$34,815,000 EVERGREEN SCHOOL DISTRICT NO. 114, CLARK COUNTY, WASHINGTON UNLIMITED TAX GENERAL OBLIGATION REFUNDING BONDS, 2011

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1 NEW ISSUE MOODY S RATING: Aa2 BOOK-ENTRY ONLY See OTHER MATTERS Ratings WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM: Aa1 (See OTHER MATTERS Ratings and APPENDIX C Washington State School District Credit Enhancement Program herein.) In the opinion of Pacifica Law Group LLP, Bond Counsel, assuming compliance with certain covenants of the District, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. See LEGAL MATTERS Tax Matters herein for a discussion of the opinion of Bond Counsel. $34,815,000 EVERGREEN SCHOOL DISTRICT NO. 114, CLARK COUNTY, WASHINGTON UNLIMITED TAX GENERAL OBLIGATION REFUNDING BONDS, 2011 Bonds Dated: Date of Delivery Due: As set forth below The Evergreen School District No. 114, Clark County, Washington (the District ) Unlimited Tax General Obligation Refunding Bonds, 2011 (the Bonds ) will be issued as fully registered bonds in the name of Cede & Co., as Bondowner and as nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Individual purchase and sale of the Bonds will initially be made in book-entry form only. Purchasers will not receive certificates representing their ownership of the Bonds. See DESCRIPTION OF THE BONDS. The Bonds will be issued in denominations of $5,000 or any integral multiple thereof. Interest on the Bonds will be payable on December 1, 2011 and semiannually thereafter on June 1 and December 1 of each year until their maturity. Principal of the Bonds will be payable by the fiscal agency of the State of Washington, currently The Bank of New York Mellon, New York, New York, to DTC which, in turn, will remit such principal and interest to the DTC participants for subsequent disbursement to the Beneficial Owners of the Bonds, as described herein under DESCRIPTION OF THE BONDS Book-Entry Only System/The Depository Trust Company. MATURITY SCHEDULE Due Maturity Amount Interest Rate Yield CUSIP No. December 1, 2012 $ 4,700, % 0.39% J63 December 1, ,195, J71 June 1, , J89 June 1, ,505, J97 June 1, ,465, K20 June 1, ,440, K38 June 1, ,915, K46 December 1, ,895, K53 December 1, ,835, K61 December 1, ,765, K79 The Bonds are not subject to optional redemption prior to maturity. The Bonds are being issued for the purpose of providing the funds to advance refund and defease certain outstanding unlimited tax general obligation bonds of the District and to pay the cost of issuing the Bonds. See SOURCES AND USES OF FUNDS Purpose. The Bonds constitute valid and legally binding general obligations of the District. The District irrevocably covenants that, unless the principal of and interest on the Bonds are paid from other sources, it will make annual levies of taxes without limitation as to rate or amount upon all of the property in the District subject to taxation in amounts sufficient to pay such principal and interest as the same shall become due. The full faith, credit and resources of the District are hereby 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 Clark County, the State of Washington or any political subdivision thereof other than the District. See SECURITY FOR THE BONDS. 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 C attached hereto and titled WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Bonds are offered when, as and if issued, subject to the approving legal opinion of Pacifica Law Group LLP, Seattle, Washington, Bond Counsel. It is expected that delivery of the Bonds will be made through the facilities of DTC in New York, New York, by Fast Automated Securities Transfer, on or about October 5, Dated: September 21, 2011

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3 EVERGREEN SCHOOL DISTRICT NO NE 28th Street PO Box 8910 Vancouver, WA (360) * Board of Directors Title Term Expiration Troy Thomas President-Director District Victoria Bradford Director District Michael Parsons Director District Joan Skelton Director District Todd Yuzuriha Director District Administration John Deeder Superintendent Mike Merlino Chief Operating Officer County Officials Peter Van Nortwick Assessor Doug Lasher Treasurer Bond Counsel Pacifica Law Group LLP Seattle, Washington Financial Advisor Public Financial Management Seattle, Washington No dealer, broker, salesperson, or other person has been authorized to give any information or to make any representation, other than the information and representations contained in this Official Statement, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon as having been authorized by the District. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy any of the Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information contained in this Official Statement has been provided by the District and other sources believed to be reliable. The information herein is subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. The CUSIP numbers provided on the cover of this Official Statement are included for convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of issuance and delivery of the Bonds. * The District s website is not part of this Official Statement, and investors should not rely on information presented in the District s website in determining whether to purchase the Bonds. This inactive textual reference to the District s website is not a hyperlink and does not incorporate the District s website by reference. -i-

4 Table of Contents Page INTRODUCTION... 1 DESCRIPTION OF THE BONDS... 1 General... 1 Redemption Provisions... 2 Purchase of Bonds for Retirement... 2 Defeasance... 2 Book-Entry Only System/The Depository Trust Company... 2 SOURCES AND USES OF FUNDS... 3 Purpose... 3 Sources and Uses... 3 Refunding Plan... 3 Verification of Mathematical Calculations... 4 SECURITY FOR THE BONDS... 4 Full Faith and Credit Pledge... 4 Debt Payment Record... 5 Washington State School District Credit Enhancement Program... 5 DEBT INFORMATION... 5 Limits of Indebtedness... 5 Authorization of Non-Voted Debt... 5 Authorization of Voted General Obligation Bonds... 6 Schedule of General Obligation Indebtedness... 8 Introduction... 9 Local Funding... 9 Assessed Valuation Determination Tax Collection Procedure Maintenance and Operations Levies Multi-Year Capital Projects Levies State Funding Federal Funding Other Sources of Funding DISTRICT PROFILE General Information Organization Page Board of Directors Key Administrative Officials Annual Enrollment Facilities Master Plan and Capital Improvement Program Transportation Budgetary Process Accounting Policies Investment Policies Insurance Coverage Labor Relations Pension System INITIATIVES AND REFERENDA LEGAL MATTERS Tax Matters Legal Opinion Litigation Enforceability OTHER MATTERS Continuing Disclosure Undertaking Ratings Financial Advisor Underwriting CUSIP Numbers Official Statement APPENDIX A Form of Bond Counsel Opinion APPENDIX B General and Economic Information APPENDIX C Washington State School District Credit Enhancement Program APPENDIX D Book-Entry Only System APPENDIX E Audited Financial Statements for the District for the Fiscal Year Ending August 31, ii-

5 $34,815,000 EVERGREEN SCHOOL DISTRICT NO. 114 CLARK COUNTY, WASHINGTON UNLIMITED TAX GENERAL OBLIGATION REFUNDING BONDS, 2011 INTRODUCTION This Official Statement, including the cover page, the appendices attached hereto and the documents incorporated herein by reference, is being provided by Evergreen School District No. 114, Clark County, Washington (the District ), to furnish information in connection with the issuance of $34,815,000 aggregate principal amount of its Unlimited Tax General Obligation Refunding Bonds, 2011 (the Bonds ). Unless otherwise defined in this Official Statement, capitalized terms used herein will have the meanings or meanings as set forth in the Bond Resolution (as defined herein) authorizing the issuance of the Bonds. The Bonds are issued pursuant to the laws of Washington State (the State ), including chapters 28A.530, 39.36, and of the Revised Code of Washington, as amended ( RCW ), and Resolution No of the District adopted on June 21, 2011, authorizing the issuance of the Bonds (the Bond Resolution ). This Official Statement is qualified in its entirety by references to the Bond Resolution. Brief descriptions of the Bonds, the District, the Bond Resolution, and certain other documents are included in this Official Statement and the appendices hereto. Such descriptions do not purport to be comprehensive or definitive. All references herein to such documents and any other documents, statutes, reports, or other instruments described herein are qualified in their entirety by reference to each such document, statute, report, or other instrument. Information contained herein has been obtained from officers, employees and records of the District and from other sources believed to be reliable. The information herein is subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is not to be construed as a contract or agreement between the District s Board of Directors (the Board ) and purchasers or holders of any of the Bonds. General DESCRIPTION OF THE BONDS The Bonds will be issued in denominations of $5,000 or any integral multiple thereof. The Bonds will bear interest at the rates and mature on the dates set forth on the cover of this Official Statement. Interest on the Bonds will be paid on December 1, 2011 and semiannually thereafter on June 1 and December 1 of each year until their maturity or early redemption. The Bonds will be issued in fully registered form and, when issued, will be registered in the name of CEDE & Co., as registered owner and nominee of The Depository Trust Company ( DTC ). DTC will act as securities depository for the Bonds. Individual purchases will initially be made in book-entry form only. Purchasers will not receive certificates representing their beneficial ownership interest in the Bonds so purchased. The District has requested that its Treasurer adopt the system of registration for the Bonds approved by the State Finance Committee of the State of Washington (the Committee ). Pursuant to chapter RCW, the Committee designates one or more fiscal agencies ( Fiscal Agency ) for bonds issued within the State of Washington. The Committee currently is under contract with The Bank of New York Mellon, New York, New York. The Fiscal Agency will act as Bond Registrar under the terms of the Bond Resolution. In order to meet payment requirements for interest on and principal of the Bonds as the same becomes due and payable, the District will remit money to the Bond Registrar. The Bond Registrar will remit payment to DTC in -1-

6 accordance with the terms of the DTC procedures as then in effect. Principal of the Bonds will be paid to registered owners upon presentation and surrender of the Bonds at maturity or upon earlier redemption to the office of the Bond Registrar in New York, New York. See Book-Entry Only System/The Depository Trust Company. Redemption Provisions The Bonds are not subject to optional redemption prior to maturity. Purchase of Bonds for Retirement The District has reserved the right and option to purchase any or all of the Bonds offered to the District at any time at any price deemed reasonable by the District. Defeasance In the event that cash and/or certain governmental obligations of the United States, maturing at such time or times and bearing interest to be earned thereon in amounts sufficient to redeem and retire the Bonds or any of them in accordance with their terms, are set aside in a special account to effect such redemption or retirement and such money and the principal of and interest on such obligations are irrevocably set aside and pledged for such purpose, then such Bonds shall cease to be entitled to any lien, benefit or security of the Bond Resolution except the right to receive the funds so set aside and pledged, and such Bonds shall be deemed not to be outstanding. Government obligations is defined in the Bond Resolution to have the meaning specified in RCW , as it may be amended from time to time, which currently means any of the following: (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, 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 to the extent guaranteed as permitted under any other provision of State law. Book-Entry Only System/The Depository Trust Company DTC will act as initial securities depository for the Bonds. The Bonds will be issued as fully registered bonds in the name of Cede & Co., as nominee of DTC. One fully registered Bond will be issued for each maturity of the Bonds in the principal amount of such maturity and will be deposited with DTC. See APPENDIX D Book-Entry Only System. If DTC or any other successor depository resigns from its functions as depository, and no substitute depository can be obtained, or the District determines that it is in the best interest of the beneficial owners of the Bonds that such Bonds be provided in certificated form, the ownership of such Bonds may then be transferred to any person or entity as provided in the Bond Resolution, and will no longer be held in fully immobilized form. In such case, the District will request the Bond Registrar to issue the Bonds in appropriate denominations and registered in the names of the appropriate persons. Neither the District nor the Bond Registrar has any responsibility or obligation to DTC participants or the persons for whom they act as nominees with respect to the Bonds for: (1) the accuracy of any records maintained by DTC or any DTC participant; (2) the payment by DTC or any DTC participant of any amount in respect of the principal of or interest on the Bonds; (3) any notice which is permitted or required to be given to Registered Owners under the Bond Resolution (except such notices as required to be given by the District to the Bond Registrar or to DTC); or (4) any consent given or other action taken by DTC as the Registered Owner. For so long as any of the Bonds are held in fully immobilized form, DTC or its successor depository shall be deemed to be the Registered Owner for all purposes, and all references to the Registered Owners means DTC (or any successor depository) or its nominee and does not mean the beneficial owners. -2-

7 SOURCES AND USES OF FUNDS Purpose As further described below under Refunding Plan, proceeds of the Bonds will be used to provide funds (a) to establish an irrevocable escrow to refund prior to maturity certain callable maturities of the District s outstanding Unlimited Tax General Obligation Bonds, 2002 (the 2002 Bonds ), issued under date of July 15, 2002 pursuant to Resolution No adopted by the Board on July 9, 2002 (the 2002 Bond Resolution ) and Unlimited Tax General Obligation Bonds, 2004 (the 2004 Bonds ), issued under date of March 15, 2004 pursuant to Resolution No adopted by the Board on March 9, 2004 (the 2004 Bond Resolution and, collectively with the 2002 Bond Resolution, the Refunded Bond Resolutions ), and (b) to pay the administrative costs of the refunding and the costs related to the sale, issuance and delivery of the Bonds. Sources and Uses The following is a brief description of the sources and uses of the proceeds of the Bonds. Figures in the following table are rounded to the nearest dollar. Sources Principal Amount of Bonds $ 34,815,000 Original Issue Premium 4,383,706 Debt Service Fund Transfers 570,292 Total Sources $ 39,768,998 Uses Escrow Fund $ 39,437,036 Costs of Issuance and Additional Proceeds (1) 331,962 Total Uses $ 39,768,998 Refunding Plan (1) Issuance costs include legal fees, underwriter s discount, financial advisor fees, and other costs incurred in connection with the issuance of the Bonds. The District will use a portion of the proceeds of the Bonds to advance refund and defease the following callable maturities of the 2002 Bonds (as identified below, the 2002 Refunded Bonds ) and the 2004 Bonds (as identified below, the 2004 Refunded Bonds, and together with the 2002 Refunded Bonds, the Refunded Bonds ): 2002 Refunded Bonds Maturity Dates (December 1) Principal Interest Rate Call Date Redemption Price 2012 $ 3,620, % June 1, % ,000, June 1, ,200, June 1,

8 2004 Refunded Bonds Maturity Dates Principal Interest Rates Call Date Redemption Price June 1, 2015 $ 1,500, % June 1, % June 1, ,000, June 1, June 1, ,000, June 1, December 1, ,000, June 1, December 1, ,000, June 1, December 1, ,000, June 1, From the proceeds of the Bonds, the District will purchase certain non-callable United States Government Obligations (as defined in chapter RCW and referred to herein as Government Obligations ). These Government Obligations will be deposited in the custody of U.S. Bank National Association (the Escrow Agent ). The maturing principal of the Government Obligations, interest earned thereon, and necessary cash balance, if any, will be used to accomplish the refunding of the Refunded Bonds pursuant to the applicable Refunded Bond Resolution. The Government Obligations, interest earned thereon, and necessary cash balance, if any, will irrevocably be pledged to and held in trust for the benefit of the owners of the Refunded Bonds by the Escrow Agent, pursuant to a refunding trust agreement to be executed by the District and the Escrow Agent. Verification of Mathematical Calculations Grant Thornton LLP, independent certified public accountants, will verify the accuracy of the mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the Government Obligations, to be placed together with other escrowed money in the escrow account to pay when due, pursuant to the call for redemption, the principal of and interest on the Refunded Bonds. The verification will also confirm the mathematical computations supporting the conclusion of Bond Counsel that the Bonds are not arbitrage bonds as defined by Section 148 of the Internal Revenue Code of 1986, as amended (the Code ). Full Faith and Credit Pledge SECURITY FOR THE BONDS The Bonds are general obligations of the District and the full faith, credit and resources of the District have been pledged irrevocably for the punctual payment of the principal of and the interest on the Bonds. The Bonds are secured by ad valorem taxes to be levied against all taxable property within the District without limitation as to rate or amount. The District will levy on all taxable property located within the District direct annual taxes that, together with all other taxes, will be sufficient in amount to provide for the payment of principal of and interest on the Bonds as the same will become due. The taxes, when collected, are required to be applied solely for the purpose of payment of principal and interest on the Bonds and for no other purpose until the Bonds will have been fully paid, satisfied and discharged. The District may, subject to applicable laws, apply other funds 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 Clark County (the County ), the State, or any political subdivision thereof, other than the District. -4-

9 Debt Payment Record The District has not been in default in the payment of principal of or interest on any bonds, notes or warrants of the District. Additionally, no refunding bonds have been issued for the purpose of preventing an impending default. 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 E attached hereto. Limits of Indebtedness DEBT INFORMATION Under State statutes a school district may incur non-voted debt not to exceed 3/8 of one percent of the assessed value of taxable property within a school district, as discussed below. With the approval of the voters, a school district may incur total indebtedness, including non-voted debt, not to exceed five percent (5%) of the assessed value of taxable property within the school district. Authorization of Non-Voted Debt The power of the District to contact 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 an employee of the District to incur liabilities in excess of budgetary appropriations. 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, grants or the sale of bonds. These short-term obligations must 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 , as amended, authorizes school districts to incur long-term indebtedness for acquisition of real or personal property and to finance structural changes and additions to buildings without a vote of the people through the issuance of bonds payable out of the District s ordinary revenues. In an emergency, school districts may, by action of the board of directors, authorize indebtedness outside the current budget. All expenditures for emergency purposes must 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 interest-bearing warrants. In adopting the budget for any fiscal year, the board of directors must appropriate funds to retire any outstanding registered warrants issued since the adoption of the last proceeding budget. -5-

10 Authorization of Voted General Obligation Bonds Authorization of a voted general obligation bond issue requires that 40% of the number of those voting in the last general election cast a ballot, and 60% of those voting approve the issue. Refunding bonds, such as the Bonds, are not subject to these authorization requirements. District s Debt Capacity (as of June 30, 2011) (1) District s Taxable Assessed Valuation (2010 for taxes collected in calendar year 2011) $ 10,960,470,383 Non-Voted General Obligation Debt Capacity: Legal Limit Without Vote (3/8 of 1% of Assessed Value) $ 41,101,764 Outstanding Non-Voted Debt (2) (22,146,686) Remaining Non-Voted Debt Capacity $ 18,955,078 Voted and Non-Voted General Obligation Debt Capacity: Legal Limit With Vote (5% of Assessed Value) $ 548,023,519 Outstanding Voted Bond Debt $ 152,128,314 The Bonds 34,815,000 Outstanding Non-Voted Debt (2) 22,146,686 Outstanding Debt $ 209,090,000 (209,090,000) Remaining Debt Capacity $ 338,933,519 Source: Evergreen School District and Clark County Assessor s Office. (1) Excludes operating lease obligations and the Refunded Bonds. (2) Includes limited general obligation bonds and the principal amount of unlimited tax general obligation refunding bonds issued in excess of the principal amount of the refunded bonds. Such excess amount is required to be counted against non-voted debt capacity. Data assumes that the principal amount to be counted against non-voted debt capacity is amortized on a pro-rata basis. -6-

11 Direct and Estimated Overlapping Debt Bonded General Obligation Debt (including the Bonds) (1) $ 209,090,000 Lease Obligations (Operating Leases) (1) 65,690 Direct Debt $ 209,155,690 G.O. Debt Outstanding (1) Percentage Overlap Estimated Overlapping Debt City of Vancouver $ 23,768, % $ 13,875,847 City of Camas 10,689, ,966 Fire District No , ,643 East Co Fire & Rescue 2,821, ,208 Fire District No , Clark County (2) 141,642, ,252,098 Port of Camas-Washougal 4,014, ,058 Port of Vancouver 90,300, ,267,100 Library District 41,925, ,332,150 Total Estimated Overlapping Debt $ 316,053,782 $ 111,218,950 $ 111,218,950 Total Direct & Estimated Overlapping Debt $ 320,374,640 Source: Clark County Assessor s Office, the Cities and certain other issuers listed. (1) As of June 30, (2) Excludes proprietary-type debt, component unit debt, public facilities district debt financed from special taxes and hotel/motel tax financed debt. Bonded Debt Ratio District Taxable Assessed Valuation (2011 collection year) $ 10,960,470,383 Evergreen School District Population* 140,171 Direct Debt to Assessed Valuation 1.91% Direct & Estimated Overlapping Debt to Assessed Valuation 2.92% Per Capita Assessed Valuation $ 78,194 Per Capita Direct Debt $ 1,492 Per Capita Direct & Estimated Overlapping Debt $ 2,286 Source: Evergreen School District. * Estimate. -7-

12 Schedule of General Obligation Indebtedness The following table summarizes the District s outstanding limited tax general obligation and unlimited tax general obligation debt, including the Bonds. Unlimited Tax General Obligation Bonds Date of Issue Date of Final Maturity Amount Outstanding (1) UTGO Refunding, /1/ /1/2011 $ 235,000 UTGO Refunding, /1/ /1/2012 8,285,000 UTGO, 2002 (2) 7/15/ /1/2011 4,030,000 UTGO, /1/2003 6/1/2013 6,050,000 UTGO, 2004 (2) 3/15/ /1/2014 1,500,000 UTGO, /1/ /1/ ,330,000 UTGO Refunding, /1/ /1/ ,820,000 UTGO Refunding, /9/ /1/ ,445,000 UTGO Refunding, 2010B 10/7/2010 6/1/ ,135,000 UTGO Refunding, 2011 (the Bonds ) 10/5/ /1/ ,815,000 UTGO Bond Total $ 191,645,000 Limited General Obligation Bonds LGO, QSCBs, /14/2010 6/1/2027 $ 17,445,000 Special Lease Obligations Key Finance Copy Machine Lease 12/15/ /15/2011 $ 11,811 Key Finance Copy Machine Lease 12/15/ /15/2011 6,494 Konica Minolta Copy Machine Lease 8/3/2010 8/3/ ,385 Special Lease Total $ 65,690 Total Long-Term Debt Outstanding $ 209,155,690 Source: Evergreen School District. (1) Borrowings do not include short-term internal fund borrowings. (2) The Date of Maturity and Amount Outstanding reflect the redemption of the Refunded Bonds. -8-

13 The following table summarizes the debt service requirements for all of the District s outstanding unlimited tax general obligation bonds including the Bonds: Debt Service for the District (1) Outstanding UTGO Bonds (2) The Bonds Calendar Year Principal Interest Total Principal Interest Total Total Debt Service 2011 $ 11,665,000 $ 6,971,836 $ 18,636,836 $ 195,343 $ 195,343 $ 18,832, ,340,000 5,707,525 14,047,525 $ 4,700,000 1,255,775 5,955,775 20,003, ,955,000 5,315,563 14,270,563 5,195,000 1,138,275 6,333,275 20,603, ,815,000 4,968,000 21,783, ,000 1,007,150 1,107,150 22,890, ,750,000 4,510,163 21,260,163 1,505, ,088 2,492,088 23,752, ,640,000 3,890,313 22,530,313 1,465, ,963 2,414,963 24,945, ,390,000 3,144,513 23,534,513 1,440, ,850 2,342,850 25,877, ,590,000 2,391,638 22,981,638 2,915, ,750 3,730,750 26,712, ,565,000 1,541,063 16,106,063 5,895, ,450 6,652,450 22,758, ,470, ,006 17,381,006 5,835, ,650 6,356,650 23,737, ,715, ,300 6,849,300 5,765, ,250 6,053,250 12,902,550 Total $ 159,895,000 $ 39,485,918 $ 199,380,918 $ 34,815,000 $ 8,819,543 $ 43,634,543 $ 243,015,460 (1) Numbers rounded to the nearest dollar. Numbers may not add due to rounding. (2) Does not include the Refunded Bonds. Includes debt service paid June 1, 2011 on obligations then outstanding. Introduction The District s primary sources of revenue are local property taxes, state funds and federal funds. Collectively, these sources comprised approximately 97.7% of the District s total general, associated student body, capital projects and transportation fund revenues in the fiscal year ending August 31, In addition, the District receives income from local non-tax sources, including tuition, sales of goods and supplies, food service, investment earnings, fines and damages, rentals and other miscellaneous sources. These additional revenues comprised approximately 2.2% of total funding, exclusive of voter approved debt service funds, in the fiscal year ending August 31, Local Funding 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 property taxes for various purposes including maintenance and operation, capital projects, and the construction, modernization and remodeling of District facilities. Historically, each of these excess property tax levies were required to be approved by 60% of those voting and the number of yes votes must equal or exceed 40% of those voting in the last general election. Commencing in 2008, the voter approval requirement for levies became a simple majority. School districts may submit special levies for maintenance and operation for up to four years subject further to the limitations described herein. Capital projects levies can range in term from one year up to six years. The District currently levies a maintenance and operation tax and capital project taxes. See Maintenance and Operation Levies and Multi-Year Capital Projects Levies below. -9-

14 The historical aggregate levy rates imposed by the District for all purposes are shown in the table that follows: Source: Evergreen School District. Assessed Valuation Determination District Tax Levy Rates Calendar Year Maintenance & Operations Bond Total 2011 $3.70 $1.76 $ Clark County Assessor (the Assessor ) determines the value of all real and personal property throughout the County (including the District) which is subject to ad valorem taxation. 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 Department of Revenue of the State of Washington. For tax purposes the assessed value of property is 100% of its actual value. The Assessor s determinations are subject to revision by the County Board of Equalization and, for certain property, subject to further revisions by the State Board of Equalization. After all administrative procedures are completed, the District s Board of Directors receives the Assessor s final certificates of assessed value of property within the school district. Tax Collection Procedure Property taxes are levied in specific amounts, and the rate for all taxes levied for all taxing districts in each county is determined, calculated, and fixed by the Assessor based upon the assessed valuation of the property within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district upon a property tax roll, which contains the total amount of taxes to be so levied and collected. The property tax roll is delivered by January 15th to the County Treasurer, who bills and collects the taxes as certified. All such taxes are due and payable on the 30th of April of each year; but if the amount due from a taxpayer exceeds fifty dollars, one-half may be paid then and the balance no later than October 31st of that year. Delinquent taxes are subject to interest at the rate of one percent per month 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 the tax was due. The method of giving notice of payment of taxes due, the County Treasurer s accounting for the money collected, the distribution of the taxes among the various taxing districts, notices of delinquency, and collection procedures are all covered by detailed statutes. The lien for property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation except for federal tax liens. By law, the County Treasurer may commence foreclosure of a tax lien on real property after 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, P.2d 627 (1982), holding the homestead right superior to the improvement district assessment). 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. The following table details the tax collection record for the District s maintenance and operation levy. The collection record for the maintenance and operation levy is representative of the collection record for all local option taxes levied by the District. -10-

15 Year Collected Maintenance and Operations Tax Collections (as of June 1, 2011) Assessed Valuation (1) Amounts Levied Tax Collection (2) Year Due % To Date % (3) (3) 2011 $11,056,197,189 $ 40,880, ,210,980,959 38,596, % 98.74% ,711,838,877 36,557, ,989,703,296 34,580, ,899,443,344 32,507, (1) Assessed value includes timber assessed value. (2) Tax collections have been adjusted to include supplements and cancellations. (3) In process of collection. Source: Evergreen School District, Clark County Assessor s Office and Clark County Treasurer s Office. Maintenance and Operations Levies The maintenance and operation levy (the M&O levy ) must be approved by the voters of the District. The voter approval requirement for M&O levies is a simple majority. The State Constitution allows school districts to submit M&O levies for up to four years and gives school districts the authority to levy local property taxes provided the voters of the district approve the levy with a simple majority in favor. In 1977 when the State assumed additional responsibility for funding schools, the Washington State Legislature (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 fund 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. The Local Effort Assistance Program ( 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. The levy equalization percentage is currently 12 percent. Beginning in 2001 portions of the state property tax and state lottery revenues were dedicated to the Student Achievement Fund, per Initiative 728 ( I-728 ). I-728 directed that, beginning in 2004, school districts receive Student Achievement Fund 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 $0. 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 , lawmakers suspended the inflation increases in I-732. The Legislature provides funding for additional staffing in K-4 classrooms beyond basic education. All districts receive this enhanced allocation, except for in the biennium. The Legislature, in 2010, approved Laws of 2010, Chapter 237 (Chapter 237), 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 kindergarten through four class-size funding. The requirement that the Office of the Superintendent of Public Instruction ( 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 -11-

16 grandfathered above 24 percent. For non-grandfathered districts, such as the District, the maximum levy percentage is increased from 24 percent to 28 percent in 2011 through 2017 and returns to 24 percent every year thereafter. The levy-equalization 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. In the fiscal year ended August 31, 2010, local maintenance and operation taxes comprised 16.7% of total general fund, associated student body fund, capital projects fund and transportation vehicle fund revenues. In February of 2010, a two-year maintenance and operations levy was approved by 63.22% of the electors voting in the election. Maintenance and operations levy amounts scheduled for collection in future years are as follows: Source: Evergreen School District. Multi-Year Capital Projects Levies Maintenance and Operations Levy Collection Year Levy Amount 2012 $ 41,500, ,800,000 The District has not sought and does not plan to seek voter approval for Multi-Year Capital Projects Levies. State Funding The Washington Basic Education Act of 1977 provides for the full funding of 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, 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. The State s largest General Fund expenditures are for education, social and health services and corrections. Approximately 36% of the State s General Fund budget is for supporting public education. The State s General Fund has experienced revenue shortfalls. Recent State budgets, including the budget adopted by the Legislature for the biennium, have reduced State funding for public education. The reductions in 2011 reflect a decrease in funding for teacher salaries. Federal Funding The District receives federal funding from the following sources: Federal Revenue for Impact Aid, Federal Forests, Head Start, Supplemental Handicapped Assistance, Remedial Education, Free and Reduced Lunch Program, and various other special purpose programs. In the fiscal year ended August 31, 2010, federal funds comprised 9.0% of total general fund, associated student bond fund, capital projects fund and transportation vehicle fund revenues. Other Sources of Funding In the fiscal year ended August 31, 2010 local non-tax, other districts and grants and student activities comprised 2.2% of total general fund, associated student body fund, capital projects fund and transportation vehicle fund revenues. -12-

17 Comparative General Fund Income/Expense Statement (Fiscal Year Ending August 31) Audited 2006 Audited 2007 Audited 2008 Audited 2009 Audited 2010 Revenues Local Taxes $ 33,586,785 $ 36,414,377 $ 39,278,325 $ 41,341,100 $ 42,625,454 State Funds 139,416, ,537, ,195, ,028, ,315,438 Federal Funds 13,915,538 14,146,673 14,654,878 27,814,237 28,206,711 Other 340, , , , ,345 Total Revenues $ 187,258,948 $ 201,789,170 $ 217,587,659 $ 236,684,389 $ 234,451,948 Expenditures Current: Basic Education $ 103,896,559 $ 110,469,288 $ 114,064,946 $ 116,886,534 $ 122,127,487 Handicapped 20,079,141 21,555,061 27,045,370 28,811,018 30,499,543 Vocational Education 8,388,134 8,624,770 9,705,020 11,250,198 11,290,342 Compensatory Education 16,468,595 17,551,239 20,701,639 18,940,078 11,721,151 Other Instructional Programs 2,058,564 2,349,733 2,296,534 2,271,650 1,942,094 Community Services 729, , , , ,086 Support Services 38,151,896 38,996,493 42,179,326 42,779,156 38,256,977 Federal Stimulus ,233,025 12,512,577 Debt Service: Principal 91, , , ,065 82,592 Interest 23,424 24,507 20,065 13,455 2,702 Capital Outlay: Equipment Other 281, , ,650 2,218,819 3,931,105 Total Expenditures $ 190,169,117 $ 200,677,694 $ 217,240,509 $ 235,357,205 $ 232,950,656 Excess of Revenues Over (Under) Expenditures $ (2,910,169) $ 1,111,476 $ 347,150 $ 1,327,184 $ 1,501,292 Other Financing Sources (Uses): Sale of Equipment 14,422 1,123 13,915 6,187 3,191 Long Term Financing 0 157, ,455 Transfers Out (362,000) (364,000) (200,000) 0 (500,000) Total Other Financing Sources (Uses) $ (347,578) $ (205,416) $ (186,085) $ 6,187 $ (449,354) Excess of Revenues Over (Under) Expenditures and Other Sources $ (3,257,747) $ 906,060 $ 161,065 $ 1,333,371 $ 1,051,938 Fund Balance at Beginning of Year (As Restated) 12,407,351 9,149,604 10,055,664 10,216,729 11,550,100 ENDING FUND BALANCE $ 9,149,604 $ 10,055,664 $ 10,216,729 $ 11,550,100 $ 12,602,038 Source: Evergreen School District. General Information DISTRICT PROFILE The District is located in Clark County. The District has a current estimated population of 140,171, and encompasses 54 square miles. The District services approximately 26,700 students in kindergarten through 12th grade. The District operates 36 schools including five high schools, six middle schools, 21 elementary schools, the -13-

18 Clark County Vocational Skills Center, the Evergreen Internet Academy, Home Choice Academy and Early Childhood Center. An elected, five-member Board of Directors has oversight for the District. The Board appoints management, sets the budget and holds other financial responsibilities. The District is currently operating on a $241.5 million annual budget, with a staff of approximately 3,100 employees. Organization The District is a municipal corporation governed by a five-member Board and operates under the constitution and laws of the State. Each director represents one of five areas within the District but is elected at large. Members of the Board are elected to four-year terms. The Board holds regular meetings twice a month and special meetings as needed. All meetings are open to the public as provided by law, and agenda items are prepared in advance. The Board appoints a chief executive officer of the District, entitled the Superintendent, who serves at the discretion of the Board. The Superintendent is responsible to the Board for the administration of all schools and departments of the District and serves as the Secretary of the Board. The Superintendent recommends department heads, district managers and legal and bond counsel; maintains a permanent journal of Board proceedings; records and certifies appropriate policies and resolutions; and serves as custodian of official District records. Board of Directors Name Title Term Expiration Troy Thomas President-Director District Victoria Bradford Director District Michael Parsons Director District Joan Skelton Director District Todd Yuzuriha Director District Key Administrative Officials John Deeder, Superintendent. John D. Deeder became the Superintendent of the District in March He came to the District in 2002 as the Director of Curriculum and Instruction and was promoted to Assistant Superintendent in 2003, Chief Academic Officer in 2004 and Deputy Superintendent in Prior to working for the District, Mr. Deeder was an Assistant Superintendent in the Reynolds School District in Fairview, Oregon. He also served the Reynolds School District as the Director of Secondary Education, interim principal at Reynolds High School, and assistant principal at Columbia High School. He has also worked in the Astoria, Oregon and Fremont, California School Districts and has been a high school guidance counselor, administrative assistant, coach and teacher. Mr. Deeder has done private consulting, including work for the Northwest Regional Laboratory as an Onward to Excellence Trainer and as an Adjunct Professor of Instructional Theory for Portland State University. Mr. Deeder received his Master of Arts in Teaching from Lewis and Clark College and his Bachelor of Science in Education from the University of Idaho. He has his Standard Principal Credential from Portland State University and Standard Superintendent Credential from Lewis and Clark College. Mike Merlino, Chief Operating Officer. Mike Merlino joined the District in June 2000 as the Director of Budget and Fiscal Services. He was promoted to Chief Financial Officer in July 2005, where he had responsibility for the areas of Budget and Fiscal Services, Accounting/Purchasing, Central Receiving/Distribution, Communication/Information Resources, Transportation, and the Food Service Program. In September 2010, Mr. Merlino was promoted to Chief Operating Officer for the District. -14-

19 Mr. Merlino obtained his B.A. in Business Administration at Washington State University in He held several positions within the Educational Service District 112 prior to joining the Evergreen Administration. Mr. Merlino has served on the Washington State Legislative Joint Task Force on Local Effort Assistance, is a member of the Educational Service District 112 Workers Compensation Trust Executive Committee, and most recently was appointed by the Washington State Governor, Christine Gregoire, to serve on the Washington Learns K-12 Advisory Committee. Annual Enrollment Actual and projected student enrollment for the District for each October 1 is shown below: Annual Enrollment (FTE) Projected FTE Elementary (K-5) 10,795 10,833 10,843 10,741 10,614 10,445 10,597 10,532 10,631 Middle School (6-8) 5,826 5,998 6,271 6,267 6,280 6,247 6,438 6,413 6,369 High School (9-12) 7,430 7,502 7,980 8,360 8,497 8,609 8,882 9,165 9,219 Total 24,051 24,333 25,094 25,368 25,391 25,301 25,917 26,110 26,219 Source: Evergreen School District. Facilities Master Plan and Capital Improvement Program The District currently is operating from a Facilities Master Plan (the Master Plan ) which scheduled capital improvement projects throughout the District over six years ( ). This Master Plan was adopted by the School Board on March 23, The revenue sources in the Master Plan included bonds, state construction match moneys, and impact fees. Transportation The District operates its own transportation system and the operational budget for the school year is $9,673,047. Of this amount, $498,259 is spent on a variety of field trip and athletic team buses, with these costs being charged to the individual schools. The remainder is required for providing drivers and maintenance for a fleet of 240 buses which provide school transportation for District students. In addition to the operating budget, the District has a Transportation Vehicle Fund budget of $1,000,000 in The District has not sought and does not plan to seek voter approval for Transportation Levies. Budgetary Process Chapter 28A.505 RCW and chapter of the Washington Administrative Code ( WAC ) mandate school district budget policies and procedures. The budgets for the General, Capital Projects, Debt Service, Associated Student Body and Transportation Vehicle funds are adopted by the Board after a public hearing. An appropriation is a prerequisite to expenditures. Appropriations lapse at the end of the fiscal period. Each fund s total expenditures cannot by law exceed its formal fund appropriation. Appropriations are authorized by budget adoption by the Board at the fund level. These are the legal levels of budgetary control. Management can move budgets by areas, departments, and divisions. Only the Board, subject to the approval of OSPI, may adopt a revised or supplemental budget appropriation after a public hearing at any time during the fiscal year. Management does not have the authority to amend the budget after the Board approves or amends the budgets. Encumbrances 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 re-established the following year. The Capital Projects Fund was encumbered at the close of the school year. -15-

20 For budgetary purposes, revenues and expenditures are recognized on the modified accrual basis of accounting as prescribed by law for all governmental funds. Fund balance is an available resource and, pursuant to law, the budgeted ending fund balance cannot be negative. Accounting Policies The modified accrual basis of accounting is used for all governmental funds and expendable trust funds. Under this basis, revenues are recognized when they become measurable and available. Measurable means the amount of the transaction can be determined and available means collectible within the current period. Reported property taxes receivable are measurable, but not available, and are, therefore, included in deferred revenue, and not recognized as current year revenue. Categorical program claims and inter-district billings are measurable and available, and both are accrued. Expenditures are recognized under a full accrual basis of accounting when the related fund liability is incurred. The fund liability is incurred when the goods or services have been received. An exception to this rule is recognition of principal and interest on general long-term debt which is recognized when due. All governmental funds and expendable trust funds are accounted for on a financial resources measurement focus. This means that only current liabilities are included on their balance sheets. Non-expendable trust funds are accounted for on a flow of economic resources measurement focus, using the full accrual basis of accounting. Revenue is recognized when it is earned and expenses are recognized when incurred. In June 1999, the Governmental Accounting Standards Board ( GASB ) adopted statement number 34, requiring all governments to prepare district wide financial statements using the economic resources measurement focus and the accrual basis of accounting. Governmental fund financial statements will continue to be reported using the current financial resources measurement focus and the modified accrual basis of accounting. The new GASB standard requires governments with total annual revenues of 100 million or more, to implement the new reporting basis, effective with reporting years beginning after June 15, OSPI and the State Auditor s Office have authorized school districts in the State to report financial information using an Other Comprehensive Basis of Accounting ( OCBOA ) report. These are special reports permitted under AU Section 623 of the Codification of Statements on Auditing Standards promulgated by the American Institute of Certified Public Accountants ( AICPA ). In particular, AU Section states, in part, For purposes of this section, a comprehensive basis of accounting other than generally accepted accounting principles is a basis of accounting that the reporting entity uses to comply with the requirements or financial reporting provisions of a governmental regulatory agency to whose jurisdiction the entity is subject. This OCBOA will present financial information using the economic resources measurement focus and the modified accrual basis of accounting. The District expects to present its financial information using the OCBOA for the school year in the fall of Investment Policies The County Treasurer is the ex-officio treasurer for the District. In this capacity, the County 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 to the following authorized investments: bonds of the State and any local government in the State, which bonds are rated at the time of investment in one of the three highest credit ratings by a nationally recognized rating agency; general obligation bonds of other states and subdivisions thereof so long as those bonds are rated in one of the three highest categories; registered warrants of a local government within the same county as the entity making the investment; and any investment authorized by law for the treasurer of the State or any local government exclusive of certificates of deposit of banks or bank branches not located in the State. Under chapter RCW, the State Treasurer may invest in non-negotiable certificates of -16-

21 deposit in designated qualified public depositories; in obligations of the U.S. government, its agencies and wholly owned corporations; in bankers acceptances; in commercial paper; in repurchase agreements; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW ). Any municipal corporation, including the District, may authorize the investment of funds not required for immediate expenditure by the County Treasurer. Such funds of the District, including debt service funds, have been invested by the County Treasurer. As of August 31, 2011 the District s investments for all District funds had a book value of $59,144,445. The County Treasurer may, upon the request of one or more units of local government that invest their money with the County, combine that money for the purposes of investment (RCW ). The Clark County Treasurer currently maintains such an investment pool. See Clark County Investment Pool below. The County Treasurer is also authorized to invest local government 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. See Local Government Investment Pool below. Clark County Investment Pool The County has a formal investment policy and under state law, has a Finance Committee, consisting of the County Treasurer as Chair, the County Auditor as Secretary, and the Chairman of the Board of County Commissioners. The County s primary investment objective is the preservation of capital. RCW , , and provide authorization for the County Treasurer to purchase various types of security instruments for the County and its junior taxing districts. The junior taxing districts for which the County Treasurer invests are cemetery, drainage, fire, health, library, ports and schools. The current County investment policy applies to all financial assets held or controlled by the County Treasurer; currently the Treasurer performs the investment function for approximately 300 funds of all types. The County Treasurer currently charges 0.063% per annum of assets invested in the investment pool, as its investment service fee. The County Treasurer may reimburse its office for any expenses incurred in the establishment and maintenance of such a county investment pool (RCW ). County investment policy establishes the following parameters for management of the County s portfolio: up to 100% of the County s total portfolio may be invested with the Washington State Local Government Investment Pool, up to 5% with any single issuer of commercial paper. up to 100% of the portfolio may be invested in federal agency obligations, limited to 10% if such obligations are variable rate notes, up to 25% in banker s acceptances, up to 40% in non-negotiable certificates of deposit, and up to 20% in bonds issued by the State of Washington and any local government in the State of Washington. The policy also addresses liquidity. The average maturity of the County s portfolio may not exceed more than two years, and maturities within the Clark County investment pool are limited to an average maturity of 1-1/2 years. The maximum term of a repurchase and reverse repurchase agreement is 90 days, and the reinvestment of proceeds must closely match the term of the reverse repurchase agreement. The County Treasurer establishes and monitors written internal controls that include details of delivery versus payment procedures, collateralization/safekeeping procedures, and trust receipt documentation. Staff members of the County Treasurer s office involved in direct investment of public funds submit reports to the Deputy Treasurer on a daily basis. County policy requires monthly financial reports to all participants in the Clark County Investment Pool and all County and junior taxing district fund managers, which reflect principal balances, book value, yield, asset allocation, average maturity and investment performance on a total return basis. In addition, the Treasurer s Investment Strategy Committee receives a written report of the complete portfolio listings and the market value of each portfolio holding showing unrealized gains and losses. Fully documented reports indicating all actions and activity -17-

22 of the portfolio are provided quarterly to the County Finance Committee, the Treasurer s Investment Strategy Committee and the Intergovernmental Investment Pool Committee. The County Treasurer s Investment Strategy Committee consists of the Treasurer, Deputy Treasurer, Investment Manager and Investment Officer at the County. The Intergovernmental Investment Pool Committee is composed of larger pool participants (as determined by the percent of pooled investments). The County Treasurer is subject to annual review by the Washington State Auditor, although a State Auditor is not required annually to audit the County s investment activity. Local Government Investment Pool The Washington State Local Government Investment Pool (the LGIP ) was created by the Legislature in 1986 to provide a mechanism for political subdivisions to invest available funds and take advantage of the economies of scale and expertise of the LGIP to earn a competitive rate of return, security and liquidity of funds. The LGIP is a conservatively managed, highly liquid money market fund that is considered low-risk. The LGIP is restricted to investments with maturities of one year or less, and the average life typically is less than 60 days. Permissible investments include U.S. government and agency securities, bankers acceptances, high quality commercial paper, repurchase and reverse repurchase agreements, and certificates of deposit issued by qualified Washington State depositories. The State Treasurer s Office administers the LGIP, reports that as of April 2011, the LGIP had 644 participants and a balance of approximately $8.7 billion. In its management of LGIP, the State Treasurer is required to adhere, at all times, to the principles appropriate for the prudent investment of public funds. These are, in priority order, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) to attain the highest possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The District did not incur any investment losses during the most recent fiscal year, and there were no known violations of legal or contractual provisions for deposits and investments. -18-

23 Insurance Coverage The District is a member of the School Insurance Association of Washington Pool administered by Canfield and Associates. The purpose of the pool is to provide its members the capability and authority to jointly purchase property/liability insurance, provide a plan of self-insurance coverage and provide related reserves to pay for selfinsurance coverage, and provide related services, including a cooperative program of risk management. The District carries a primary coverage of $25 million of general liability/automotive liability coverage as shown below. Insurance Coverage (1) Type of Coverage Property Bus Physical Damage Deductible Automobile Physical Damage Deductible Property Deductible Property Coverage Limits Boiler & Machinery Coverage Limits Crime Money & Securities Deductible Money & Securities Limits Employee Dishonesty Deductible Employee Dishonesty Limits Liability General & Automobile Liability Deductible General & Automobile Liability Limits Sexual Abuse Liability Limits Errors and Omissions Liability Errors & Omissions Liability Deductible Errors & Omissions Liability Limits Employment Practices Deductible Employment Practices Liability Limits Source: Evergreen School District. (1) The fiscal year coverages for the District. Coverage $1,000 per occurrence $1,000 per occurrence $5,000 per occurrence $150,000,000 per occurrence $100,000,000 per occurrence $5,000 per occurrence $50,000 per occurrence $5,000 per occurrence $1,000,000 per occurrence $5,000 per occurrence $25,000,000 per occurrence & $31,000,000 aggregate $10,000,000 per occurrence & $30,000,000 aggregate $1,000 per occurrence $25,000,000 per occurrence $5,000 $25,000,000 per claim & $31,000,000 aggregate There have been no claim settlements that were in excess of insurance coverage for any of the past 10 fiscal years. -19-

24 Labor Relations A majority of employees of the District are represented by labor organizations. There are four bargaining units. The Large Group PSE, Evergreen Education Association, Evergreen Administrator Association and the Office Clerical PSE. The Large Group PSE, the largest labor organization, represents the teachers and other certificated support staff. Each bargaining unit has negotiated a collective bargaining agreement with the District. These agreements contain provisions such as salaries, vacation, sick leave, medical and dental insurance, working conditions and grievance procedures. The District also meets with two other employee groups which are not recognized as labor organizations under the law. They are the Supervisory Administrators which includes the principals and directors of non-school departments and the coaches and advisors of the co-curricular and extra-curricular sports and student activities. The District s central office classified staff is not represented, but has been granted salary and benefit enhancements granted represented classified employees through past practice. The District strives to complete agreements with all groups in a timely manner, consistent with applicable state law, and to promote labor relation policies mutually beneficial to management, employees, and the educational program. The District has been involved in a collaborative bargaining model with its teachers that focuses on ongoing communication to enhance issue resolution. The District also engages in periodic labor management or meet and confer meetings with its employee groups to further continued communication between the parties overall. The District considers labor relations with its employees to be positive and never has had a work stoppage by any of its groups. Employees of the District are represented by the following bargaining units: Bargaining Units Bargaining Unit Number of Employees Contract Expires Large Group PSE 1,200 8/31/2013 Evergreen Education Association 1,600 8/31/2011 (1) Evergreen Administrator Association 185 8/31/2013 Office Clerical PSE 210 8/31/2012 (1) Negotiations between the Evergreen Education Association (the EEA ) and the District have concluded, and an agreement has been reached with the EEA. The School Board is expected to consider the contract at their September 27, 2011 meeting. The contract would be for two years. Pension System Pensions for District employees are provided through the Washington State Department of Retirement Systems. Substantially all District full-time and qualifying part-time employees participate in one of the following three contributory, multi-employer, cost-sharing statewide retirement systems that include (i) the State Teacher s Retirement System ( TRS ) for certificated employees, (ii) the Public Employee s Retirement System ( PERS ) for non-certificated employees and (iii) the School Employee s Retirement System ( SERS ) for classified employees (as described by the Washington State Department of Retirement Systems website, * TRS includes three plans (Plans I, II and III), PERS includes three plans (Plans I, II and III), and SERS includes two plans (Plans II and III). Participants who joined the retirement system by September 30, 1977 are eligible to be either TRS or PERS Plan I members. Those who joined thereafter are enrolled in TRS Plans II or III or SERS Plans II or III. Employees who do not specify a plan choice will transfer automatically to Plan III. Retirement benefits are financed from both employee and employer contributions and from investment earnings. Retirement benefits under all Plans I and II are vested after completion of five years of eligible service. Plan III 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. All Plans I and II are defined benefit plans. The PERS Plan III, the SERS Plan III and the TRS Plan III consist of two separate elements: a defined benefit, and a defined contribution portion. Eligible participants enrolled in TRS, * This inactive textual reference is not a hyperlink and does not incorporate the Washington State Department of Retirement System s website by reference. -20-

25 PERS or SERS Plan II may elect to transfer to the respective Plan III, during the specified transfer window period that occurs in January of each year. Once employees transfer to Plan III, they may not return to Plan II membership. Each biennium the State legislature establishes all Plan I employer contribution rates and all Plan II employer and employee contribution rates. Employee contribution rates for Plan I have been established by statute at six percent. The employer and employee contribution rates for Plan II, and the employer contribution rates for the defined benefit portion of Plan III, are developed by the Office of the State Actuary and established by the Pension Funding council to fully fund those portions. The employee contribution rates to the defined contribution portion are set by statute and range from five to fifteen percent. Methods used to establish employer and employee contribution rates are defined in chapter RCW. The methods used to determine the contribution requirements are established under chapters 41.40, and RCW for PERS, SERS and TRS, respectively. All employers are required to contribute at the level established by the State legislature. The State is responsible for funding basic education; based upon that funding, school districts make payments directly to the pension funds incurred for their employees. Legislation directs that employer contributions will provide for current pension liabilities and for the amortization of each system s unfunded liability by June 30, The District contribution represents its full liability under both the TRS and PERS systems, except that future contribution rates may be adjusted to meet the system needs. See Note 3 in the financial statements attached hereto in Appendix E. INITIATIVES AND REFERENDA Under the State Constitution, the voters of the State have the ability to initiate legislation and modify existing legislation through the powers of initiative and referendum, respectively. The initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent (initiative) 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 in this manner 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 members elected to each house of the Legislature. After two years, the law is subject to amendment or repeal by the Legislature in the same manner as other laws. In recent years, the State s voters have approved numerous initiatives and referenda that have limited the District s ability to impose taxes and collect fees. Some, but not all, of these initiatives and referenda have been determined to be unconstitutional. Other tax and fee initiative measures have been and may be filed, but it cannot be predicted whether any such initiatives might gain sufficient signatures to qualify for submission to the Legislature and/or the voters or, if submitted, whether they ultimately would be approved. Tax Matters LEGAL MATTERS General. In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Federal income tax law contains a number of requirements that apply to the Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the use of proceeds of the bonds and the facilities refinanced with proceeds of the Bonds and certain other matters. The District has covenanted to comply with all applicable requirements. Bond Counsel s opinion is subject to the condition that the District comply with the above-referenced covenants and, in addition, will rely on representations by the District and its advisors with respect to matters solely within the knowledge of the District and its advisors, respectively, which Bond Counsel has not independently verified. If the District fails to comply with such covenants or if the foregoing representations are determined to be inaccurate or -21-

26 incomplete, interest on the Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds, regardless of the date on which the event causing taxability occurs. In rendering its opinion, Bond Counsel has relied on the report of Grant Thornton LLP with respect to the accuracy of certain mathematical calculations. Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with excess net passive income, foreign corporations subject to the branch profits tax, life insurance companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding any collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding collateral federal income tax consequences. Payments of interest on tax-exempt obligations such as the Bonds, are in many cases required to be reported to the Internal Revenue Service ( IRS ). Additionally, backup withholding may apply to any such payments made to any owner who is not an exempt recipient and who fails to provide certain identifying information. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. Bond Counsel s opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion represents Bond Counsel s legal judgment based on its review of existing law and in reliance on the representations made to Bond Counsel and the District s compliance with its covenants. The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Bonds. Owners of the Bonds are advised that, if the IRS does audit the Bonds, under current IRS procedures, at least during the early stages of an audit, the IRS will treat the District as the taxpayer, and the owners of the Bonds may have limited rights to participate in the audit. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome. Qualified Tax-Exempt Obligations. The District has not designated the Bonds as qualified tax-exempt obligations within the meaning of Section 265(b)(3)(B) of the Code. Original Issue Premium. An amount equal to the excess of the purchase price of a Bond over its stated redemption price at maturity constitutes premium on that Bond. A purchaser of a Bond must amortize any premium over that Bond s term using constant yield principles, based on the Bond s yield to maturity. As premium is amortized, the purchaser s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the purchaser. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the purchaser s basis is reduced, no federal income tax deduction is allowed. Purchasers of Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult their tax advisors with respect to the determination and treatment of premium for federal income tax purposes and the state and local tax consequences of owning such Bonds. Proposed Tax Legislation; Miscellaneous. On September 12, 2011, President Obama submitted to Congress a legislative proposal entitled the American Jobs Act of The proposal includes a number of changes to the Code, including one that would reduce the tax value of all itemized deductions and targeted tax expenditures for certain high-income taxpayers in tax years commencing on or after January 1, Among the targeted tax expenditures is interest on any bond excludable from gross income under Section 103 of the Code, whether the bond is outstanding on the enactment date of the proposed legislation or is issued thereafter, including interest on the Bonds. It is not possible to predict whether this proposal will be enacted into law. Tax legislation (either proposed -22-

27 or future), administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal or state law or otherwise prevent beneficial owners of the Bonds from realizing the full current benefit of the tax status of such interest and could affect the market price or marketability of the Bonds. Prospective investors should consult with their tax advisors on the foregoing matters as they consider an investment in the Bonds. Legal Opinion The Bonds will be issued with the approving legal opinion of Pacifica Law Group LLP, Bond Counsel, Seattle, Washington. See Appendix A for a form of legal opinion from Bond Counsel. Litigation There is no controversy or litigation pending, or to the best knowledge of the District threatened, affecting the issuance and delivery of the Bonds, or the power and authority of the District to issue the Bonds. Enforceability The provisions of the Bonds and the Bond Resolution, constitute contracts between the District and the owner or owners of the Bonds, and such provisions are enforceable by the registered owner or owners in a court of competent jurisdiction in the State of Washington by mandamus or other appropriate remedy, subject to judicial discretion and the valid exercise of sovereign police power of the State of Washington and may be limited by laws affecting the rights of creditors. Continuing Disclosure Undertaking OTHER MATTERS In accordance with Section (b)(5) of Securities and Exchange Commission (the Commission ) Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time (the Rule ), the District has agreed in the Bond Resolution for the benefit of the Bond Owners or Beneficial Owners of the Bonds to provide or cause to be provided to the Municipal Securities Rulemaking Board (the MSRB ) in accordance with the Rule, the following annual financial information and operating data for the prior fiscal year (commencing in 2012 for the fiscal year ended August 31, 2011): (i) annual financial statements, which statements may or may not be audited showing ending fund balances, prepared in accordance with regulations prescribed by the Superintendent of Public Instruction and the State Auditor pursuant to RCW 28A , RCW 28A , RCW 28A , and RCW (or any successor statutes) and generally of the type included in this Official Statement for the Bonds under the heading Comparative General Fund Income/Expense Statement, (ii) the assessed valuation of taxable property in the District; (iii) ad valorem taxes due and percentage of taxes collected; (iv) property tax levy rate per $1,000 of assessed valuation; and (v) outstanding general obligation debt of the District. Items ii-iv shall be required only to the extent that such information is not included in the annual financial statements. The information and data described above will be provided on or before nine months after the end of the District's fiscal year. The District's current fiscal year ends August 31. The District may adjust such fiscal year by providing written notice of the change of fiscal year to the MSRB. In lieu of providing such annual financial information and operating data, the District may cross-reference to other documents available to the public on the MSRB's internet website or filed with the Commission and, if such document is a final official statement within the meaning of the Rule, available from the MSRB. If not provided as part of the annual financial information discussed above, the District will provide the District's audited annual financial statement prepared in accordance with the Budget Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW , 28A , 28A , and 28A (or any successor statute) when and if available to the MSRB. -23-

28 The District further agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: Principal and interest payment delinquencies; Non-payment related defaults, if material; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; Modifications to the rights of Bondholders, if material; Optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release , if material, and tender offers; Defeasances; Release, substitution, or sale of property securing repayment of the Bonds, if material; Rating changes; Bankruptcy, insolvency, receivership or similar event of the District; 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 Appointment of a successor or additional trustee or the change of name of a trustee, if material. The District will promptly determine whether the events described above are material. The District agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information described above on or prior to the date set forth above. Until otherwise designated by the MSRB or the Commission, any information or notices submitted to the MSRB in compliance with the Rule are to be submitted through the MSRB's Electronic Municipal Market Access system ( EMMA ), currently located at (which is not incorporated into this Official Statement by this reference). All notices, financial information and operating data required by the District s undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to the District s undertaking must be accompanied by identifying information as prescribed by the MSRB. The District's obligations to provide annual financial information and notices of listed events will terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. Any provision of the District s undertaking will be null and void if the District (1) obtains an opinion of nationally recognized bond counsel to the effect that the portion of the Rule that requires that provision is invalid, has been repealed retroactively or otherwise does not apply to the Bonds and (2) notifies the MSRB of such opinion and the cancellation of the District s undertaking. Notwithstanding any other provision of the District s undertaking, the District may amend its undertaking with an opinion of nationally recognized bond counsel in accordance with the Rule. In the event of any amendment, the District will describe such amendment in the next annual report, and shall include a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a listed event described above, and (ii) the annual report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. -24-

29 The right of any bondowner or beneficial owner of Bonds to enforce the provisions of the District s undertaking described in the Bond Resolution will be limited to a right to obtain specific enforcement of the District's obligations, and any failure by the District to comply with the provisions of the undertaking will not be an event of default with respect to the Bonds. For purposes of this section, beneficial owner means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories. Prior Compliance with Continuing Disclosure Undertakings. The District entered into an undertaking under the Rule with respect to its obligations issued after July 3, 1995 and has not failed to comply with any prior undertaking under the Rule in the past five years. For fiscal years ending August 31, 2007 and August 31, 2008, the District timely filed hard copies of its required annual financial statements and operating data with the then-designated National Recognized Municipal Securities Information Repositories. In May 2010, the District electronically filed such financial information and operating data with EMMA, and, as a precautionary measure, attached a notice of failure to provide financial information as required. The District was in compliance with its prior undertakings at the time such notice was provided and continues to be in compliance as of the date of this Official Statement. Ratings The Bonds have been assigned a rating of Aa1 based upon the District s participation in the Washington State School District Credit Enhancement Program (see Appendix E attached hereto) by Moody s Investors Service, ( Moody s ). Moody s has also assigned an underlying rating of Aa2 to the Bonds. Such ratings will reflect only the views of Moody s at the time the ratings will be given, and the District makes no representation as to the appropriateness of such ratings. An explanation of the significance of the ratings may be obtained only from Moody s. There is no assurance that the ratings will continue for any given period of time or that they will not be revised downward, suspended or withdrawn entirely by Moody s, if, in Moody s judgment, circumstances so warrant. Any such downward revision, suspension or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. Financial Advisor Public Financial Management, Inc., Seattle, Washington, serves as financial advisor to the District in conjunction with the issuance of the Bonds. The financial advisor has not audited, authenticated or otherwise verified the information set forth in this Official Statement or any other related information available to the District with respect to the accuracy and completeness of disclosure of such information, and no guaranty, warranty or other representation is made by the financial advisor respecting the accuracy and completeness of this Official Statement or any other matter related to this Official Statement. Underwriting The Bonds are being purchased by Guggenheim Securities, LLC (the Purchaser ) at an aggregate price of $38,994,627.73, which represents the principal amount of the Bonds plus original issue premium of $4,383, and less an underwriter s discount of $204, After the initial public offering, the public offering prices may be varied from time to time. The Purchaser has not audited, authenticated or otherwise verified the information set forth in this Official Statement or any other related information available to the District with respect to the accuracy and completeness of disclosure of such information, and no guaranty, warranty or other representation is made by the Purchaser respecting the accuracy and completeness of this Official Statement or any other matter related to this Official Statement. -25-

30 CUSIP Numbers It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bonds or any error with respect thereto shall constitute cause for a failure or refusal by the purchaser hereof to accept delivery of and pay for said Bonds in accordance with the terms of the purchase contract. All expenses in relation to the printing of CUSIP numbers on said Bonds shall be paid by the District; provided, however, that the CUSIP Service Bureau charge for the assignment of said numbers shall be the responsibility of and shall be paid for by the purchaser. Official Statement At the time of delivery of the Bonds, one or more officials of the District will furnish a certificate stating that to the best of his or her knowledge, this Official Statement, as of its date and as of the date of delivery of the Bonds does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein, in light of the circumstances in which they were made, not misleading. Statements in this Official Statement, including matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the owners of the Bonds. The preparation and distribution of this Official Statement has been authorized by the District. EVERGREEN SCHOOL DISTRICT NO. 114, CLARK COUNTY, WASHINGTON By /s/ John D. Deeder Superintendent -26-

31 APPENDIX A FORM OF BOND COUNSEL OPINION

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33 APPENDIX A FORM OF BOND COUNSEL OPINION October 5, 2011 Evergreen School District No. 114 Clark County, Washington Guggenheim Securities, LLC New York, New York Re: Evergreen School District No. 114, Clark County, Washington Unlimited Tax General Obligation Refunding Bonds, $34,815,000 Ladies and Gentlemen: We have acted as bond counsel to the Evergreen School District No. 114, Clark County, Washington (the District ), and have examined a certified transcript of the proceedings taken in the matter of the issuance by the District of its Unlimited Tax General Obligation Refunding Bonds, 2011 (the Bonds ), dated as of the date hereof, in the aggregate principal amount of $34,815,000, issued pursuant to an approving vote of the District s voters and Resolution No (the Bond Resolution ) of the District, for the purpose of providing funds to refund certain outstanding unlimited tax general obligation bonds of the District and paying costs of issuing the Bonds. The Bonds are not subject to redemption prior to their stated maturities. Regarding questions of fact material to our opinion, we have relied on representations of the District in the Bond Resolution and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid and binding general obligations of the District, except to the extent that the enforcement of the rights and remedies of the holders and owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion; 2. Both principal of and interest on the Bonds are payable out of annual levies of ad valorem taxes to be made upon all of the taxable property within the District without limitation as to rate or amount and in amounts that, together with other available funds, will be sufficient to pay such principal and interest as the same shall become due; and 3. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the Code ), that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The District has covenanted to comply with all applicable requirements. Failure to comply with certain of such A-1

34 Evergreen School District No. 114 Guggenheim Securities, LLC October 5, 2011 Page 2 covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. The District has not designated the Bonds as qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Code. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. This opinion is given as of the date hereof, and we assume no obligation to update, 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. Very truly yours, PACIFICA LAW GROUP LLP A-2

35 APPENDIX B GENERAL AND ECONOMIC INFORMATION

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37 APPENDIX B GENERAL AND ECONOMIC INFORMATION Year City of Vancouver Population (1) Clark County Washington State , ,000 6,767, , ,600 6,733, , ,200 6,668, , ,200 6,587, , ,000 6,488,000 (1) Estimated. Source: Washington State Office of Financial Management. Per Capita Income Year Clark County State of Washington United States 2010 (1) N/A $ 43,564 $ 40, (1) $ 35,027 42,870 39, ,547 43,711 40, ,360 42,169 39, ,691 39,561 37, ,118 36,743 35,424 (1) Most recent data available. Source: U.S. Department of Commerce, Bureau of Economic Analysis. Personal Income ($ in thousands) Year Clark County State of Washington United States 2010 (1) N/A $ 292,950,106 $ 12,530,101, (1) $ 15,131, ,696,255 12,168,161, ,520, ,010,560 12,380,225, ,733, ,624,864 11,900,562, ,750, ,091,288 11,256,516, ,832, ,057,261 10,476,669,000 (1) Most recent data available. Source: U.S. Department of Commerce, Bureau of Economic Analysis. B-1

38 Non-Agricultural Wage and Salary Employment in Clark County (Annual Averages) Annual Average NAICS Industry Title (1) Total Nonfarm 128, , ,700 Construction, Mining and Logging 9,800 8,500 7,800 Manufacturing 11,900 11,400 11,100 Durable Goods 7,800 7,300 7,100 Nondurable Goods 4,200 4,100 4,000 Trade, Transportation, and Utilities 24,300 24,100 23,800 Wholesale Trade 5,200 5,100 5,200 Retail Trade 15,200 15,000 14,800 Transportation and Warehousing 3,900 3,900 3,700 Information 2,700 2,700 2,700 Financial Activities 6,100 5,800 5,800 Finance and Insurance 3,500 3,600 3,600 Real Estate and Rental and Leasing 2,500 2,200 2,200 Professional and Business Services 14,200 14,500 14,800 Professional and Technical Services 6,800 6,800 6,900 Management of Companies 1,200 1,200 1,400 Admin. Support, and Waste Management 6,200 6,600 6,600 Education and Health Services 18,400 18,800 19,200 Education Services 1,200 1,300 1,400 Health Care and Social Assistance 17,300 17,600 17,800 Leisure and Hospitality 12,800 12,300 11,800 Arts, Entertainment and Recreation 2,400 2,200 2,100 Accommodation and Food Services 10,400 10,200 9,800 Other Services 4,500 4,500 4,600 Government 24,200 24,100 24,200 Federal Government 3,000 3,100 3,100 State Government 3,900 4,000 4,000 Local Government 17,300 17,100 17,100 (1) Average through July, 2011 Source: Washington State Employment Security Department. Employment Statistics State of Washington Employed 3,155,380 3,235,740 3,286,970 3,205,640 3,192,120 Unemployed 163, , , , ,510 % Unemployed 4.9% 4.6% 5.5% 9.3% 9.6% Clark County Employed 192, , , , ,230 Unemployed 11,730 11,580 15,140 29,010 30,250 % Unemployed 5.7% 5.6% 7.1% 13.2% 13.7% Source: Washington State Department of Employment Security. B-2

39 Major Employers in Clark County Employer Services/Product Number of Employees Vancouver Public Schools PreK-12 th Grade Education 3,412 Evergreen Public Schools K-12 th Grade Education 3,224 Southwest Washington Medical Center Hospital 2,625 Clark County Local County Government 1,529 Fred Meyer Stores Grocery, Apparel, General Merchandise 1,405 City of Vancouver Local City Government 1,100 Battle Ground School District K-12 th Grade Education 1,006 WaferTech Silicon Wafer Fabrication 950 Wells Fargo Co. Financial Services 942 S E H America Inc. Silicon Wafer Fabrication 842 Source: Columbia River Economic Development Council, Vancouver Business Journal 2010 Books of Lists. Major Taxpayers The following table lists the top ten taxpayers within Evergreen School District (2009/2010 Tax Roll Year). Taxpayer Type of Business Assessed Value ($000) (1) SEH America Micro-Electronics $ 312,950,246 Columbia Tech Center LLC Land Development 208,559,777 Vancouver Clinic Healthcare 53,507,334 Wal-Mart Retail 51,300,790 Park Plaza Inc. Land Development 49,162,900 S-E Inc. Land Development 47,528,531 Mission Hills LLC Land Development 43,759,800 Eastridge Associates Land Development 42,876,575 Tom Moyer Theatres Cinema/Entertainment 39,844,905 Olivia Steven, Olivia Janice Private Land Owner 38,104,000 Total Assessed Valuation $887,594,858 (1) Total value includes real property and personal property Source: Clark County Assessor s Office. Source: Washington State Department of Revenue. Taxable Retail Sales Year City of Vancouver Clark County 2010 $ 2,276,978,353 $ 4,036,327, ,257,127,731 3,893,050, ,631,533,663 4,547,933, ,709,692,390 4,849,742, ,646,162,994 4,866,777,344 B-3

40 Year Clark County Historical Building Permits and Valuations Commercial Construction No. of Permits Total Valuation Residential Construction No. of Permits Total Valuation 2011 (1) 180 $ 26,907,381 1,803 $ 68,148, ,131,614 3, ,760, ,063,894 3,561 98,255, ,120,482 4, ,401, ,261,451 5, ,841, ,458,957 6, ,537,471 (1) Through July, 2011 Source: Clark County. B-4

41 A P P E N D I X C Washington State School District Credit Enhancement Program

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43 WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM The following information has been furnished by the State of Washington for use in this Official Statement. The issuer of the bonds offered pursuant to this Official Statement (the Offered Bonds ) makes no representation as to the accuracy or the completeness of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. Definitions Act means the Washington State School District Credit Enhancement Program Act, chapter Revised Code of Washington. Program means the Washington State School District Credit Enhancement Program established by the Act. Program Bond means any voted general obligation bond issued by a school district, holding a certificate issued pursuant to the Act for such a bond. State means the State of Washington. Program Provisions Article VIII, section 1(e) of the Constitution of the State and the Act allow the State to guarantee any voted general obligation bonds issued by a school district. Payment of the principal of and interest on Program Bonds when due is guaranteed by the full faith, credit and taxing power of the State under the provisions of the Act. The Act provides as follows: The full faith, credit, and taxing power of the State is pledged to guarantee full and timely payment of the principal of and interest on Program Bonds as such payments become due. However, in the event of any acceleration of the due date of the principal by reason of mandatory redemption or acceleration resulting from default, the payments guaranteed shall be made in the amounts and at the times as payments of principal would have been due had there not been any acceleration. The State guarantee does not extend to the payment of any redemption premium. The Act further provides that the State pledges to and agrees with the owners of any Program Bonds that the State will not alter, impair, or limit the rights vested by the Program with respect to the Program Bonds until the Program Bonds, together with applicable interest, are fully paid and discharged. However, an alteration, impairment, or limitation of such rights is not precluded if full provision is made by law for the payment of the Program Bonds. Program Procedures In accordance with applicable law, the County Assessor for each school district with outstanding, unpaid Program Bonds is required to levy property taxes approved by the voters for repayment of the Program Bonds. In accordance with applicable law, the County Treasurer for each school district with outstanding, unpaid Program Bonds is required to collect property taxes approved by the voters for repayment of the Program Bonds. The County Treasurer is required to transfer money sufficient for each scheduled debt service payment to the paying agent on or before any principal or interest payment date for the Program Bonds. A County Treasurer who is unable to transfer to the paying agent funds required to make any scheduled debt service payments on the Program Bonds on or prior to the payment date, due to the lack of adequate funds, is required to immediately provide notice to the State Treasurer and to the paying agent. If sufficient funds are not transferred to the paying agent at the time required to make a scheduled debt service payment on the Program Bonds, the paying agent is required to immediately notify the State Treasurer. Pursuant to the Act, the State legislature is required to appropriate, in each and every biennial appropriations act, such amount as may be required to make timely payment on the Program Bonds. If sufficient money to make any scheduled debt service payment on the Program Bonds has not been transferred to the paying agent in a timely manner, the paying agent is required to make such scheduled debt service payment and the State Treasurer is required to transfer sufficient money to the paying agent for such payment. Each school district is responsible for paying in full the principal of and interest on its Program Bonds. The State C-1

44 Treasurer is required to recover from the school district any funds paid by the State on behalf of that school district under the Program. The State Treasurer will charge interest in connection with the recovery of funds under the Act. In addition to charging interest, the State Treasurer may impose a penalty on a school district for which the State made a payment under the Program, which penalty may not be more than five percent of the amount paid by the State pursuant to its guarantee for each instance in which a payment by the State is made. A payment by the State Treasurer discharges the obligation of the school district to its Program Bond owners for the payment, but does not retire any Program Bond that has matured. The terms of that Program Bond remain in effect until the State is repaid. Any such payment by the State transfers the rights represented by the general obligation of the school district from the Program Bond owners to the State. If the State has made all or part of a debt service payment on behalf of a school district that has issued Program Bonds, the State Treasurer may (a) direct the school district and the County Treasurer to restructure and revise, to the extent permitted by law, the collection of excess levy taxes for the payment of Program Bonds on which the State Treasurer has made payments under the Act to the extent necessary to obtain repayment to the State Treasurer; and (b) require, to the extent permitted by law, that the proceeds of such taxes be applied to the school district s obligations to the State if all outstanding obligations of the school district payable from such taxes are fully paid or their payment is fully provided for. Outstanding Certificates of Eligibility and Outstanding Program Bonds As of September 19, 2011, the State has guaranteed the following under the Act (not including the Offered Bonds): Number of school districts with Certificates of Eligibility 190 Number of Program Bond issues guaranteed 498 Aggregate total principal amount outstanding of Program Bonds guaranteed $8,444,915, Program Contact Person Requests for information regarding the Program may be directed to: Office of the State Treasurer Attn: Deputy Treasurer Debt Management Division Legislative Office Building 2nd Floor P.O. Box Olympia, WA Phone: (360) Fax: (360) State of Washington - Financial and Operating Information The State s most recent audited financial statements and the financial and operating information relating to the State included in the most recent official statement for the State s general obligation debt are on file with the Municipal Securities Rulemaking Board (the MSRB ), in an electronic format as prescribed by the MSRB, and are incorporated by this reference in this official statement. State of Washington - Continuing Disclosure The State has undertaken (the Undertaking ) to provide (1) not later than seven months after the end of each fiscal year in each fiscal year that the Offered Bonds are outstanding, 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, (a) audited financial statements of the State for such fiscal year prepared (except as noted therein) in accordance with generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board, as such principles may be changed from time to time, except that if the audited financial statements are not available by such date, unaudited financial statements in a format similar to the audited financial statements most recently prepared for the State shall be provided, and the State s audited financial statements shall be provided when and if they become available; and (b) the historical financial and operating information relating to the State included in the most recent official statement for the State s general obligation debt; and (2) to the MSRB, C-2

45 in a timely manner, notice of its failure to provide the foregoing information on or prior to the date set forth in (1). The Undertaking is subject to amendment or termination under the circumstances and in the manner permitted by SEC Rule 15c2-12. The right to enforce the provisions of the Undertaking shall be limited to a right to obtain specific performance of the State s obligations thereunder, and any failure by the State to comply with the provisions of the Undertaking shall not be a default with respect to the Offered Bonds. The Undertaking inures to the benefit of the State and the issuer, any underwriter and any holder of the Offered Bonds, and does not inure to the benefit of or create any rights in any other person. C-3

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47 APPENDIX D BOOK-ENTRY ONLY SYSTEM

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49 APPENDIX D BOOK-ENTRY ONLY SYSTEM T H E D E P O S I T O R Y T R U S T C O M P A N Y SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC--bracketed material may apply only to certain issues) 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 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 D-1

50 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). 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. (08/10/11) D-2

51 APPENDIX E AUDITED FINANCIAL STATEMENTS FOR THE DISTRICT FOR THE FISCAL YEAR ENDING AUGUST 31, 2010

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53 Washington State Auditor s Office Financial Statements and Federal Single Audit Report Evergreen School District No. 114 Clark County Audit Period September 1, 2009 through August 31, 2010 Report No Issue Date May 23, 2011

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55 Washington State Auditor Brian Sonntag May 23, 2011 Board of Directors Evergreen School District No. 114 Vancouver, Washington Report on Financial Statements and Federal Single Audit Please find attached our report on Evergreen School District No. 114 s financial statements and compliance with federal laws and regulations. We are issuing this report in order to provide information on the District s financial condition. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR Insurance Building, P.O. Box Olympia, Washington (360) TDD Relay (800) FAX (360)

56 Table of Contents Evergreen School District No. 114 Clark County September 1, 2009 through August 31, 2010 Federal Summary... 1 Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards... 3 Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A Independent Auditor s Report on Financial Statements... 7 Financial Section... 9

57 Federal Summary Evergreen School District No. 114 Clark County September 1, 2009 through August 31, 2010 The results of our audit of Evergreen School District No. 114 are summarized below in accordance with U.S. Office of Management and Budget Circular A-133. FINANCIAL STATEMENTS An unqualified opinion was issued on the financial statements. Internal Control Over Financial Reporting: Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over financial reporting that we consider to be significant deficiencies. Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses. We noted no instances of noncompliance that were material to the financial statements of the District. FEDERAL AWARDS Internal Control Over Major Programs: Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over major federal programs that we consider to be significant deficiencies. Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses. We issued an unqualified opinion on the District s compliance with requirements applicable to each of its major federal programs. We reported no findings that are required to be disclosed under section 510(a) of OMB Circular A-133. Washington State Auditor's Office 1

58 Identification of Major Programs: The following were major programs during the period under audit: CFDA No. Program Title Title I Grants to Local Educational Agencies Special Education - Grants to States (IDEA, Part B) Special Education - Preschool Grants (IDEA Preschool) ARRA - Title I Grants to Local Educational Agencies, Recovery Act ARRA - Special Education - Grants to States, Recovery Act (IDEA Part B) ARRA - Special Education - Preschool Grants, Recovery Act ARRA - State Fiscal Stabilization Fund - Education State Grants, Recovery Act The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by OMB Circular A-133, was $836,886. The District qualified as a low-risk auditee under OMB Circular A-133. Washington State Auditor's Office 2

59 Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards Evergreen School District No. 114 Clark County September 1, 2009 through August 31, 2010 Board of Directors Evergreen School District No. 114 Vancouver, Washington We have audited the financial statements of Evergreen School District No. 114, Clark County, Washington, as of and for the year ended August 31, 2010, and have issued our report thereon dated April 13, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to the financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit, we considered the District s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Washington State Auditor's Office 3

60 COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the District s financial statements are free of material misstatement, we performed tests of the District s compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended for the information and use of management, the Board of Directors, federal awarding agencies and pass-through entities. 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. BRIAN SONNTAG, CGFM STATE AUDITOR April 13, 2011 Washington State Auditor's Office 4

61 Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 Evergreen School District No. 114 Clark County September 1, 2009 through August 31, 2010 Board of Directors Evergreen School District No. 114 Vancouver, Washington COMPLIANCE We have audited the compliance of Evergreen School District No. 114, Clark County, Washington, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended August 31, The District s major federal programs are identified in the Federal Summary. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the District s management. Our responsibility is to express an opinion on the District s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to the financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the District s compliance with those requirements. In our opinion, the District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended August 31, Washington State Auditor's Office 5

62 INTERNAL CONTROL OVER COMPLIANCE The management of the District is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the District s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended for the information of management, the Board of Directors, federal awarding agencies and pass-through entities. 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. BRIAN SONNTAG, CGFM STATE AUDITOR April 13, 2011 Washington State Auditor's Office 6

63 Independent Auditor s Report on Financial Statements Evergreen School District No. 114 Clark County September 1, 2009 through August 31, 2010 Board of Directors Evergreen School District No. 114 Vancouver, Washington We have audited the accompanying financial statements of Evergreen School District No. 114, Clark County, Washington, as of and for the year ended August 31, 2010, as listed on page 9. These financial statements are the responsibility of the District s management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 1 to the financial statements, the District prepares its financial statements using accounting practices prescribed by Washington State statutes and the Accounting Manual for Public Schools in the State of Washington, which demonstrates compliance with the regulatory basis of accounting which differs from accounting principles generally accepted in the United States of America. The differences between the regulatory basis of accounting and the accounting principles generally accepted in the United States of America are also described in Note 1. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Evergreen School District No. 114, as of August 31, 2010, and the changes in financial position thereof for the year then ended on the basis of accounting described in Note 1. In accordance with Government Auditing Standards, we have also issued our report 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 and should be considered in assessing the results of our audit. Washington State Auditor's Office 7

64 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 Debt 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 has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. This report is intended for the information and use of the governing body and management 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. BRIAN SONNTAG, CGFM STATE AUDITOR April 13, 2011 Washington State Auditor's Office 8

65 Financial Section Evergreen School District No. 114 Clark County September 1, 2009 through August 31, 2010 FINANCIAL STATEMENTS Balance Sheet Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds 2010 Statement of Fiduciary Net Assets Fiduciary Funds 2010 Statement of Changes in Fiduciary Net Assets Fiduciary Funds 2010 Notes to Financial Statements 2010 SUPPLEMENTAL INFORMATION Schedule of Long-Term Debt 2010 Schedule of Expenditures of Federal Awards 2010 Notes to the Schedule of Expenditures of Federal Awards 2010 Washington State Auditor's Office 9

66 EVERGREEN SCHOOL DISTRICT NO. 114 BALANCE SHEET AS OF AUGUST 31, 2010 Debt Capital Transportation General ASB Service Projects Vehicle Fund Fund Fund Fund Fund ASSETS Cash on Hand 524,994 77,663 Cash on Deposit w/treasurer 2,553,357 41,789 10, , Warrants Outstanding 2,535,371 41, ,584 Net Cash on Dep. w/treas 17, , Cash with Fiscal Agent Taxes Receivable 19,045,561 9,192,295 Accounts Receivable 115, Intergovernmental Receivable 880,115 Interfund Receivables 4,171,638 Inventories 479,323 Prepaid Items 1,233,830 97,806 Investments 19,791,067 1,557,335 6,536,347 39,459,855 2,326,792 TOTAL ASSETS 42,088,828 1,733,241 15,738,682 43,632,093 2,327,566 LIABILITIES Accounts Payable 1,067,226 40,404 1,784,755 Payroll Ded & Taxes Payable 3,384,288 Estimated Employee Benefits Payable 110,492 Interfund Payables 4,145,926 24, Matured Bonds Payable Matured Bond Interest Payable Deferred Revenue 20,778, ,774 9,192,295 TOTAL LIABILITIES 29,486, ,142 9,193,043 1,784,755 FUND BALANCE Reserve for Debt Service 95,133 Reserve for Inventory Reserve for Uninsured Risks Reserve for Bond Proceeds Reserve for Federal Proceeds 16,943,985 Reserve for Other Items 5,300,000 6,545,639 24,903,353 Unreserved - Undesignated 7,206,905 1,375,099 2,327,566 TOTAL FUND BALANCE 12,602,038 1,375,099 6,545,639 41,847,338 2,327,566 TOTAL LIABILITIES AND FUND BALANCE 42,088,828 1,733,241 15,738,682 43,632,093 2,327,566 The notes to the Financial Statements are an integral part of this statement. Washington State Auditor's Office 10

67 EVERGREEN SCHOOL DISTRICT NO. 114 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED AUGUST 31, 2010 DEBT CAPITAL TRANSPORTATION GENERAL ASB SERVICE PROJECTS VEHICLE FUND FUND FUND FUND FUND REVENUES Local 42,625,454 18,639,804 1,916,533 22,629 State 163,315, ,395,251 Federal 15,911,945 Federal Stimulus 12,294,766 Other 304,345 ASB 2,262,453 TOTAL REVENUES 234,451,948 2,262,453 18,639,942 1,916,533 1,417,880 EXPENDITURES Current: Regular Instruction 122,127,487 Federal Stimulus 12,512,577 Special Education 30,499,543 Vocational Education 7,100,400 Skills Center 4,189,942 Compensatory Education 11,721,151 Other Instructional Programs 1,942,094 Community Services 584,086 Support Services 38,256,977 ASB 1,964,653 CAPITAL OUTLAY: Sites 169,556 Buildings 565,196 Equipment 417,855 Energy Capital Improvements Buses 807,180 Other 3,931,105 Debt Service: Principal 82,592 8,625,000 Interest and Other Charges 2,702 9,898, ,308 TOTAL EXPENDITURES 232,950,656 1,964,653 18,523,278 1,306, ,180 REVENUES OVER(UNDER) EXPENDITURES 1,501, , , , ,700 OTHER FINANCING SOURCES (USES): Bond Sales & Refund Bond Sales 44,883,635 17,445,000 Sale of Property & Equipment 3,191 7,595 Long-Term Financing 47,455 Operating Transfers In 500,000 Operating Transfer Out -500,000 Other Financing Uses -44,518, ,114 TOTAL OTHER FINANCING SOURCES (USES) -449, ,148 17,068, ,595 REVENUE AND OTHER FINANCING SOURCES OVER (UNDER ) EXPENDITURES AND OTHER FINANCING USES 1,051, , ,812 17,678,504 1,118,295 Fund Balance September 1, ,550,100 1,077,299 6,063,827 24,168,834 1,209,271 Fund Balance August 31, ,602,038 1,375,099 6,545,639 41,847,338 2,327,566 The Notes to the Financial Statements are an integral part of this statement. Washington State Auditor's Office 11

68 EVERGREEN SCHOOL DISTRICT NO. 114 STATEMENT OF FIDUCIARY NET ASSETS OTHER TRUST AND AGENCY FUNDS FOR THE YEAR ENDED AUGUST 31, 2010 Private Purpose Trust ASSETS Cash on Hand 18,261 Cash on Deposit w/treasurer Warrants Outstanding Net Cash on Dep. w/treas Cash with Fiscal Agent Taxes Receivable Accounts Receivable Intergovernmental Receivable Interfund Receivables Inventories Prepaid Items Investments 4,025 TOTAL ASSETS 22,286 LIABILITIES Accounts Payable 16,240 Interfund Payable TOTAL LIABILITIES 16,240 NET ASSETS HELD IN TRUST Reserved for Other Items Reserved for Trust Principal Unreserved, Designated for Other Items 6,046 Unreserved, undesignated Fund Balance TOTAL NET ASSETS HELD IN TRUST 22,286 Washington State Auditor's Office 12

69 EVERGREEN SCHOOL DISTRICT NO. 114 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS OTHER TRUST & AGENCY FUNDS FOR THE YEAR ENDED AUGUST 31, 2010 Private Purpose Trust ADDITIONS: Contributions: Private Donations 11,186 Employer Members Other Total Contributions 11,186 Investment Earnings: Net Increase (Decrease) in Fair Value of Investments -19 Interest 51 Dividends Total Investment Earnings 31 Less Investment Expense Net Investment Earnings 31 Rent or Lease Revenue TOTAL ADDITIONS 11,217 DEDUCTIONS: Benefits Refund of Contributions Administrative Expenses Scholarships 1,000 Other 14,253 TOTAL DEDUCTIONS 15,253 CHANGES IN NET ASSETS: -4,035 Net Assets September 1, ,081 Net Assets August 31, ,046 Washington State Auditor's Office 13

70 EVERGREEN SCHOOL DISTRICT NO. 114 Notes to Financial Statements September 1, 2009 through August 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The Evergreen School District No. 114 is a municipal corporation organized pursuant to Title 28A Revised Code of Washington (RCW) for the purpose of providing public school services to students in kindergarten through grade twelve. 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. For financial reporting purposes, the Evergreen School District No. 114 includes all funds and organizations that are controlled by or dependent on the district's board of directors. Control by or dependence on the district was determined on the basis of budget adoption, taxing authority, outstanding debt secured by the general credit of the district, obligation of the district to finance any deficits that may occur, or receipt of significant subsidies from the district. B. Basis of Presentation - Fund Accounting The Evergreen School District No. 114 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. However, the district elects to not present district wide financial statements, and management s discussion and analysis, which are departures from GAAP. Long-term debt is reported on a required supplementary schedule. The accounts of the district are organized on the basis of funds, each of which is considered a separate set of 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 (or expenses), as appropriate. The various funds in the report are grouped into governmental and fiduciary funds as follows: GOVERNMENTAL FUNDS General Fund This fund is used to account for all expendable financial resources, except those required to be accounted for in another fund. In keeping with the principle of as few funds as necessary, food services, maintenance, data processing, printing and transportation activities are included in this fund. Capital Projects Funds The Capital Projects Fund Type consists of the Capital Projects Fund and the Transportation Vehicle Fund. These funds account for financial resources to be used for the acquisition of major capital assets. Capital Projects Fund - This fund is used to account for resources set-aside for the acquisition and construction of capital assets. Transportation Vehicle Fund - This fund is used to account for the purchase, major repair, rebuilding and debt service expenditures related to pupil transportation equipment. Washington State Auditor's Office 14

71 Debt Service Fund This fund is used to account for the accumulation of resources for, and the payment of matured general long-term debt principal, interest, and related expenditures. Special Revenue Fund This fund type accounts for the proceeds of specific revenue sources that are legally restricted for specific purposes. The Associated Student Body Program Fund (ASB Fund) 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 school district. FIDUCIARY FUNDS Fiduciary funds that include private-purpose trust funds and agency funds are used to account for assets held by the district in a trustee and agency capacity. Private Purpose Trust Fund This fund is used to account for resources legally held in trust where principal and income benefit individuals, private organizations, or other governments. Agency Funds These funds are use to account for assets that the District holds for other agencies in a custodial capacity. C. Basis of Accounting 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 and the Superintendent of Public Instruction by the authority of RCW , RCW 28A , RCW 28A (1), and RCW 28A This manual allows for a practice that differs from generally accepted accounting principles in the manner of districtwide statements are not presented and the management discussion and analysis is not required. The financial statements do not report capital assets. Debt is not reported on the face of the financial statements. It is reported in the notes to the financial statements and on the Schedule of Long-Term Debt. The original budget is not presented. This information is available through the Office of Superintendent of Public Instruction. A modified accrual basis of accounting is used for all governmental funds. Revenues are recognized when they become measurable and available. Measurable means the amount of the transaction can be determined and the district considers all revenues available if they are collected within 60 days after year end to pay liabilities of the current period. Property taxes receivable is measurable but not available and is, therefore, not accrued. However, categorical program claims and inter-district 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, 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, (obligations means purchase order issued, contracts awarded, or goods and services received). All governmental funds reporting focus 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. Washington State Auditor's Office 15

72 D. Budgetary Data General Budgetary Policies Chapter 28A.505 RCW and Chapter of the Washington Administrative Code (WAC) mandate school district budget policies and procedures. The budget is adopted by the Board after a public hearing. An appropriation is a prerequisite to expenditures. 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 a modified accrual basis as prescribed in law for all governmental funds. Fund balance is budgeted as available resources, and pursuant to law, the budgeted ending fund balance cannot be negative, unless the District enters into binding conditions with State oversight pursuant to RCW 28A Encumbrances Encumbrance accounting is employed in governmental funds. Purchase orders, contracts, and other commitments for the expenditure of monies 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. Encumbrances in the amount of $3,153,137 were closed on August 31, This amount will be reencumbered on September 1, E. Assets, Liabilities and Fund Equity Deposits and Investments 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. The county treasurer is the ex-officio treasurer for the school district. In this capacity, the county treasurer receives deposits and transacts investments on the district's behalf. Eligible investments are only those securities and deposits authorized by Washington State statute (RCW , , , , , and ). The Treasurer may invest in any investment authorized by law for the treasurer of the state of Washington or any local government in the state of Washington (RCW ) Permitted investments include securities, certificates of deposits, notes, bonds, short-term securities, or other obligations of the United States. The District's investments (excluding temporary investments) are placed in the Clark County Treasurer's Investment Pool, which are managed by the Clark County Treasurer. The investments are not evidenced by securities and therefore are not listed under a category of credit risk. Category one (1) includes investments that are insured or registered or for which the securities are held by the District or its agent in the District s name. The Clark County Treasurer determines fair value of investments in the pool by using a combination of an on-line financial services system that uses price-modeling techniques, and quotes from brokers and dealers. Investments are reported using the security's fair market value and not at amortized cost. The Clark County Investment Pool is not SEC registered. Authority to manage the Clark County Investment Program is from RCW Regulatory oversight is provided by the Finance Committee, which by statute consists of the Clark County Treasurer (as chair), the County Auditor (as secretary), and the Chair of the Board of County Commissioners. The committee approves the investment policy and makes all appropriate rules and regulations to carry out the provisions of RCW through Washington State Auditor's Office 16

73 There is no involuntary participation in the Clark County Investment Pool. All participants have the option of investing in the Pool, or requesting specific investment amounts and maturity dates for investments outside of the Pool. The Clark County Treasurer provides monthly investment reports at fair value on a Fund level to all participants. The information is based on net asset value of each share in the Pool. The investments on the District's combined balance sheet are valued at fair market value. All temporary money market investments are stated at cost. The district s investments on August 31, 2010 are as follows: Market Value Obligations of U.S. Government $ 1,210,000 -Category 1 Clark County Treasurer s Investment Pool 68,465,422 Total Investment $ 69,675,422 Inventory Warehouse inventory is valued at cost using the average cost method. Warehouse inventory in the General Fund consists of expendable supplies held for consumption. The "consumption method" of inventory is used for luncheon inventory (food and supplies), under which inventory items are charged to expenditures when they are consumed. Management may reserve a portion of fund balance in any amount as a budgetary technique to insure the availability of resources at the appropriate time. 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. F. Revenue and Expenditure Recognition Debt Service Principal and interest on general long-term debt is recognized only when due. Property Taxes Property tax revenues are collected as the result of special levies passed by the voters in the school district. Taxes are levied 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, a little 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 taxes due on October 31 are recorded as deferred revenue. 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 Revised Code of Washington, sick leave accumulated by district employees is reimbursed at death or retirement at the rate of one day for each four days of accrued leave, limited to 180 accrued days. This statute also provides for an annual buy back of an amount up to the maximum annual accumulation of twelve days. For buy-back purposes employees may accumulate such leave to a maximum of 192 days, including the annual accumulation, as of December 31 of each year. Washington State Auditor's Office 17

74 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 is computed using the vesting method. Vacation pay that is 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. Amounts not expected to be liquidated with expendable available financial resources are reported on the Schedule of Long-Term Debt. No expenditure is reported for these amounts. G. Fund Balance May Contain Designation Or Reserves Reservation is a legal restriction on spending of the fund balance of a district based upon statute, WAC or other legal requirements beyond the discretion of the board of directors of the district. Examples include anticipated carryover or recovery of revenues previously received and restricted as to usage. Unreserved, Designated is used to set aside financial resources 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. 2. CHANGES IN CAPITAL ASSETS Balance Retirements Balance Property Type 9/01/09 Additions Transfers 8/31/10 Land $ 40,304,614 $ 570,857 $ $ 40,875,471 Building 290,180,891 2,891,069 59,427, ,499,188 Transportation Equipment 17,331, , ,673 17,860,753 Machinery & Equipment 8,009, , ,155 8,678,467 Construction in Progress 59,405, ,984-59,427, ,064 TOTAL $415,231,281 $5,518,490 $ -620,828 $420,128,943 Construction in Progress Project Expended Additional Authorization as of Funds Committed Project Amount 8/31/10 Local State Health & BioScience Academy $ 200,000 $ 187,512 $ 12,488 $ 0 New Middle School 150,000 27, ,448 0 TOTAL $ 350,000 $ 215,064 $ 134,936 $ 0 Capital assets are valued at cost or estimated historical cost if actual cost is unknown. Donated capital assets are valued at their estimated fair value on the date donated. Depreciation is not recognized on general capital assets. The inventory of other equipment and machinery contains vehicles other than school buses, computer and copier equipment. School buses are carried as Transportation Equipment. The district's capital assets are insured in the amount of $150,000,000. In the opinion of the district's insurance consultant, this amount is sufficient to adequately fund replacement of the district's assets. Washington State Auditor's Office 18

75 3. PENSIONS A. General Information Substantially all Evergreen School District No. 114 full-time and qualifying part-time employees participate in one of the following three contributory, multi-employer, cost-sharing statewide retirement systems managed by the State of Washington Department of Retirement Systems (DRS): Teachers' Retirement System (TRS), Public Employees' Retirement System (PERS), School Employee s Retirement System (SERS). Participation in the programs was as follows: Membership retirement system program as of June 30, 2009: Program Active Members Inactive Vested Members Retired Members TRS 67,388 8,660 39,927 PERS 159,235 28,074 74,857 SERS 52,474 9,193 4,629 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, or 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 programs respectively. Members of TRS and SERS programs 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. Plan 3 under the TRS and SERS programs are defined benefit, defined contribution pension plans whose members joined on or after July 1, 1996, to September 1, 2000, for TRS and SERS, respectively. Members are eligible to retire with full benefits after five years of credited service and attainment of age 60 or after ten years of credited service and attainment of age 55 with benefit actuarially reduced from age 65. 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 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 two percent per year of service capped at sixty percent with provision for a cost of living adjustment. For Plan 2 TRS, and SERS members, it is the AFC multiplied by two 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 one percent per year of service with provision for 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 Fund Council with assistance from the Office of the 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 RCW 41.40, and for PERS, SERS and TRS respectively. The district contribution represents its full liability under all systems, except that future rates may be adjusted to meet the system needs. Washington State Auditor's Office 19

76 B. Contributions Employee contribution rates as of August 31, 2010: Plan 1 TRS 6.00% Plan 1 PERS 6.00% Plan 2 TRS 3.36% Plan 2 SERS 3.14% Plan 3 TRS & 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 from 5 percent to a maximum of 15 percent. Employer contribution rates as of August 31, 2010: Plan 1 TRS 6.14% Plan 1 PERS 5.31% Plan 2 TRS 6.14% Plan 2 SERS 5.44% Plan 3 TRS 6.14% Plan 3 SERS 5.44% Employer contribution rates include DRS administrative of.16%. Under current law the employer must contribute 100% of the employer-required contribution. Employer required contributions in dollars (TRS: July 1- June 30, PERS: January 1- December 31): Plan FY FY FY Plan 1 TRS $ 447,938 $ 646,246 $ 501,746 Plan 2 TRS $ 853,345 $ 984,947 $ 562,683 Plan 3 TRS $5,808,048 $ 6,857,268 $ 4,503,805 Plan 1 PERS $ 54,113 $ 58,497 $ 52,363 Plan 2 SERS $ 640,420 $ 565,290 $ 379,880 Plan 3 SERS $1,421,820 $ 1,385,714 $ 114,744 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, 2010, comprehensive annual financial report. Refer to said report for detailed trend information. It is available from: 4. RISK MANAGEMENT State of Washington Office of Financial Management 300 Insurance Building PO Box Olympia, WA 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. In the fiscal year , the district made payments totaling $279,766 and $1,013,222 to the unemployment insurance pool and industrial insurance pool, respectively that are administered by the Educational Service District 112 on behalf of several local school districts. These funds are operated for the district's benefit in-lieu-of the district having to make monthly premium payments to the state of Washington for unemployment and industrial insurance beneficiaries as they occur and minimize the district's costs for the two programs. The Evergreen School District No. 114 is a member of the Schools Insurance Association of Washington, a public entity insurance pool that presently has 45 member districts. Washington State Auditor's Office 20

77 The pool allows members to jointly purchase insurance coverage and provide related services, such as administration, risk management, claims administration, etc. Coverage for Wrongful Act and Employee Benefit Liability are on a claims-made basis. All other coverages are on an occurrence basis. The pool provides the following forms of group purchased insurance coverage for its members: Property, earthquake, liability, vehicle liability, equipment breakdown, crime, employee benefits, and wrongful act liability. The pool is fully funded by its member participants. The pool acquires liability insurance from unrelated underwriters that are subject to a per-occurrence deductible of $100,000. Members are responsible for the first $1,000 of the deductible amount of each claim, while the pool is responsible for the remaining $99,000. Insurance carriers cover insured losses over $100,000 to the limits of each policy. Since the pool is a cooperative program, there is a joint liability among the participating members towards the sharing of the $99,000 portion of the deductible. The pool, however, purchases a Stop Loss Policy in the amount of $3,200,000 to reduce risk to members, which is fully funded. Property insurance is subject to a per-occurrence deductible of $25,000. Members are responsible for the first $5,000 of the deductible amount of each claim, while the pool is responsible for the remaining $20,000. Equipment breakdown insurance is subject to a per-occurrence deductible of $5,000. Members are responsible for the deductible amount of each claim. A governing board is selected by the membership and is responsible for conducting the business affairs of the pool. The Board of Directors has contracted with Canfield & Associates to perform day-to-day administration of the pool. This pool has no employees. Risk Management (continued) The pool is fully funded by its member participants. Claims are filed by members with Canfield & Associates, Inc., which has been contracted to perform pool administration, claims adjustment and administration and loss prevention for the pool. Fees paid to the third party administrator under this arrangement for the year ended August 31, 2010, were $3,098,672. Members contract to remain in the pool 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 pool for any unresolved, unreported, and in-process claims for the period they were a signatory to the Interlocal Agreement. Washington State 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 purchasing of insurance, and/or joint selfinsuring, and/or joint hiring or contracting for risk management services to the same extent that they may individually purchase insurance, self-insure, or hire or 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 pool was formed on September 1, 1995, when seven mid-sized school districts in the State of Washington joined together by signing an Interlocal Agreement to pool their selfinsured losses and jointly purchase insurance and administrative services. 5. LEASE OBLIGATIONS For the year ending August 31, 2010, the District is obligated under certain leases accounted for as capital leases as follows: Washington State Auditor's Office 21

78 Capital Leases: Final Installment Installment Interest Balance Amount Amount Date Rate Due GE Capital Copy Machines $ 11,591 $ /20/ % $ 236 Key Finance Copy Machines 101,668 2,008 12/15/ % 30,613 Copy Machines 55,795 1,105 12/15/ % 16,829 Konica Minolta Copy Machines 47,455 1,063 11/01/ % 47,455 Total Capital Leases $95,133 Future Minimum Lease Payments: Year Ended August 31: 2011 $ 47, , , , ,945 Net Minimum Lease Payments $113,822 Less Imputed Interest 18,689 Present Value of Net Minimum Lease Payments $ 95, LONG-TERM DEBT The following is a summary of general obligation long-term debt transactions of the district for the year ended August 31, Long-Term Debt Payable at 9/1/09 $207,590,000 Debt Issued 59,610,000 Debt Retired 49,045,000 Long-Term Debt Payable 8/31/10 $218,155,000 Bonds payable at August 31, 2010, are comprised of the following individual issues: Principal Interest 8/31/10 8/31/10 $4,050, Serial GO Refunding 460,000 22,320 Bonds, interest rates from 4.0% to 4.8%, maturing through December 1, 2011, in annual installments of $40,000 to $545,000. $20,670, Unlimited Tax GO. 11,875, ,994 Refunding Bonds interest rates of 3.8% to 5.25% maturing through December 1, 2012 in annual installments of $95,000 to $4,425,000. Subtotal Long-Term Bonded Debt $ 12,335,000 $1,001,314 Washington State Auditor's Office 22

79 Principal Interest 08/31/10 8/31/10 Subtotal Long-Term Bonded Debt $12,335,000 $1,001,314 $59,000, Unlimited GO Bonds 17,310,000 1,667,964 interest rates of 3.0% to 5.25% maturing through December 1, 2018 in annual installments of $1,000,000 to $8,930,000. $58,000, Serial GO Bonds 49,750,000 17,698,188 interest rates from 2.0% to 5.25% maturing through June 1, 2021 in annual installments of $1,950,000 through $7,000,000 (except in 2005 through 2007). $30,000, Unlimited GO Bonds interest rates from 2.0% to 5.0% maturing through December 1, 2021 in annual installments of $150,000 to $6,450, ,000,000 12,217,500 $20,930, Unlimited GO Bonds interest rates from 3.5% to 5% maturing through December 1, 2020 in annual installments for $1,600,000 to $10,675, ,330,000 9,715,500 $33,445, Unlimited GO Refunding Bonds interest rates from 4.0% to 5% maturing through December 1, 2018, in annual installments of $3,415,000 to $7,420,000 starting in ,820,000 10,396,862 $42,165, Unlimited Tax General Obligation reflecting bonds interest rates of 2.0% to 4.0% maturing through December 1, 2018 in annual installments of $475,000 to $8,395,000 42,165,000 9,098,200 $17,445, Limited General Obligation Bonds (Qualified School Construction Bonds Direct Payment to Issuer) interest rate of 5.52% maturing on June, 2027 with one payment of $17,445, ,445,000 16,335,614 Total Long Term Bonded Debt 8/31/10 $218,155,000 $78,131,142 Washington State Auditor's Office 23

80 Annual Requirements to Amortize Long-Term Debt as of August 31, 2010 Year Ending August 31 Principal Interest Total ,495,000 9,955,321 20,450, ,450,000 9,512,355 20,962, ,735,000 8,960,758 21,695, ,270,000 8,367,776 23,637, ,910,000 7,748,339 24,658, ,255,000 7,024,914 25,279, ,470,000 6,150,889 26,620, ,640,000 5,205,414 28,845, ,155,000 4,134,664 25,289, ,655,000 3,113,089 23,768, ,675,000 2,029,839 25,704, ,000,000 1,112,964 7,112, , , , , , , , , ,445, ,964 18,407,964 Total Long-Term Bonded Debt $218,155,000 $ 78,131,142 $296,286,142 Authorized Bonds-Unissued As of August 31, 2010, the district had $0 unissued general obligation bonds that were authorized. Refunded Debt Total Refunded Bonds Outstanding at August 31, 2010, is $36,500,000. Debt service on these bonds is met by cash and investments held by the refunding trustees. As of August 31, 2010, the trustees were holding cash and investments of $39,673,721 that is expected to fund debt service fully. These refunded bonds constitute a contingent liability of the district, but are excluded from the balance sheets of the district's funds and account groups. On February 9, 2010, the district issued $42,165,000 million in general obligation bonds with an average interest rate of 3.5 percent to advance refund $40,420,000 million of outstanding 1999 and 2002 series bonds with an average interest rate of 5.4 percent. The net proceeds of $44,518,488 million after payment of $365,148 in underwriting fees, insurance, and other issuance costs were used to purchase U.S. Government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1999 and 2002 series bonds. As a result, the 1999 and 2002 series bonds are considered defeased. The district advance refunded the 1999 and 2002 series bonds to reduce its total debt service payments over the next 8 years by $3,942,313 million and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $3,517,097 million. Legal Debt Margin Sections and of the Revised Code of Washington provide that debt cannot be incurred in excess of the following percentages of the value of the taxable property of the district: Washington State Auditor's Office 24

81 0.375% without a vote of the people (non-bonded debt only per RCW 28A ) 5.0% - with a vote of the people, provided the indebtedness in excess of 2.5% is for capital outlay. Assessed valuation of taxable property for 2010 taxing purposes was $12,211,125,647. At August 31, 2010 the debt limits for the district were as follows: Without A Vote With A Vote.375% 5.0% Legal Limit $ 45,791, ,556,282 Outstanding Indebtedness 6,671, ,942,179 Margin Available $ 39,120,360 $409,614, Interfund Loans No interfund loans were outstanding or authorized during fiscal year SUMMARY OF SIGNIFICANT CONTINGENCIES Litigation The Evergreen School District has no known legal obligations that would materially impact the financial position of the district. Arbitrage Rebate The Tax Reform Act of 1986 requires the district to rebate the earnings on the investment of bond and revenue anticipation note proceeds, in excess of their yield, to the Federal Government. This requirement is effective for the district's General Obligation bond issue(s) after September 1, 1986 currently totaling $17,445,000. Ninety percent (90%) of the rebate is due and payable five years from the date bonds were issued and at five-year intervals thereafter. The remaining ten-percent (10%) is payable sixty (60) days after retirement of the bonds. Rebate is due and payable on revenue anticipation notes sixty (60) days after they are retired. Because positive arbitrage can be offset against negative arbitrage, the rebate amount fluctuates each year and may or may not be owing at the payment intervals. Because of the uncertainty of having to make this payment, the district is contingently liable for arbitrage rebate currently computed to total $ OTHER DISCLOSURES King County Directors' Association The Evergreen School District is a member of the King County Directors' Association, a purchasing cooperative consisting of more than 200 school districts throughout the State of Washington. The Evergreen School District's annual purchases approximated $310,103 for the year ending December 31, At December 31, 2009, the Evergreen School District's equity in the King County Directors' Association was $69,437. Because of the purchasing power of KCDA, it is the intent of the district to remain a member. One year after notice of termination has been given by the district, the following options are available in regard to withdrawing the ownership amount if a district so chooses: 1. A district may withdraw inventory at a maximum rate of ten (10) percent per year for a ten Washington State Auditor's Office 25

82 (10) year period or; 2. A district may withdraw cash equally over a fifteen-(15) year period. The annual financial statements of the purchasing cooperative are available from: Clark County Skills Center King County Directors Association th Avenue South P.O. Box 5550 Kent, Washington The district operates the Skills Center in cooperation with eight neighboring districts for the purpose of training students of all nine districts in certain vocational skills. Financial operations of this facility are included in these financial statements in the amount of revenues and expenditures totaling $4,342,340 and $4,283,932, respectively. Comparable revenues and expenditures during the preceding year were $4,341,669 and $4,156,396, respectively. 10. SUBSEQUENT EVENTS The District issued $43,700,000 in Unlimited Tax General Obligation Refunding Bonds on October 7, 2010 to refund portion of 2003 Unlimited General Obligation Bonds. The District purchased land in December 2010 for the construction of the Health & BioScience Academy Building for a purchase price of $3,621,278. Washington State Auditor's Office 26

83 Washington State Auditor's Office 27 EVERGREEN SCHOOL DISTRICT NO. 114 SCHEDULE OF LONG-TERM DEBT FOR THE YEAR ENDED AUGUST 31, 2010 Beginning Ending Outstanding Amount Amount Outstanding Description Debt Issued Redeemed Debt 9/1/2009 8/31/2010 Total Voted Bonds 207,590,000 42,165,000 49,045, ,710,000 Total Non-Voted Bonds Qualified School Construction Bonds 17,445,000 17,445,000 Other Long-Term Debt: Capital Leases 113,261 47,455 65,583 95,133 Contracts Payable (GL 603) NonCancellable Operating Leases Claims & Adjustments Compensated Absences 6,488, ,471 6,671,341 Other Long-Term Debt Total Other Long-Term Debt 6,602, ,926 65,583 6,766,474 Total Long-Term Debt 214,192,131 59,839,926 49,110, ,921,474

84 Evergreen School District No. 114 Schedule of Expenditures of Federal Awards For the Year Ending August 31, 2010 Pass Other From From Through Federal Program Title CFDA Identification Direct Pass-Through Footnote Federal Agency Name Agency Number Number Awards Awards Total US Department of Agriculture WA OSPI School Breakfast Program , ,188 WA OSPI National School Lunch Program-Cash Assistance ,590,199 3,590,199 WA OSPI National School Lunch-Non Cash Asstistance Food Commodities , ,409 (2) St of WA Child and Adult Care Food Program ,839 9,839 St of WA Schools and Roads-Grants to States ,237 2,237 Subtotal US Dept. of Agriculture 4,825,872 4,825,872 National Science Foundation Education and Human Resources HRD Subtotal National Science Foundation US Department of Education WA OSPI Title I-Grants to Local Education Agencies ,997 9,997 WA OSPI Title I-Grants to Local Education Agencies A ,809,145 3,809,145 (3) WA OSPI Special Education-Grants to States A , ,234 WA OSPI Special Education-Grants to States A ,305,188 4,305,188 4,698,422 4,698,422 WA OSPI Career and Technical Education-Basic Grants to States ,893 59,893 WA OSPI Career and Technical Education-Basic Grants to States , , , ,077 Indian Education-Grants to Local Educational Agencies A S060A Indian Education-Grants to Local Educational Agencies A S060A ,396 50,396 51,008 51,008 WA OSPI Special Education-Preschool Grants A , ,177 Safe and Drug Free Schools and Communities-National Programs B Q184B , ,548 WA OSPI Safe and Drug Free Schools and Communities-State Programs A ,108 53,108 WA OSPI Education for Homeless Children and Youth ,817 1,817 WA OSPI Education for Homeless Children and Youth ,982 25,982 27,799 27,799 WSD Fund for the Improvement of Education F Washougal 160, ,994 Fund for the Improvement of Education K U215K , ,493 WSD Fund for the Improvement of Education X Washougal 17,167 17,167 Portland Impact dba Impact NW Twenty-First Century Community Learning Centers Impact NW 2,685 2,685 Portland Impact dba Impact NW Twenty-First Century Community Learning Centers Impact NW 1,124 1,124 3,809 3,809 Advanced Placement Program C S330C , ,626 WA OSPI English Language Acquisition Grants ,457 10,457 WA OSPI English Language Acquisition Grants , , , ,677 WA OSPI Improving Teacher Quality State Grants A ,618 33,618 WA OSPI Improving Teacher Quality State Grants A , , , ,438 WA OSPI ARRA Grants for Advanced Assessment Instruments A ,560 82,560 (4) WA OSPI ARRA Education for Homeless Children and Youth Recovery Act A ,509 9,509 (4) WA OSPI ARRA Title I Grants to Local Educational Agencies, Recovery Act A ,120,388 1,120,388 (4) WA OSPI ARRA Special Education Grants to States Recovery Act A ,939,786 1,939,786 (4) Washington State Auditor's Office 28

85 WA OSPI ARRA Special Education Preschool Grants, Recovery Act A , ,301 (4) WA OSPI ARRA State Fiscal Stabilization Fund-Education State Grants, Recovery Act ,944,221 8,944,221 (4) Department of Health and Human Services Subtotal US Dept. of Education 510,675 22,412,575 22,923,250 WA DSHS Social Services Block Grant , ,432 Clark County Block Grants for Prevention and Treatment of Substance Abuse PO ,000 17,000 Clark County Block Grants for Prevention and Treatment of Substance Abuse CMP Clark County Block Grants for Prevention and Treatment of Substance Abuse CMP-06 9,246 9,246 26,449 26,449 Subtotal Dept. of Health 136, ,881 and Human Services Corporation for National CES NW Learn and Serve America; Community and Community Based Programs CES NW 5,376 5,376 and Community Service WA OSPI Learn and Serve America; Community and Community Based Programs WA OSPI Learn and Serve America; Community and Community Based Programs Youth Service America Learn and Serve America; Community and Community Based Programs ,575 3,575 Subtotal Corp. for National 9,878 9,878 and Community Service TOTAL FEDERAL AWARDS EXPENDED 510,675 27,385,512 27,896,187 Washington State Auditor's Office 29

86 Evergreen School District No. 114 Notes to Schedule of Expenditures of Federal Awards September 1, 2009 Through August 31, 2010 Note 1 Basis of Accounting The Schedule of Expenditures of Federal Awards is prepared on 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 Non Cash Awards The amount of food commodities reported on the schedule is the market value of commodities distributed by the District during the current year. The value is determined by the USDA. Note 3 Schoolwide Programs The District operates a "schoolwide program" in three 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 (84.010) $3,809,145. Note 4 American Recovery and Reinvestment Act (ARRA) The funding for this program was provided by the American Recovery and Reinvestment Act of 2009 (ARRA). Of the amount shown, no payments were made to subrecipients. Washington State Auditor's Office 30

87 ABOUT THE STATE AUDITOR'S OFFICE 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 in cooperation 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 our 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 continue to refine our reporting efforts to ensure the results of our audits are useful and understandable. 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 Brian Sonntag, CGFM Chief of Staff Ted Rutt Deputy Chief of Staff Doug Cochran Chief Policy Advisor Jerry Pugnetti Director of Audit Chuck Pfeil, CPA Director of Special Investigations Jim Brittain, CPA Director for Legal Affairs Jan Jutte, CPA, CGFM Director of Quality Assurance Ivan Dansereau Local Government Liaison Mike Murphy Communications Director Mindy Chambers Public Records Officer Mary Leider Main number (360) Toll-free Citizen Hotline (866) Website Subscription Service (SAO FACTS.DOC - Rev. 06/09)