirement did not change. Bond Levies are dedicated exclusively to the repayment of the bonds for which the taxes were approved and those tax proceeds cannot be diverted to other purposes. Therefore, a change in M&O, Capital Projects Levies and Transportation Vehicle Levies will not affect the District s levy of excess property taxes for the repayment of the Bonds. 10

17 M&O Levies. The State Constitution allows school districts to submit to voters M&O levies for up to four years. In 1977 when the State assumed additional responsibility for funding schools, the Legislature limited school district M&O Levy authority by passing the levy lid law. This law establishes the maximum amount of a school district s M&O Levy for a calendar year. In 1979 the levy lid law took effect, limiting excess General revenue to 10 percent of the school district s basic education allocation for the school year. The law allowed districts that historically relied on M&O Levies to be grandfathered in and exceed the 10 percent limit. In 1987 the levy lid limit was increased to 20 percent. In 1994, the levy base increased to 24 percent. RCW outlines the process for deriving a district s levy limit. The Legislature provided funding for additional staffing in K-4 classrooms beyond basic education through This funding was eliminated for both the biennium and the biennium. The Legislature, in 2010, approved Laws of 2010, Chapter 237 ( 2010 Supplemental Levy Act ), enhancing the levy authority of school districts. For levy collections through calendar year 2017 a district s levy base will include the amounts the districts would have received from state funding for I-728 and I-732. Districts are allowed to include in their levy bases any cuts to the K-4 class-size funding. The requirement that OSPI must offset the amount added to a district s levy base is removed. The levy lid is increased by four percent, including districts, which are currently grandfathered above 24 percent. For nongrandfathered districts, such as the District, a district s maximum levy percentage is increased from 24 percent to 28 percent in 2011 through 2017 and returns to 24 percent every year thereafter. The LEA percentage is increased to 14 percent for calendar years 2011 through 2017 and returns to 12 percent in calendar year Additional levies to provide for subsequently-enacted increases affecting the districts levy base or maximum levy percentages may be authorized by voters during the term of the levy collection period. RCW outlines the process for deriving a district s levy limit. In April 2013 the qualified electors of the District approved a four-year M&O levy in the amount of $11,131,000 for collection in 2014, $11,465,000 for collection in 2015, $11,809,000 for collection in 2016 and $12,163,000 for collection in By law, taxes levied to pay principal of and interest on unlimited tax general obligation bonds, such as the Bonds, are not available for any other use. Thus, any possible decline in the District s M&O levy would not impair the security of the Bonds. Capital Projects Levies and Transportation Vehicle Levies. Capital Projects Levies (maximum term of six-years) and Transportation Vehicle Levies may also be authorized by a school district s voters (RCW ). These types of levies also require a simple majority vote of approval by the District s voters. The levy lid lift described previously does not apply to Capital Projects Levies or Transportation Vehicle Levies. The District does not have any authorized Capital Projects Levies or Transportation Vehicle Levies at this time. The following table shows the District s excess property tax levy rates and dollar amounts levied since Ad Valorem Tax Levies Levy Rates Collection (Dollars per $1,000 of Assessed Value) Levy Amounts Year Bond M&O Total Bond M&O Total 2014 $ $ $ $ 2,399,208 $ 11,163,374 $ 13,562, ,399,390 10,840,967 13,240, ,399,696 10,525,415 12,925, ,499,873 10,186,745 12,686, ,534,058 10,016,224 12,550, ,597,540 9,597,454 12,194,994 Sources: Chelan County Assessor and Treasurer. 11

18 Assessed Value The Chelan County Assessor, or equivalent thereof (the Assessor ), determines the value of all real property (including all land, buildings, structures and improvements to land) and personal property (including machinery and equipment, fixtures, furniture and other items that are movable in nature) throughout the County that is subject to ad valorem taxation, except certain utility properties which are valued by the State Department of Revenue. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the State Department of Revenue. For tax purposes, the assessed value of property is 100 percent of its market value. Three approaches may be used to determine real property value: market data, replacement cost and income generating capacity. In the County, all property is subject to an annual property valuation and all properties are physically inspected at least once every four years. The property is listed by the Assessor on a roll at its current assessed value and the roll is filed in the Assessor s office. The Assessor s determinations are subject to revisions by the County Board of Equalization and, for certain property, subject to further revisions by the State Board of Tax Appeals. Tax Collection Procedure Property taxes are levied in specific amounts and the rate for all taxes levied for all taxing districts in the County is determined, calculated and fixed by the Assessor based upon the assessed value of the property within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district on a tax roll which contains the total amount of taxes to be so levied and collected. The tax roll is delivered to the Treasurer, or equivalent thereof, by January 15, who creates a tax account for each taxpayer and is responsible for the collection of taxes due to each account. All such taxes are due and payable on April 30 of each year, but if the amount due from a taxpayer exceeds $50, one-half may be paid then and the balance no later than October 31, of each year. Delinquent taxes are subject to interest at the rate of 12 percent per year computed on a monthly basis from the date of delinquency until paid. In addition, a penalty of three percent will be assessed on June 1st of the year in which the tax was due and eight percent on December 1st of the year due. All collections of interest on delinquent taxes will be credited to the County s current expense fund. The method of giving notice of payment of taxes due, the accounting for the money collected, the division of the taxes among the various taxing districts, notices of delinquency and collection procedures are covered by detailed statutes. Tax Liens and Foreclosure Property taxes and all charges and expenses relating to the taxes constitute a statutory lien on the property taxed. The lien attaches to the property from and including January 1 in the year in which the tax is levied, and is discharged only when taxes are paid. The lien for ad valorem property taxes on personal property, which have been levied prior to the filing of federal tax liens, is prior to such federal tax liens. In addition, a federal civil judgment lien (but not a federal tax lien) is senior to real property taxes that are incurred after the judgment lien has been recorded. In other respects, and subject to the Homestead Exemption, the lien for delinquent property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation. By law the Treasurer may not commence foreclosure of a tax lien on real property until three years have passed since the first delinquency. The State s courts have not decided whether the Homestead Law (chapter 6.13 RCW) may give the occupying homeowner a right to retain the first $125,000 of proceeds of the forced sale of the family residence or other homestead property for delinquent general property taxes. (See Algona v. Sharp, 30 Wn. App. 837, 638 P.2d 627 (1982), holding the homestead right superior to the improvement district assessments). The United States Bankruptcy Court for the Western District of Washington has held that the Homestead Exemption applies to the lien for property taxes, while the State Attorney General has taken the position that it does not. 12

19 Tax Collection Record Bond Tax Collection Collection Assessed Ad Valorem Year As of Year Value (1) Tax Levy of Levy 2/28/ $ 3,392,391,792 $ 13,562,582 (2) (2) ,495,912,633 13,240, % 98.6% ,653,658,521 12,925, ,698,014,216 12,686, ,464,898,829 12,550, ,051,988,421 12,194, (1) Bond Assessed Value is based upon the aggregate assessed value, and is adjusted to exclude exempt senior citizens and to include Timber Assessed Value, which is $1,118,364 for collection year (2) In process of collection. Source: Chelan County Assessor s and Treasurer s Offices. Overlapping Taxing Districts The overlapping taxing districts within the District have the statutory power to levy regular property taxes at the following rates subject to the limitations provided by chapter RCW and levy excess voter approved property taxes. Representative levy rates for levy code 800 of the County, located entirely within the District, as well as the statutory levy authority of each type of potential overlapping district are listed below. Levy code 800 does not include all of the property within the District; as a result, additional taxing districts, not listed below, levy taxes within the District. Representative Levy Rates Statutory Levy Authority Per $1,000 of Per $1,000 of Assessed Value Assessed Value Chelan County $ $1.800 (2) County (Road Levy) n/a (1) Regional Library Fire Protection District n/a (1) Port of Chelan City of Wenatchee City of Wenatchee (Bonds) not applicable Cities and Towns n/a (3) Hospital Districts n/a (1) State Schools (4) The District not applicable Total rate for Chelan County levy code 800: $ (1) Chelan County levy code 800 is included within the incorporated portion of the County and therefore does not have a county road levy. Likewise, it does not contain either a fire district or a hospital district. (2) Pursuant to RCW (1), a county may increase its levy from $1.80 per $1,000 to a rate not to exceed $2.475 per $1,000 for general county purposes if (i) the total levies for both the county and any road district within the county do not exceed $4.05 per $1,000 and (ii) no other taxing district has its levy reduced as a result of the increased county levy. (3) RCW To be used for pension funding purposes, if required; otherwise this tax may be levied and used for any other municipal purpose. (4) RCW (1). The levy by the State shall not exceed $3.60 per $1,000 assessed value adjusted to the State equalized value in accordance with the indicated ratio fixed by the State Department of Revenue to be used exclusively for the support of the common schools. Source: Chelan County Assessor s Office. 13

20 2014 Major Taxpayers Percent of 2014 Collection Year District s Taxpayer Type of Business Assessed Value (A.V.) Total A.V. Stemilt Growers LLC (1) Fruit packing $ 100,183, % Alcoa Inc. (2) Aluminum manufacturer 29,996, Wenatchee Valley Medical Center (3) Medical center 23,571, Keyes Fibre Corporation Fruit packaging 18,481, Valley North Center LLC Mall/Retail 16,830, Burlington Northern Sante Fe Railroad 15,445, Columbia Fruit Packers Inc. Fruit packing 14,855, Frontier Communications NW Utility 14,748, Cascadian Fruit Shippers Inc. Fruit packing 13,964, Wal-Mart Stores Retail 11,951, Subtotal District s Ten Largest Taxpayers $ 260,028, % All Other District Taxpayers 3,132,363, Total District Taxpayers $ 3,392,391,792 10% (1) Stemilt Growers Inc. owns over 10,000 acres of fruit orchards throughout central Washington. The company harvests apples, pears, cherries and other fruit. The company operates multiple storage, processing and shipping facilities within the District. (2) Alcoa Inc. operates an aluminum smelter within the District. In calendar year 2014 Alcoa Inc. challenged the taxable value of their properties which resulted in that contested value being removed from the County tax rolls. As of the Date of Delivery this contestation has been settled. It is expected that the 2015 collection year taxable value for Alcoa Inc. will increase to an estimated value of approximately $57 million. (3) Wenatchee Valley Medical Center has applied for tax-exempt status for a majority of their facilities. It is expected that the medical center s 2015 collection year taxable assessed value will decline to a de minimus amount. Source: Chelan County Assessor s Office. The District Washington school districts are municipal corporations empowered to provide elementary and secondary educational services. Their operations are supported primarily by State funds, excess property taxes (the most significant local revenue source) and federal grants. School districts are governed by a board of directors elected by the voters of the school district. The chief administrative officer is a superintendent chosen by the board of directors. Description The District is located in Chelan County. The District has an estimated population of 43,274, and encompasses approximately 256-square miles. The District operates seven elementary schools, three middle schools, two high schools, the Wenatchee Valley Technical Skills Center and the Valley Academy. The Board of Directors The policies of the District are established by the Board. The District s current members are listed below. Member Position Term Expires Laura Jaecks President December 2015 Dr. Walter S. Newman Vice President December 2015 Jesus Hernandez Member December 2015 Robert Sealby Member December 2017 Jennifer Talbot Member December

21 Staff and Labor Relations The District employs 1,243 employees, which includes 519 certificated and 297 classified staff members. The majority of employees, who are eligible under State law to be represented by a labor organization, are employed under provisions of negotiated contracts with ten labor organizations. The District enters into written bargaining agreements with each of the bargaining organizations. Agreements contain provisions on such matters as salaries, vacation, sick leave, medical and dental insurance, working conditions and grievance procedures. Following are the bargaining groups which represent District employees: Bargaining Group Number of Employees Contract Expires Wenatchee Education Association (Certificated) 497 August 31, 2015 Co-Curricular Employees Association 153 August 31, 2016 Washington Association of Public School Employees Secretaries/Para-Educators/Technical Professionals 260 August 31, 2015 Wenatchee Association of School Bus Drivers 31 August 31, 2016 Maintenance and Operations Employees 59 August 31, 2015 Food Service Managers 4 August 31, 2016 Food Service Employees 34 August 31, 2014 Principals and Directors Association 24 August 31, 2015 School Business Association 3 August 31, 2014 Central Office Administrative Support Association 4 August 31, 2014 Enrollment Historical and projected Average Annual Full-Time Equivalent ( AAFTE ) enrollments for the District are shown in the following table. (1) Current annualized average as of February Source: Wenatchee School District No AAFTE Enrollment Historical Projected (1) 7, , , , , , , , , ,800 Financial Factors Accounting Policies Washington school districts prepare their financial statements on the basis of accounting that demonstrates compliance with Washington State statutes and the Accounting Manual for Public Schools in the State of Washington, (issued jointly by the State Auditor and the Superintendent of Public Instruction, by the authority of RCW , RCW 28A , RCW 28A (1) and RCW 28A ) which is an Other Comprehensive Basis Of Accounting ( OCBOA ) that differs from Generally Accepted Accounting Principles ( GAAP ). Financial statements for school districts in the State fall into one of three categories: (i) GAAP- School districts that issue GAAP financial statements; (ii) OCBOA- School districts that issue GAAP financial statements except that the General Fixed Asset Group, district-wide financial statements and the original budget are not reported; debt is reported in the notes to the financial statements; and management s discussion and analysis are not required and (iii) School districts with less than 1,000 FTE students for the preceding fiscal year may issue cash basis financial statements. The District prepares its financial reports utilizing OCBOA. All governmental and expendable trust funds are accounted for on a spending or financial flow measurement focus. This means that only current assets and current liabilities are included on their balance sheets. 15

22 The modified accrual basis of accounting is used for all governmental and expendable trust funds. Revenues are recognized when they become measurable and available. Property taxes receivable are measurable but not available and are, therefore, not accrued. However, categorical program claims and interdistrict billings are measurable and available and are, therefore, accrued. Expenditures are recognized under the modified accrual basis of accounting when the related fund liability is incurred. The fund liability is incurred when the goods or services have been received. The one exception is the recognition of principal of and interest on long-term debt which is recognized when due. Accounting. The accounts of the District are organized on the basis of funds and account groups, each of which is a separate accounting entity. The operations of each fund are accounted for with a separate set of selfbalancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. The various funds are grouped into governmental funds. Governmental s General. This fund is used to account for all expendable financial resources, except those required to be accounted for in another fund. Debt Service. This fund is used to account for revenue sources that are legally restricted for the payment of general long-term debt principal, interest and related expenditures. Capital Projects. This fund is used to account for resources set aside for the acquisition and construction of major capital facilities. The fund is generally financed from the proceeds from the sale of voted and/or nonvoted bonds, state matching revenues, lease or sale of surplus real property, interest earnings, and special levies. In all instances where moneys are raised by voter-approved bond issues, the proposition must include a description of the projects for which the money is being raised. Transportation Vehicle. This fund is used to account for expenditures related to student transportation vehicle expenses. Special Revenue s. These funds account for the proceeds of specific revenue sources that are legally restricted for specific purposes. The Associated Student Body Program (ASB ) is the only fund of this type. This fund is accounted for as a special revenue fund since the financial resources legally belong to the District. Financial Reporting The District presents governmental fund financial statements and related notes in accordance with OCBOA (see Accounting Policies above). The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The regulatory agencies require all funds be presented as major funds. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures (or expenses), as appropriate. The Government Accounting Standards Board ( GASB ) has issued a new standard concerning Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions ( GASB 45 ). In addition to pensions, many state and local governmental employers provide other post employment benefits ( OPEB ) as a part of total compensation to attract and retain the services of qualified employees. OPEB includes post employment healthcare, as well as other forms of post employment benefits when provided separately from a pension plan. The new standard provides for the measurement, recognition and display of OPEB expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary information in the financial reports. The District does not offer any OPEB to current or past employees and does not plan to offer any such benefits in the future. The District currently prepares its financial reports utilizing OCBOA (see Accounting Policies above) and therefore does not anticipate it will incorporate this reporting standard into its basis of accounting. 16

23 Auditing The State Auditor is required to examine the financial affairs of school districts. School districts are audited annually, biennially or triennially depending on their size and whether or not they receive certain federal funding. Additionally, annual audits may be conducted at the request of a school district or the State. The District is audited annually. The examination must include, among other things, the financial conditions and resources of the school district, compliance with the State constitution and laws, and the methods and accuracy of the accounts and reports of the school district. Reports of the auditor s examinations are required to be filed in the office of the State Auditor and in the auditing department of the school district. The un-audited financial statements of the District for the fiscal year ending August 31, 2013, and the audited financial statements of the District for the fiscal year ended August 31, 2012, attached as Appendix C, are incorporated by reference to this Official Statement which Official Statement which will be filed by the Underwriter with the Municipal Securities Rulemaking Board (the MSRB ). A five-year summary of the Statement of Revenues, Expenditures and Changes in the General Balance and a three-year summary of the District s Debt Service Income Statement follow. 17

24 Statement of Revenues, Expenditures and Changes in General Balance (Fiscal Years Ended August 31) Budget Unaudited Audited Revenues Local s $ 13,032,921 $ 12,467,149 $ 12,005,916 $ 11,640,494 $ 11,398,909 $ 11,176,324 State s 56,106,387 51,277,641 51,338,438 50,260,905 49,503,935 48,991,890 Federal s 8,776,717 8,607,370 9,327,157 8,291,089 8,751,048 8,560,145 Federal Stimulus ,680 3,757,892 3,504,936 3,293,710 Other 124, , ,428 68,004 66,537 39,010 Total Revenues 78,040,525 72,568,025 72,810,620 74,018,385 73,225,365 72,061,079 Expenditures Regular Instruction 42,412,531 38,625,542 37,345,832 34,284,312 34,066,266 33,262,338 Federal Stimulus ,680 3,632,634 3,121,203 2,797,919 Special Education Instruction 8,025,144 7,680,550 7,303,093 6,480,277 6,591,322 6,760,576 Vocational Education 2,410,057 2,333,531 2,254,855 2,051,670 2,162,649 2,038,020 Skills Center Instruction 1,524,832 1,211,815 1,348,429 1,613,901 1,326,880 0 Compensatory Education 7,486,714 6,617,963 6,941,678 6,246,998 6,506,372 8,072,867 Other Instructional Programs 1,729,612 1,409,185 1,413,461 1,494,154 1,572,313 1,810,413 Community Services 541, , , , , ,160 Support Services 15,337,867 15,250,517 14,031,294 13,415,938 13,058,786 13,726,547 Capital Outlay 0 504, , , , ,627 Debt Service Total Expenditures 79,467,978 73,961,690 71,717,915 70,191,602 69,413,776 69,833,466 Rev. over/(under) Expenditures (1,427,453) (1,393,665) 1,092,705 3,826,783 3,811,589 2,227,613 Net Adjustments/Transfers (1,970,000) (154,000) (46,000) (3,000,000) (2,530,000) (30,000) Prior Year(s) Corrections Beginning Balance 14,500,000 14,717,300 13,670,595 12,843,812 11,562,223 9,363,198 Ending Balance $ 11,102,547 $ 13,169,635 $ 14,717,300 $ 13,670,595 $ 12,843,812 $ 11,560,810 Balance Sheet Information Nonspendable, Restricted & Committed/Reserved $ 5,030,000 $ 5,194,414 $ 4,430,160 $ 4,582,694 $ 34,253 $ 28,553 Assigned/Unreserved, Designated 1,050,000 3,022,000 4,912,000 7,152,000 7,711,788 6,972,514 Unassigned/Unreserved, Undesignated 5,022,547 4,953,221 5,375,139 1,935,901 5,097,771 4,559,742 Ending Balance $ 11,102,547 $ 13,169,635 $ 14,717,300 $ 13,670,595 $ 12,843,812 $ 11,560,810 (1) The estimated ending General balance for August 31, 2014 is $12,490,547. Source: Wenatchee School District No. 246, Financial Statements. 18

25 Statement of Revenues, Expenditures and Changes in Debt Service Balance (Fiscal Years Ended August 31) Unaudited Audited Revenues Local $ 2,439,694 $ 2,446,096 $ 2,504,940 State s Federal Total Resources 2,439,694 2,446,096 2,504,940 Expenditures Principal 1,580,000 1,450,000 1,670,000 Interest and Other 814, , ,905 Total Expenditures 2,394,252 2,312,704 2,597,905 Revenues Over/(Under) Expenditures 45, ,392 (92,965) Other Financing Sources/(Uses) Beginning Balance 2,506,420 2,373,028 2,465,993 Ending Balance $ 2,551,862 $ 2,506,420 $ 2,373,028 Source: Wenatchee School District No. 246, Financial Statements. Budgetary Process General Budgetary Policies. Chapter 28A.505 RCW and Chapter Washington Administrative Code mandate school district budget policies and procedures. The budget is adopted by the board after a public hearing. An appropriation is a prerequisite to expenditure. Appropriations lapse at the end of the fiscal period. Budgetary Basis of Accounting. For budget and accounting purposes, revenues and expenditures are accounted for on the modified accrual basis as prescribed by law for all governmental funds. balance is budgeted as available resources and, pursuant to law, the budgeted ending fund balance cannot be negative. Encumbrances. Encumbrance accounting is employed in governmental funds. Purchase orders, contracts and other commitments for the expenditure of moneys are recorded in order to reserve a portion of the applicable appropriation. Encumbrances are closed at the end of the fiscal year and reopened the following year. Investment Policy The Treasurer is the ex officio treasurer for the District. In this capacity, the Treasurer receives deposits and makes investments on the District s behalf. All temporary investments are stated at cost plus accrued interest, which approximates market. Investments are shown on the combined balance sheet at cost, net of amortized premium or discount. Reductions in market value are not reflected on the financial statements. Gains or losses on investments sold or exchanged are recognized at the time of sale or exchange. Chapter RCW limits the investment of public funds by local governments to the following authorized instruments: (i) bonds of the State or any local government in the State or general obligation bonds of any other state or political subdivision thereof which has at the time of investment one of the three highest credit ratings of a nationally recognized rating agency, (ii) registered warrants of a local government in the same 19

26 county as the local government making the investment, (iii) certificates of deposit and (iv) any investments authorized by law for the State Treasurer. In addition to these instruments, bond proceeds may be invested in qualified money market and mutual funds which restrict their portfolios to specified securities and post a bond with the State (RCW ). Investments authorized by law for the State Treasurer include (i) obligations of the U.S. government, its agencies and wholly owned corporations, (ii) bankers acceptances, (iii) commercial paper, (iv) obligations of the Federal Home Loan Bank, Fannie Mae and other government-sponsored enterprises, (v) motor vehicle fund warrants and (vi) certificates of deposit (chapter RCW). Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW ). The District invests its funds with the Treasurer. At the request of one or more local governments that invest their money with a county, a county treasurer may pool those moneys for the purposes of investment (RCW ). The County currently does not have such an investment pool. The Treasurer may also invest public funds in the Local Government Investment Pool (the LGIP ), authorized by chapter RCW and administered by the State Treasurer. The LGIP is comparable to a Rule 2a-7 money market fund, as recognized by the Securities and Exchange Commission, and its weighted average maturity does not exceed 90 days. For a full description of the LGIP and its investment structure visit the Washington State Treasurer s website at (which is not incorporated into this Official Statement by reference). Pension System Pensions for District employees are provided through the State Department of Retirement Systems (the DRS ). Substantially all District full-time and qualifying part-time employees participate in one of the following three state-wide retirement systems: (i) the State Teachers Retirement System ( TRS ) for certificated employees, (ii) the Public Employees Retirement System ( PERS ) for non-certificated employees and (iii) the School Employees Retirement System ( SERS ) for classified employees. TRS includes three plans (Plans 1, 2 and 3), PERS includes three plans (Plans 1, 2 and 3), and SERS includes two plans (Plans 2 and 3). Participants who joined the retirement system by September 30, 1977 are eligible to be either TRS or PERS Plan 1 members. Those who joined thereafter are enrolled in TRS Plans 2 or 3, PERS Plans 2 or 3 or SERS Plans 2 or 3. All Plans 1 and 2 are defined benefit plans. New TRS, PERS and SERS participants have the irrevocable option of choosing membership in either their respective Plans 2 or Plans 3. This option must be exercised within 90 days, and if not exercised the participant will be placed in their respective Plan 3. Each of the PERS Plan 3, the SERS Plan 3 and the TRS Plan 3 consist of a defined benefit and a defined contribution portion. Once a member chooses to enter a Plan 3 they may not revert back to a Plan 2. Retirement benefits under all Plans 1 and 2 are vested after completion of five years of eligible service. PERS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in PERS Plan 2 by June 1, Plan 3 members are immediately vested in the defined contribution portion of their plan. TRS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in TRS Plan 2 by July 1, Plan 3 members are immediately vested in the defined contribution portion of their plan. SERS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in PERS Plan 2 by September 1, The District contributed $3,229,528 in fiscal year 2012 and $3,423,422 in fiscal year 2013 to these pension plans. District employees also are eligible to participate in the federal social security program. 20

27 The Legislature establishes all employer and employee contribution rates for all plans during even numbered years according to a statutory rate-setting process. The following table lists current contribution rates for employers and employees: Contribution Rates (in percentage) Current Rates for Employer Rate (1) Employee Rate PERS Plan % 6.00% PERS Plan 2/3 (2) TRS Plan TRS Plan 2/3 (2) SERS Plan 2/3 (2) (1) Includes a 0.18 percent Department of Retirement Systems administrative expense rate. (2) Plan 3 members do not contribute to the defined benefit plan. Source: Department of Retirement Systems. While the District s contributions in 2012 represent its full current liability under the retirement systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the TRS Plans 2 and 3 and PERS Plans 2 and 3 will increase in the coming years. The State Actuary s website (which is not incorporated into this Official Statement by reference) includes information regarding the values, funding levels and investments of these retirement plans. For additional information, see Note 5 to the Audited Financial Statements for the Year Ended August 31, 2012, attached hereto as Appendix C. The OSA uses two funded status measures. The first funded status measure compares the Actuarial Value of Assets ( AVA ) to the Projected Unit Credit ( PUC ) liabilities. The PUC cost method projects future benefits using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. The asset valuation method smoothes the inherent volatility in the Market Value of Assets ( MVA ) by deferring a portion of the annual investment gains or losses over a period of up to eight years. This method is consistent with governmental accounting standards. The OSA also uses a second measure, comparing the MVA to the PUC liabilities calculated using a short-term interest rate assumption. This measure is used for the closed plans, PERS 1 and TRS 1. Additional information on this measure is provided in the 2012 Actuarial Valuation Report. In 2011, the Legislature ended the future automatic annual increase, which is a fixed dollar amount multiplied by the member s total years of service, for most retirees in the PERS Plan 1 and TRS Plan 1 plans, which is forecast to reduce the unfunded accrued actuarial liability in PERS Plan 1 and TRS Plan 1. A lawsuit was filed challenging this legislation. In November 2012, Thurston County Superior Court Judge Chris Wickam issued a letter opinion that granted the plaintiffs motion for summary judgment for the repeal of the legislation. In April 2013, Judge Wickam reaffirmed that decision and signed an order to allow immediate review of his decision. The Washington State Supreme Court accepted direct review of the case in May Oral arguments were given on October 24, A timeline for a ruling following those arguments is not known at this time. The Actuarial Valuation Report Washington 2012, produced by the Office of the State Actuary, states that as of June 30, 2012, PERS Plans 2 and 3 and TRS Plans 2 and 3 had no unfunded actuarial accrued liability. However, during the years 2001 through 2010 the rates adopted by the Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1 and TRS Plan 1, closed plans with a large proportion of the retirees. The following table shows the funded status of the PERS, TRS and SERS for The assumptions used by the State Actuary in calculating the unfunded liability are a 7.9 percent annual rate of investment return, 3.75 percent general salary increases, 3.0 percent consumer price index increase and 0.95 percent growth in membership (0.80 percent for TRS). The long-term investment return assumption is used as the discount rate for determining the liabilities for a plan.

28 ed Status on an Actuarial Value Basis (1) PERS TRS SERS Plan 1 Plan 2/3 Plan 1 Plan 2/3 Plan 2/3 PUC Liability (2) $12,368 $20,347 $9,058 $6,799 $2,820 Valuation Assets (2) 8,521 22,653 7,145 7,758 3,100 Unfunded Liability (2) $ 3,847 $ (2,306) $1,914 $ (959) $ (280) ed Ratio (%) (3) (3) (3) (3) (3) (3) (1) Liabilities valued using the Projected Unit Credit ( PUC ) cost method at an interest rate of 7.9 percent while assets have been valued under the actuarial value of assets. (2) Dollars in millions. Based on actuarial valuation as of June 30, (3) Actuarial assumptions changed. Source: Office of the State Actuary, 2012 Actuarial Valuation Report, September Other Post-Employment Benefits PEBB Overview. The Public Employee Benefits Board ( PEBB ), created within the State Health Care Authority ( HCA ), administers medical, dental and life insurance plans for State public employees and retirees and offers retirees access to OPEB benefits (the PEBB Plan ). Employers who participate in the PEBB Plan include the State, K-12 school districts, numerous political subdivisions of the State and tribal governments. Employers subsidize a portion of the cost of some PEBB Plan benefits. The relationship between the PEBB Plan and its member employers and their employees and retirees is not formalized in a contract or plan document; rather, the benefits are provided in accordance with a substantive plan, which GASB defines as the plan as understood by employers employees members. The District does not offer any OPEB to current or past employees and does not plan to offer any such benefits in the future. According to State law, the State Treasurer collects a fee from all school district entities which have employees that are not current active members of the HCA but participate in the State retirement system. The purpose of this fee is to cover the impact of the subsidized rate of health care benefits for school retirees that elect to purchase their health care benefits through the HCA. For the fiscal year , the District was required to pay the HCA $65.17 per month per full-time equivalent employee to support the program, for a total payment of $610, This assessment to the District is set forth in the State s operating budget and is subject to change on an annual basis. This amount is not actuarially determined and is not placed in a trust to pay the obligations for post-employment health care benefits. The District has no control over the benefits offered to retirees, the rates charged to retirees, nor the fee paid to the HCA. The District does not determine its annual required contribution nor the net OPEB obligation associated with this plan. Accordingly, these amounts are not shown on the District s financial statements. This is a departure from GAAP. PEBB Membership. Retirees access to PEBB depends on the retirement eligibility of their respective retirement system. PEBB members are covered in the PERS, TRS and SERS retirement systems. The following table shows PEBB plan membership. 22

29 Membership in PEBB Plan (As of June 30, 2013) Active Employees Retirees (1) Total State 107,003 28, ,636 K-12 Schools and ESDs (2) 1,838 30,354 32,192 Political Subdivision 11,840 1,392 13,232 Total 120,681 60, ,060 (1) Retirees include retired employees, surviving spouses, and terminated members entitled to a benefit. (2) In Fiscal Year 2013, there were 101,189 full-time equivalent active employees in the 243 K-12 schools and ESDs which elected to limit participation in PEBB only to their retirees. Source: Washington State Comprehensive Annual Financial Report ( CAFR ) for Fiscal Year Ended June 30, ing of PEBB Plan. In the State, retiree benefits and contributions by the State and local governments for their respective employees are set each biennium as part of the budget process. These benefits are funded on a pay-as-you-go basis. Demographic Information Wenatchee School District is located in the central portion of the State of Washington (about 140 miles east of Seattle and 165 miles west of Spokane), in the southeast portion of the County. The District includes unincorporated portions of the County and the City of Wenatchee (the City ), which is the County seat. Historical population figures for the County and the City are shown below: Chelan County Washington Year Chelan County Population City of Wenatchee ,600 32, ,200 32, ,700 32, (1) 72,453 31, ,185 31,659 (1) Official 2010 U.S. Census figure. Source: Washington State Office of Financial Management, March

30 Income. Historic personal income and per capita income levels for the County and the State are shown below: Year Total Personal and Per Capita Income Chelan County Total Personal Income (in thousands) Per Capita Income State of Washington Total Personal Income (in thousands) Per Capita Income 2012 $2,932,513 $39,797 $317,574,707 $46, ,821,333 38, ,087,834 44, ,683,045 36, ,743,785 42, ,662,875 37, ,778,028 42, ,721,215 38, ,801,024 44,162 Source: U.S. Department of Commerce, Bureau of Economic Analysis, March Median Household Income. Median household income estimation is based on 1990 and 2000 Census data, and on the Census Bureau's American Community Surveys' estimates for Year Chelan County State of Washington 2012 (1) $ 47,265 $ 56, (2) 46,275 55, ,478 54, ,780 55, ,013 57,858 (1) The Revenue Forecast Council's September 2012 forecast of the state personal income is used in the projection of 2012 median household income. (2) In addition to the state personal income data published by BEA, the payroll data compiled by the state Employment Security Department are used in the Preliminary estimates of 2011 median household income. Source: Washington State Department of Revenue, March Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable retail sales for the County and the City are shown below: Taxable Retail Sales Chelan County City of Wenatchee 2013 (1) $ 1,059,372,045 $ 533,477, ,325,241, ,019, ,308,164, ,802, ,319,346, ,935, ,304,754, ,310, ,300,189, ,592,890 (1) Through third quarter only. Source: Washington State Department of Revenue, March

31 Building Permits. The number and valuation of new single-family and multi-family residential building permits in the County are listed below: Residential Building Permits New Single Family Units New Multi-Family Units Total Year Number Construction Cost Number Construction Cost Construction Cost 2014 (1) 9 $ 1,631,314 0 $ 0 $ 1,631, (2) ,193, ,193, ,534, ,623 37,793, ,463, ,463, ,537, ,991 37,928, ,764, ,185,088 40,950,012 (1) Preliminary data for Unincorporated Chelan County through January only. (2) Preliminary data for Unincorporated Chelan County through December. Source: U.S. Bureau of the Census, March Employment. Major employers located within the County and neighboring Douglas County include the following: Major Employers Employer Type of Business Number of Employees (1) Stemilt Growers, Inc. Agriculture 3,024 Wenatchee Valley Medical Center Healthcare 1,697 Central Washington Hospital Healthcare 1,456 Wenatchee School District Education 1,027 McDougall & Sons, Inc. Agriculture 900 Chelan County PUD Utilities 640 Eastmont School District Education 610 Crunch Pak Processing 500 Custom Apple Packers Agriculture 497 ALCOA Manufacturing 465 (1) Includes full-time and part-time employees. Source: Survey of Chelan and Douglas County Employers, Port of Chelan County, December

32 Employment within the County is described in the following tables. Civilian Labor Force data is based on household surveys of residents. NAICS data are estimates based on surveys of employers and benchmarked based on covered employment as reported by all employers. Wenatchee MSA (Chelan & Douglas Counties) Nonagricultural Wage & Salary Workers (1) and Labor Force and Employment Data Annual Average 2013 (2) Civilian Labor Force 40,240 40,750 40,050 40,940 41,780 Total Employment 37,370 37,600 36,660 37,270 38,420 Total Unemployment 2,870 3,150 3,390 3,670 3,360 Percent of Labor Force 7.1% 7.7% 8.5% 9.0% 8.0% NAICS INDUSTRY (3) 2013 (2) Total Nonfarm 39,850 39,017 38,575 38,242 38,825 Total Private 31,308 30,283 29,792 29,400 29,942 Goods Producing 4,433 4,217 4,300 4,092 4,433 Mining, Logging, and Construction 2,008 1,792 1,958 2,000 2,325 Manufacturing 2,425 2,425 2,342 2,092 2,108 Service Providing 35,417 34,800 34,275 34,150 34,392 Private Service Providing 26,875 26,067 25,492 25,308 25,508 Trade, Transportation, Warehousing, & Utilities 9,917 9,633 9,108 8,967 9,142 Retail Trade 5,875 5,783 5,792 5,775 5,800 Education and Health Services 5,917 5,725 5,808 5,875 5,908 Leisure and Hospitality 5,467 5,308 5,175 5,183 5,017 Government 8,542 8,733 8,783 8,842 8,883 Federal Government State Government 1,092 1,275 1,275 1,325 1,275 Local Government 6,583 6,583 6,617 6,558 6,717 Workers in Labor/Management Disputes (1) Excludes proprietors, self-employed, members of the armed services, workers in private households, and agriculture. Includes all full- and part-time wage and salary workers receiving pay during the pay period including the 12th of the month. (2) Preliminary data through December (3) North American Industry Classification System. Source: Washington State Employment Security Department, March Initiatives and Referenda General. Under the State constitution, the voters of the State have the ability to initiate legislation and to modify existing statutes through the powers of initiative and referendum. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent (initiatives) and four percent (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved through the power of initiative by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of all the members elected to each house of the Legislature, but thereafter is subject to amendment or repeal by the Legislature in the same manner as other laws. Future Initiatives. Initiative petitions affecting tax collections and levy rates (not including the taxes pledged to the repayment of the Bonds) and other matters may be filed in the future. The District cannot predict whether any such initiatives will qualify to be submitted to the voters or, if submitted, will be approved. Likewise, the District cannot predict what actions the Legislature might take, if any, regarding future initiatives approved by voters. 26

33 Tax Exemption Exclusion From Gross Income. In the opinion of Bond Counsel, under existing federal law and assuming compliance by the District with applicable requirements of the Internal Revenue Code of 1986, as amended (the Code ), that must be satisfied subsequent to the issue date of the Bonds, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. Continuing Requirements. The District is required to comply with certain requirements of the Code after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances, and the requirement to comply with the arbitrage rebate requirement to the extent applicable to the Bonds. The District has covenanted in the Bond Resolution to comply with those requirements, but if the District fails to comply with those requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. Bond Counsel has not undertaken and does not undertake to monitor the District's compliance with such requirements. Corporate Alternative Minimum Tax. While interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, under Section 55 of the Code, tax exempt interest, including interest on the Bonds, received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable income of a corporation will be increased by 75 percent of the excess of the corporation's adjusted current earnings (including any tax exempt interest) over the corporation's alternative minimum taxable income determined without regard to such increase. A corporation's alternative minimum taxable income, so computed, that is in excess of an exemption of $40,000, which exemption will be reduced (but not below zero) by 25 percent of the amount by which the corporation's alternative minimum taxable income exceeds $150,000, is then subject to a 20 percent minimum tax. A small business corporation is exempt from the corporate alternative minimum tax for any taxable year beginning after December 31, 1997, if its average annual gross receipts during the three-taxable-year period beginning after December 31, 1993, did not exceed $5,000,000, and its average annual gross receipts during each successive three-taxable-year period thereafter ending before the relevant taxable year did not exceed $7,500,000. Tax on Certain Passive Investment Income of S Corporations. Under Section 1375 of the Code, certain excess net passive investment income, including interest on the Bonds, received by an S corporation (a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the close of the taxable year may be subject to federal income taxation at the highest rate applicable to corporations if more than 25 percent of the gross receipts of such S corporation is passive investment income. Foreign Branch Profits Tax. Interest on the Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the Bonds are owned by, and effectively connected with a trade or business of, a United States branch of a foreign corporation. Original Issue Premium. The initial public offering price of Bonds of certain maturities may be greater than the amount payable on such Bonds at maturity ( Premium Bonds ). All prospective purchasers of Premium Bonds should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Premium Bonds. Original Issue Discount. The initial public offering price of Bonds of certain maturities may be less than the amount payable on such Bonds at maturity ( Discount Bonds ). All prospective purchasers of Discount Bonds should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Bonds. 27

34 Possible Consequences of Tax Compliance Audit. The Internal Revenue Service (the IRS ) has established a general audit program to determine whether issuers of tax-exempt obligations, such as the Bonds, are in compliance with requirements of the Code that must be satisfied in order for interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS would commence an audit of the Bonds. Depending on all the facts and circumstances and the type of audit involved, it is possible that commencement of an audit of the Bonds could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of its ultimate outcome. Potential Future Federal Tax Law Changes. Current and future legislative proposals, if enacted into law, may directly or indirectly cause interest on the Bonds to be subject in whole or in part to federal income taxation, prevent the beneficial owners of the Bonds from realizing the full benefits of the current federal tax status of interest on the Bonds, or affect, perhaps significantly, the market value or marketability of the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors regarding the potential impact of any pending or proposed legislation or regulations. Certain Other Federal Tax Consequences Bonds not "Qualified Tax-Exempt Obligations" for Financial Institutions. Section 265 of the Code generally provides that 100 percent of any interest expense incurred by banks and other financial institutions for interest allocable to tax-exempt obligations acquired after August 7, 1986, will be disallowed as a tax deduction. However, if the tax-exempt obligations are obligations other than private activity bonds, are issued by a governmental unit that, together with all entities subordinate to it, does not reasonably anticipate issuing more than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) in the current calendar year, and are designated by the governmental unit as "qualified tax-exempt obligations," only 20 percent of any interest expense deduction allocable to those obligations will be disallowed. The District is a governmental unit that, together with all subordinate entities, reasonably anticipates issuing more than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) during the current calendar year, and has not designated the Bonds as "qualified tax-exempt obligations" for purposes of the 80 percent financial institution interest expense deduction. Therefore, no interest expense deduction of a financial institution allocable to the Bonds is deductible for federal income tax purposes. Reduction of Loss Reserve Deductions for Property and Casualty Insurance Companies. Under Section 832 of the Code, interest on the Bonds received by property and casualty insurance companies will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15 percent of tax-exempt interest received during the taxable year. Effect on Certain Social Security and Retirement Benefits. Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the Bonds into account in determining gross income. Other Possible Federal Tax Consequences. Receipt of interest on the Bonds may have other federal tax consequences as to which prospective purchasers of the Bonds may wish to consult their own tax advisors. Continuing Disclosure Basic Undertaking to Provide Annual Financial Information and Notice of Listed Events. To meet the requirements of United States Securities and Exchange Commission (the SEC ) Rule 15c2-12(b)(5) (the Rule ), as applicable to a participating underwriter for the Bonds, the District will undertake (the Undertaking ) for the benefit of holders of the Bonds to provide or cause to be provided, either directly or through a designated agent, to the MSRB, in an electronic format as prescribed by the MSRB accompanied by identifying information as prescribed by the MSRB: (i) Annual financial information and operating data of the type included in this Official Statement as generally described below ( annual financial information ); and 28

35 (ii) Timely notice (not in excess of ten business days after the occurrence of the event) of the occurrence of any of the following events with respect to the Bonds: a. principal and interest payment delinquencies; b. non-payment related defaults, if material; c. unscheduled draws on debt service reserves reflecting financial difficulties; d. unscheduled draws on credit enhancements reflecting financial difficulties; e. substitution of credit or liquidity providers, or their failure to perform; f. adverse tax opinions, the issuance by the IRS of proposed final determinations of taxability, Notice of Proposed Issue (IRS Form 5701 TEB) or the material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the bonds; g. modifications to rights of holders of the Bonds, if material; h. bond calls (other than scheduled mandatory redemptions of Term Bonds), if material, and tender offers; i. defeasances; j. release, substitution, or sale of property securing repayment of the Bonds, if material; k. rating changes; l. bankruptcy, insolvency, receivership or similar event of the District (a Bankruptcy Event, as defined in the Rule); m. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and n. appointment of a successor or additional trustee or the change of name of a trustee, if material. The District also will provide to the MSRB timely notice of a failure by the District to provide required annual financial information on or before the date specified below. Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the District undertakes to provide will consist of (i) annual financial statements prepared (except as noted in the financial statements) in accordance with applicable generally accepted accounting principles applicable to local governmental units of the State, such as the District, as such principles may be changed from time to time and as permitted by State law; which statements may be unaudited, provided that if and when audited financial statements are prepared and available to the District they will be provided; (ii) a statement of authorized, issued and outstanding general obligation debt of the District; (iii) the assessed value of the property within the District subject to ad valorem taxation; and (iv) ad valorem tax levy rates and amounts and percentage of taxes collected. The annual financial information will be provided to the MSRB not later than the last day of the ninth month after the end of each fiscal year of the District (currently, the fiscal year ending August 31), as such fiscal year may be changed as required or permitted by State law, commencing with the District s fiscal year ending August 31, The annual financial information may be provided in a single or multiple documents, and may be incorporated by specific reference to documents available to the public on the internet website of the MSRB or filed with the SEC. Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency, or the MSRB, under the circumstances and in the manner permitted by the Rule. The District will give notice to the MSRB of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided. 29

36 Termination of Undertaking. The District s obligations under the Undertaking shall terminate upon the legal defeasance of all of the Bonds. In addition, the District s obligations under the Undertaking shall terminate if those provisions of the Rule which require the District to comply with the Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with federal securities laws delivered to the District, and the District provides timely notice of such termination to the MSRB. Remedy for Failure to Comply with Undertaking. If the District or any other obligated person fails to comply with the Undertaking, the District will proceed with due diligence to cause such noncompliance to be corrected as soon as practicable after the District learns of that failure. No failure by the District or other obligated person to comply with the Undertaking will constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond will be to take such actions as that holder deems necessary, including seeking an order of specific performance from an appropriate court, to compel the District or other obligated person to comply with the Undertaking. Continuing Disclosure Obligation of the State of Washington. The following sentence was furnished by the State for use in this Official Statement. In accordance with the Rule, the State of Washington is also an obligation party with respect to the Bonds and will provide the information described in Appendix D under the heading State of Washington Continuing Disclosure. Prior Compliance with Continuing Disclosure Undertakings. The District entered into an undertaking under the Rule with respect to its Unlimited Tax General Obligation Refunding Bonds, 2010, dated February 16, 2010 (the 2010 Bonds ), which are the only bonds currently outstanding for the District. The District has not failed to comply with its obligations for this undertaking for the 2010 Bonds in the past five years. Pursuant to the Rule, the District entered into an undertaking with respect to its Unlimited Tax General Obligation Bonds, 2002, dated June 1, 2002 (the 2002 Bonds ), which required the District to provide its annual financial information to the nationally recognized municipal securities information repositories ( NRMSIRs ) no later than the ninth month after the end of the District s fiscal year, commencing with the District s fiscal year ending August 31, This undertaking also required the District to provide to the NRMSIRs the District s audited financial statements when available. During the preparation of the official statement for the 2010 Bonds, the District discovered that it was not in compliance with this undertaking. Specifically, the District failed to provide (i) annual financial information for the calendar year ending December 31, 2008; and (ii) audited financial statements for the fiscal year ending August 31, Upon learning of the foregoing noncompliance, the District submitted the required information and financial statements via the EMMA website. In addition, a material event notice identifying the late filing was submitted via the EMMA website. Ratings As noted on the cover page of this Official Statement, Moody s Investors Service ( Moody s ) has assigned its credit enhanced rating of Aa1 based upon the District s participation in the Washington State School District Credit Enhancement Program (see Appendix D). Moody s has also assigned an underlying rating of Aa3 to the Bonds. The ratings reflect only the views of the rating agency and an explanation of the significance of the ratings may be obtained from the rating agency. There is no assurance that the ratings, will be retained for any given period of time or that the ratings will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the ratings will likely have an adverse effect on the market price of the Bonds. 30

37 Legal and Underwriting Approval of Counsel Legal matters incident to the authorization, issuance and sale of the Bonds by the District are subject to the approving legal opinion of Bond Counsel. The form of the opinion of Bond Counsel with respect to the Bonds is attached as Appendix A. The opinion of Bond Counsel is given based on factual representations made to Bond Counsel, and under existing law, as of the date of initial delivery of the Bonds, and Bond Counsel assumes no obligation to revise or supplement its opinion to reflect any facts or circumstances that may thereafter come to its attention, or any changes in law that may thereafter occur. The opinion of Bond Counsel is an expression of its professional judgment on the matters expressly addressed in its opinion and does not constitute a guarantee of result. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Litigation There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of the District to issue the Bonds. There is no litigation pending or threatened which would materially affect the finances of the District or affect the District s ability to meet debt service requirements on the Bonds. Because of the nature of its activities, the District is subject to certain pending legal actions which arise in the ordinary course of business. Based on the information presently known, the District believes that the ultimate liability for any of such legal actions will not be material to the financial position of the District. Public Disclosure Law. Chapter 42.17A RCW (the Public Disclosure Law) provides, among other things, for reporting procedures relating to the financing of election campaigns. Public agencies are prohibited from making expenditures to promote ballot propositions. One of the civil remedies and sanctions which may be imposed by court order, if the court finds the violation of any provision of such law probably affected the outcome of any election, is that the result of such election may be held void and a special election is ordered to be held within 60 days of that finding. Any action to void an election must be commenced within one year of the date of the election in question. RCW 42.17A.765 provides that the State Attorney General and the prosecuting authorities of political subdivisions of the State (the Prosecuting Attorney ) may bring civil actions in the name of the State for any appropriate civil remedy, including the remedy referred to in the immediately preceding paragraph. If after written notification to the State Attorney General and the Prosecuting Attorney such officials do not commence an action within 45 days after such notice, the notifying citizen may bring a citizen s action to enforce the remedy. The election in the District which approved the issuance of the Bonds was held on February 11, No proceedings have been instituted nor demands made upon the appropriate officials to institute any proceedings, nor are threats thereof known to any of the District s officials, challenging such election. Conflicts of Interest All or a portion of the fees of the Underwriter and Bond Counsel are contingent upon the issuance and sale of the Bonds. In addition, Bond Counsel from time to time serves as counsel to the Underwriter with respect to bonds issued by issuers other than the District. None of the Board of Directors or other officers of the District have any conflict of interest in the issuance of the Bonds that is prohibited by applicable law. Official Statement This Preliminary Official Statement has been deemed final by the District as of its date pursuant to the Rule. 31

38 Financial Advisor D.A. Davidson & Co. has served as financial advisor to the District relative to the preparation of the Bonds for sale, timing of the sale and other factors relating to the Bonds. The financial advisor has not audited, authenticated or otherwise verified the information set forth in this Official Statement or other information provided relative to the Bonds. D.A. Davidson & Co. makes no guaranty, warranty or other representation on any matter related to the information contained in the Official Statement. The financial advisor s compensation is contingent on the sale and delivery of the Bonds. Underwriting The Bonds are being purchased by the Underwriter. The purchase contract provides that the Underwriter will purchase all of the Bonds, if any are purchased, at a price of percent of the par value of the Bonds. The Bonds will be reoffered at an average price of percent of the par value of the Bonds. After the initial public offering, the public offering prices may be varied from time to time. The Underwriter has entered into an agreement (the Agreement ) with Pershing LLC ( Pershing ), a subsidiary of The Bank of New York Mellon Corporation, for the distribution of certain municipal securities offerings allocated to the Underwriter at the original offering prices. Under the Agreement, if applicable to the Bonds, the Underwriter will share with Pershing a portion of the fee or commission, exclusive of management fees, paid to the Underwriter. The Underwriter of the Bonds has entered into a distribution agreement ( Distribution Agreement ) with Charles Schwab & Co., Inc. ( CS&Co ) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Distribution Agreement, CS&Co. will purchase Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co. sells. Concluding Statement The information contained herein should not be construed as representing all conditions affecting the District or the Bonds. Additional information may be obtained from the District. The statements relating to the Bond Resolution are in summarized form, and in all respects are subject to and qualified in their entirety by express reference to the provisions of the Bond Resolution in its complete form. The information assembled herein is not to be construed as a contract with owners of the Bonds. 32

39 Appendix A Form of Bond Counsel Opinion

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41 FORM OF BOND COUNSEL OPINION May, 2014 Wenatchee School District No. 246, Chelan County, Washington Re: Wenatchee School District No. 246, Chelan County, Washington $ Unlimited Tax General Obligation Bonds, 2014 We have served as bond counsel to Wenatchee School District No. 246, Chelan County, Washington (the District ), in connection with the issuance of the above-referenced bonds (the Bonds ), and in that capacity have examined such law and such certified proceedings and other documents as we have deemed necessary to render this opinion. As to matters of fact material to this opinion, we have relied upon representations contained in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. The Bonds are issued by the District pursuant to Resolution No (the Bond Resolution ) for capital purposes only, being the Projects specified in the Bond Resolution, which shall not include the replacement of equipment, pursuant to an election authorizing the Bonds and under and in accordance with the Constitution and laws of the State of Washington. Reference is made to the Bonds and the Bond Resolution for the definitions of capitalized terms used and not otherwise defined herein. We express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material relating to the issuance of the Bonds or otherwise used in connection with the Bonds. Under the Internal Revenue Code of 1986, as amended (the Code ), the District is required to comply with certain requirements after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances and the arbitrage rebate requirement to the extent applicable to the Bonds. The District has covenanted in the Bond Resolution to comply with those requirements, but if the District fails to comply with those requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. We have not undertaken and do not undertake to monitor the District s compliance with such requirements. Based upon the foregoing, as of the date of initial delivery of the Bonds to the purchaser thereof and full payment therefor, it is our opinion that under existing law: 1. the District is a duly organized and legally existing municipal corporation under the laws of the State of Washington; PHONE: FAX: WEST 422 RIVERSIDE AVENUE, SUITE 1310, SPOKANE, WASHINGTON SPOKANE WASHINGTON SEATTLE WASHINGTON

42 Wenatchee School District No. 246, Chelan County, Washington May, 2014 Page 2 2. the Bonds have been duly authorized and executed by the District and are issued in full compliance with the provisions of the Constitution and laws of the State of Washington and the resolutions of the District relating thereto; 3. the Bonds constitute valid and binding general obligations of the District payable from annual ad valorem taxes to be levied without limitation as to rate or amount on all of the taxable property within the District, except only to the extent that enforcement of payment may be limited by bankruptcy, insolvency or other laws affecting creditors rights and by the application of equitable principles and the exercise of judicial discretion in appropriate cases; and 4. assuming compliance by the District after the date of issuance of the Bonds with applicable requirements of the Code, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals; however, while interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by corporations is to be taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by certain S corporations may be subject to tax, and interest on the Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. We express no opinion regarding any other federal tax consequences of receipt of interest on the Bonds. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. We bring to your attention the fact that the foregoing opinions are expressions of our professional judgment on the matters expressly addressed and do not constitute guarantees of result. Respectfully submitted,

43 Appendix B Book Entry Transfer System

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45 The Depository Trust Company A subsidiary of The Depository Trust & Clearing Corporation Sample Offering Document Language Describing DTC and Book-Entry-Only Issuance 1. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the securities (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at -i- SOL

46 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.] 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). -ii- SOL

47 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant s interest in the Securities, on DTC s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent s DTC account. 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. [8/11] -iii- SOL

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49 Appendix C Financial Statements

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51 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 F-196 Annual Financial Statements Chelan Fiscal Year RUN: 12/12/ :52:09 AM ANNUAL FINANCIAL STATEMENTS Certification Page Balance Sheet as of August 31, 2013-All s Statement of Revenues, Expenditures, and Changes in Balance For the Year Ended August 31, 2013-All s Budgetary Comparison Schedules-All s Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets Schedule of Long-Term Liabilities Report of Revenues and Other Financing Sources-All s Program/Activity/Object Report

52 REPORT F196 WENATCHEE SCHOOL DISTRICT NO. 246 F-196 ANNUAL FINANCIAL STATEMENTS FOR FISCAL YEAR RUN: 12/12/ :52:10 AM CERTIFICATION The Annual Financial Statements (Report F-196) for Wenatchee School District No. 246 of Chelan County for the fiscal year ended August 31, 2013, were prepared on the modified accrual basis of accounting in accordance with the appropriate accounting principles as stated in the Accounting Manual for Public School Districts in the State of Washington. School was conducted for 180 days. (If school was operated fewer than 180 days, please include a statement covering the reasons and effort to make up days lost.) The indirect cost rate proposal has been reviewed and the data reflects allowable costs in accordance with federal requirements and OMB circular A-87 and all costs are properly allocable to federal awards. The school district Annual Financial Statement has been reviewed and submitted to OSPI in accordance with WAC for the fiscal year September 1, 2012-August 31, 2013 Approved: Reviewed: School District Superintendent or Authorized Official ESD Superintendent or Authorized Official Date Date REPORT F-196 SUMMARY Total Revenues and Other Financing Sources Total Expenditures Other Financing Uses Excess of Revenues/Other Financing Sources Over/(Under) Expenditures and Other Financing Uses Beginning Total Balance Prior Year(s) Corrections or Restatements Ending Total Balance General 72,568, ,961, ,00-1,547, ,717, ,169, ASB 892, , , , , Debt Service 2,439, ,394, , ,506, ,551, Capital Projects 1,302, ,746, ,444, ,827, , Transportation Vehicle 254, , , , , Permanent Total 77,457, ,994, ,00-3,691, ,476, ,785, Locked Date: Nov 04, 2013 Certification Page

53 REPORT F196 E.S.D. 171 Wenatchee School District No. 246 Balance Sheet RUN: 12/12/ :52:11 AM COUNTY: 04 Chelan Governmental s August 31, 2013 General ASB Debt Service Capital Projects Transportation Vehicle Permanent Total ASSETS: Cash and Cash Equivalents Minus Warrants Outstanding Taxes Receivable Due From Other s Due From Other Governmental Units Accounts Receivable Interfund Loans Receivable Accrued Interest Receivable Inventory Prepaid Items Investments Investments/Cash With Trustee Investments-Deferred Compensation Self-Insurance Security Deposit TOTAL ASSETS 2,009, ,968, ,056, , , , , ,457,00 21,430, , , ,00 544, ,124, ,551,25 3,676, , , , ,144, ,352, , , , ,49 248, ,066, ,077, ,180, , , , , , ,914, ,252, LIABILITIES: Accounts Payable Contracts Payable Current Accrued Interest Payable Accrued Salaries Revenue Anticipation Notes Payable Payroll Deductions and Taxes Payable Due To Other Governmental Units Deferred Compensation Payable Estimated Employee Benefits Payable Due To Other s 1,200, ,723, , , , , , , ,178, ,723, , , , Page 1 of 2

54 REPORT F196 E.S.D. 171 Wenatchee School District No. 246 Balance Sheet RUN: 12/12/ :52:11 AM COUNTY: 04 Chelan Governmental s August 31, 2013 General ASB Debt Service Capital Projects Transportation Vehicle Permanent Total LIABILITIES: Interfund Loans Payable Deposits Matured Bonds Payable Matured Bond Interest Payable Arbitrage Rebate Payable Deferred Revenue TOTAL LIABILITIES 5,118, ,260, , , ,124, ,124, , ,343, ,466, FUND BALANCE: Nonspendable Balance Restricted Balance Committed Balance Assigned Balance Unassigned Balance TOTAL FUND BALANCE 37, ,459, ,698, ,022,00 4,953, ,169, , , ,551, ,551, , , , , , ,442, ,698, ,654, ,953, ,785, TOTAL LIABILITIES AND FUND BALANCE 21,430, , ,676, ,352, , ,252, Page 2 of 2

55 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:12 AM E.S.D. 171 Statement of Revenues, Expenditures, and Changes in Balance COUNTY: 04 Chelan Governmental s For the Year Ended August 31, 2013 General ASB Debt Service Capital Projects Transportation Vehicle Permanent Total REVENUES: Local 12,467, , ,439, , ,961, State 51,277, , , ,518, Federal 8,607, ,607, Federal Stimulus Other 215, , TOTAL REVENUES 72,568, , ,439, ,148, , ,303, EXPENDITURES: CURRENT: Regular Instruction 38,625, ,625, Federal Stimulus Special Education 7,680, ,680, Vocational Education 2,333, ,333, Skills Center 1,211, ,211, Compensatory Programs 6,617, ,617, Other Instructional Programs 1,409, ,409, Community Services 328, , Support Services 15,250, ,250, Student Activities/Other 878, , CAPITAL OUTLAY: Sites 156, , Building 3,449, ,449, Equipment 140, , Instructional Technology Energy Transportation Equipment 13, , Sales and Lease Other 504, , DEBT SERVICE: Principal 1,580,00 1,580,00 Interest and Other Charges 814, , Bond/Levy Issuance TOTAL EXPENDITURES 73,961, , ,394, ,746, , ,994, Page 1 of 2

56 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:12 AM E.S.D. 171 Statement of Revenues, Expenditures, and Changes in Balance COUNTY: 04 Chelan Governmental s For the Year Ended August 31, 2013 General ASB Debt Service Capital Projects Transportation Vehicle Permanent Total DEBT SERVICE: REVENUES OVER (UNDER) EXPENDITURES -1,393, , , ,598, , ,691, OTHER FINANCING SOURCES (USES): Bond Sales & Refunding Bond Sales Long-Term Financing Transfers In Transfers Out (GL 536) Other Financing Uses (GL 535) Other TOTAL OTHER FINANCING SOURCES (USES) -154,00-154,00 154,00 154,00 154,00-154,00 EXCESS OF REVENUES/OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES -1,547, , , ,444, , ,691, BEGINNING TOTAL FUND BALANCE 14,717, , ,506, ,827, , ,476, Prior Year(s) Corrections or Restatements ENDING TOTAL FUND BALANCE 13,169, , ,551, , , ,785, Page 2 of 2

57 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:14 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan General For The Year Ended August 31, 2013 REVENUES: Local State Federal Federal Stimulus Other TOTAL REVENUES EXPENDITURES CURRENT: Regular Instruction Federal Stimulus Special Education Vocational Education Skills Center Compensatory Programs Other Instructional Programs Community Services Support Services Student Activities/Other CAPITAL OUTLAY: Sites Building Equipment Energy Transportation Equipment Other FINAL BUDGET 12,655,64 50,931, ,397, ,60 73,082, ,403, ,820, ,286, ,241, ,493, ,003, , ,093, ,49 ACTUAL 12,467, ,277, ,607, , ,568, ,625, ,680, ,333, ,211, ,617, ,409, , ,250, , Variance with Final Budget POSITIVE (NEGATIVE) -188, , , , , ,777, , , , , , , , , DEBT SERVICE: Principal Interest and Other Charges TOTAL EXPENDITURES 75,997, ,961, ,036, REVENUES OVER (UNDER) EXPENDITURES -2,914, ,393, ,521, Page 1 of 2

58 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:14 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan General For The Year Ended August 31, 2013 OTHER FINANCING SOURCES (USES) Bond Sales and Refunding Bond Sales Long-Term Financing Transfers In Transfers Out (GL 536) Other Financing Uses (GL 535) Other TOTAL OTHER FINANCING SOURCES (USES) FINAL BUDGET ACTUAL -154,00-154,00 Variance with Final Budget POSITIVE (NEGATIVE) -154,00-154,00 EXCESS OF REVENUES/OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES -2,914, ,547, ,367, BEGINNING TOTAL FUND BALANCE Prior Year(s) Corrections or Restatements ENDING TOTAL FUND BALANCE 14,000,00 11,085, ,717, ,169, , ,084, Page 2 of 2

59 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:17 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Associated Student Body For The Year Ended August 31, 2013 REVENUES: Local State Federal Federal Stimulus Other TOTAL REVENUES EXPENDITURES CURRENT: Regular Instruction Federal Stimulus Special Education Vocational Education Skills Center Compensatory Programs Other Instructional Programs Community Services Support Services Student Activities/Other CAPITAL OUTLAY: Sites Building Equipment Energy Transportation Equipment Other FINAL BUDGET 1,083, ,083, , ACTUAL 892, , , Variance with Final Budget POSITIVE (NEGATIVE) -190, , , DEBT SERVICE: Principal Interest and Other Charges TOTAL EXPENDITURES 956, , , REVENUES OVER (UNDER) EXPENDITURES 127, , , Page 1 of 2

60 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:17 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Associated Student Body For The Year Ended August 31, 2013 OTHER FINANCING SOURCES (USES) Bond Sales and Refunding Bond Sales Long-Term Financing Transfers In Transfers Out (GL 536) Other Financing Uses (GL 535) Other TOTAL OTHER FINANCING SOURCES (USES) FINAL BUDGET ACTUAL Variance with Final Budget POSITIVE (NEGATIVE) EXCESS OF REVENUES/OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES 127, , , BEGINNING TOTAL FUND BALANCE Prior Year(s) Corrections or Restatements ENDING TOTAL FUND BALANCE 485,00 612, , , , , Page 2 of 2

61 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:18 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Debt Service For The Year Ended August 31, 2013 REVENUES: Local State Federal Federal Stimulus Other TOTAL REVENUES EXPENDITURES CURRENT: Regular Instruction Federal Stimulus Special Education Vocational Education Skills Center Compensatory Programs Other Instructional Programs Community Services Support Services Student Activities/Other CAPITAL OUTLAY: Sites Building Equipment Energy Transportation Equipment Other FINAL BUDGET 2,407,00 2,407,00 ACTUAL 2,439, ,439, Variance with Final Budget POSITIVE (NEGATIVE) 32, , DEBT SERVICE: Principal Interest and Other Charges TOTAL EXPENDITURES 1,580,00 863,95 2,443,95 1,580,00 814, ,394, , , REVENUES OVER (UNDER) EXPENDITURES -36,95 45, , Page 1 of 2

62 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:18 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Debt Service For The Year Ended August 31, 2013 OTHER FINANCING SOURCES (USES) Bond Sales and Refunding Bond Sales Long-Term Financing Transfers In Transfers Out (GL 536) Other Financing Uses (GL 535) Other TOTAL OTHER FINANCING SOURCES (USES) FINAL BUDGET ACTUAL Variance with Final Budget POSITIVE (NEGATIVE) EXCESS OF REVENUES/OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES -36,95 45, , BEGINNING TOTAL FUND BALANCE Prior Year(s) Corrections or Restatements ENDING TOTAL FUND BALANCE 2,856,19 2,819,24 2,506, ,551, , , Page 2 of 2

63 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:19 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Capital Projects For The Year Ended August 31, 2013 REVENUES: Local State Federal Federal Stimulus Other TOTAL REVENUES EXPENDITURES CURRENT: Regular Instruction Federal Stimulus Special Education Vocational Education Skills Center Compensatory Programs Other Instructional Programs Community Services Support Services Student Activities/Other CAPITAL OUTLAY: Sites Building Equipment Instructional Technology Energy Sales and Lease Transportation Equipment Other FINAL BUDGET 97, ,179, , ,326, , ,540,00 500,00 397, ACTUAL 161, , ,148, , ,449, , Variance with Final Budget POSITIVE (NEGATIVE) 63, ,192, , ,178, , ,090, , , Page 1 of 2

64 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:19 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Capital Projects For The Year Ended August 31, 2013 DEBT SERVICE: Bond/Levy Issuance and/or Election Principal Interest and Other Charges TOTAL EXPENDITURES 14,761, ,746, ,014, REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Bond Sales and Refunding Bond Sales Long-Term Financing Transfers In Transfers Out (GL 536) Other Financing Uses (GL 535) Other TOTAL OTHER FINANCING SOURCES (USES) -3,435,00 FINAL BUDGET -2,598, ACTUAL 154,00 154,00 836, Variance with Final Budget POSITIVE (NEGATIVE) 154,00 154,00 EXCESS OF REVENUES/OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES -3,435,00-2,444, , BEGINNING TOTAL FUND BALANCE Prior Year(s) Corrections or Restatements ENDING TOTAL FUND BALANCE 3,435,00 2,827, , , , Page 2 of 2

65 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:21 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Transportation Vehicle For The Year Ended August 31, 2013 REVENUES: Local State Federal Federal Stimulus Other TOTAL REVENUES EXPENDITURES CURRENT: Regular Instruction Federal Stimulus Special Education Vocational Education Skills Center Compensatory Programs Other Instructional Programs Community Services Support Services Student Activities/Other CAPITAL OUTLAY: Sites Building Equipment Energy Transportation Equipment Other FINAL BUDGET 5 200,00 200,05 50,00 ACTUAL , , , Variance with Final Budget POSITIVE (NEGATIVE) , , , DEBT SERVICE: Bond/Levy Issuance and/or Election Principal Interest and Other Charges TOTAL EXPENDITURES 50,00 13, , Page 1 of 2

66 REPORT F196 Wenatchee School District No. 246 RUN: 12/12/ :52:21 AM E.S.D. 171 Budgetary Comparison Schedule COUNTY: 04 Chelan Transportation Vehicle For The Year Ended August 31, 2013 REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Bond Sales and Refunding Bond Sales Long-Term Financing Transfers In Transfers Out (GL 536) Other Financing Uses (GL 535) Other TOTAL OTHER FINANCING SOURCES (USES) 150,05 FINAL BUDGET 240, ACTUAL Variance with Final 90, Budget POSITIVE (NEGATIVE) EXCESS OF REVENUES/OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES 150,05 240, , BEGINNING TOTAL FUND BALANCE Prior Year(s) Corrections or Restatements ENDING TOTAL FUND BALANCE 8, , , , , Page 2 of 2

67 REPORT F196 E.S.D. 171 COUNTY: 04 Chelan Wenatchee School District No. 246 Statement Of Fiduciary Net Assets Fiduciary s August 31, 2013 RUN: 12/12/ :52:22 AM ASSETS: Imprest Cash Cash On Hand Cash On Deposit with Cty Treas Minus Warrants Outstanding Due From Other s Accounts Receivable Accrued Interest Receivable Investments Investments/Cash With Trustee Other Assets Capital Assets, Land Capital Assets, Buildings Capital Assets, Equipment Accum Depreciation, Buildings Accum Depreciation, Equipment TOTAL ASSETS LIABILITIES: Accounts Payable Due To Other s TOTAL LIABILITIES NET ASSETS: Net assets held in trust for: Restricted for Other Items Restricted for Self Insurance Restricted for Uninsured Risks Nonspendable -- Trust Principal Committed to Other Purposes Assigned to Purposes Unassigned Balance TOTAL NET ASSETS Private Purpose Trust Other Trust Page 1 of 1

68 REPORT F196 E.S.D. 171 Wenatchee School District No. 246 Statement of Changes in Fiduciary Net Assets RUN: 12/12/ :52:23 AM COUNTY: 04 Chelan Fiduciary s For the Year Ended August 31, 2013 ADDITIONS: Contributions: Private Donations Employer Members Other TOTAL CONTRIBUTIONS Investment Income: Net Appreciation (Depreciation) in Fair Value Interest and Dividends Less Investment Expenses Net Investment Income Other Additions: Rent or Lease Revenue Total Other Additions TOTAL ADDITIONS DEDUCTIONS: Benefits Refund of Contributions Administrative Expenses Scholarships Other TOTAL DEDUCTIONS Private Purpose Trust Other Trust Net Increase (Decrease) Net Assets--Beginning Prior Year(s) Corrections or Restatements NET ASSETS--ENDING Page 1 of 1

69 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Schedule of Long-Term Liabilities Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:24 AM Description Beginning Outstanding Debt September 1, 2012 Amount Issued/Increased Amount Redeemed/Decreased Ending Outstanding Debt August 31, 2013 Total Voted Bonds Total Non-Voted Notes/Bonds Qualified Zone Academy Bonds (QZAB) Qualified School Construction Bonds(QSCB) 21,075,00 1,580,00 19,495,00 Other Long-Term Debt Capital Leases Contracts Payable (GL 603) NonCancellable Operating Leases Claims & Judgments Compensated Absences Other Long-Term Liabilities 1,342, , ,449, Total Other Long-Term Liabilities 1,342, , ,449, TOTAL LONG-TERM LIABILITIES 22,417, , ,580,00 20,944, Page 1 of 1

70 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Report of Revenues and Other Financing Sources Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:25 AM General Debt Service Capital Projects Transportation Vehicle LOCAL TAXES 1100 Local Property Tax 1300 Sale of Tax Title Property 1400 Local in Lieu of Taxes 1500 Timber Excise Tax 1600 County-Administered Forests 1900 Other Local Taxes 1000 Total Local Taxes 10,840, , , ,845, ,434, ,435, LOCAL SUPPORT NONTAX 2100 Tuition and Fees, Unassigned 2131 Secondary Vocational Education - Tuition 2145 Skills Center Tuitions and Fees 2171 Traffic Safety Education Fees 2173 Summer School Tuitions and Fees 2186 Community School Tuitions and Fees 2188 Day Care Tuitions and Fees 2200 Sales of Goods, Supplies and Services, Unassigned 2231 Secondary Voc. Ed., Sales of Goods, Supplies and Services 2245 Skills Center, Sales of Goods, Supplies and Services 2288 Day Care Sales of Goods, Supplies, and Services 2289 Other Community Services Sales of Goods, Supplies, and Services 2298 School Food Services--Sales of Goods, Supplies, and Services 2300 Investment Earnings 2400 Interfund Loan Interest Earnings 2500 Gifts and Donations 2600 Fines and Damages 2700 Rentals and Leases 2800 Insurance Recoveries 2900 Local Support Nontax, Unassigned 2910 E-rate 2000 Total Local Support Nontax STATE, GENERAL PURPOSE 80, , ,15 148, , , , , , , , , , , ,621, , , , , , Page 1 of 6

71 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Report of Revenues and Other Financing Sources Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:25 AM General Debt Service Capital Projects Transportation Vehicle 3100 Apportionment 3121 Special Education - General Apportionment 3300 Local Effort Assistance 3600 State Forests 3900 Other State General Purpose, Unassigned 3000 Total State, General Purpose 37,874, ,019, ,367, ,260, STATE, SPECIAL PURPOSE 4100 Special Purpose, Unassigned 4121 Special Education 4126 State Institutions, Special Education 4130 State ing Assistance Paid Direct to District 4155 Learning Assistance 4156 State Institutions, Centers and Homes, Delinquent 4158 Special and Pilot Programs 4159 Juveniles in Adult Jails 4165 Transitional Bilingual 4166 Student Achievement 4174 Highly Capable 4188 Day Care 4198 School Food Service 4199 Transportation - Operations 4230 State ing Assistance Paid Direct to Contractor 4300 Other State Agencies, Unassigned 4321 Special Education - Other State Agencies 4326 State Institutions - Special Education - Other State Agencies 4330 State ing Assistance Other 4356 State Institutions, Centers and Homes, Delinquent - Other State Agencies 4358 Special and Pilot Programs - Other State Agencies 4365 Transitional Bilingual - Other State Agencies 4388 Day Care - Other State Agencies 4398 School Food Service - Other State Agencies 4399 Transportation Operations - Other State Agencies 4499 Transportation Reimbursement - Depreciation 4,285, ,252, , , ,346, , , ,102, , , , Page 2 of 6

72 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Report of Revenues and Other Financing Sources Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:25 AM General Debt Service Capital Projects Transportation Vehicle STATE, SPECIAL PURPOSE 4000 Total State, Special Purpose 9,016, , , FEDERAL, GENERAL PURPOSE 5200 General Purpose Direct Federal Grants, Unassigned 5300 Impact Aid, Maintenance and Operation 5329 Impact Aid, Special Education ing 5400 Federal in Lieu of Taxes 5500 Federal Forests 5600 Qualified Bond Interest Credit 5000 Total Federal, General Purpose 462, , FEDERAL, SPECIAL PURPOSE 6100 Special Purpose, OSPI, Unassigned 6111 Federal Stimulus-Title I 6112 Federal Stimulus-School Improvement 6113 Federal Stimulus-State Fiscal Stabilization 6114 Federal Stimulus-IDEA 6118 Federal Stimulus-Competitive Grants 6119 Federal Stimulus-Other 6121 Special Education, Medicaid Reimbursement 6124 Special Education, Supplemental 6138 Secondary Vocational Education 6140 Impact Aid?Construction 6146 Skills Center 6151 ESEA Disadvantaged, Fed 6152 Other Title, ESEA Fed 6153 ESEA Migrant, Federal 6154 Reading First, Federal 6157 Institutions, Neglected and Delinquent 6161 Head Start 6162 Math and Science - Professional Development 6164 Limited English Proficiency 6167 Indian Education, JOM 6168 Indian Education, ED 6176 Targeted Assistance 526, ,471, , , ,609, , , , Page 3 of 6

73 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Report of Revenues and Other Financing Sources Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:25 AM General Debt Service Capital Projects Transportation Vehicle FEDERAL, SPECIAL PURPOSE 6178 Youth Training Programs 6188 Day Care 6189 Other Community Services 6198 School Food Services 6199 Transportation - Operations 6200 Direct Special Purpose Grants 6211 Federal Stimulus-Title I 6212 Federal Stimulus-School Improvement 6213 Federal Stimulus-State Fiscal Stabilization 6214 Federal Stimulus-IDEA 6218 Federal Stimulus-Competitive Grants 6219 Federal Stimulus-Other 6221 Special Education - Medicaid Reimbursement 6224 Special Education - Supplemental 6238 Secondary Vocational Education 6240 Impact Aid 6246 Skills Center 6251 ESEA Disadvantaged, Fed 6252 Other Title, ESEA Fed 6253 ESEA Migrant, Federal 6254 Reading First, Federal 6257 Institutions, Neglected and Delinquent 6261 Head Start 6262 Math and Science - Professional Development 6264 Limited English Proficiency 6267 Indian Education - JOM 6268 Indian Education - ED 6276 Targeted Assistance 6278 Youth Training, Direct Grants 6288 Day Care 6289 Other Community Services 6298 School Food Services 6299 Transportation - Operations 2,150, Page 4 of 6

74 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Report of Revenues and Other Financing Sources Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:25 AM General Debt Service Capital Projects Transportation Vehicle FEDERAL, SPECIAL PURPOSE 6300 Federal Grants Through Other Agencies, Unassigned 6310 Medicaid Administrative Match 6311 Federal Stimulus-Title I 6312 Federal Stimulus-School Improvement 6313 Federal Stimulus-State Fiscal Stabilization 6314 Federal Stimulus-IDEA 6318 Federal Stimulus-Competitive Grants 6319 Federal Stimulus-Other 6321 Special Education - Medicaid Reimbursement 6324 Special Education - Supplemental 6338 Secondary Vocational Education 6340 Impact Aid Construction 6346 Skills Center 6351 ESEA Disadvantaged, Fed 6352 Other Title, ESEA Fed 6353 ESEA Migrant, Federal 6354 Reading First, Federal 6357 Institutions, Neglected and Delinquent 6361 Head Start 6362 Math and Science - Professional Development 6364 Limited English Proficiency 6367 Indian Education - JOM 6368 Indian Education - ED 6376 Targeted Assistance 6378 Youth Training 6388 Day Care 6389 Other Community Services 6398 School Food Services 6399 Transportation - Operations 6998 USDA Commodities 6000 Total Federal, Special Purpose REVENUES FROM OTHER SCHOOL DISTRICTS 7100 Program Participation, Unassigned 45, , , , ,144, Page 5 of 6

75 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Report of Revenues and Other Financing Sources Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:25 AM General Debt Service Capital Projects Transportation Vehicle REVENUES FROM OTHER SCHOOL DISTRICTS 7121 Special Education 7131 Vocational Education 7145 Skills Center 7189 Other Community Services 7197 Support Services 7198 School Food Services 7199 Transportation 7301 Nonhigh Participation 7000 Total Revenues From Other School Districts 6, , , REVENUES FROM OTHER ENTITITES 8100 Governmental Entities 8188 Day Care 8189 Community Services 8198 School Food Services 8199 Transportation 8200 Private Foundations 8500 Nonfederal, ESD 8000 Total Revenues From Other Entities 42,00 13, ,00 20, , OTHER FINANCING SOURCES 9100 Sale of Bonds 9200 Sale of Real Property 9300 Sale of Equipment 9400 Compensated Loss of Fixed Assets 9500 Long-Term Financing 9600 Sale of Refunding Bonds 9900 Transfers 9000 Total Other Financing Sources 154,00 154,00 TOTAL REVENUES AND OTHER FINANCING SOURCES 72,568, ,439, ,302, , Page 6 of 6

76 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Program/Activity/Object Report Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:26 AM NO. PROGRAM TITLE PROGRAM EXPENDITURE SUMMARY 13 Federal Stimulus - SFSF and Education Jobs AMOUNT 01 Basic Education 37,471, ALE 1,304, Stim, Title I Stim, Schl Imprv Stim, IDEA Stim, Compt Grants Stim, Other Sp Ed, Sup, St 6,260, Sp Ed, Sup, Fed 1,420, Sp Ed, Inst, St Sp Ed, Oth, Fed Voc, Basic, St 2,304, MidSchCar/Tec Voc, Fed 45, Voc, Other Skil Cnt, Bas, St 1,193, Skill Cntr, Fed 25, ESEA Disadvantaged, Fed 1,553, Other Title, ESEA, Fed 592, ESEA Migrant, Federal 959, Read First, Fed LAP 1,196, St In, Ctr/Hm, D 102, St In, N/D, Fed Sp/Plt Pgm, St 740, Inst. JAJ Head Start, Fed MS, Pro Dv, Fed LEP, Fed 258, Tran Biling, St 1,171, Stu Achvmnt, St Ind Ed, Fd, JOM.00 ACTIVITY EXPENDITURE SUMMARY NO. ACTIVITY TITLE AMOUNT 11 Bd of Dir 579, Supt Off 1,165, Busns Off 859, HR 533, Pblc Rltn 85, Supv Inst 1,512, Lrn Resrc 1,013, Princ Off 4,716, Guid/Coun 2,580, Pupil M/S 213, Health 1,885, Teaching 41,392, Extracur 1,552, Pmt to SD 14,60 31 InstProDev 1,927, Inst Tech 1,265, Supervisn 219, Food 1,327, Operation 1,325, Transfers -29, Supervisn 208, Operation 1,109, Maintnce 291, Insurance 19, Transfers -105, Supv Bldg 298, Grnd Mnt 479,56 63 Oper Bldg 2,203, Maintnce 2,071, Utilities 1,145, Bldg Secu 160, Insurance 413, Info Sys 1,088, Printing.00 Page 1 of 2 OBJECT EXPENDITURE SUMMARY NO. OBJECT TITLE AMOUNT 0 Debit Transfer 227, Credit Transfer -227, Cert. Salaries 32,999, Class. Salaries 12,477, Employee Benefits 15,944, Supplies / Materials 4,993, Purchased Services 6,749, Travel 292, Capital Outlay 504, TOTAL ALL OBJECTS 73,961,689.77

77 REPORT F196 E.S.D. 171 COUNTY: 04 Wenatchee School District No. 246 Program/Activity/Object Report Chelan For the Year Ended August 31, 2013 RUN: 12/12/ :52:26 AM PROGRAM EXPENDITURE SUMMARY NO. PROGRAM TITLE AMOUNT 68 Ind Ed, Fd, ED Comp, Othr 42, Traffic Safety Summer School 1,15 74 Highly Capable 376, Prof Dev, State Target Asst, Fed Yth Trg Pm, Fed Inst Pgm, Othr 1,031, Public Radio/TV Comm Schools Day Care 309, Othr Comm Srv 18, Distwide Suppt 11,116, Schl Food Serv 2,843, Pupil Transp 1,621, TOTAL ALL PROGRAMS 73,961, ACTIVITY EXPENDITURE SUMMARY NO. ACTIVITY TITLE AMOUNT 74 Warehouse 92, Mtr Pool 14, Interest Principal Debt Expn Publ Actv 328, TOTAL ALL ACTIVITIES 73,961, Page 2 of 2

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79 Independent Auditor s Report on Financial Statements Board of Directors Wenatchee School District No. 246 Wenatchee, Washington Wenatchee School District No. 246 Chelan County September 1, 2011 through August 31, 2012 REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of Wenatchee School District No. 246, Chelan County, Washington, as of and for the year ended August 31, 2012, and the related notes to the financial statements, which collectively comprise the District s financial statements, as listed on page 13. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the basis of accounting that demonstrates compliance with the Washington State statutes and the Accounting Manual for Public Schools in the State of Washington described in Note 1. This includes determining that the basis of accounting is acceptable for the presentation of the financial statements in the circumstances. Management is also responsible for 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 an opinion 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. Those standards 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 account estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wenatchee School District No. 246, as of August 31, 2012, and the changes in financial position thereof for the year then ended on the basis of accounting that demonstrates compliance with Washington State statutes and the Accounting Manual for Public Schools in the State of Washington described in Note 1. Basis of Accounting We draw attention to Note 1 of the financial statements, which describes the basis of accounting. As described in Note 1 to the financial statements, the financial statements are prepared in accordance with the basis of accounting that demonstrates compliance with Washington State statutes and the Accounting Manual for Public Schools in the State of Washington, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Supplementary and Other Information Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. The accompanying Schedule of Long-Term Liabilities is also presented for purposes of additional analysis as required by the prescribed accounting manual. These schedules are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements, and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements taken as a whole. Purpose of this Report This report is intended for the information and use of management, the Board of Directors, federal awarding agencies and pass-through entities of the District. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations.

80 OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated April 29, 2013 on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control over financial reporting and compliance. TROY KELLEY STATE AUDITOR April 29, 2013 FINANCIAL STATEMENTS Financial Section Wenatchee School District No. 246 Chelan County September 1, 2011 through August 31, 2012 Balance Sheet Governmental s 2012 Statement of Revenues, Expenditures and Changes in Balance Governmental s 2012 Notes to Financial Statements 2012 SUPPLEMENTARY INFORMATION Schedule of Long-Term Liabilities 2012 Schedule of Expenditures of Federal Awards 2012 Notes to the Schedule of Expenditures of Federal Awards 2012

81 Wenatchee School District No. 246 Balance Sheet Governmental s Washington State Auditor's Office 14 August 31, 2012 Debt Capital Transportation General ASB Service Projects Vehicle Permanent Total ASSETS: Cash and Cash Equivalents 2,864, , ,905, Minus Warrants Outstanding -1,771, , ,783, Taxes Receivable 5,141, ,179, ,321, Due From Other s 41, , Due From Other Governmental 728, , , Units Accounts Receivable 61, , Interfund Loans Receivable Accrued Interest Receivable Inventory 33, , Prepaid Items 5, , Investments 15,580,00 498,00 2,505,50 2,733, , ,325, Investments/Cash With Trustee Investments-Deferred Compensation Self-Insurance Security Deposit TOTAL ASSETS 22,643, , ,686, ,979, , ,843, LIABILITIES: Accounts Payable 807, , , , Contracts Payable Current Accrued Interest Payable Accrued Salaries 1,651, ,651, Revenue Anticipation Notes Payable Payroll Deductions and Taxes 153, , Payable Due To Other Governmental 5, , , Units Deferred Compensation Payable Estimated Employee Benefits Payable Due To Other s 41, ,276.42

82 Wenatchee School District No. 246 Balance Sheet Governmental s Washington State Auditor's Office 15 August 31, 2012 Debt Capital Transportation General ASB Service Projects Vehicle Permanent Total LIABILITIES: Interfund Loans Payable Deposits Matured Bonds Payable Matured Bond Interest Payable Arbitrage Rebate Payable Deferred Revenue 5,267, , ,179, ,518, TOTAL LIABILITIES 7,926, , ,179, , ,366, FUND BALANCE: Nonspendable Balance 33, , Restricted Balance 811, , ,506, ,733, Committed Balance 3,585,92 3,585,92 Assigned Balance 4,912,00 1,00 2,827, , ,749, Unassigned Balance 5,375, ,375, TOTAL FUND BALANCE 14,717, , ,506, ,827, , ,476, TOTAL LIABILITIES AND FUND 22,643, , ,686, ,979, , ,843, BALANCE The accompanying notes are an integral part of this financial statement.

83 Wenatchee School District No. 246 Statement of Revenues, Expenditures, and Changes in Balance Governmental s Washington State Auditor's Office 16 REVENUES: For the Year Ended August 31, 2012 Debt Capital Transportation General ASB Service Projects Vehicle Permanent Total Local 12,005, , ,446, , ,408, State 51,338, , , ,507, Federal 9,327, ,327, Federal Stimulus 25,68 25,68 Other 113, , , TOTAL REVENUES 72,810, , ,446, ,098, , ,433, EXPENDITURES: CURRENT: Regular Instruction 37,345, ,345, Federal Stimulus 25,68 25,68 Special Education 7,303, ,303, Vocational Education 2,254, ,254, Skills Center 1,348, ,348, Compensatory Programs 6,941, ,941, Other Instructional Programs 1,413, ,413, Community Services 306, , Support Services 14,031, ,031, Student Activities/Other 841, , CAPITAL OUTLAY: Sites 2,585, ,585, Building 835, , Equipment Instructional Technology Energy 456, , Transportation Equipment 288, , Sales and Lease Other 746, , DEBT SERVICE: Principal 1,450,00 1,450,00 Interest and Other Charges 862, , Bond/Levy Issuance TOTAL EXPENDITURES 71,717, , ,312, ,877, , ,038,541.59

84 Wenatchee School District No. 246 Statement of Revenues, Expenditures, and Changes in Balance Governmental s Washington State Auditor's Office 17 For the Year Ended August 31, 2012 Debt Capital Transportation General ASB Service Projects Vehicle Permanent Total DEBT SERVICE: REVENUES OVER (UNDER) EXPENDITURES 1,092, , , ,778, , ,605, OTHER FINANCING SOURCES (USES): Bond Sales & Refunding Bond Sales Long-Term Financing Transfers In 46,00 46,00 Transfers Out (GL 536) -46,00-46,00 Other Financing Uses (GL 535) Other TOTAL OTHER FINANCING SOURCES (USES) -46,00 46,00 EXCESS OF REVENUES/OTHER FINANCING SOURCES 1,046, , , ,778, , ,605, OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES BEGINNING TOTAL FUND BALANCE 13,670, , ,373, ,606, , ,082, Prior Year(s) Corrections or Restatements ENDING TOTAL FUND BALANCE 14,717, , ,506, ,827, , ,476, The accompanying notes are an integral part of this financial statement.

85 Wenatchee School District Notes to Financial Statements September 1, 2011 through August 31, 2012 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (SSAP) The Wenatchee School District (District) is a municipal corporation organized pursuant to Title 28A of the Revised Code of Washington (RCW) for the purpose of providing public school services to students in Grades K 12. Oversight responsibility for the District s operations is vested with the independently elected board of directors. Management of the district is appointed by and is accountable to the board of directors. Fiscal responsibility, including budget authority and the power to set fees, levy property taxes, and issue debt consistent with provisions of state statutes, also rests with the board of directors. The District presents governmental fund financial statements and related notes on the modified accrual basis of accounting as prescribed by generally accepted accounting principles (GAAP) and required by its regulatory agencies, the Office of Superintendent of Public Instruction and the State Auditor s Office. The District s accounting policies, as reflected in the accompanying financial statements, conform to the Accounting Manual for Public School Districts in the State of Washington, issued jointly by the State Auditor s Office and the Superintend of Public Instruction by the authority of RCW , RCW 28A (1), and RCW 28A This manual allows for a practice that differs from generally accepted accounting principles in the following manner: (1) Districtwide statements are not presented. (2) The financial statements do not report capital assets. (3) Debt is not reported on the face of the financial statements. It is reported on the notes to the financial statements and on the schedule of Long-Term Liabilities. The Schedule of Long-Term Liabilities is required supplemental information. (4) The original budget is not presented. This information is available through the Office of Superintendent of Public Instruction. (5) The Management Discussion and Analysis is not required. (6) The financial statements do not report a liability for Other Post-Employment Benefits (GASB Statement 45). (7) Other departures from GAAP that are material in nature are indicated throughout the Notes. The District presents financial information on the basis of funds, each of which is considered a separate accounting entity. The regulatory agencies require all funds to be presented as major funds. The operations of each fund are accounted for with a separate set of selfbalancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures as appropriate. The various funds in the report are grouped into governmental funds as follows: GOVERNMENTAL FUNDS General This fund is used to account for all expendable financial resources, except those that are required to be accounted for in another fund. In keeping with the principle of as few funds as are necessary, activities such as food services, maintenance, data processing, printing, and transportation activities are included in the General. Capital Projects s These funds account for financial resources to be used for the construction or acquisition of major capital assets. There are two funds that are considered to be of the capital projects fund type: the Capital Projects and the Transportation Vehicle. Capital Projects. This fund is used to account for resources set aside for the acquisition and construction of major capital assets such as land and buildings. Transportation Vehicle. This fund is used to account for the purchase, major repair, rebuilding, and debt service expenditures that relate to pupil transportation equipment. Debt Service This fund is used to account for the accumulation of resources for and the payment of matured general long-term debt principal and interest. Special Revenue In Washington State, the only allowable special revenue fund for school districts is the Associated Student Body (ASB). This fund is accounted for in the District s financial statements as the financial resources legally belong to the District. As a special revenue fund, amount within the ASB may only be used for those purposes that relate to the operation of the Associated Student Body of the District. The District s accounting policies conform to the Accounting Manual for Public School Districts in the State of Washington, issued jointly by the State Auditor and the Superintendent of Public Instruction. The District s financial statements are presented in conformity with that publication. The measurement focus for the District s funds is the modified accrual basis and the current financial resources focus. This basis of accounting focuses primarily on the sources, uses, and balances of current financial resources and often has a budgetary orientation. This means that only current assets and current liabilities are included on their balance sheets. Revenues are recognized as soon as they are measurable and available. Measurable means the amount of the transaction can be readily determined. Revenues are considered available if they are collected within 60 days after year-end to pay liabilities of the current period. Property taxes receivable are measurable but not available and are, therefore, not accrued. Categorical program claims and inter-district billings are measurable and available and are, therefore, accrued.

86 Expenditures are recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for unmatured principal and interest on long-term debt which are recorded when due. The fund liability is incurred when the goods or services have been received. For federal grants, the recognition of expenditures is dependent on the obligation date. (Obligation means a purchase order has been issued, contracts have been awarded, or goods and/or services have been received). BUDGETARY DATA General Budgetary Policies Chapter 28A.505 RCW and Chapter Washington Administrative Code (WAC) mandate school district budget policies and procedures. The board adopts the budget after a public hearing. An appropriation is a prerequisite to expenditure. Appropriations lapse at the end of the fiscal period. Budgetary Basis of Accounting For budget and accounting purposes, revenues and expenditures are accounted for on the modified accrual basis as prescribed in law for all governmental funds. balance is budgeted as available resources and, under statute, may not be negative, unless the district enters into binding conditions with state oversight pursuant to RCW 28A The District receives state funding for specific categorical education-related programs. Amounts that are received for these programs that are not used in the current fiscal year may be carried forward into the subsequent fiscal year, where they may be used only for the same purpose as they were originally received. When the District has such carryover, those funds are expended before any amounts received in the current year are expended. Additionally, the District has other restrictions placed on its financial resources. When expenditures are recorded for purposes for which a restriction or commitment of fund balance is available, those funds that are restricted or committed to that purpose are considered first before any unrestricted or unassigned amount are expended. The District classifies ending fund balance for its governmental funds into five categories. Nonspendable Balance. The amounts reported as Nonspendable are resources of the District that are not in spendable format. They are either non-liquid resources such as inventory or prepaid items, or the resources are legally or contractually required to be maintained intact. Restricted Balance. Amounts that are reported as Restricted are those resources of the District that have had a legal restriction placed on their use either from statute, WAC, or other legal requirements that are beyond the control of the board of directors. Restricted fund balance includes anticipated recovery of revenues that have been received but are restricted as to their usage. Committed Balance. Amounts that are reported as Committed are those resources of the District that have had a limitation placed upon their usage by formal action of the District s board of directors. Commitments are made either though a formal adopted board resolution or are related to an established policy of the board. Commitments may only be changed when the resources are used for the intended purpose of the limitation is removed by a subsequent formal action of the board of directors. Assigned Balance. In the General, amounts that are reported as Assigned are those resources that the District has set aside for specific purposes. These accounts reflect tentative management plans for future financial resource use such as the replacement of equipment or the assignment of resources for contingencies. Assignments reduce the amount reported as Unassigned Balance, but may not reduce that balance below zero. In other governmental funds, Assigned fund balance represents a positive ending spendable fund balance once all restrictions and commitments are considered. These resources are only available for expenditure in that fund and may not be used in any other fund without formal action by the District s board of directors and as allowed by statute. Unassigned Balance. In the General, amounts that are reported as Unassigned are those net spendable resources of the District that are not otherwise Restricted, Committed, or Assigned, and may be used for any purpose within the General. In other governmental funds, Unassigned fund balance represents a deficit ending spendable fund balance once all restrictions and commitments are considered. A negative Unassigned fund balance means that the legal restrictions and formal commitments of the District exceed its currently available resources. ASSETS, LIABILITIES AND FUND EQUITY All of the District s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. INVENTORY Inventory is valued at cost using the first-in, first-out (FIFO) method. The consumption method of inventory is used, which charges inventory as an expenditure when it is consumed. A portion of fund balance, representing inventory, is considered Nonspendable. Such reserves for inventory indicate that a portion of net current assets is set aside to replace or increase the inventory. USDA commodity inventory consists of food donated by the United States Department of Agriculture. It is valued at the prices paid by the USDA for the commodities. NOTE 2: CASH DEPOSITS WITH FINANCIAL INSTITUTIONS The Chelan County Treasurer is the ex officio treasurer for the District and holds all accounts of the District. The District directs the County Treasurer to invest those financial resources of the District that the District has determined are not needed to meet the current financial obligations of the District. All of the District s investments during the year and at year end were insured or registered and held by the District or its agent in the District s name.

87 The district s investments as of August 31, 2012 are as follows: Number of Securities Carrying Amount Market Value Certificates of Deposit or Other Time Deposits Repurchase Agreements Bankers Acceptance Obligations of the U.S. Government or Its Subsidiary Corporations Investments Held by Broker-Dealers Under Reverse Repurchase Agreements: U.S. Government Securities U.S. Instrumentality Securities State Treasurer s Investment Pool County Treasurer s Investment Pool 1* $21,365,079 $21,365,079 Total Investments $21,365,079 $21,365,079 *Combined in the name of the Chelan County Treasurer NOTE 3: SIGNIFICANT CONTINGENT LIABILITIES LITIGATION The district has no known legal obligations that would materially impact the financial position of the District. NOTE 4: SIGNIFICANT EFFECTS OF SUBSEQUENT EVENTS There were not events after the balance sheet date that would have a material impact on the next or future fiscal years. NOTE 5: ANNUAL PENSION COST AND NET PENSION OBLIGATIONS GENERAL INFORMATION Substantially all District full-time and qualifying part-time employees participate in one of the following statewide retirement systems managed by the Washington State Department of Retirement Systems (DRS), under cost-sharing multiple employer public employee defined benefit and defined contribution retirement plans. The DRS, a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, PO Box 48380, Olympia, WA ; or it may be downloaded from the DRS website at The following disclosures are made pursuant to GASB Statements No. 27, Accounting for Pensions by State and Local Government Employers and No. 50, Pension Disclosures, an Amendment of GASB Statements No. 25 and No. 27. Membership by retirement system program as of June 30, 2011: Program Active Members Inactive Vested Members Retired Members TRS 66,203 9,204 41,709 PERS 152,417 29,925 79,363 SERS 52,332 10,262 6,428 Data is as of last actuarial valuation date of June 30, 2011 Certificated public employees are members of TRS. Noncertificated public employees are members of PERS (if Plan 1) or SERS. Plan 1 under the TRS and PERS programs are defined benefit pension plans whose members joined the system on or before September 30, Plan 1 members are eligible to retire with full benefits after five years of credited service and attainment of age 60, after 25 years of credited service and attainment of age 55, or after 30 years of credited service. Plan 2 under the TRS or SERS programs are defined benefit pension plans whose members joined on or after October 1, 1977 but before June 30, 1996 or August 31, 2000, for TRS or SERS, respectively. Members are eligible to retire with full benefits after five years of credited service and attainment of age 65, or after 20 years of credited service and attainment of age 55 with the benefit actuarially reduced from age 65, or 30 years of credited service and receive either a reduced benefit or stricter return-to-work rules. Plan 3 under the TRS and SERS programs are defined benefit, defined contribution pension plans whose members joined on or after July 1, 1996, or September 1, 2000, for TRS and SERS, respectively. Members are eligible to retire with full benefits at age 65, or they may retire at age 55 with at least ten service years with a reduced benefit amount, or they may retire at age 55 with at least 30 service years and receive either a reduced benefit or stricter-return-towork rules. Average final compensation (AFC) of Plan 1 TRS and PERS members is the highest average salary during any two consecutive years. For Plan 2 and Plan 3 TRS and SERS members, it is the highest average salary during any five consecutive years. The retirement allowance of Plan 1 TRS and PERS members is the AFC multiplied by 2 percent per year of service capped at 60 percent with a cost-of-living adjustment. For Plan 2 TRS and SERS members, it is the AFC multiplied by 2 percent per year of service with provision for a cost-of-living adjustment. For the defined benefit portion of Plan 3 TRS and SERS it is the AFC multiplied by 1 percent per year of service with a cost-of-living adjustment. The employer contribution rates for PERS, TRS, and SERS (Plans 1, 2 and 3) and the TRS and SERS Plan 2 employee contribution rates are established by the Pension ing Council based upon advice from the Office of State Actuary. The employee contribution rate for Plan 1 in PERS and TRS is set by statute at 6 percent and does not vary from year to year. The employer rate is the same for all plans in a system. The methods used to determine the contribution requirements are established under chapters 41.40, and RCW for PERS, TRS and SERS respectively.

88 The District s contribution represents its full liability under both systems, except that future rates may be adjusted to meet the system needs. CONTRIBUTIONS Employee contribution rates as of August 31, 2012: Plan 1 TRS 6.00% Plan 1 PERS 6.00% Plan 2 TRS 4.69% Plan 2 SERS 4.09% Plan 3 TRS and SERS 5.00%(minimum), 15.00% (maximum) For Plan 3 TRS and SERS, rates adjusted based upon age may be chosen. The optional rates range begins at 5 percent and increase to a maximum of 15 percent. Employer contribution rates as of August 31, 2012: Plan 1 TRS 8.04% Plan 1 PERS 7.21% Plan 2 TRS 8.04% Plan 2 SERS 7.58% Plan 3 TRS 8.04% Plan 3 SERS 7.58% Under current law the employer must contribute 100 percent of the employer-required contribution. Employer required contributions in dollars (Participant information for all plans is as of August 31): Plan FY FY FY Plan 1 TRS $ 177,774 $ 146,483 $ 172,533 Plan 2 TRS $ 308,130 $ 223,595 $ 239,535 Plan 3 TRS $1,956,295 $1,510,833 $1,498,096 Plan 1 PERS $ 12,267 $ 10,947 $ 14,672 Plan 2 SERS $ 353,345 $ 258,433 $ 264,969 Plan 3 SERS $ 421,717 $ 311,916 $ 306,302 Historical trend information showing TRS, PERS and SERS progress in accumulating sufficient assets to pay benefits when due is presented in the State of Washington s June 30, 2012 comprehensive annual financial report (CAFR). Refer to this report for detailed trend information. It is available from: State of Washington Office of Financial Management 300 Insurance Building PO Box Olympia, WA NOTE 6: ANNUAL OTHER POST-EMPLYMENT BENEFIT COST AND NET OPEB OBLIGATIONS and retired employee participation and coverage, including establishment of eligibility criteria for both active and retire employees. Programs include medical, dental, life insurance and longterm disability insurance. Employers participating in the plan include the State of Washington (which includes general government agencies and higher education institutions), 57 of the state s K-12 school districts and educational service districts (ESD s), and 206 political subdivisions and tribal governments. Additionally, the PEBB plan is available to the retirees of the remaining 247 K-12 school districts and ESD s. The District s retirees are eligible to participate in the PEBB plan under this arrangement. According to state law, the Washington State Treasurer collects a fee from all school district entities which have employees that are not current active members of the state Health Care Authority but participate in the state retirement system. The purpose of this fee is to cover the impact of the subsidized rate of health care benefits for school retirees that elect to purchase their health care benefits through the state Health Care Authority. For the fiscal year , the District was required to pay the HCA $66.01 per month per full-time equivalent employee to support the program, for a total payment of $643, This assessment to the District is set forth in the State s operating budget and is subject to change on the annual basis. This amount is not actuarially determined and is not placed in a trust to pay the obligations for postemployment health care benefits. The District has no control over the benefits offered to retirees, the rates charged to retirees, or the fee paid to the Health Care Authority. The District does not determine its Annual Required Contribution nor the Net Other Post-Employment Benefit obligation associated with this plan. Accordingly, these amounts are not shown on the financial statements. This is a departure from GAAP. NOTE 7: COMMITMENTS UNDER NONCAPITALIZED (OPERATING) LEASES Chapter 28A RCW affords the district the right to enter into contract to provide pupil transportation services; lease building space and portable buildings; and rent/lease or have maintained security systems, computers, and other equipment. Leases that do not satisfy any of the criteria for capitalization are operating leases. Operating leases do not generate asset or liability recognition at their inception. The lease payments are recognized as expenditures as they become payable. Wenatchee School District has one operating lease: Ricoh Corporation A 60-month lease beginning August 2009 effective until August Lease provides copying equipment in the form of 29 machines located in 21 school district facilities. Lease provides for equipment repairs, adjustments, supplies, monthly meter reads and staff training on equipment operations. A fixed base cost of $ 9, per month, plus sales tax is charged, and a variable cost per copy ranging from plus sales tax is charged. The State, through the Health Care Authority (HCA), administers an agent multi-employer Other Post-Employment Benefit plan. The Public Employees Benefits Board (PEBB), created within the HCA, is authorized to design benefits and determine the terms and conditions of employee

89 NOTE 8: CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS, INCLUDING ENCUMBRANCES Construction in progress is composed of: Project Project Authorization Amount Expended as of 8/31/2012 Additional State s Committed Skills Center Minor Works #K $ 866,000 $ 695,483 $ 170,517 ENCUMBRANCES Encumbrance accounting is employed in governmental funds. Purchase orders, contracts, and other commitments for the expenditure of moneys are recorded in order to reserve a portion of the applicable appropriation. Encumbrances lapse at the end of the fiscal year and may be reencumbered the following year. Encumbrances in the amount of $48,182 within the General were re-encumbered on September 1, The following is a schedule of annual requirements to amortize long-term debt at August 31, 2012: Fiscal Years Ending August 31, Principal Interest Total ,580, ,750 2,409, ,665, ,150 2,463, ,765, ,700 2,510, ,880, ,250 2,571, ,000, ,800 2,617, ,135, ,900 2,675, ,275, ,500 2,730, ,425, ,500 2,789, ,580, ,500 2,847, ,770, ,500 2,908,500 Total $21,075,000 $ 5,449,550 $26,524,550 At August 31, 2012 the district had $2,506,420 available in the Debt Service to service the general obligation bonds. NOTE 9: REQUIRED DISCLOSURES ABOUT CAPITAL ASSETS The district s capital assets are insured in the amount of $210,513,190 for fiscal year In the opinion of the District s insurance consultant, the amount is sufficient to adequately fund replacement of the District s assets. NOTE 10: REQUIRED DISCLOSURES ABOUT LONG-TERM LIABILITIES LONG-TERM DEBT Bonds payable at August 31, 2012, are comprised of the following issue: Amount Final Interest Amount Issue Name Authorized Maturity Rate(s) Outstanding General Obligation Bonds 2010-UTGO 26,700,000 12/ % 21,075,000 Total General Obligation Bonds $21,075,000 NOTE 11: ENTITY RISK MANAGEMENT ACTIVITIES The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. PROPERTY AND LIABILITY INSURANCE The Wenatchee School District is a member of the Schools Insurance Association of Washington. Chapter RCW authorizes the governing body of any one or more governmental entities to form together into or join a program or organization for the joint purchasing of insurance, and/or joint self-insuring, and/or joint hiring or contracting for risk management services to the same extent that they may individually purchase insurance, self-insure or hire contract for risk management services. An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter RCW, the Interlocal Cooperation Act. The program was formed on September 1, 1995, when 7 mid-sized school districts in the State of Washington joined together by signing an Interlocal Agreement to pool their self-insured losses and jointly purchase insurance and administrative services. Presently, the SIAW program has 44 member districts. The program allows members to jointly purchase insurance coverage and provide related services, such as administration, risk management, claims administration, etc. Coverage for Wrongful Act Liability and Employee Benefit Liability is on a claims-made basis. All other coverages are on an occurrence basis. The program provides the following forms of group purchased insurance coverage for its members: property, earthquake, liability, automotive liability, equipment breakdown, crime, employee benefits and wrongful act liability. The program acquires liability insurance through their Administrator, Canfield; that is subject to a per-occurrence of $100,000. Members are responsible for $2,500 deductible for each claim, while the program is responsible for the $100,000 self-insured retention. Insurance

90 carriers cover insured losses over $102,500 to the limits of each policy. Since the program is a cooperative program, there is a joint liability among the participating members towards the sharing of the $100,000 of the self-insured retention. The pool also purchases a Stop Loss Policy with an attachment point of $3,866,875, which it fully funds in its annual budget. Property insurance is subject to a per-occurrence self-insured retention of $250,000. Members are responsible for a $10,000 deductible amount for each claim. The program is responsible for the remaining $250,000 self-insured retention. Equipment breakdown insurance is subject to a per-occurrence deductible of $10,000. Members are responsible for the deductible amount of each claim. Members contract to remain in the program for one year and must give notice before December 31 before terminating participation the following September 1. Renewal of the Interlocal Agreement occurs automatically each year. Even after termination, a member is still responsible for contributions to the program for any unresolved, unreported, and in-process claims for the period they were a signatory to the Interlocal Agreement. The program is fully funded by its member participants. Claims are filed by members with Canfield, which has been contracted to perform program administration, claims adjustment and administration and loss prevention for the program. Fees paid to the third party administrator under this arrangement for the year ended August 31, 2012 were $2,853,190. A Board of Directors of 8 members is selected by the membership from the east and west side of the state and is responsible for conducting the business affairs of the program. The Board of Directors has contracted with Canfield to perform day-to-day administration of the program. This program has no employees. UMEMPLOYMENT AND WORKERS COMPENSATION Each member s contributions to the pool are determined by a rate-making formula based on claims cost and other expenses paid. In fiscal year ending August 31, 2012, Wenatchee School District made payments totaling $90, to the unemployment insurance pool and $570, to the industrial insurance pool. NOTE 12: PROPERTY TAXES Property tax revenues are collected as the result of special levies passed by the voters in the District. Taxes are levied on January 1. The taxpayer has the option of paying all taxes on April 30 or one-half then and one-half on October 31. Typically, slightly more than half of the collections are made on the April 30 date. The October 31 collection is not available in time to cover liabilities for the fiscal period ended August 31. Therefore, the fall portion of property taxes is not accrued as revenue. Instead, the property taxes due on October 31 are recorded as deferred revenue. NOTE 13: JOINT VENTURES AND JOINTLY GOVERNED ORGANIZATIONS The district is a member of the King County Directors Association (KCDA). KCDA is a purchasing cooperative designed to pool the member districts purchasing power. The District joined the association on February 28, 1977, and has remained in the joint venture ever since. The District s current equity of $57,748 is the accumulation of the annual assignment of KCDA s operating surplus based upon the percentage derived from KCDA s total sales to the District compared to all other districts applied against paid administrative fees. The District may withdraw from the joint venture and will receive its equity in 10 annual allocations of merchandise or 15 annual payments. Chapter RCW authorizes the governing body of any one or more governmental entities to form together into or join a pool or organization for the joint self-insuring to the same extent that they may individually self-insure. Separate agreements to form an unemployment pool and workers compensation pool were made pursuant to the provisions of Chapter RCW, the Interlocal Cooperation Act. The North Central Unemployment Pool was formed on July 1, 1988, and the North Central Washington Workers Compensation Pool was formed on April 1, 1984, when school districts and North Central Educational Service District (ESD) in the State of Washington joined together by signing an Interlocal Governmental Agreement to pool their self-insured losses. 24 school districts and the ESD have joined the unemployment pool; 29 school districts and the ESD have joined the workers compensation pool. These funds are operated for the Wenatchee School District s benefit in lieu of the district having to make monthly premium payments to the state of Washington for unemployment and industrial insurance. Membership automatically renews each year. Even after termination, members are still responsible for contributions for unresolved claims occurring during a period when the district was a member of the pool. The pools are governed by a board of directors of each pool, which is comprised of one designated representative from each participating member. Executive committees are elected for each pool and are responsible for conducting the business affairs of each pool.

91 NOTE 14: FUND BALANCE CLASSIFICATION DETAILS The district s financial statements include the following amounts presented in the aggregate. General ASB Capital Projects Debt Service Transportation Vehicle Nonspendable Balance Inventory and $ 33,062 Prepaid Items Restricted Balance Carryover of Restricted $ 811,178 Revenues Debt Service Arbitrage Rebate Uninsured Risks Other Items $ 723,754 Committed Balance Minimum Balance $3,585,920 Policy Other Commitments Assigned Balance Contingencies $1,000,000 Other Capital $2,860,000 Projects Other Purposes $1,052,000 Purposes $4,651,385 $416,945 $2,827,810 $2,506,420 $ 8,419 The Board of Directors has established a minimum fund balance policy for the general fund to provide for financial stability and contingencies within the District. The policy is that the District shall maintain 5% of general fund expenditures. Portions of fund balance that are set aside for the purpose of meeting this policy are recorded on the financial statements as part of Committed fund balance. NOTE 15: POST-EMPLOYMENT BENEFIT PLANS OTHER THAN PENSION PLANS BOTH IN SEPARATELY ISSUED PLAN FINANCIAL STATEMENTS AND EMPLOYER STATEMENTS 457 PLAN DEFERRED COMPENSATION PLAN District employees have the option of participating in a deferred compensation plan as defined in Section 457 of the Internal Revenue Code that is administered by the state deferred compensation plan, or the District. 403(B) PLAN TAX SHELTERED ANNUITY (TSA) The District offers a tax deferred annuity plan for its employees. The plan permits participants to defer a portion of their salary until future years under the elective deferrals employee contribution process. The District complies with IRS regulations that require school districts to have a written plan to include participating investment companies, types of investments, loans, transfers and various requirements. The plan is administered by a third party administrator. The plan assets are assets of the District employees, not the school district, and are therefore not reflected on these financial statements. NOTE 16: TERMINATION BENEFITS COMPENSATED ABSENCES Employees earn sick leave at a rate of 12 days per year up to a maximum of one contract year. Under the provisions of RCW 28A , sick leave accumulated by District employees is reimbursed at death or retirement at the rate of 1 day for each 4 days of accrued leave, limited to 180 accrued days. This chapter also provides for an annual buy out of an amount up to the maximum annual accumulation of 12 days. For buyout purposes employees may accumulate such leave to a maximum of 192 days, including the annual accumulation, as of December 31 of each year. These expenditures are recorded when paid, except termination sick leave that is accrued upon death, retirement, or upon termination provided the employee is at least 55 years of age and has sufficient years of service. Vested sick leave was computed using the vesting method. Vacation pay, including benefits that are expected to be liquidated with expendable available financial resources, is reported as expenditures and a fund liability of the governmental fund that will pay it. No unrecorded liability exists for other employee benefits. NOTE 17: OTHER DISCLOSURES SKILLS CENTER CORE CAMPUS The District is the host district for the Wenatchee Valley Technical Skills Center, a regional program designed to provide career and technical education opportunities to students in participating districts. The purpose of a Skills Center is to enhance the career and technical education course offerings among districts by avoiding unnecessary duplication of courses. The Wenatchee Valley Technical Skills Center was created through an agreement of 10 member districts. The Skills Center is governed by an Administrative Council, comprised of the superintendents, or their appointed representatives, of all member districts plus leaders from the business and industry who are representative of the established business enterprises in the member districts. The Skills Center administration is handled through a director, employed by the District.

92 As host district, the District has the following responsibilities: 1. Employ staff of the Skills Center. 2. Act as fiscal agent for the Skills Center and maintain separate accounts and fund balances for each fund. 3. Review and adopt the Skills Center budget as part of the District s overall budget. 4. Provide such services as may be mutually agreed upon by the District and the Skills Center. SOURCES OF FUNDING The Skills Center is primarily funded by state apportionment, based on the number of students who attend the Sills Center. Other sources of income include federal grants from the Carl D. Perkins program, tuition and fees, and sale of goods. CAPITAL IMPROVEMENTS The Skills Center has ongoing construction projects beginning in These projects are funded by state grant funds from the State of Washington. UNSPENT FUNDS Any funds remaining at the end of the year from Skills Center operations are recorded as a restriction of the District s General balance, and are to be used for financing future operations of the Skills Center. Member districts to not have claim to any unspent funds of the Skills Center. The following school districts are members of the Skills Center: Cascade, Cashmere, Eastmont, Entiat, Lake Chelan, Manson, Moses Lake, Pateros, Quincy and Waterville. In addition, the Moses Lake School District operates a branch campus of the Wenatchee Valley Technical Skills Center. As a branch campus, the district is allowed to claim its own students and receive direct Skills Center funding for those students. The statements of that district reflect the portion of total Skills center operations that pertain to the operation of the branch campus alone. This page left blank intentionally

93 Wenatchee School District No. 246 Schedule of Long-Term Liabilities For the Year Ended August 31, 2012 Washington State Auditor's Office 33 Beginning Ending Outstanding Debt Amount Amount Outstanding Debt Description September 1, 2011 Issued/Increased Redeemed/Decreased August 31, 2012 Total Voted Bonds 22,525,00 1,450,00 21,075,00 Total Non-Voted Notes/Bonds Qualified Zone Academy Bonds (QZAB) Qualified School Construction Bonds(QSCB) Other Long-Term Debt Capital Leases Contracts Payable (GL 603) NonCancellable Operating Leases Claims & Judgments Compensated Absences 1,429, , ,342, Other Long-Term Liabilities Total Other Long-Term Liabilities 1,429, , ,342, TOTAL LONG-TERM LIABILITIES 23,954, ,536, ,417,602.32

94 Washington State Auditor's Office Federal Agency Name Pass Through Agency Federal Program Title WENATCHEE SCHOOL DISTRICT #246 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ending August 31, 2012 CFDA Number Other Identification Number From Direct Awards From Pass Through Awards Expenditures Dept of Agriculture WA OSPI School Breakfast Program $ 405,888 $ 405,888 WA OSPI Nat'l School Lunch Program - Cash Assistance $ 1,727,375 $ 1,727,375 Nat'l School Lunch Program - Non Cash Asst. WA OSPI Food Commodities $ 193,573 $ 193,573 2 Total Nat'l School Lunch $ 1,920,948 WA OSPI Child & Adult Care Food Program $ 38,487 $ 38,487 WA OSPI School & Roads Grants to State $ 513,409 $ 513,409 Dept of Agriculture Subtotal $ - $ 2,878,732 $ 2,878,732 Dept of Education WA OSPI Title 1, Part A, Grants to LEA's $ 2,013,173 $ 2,013,173 3, 4 WA OSPI Migrant Ed - Basic State $ 903,845 $ 903,845 4 WA OSPI Special Ed - State Grants $ 1,468,755 $ 1,468,755 4 WA OSPI Voc Ed Basic Grants to States , $ 89,782 $ 89,782 4 WA OSPI Special Ed - Preschool Grants $ 68,130 $ 68,130 4 WA OSPI Bilingual Ed Support Services $ 305,147 $ 305,147 4 WA OSPI Ed for Homeless Children / Youth $ 31,808 $ 31,808 4 WA OSPI 21st Century Community Learning Center $ 255,397 $ 255,397 4 WA OSPI Enhancing Ed Through Technology - Title IID $ 3,316 $ 3,316 4 Early Awareness / Readiness P334A $ 560,118 $ 560,118 4 HECB Early Awareness / Readiness IA034 $ 9,221 $ 9,221 4 Total Early Awareness / Readiness $ 569,339 WA OSPI Title II Improving Teacher Quality $ 391,718 $ 391,718 4 Dept of Education Subtotal $ 560,118 $ 5,540,292 $ 6,100,410 WA DSHS Medicaid - Medical Assistance Program $ 199,652 $ 199,652 Children's Home Society Community Mental Health Block Grant PIP $ 19,111 $ 19,111 Dept Health / Human Svcs Subtotal $ - $ 218,763 $ 218,763 Total Federal Awards Expended $ 560,118 $ 8,637,786 $ 9,197,904 Total Footnote The Accompanying Notes to the Schedule of Expenditures of Federal Awards are an Integral Part of this Schedule.

95 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS ABOUT THE STATE AUDITOR'S OFFICE NOTE 1 BASIS OF ACCOUNTING The Schedule of Expenditures of Federal Awards is prepared on the same basis of accounting as the district's financial statements. The district uses the modified accrual basis of accounting. Expenditures represent only the federally funded portions of the program. District records should be consulted to determine amounts expended or matched from non-federal sources. NOTE 2 NONCASH AWARDS The amount of food commodities reported on the schedule is the market value of commodities distributed by the district during the current year and priced as prescribed by USDA. NOTE 3 SCHOOLWIDE PROGRAMS The district operates a schoolwide program in five elementary buildings. Using federal funding, schoolwide programs are designed to upgrade an entire educational program within a school for all students, rather than limit services to certain targeted students. The following federal program amounts were expended by the district in its schoolwide program: Title I, Part A (84.010) $1,220,059. NOTE 4 FEDERAL INDIRECT RATE The district used the federal restricted rate of 3.06 percent for this program. NOTE 5 FEDERAL INDIRECT RATE The district used the federal unrestricted rate of percent for this program. The State Auditor's Office is established in the state's Constitution and is part of the executive branch of state government. The State Auditor is elected by the citizens of Washington and serves four-year terms. Our mission is to work with our audit clients and citizens as an advocate for government accountability. As an elected agency, the State Auditor's Office has the independence necessary to objectively perform audits and investigations. Our audits are designed to comply with professional standards as well as to satisfy the requirements of federal, state, and local laws. The State Auditor's Office employees are located around the state to deliver services effectively and efficiently. Our audits look at financial information and compliance with state, federal and local laws on the part of all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits of state agencies and local governments and fraud, whistleblower and citizen hotline investigations. The results of our work are widely distributed through a variety of reports, which are available on our Web site and through our free, electronic subscription service. We take our role as partners in accountability seriously. We provide training and technical assistance to governments and have an extensive quality assurance program. State Auditor Troy Kelley Chief of Staff Doug Cochran Director of State and Local Audit Chuck Pfeil, CPA Director of Performance Audit Larisa Benson Deputy Director of State and Local Audit Kelly Collins, CPA Deputy Director of State and Local Audit Jan M. Jutte, CPA, CGFM Deputy Director of State and Local Audit Sadie Armijo Deputy Director of Quality Assurance Barb Hinton Local Government Liaison Mike Murphy Public Records Officer Mary Leider Main number (360) Toll-free Citizen Hotline (866) Website Subscription Service