DATED JANUARY 19, 2016 NEW ISSUE RATING Electronic Bidding via Parity Moody s: " " NOT Bank Interest Deduction Eligible BOOK-ENTRY-ONLY SYSTEM

Transcription

1 PRELIMINARY OFFICIAL STATEMENT This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sales of these Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the laws of any such jurisdiction. DATED JANUARY 19, 2016 NEW ISSUE RATING Electronic Bidding via Parity Moody s: " " NOT Bank Interest Deduction Eligible BOOK-ENTRY-ONLY SYSTEM In the opinion of Bond Counsel, under existing law (i) interest on the Bonds will be excludable from gross income of the holders thereof for purposes of federal taxation and (ii) interest on the Bonds will not be a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, all subject to the qualifications described herein under the heading "Tax Exemption." The Bonds and interest thereon are exempt from income taxation and ad valorem taxation by the Commonwealth of Kentucky and political subdivisions thereof (see "Tax Exemption" herein). $11,045,000* CORBIN INDEPENDENT SCHOOL DISTRICT FINANCE CORPORATION SCHOOL BUILDING REFUNDING REVENUE BONDS, SERIES OF 2016 Dated: February 1, 2016 Due: as shown below Interest on the Bonds is payable each February 1 and August 1, beginning August 1, The Bonds will mature as to principal on February 1, 2017 and each February 1 thereafter as shown below. The Bonds are being issued in Book-Entry-Only Form and will be available for purchase in principal amounts of $5,000 and integral multiples thereof. Maturing Interest Reoffering Maturing Interest Reoffering February 1 Amount Rate Yield CUSIP February 1 Amount Rate Yield CUSIP 2017 $135,000 % % 2023 $1,090,000 % % 2018 $1,005,000 % % 2024 $1,115,000 % % 2019 $1,015,000 % % 2025 $1,140,000 % % 2020 $1,035,000 % % 2026 $1,175,000 % % 2021 $1,050,000 % % 2027 $1,210,000 % % 2022 $1,075,000 % % The Bonds are subject to redemption prior to their stated maturity as described herein. Notwithstanding the foregoing, the Corporation reserves the right to call, upon thirty (30) days notice, the Bonds in whole or in part on any date for redemption upon the total destruction by fire, lightning, windstorm or other hazard of any of the building(s) constituting the Project(s) and apply casualty insurance proceeds to such purpose. The Bonds constitute a limited indebtedness of the Corbin Independent School District Finance Corporation and are payable from and secured by a pledge of the gross income and revenues derived by leasing the Project (as hereinafter defined) on an annual renewable basis to the Corbin Independent Board of Education. The Corbin (Kentucky) Independent School District Finance Corporation will until January 26, 2016 at 12:30 P.M., E.S.T., receive competitive bids for the Bonds at the office of the Executive Director of the Kentucky School Facilities Construction Commission, 229 West Main Street, Suite 102, Frankfort, Kentucky *As set forth in the "Official Terms and Conditions of Bond Sale," the principal amount of Bonds sold to the successful bidder is subject to a Permitted Adjustment by increasing or decreasing the amount not to exceed $2,210,000. PURCHASER'S OPTION: The Purchaser of the Bonds, within 24 hours of the sale, may specify to the Financial Advisor that any Bonds may be combined immediately succeeding sequential maturities into a Term Bond(s), bearing a single rate of interest, with the maturities set forth above (or as may be adjusted as provided herein) being subject to mandatory redemption in such maturities for such Term Bond(s). The Bonds will be delivered utilizing the BOOK-ENTRY-ONLY-SYSTEM administered by The Depository Trust Company. The Corporation deems this preliminary Official Statement to be final for purposes of the Securities and Exchange Commission Rule 15c2-12(b)(1), except for certain information on the cover page hereof which has been omitted in accordance with such Rule and which will be supplied with the final Official Statement.

2 CORBIN INDEPENDENT BOARD OF EDUCATION Kim Croley, Chairperson Angela Morris, Member Todd Childers, Member Carcille Burchette, Member Stephen Mullberry, Member Dave Cox, Superintendent/Secretary CORBIN INDEPENDENT (KENTUCKY) SCHOOL DISTRICT FINANCE CORPORATION Kim Croley, President Angela Morris, Member Todd Childers, Member Carcille Burchette, Member Stephen Mullberry, Member Dave Cox, Secretary Alicia Logan, Treasurer BOND COUNSEL Steptoe & Johnson PLLC Louisville, Kentucky FINANCIAL ADVISOR Ross, Sinclaire & Associates, LLC Lexington, Kentucky PAYING AGENT AND REGISTRAR U.S. Bank National Association Louisville, Kentucky BOOK-ENTRY-ONLY-SYSTEM i

3 REGARDING USE OF THIS OFFICIAL STATEMENT This Official Statement does not constitute an offering of any security other than the original offering of the Corbin Independent School District Finance Corporation School Building Refunding Revenue Bonds, Series of 2016, identified on the cover page hereof. No person has been authorized by the Corporation or the Board to give any information or to make any representation other than that contained in the Official Statement, and if given or made such other information or representation must not be relied upon as having been given or authorized. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of the Bonds by any person in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Corporation or the Board since the date hereof. Neither the Securities and Exchange Commission nor any other federal, state or other governmental entity or agency, except the Corporation will pass upon the accuracy or adequacy of this Official Statement or approve the Bonds for sale. The Official Statement includes the front cover page immediately preceding this page and all Appendices hereto. ii

4 TABLE OF CONTENTS Page Introduction Book-Entry-Only System The Corporation Kentucky School Facilities Construction Commission Biennial Budget for Period Ending June 30, Outstanding Bonds Authority The Bonds General Registration, Payment and Transfer Redemption Security General The Lease; Pledge of Rental Revenues State Intercept Commission's Participation Verification of Mathematical Accuracy The Plan of Refunding Purpose of the Prior Bonds Estimated Bond Debt Service Estimated Use of Bond Proceeds District Student Population State Support of Education Support Education Excellence in Kentucky (SEEK) Capital Outlay Allotment Facilities Support Program of Kentucky Local Support Homestead Exemption Limitation on Taxation Local Thirty Cents Minimum Additional 15% Not Subject to Recall Assessment Valuation Special Voted and Other Local Taxes Local Tax Rates, Property Assessments and Revenue Collections Overlapping Bond Indebtedness SEEK Allotment State Budgeting Process Potential Legislation Continuing Disclosure Tax Exemption; Not Bank Qualified Original Issue Premium Original Issue Discount Absence of Material Litigation Approval of Legality No Legal Opinion Expressed as to Certain Matters Bond Rating Financial Advisor Approval of Official Statement Demographic and Economic Data APPENDIX A Financial Data APPENDIX B Continuing Disclosure APPENDIX C Official Terms & Conditions of Bond Sale APPENDIX D Official Bid Form APPENDIX E iii

5 OFFICIAL STATEMENT Relating to the Issuance of $11,045,000* CORBIN INDEPENDENT SCHOOL DISTRICT FINANCE CORPORATION SCHOOL BUILDING REFUNDING REVENUE BONDS, SERIES OF 2016 *Subject to Permitted Adjustment INTRODUCTION The purpose of this Official Statement, which includes the cover page and Appendices hereto, is to set forth certain information pertaining to the Corbin Independent School District Finance Corporation (the "Corporation") School Building Refunding Revenue Bonds, Series of 2016 (the "Bonds"). The Bonds are being issued to (i) pay the accrued interest and refund in advance of maturity on February 1, 2017 certain of the outstanding Corbin Independent School District Finance Corporation School Building Revenue Bonds, Series of 2007, dated February 15, 2007 (the "2007 Bonds") maturing February 1, 2018 and thereafter (the "Refunded Bonds"); and, (ii) pay the cost of the Bond issuance expenses (see "Plan of Refunding" herein). The Board has determined that the plan of refunding the Refunded Bonds will result in considerable interest cost savings to the Corbin Independent School District (the "District") and is in the best interest of the District. The 2007 Bonds maturing on February 1, 2016 and February 1, 2017 will not be defeased and will remain payable under the terms of the Prior Lease (the "Remaining Bonds"). The Bonds are revenue bonds and constitute a limited indebtedness of the Corporation. The Bonds will be secured by a statutory mortgage lien and a pledge of the rental income derived by the Corporation from leasing the Projects (as hereinafter defined) to the Corbin Independent Board of Education (the "Board") on a year to year basis (see "Security" herein). All financial and other information presented in this Official Statement has been provided by the Corbin Independent Board of Education from its records, except for information expressly attributed to other sources. The presentation of financial and other information is not intended, unless specifically stated, to indicate future or continuing trends in the financial position or other affairs of the Board. No representation is made that past experience, as is shown by financial and other information, will necessarily continue or be repeated in the future. This Official Statement should be considered in its entirety, and no one subject discussed should be considered more or less important than any other by reason of its location in the text. Reference should be made to laws, reports or other documents referred to in this Official Statement for more complete information regarding their contents. Copies of the Bond Resolution authorizing the issuance of the Bonds, the Participation Agreement and the Lease Agreement, dated February 1, 2016, may be obtained at the office of Steptoe & Johnson PLLC, Bond Counsel, 700 N. Hurstbourne Parkway, Suite 115, Louisville, Kentucky BOOK-ENTRY-ONLY-SYSTEM The Bonds shall utilize the Book-Entry-Only-System administered by The Depository Trust Company ("DTC"). The following information about the Book-Entry only system applicable to the Bonds has been supplied by DTC. Neither the Corporation nor the Paying Agent and Registrar makes any representations, warranties or guarantees with respect to its accuracy or completeness. DTC will act as securities depository for the Bonds. 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. 1

6 DTC, the world's largest 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 85 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("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 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. To facilitate subsequent transfers, all Bonds 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 Bonds 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 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds 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. 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 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds 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 Paying Agent and Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds 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. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Corporation 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and interest payments on the Bonds 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 the Corporation or the Paying Agent and Registrar, 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 Bonds 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 or its nominee, the Paying Agent and Registrar 2

7 or the Corporation, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Corporation or the Paying Agent and Registrar, 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. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice the Corporation or the Paying Agent and Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Corporation may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's Book-Entry system has been obtained from sources that the Corporation believes to be reliable but the Corporation takes no responsibility for the accuracy thereof. THE CORPORATION The Corporation has been formed in accordance with the provisions of Sections through and Section of the Kentucky Revised Statutes ("KRS"), and KRS Chapter 273 and KRS , as a non-profit, non-stock corporation for the purpose of financing necessary school building facilities for and on behalf of the Board. Under the provisions of existing Kentucky law, the Corporation is permitted to act as an agency and instrumentality of the Board for financing purposes and the legality of the financing plan to be implemented by the Board herein referred to has been upheld by the Kentucky Court of Appeals (Supreme Court) in the case of White v. City of Middlesboro, Ky. 414 S.W.2d 569. Any bonds, notes or other indebtedness issued or contracted by the Corporation shall, prior to the issuance or incurrence thereon, be specifically approved by the Board. The members of the Board of Directors of the Corporation are the members of the Board. Their terms expire when they cease to hold the office and any successor members of the Board are automatically members of the Corporation upon assuming their public offices. KENTUCKY SCHOOL FACILITIES CONSTRUCTION COMMISSION The Kentucky School Facilities Construction Commission (the "Commission") is an independent corporate agency and instrumentality of the Commonwealth of Kentucky established pursuant to the provisions of KRS Sections through , as amended, repealed and reenacted (the "Act") for the purpose of assisting local school districts in meeting the school construction needs of the Commonwealth in a manner which will ensure an equitable distribution of funds based upon unmet need. Pursuant to the provisions of the Act, the Regulations of the Kentucky Board of Education and the Commission, the Commission has determined that the Board is eligible for participation from the Commission in meeting the costs of construction of the Project and has entered into a Participation Agreement with the Board whereunder the Commission agrees to pay an annual Agreed Participation equal to approximately $68,068 toward the annual debt service requirements for the Bonds herein identified each year until their retirement; provided, however, that the contractual commitment of the Commission to pay the annual Agreed Participation is limited to the biennial budget period of the Commonwealth, with the first such biennial period terminating on June 30, 2016; the right is reserved in the Commission to terminate its commitment to pay the Agreed Participation after the initial biennial period and every two years thereafter. The obligation of the Commission to make payments of the Agreed Participation shall be automatically renewed each two years for a period of two years unless the Commission shall give notice of its intention not to participate not less than sixty days prior to the end of the biennium; however, by the execution of the Participation Agreement, the Commission has expressed its present intention to continue to pay the Agreed Participation in each successive biennial budget period until the retirement of all of the Bonds, but such execution does not obligate the Commission to do so. The Regular Session of the General Assembly of the Commonwealth adopted the State's Budget for the biennium ending June 30, Inter alia, the Budget provides $99,334,000 in FY and $108,270,000 in FY to pay debt service on existing and future bond issues; $100,000,000 of the Commission's previous Offers of Assistance made during the last biennium; and authorizes $100,000,000 in additional Offers of Assistance for the current biennium to be funded in the Budget for the biennium ending June 30, The 1986, 1988, 1990, 1992, 1994, 1996, 1998, 2000, 2003, 2005, 2006, 2008, 2010, 2012 and 2014 Regular Sessions of the Kentucky General Assembly appropriated funds to be used for debt service of participating school districts. The appropriations for each biennium are shown in the following table: 3

8 Biennium Appropriation $18,223, ,050, ,542, ,075, ,800, ,996, ,141, ,100, ,500, ,000, ,000, ,968, ,656, ,469, ,764,000 Total $150,286,900 In addition to the appropriations for new financings as shown, appropriations subsequent to that for 1986 included additional funds to continue to meet the annual debt requirements for all bond issues involving Commission participation issued in prior years. BIENNIAL BUDGET FOR PERIOD ENDING JUNE 30, 2016 The Kentucky General Assembly, during its Regular Session, adopted a budget for the biennium ending June 30, 2016 which was approved and signed by the Governor. Such budget was effective beginning July 1, OUTSTANDING BONDS The following table shows the outstanding Bonds of the Board by the original principal amount of each issue, the current principal outstanding, the amount of the original principal scheduled to be paid with the corresponding interest thereon by the Board or the School Facilities Construction Commission, the approximate interest range; and, the final maturity date of the Bonds: Current Principal Principal Approximate Bond Original Principal Assigned to Assigned to Interest Rate Final Series Principal Outstanding Board Commission Range Maturity 2005 REF $ 530,000 $ 63,000 $ 381,292 $ 148, % $ 15,005,000 $ 12,040,000 $ 14,012,512 $ 992, % QZAB $ 5,000,000 $ 5,000,000 $ 1,800,572 $ 3,199, % $ 950,000 $ 860,000 $ 0 $ 950, % % REF $ 396,000 $ 240,000 $ 6,711 $ 389, % $ 2,600,000 $ 2,330,000 $ 970,159 $ 1,629, % % REF $ 9,605,000 $ 8,925,000 $ 8,655,074 $ 949, % % $ 1,626,000 $ 1,626,000 $ 0 $ 1,626, % % $ 28,350,000 $ 28,350,000 $ 8,467,952 $ 19,882, % % 2036 Totals: $64,062,000 $59,434,000 $34,294,272 $29,767,728 AUTHORITY things: The Board of Directors of the Corporation has adopted a Bond Resolution which authorized among other i) the issuance of approximately $11,045,000 of Bonds subject to a permitted adjustment of $2,210,000; 4

9 ii) iii) iv) the advertisement for the public sale of the Bonds; the Official Terms and Conditions for the sale of the Bonds to the successful bidder; and, the President and Secretary of the Corporation to execute certain documents relative to the sale and delivery of the Bonds. THE BONDS General The Bonds will be dated February 1, 2016, will bear interest from that date as described herein, payable semi-annually on February 1 and August 1 of each year, commencing August 1, 2016, and will mature as to principal on February 1, 2017 and each February 1 thereafter in the years and in the principal amounts as set forth on the cover page of this Official Statement. Registration, Payment and Transfer The Bonds are to be issued in fully registered form (both principal and interest). U.S. Bank National Association, Louisville, Kentucky, the Bond Registrar and Paying Agent, shall remit interest on each semiannual due date to each Registered Owner of record as of the 15th day of the month preceding the due date which shall be Cede & Co., as the Nominee of The Depository Trust Company ("DTC"). Please see "Book-Entry-Only-System" below. Interest on the Bonds will be paid at rates to be established upon the basis of competitive bidding as hereinafter set forth, such interest to be payable on February 1 and August 1 of each year, beginning August 1, 2016 (Record Date is 15th day of month preceding interest due date). Redemption The Bonds scheduled to mature on and after February 1, 2027, are subject to redemption at the option of the Corporation prior to their stated maturities on any date falling on or after February 1, 2026, in any order of maturities (less than all of a single maturity to be selected by lot), in whole or in part, expressed in percentages of the principal amount with respect to each redeemed Bond as set forth below, plus accrued interest to the date of redemption: Redemption Dates (inclusive) Redemption Price February 1, 2026 and thereafter 100% Notwithstanding the foregoing, the Corporation reserves the right, upon thirty (30) days notice, to call the Bonds in whole or in part on any date at par for redemption upon the total destruction by fire, lightning, windstorm or other hazard of any building constituting the Project and apply casualty insurance proceeds to such purpose. General SECURITY The Bonds are revenue bonds and constitute a limited indebtedness of the Corporation. The Bonds are payable as to both principal and interest solely from the income and revenues derived from the leasing of the Project financed from the Bond proceeds from the Corporation to the Board. The Bonds are secured by a pledge of revenue on and from the site of the project. 5

10 The Lease; Pledge of Rental Revenues The Board has leased the school Project securing the Bonds for an initial period from February 1, 2016, through June 30, 2016, with the option in the Board to renew said Lease from year to year for one year at a time, at annual rentals, sufficient in each year to enable the Corporation to pay, solely from the rental due under the Lease, the principal and interest on all of the Bonds as same become due. The Lease provides further that so long as the Board exercises its annual renewal options, its rentals will be payable according to the terms and provisions of the Lease until February 1, 2027, the final maturity date of the Bonds. Under the lease, the Corporation has pledged the rental revenue to the payment of the Bonds. STATE INTERCEPT Under the terms of the Lease and any renewal thereof, so long as the Bonds remain outstanding and in conformance with the intent and purpose of KRS (5) and KRS (5), in the event of a failure by the Board to pay the rentals due under the Lease, and unless sufficient funds have been transmitted to the Paying Agent, or will be so transmitted, for paying said rentals when due, the Board has granted under the terms of the Lease and Participation Agreement to the Corporation and the Commission the right to notify and request the Kentucky Department of Education to withhold from the Board a sufficient portion of any undisbursed funds then held, set aside, or allocated to the Board and to request said Department or Commissioner of Education to transfer the required amount thereof to the Paying Agent for the payment of such rentals. COMMISSION'S PARTICIPATION The Commission has determined that the Board is eligible for an average annual participation equal to approximately $68,068 from the Commission's appropriation by the Kentucky General Assembly which will be used to meet a portion of the debt service of the Bonds. The plan for financing the Project will require the Commission to pay approximately six percent (6%) of the debt service of the Bonds. The Participation Agreement to be entered into with the Board will be limited to the biennial budget period of the Commonwealth of Kentucky, with the first such biennial period terminating on June 30, The right is reserved in the Commission to terminate the commitment to pay the agreed participation every two years thereafter. The obligation of the Commission to make payments of the agreed participation shall be automatically renewed each two years thereafter unless the Commission gives notice to the Board of its intention not to participate not less than sixty days prior to the end of the biennium. However, the Commission has expressed its intention to continue to pay the agreed participation in successive biennial budget periods until the Bonds are retired, but the Commission is not required to do so. VERIFICATION OF MATHEMATICAL ACCURACY AMTEC, will verify from the information provided to them the mathematical accuracy as of the date of the closing of the Bonds of (1) the computations contained in the provided schedules to determine that the anticipated receipts from the securities and cash deposits listed in the Financial Advisor's schedules, to be held in escrow, will be sufficient to pay, when due, the principal, interest and call premium payment requirements, if any, of the Prior Bonds, and (2) the computations of yield on both the securities and the Bonds contained in the provided schedules used by Bond Counsel in its determination that the interest on the Bonds is not includable in gross income for federal income tax purposes. AMTEC will express no opinion on the assumptions provided to them, nor as to the exemption from taxation of the interest on the Bonds. 6

11 THE PLAN OF REFUNDING A sufficient amount of the proceeds of the Bonds at the time of delivery will be deposited into an Escrow Fund for the Refunded Bonds. The Escrow Fund deposit is intended to be sufficient to (i) pay the accrued interest and refund in advance of maturity on February 1, 2017 all or portion of the Corbin Independent School District Finance Corporation School Building Revenue Bonds, Series of 2007, dated February 15, 2007 maturing February 1, 2018 and thereafter (the "Refunded Bonds"); and, (ii) pay the cost of the Bond issuance expenses (see "Plan of Refunding" herein). The Board has determined that the plan of refunding the Refunded Bonds will result in considerable interest cost savings to the Corbin Independent School District (the "District") and is in the best interest of the District. The 2007 Bonds maturing February 1, 2016 and February 1, 2017 will not be defeased and will remain payable under the terms of the Prior Lease (the "Remaining Bonds"). Any investments purchased for the Escrow Fund shall be limited to (i) direct Obligations of or Obligations guaranteed by the United States government, or (ii) Obligations of agencies or corporations of the United States as permitted under KRS (1)(b) and (c) or (iii) Certificates of Deposit of FDIC banks fully collateralized by direct Obligations of or Obligations guaranteed by the United States. The Plan of Refunding the Bonds of the Prior Issue as set out in the Preliminary Official Statement is tentative as to what Bonds of the Prior Issue shall be refunded and will not be finalized until the sale of the Refunding Bonds. PURPOSE OF THE PRIOR BONDS The Refunded Bonds were issued by the Corporation for the purpose of providing funds to finance construction of Corbin Elementary School (the Project ). 7

12 ESTIMATED BOND DEBT SERVICE The following table shows by fiscal year the current bond payments of the Board. The plan of financing provides for the Board to meet 94% of the debt service of the Bonds. Fiscal Current Total Year Local Refunding Revenue Bonds Local Ending Bond Principal Interest Total SFCC Local Bond June 30 Payments Portion Portion Payment Portion Portion Payments 2017 $2,252,073 $135,000 $231,865 $366,865 $22,012 $344,853 $2,199, $2,249,878 $1,005,000 $230,448 $1,235,448 $74,127 $1,161,321 $2,195, $2,319,442 $1,015,000 $219,895 $1,234,895 $74,094 $1,160,801 $2,264, $2,320,451 $1,035,000 $205,685 $1,240,685 $74,441 $1,166,244 $2,267, $2,316,569 $1,050,000 $190,160 $1,240,160 $74,410 $1,165,750 $2,265, $2,316,628 $1,075,000 $171,260 $1,246,260 $74,776 $1,171,484 $2,266, $2,319,871 $1,090,000 $150,298 $1,240,298 $74,418 $1,165,880 $2,264, $2,318,140 $1,115,000 $126,863 $1,241,863 $74,512 $1,167,351 $2,266, $2,319,751 $1,140,000 $100,103 $1,240,103 $74,406 $1,165,696 $2,265, $2,317,542 $1,175,000 $71,033 $1,246,033 $74,762 $1,171,271 $2,265, $2,313,383 $1,210,000 $38,720 $1,248,720 $74,923 $1,173,797 $2,262, $2,312,467 $2,312, $2,314,142 $2,314, $2,318,830 $2,318, $1,639,221 $1,639, $1,638,469 $1,638, $1,643,743 $1,643, $1,641,411 $1,641, $1,640,651 $1,640, $1,338,454 $1,338,454 Totals: $41,851,114 $11,045,000 $1,736,328 $12,781,328 $766,880 $12,014,448 $41,270,242 Note: Numbers rounded to the nearest $1.00. Estimated Net Interest Cost of 2.533% ESTIMATED USE OF BOND PROCEEDS The table below shows the estimated sources of funds and uses of proceeds of the Bonds, other than any portions thereof representing accrued interest: Sources: Par Amount of Bonds $11,045, Total Sources $11,045, Uses: Deposit to Prior Bond Fund $10,850, Underwriter's Discount (1%) 110, Cost of Issuance 83, Total Uses $11,045,

13 DISTRICT STUDENT POPULATION Selected school census and average daily attendance for the Corbin Independent School District is as follows: Average Daily Average Daily Year Attendance Year Attendance , , , , , , , , , , , , , , , , , , , , , , , , , ,697.2 Source: Kentucky State Department of Education. STATE SUPPORT Support Education Excellence in Kentucky (SEEK). In determining the cost of the program to Support Education Excellence in Kentucky (SEEK), the statewide guaranteed base funding level is computed by dividing the amount appropriated by the prior year's statewide average daily attendance. The SEEK fund is a guaranteed amount of money per pupil in each school district of Kentucky. The current SEEK allotment is $3,866 per pupil. The $100 capital outlay allotment per each average daily attendance is included within the guaranteed amounts. Each district's base funding from the SEEK program is adjusted for the number of at-risk students, the number and types of exceptional children in the district, and cost of transporting students from and to school in the district. Capital Outlay Allotment. The per pupil capital outlay allotment for each district from the public school fund and from local sources shall be kept in a separate account and may be used by the district only for capital outlay projects approved by the State Department of Education. These funds shall be used for the following capital outlay purposes: a. For direct payment of construction costs. b. For debt service on voted and funding bonds. c. For payment or lease-rental agreements under which the board will eventually acquire ownership of the school plant. d. For retirement of any deficit resulting from over-expenditure for capital construction, if such deficit resulted from certain declared emergencies. e. As a reserve fund for the above named purposes, to be carried forward in ensuing budgets. The allotment for each school board of education in the Commonwealth for fiscal year was $1,800 per classroom unit. The 1979 Session of the Kentucky General Assembly approved increases in this allotment in to $1,900 per classroom unit. This rate remained unchanged in The 1981 Session of the Kentucky General Assembly decreased the allotment per classroom to $1,800 and this allotment rate did not change from the rate, until the school year. Beginning with , the Capital Outlay allotment for each district is based on $100 per average daily attendance. 9

14 The following table shows the computation of the capital outlay allotment for the Corbin Independent School District for certain preceding school years. Beginning , the allotment is based on average daily attendance as required by law. Capital Capital Outlay Outlay Year Allotment Year Allotment , , , , , , , , , , , , , , , , , , , , , , , , ,000.0 If the school district has no capital outlay needs, upon approval from the State, the funds can be used for school plant maintenance, repair, insurance on buildings, replacement of equipment, purchase of school buses and purchase of modern technological equipment for educational purposes. If any district has a special levy for capital outlay or debt service that is equal to the capital outlay allotment or a proportionate fraction thereof, and spends the proceeds of the levy for eligible purposes, the State may authorize the district to use all or a proportionate fraction of its capital outlay allotment for current expenses (school districts which use capital outlay allotments to meet current expenses are not eligible to participate in the School Facilities Construction Commission funds). Facilities Support Program of Kentucky. School districts may be eligible to participate in the Facilities Support Program of Kentucky (FSPK), subject to the following requirements: 1) The district must have unmet needs as set forth and approved by the State Department of Education in a School Facilities Plan; 2) The district must commit to establish an equivalent tax rate of at least 5 cents, in addition to the 30 cents minimum current equivalent tax rate; and, 3) The new revenues generated by the 5 cent addition, must be placed in a restricted account for school building construction bonding. LOCAL SUPPORT Homestead Exemption. Section 170 of the Kentucky Constitution was amended at the General Election held November 2, 1971, to exempt from property taxes $6,500 of value of single unit residential property of taxpayers 65 years of age or older. The 1972 General Assembly amended KRS Chapter 132 to permit counties and school districts to adjust their local tax revenues lost through the application of this Homestead Exemption. The "Single Unit" qualification has been enlarged to subsequent sessions of the General Assembly to provide that such exemption shall apply to such property maintained as the permanent resident of the owner and the dollar amount has been construed to mean $6,500 in terms of the purchasing power of the dollar in Every two years thereafter, if the cost of living index of the U.S. Department of Labor has changed as much as 1%, the maximum exemption shall be adjusted accordingly. Under the cost of living formula, the maximum was increased to $36,000 effective January 1,

15 Limitation on Taxation. The 1979 Special Session of the Kentucky General Assembly enacted House Bill 44 which provides that no school district may levy a general tax rate, voted general tax rate, or voted building tax rate which would generate revenues that exceeds the previous years revenues by four percent (4%). The 1990 Regular Session of the Kentucky General Assembly in enacting the "School Reform" legislative package amended the provisions of KRS which prohibited school districts from levying ad valorem property taxes which would generate revenues in excess of 4% of the previous year's revenues without said levy subject to recall to permit exceptions to the referendum under (1) KRS (12) [a new section of the statute] and (2) an amended KRS Under KRS (12)(a) for fiscal years beginning July 1, 1990 school districts are required to levy a "minimum equivalent tax rate" of thirty cents ($.30) for general school purposes. The equivalent tax rate is defined as the rate which results when the income collected during the prior year from all taxes (including occupational or utilities) levied by the district for school purposes divided by the total assessed value of property plus the assessment for motor vehicles certified by the State Revenue Cabinet. Failure to levy the minimum equivalent rate subjects the board of the district to removal. The exception provided by KRS (1)(a) permits school districts to levy an equivalent tax rate as defined in KRS (12)(a) which will produce up to 15% of those revenues guaranteed by the program to support education excellence in Kentucky. Levies permitted by this section of the statute are not subject to public hearing or recall provisions as set forth in KRS Local Thirty Cents Minimum. Effective for school years beginning after June 30, 1990, the board of education of each school district shall levy a minimum equivalent tax rate of thirty cents ($0.30) for general school purposes. If a board fails to comply, its members shall be subject to removal from office for willful neglect of duty. Additional 15% Not Subject to Recall. Effective with the school year beginning July 1, 1990, each school district may levy an equivalent tax rate which will produce up to 15% of those revenues guaranteed by the SEEK program. Effective with the school year, the State will equalize the revenue generated by this levy at one hundred fifty percent (150%) of the statewide average per pupil equalized assessment. For and thereafter, this level is set at $225,000. The additional 15% rate levy is not subject to the public hearing or recall provisions. Assessment Valuation. No later than July 1, 1994, all real property located in the state and subject to local taxation shall be assessed at one hundred percent (100%) of fair cash value. Special Voted and Other Local Taxes. Any district may, in addition to other taxes for school purposes, levy not less than four cents nor more than twenty cents on each one hundred dollars ($100) valuation of property subject to local taxation, to provide a special fund for the purchase of sites for school buildings and the erection, major alteration, enlargement, and complete equipping of school buildings. In addition, districts may levy taxes on tangible and intangible property and on utilities, except generally any amounts of revenues generated above that provided for by House Bill 44 is subject to voter recall. 11

16 Local Tax Rates, Property Assessments and Revenue Collections Combined Total Property Tax Equivalent Property Revenue Year Rate Assessment Collections ,121,235 1,307, ,206,967 1,475, ,773,817 1,498, ,147,465 1,546, ,341,992 1,634, ,435,389 1,605, ,713,102 1,700, ,000,000 1,846, ,179,727 1,693, ,894,256 1,798, ,445,462 1,823, ,272,020 2,324, ,390,793 2,448, ,645,316 2,431, ,525,950 2,986, ,323,347 3,087, ,204,055 3,439, ,279,232 3,029, ,461,513 3,151, ,243,436 3,372, ,820,337 3,438, ,442,003 3,450, ,149,369 3,749, ,083,596 3,847,251 Overlapping Bond Indebtedness The following table shows any other overlapping bond indebtedness of the Corbin Independent School District or other issuing agency within the County as reported by the State Local Debt Officer for the period ending June 30, Original Amount Current Principal of Bonds Principal Issuer Amount Redeemed Outstanding County of Laurel General Obligation $47,955,000 $10,930,000 $37,025,000 Detention Facility Public Corp. $5,570,000 $3,435,000 $2,135,000 Solid Waste Revenue $7,300,000 $0 $7,300,000 Building Revenue $10,000,000 $0 $10,000,000 Judicial Facility Revenue $23,725,000 $3,445,000 $20,280,000 Building Renewable $5,650,000 $1,130,000 $4,520,000 Multiple Purposes $2,280,000 $570,000 $1,710,000 City of London Utilities Revenue $10,730,000 $5,602,000 $5,128,000 Ky. Infrastructure Authority $4,061,138 $1,315,818 $2,745,320 Special Districts Cumberland Valley Area Dev. District $1,015,000 $430,000 $585,000 East Laurel Water District $2,819,000 $732,500 $2,086,500 Laurel County Water District #2 $10,432,306 $1,109,698 $9,322,608 Wood Creek Water District $23,063,400 $4,750,800 $18,312,600 Totals: $154,600,844 $33,450,816 $121,150,028 Source: 2013 Kentucky Local Debt Report. 12

17 SEEK Allotment The Board has reported the following information as to the SEEK allotment to the District, and as provided by the State Department of Education. These receipts are compared to the fiscal year funding prior to enactment of the Kentucky Education Reform Act: Base Local Total State & Funding Tax Effort Local Funding SEEK 12,921,230 3,847,251 16,768, SEEK 11,991,176 3,749,189 15,740, SEEK 11,948,724 3,450,224 15,398, SEEK 11,615,868 3,438,865 15,054, SEEK 10,311,615 3,372,445 13,684, SEEK 10,025,258 3,151,238 13,176, SEEK 10,762,222 3,029,741 13,791, SEEK 10,062,946 3,439,947 13,502, SEEK 8,733,050 3,087,630 11,820, SEEK 8,419,494 2,986,671 11,406, SEEK 7,768,571 2,431,724 10,200, SEEK 7,432,637 2,448,378 9,881, SEEK 7,254,080 2,324,199 9,578, SEEK 6,872,647 1,823,319 8,695, SEEK 6,757,783 1,798,936 8,556, SEEK 6,273,120 1,693,740 7,966, SEEK 5,684,533 1,846,400 7,530, SEEK 5,431,642 1,700,495 7,132, SEEK 5,454,386 1,605,447 7,059, SEEK 5,247,683 1,634,151 6,881, SEEK 5,187,885 1,546,192 6,734, SEEK 5,179,250 1,498,054 6,677, SEEK 5,038,894 1,475,040 6,513, SEEK 4,700,824 1,307,455 6,008,278 (1) Support Education Excellence in Kentucky (SEEK) replaces the minimum foundation program and power equalization funding. Capital Outlay is now computed at $100 per average daily attendance (ADA). Capital Outlay is included in the SEEK base funding. (2) The Board established a current equivalent tax rate (CETR) of $0.719 for FY The "equivalent tax rate" is defined as the rate which results when the income from all taxes levied by the district for school purposes is divided by the total assessed value of property plus the assessment for motor vehicles certified by the Commonwealth of Kentucky Revenue Cabinet. State Budgeting Process i) Each district board of education is required to prepare a general school budget on forms prescribed and furnished by the Kentucky Board of Education, showing the amount of money needed for current expenses, debt service, capital outlay, and other necessary expenses of the school during the succeeding fiscal year and the estimated amount that will be received from all sources. ii) iii) By September 15 of each year, after the district receives its tax assessment data from the Department of Revenue and the State Department of Education, 3 copies of the budget are forwarded to the State Department for approval or disapproval. The State Department of Education has adopted a policy of disapproving a school budget if it is financially unsound or fails to provide for: 13

18 a) payment of maturing principal and interest on any outstanding voted school improvement bonds of the district or payment of rental in connection with any outstanding school building revenue bonds issued for the benefit of the school district; or b) fails to comply with the law. POTENTIAL LEGISLATION No assurance can be given that any future legislation, including amendments to the Code, if enacted into law, or changes in interpretation of the Code, will not cause interest on the Refunding Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Refunding Bonds from realizing the full current benefit of the tax exemption of such interest. In addition, current and future legislative proposals, if enacted into law, may cause interest on state or local government bonds (whether issued before, on the date of, or after enactment of such legislation) to be subject, directly or indirectly, to federal income taxation by, for example, changing the current exclusion or deduction rules to limit the amount of interest on such bonds that may currently be treated as tax exempt by certain individuals. Prospective purchasers of the Refunding Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation. Further, no assurance can be given that the introduction or enactment of any such future legislation, or any action of the IRS, including but not limited to regulation, ruling, or selection of the Refunding Bonds for audit examination, or the course or result of any IRS examination of the Refunding Bonds or obligations which present similar tax issues, will not affect the market price for the Refunding Bonds. CONTINUING DISCLOSURE As a result of the Board and issuing agencies acting on behalf of the Board having outstanding at the time the Bonds referred to herein are offered for public sale municipal securities in excess of $1,000,000, the Corporation and the Board will enter into a written agreement for the benefit of all parties who may become Registered or Beneficial Owners of the Bonds whereunder said Corporation and Board will agree to comply with the provisions of the Municipal Securities Disclosure Rules set forth in Securities and Exchange Commission Rule 15c2-12 by filing annual financial statements and material events notices with the Electronic Municipal Market Access (EMMA) System maintained by the Municipal Securities Rule Making Board. The Board and Corporation have been late in making certain required filings under the terms of the Continuing Disclosure Agreements between the Board and the Corporation executed in connection with previous bond issues. The Board has filed Material Event Notices indicating its failure to file on a timely basis the following information: (1) An upgrade in Moody's rating of its bonds from "Aa3" to "Aa2" on April 16, 2010; (2) A downgrade in Moody's rating of its bonds from "Aa2" to Aa3" on April 11, 2011; and (3) Failure to file Annual Operating Data on a timely basis. Operating Data for FYs ending June 30, 2010 was filed on August 13, The Board has adopted new procedures to assure timely and complete filings in the future with regard to the Rule in order to provide required financial reports and operating data or notices of material events. Financial information regarding the Board may be obtained from Superintendent, Corbin Independent Board of Education, 108 Roy Kidd Avenue, (606)

19 Bond Counsel is of the opinion that: TAX EXEMPTION; NOT BANK QUALIFIED (A) The Refunding Bonds and the interest thereon are exempt from income and ad valorem taxation by the Commonwealth of Kentucky and all of its political subdivisions. (B) The interest income from the Refunding Bonds is excludable from the gross income of the recipient thereof for Federal income tax purposes under existing law; provided, that the corporate entities noted below are advised of certain tax consequences as follows: (1) In the computation of the corporate minimum tax, earnings and profits may include otherwise tax-exempt interest on the Refunding Bonds; this provision applies to corporations only. (2) Property and casualty insurance companies may be denied certain loss reserve deductions to the extent of otherwise tax-exempt interest on the Refunding Bonds. (C) As a result of designations and certifications by the Board and the Corporation, indicating the issuance of more than $10,000,000 of tax-exempt obligations during the calendar year ending December 31, 2016, the Refunding Bonds are NOT "qualified tax-exempt obligations" within the meaning of the Internal Revenue Code of 1986, as amended. (D) The interest income from the Refunding Bonds is excludable from the gross income of the recipient thereof for Federal income tax purposes under existing law for individuals; however, said income must be included in the calculation of "modified adjusted gross income" in the determination of whether and to what extent Social Security benefits are subject to Federal income taxation. Original Issue Premium Certain of the Bonds are being initially offered and sold to the public at a premium ( Acquisition Premium from the amounts payable at maturity thereon. "Acquisition Premium" is the excess of the cost of a bond over the stated redemption price of such bond at maturity or, for bonds that have one or more earlier call dates, the amount payable at the next earliest call date. The Bonds that bear an interest rate that is higher than the yield (as shown on the cover page hereof), are being initially offered and sold to the public at an Acquisition Premium (the "Premium Bonds"). For federal income tax purposes, the amount of Acquisition Premium on each bond the interest on which is excludable from gross income for federal income tax purposes ("tax-exempt bonds") must be amortized and will reduce the bondholder's adjusted basis in that bond. However, no amount of amortized Acquisition Premium on tax-exempt bonds may be deducted in determining bondholder's taxable income for federal income tax purposes. The amount of any Acquisition Premium paid on the Premium Bonds, or on any of the Bonds, that must be amortized during any period will be based on the "constant yield" method, using the original bondholder's basis in such bonds and compounding semiannually. This amount is amortized ratably over that semiannual period on a daily basis. Holders of any Bonds, including any Premium Bonds, purchased at an Acquisition Premium should consult their own tax advisors as to the actual effect of such Acquisition Premium with respect to their own tax situation and as to the treatment of Acquisition Premium for state tax purposes. Original Issue Discount Certain of the Bonds (the "Discount Bonds") are being initially offered and sold to the public at a discount ("OID") from the amounts payable at maturity thereon. OID is the excess of the stated redemption price of a bond at maturity (the face amount) over the "issue price" of such bond. The issue price is the initial offering price to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of bonds of the same maturity are sold pursuant to that initial offering. For federal income tax purposes, OID on each bond will accrue over the term of the bond. The amount accrued will be based 15

20 on a single rate of interest, compounded semiannually (the "yield to maturity") and, during each semi-annual period, the amount will accrue ratably on a daily basis. The OID accrued during the period that an initial purchaser of a Discount Bond at its issue price owns it is added to the purchaser's tax basis for purposes of determining gain or loss at the maturity, redemption, sale or other disposition of that Discount Bond. In practical effect, accrued OID is treated as stated interest, that is, as excludible from gross income for federal income tax purposes. In addition, original issue discount that accrues in each year to an owner of a Discount Bond is included in the calculation of the distribution requirements of certain regulated investment companies and may result in some of the collateral federal income tax consequences discussed above. Consequently, owners of any Discount Bond should be aware that the accrual of original issue discount in each year may result in an alternative minimum tax liability, additional distribution requirements or other collateral federal income tax consequences although the owner of such Discount Bond has not received cash attributable to such original issue discount in such year. Holders of Discount Bonds should consult their own tax advisors as to the treatment of OID and the tax consequences of the purchase of such Discount Bonds other than at the issue price during the initial public offering and as to the treatment of OID for state tax purposes. ABSENCE OF MATERIAL LITIGATION There is no litigation presently pending against the Corporation or the District, nor to the knowledge of the officials of the Corporation or the District is there any litigation threatened, which questions or affects the validity of the Bonds or any proceedings or transactions relating to the issue, sale and delivery thereof. APPROVAL OF LEGALITY Legal matters incident to the authorization and issuance of the Bonds are subject to the approving legal opinion of Steptoe & Johnson PLLC, Bond Counsel. The form of the approving legal opinion of Bond Counsel will appear on each printed Bond. NO LEGAL OPINION EXPRESSED AS TO CERTAIN MATTERS Bond Counsel has reviewed the information contained in the Official Statement describing the Bonds and the provisions of the Bond Resolution and related proceedings authorizing the Bonds, but Bond Counsel has not reviewed any of the financial data, computations, tabulations, balance sheets, financial projections, and general information concerning the Corporation or District, and expresses no opinion thereon, assumes no responsibility for same and has not undertaken independently to verify any information contained herein. BOND RATING As noted on the cover page of this Official Statement, Moody s Investors Service has given the Bonds the indicated rating. Such rating reflects only the respective views of such organization. Explanations of the significance of the rating may be obtained from the rating agency. There can be no assurance that such rating will be maintained for any given period of time or will not be revised or withdrawn entirely by the rating agency, if in their judgement circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. FINANCIAL ADVISOR Prospective bidders are advised that Ross, Sinclaire & Associates, LLC ("Ross Sinclaire") has been employed as Financial Advisor in connection with the issuance of the Bonds. Ross Sinclaire's fee for services 16

21 rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery thereof. Bidders may submit a bid for the purchase of the Bonds at the time of the advertised public sale, either individually or as a member of a syndicate organized to submit a bid for the purchase of the Bonds. APPROVAL OF OFFICIAL STATEMENT The Corporation has approved and caused this "Official Statement" to be executed and delivered by its President. In making this "Official Statement" the Corporation relied upon information furnished to it by the Board of Education of the Corbin Independent School District and does not assume any responsibility as to the accuracy or completeness of any of the information in this Official Statement except as to copies of documents denominated "Official Terms and Conditions" and "Bid Form." The financial information supplied by the Board of Education is represented by the Board of Education to be correct. The Corporation deems this preliminary Official Statement to be final for purposes of Securities Exchange Commission Rule 15c2-12(b)(1) as qualified by the cover hereof. No dealer, broker, salesman, or other person has been authorized by the Corporation, the Corbin Independent Board of Education or the Financial Advisor to give any information or representations, other than those contained in this Official Statement, and if given or made, such information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Except when otherwise indicated, the information set forth herein has been obtained from the Kentucky Department of Education and the Corbin Independent School District and is believed to be reliable; however, such information is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the Financial Advisor or by Counsel. The delivery of this Official Statement at any time does not imply that information herein is correct as of any time subsequent to the date hereof. This Official Statement does not, as of its date, contain any untrue statement of a material fact or omit to state a material fact which should be included herein for the purpose for which the Official Statement is to be used or which is necessary in order to make the statements contained herein, in the light of the circumstances under which they were made, not misleading in any material respect. By /s/ By /s/ President Secretary 17

22 APPENDIX A Corbin Independent School District Finance Corporation School Building Refunding Revenue Bonds Series of 2016 Demographic and Economic Data

23 CORBIN INDEPENDENT, KENTUCKY Corbin, located in Whitley County, is the largest city in the county. Corbin had an estimated 2013 population of 7,368 in Williamsburg had an estimated 2013 population of 5,302. Whitley County covers a total land area of 440 square miles. Whitley County is a well-dissected upland with a hilly to mountainous terrain. The Kentucky-Tennessee state line forms the county's southern boundary. The tri-county are consisting of Whitley, Knox and Laurel Counties had a combined population of 127,119 in The Economic Framework The total number of Whitley County residents employed in 2012 averaged 17,312. Manufacturing firms in the County reported 1,131 employees; trade, transportation and utilities provided 1,829 jobs; 2,340 people were employed in service occupations; public administration accounted for 593 employees; 197 jobs were present in contract construction; financial activities provided 282 jobs and information services provided 144 jobs. Labor Supply There is a current estimated labor supply of 28,002 persons available for industrial jobs in the labor market area which includes Knox, Laurel and Whitley Counties. In addition, from 2014 through 2017, 20,948 young persons in the area will become 18 years of age and potentially available for industrial jobs. LABOR MARKET STATISTICS The Labor Market Area includes Bell, Knox, Laurel, McCreary, Rockcastle and Whitley Counties. Although not included in the statistics below, the Labor Market Area is supplemented by the nearby Tennessee county of Campbell. Population Area Labor Market Area 414, , ,212 Knox, Laurel & Whitley Counties 126, , ,119 Corbin 7,292 7,272 7,368 Source: U.S. Department of Commerce, Bureau of the Census. Population Projections Area Knox, Laurel & Whitley Counties 132, , ,978 Source: Kentucky State Data Center, University of Louisville and Kentucky Cabinet for Economic Development. EDUCATION Public Schools Total Enrollment (13-14) Pupil to Teach Ratio Corbin Independent Schools 2, Whitley County Schools 4, Williamsburg Independent Schools (A-1)

24 Vocational Training Kentucky Tech schools are operated by the Cabinet for Workforce Development and provide secondary (Sec) and postsecondary (P/S) vocational-technical training. Bluegrass State Skills Corporation The Bluegrass State Skills Corporation(BSSC), an independent public corporation created and funded by the Kentucky General Assembly, provides programs of skills training to meet the needs of business and industry from entry level to advanced training, and from upgrading present employees to retraining experienced workers. The Bluegrass State Skills corporation is a major source for skills training assistance for a new or existing company. The Corporation works in partnership with other employment and job training resources and programs, as well as Kentucky's economic development activities, to package a program customized to meet the specific needs of a company. Enrollment Technical School Location Corbin ATC Corbin, KY 334 Knox County ATC Barbourville, KY 427 Bell County ATC Pineville, KY 339 Pulaski ATC Somerset, KY 382 Clay County ATC Manchester, KY 149 Wayne County ATC Monticello, KY 572 Rockcastle County ATC Mount Vernon, KY 399 Jackson County ATC McKee, KY 270 Leslie County ATC Hyden, KY 398 Clinton County ATC Albany, KY 311 Lake Cumberland ATC Russell Springs, KY 413 Casey County ATC Liberty, KY 334 Colleges and Universities Enrollment Institution Location (Fall 2012) University of the Cumberlands Williamsburg, KY 4,297 Union College Barbourville, KY 1,211 Clear Creek Baptist Bible College Pineville, KY 174 Frontier School of Midwifery and Family Nursing Hyden, KY 1,398 Berea College Berea, KY 1,658 Source: Kentucky Cabinet for Economic Development. (A-2)

25 EXISTING INDUSTRY Firm Product Total Employed Williamsburg: Firestone Industrial Products Air springs 400 Jamie's Interiors Custom bedspreads, curtains & decorative items and wholesale furniture, warehouse 12 TEKSwork IT solutions: phone systems, security systems and customized software 12 Williamsburg Plastics Plastic injection molded products 275 Corbin: Benore Logistic Logistics organization-transportation of BMW parts 94 Central Automotive Supply Machine shop: drilling, boring, surface grinding & engine rebuilding and repairs 24 Classic Metal Vaults High-quality lined concrete and metal burial vaults 22 Corbin Materials Inc. Ready-mixed concrete 10 CTA Acoustics Inc. Organic fiber padding, industrial automotive insulation & acoustical materials 480 D&C Machine Machine shop: general machining, drilling & boring, lathe & mill work 10 General Dynamics Information Tech Call center 550 Northern Contours of Kentucky Inc. Laminated cabinet doors & drawer fronts 125 Nucsafe Instruments Inc. Radiation measurement systems 11 Owens Auto Parts General truck equipment - service bodies, flat beds, cranes, dump bodies, air compressors, lift gates, snow removal equipment, truck accessories, sales & service 18 Pepsi-Cola Bottling Co of Corbin Soft drinks 241 Salem Tool Inc. Coal recovery & coal auger mining equipment 17 Southeast Apparatus LLC Manufacture fire trucks 17 Southeastern Kentucky Rehabilitation Apparel manufacturing for US military 70 Stidham Cabinet Inc. Custom cabinets, laminated & solid surface counters 42 TCO LLC Contract packaging and assembly of automotive lighting units 250 The MPI Group LLC Hollow metal doors & frames 79 Times Tribune Newspaper publishing & printing 27 Troll and Toad Fulfillment center for games, collector items 89 Source: Kentucky Cabinet for Economic Development (12/3/2015). (A-3)

26 APPENDIX B Corbin Independent School District Finance Corporation School Building Refunding Revenue Bonds Series of 2016 Audited Financial Statement ending June 30, 2015

27 CORBIN INDEPENDENT SCHOOL DISTRICT REPORT OF AUDIT Year Ended June 30, 2015

28 CONTENTS Independent Auditor's Report Management's Discussion and Analysis (Unaudited) Page Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Net Position - Fiduciary Fund Notes to the Basic Financial Statements Supplementary Information: Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Special Revenue Fund Notes to Required Supplementary Information - Budget and Actual - General Fund Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Statements of Receipts, Disbursements and Fund Balances - Activity Funds Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards

29 CONTENTS Page Schedule of Findings and Questioned Costs 54 Schedule of Prior Year Audit Findings 55 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by OMB Circular A Independent Auditor's Introductory Letter to Management Letter Points 60

30 Marr, Miller & MY-~t:~ 1?S Certified Public Accountants (606) (FAX ) p.o. Box INDEPENDENT AUDITOR'S REPORT September 28, 2015 Members of the Board of Education Corbin Independent School District Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Corbin Independent School District (the "District"), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the provisions of Office of Management and Budget Circular No. A-133, Audits of States, Local Governments, and Non-Profit Organizations; Appendix I to the Independent Auditor's Contract General Audit Requirements, Appendix II to the Independent Auditor's Contract - State Audit ReqUirements, Appendix III to the Independent Auditor's Contract - Audit Extension Request and Appendix IV to the Independent Auditor's Contract - Instructions for Submission of the Audit Report. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

31 ,Marr, Miller & Mye.rs, PSC ""--_. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the District as of June 30, 2015, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with U.S. generally accepted accounting principles. Other Matters Required Supplementary Information U.S. generally accepted accounting principles require that the management's discussion and analysis and budgetary comparison information on pages 4-7 and 43-44, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context We have applied certain limited procedures to the required supplementary information in accordance with U.S. generally accepted auditing standards, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The statements of receipts, disbursements and fund balances-activity Funds and the combining nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The 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, and is also not a required part of the basic financial statements. The Activity Fund statements, combining nonmajor fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with U.S. generally accepted auditing standards. In our opinion, the activity fund statements, combining non major fund financial statements and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole.

32 _Marr, Miller & M..,yers, PS~. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 28, 2015, on our consideration of the District's internal control over financial reporting and 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance. ~i ljl...u...u ~ ~O~, fsc. Certified Public Accountants

33 CORBIN INDEPENDENT SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) June 30,2015 This section of the financial statements for the Corbin Independent School District (District) presents management's discussion and analysis of the financial performance of the District during the fiscal year that ended on June 30, As management of the District, we offer readers of the financial statements this narrative overview and analysis to highlight and further explain the financial events that have taken place in the past year. We encourage readers to consider the information presented herein along with the District's financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS The ending cash balance for the District was $2,580,493 in 2015 and $2,093,210 in The General Fund had $20,275,124 in revenues (excluding interfund transfers), which primarily consisted of the state program (SEEK) and property, utilities, and motor vehicle taxes. Excluding interfund transfers, there were $19,789,724 in General Fund expenditures. Governmental capital assets had a net increase of $2,616,043. Business-type capital assets had a net increase of $3,163 during the current fiscal year. Bonds are issued as the District renovates and constructs facilities consistent with a long-range facilities plan that is established with the community input and keeping with the Department of Education stringent compliance regulations. The total debt increased by $1,299,434. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the District's basic financial statements. The District's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the District's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the District's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the District's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements outline functions of the District that are principally supported by property taxes and intergovernmental revenues (governmental activities). The governmental activities of the District include instruction, support services, plant operations and maintenance, student transportation and operation of non-instructional services. Fixed assets and related debt is also supported by taxes and intergovernmental revenues. The government-wide financial statements can be found on pages 8 through 10 of this report. Page 4

34 CORBIN INDEPENDENT SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) June 30, 2015 Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. This is a state mandated uniform system and chart of accounts for all Kentucky public school districts utilizing the MUNIS administrative software. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into three categories: governmental, proprietary and fiduciary. Fiduciary funds are trust funds established by benefactors to aid in student education, welfare and teacher support. The proprietary funds are for day care and food service operations. All other activities of the District are included in the governmental funds. The basic governmental fund financial statements can be found on pages 11 through 19 of this report. Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found on pages 20 through 42 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS The largest portion of the District's net position reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, general equipment and construction in progress); less any related debt used to acquire those assets that are still outstanding. The District uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although the District's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The District's financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. Net Position for the period ending June 30, 2015 Fiscal year2014 government-wide net position compared to 2015 is as follows: Current assets $ 4,684,937 $ 2,536,016 Capital assets 47,212,766 46,118,716 Deferred outflows (inflows) of resources 93,935 3,575 Total Assets and Deferred Outflows (Inflows) of Resources $ $ Current liabilities $ 2,641,312 $ 2,654,605 Noncurrent liabilities 34,999,213 29,953,490 Total Liabilities $ $ Net position Net investment in capital assets $ 14,528,971 $ 15,555,847 Restricted 1,809, ,622 Unrestricted (deficit) (1,986,859) (327,257) Total Net Position $ 1435J JJ3 $ 16 05Q 212 Page 5

35 CORBIN INDEPENDENT SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) June 30,2015 The most significant change in the financial position of the District since the last audit was the increase in current assets in the amount of $2,148,921. The District also had an overall increase in liabilities in the amount of $5,032,430. These increases were primarily due to bond proceeds and the related liability incurred in 2015 along with the recognition of the CERS net pension liability of $3,614,000. The investment in capital assets, net of related debt had a decrease in the amount of $1,026,876. The following table presents a summary of revenues and expenditures, Governmental Funds only, for the fiscal years ended June 30: 2015 Percent 2014 Percent REVENUES AND OTHER FINANCING SOURCES Local revenue sources $ 4,455, % $ 4,366, % State revenue sources 20,116, ,363, Federal revenue sources 2,539, ,256, Bond proceeds 3,021, ,605, Total revenues and other financing services 30,132, ,590, EXPENDITURES AND OTHER FINANCING USES Instruction 15,834, ,668, Student support services 430, , Instruction staff 462, , District administration 778, , School administration 1,449, ,388, Business 755, , Plant operations and maintenance 2,264, ,047, Student transportation 1,205, ,119, Other instructional 5, , Land improvements 426, Building acquisitions and construction 317, Site improvement 1,226, , Community services activities 212, , Bond discount 13, Bond feeslissuance costs 42, Payment of bonds and note 1,721, ,516, Payment of interest 1,113, Operating transfers (net) 65, Total expenditures and other financing uses 28,260, ,614, Net change in fund balance $ % $ (24170) 1.07)% The majority of the District's revenues were derived from state revenue sources, making up 66.76% of total revenues in 2015 as compared to 53.09% in Bond proceeds comprised 10.02% of total revenues in 2015 as compared to 27.77% in Federal revenue sources comprised 8.43% of total revenues in 2015 as compared to 6.52% in The majority of the District's expenditures were for instruction, making up 52.55% of total expenditures in 2015 as compared to % in Student transportation comprised 4.00% of the District's total expenditures in 2015 as compared to 3.24% in Plant operations and maintenance comprised 7.52% of the District's total expenditures in 2015 as compared to 5.92% in Capital assets of $2,628,836 were charged to expenditures in 2015 as compared to $467,700 in Page 6

36 CORBIN INDEPENDENT SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) June 30, 2015 Comments on Budget Comparisons In Kentucky, the public schools fiscal year is July 1 to June 30. Other programs operate on a different fiscal calendar, but are reflected in the District's overall budget. By law, the budget must have a minimum 2% contingency. The District adopted the budget with $1,048,390 in contingency (5.50%). The District's total general fund revenues for the fiscal year ended June 30, 2015 were $20,275,124. General fund budgeted revenues compared to actual varied from line item to line item, with the ending actual balance being $1,223,751 more than budget or 6.42%. This is mainly attributed to on-behalf payments being $704,576 more than budget. The District's total general fund expenditures for the fiscal year ended June 30, 2015 were $19,789,724. General fund budgeted expenditures compared to actual varied in instruction support with them being $167,278 over budget. Business support services closed with a budget deficit of $109,461. Plant operations and maintenance closed with a budget deficit of $174,060. Student transportation also closed with a budget deficit of $45,507. Overall general fund expenditures compared to budget were $754,225 or 3.67% less than budget. When the on-behalf payment difference of $704,576 is eliminated, expenditures were $1,458,801 less than budget. Future Budget Implications The District adopted a budget for with $1,573,418 in contingency (7.59%). Significant Board action that impacts the finances includes the funding of extra-curricular activities, KETS matching funds, the KSBIT liability assessment and construction of the new Corbin Middle School. Contacting the District's Financial Management This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. Questions regarding this report should be directed to the Superintendent or to Alicia Logan, Certified School Financial Officer, at (606) or by mail at 108 Roy Kidd Avenue, Corbin, KY Page 7

37 CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF NET POSITION June 30, 2015 ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable: Taxes - cu rrent Accounts receivable Intergovernmental - state Intergovernmental - federal Materials and supplies inventory Total current assets Governmental Activities $ 2,270,969 78,654 1,605,671 13, , ,786 Business-Type Activities $ 309,524 $ 12,030 65,105 47, ,151 Total 2,580,493 78,654 1,617,701 13, ,097 47,492 4,684,937 NONCURRENT ASSETS Capital assets, net Total noncurrent assets 47,129,089 47,129,089 83,677 83,677 47,212, ,766 DEFERRED OUTFLOWS (INFLOWS) OF RESOURCES 93,935 93,935 TOTAL ASSETS AND DEFERRED OUTFLOWS (INFLOWS) OF RESOURCES 51,473, ,828 51,991,638 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable Construction retainage payable Deferred revenue Interest payable Current portion of bond obligations Current portion of note payable Current portion of accumulated sick leave payable Current portion of insurance claims payable Total current liabilities 149,596 69, , ,828 1,592, ,000 95,000 23,961 2, ,096 20, ,692 69, , ,828 1,592, ,000 95,000 23,961 2,641,312 NONCURRENT LIABILITIES Noncurrent portion of bond obligations Noncurrent portion of note payable Noncurrent portion of accumulated sick leave payable Noncurrent portion of insurance claims payable Net pension liability - CERS Total noncurrent liabilities 30,491, , , ,805 3,614,000 34,999,213 30,491, , , ,805 3,614,000 34,999,213 TOTAL LIABILITIES 37, ,096 37,640,525 The accompanying notes are an integral part of these financial statements. Page 8

38 CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF NET POSITION (CONTINUED) June 30, 2015 NET POSITION Net investment in capital assets Restricted for: Capital projects Other Unrestricted (deficit) TOTAL NET POSITION Governmental Activities 14,445,294 1,284, ,750 (1,986,859) : Business-Type Activities Total 83,677 14,528,971 1,284, , ,805 (1,986,859 ) : The accompanying notes are an integral part of these financial statements. Page 9

39 CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF ACTIVITIES Year Ended June 30, 2015 PROGRAM REVENUES Charges for Operating Capital Services Grants and Grants and FUNCTIONS/PROGRAMS EXQenses and Sales Contributions Contributions GOVERNMENTAL ACTIVITIES: Instruction $ 16,445,423 $ 69,319 $ 3,688,067 $ 2,248,249 Support services: Student 426,684 Instructional staff 471,914 District administration 797,941 School administration 1,447,736 Business 738,705 Plant operations and maintenance 2,615,568 Student transportation 920,596 Other instructional 5,055 Community services activities 175, ,835 Interest on long-term debt 1,147,799 Bond fees/issuance costs/amortization 33,519 TOTAL GOVERNMENTAL ACTIVITIES $ $ $ $ BUSINESS-TYPE ACTIVITIES: Food service $ 1,631,900 $ 377,170 $ 1,354,241 $ Day care 373, ,667 70,089 TOTAL BUSINESS-TYPE ACTIVITIES $ $ $ $ TOTAL PRIMARY GOVERNMENT :I> 1 Q23991 II Z :I> The accompanying notes are an integral part of these financial statements. Page 10

40 NET (EXPENSES) REVENUES AND CHANGES IN NET POSITION Governmental Business-Type Activities Activities Total $ (10,439,788) (426,684 ) (471,914 ) (797,941 ) (1,447,736) (738,705 ) (2,615,568 ) (920,596 ) (5,055 ) 52,863 (1,147,799 ) (33,519 ) (18,992,442) $ (10,439,788) (426,684 ) (471,914 ) (797,941 ) (1,447,736) (738,705 ) (2,615,568 ) (920,596 ) (5,055 ) 52,863 (1,147,799) (33,519) (18,992,442) $ 99,511 44, ,448 99,511 44, ,448 (18,847,994) GENERAL REVENUES Taxes Property Motor vehicle Utilities Revenue in lieu of taxes State and formula grants Earnings on investments Loss on disposal of fixed assets Other local revenues Total general revenues 2,760, , ,780 35,423 16,684,346 3,286 (527) 303,203 20,876, ,760, , ,780 35,423 16,684,346 3,346 (527) 303,203 20,876,895 Change in net position 1,884, ,508 2,028,901 Net position, July 1,2014, as previously reported Restatement for adoption of GASB 68 Net position, July 1,2014, as restated 15,696,988 (3,728,000 ) 11,968, , ,224 16,050,212 (3,728,000) 12,322,212 Net position, June 30, 2015 : :11 " $ Page 10

41 CORBIN INDEPENDENT SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2015 Other Total General Special Governmental Governmental Fund Revenue Funds Funds ASSETS AND RESOURCES Cash and cash equivalents $ 2,592,058 $ (138,682 ) $ (182,407) $ 2,270,969 Accounts receivable: Taxes - current 78,654 78,654 Accounts receivable 1,500 6,952 1,597,219 1,605,671 Intergovernmental - state 13,500 13,500 Intergovernmental - federal 281, ,992 TOTAL ASSETS AND RESOURCES $ $ $ $ 4250 Z86 LIABILITIES Accounts payable $ 79,500 $ 8,522 $ 61,574 $ 149,596 Construction retainage payable 69,042 69,042 Deferred revenue 155, ,240 TOTAL LIABILITIES 79, , , ,878 FUND BALANCES Restricted Sick leave payable 95,000 95,000 Future construction projects (BG-1) 1,284,196 1,284,196 Assigned Site based carry forward 21,911 21,911 Other 88,839 88,839 Unassigned 2,386,962 2,386,962 TOTAL FUND BALANCES 2,592,712 1,284,196 3,876,908 TOTAL LIABILITIES AND FUND BALANCES $ 2 6Z2 212 $ 163 Z62 $ $ 4 25Q Z86 The accompanying notes are an integral part of these financial statements. Page 11

42 CORBIN INDEPENDENT SCHOOL DISTRICT RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION June 30, 2015 Total fund balances - governmental funds $ 3,876,908 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported as assets in governmental funds. The cost of the assets is $66,316,043, and the accumulated depreciation is $19,186,954. Bond discounts, net of amortization are not current financial resources and therefore are reported as deferred outflows of resources in governmental funds. CERS contributions subsequent to the measurement date ($470,198) net of the net difference between projected and actual earnings on CERS pension plan investments are reported as deferred outflows (inflows) of resources in governmental funds. Bonds payable are not reported in the governmental fund balance sheet because they are not due and payable in the current period, but they are presented in the statement of net position. Note payable is not reported in the governmental fund balance sheet because it is not due and payable in the current period, but it is presented in the statement of net position. Accumulated sick leave is not reported in the governmental fund balance sheet because it is not due and payable in the current period, but it is presented in the statement of net position. Interest payable is not reported in the governmental fund balance sheet because it is not due and payable in the current period, but it is presented in the statement of net position. Insurance claims liability is not reported in the governmental fund balance sheet because it is not due and payable in the current period, but it is presented in the statement of net position. Net CERS pension liability is not reported in the governmental fund balance sheet because it is not due and payable in the current period, but it is presented in the statement of net position. 47,129,089 26,737 67,198 (32,083,795 ) (600,000 ) (469,162 ) (335,828 ) (143,766) 13,614,000 ) Total Net Position - Governmental Activities $ The accompanying notes are an integral part of these financial statements. Page 12

43 CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended June 30, 2015 General Special REVENUES Fund Revenue From local sources: Taxes Property $ 1,957,646 $ Motor vehicle 460,052 Utilities 630,780 Earnings on investments 2,482 Other local revenues 464, ,675 Intergovernmental - state 16,719,769 1,148,976 Intergovernmental - indirect federal 39,712 Intergovernmental - direct federal 2,297,497 TOTAL REVENUES 20275,124 3,583,148 EXPENDITURES Instruction 12,741,252 3,092,962 Support services: Student 400,548 30,000 Instructional staff 293, ,095 District administration 778,425 School administration 1,368,441 81,000 Business 755,048 Plant operations and maintenance 2,264,705 Student transportation 1,183,190 22,176 Other instructional 5,055 Land improvements Building acquisitions and construction Site improvement Community services activities 212,839 Payment of bonds and note Payment of interest TOTAL EXPENDITURES 19,789,724 3,608,072 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 485,400 (24924 ) OTHER FINANCING SOURCES (USES) Bond proceeds Bond discount Bond fees/issuance costs Operating transfers in 552,205 62,469 Operating transfers out (62,469) (37,545 ) TOTAL OTHER FINANCING SOURCES (USES) 489,736 24,924 NET CHANGES IN FUND BALANCES 975,136 FUND BALANCES, JULY 1, ,617,576 FUND BALANCES, JUNE 30, The accompanying notes are an integral part of these financial statements. Page 13

44 Other Governmental Funds Total Governmental Funds $ 802,626 $ 2,760, , , , ,358 2,248,249 20,116,994 39, ,882 2,499,379 3,253,561 27,111,833 15,834, , , ,425 1,449, ,048 2,264,705 1,205,366 5, , , , ,185 1,226,926 1,226, ,839 1,721,566 1,721,566 1,113,331 1,113,331 4, ,203,616 (1,552,259) (1,091,783 ) 3,021,000 3,021,000 (13,950) (13,950 ) (42,731 ) (42,731 ) 2,170,106 4,151,880 (2,684,766 ) (4,151,880 ) 2,449,659 2,964, ,400 1,872, ,796 2,004,372 ~ ~ Page 13

45 CORBIN INDEPENDENT SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended June 30, 2015 Total Net Change In Fund Balances per fund financial statements $ 1,872,536 Amounts reported for govern mental activities in the statement of activities are different because: Governmental funds report capital outlays to purchase or build capital assets as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as annual depreciation expense in the statement of activities. This is the amount by which the current year capital outlays exceeded the current year depreciation expense. Depreciation Capital outlays The difference between the proceeds related to the sale of capital assets, and the net book value of those assets disposed of during the year, is shown as a gain (loss) on disposal of capital assets on the statement of activities, while this is not reported in the governmental fu nds, as the costs of these capital assets were reported as an expenditure at the time of acquisition. Bond proceeds are reported as other financing sources in the governmental funds but are shown as an increase in noncurrent liabilities in the statement of net position. Repayment of bond and note principal is an expenditure in the governmental funds, but the repayment reduces liabilities in the statement of net position and does not result in an expense in the statement of activities. Interest payments are recognized as expenditures of current financial resources in the governmental fund financial statements, but are expensed as incurred in the statement of activities. Discounts on bonds are reported in the governmental funds as other financing sources. However, for governmental activities, those items are shown in the statement of net position and allocated over the term of the bond in the statement of activities. This is the amount by which the current year discount exceeded the current year amortization expense. Discount on bonds Amortization expense Compensated absences (sick leave) are measured by the amounts earned during the year in the statement of activities. In the governmental funds, expenditures for these amounts are measured by the amount of financial resources used (the amount paid). The difference in expenses reported in the statement of activities is a result of the change in accumulated sick leave. Payments on the insurance claims payable are recognized as expenditures of current financial resources in the governmental funds financial statement but are a reduction in the liability on the statement of net position. $ (1,516,752) 2,628,836 27,900 (4,738) 1,112,084 (527) (3,021,000) 1,721,566 (34,468 ) 23,162 (65,338 ) 95,180 The accompanying notes are an integral part of these financial statements. Page 14

46 CORBIN INDEPENDENT SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES (CONTINUED) Year Ended June 30,2015 CERS payments are recognized as expenditures of current financial resources in the governmental fund financial statements, but are shown as deferred (inflows) and outflows on the statement of net position. The amount that the current year expense and the effect on the net position is as follows: Deferred inflow - CERS Current year expense - CERS $ 470,198 (289,000) 181,198 Change In Net Position of Governmental Activities $ The accompanying notes are an integral part of these financial statements. Page 15

47 CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF NET POSITION PROPRIETARY FUNDS June 30, 2015 Food Day ASSETS Service Care Total CURRENT ASSETS Cash and cash equivalents $ 108,933 $ 200,591 $ 309,524 Materials and supplies inventory 47,492 47,492 Accounts receivable: Accounts receivable 12,030 12,030 Intergovernmental - federal 65,105 65,105 Total current assets 233, , ,151 NONCURRENT ASSETS Capital assets, net 83,677 83,677 TOTAL ASSETS 317, , ,828 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable 19, ,096 Total current liabilities 19, ,096 NET POSITION Net investment in capital assets 83,677 83,677 Restricted 213, , ,055 TOTAL NET POSITION :I :I 2QQ j The accompanying notes are an integral part of these financial statements. Page 16

48 CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS Year Ended June 30,2015 Food Day Service Care Total OPERATING REVENUES Tuition and fees $ $ 348,667 $ 348,667 Sales 377, ,170 TOTAL OPERATING REVENUES 377, , ,837 OPERATING EXPENSES Salaries 431, , ,714 Employee benefits 99,668 30, ,513 On-behalf payments 288,563 70, ,652 Purchased services 20,113 21,746 41,859 Supplies and materials 763,977 53, ,309 Property 4,743 5,100 9,843 Depreciation 22,250 22,250 Debt service and miscellaneous 1,237 1,342 2,579 TOTAL OPERATING EXPENSES 1,631, ,819 2,005,719 OPERATING INCOME (LOSS) (1,254,730) (25,152) (1,279,882) NON-OPERATING REVENUES (EXPENSES) Operating grants - federal 973, ,896 Operating grants - state 300,892 70, ,981 Donated commodities 79,453 79,453 Interest income TOTAL NON-OPERATING REVENUES (EXPENSES) 1,354,301 70,089 1,424,390 CHANGES IN NET POSITION 99,571 44, ,508 NET POSITION, JULY 1, , , ,224 NET POSITION, JUNE 30, 2015 $ :I> 2QQ 185 :I> 49Z Z32 The accompanying notes are an integral part of these financial statements. Page 17

49 CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year Ended June 30, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from tuition and fees $ Cash received from sales Cash payments for salaries and employee benefits Cash payments for purchased services Cash payments for supplies and materials Net cash provided (used) by operating activities Food Service 362,700 (819,580) (20,113) (759,770 ) (1,236,763) Day Care Total $ 348,667 $ 348, ,700 (292,299) (1,111,879) (21,746) (41,859) (59,368 ) (819,138) (24,746 ) (1,261,509) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of capital assets Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Receipt of interest Receipt of grants Receipt of donated commodities Net cash provided (used) by investing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, JULY 1,2014 (4,743 ) (4,743 ) 60 1,274,788 79,453 1,354, ,795 (3,862) (4,743) (4,743) 60 70,089 1,344,877 79,453 70,089 1,424,390 45, , , ,386 CASH AND CASH EQUIVALENTS, JUNE 30, 2015 $ lq8933 $ 2QQ 591 $ 3Q9524 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $(1,254,730 ) ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Depreciation 22,250 Changes in assets and liabilities: Accounts receivable (14,470 ) Inventory (1,852 ) Accounts payable 12,039 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $( ) $ (25,152 ) $(1,279,882 ) 22,250 (14,470 ) (1,852 ) ,445 $ (24 746) $( ) SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Donated commodities received from federal government On-behalf payments from state government $ $ The accompanying notes are an integral part of these financial statements. Page 18

50 CURRENT ASSETS Cash and cash equivalents Accounts receivable TOTAL ASSETS CURRENT LIABILITIES Accounts payable Due to students TOTAL LIABILITIES NET POSITION CORBIN INDEPENDENT SCHOOL DISTRICT STATEMENT OF NET POSITION FIDUCIARY FUND June 30, 2015 ASSETS LIABILITIES AND NET POSITION School Activity Funds $ 202, ,717 $ 3, , ,717 The accompanying notes are an integral part of these financial statements. Page 19

51 CORBIN INDEPENDENT SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies that affect the significant elements of the Corbin Independent School District are summarized as follows: REPORTING ENTITY The Corbin Independent Board of Education (Board), a five-member group, is the level of government which has oversight responsibilities over all activities related to public elementary and secondary school education within the jurisdiction of the Corbin Independent School District (District). The District receives funding from local, state and federal government sources and must comply with the commitment requirements of these funding source entities. However, the District is not included in any other governmental "reporting entity" as defined by the Governmental Accounting Standards Board (GAS B) pronouncement since Board members are elected by the public and have decision making authority, the power to designate management, the responsibility to develop policies which may influence operations and primary accountability for fiscal matters. The District, for financial purposes, includes all of the funds and account groups relevant to the operation of the Corbin Independent School District. The financial statements presented herein do not include funds of groups and organizations, which although associated with the school system, have not originated within the District itself such as Band Boosters, Parent-Teacher Associations, etc. The financial statements of the District include those of separately administered organizations that are controlled by or dependent on the District. Control or dependence is determined on the basis of budget adoption, funding and appointment of the respective governing board. Based on the foregoing criteria, the financial statement of the following organization is included in the accompanyi ng financial statements: CORBIN INDEPENDENT SCHOOL DISTRICT FINANCE CORPORATION The Corbin Independent Board of Education resolved to authorize the establishment of the Corbin Independent School District Finance Corporation (a non-profit, non-stock, public and charitable corporation organized under the School Board Act and KRS 273 and KRS Section ) as an agency of the District for financing the costs of school building facilities. The Board members of the Corbin Independent Board of Education also comprise the corporation's Board of Directors. BASIS OF PRESENTATION Government-Wide Financial Statements: The statement of net position and the statement of activities display information about the District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statements distinguish between governmental and business-type activities of the District. The government-wide financial statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of proprietary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements of governmental funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the District and for each function or program of the governmental activities of the District. Direct expenses are those that are specifically associated with a service, Page 20

52 CORBIN INDEPENDENT SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) program or department and therefore clearly identifiable to a particular function. Program revenues include amounts paid by the recipient of goods or services offered by the program and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. All taxes and revenues not classified as program revenues are presented as general revenues of the District, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each business segment or governmental function is self-financing or draws from the general revenues of the District. Fund Financial Statements: Fund financial statements report detailed information about the District. Their focus is on major funds rather than reporting funds by type. Each major fund is presented in a separate column, and all nonmajor funds are aggregated into one column. Fiduciary funds are reported by fund type. The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. All proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations of these funds are included on the balance sheet. Proprietary fund's operating statements present increases (i.e., revenues) and decreases (i.e., expenses) in total net position. The District has the following funds: I. Governmental Fund Types (A) (B) (C) The General Fund is the main operating fund of the District. It accounts for financial resources used for general types of operations. This is a budgeted fund, and any fund balances are considered as resources available for use. This is a major fund of the District. The Special Revenue (Grant) Funds account for proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to disbursements for specified purposes. It includes federal financial programs where unused balances are returned to the grantor at the close of the specified project periods as well as the state grant programs. Project accounting is employed to maintain integrity for the various sources of funds. The separate projects of federally funded grant programs are identified in the Schedule of Expenditures of Federal Awards included in this report. This is a major fund of the District. Capital Project Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities and equipment (other than those financed by the Proprietary Fund). 1. The Support Education Excellence in Kentucky (SEEK) Capital Outlay Fund receives those funds designated by the state as Capital Outlay funds and is restricted for use in financing projects identified in the District's facility plan. Page 21

53 CORBIN INDEPENDENT SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2. The Facility Support Program of Kentucky (FSPK) accounts for funds generated by the building tax levy required to participate in the School Facilities Construction Commission's construction funding and state matching funds, where applicable. Funds may be used for projects identified in the District's facility plan. 3. The Construction Fund accounts for proceeds from sales of bonds and other revenues to be used for authorized construction. (D) Debt Service Funds The Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest and related costs; and for the payment of interest on general obligation notes payable, as required by Kentucky Law. II. Proprietarv Fund Types (Enterprise Fund) (A) The Food Service Fund is used to account for school food service activities, including the National School Lunch Program, which is conducted in cooperation with the U.S. Department of Agriculture (USDA). Amounts have been recorded for in-kind contributions of commodities from the USDA. The Food Service Fund is a major fund. The District applies all GASB pronouncements to proprietary funds as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. (B) The Day Care Fund is used to account for the day care operations of the District. III. Fiduciary Fund Type (Agency Fund) (A) The Agency fund accounts for activities of student groups and other types of activities requiring clearing accounts. This fund is accounted for in accordance with the Uniform Program of Accounting for School Activity Funds. BASIS OF ACCOUNTING Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. The fund financial statements are prepared using either modified accrual for governmental funds or accrual basis for proprietary and fiduciary funds. Revenues, Exchange and Nonexchange Transactions: Revenues resulting from exchange transactions, in which each party receives essentially equal value, are recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenues are recognized in the fiscal year when they become both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current fiscal year. The available period of the District is sixty days after year end. Page 22

54 CORBIN INDEPENDENT SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Nonexchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been met. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the fiscal year when use is first permitted, matching requirements, in which the District must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. On the modified accrual basis, revenue from nonexchange transactions must also be available before it can be recog n ized. Deferred Revenue: The District reports deferred revenue on its statement of net position and governmental funds balance sheet. In both the government-wide and governmental fund statements, grants that are "intended to finance" future periods are reported as deferred revenue. In subsequent periods, the liability for deferred revenue is removed from the statement of net position and governmental funds balance sheet and revenue is recognized. Expenditures/Expenses: On the accrual basis of accounting, expenses are recorded at the time they are incurred. The measurement focus of governmental fund accounting is on a flow of current financial resources. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred except for (1) principal and interest on general long-term debt, which is recorded when due, and (2) the costs of accumulated unpaid vacation and sick leave, which are reported as fund liabilities in the period in which they will be liquidated with available financial resources rather than in the period earned by employees. CASH AND INVESTMENTS The District maintains a cash and investment pool used by all funds. The cash and investment pool has the same characteristics as demand deposits. Each fund type's portion of this pool is displayed in the financial statements as cash and cash equivalents in that fund. The District utilizes a financial institution to service bonded debt as principal and interest payments come due. The monies are either maintained in a central bank account or used to purchase legal investments. It is the policy of the District to value investment contracts and money market investments with a maturity of one year or less at the time of purchase at cost or amortized cost. Investment contracts and money market investments that have a remaining maturity of greater than one year at the time of purchase are reported at fair value. The Kentucky Revised Statutes authorize the District to invest in United States and State of Kentucky bonds, notes and other obligations; bank certificates of deposit; bankers' acceptances; and commercial paper notes rated prime that are issued by United States corporations. It is the District's policy to invest in all of the above types of investments. Under existing Kentucky statutes, all investment earnings accrue to the general and food service funds except certain trust funds and those funds individually authorized by Board resolution. PREPAID ASSETS/EXPENDITURES Payments made that will benefit periods beyond June 30, 2015 are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of the purchase and an expenditure/expense is reported in the year in which services are consumed. INVENTORY On government-wide financial statements, inventories are presented at cost or using the first in, first out (FIFO) method and are expensed when used. Page 23