Official Statement $20,625,000 GIBSON COUNTY SPECIAL SCHOOL DISTRICT (TENNESSEE)

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1 New Issue Book-Entry Only Official Statement Rating: Standard & Poor s AA (BAM Insured) Standard & Poor s A (Underlying) (See "RATING" herein) In the opinion of Bond Counsel, based on existing law and assuming compliance with certain tax covenants of the District, interest on the Bonds will be excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings of certain corporations for purposes of alternative minimum tax on corporations. For an explanation of certain tax consequences under federal law which may result from the ownership of the Bonds, see the discussion under the heading "Tax Matters" herein. Under existing law, the Bonds and the income therefrom will be exempt from all state, county and municipal taxation in the State of Tennessee, except inheritance, transfer and estate taxes, and Tennessee franchise and excise taxes. (See "Tax Matters" herein). Dated: Date of Delivery $20,625,000 GIBSON COUNTY SPECIAL SCHOOL DISTRICT (TENNESSEE) SCHOOL REFUNDING BONDS, SERIES 2015 (GENERAL OBLIGATION LIMITED TAX) (NON-BANK QUALIFIED) Due: April 1, as shown below Gibson County Special School District (Tennessee) (the "District"), a governmental entity created by the Tennessee General Assembly and a local education agency under Title 49, Tennessee Code Annotated relating to the administration of public school systems, will issue its $20,625,000 School Refunding Bonds, Series 2015 (the "Bonds") in fully registered form, without coupons, and, when issued, the Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository of the Bonds. Individual purchases of beneficial ownership interest in the Bonds will be made in book-entry form only, in denominations of $5,000 or multiples thereof through DTC Participants. Interest on the Bonds will be payable semiannually on April 1 and October 1 of each year, commencing on April 1, 2015, calculated on the basis of a 360-day year consisting of twelve 30-day months. Payments of principal of and interest on the Bonds are to be made to purchasers by DTC through the Participants (as such term is herein defined). Purchasers will not receive physical delivery of Bonds purchased by them. See "The Bonds-Book-Entry-Only System." Principal of and interest on the Bonds are payable by the District to the corporate trust office of U.S. Bank National Association, Nashville, Tennessee, as registration and paying agent (the "Registration Agent"). The Bonds are subject to optional redemption on or after April 1, 2024 See The Bonds Optional Redemption herein. The Bonds are payable on April 1 of each year as follows: Maturity (April 1) Principal Interest Maturity Rate Yield CUSIP * (April 1) Principal Interest Rate Yield CUSIP * 2016 $100, % 0.400% DW $1,660, % 2.150% EE , DX ,735, c EF , DY ,785, c EG , DZ ,835, c EH ,385, EA , EK ,495, EB , EL ,500, EC , EM ,580, ED , EN2 $3,635, % Term Bond due April 1, 2029, Yield at Par, CUSIP * EJ1 c = Yield to call date of April 1, 2024 The Bonds are payable primarily from and secured by the pledge of a continuing annual tax levied on all taxable property within the boundaries of the District, the rate of which has been established by the General Assembly of the State of Tennessee pursuant to Chapter 62 of the 1981 Private Acts of the State of Tennessee, as most recently amended by Chapter 5 of the 2013 Private Acts of the State of Tennessee, as such rate may hereafter be adjusted from time to time by the General Assembly, subject to the prior pledge of such revenues in favor of the Prior Lien Bonds (as such term is defined herein.) In the event the revenues derived from said tax are insufficient to pay principal of and interest on the Bonds when due, any such deficiency shall be paid from all other legally available funds of the District, subject to prior pledges in favor of the Prior Lien Bonds, and as more fully described herein. The Bonds are not obligations of the State of Tennessee or any of its political subdivisions, and the purchasers shall have no recourse to the taxing power of any of the foregoing. In the event of any deficiency or default in payment of principal of or interest on the Bonds, the General Assembly of the State of Tennessee has the authority and power to increase the tax rate and provide other sources for the payment of said principal and interest but has not undertaken any obligation to do so. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. The Bonds are offered when, as and if issued, subject to the approval of the legality by Bass, Berry & Sims PLC, Nashville, Tennessee, Bond Counsel, whose opinion will be delivered with the Bonds. Certain legal matters will be passed upon for the District by Bill R. Barron, Esq., Counsel to the District. Stephens Inc. is serving as Municipal Advisor to the District. The Bonds, in book-entry form, are expected to be available for delivery through Depository Trust Company in New York, New York, on or about January 15, December 17, 2014 * These CUSIP numbers have been assigned by Standard & Poor's CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc., and are included solely for convenience of the Bondholders. The District is not responsible for the selection or use of these CUSIP numbers, nor is any representation made as to their correctness on the Bonds or as indicated herein.

2 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the same may be supplemented or amended (collectively, the "Official Statement") by Gibson County Special School District (the "District") from time to time, is an Official Statement with respect to the Bonds described herein that is deemed final by the District as of the date hereof (or of any such supplement or amendment). No dealer, broker, salesman or other person has been authorized by the District or by Stephens Inc. (the "Municipal Advisor") to give any information or make any representations other than those contained in this Official Statement and, if given or made, such information or representations with respect to the District or the Bonds must not be relied upon as having been authorized by the District or the Municipal Advisor. This Official Statement does not constitute an offer to sell, or solicitation of an offer to buy, any securities other than the securities offered hereby to any person in any jurisdiction where such offer or solicitation of such offer would be unlawful. This Official Statement should be considered in its entirety and no one factor should be considered more or less important than any other by reason of its position in this Official Statement. Where statutes, reports or other documents are referred to herein, reference should be made to such statutes, reports or other documents for more complete information regarding the rights and obligations of parties thereto, facts and opinions contained therein and the subject matter thereof. The information and expressions of opinion in this Official Statement are subject to change without notice and neither the delivery of this Official Statement nor any sale made under it shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date as of which information is given in this Official Statement. Build America Mutual Assurance Company ( BAM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading Bond Insurance and Appendix D Specimen Municipal Bond Insurance Policy. In making an investment decision investors must rely on their own examination of the District and the terms of the offering, including the merits and risks involved. No registration statement relating to the Bonds has been filed with the Securities and Exchange Commission or with any state securities agency. The Bonds have not been approved or disapproved by the Commission or any state securities agency, nor has the Commission or any state securities agency passed upon the accuracy or adequacy of this Official Statement. Any representation to the contrary is a criminal offense.

3 The material contained herein has been obtained from sources believed to be current and reliable, but the accuracy thereof is not guaranteed. The Official Statement contains statements which are based upon estimates, forecasts, and matters of opinion, whether or not expressly so described, and such statements are intended solely as such and not as representations of fact. All summaries of statutes, resolutions, and reports contained herein are made subject to all the provisions of said documents. The Official Statement is not to be construed as a contract with the purchasers of any of Gibson County Special School District (Tennessee) School Refunding Bonds, Series Table of Contents Officials... iv Summary Statement... v Official Statement... 1 Introduction... 1 Introduction... 1 The Bonds... 2 Description... 2 Optional Redemption... 3 Mandatory Redemption... 3 Notice of Redemption... 4 Security and Sources of Payment... 4 Pledged Revenues Compared to Debt Service Requirements... 5 Rating... 5 Discharge and Satisfaction of Bonds... 6 Book-Entry-Only System... 7 Plan of Financing... 8 Verification of Mathematical Computations... 9 Sources and Uses of Funds... 9 Bond Insurance... 9 Continuing Disclosure Annual Report Reporting of Significant Events Termination of Reporting Obligation Amendment/Waiver Default Future Issues Litigation Approval of Legal Proceedings Tax Matters General Bond Premium Original Issue Discount Information Reporting and Backup Withholding State Taxes Changes in Federal and State Tax Law Municipal Advisor Underwriting Miscellaneous Certificate of Chairman... 18

4 Form of Legal Opinion... Appendix A Demographics and Financial Information Related to the District... Appendix B Comprehensive Annual Financial Report for Gibson County Special School District for the Year Ended June 30, Appendix C Specimen Municipal Bond Insurance Policy... Appendix D

5 OFFICIALS GIBSON COUNTY SPECIAL SCHOOL DISTRICT, TENNESSEE Chairman Board Member Board Member Board Member Board Member Board Member Board Member Board of Trustees Treva Maitland Benny Boals Tom Lannon Charles Scott Steven Tate Eddie Watkins Dana Welch Director of Schools and Secretary to the Board of Trustees Eddie Pruett Bond Counsel to the District Bass, Berry & Sims PLC Nashville, Tennessee Registration Agent and Paying Agent and Escrow Agent U.S. Bank National Association Nashville, Tennessee Auditors Cowart Reese Sargent, CPA s, P.C. Martin, Tennessee Municipal Advisor Stephens Inc. Nashville, Tennessee Verification Agent Grant Thornton, LLC Minneapolis, Minnesota Underwriter Robert W. Baird & Co., Inc. Red Bank, New Jersey Bond Insurer Build America Mutual Assurance Company New York, New York iv

6 Summary Statement This Summary is expressly qualified by the entire Official Statement, which should be viewed in its entirety by potential investors. ISSUER... Gibson County Special School District (Tennessee) (the "District"). ISSUE... $20,625,000 School Refunding Bonds, Series 2015 (the "Bonds"). PURPOSE... DATED DATE... The Bonds are being issued to provide funds for (A) refunding the District s outstanding School Bonds, Series 2005, dated August 26, 2005, having a final maturity of April 1, 2025, with mandatory annual principal payments, School Bonds, Series 2007, dated July 27, 2007, maturing April 1, 2018 through April 1, 2027, inclusive, April 1, 2029, April 1, 2031 and April 1, 2033; and School Bonds, Series 2008, dated December 4, 2008, maturing April 1, 2019 through April 1, 2026, inclusive and April 1, 2029 (collectively, the Outstanding Bonds ); and (B) the payment of costs of issuance and sale of the Bonds. Date of Delivery of Bonds. INTEREST DUE... Each April 1 and October 1, commencing April 1, PRINCIPAL DUE... April 1, commencing April 1, 2016 through April 1, 2027, inclusive, and April 1, 2029 through April 1, 2033, inclusive. SETTLEMENT DATE... January 15, OPTIONAL REDEMPTION... MANDATORY REDEMPTION... SECURITY... Bonds maturing April 1, 2025 and thereafter shall be subject to redemption prior to maturity at the option of the District on April 1, 2024 and thereafter, as a whole or in part, at any time, at the redemption prices described herein. Bonds maturing April 1, 2029 are subject to mandatory redemption on the dates and in the amounts described herein. The Bonds are payable primarily from and secured by the pledge of a continuing annual tax levied on all taxable property within the boundaries of the District the rate of which has been set by the General Assembly, as such rate may hereafter be adjusted from time to time by the General Assembly (the Debt Service Tax ), subject to the prior pledge of such tax revenues in favor of the District s School Refunding Bonds, Series 2001, dated September 1, 2001; School Refunding and Improvement Bonds, Series 2009, dated December 9, 2009; School Bonds, Series 2012, dated May 30, 2012; School Bonds, Series 2013, dated May 29, 2013, and any unrefunded Outstanding Bonds (as such term is defined above) (the Prior Lien Bonds ). See Appendix B Major Taxes and Revenues Funding District Schools Property Tax for more detailed information regarding the Debt Service Tax. The District has additionally covenanted to take no action to rescind or reduce the Debt Service Tax or seek to have it rescinded or reduced or the legislation authorizing such Debt Service Tax repealed or amended in such a way as to abolish or reduce the annual levy to an v

7 amount less than that necessary to maintain funds sufficient to pay annual principal and interest requirements on the Bonds. If the District has a deficiency or possibly a default in payment of principal of or interest on the Bonds, the General Assembly has the authority and power to increase the rate of the Debt Service Tax and to provide other sources for the payment of said principal and interest but has not undertaken any obligation to do so. In the event the revenues derived from the Debt Service Tax are insufficient to pay the principal of and interest on the Bonds when due, the Bonds are additionally payable from all other legally available funds of the District, subject to prior pledges in favor of the Prior Lien Bonds, including without limitation the following: 1. Funds received by the District under the Tennessee Basic Education Program (the BEP ) available to be used for capital outlay expenditures as set forth in Sections et seq., Tennessee Code Annotated and related sections. 2. The District s share of the Local Option Sales and Use Tax now or hereafter levied and collected in the County and distributed for school purposes pursuant to Section et seq., Tennessee Code Annotated. The Bonds are not obligations of the State of Tennessee, Gibson County or any of their political subdivisions, and the purchasers shall have no recourse to the taxing power of any of the foregoing. The power of the District to levy and/or collect any taxes is authorized only by special legislation of the General Assembly of the State of Tennessee. RATING... The Bonds have been rated "AA" (BAM Insured) and "A" (Underlying) by Standard & Poor s Ratings Services, a Division of McGraw-Hill Companies ( S&P ) based on documents and other information provided by the District. The rating reflects only the view of S&P and neither the District nor the Underwriter makes any representation as to the appropriateness of such rating. There is no assurance that such rating will continue for any given period of time or that it will not be lowered or withdrawn entirely by S&P if in its judgment circumstances so warrant. Any such downward change in or withdrawal of the rating may have an adverse effect on the secondary market price of the Bonds. Any explanation of the significance of the rating may be obtained from S&P. See "Bond Insurance" and "Ratings" herein. BOND INSURANCE... TAX MATTERS... Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as Appendix D to this Official Statement. In the opinion of Bond Counsel, based on existing law and vi

8 assuming compliance with certain tax covenants of the District, interest on the Bonds will be excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings of certain corporations for purposes of alternative minimum tax on corporations. For an explanation of certain tax consequences under federal law which may result from the ownership of the Bonds, see the discussion under the heading "Tax Matters" herein. Under existing law, the Bonds and the income therefrom will be exempt from all state, county and municipal taxation in the State of Tennessee, except inheritance, transfer and estate taxes, and Tennessee franchise and excise taxes. (See "Tax Matters" herein). MUNICIPAL ADVISOR... REGISTRATION AND PAYING AGENT AND ESCROW AGENT.. VERIFICATION AGENT... UNDERWRITER... Stephens Inc., Nashville, Tennessee. U.S. Bank National Association, Nashville, Tennessee. Grant Thornton, LLC, Minneapolis, Minnesota. Robert W. Baird & Co., Inc., Red Bank, New Jersey. vii

9 Official Statement Gibson County Special School District (Tennessee) $20,625,000 School Refunding Bonds, Series 2015 (General Obligation Limited Tax) (Non-Bank Qualified) Introduction The Official Statement, including the cover page and appendices hereto, is furnished in connection with the issuance by Gibson County Special School District (the "District") of $20,625,000 School Refunding Bonds, Series 2015 (the "Bonds"). The Bonds are issuable under and in full compliance with the constitution and statutes of the State of Tennessee, including Chapter 62 of the 1981 Private Acts of the State of Tennessee, as amended (the Act ), and pursuant to and subject to the terms and conditions of a resolution adopted by the Board of Trustees of the District on November 13, 2014 (the "Resolution") authorizing the execution, terms, issuance and sale of the Bonds. This Official Statement includes descriptions of, among other matters, the Bonds, the Resolution, and the District. Such descriptions and information do not purport to be comprehensive or definitive. All references to the Resolution are qualified in their entirety by reference to the definitive document, including the form of the Bonds included in the Resolution. During the period of the offering of the Bonds, copies of the Resolution and any other documents described herein or in the Resolution may be obtained from the District. After delivery of the Bonds, copies of such documents will be available for inspection at the Gibson County Special School District, 130 Trenton Highway, Dyer, Tennessee or Stephens Inc., One American Center, 3100 West End Avenue, Suite 630, Nashville, Tennessee 37203, phone: (615) or fax: (615) After delivery of the Bonds, copies of such documents will be available for inspection at the District s office. All capitalized terms used in this Official Statement and not otherwise defined herein have the meanings set forth in the Resolution. The Issuer The District was created in 1981 by private act of the Tennessee General Assembly (the General Assembly ) as a local education agency to provide kindergarten through twelfth grade education to children within its boundaries. The District is located in Gibson County, Tennessee (the County ) in the western division of the state approximately 15 miles north of Jackson, Tennessee. The District offers a program of public education for approximately 3,722 students as a local educational agency under the general education laws of the State codified in Title 49, Tennessee Code Annotated and the regulations of the State Board of Education. For additional information regarding the District and the County, see Appendix B General and Financial Information Related to the District. 1

10 The Bonds Description The Bonds are being issued for the purpose of providing funds for (A) refunding the District s outstanding School Bonds, Series 2005, dated August 26, 2005, having a final maturity of April 1, 2025, with mandatory annual principal payments, School Bonds, Series 2007, dated July 27, 2007, maturing April 1, 2018 through April 1, 2027, inclusive, April 1, 2029, April 1, 2031 and April 1, 2033; and School Bonds, Series 2008, dated December 4, 2008, maturing April 1, 2019 through April 1, 2026, inclusive and April 1, 2029 (collectively, the Outstanding Bonds ); and (B) the payment of costs of issuance and sale of the Bonds. The Bonds will be issued as fully registered book-entry, without coupons, in denominations of $5,000 or any integral multiple thereof. The Bonds will be dated the date of delivery. Interest on the Bonds, at the rates per annum set forth on the cover page and calculated on the basis of a 360-day year, consisting of twelve 30-day months, will be payable semiannually on April 1 and October 1 of each year (herein an "Interest Payment Date"), commencing April 1, The Bonds will mature on the dates and in the amounts set forth on the cover page. The Bonds will be initially registered only in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Bonds. U.S. Bank National Association, Nashville, Tennessee (the "Registration Agent") will make all interest payments with respect to the Bonds on each Interest Payment Date directly to the registered owners as shown on the Bond registration records maintained by the Registration Agent as of the close of business on the fifteenth day of the month next preceding the Interest Payment Date (the "Regular Record Date") by check or draft mailed to such owners at their addresses shown on said registration records, without, except for final payment, the presentation or surrender of such registered Bonds, and all such payments shall discharge the obligations of the District in respect of such Bonds to the extent of the payments so made. Payment of principal of the Bonds shall be made upon presentation and surrender of such Bonds to the Registration Agent as the same shall become due and payable. In the event the Bonds are no longer registered in the name of DTC or its successor or assigns, if requested by the Owner of at least $1,000,000 in aggregate principal amount of the Bonds, payment of interest on such Bonds shall be paid by wire transfer to a bank within the continental United States or deposited to a designated account if such account is maintained with the Registration Agent and written notice of any such election and designated account is given to the Registration Agent prior to the record date. Any interest on any Bond which is payable but is not punctually paid or duly provided for on any interest payment date (hereinafter "Defaulted Interest") shall forthwith cease to be payable to the registered owner on the relevant Regular Record Date; and, in lieu thereof, such Defaulted Interest shall be paid by the District to the persons in whose names the Bonds are registered at the close of business on a date (the "Special Record Date") for the payment of such Defaulted Interest, which shall be fixed in the following manner: The District shall notify the Registration Agent in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment, and at the same time the District shall deposit with the Registration Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Registration Agent for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest. Thereupon, not less than ten (10) days after the receipt by the Registration Agent of the notice of the proposed payment, the Registration Agent shall fix a Special Record Date for the payment of such Defaulted Interest which date shall not be more than fifteen (15) nor less than ten (10) days prior to the date of the proposed payment to the 2

11 registered owners. The Registration Agent shall promptly notify the District of such Special Record Date and, in the name and at the expense of the District, not less than ten (10) days prior to such Special Record Date, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each registered owner at the address thereof as it appears in the Bond registration records maintained by the Registration Agent as of the date of such notice. Nothing contained in the Resolution or in the Bonds shall impair any statutory or other rights in law or in equity of any registered owner arising as a result of the failure of the District to punctually pay or duly provide for the payment of principal of and interest on the Bonds when due. Optional Redemption Bonds maturing on or before April 1, 2024 shall mature without option of prior redemption. Bonds maturing April 1, 2025 and thereafter shall be subject to redemption prior to maturity at the option of the District on and after April 1, 2024, as a whole or in part at any time at the redemption price of par plus accrued interest to the redemption date. If less than all the Bonds shall be called for redemption, the maturities to be redeemed shall be selected by the Board of Trustees of the District, in its discretion. If less than all of the Bonds within a single maturity shall be called for redemption, the interests within the maturity to be redeemed shall be selected as follows: (i) (ii) if the Bonds are being held under a Book-Entry System by DTC, or a successor Depository, the Bonds to be redeemed shall be determined by DTC, or such successor Depository, by lot or such other manner as DTC, or such successor Depository, shall determine; or if the Bonds are not being held under a Book-Entry System by DTC, or a successor Depository, the Bonds within the maturity to be redeemed shall be selected by the Registration Agent by lot or such other random manner as the Registration Agent in its discretion shall determine. Mandatory Redemption Subject to the credit hereinafter provided, the District shall redeem Bonds maturing April 1, 2029 on the redemption dates set forth below opposite the maturity dates, in aggregate principal amounts equal to the respective dollar amounts set forth below opposite the respective redemption dates at a price of par plus accrued interest thereon to the date of redemption. DTC, as securities depository for the Bonds, or such Person as shall then be serving as the securities depository for the Bonds, shall determine the interest of each Participant in the Bonds to be redeemed using its procedures generally in use at that time. If DTC, or another securities depository is no longer serving as securities depository for the Bonds, the Bonds to be redeemed within a maturity shall be selected by the Registration Agent by lot or such other random manner as the Registration Agent in its discretion shall select. The dates of redemption and principal amount of Bonds to be redeemed on said dates are as follows: Principal Amount Final Redemption of Bonds Maturity Date Redeemed April 1, 2029 April 1, 2028 $1,835,000 April 1, 2029* 1,800,000 *Final Maturity 3

12 At its option, to be exercised on or before the forty-fifth (45th) day next preceding any such redemption date, the District may (i) deliver to the Registration Agent for cancellation Bonds to be redeemed, in any aggregate principal amount desired, and/or (ii) receive a credit in respect of its redemption obligation under this mandatory redemption provision for any Bonds of the maturity to be redeemed which prior to said date have been purchased or redeemed (otherwise than through the operation of this mandatory sinking fund redemption provision) and canceled by the Registration Agent and not theretofore applied as a credit against any redemption obligation under this mandatory sinking fund provision. Each Bond so delivered or previously purchased or redeemed shall be credited by the Registration Agent at 100% of the principal amount thereof on the obligation of the District on such payment date and any excess shall be credited on future redemption obligations in chronological order, and the principal amount of Bonds to be redeemed by operation of this mandatory sinking fund provision shall be accordingly reduced. The District shall on or before the forty-fifth (45th) day next preceding each payment date furnish the Registration Agent with its certificate indicating whether or not and to what extent the provisions of clauses (i) and (ii) of this subsection are to be availed of with respect to such payment and confirm that funds for the balance of the next succeeding prescribed payment will be paid on or before the next succeeding payment date. Notice of Redemption Notice of call for redemption, whether optional or mandatory, shall be given by the Registration Agent not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption by sending an appropriate notice to the registered owners of the Bonds to be redeemed by first-class mail, postage prepaid, at the addresses shown on the Bond registration records of the Registration Agent as of the date of the notice; but neither failure to mail such notice nor any defect in any such notice so mailed shall affect the sufficiency of the proceedings for the redemption of any of the Bonds for which proper notice was given. The notice may state that it is conditioned upon the deposit of moneys in an amount equal to the amount necessary to affect the redemption with the Registration Agent no later than the redemption date ( Conditional Redemption ). As long as DTC, or a successor Depository, is the registered owner of the Bonds, all redemption notices shall be mailed by the Registration Agent to DTC, or such successor Depository, as the registered owner of the Bonds, as and when above provided, and neither the District nor the Registration Agent shall be responsible for mailing notices of redemption to DTC Participants or Beneficial Owners. Failure of DTC, or any successor Depository, to provide notice to any DTC Participant will not affect the validity of such redemption. From and after any redemption date, all Bonds called for redemption shall cease to bear interest if funds are available at the office of the Registration Agent for the payment thereof and if notice has been duly provided as set forth in the Resolutions. In the case of a Conditional Redemption, the failure of the District to make funds available in part or in whole on or before the redemption date shall not constitute an event of default, and the Registration Agent shall give immediate notice to the Depository or the affected Bondholders that the redemption did not occur and that the Bonds called for redemption and not so paid remain Outstanding. Security and Sources of Payment The Bonds are payable primarily from and secured by the pledge of a continuing annual tax levied on all taxable property within the boundaries of the District the rate of which has been set by the General Assembly, as such rate may hereafter be adjusted from time to time by the General Assembly (the Debt Service Tax ), subject to the prior pledge of such tax revenues in favor of the District s School Refunding Bonds, Series 2001; School Refunding and Improvement Bonds, Series 2009; School Bonds, Series 2012, dated May 30, 2012 and School Bonds, Series 2013, dated May 29, 2013 and any unrefunded Outstanding Bonds (the Prior Lien Bonds ). See Appendix B Major Taxes and Revenues Funding District Schools Property Tax for more detailed information regarding the Debt Service Tax. The District has additionally covenanted to take no action to rescind or reduce the Debt Service Tax or seek to have it rescinded or reduced or the legislation authorizing such Debt Service Tax repealed or amended in 4

13 such a way as to abolish or reduce the annual levy to an amount less than that necessary to maintain funds sufficient to pay annual principal and interest requirements on the Bonds. If the District has a deficiency or possibly a default in payment of principal of or interest on the Bonds, the General Assembly has the authority and power to increase the rate of the Debt Service Tax and to provide other sources for the payment of said principal and interest but has not undertaken any obligation to do so. In the event the revenues derived from the Debt Service Tax are insufficient to pay the principal of and interest on the Bonds when due, the Bonds are additionally payable from all other legally-available funds of the District, subject to prior pledges in favor of the Prior Lien Bonds, including without limitation the following: 1. Funds received by the District under the Tennessee Basic Education Program (the BEP ) available to be used for capital outlay expenditures as set forth in Sections et seq., Tennessee Code Annotated and related sections. 2. The District s share of the Local Option Sales and Use Tax now or hereafter levied and collected in the County and distributed for school purposes pursuant to Section et seq., Tennessee Code Annotated. The Bonds are not obligations of the State of Tennessee, Gibson County or any of their political subdivisions, and the purchasers shall have no recourse to the taxing power of any of the foregoing. The power of the District to levy and/or collect any taxes is authorized only by special legislation of the General Assembly of the State of Tennessee. Pledged Revenues Compared to Debt Service Requirements For information regarding the historic debt service coverage for the District, see Appendix B Security Description and Estimates According to State Authorization. Rating Standard & Poor s Ratings Services, a Division of The McGraw-Hill Companies ("S&P") is expected to assign their municipal bond rating of "AA" to the Bonds with the understanding that upon delivery of the Bonds, a policy guaranteeing the payment when due of the principal of and interest on the Bonds will be issued by Build America Mutual Assurance Company. Such rating reflects only the views of such organization and explanations of the significance of such rating should be obtained from such agency. Additionally, S&P has assigned the Bonds an underlying rating of "A". An explanation of the significance of such rating may be obtained from S&P. This rating is not a recommendation to buy, sell or hold the Bonds. Generally, rating agencies base their ratings on information and materials furnished to the agencies and on investigations, studies and assumptions by the agencies. There is no assurance that this rating will be maintained for any given period of time or that this rating will not be revised downward or withdrawn entirely by S&P if, in such agency s judgment, circumstances so warrant. Any such downward revision or withdrawal of this rating may have an adverse effect on the market price of the Bonds. Neither the District nor the Underwriter has undertaken any responsibility to oppose any revision or withdrawal of the rating. Due to the ongoing uncertainty regarding the economy of the United States of America, including, without limitation, matters such as the future political uncertainty regarding the United States debt limit, obligations issued by state and local governments, such as the Bonds, could be subject to a rating downgrade. Additionally, if a significant default or other financial crisis should occur in the affairs of the 5

14 United States or of any of its agencies or political subdivisions, then such event could also adversely affect the market for and ratings, liquidity, and market value of outstanding debt obligations, including the Bonds. Discharge and Satisfaction of Bonds The Bonds may be discharged and defeased in any one or more of the following ways: (a) By depositing sufficient funds as and when required with the Registration Agent, to pay the principal of and interest on such Bonds as and when the same become due and payable; (b) By depositing or causing to be deposited with any trust company or financial institution whose deposits are insured by the Federal Deposit Insurance Corporation or similar federal agency and which has trust powers ("an Agent"; which Agent may be the Registration Agent) in trust or escrow, on or before the date of maturity or redemption, sufficient money or Defeasance Obligations, as hereafter defined, the principal of and interest on which, when due and payable, will provide sufficient moneys to pay or redeem such Bonds and to pay interest thereon when due until the maturity or redemption date (provided, if such Bonds are to be redeemed prior to maturity thereof, proper notice of such redemption shall have been given or adequate provision shall have been made for the giving of such notice); (c) By delivering such Bonds to the Registration Agent, for cancellation by it; and if the District shall also pay or cause to be paid all other sums payable under the Resolution, or make adequate provision therefor, and by resolution of the Governing Body instruct any such Escrow Agent to pay amounts when and as required to the Registration Agent for the payment of principal of and interest on such Bonds when due, then such Bonds shall be discharged and satisfied and all covenants, agreements and obligations of the District to the holders of such Bonds shall be fully discharged and satisfied. If the District pays and discharges the indebtedness evidenced by any of the Bonds in the manner provided in either clause (a) or clause (b) above, then the registered owners of such Bonds shall thereafter be entitled only to payment out of the money or Defeasance Obligations. Defeasance Obligations are direct obligations of, or obligations, the principal of and interest on which are guaranteed by, the United States of America, or any agency thereof, obligations of any agency or instrumentality of the United States or any other obligations at the time of the purchase thereof are permitted investments under Tennessee law for the purposes described above, which bonds or other obligations shall not be subject to redemption prior to their maturity other than at the option of the registered owner thereof. Tennessee law, as codified, currently permits the use of the following as Defeasance Obligations: (a) Direct obligation or, or obligations, the principal of and interest on which are guaranteed by, the United States; (b) Obligations of any agency or instrumentality of the United States; (c) Certificates of deposit issued by a bank or trust company located in the state of Tennessee; provided, that such certificates shall be secured by a pledge of any of the obligations referred to in subdivisions (a) and (b) having an aggregate market value, exclusive of accrued interest, equal at least to the principal amount of the certificates of deposit so secured; or (d) Obligations which are rated in either of the top two (2) highest rated categories by a nationally recognized rating agency of such obligations and whose interest income is exempt from tax by 6

15 the United States, which are direct general obligations of the state or a political subdivision thereof or obligations guaranteed by the state, to the payment of the principal of and interest on which the full faith and credit of the state are pledged or obligations of any other state or political subdivision or instrumentality thereof; provided, that approval of the state director of local finance is first obtained. Book-Entry-Only System The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee). Only one fully-registered Bond certificate will be issued in the aggregate principal amount of each maturity of the Bonds, and will be deposited with DTC. DTC 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 securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with Direct Participants, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. 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, but Beneficial Owners are expected to receive written confirmation 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 interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no 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 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. 7

16 Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the District 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to DTC. DTC s practice is to credit Direct Participants accounts on the payable date in accordance with their respective holdings shown on DTC s records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of such Participant and not of DTC, the Registration Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the District or the Registration Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the District or the Registration Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. The District 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 District believes to be reliable, but the District takes no responsibility for the accuracy thereof. THE DISTRICT AND THE REGISTRATION AGENT HAVE NO RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT; (II) THE PAYMENT BY DTC OR ANY PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF OR INTEREST ON THE BONDS; (III) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY PARTICIPANT OR ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; OR (IV) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR CEDE & CO. AS BONDHOLDER. Plan of Refunding The Bonds are being issued, in part, to refund all or a portion of the Outstanding Bonds as described under "THE BONDS Description" herein. Pursuant to Refunding Escrow Agreement between the District and U.S. Bank National Association, Nashville, Tennessee (the "Escrow Agent") for the Bonds, a portion of the proceeds of the Bonds, excluding amounts to pay issuance costs and underwriter s discount, will be used to purchase United States Treasury Obligations, such other obligations permitted under Tennessee law, or held in cash (the "Escrow Investments"). The Escrow Investments will be held in a separate fund established by the Escrow Agent with the interest earned and the principal amount of the Escrow Investments being sufficient to pay principal of, premium, if any, and interest on the Outstanding Bonds. Neither the principal of nor the interest on the Escrow Investments will be available for payment of the Bonds. The District, or the Escrow Agent, as applicable, will give the paying agent for the 8

17 Outstanding Bonds irrevocable directions to redeem the Outstanding Bonds on their earliest optional redemption date following delivery of the Bonds. Verification of Mathematical Computations Grant Thornton, LLP, Minneapolis, Minnesota, a firm of independent arbitrage consultants, will deliver to the District, on or before the settlement date of the Bonds, its attestation report indicating that it has examined, in accordance with standards established by the American Institute of Certified Public Accountants, the information and assertions provided by the District and its representatives. Included in the scope of its examination will be a verification of the mathematical accuracy of (a) the mathematical computations of the adequacy of the cash and the maturing principal of and interest on the Escrow Investments to pay, when due, the principal of and interest on the Outstanding Bonds and (b) the mathematical computations supporting the conclusion of Bond Counsel that the Bonds are not "arbitrage bonds" under the Code and the regulations promulgated thereunder. The examinations performed by Grant Thornton, LLP will be solely based upon data, information and documents provided to it by the District and its representatives. Grant Thornton s report of its examination will state that it has no obligation to update the report because of events occurring, or data or information coming to its attention, subsequent to the date of the report. Sources and Uses of Funds The following table sets forth the sources and uses of funds in connection with the issuance of the Bonds. Bond Insurance Policy Sources of Funds Par Amount $20,625, Net Reoffering Premium 2,753, Contribution from District Funds 253, Total Sources $23,632, Uses of Funds Deposit to Escrow Fund $23,290, Costs of Issuance (includes Underwriter s Discount, Bond Insurance Premium and Expenses) 342, Total Uses $23,632, Bond Insurance Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company ( BAM ) will issue its Municipal Bond Insurance Policy for the Bonds (the Policy ). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an appendix to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. 9

18 Build America Mutual Assurance Company BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27 th Floor, New York, New York 10281, its telephone number is: , and its website is located at: BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM s financial strength is rated AA/Stable by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ). An explanation of the significance of the rating and current reports may be obtained from S&P at The rating of BAM should be evaluated independently. The rating reflects the S&P s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn. Capitalization of BAM BAM s total admitted assets, total liabilities, and total capital and surplus, as of September 30, 2014 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $492.2 million, $38.0 million and $454.2 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. BAM s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM s website at is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading BOND INSURANCE. 10

19 Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. Obligor Disclosure Briefs. Subsequent to closing, BAM posts an Obligor Disclosure Brief on every issue insured by BAM, including the Bonds. BAM Obligor Disclosure Briefs provide information about the gross par insured by CUSIP, maturity and coupon; sector designation (e.g., general obligation, sales tax); a summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. The Obligor Disclosure Briefs are also easily accessible on BAM's website at buildamerica.com/obligor/. Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insight videos are prepared by BAM and have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and they assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. Continuing Disclosure The District will at the time the Bonds are delivered execute a Continuing Disclosure Certificate under which it will covenant for the benefit of holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the District by not later than twelve months after the end of each fiscal year commencing with the fiscal year ending June 30, 2014 (the "Annual Report"), and to provide notice of the occurrence of certain enumerated events and notice of failure to provide any required financial information of the District. The Annual Report (and audited financial statements if filed separately) and notices described above will be filed by the District with the Municipal Securities Rulemaking Board ("MSRB") at and with any State Information Depository which may be established in Tennessee (the "SID"). The specific nature of the information to be contained in the Annual Report or the notices of events is summarized below. These covenants have been made in order to assist the Underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b), as it may be amended from time to time (the "Rule"). The District's only material failures to comply with its previous continuing disclosure undertakings in the past five years are described in the following sentence. The insured credit rating on certain bonds of the Issuer changed on October 25, 2010, November 30, 2011, and January 17, These insured credit rating changes were not reported on EMMA until December 10, Annual Report The District s Annual Report shall contain or incorporate by reference the General Purpose Financial Statements of the District for the fiscal year, prepared in accordance with generally accepted accounting principles; provided, however, if the District s audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain unaudited financial statements 11

20 in a format similar to the financial statements contained herein, and the audited financial statements shall be filed when available. The Annual Report shall also include in a similar format the following information included in Appendix B to this Official Statement as follows. 1. "School District Summary of Outstanding Debt"; 2. "School District Debt Statement"; 3. "School District Debt Record"; 4. "Population"; 5. "School District Per Capita Debt Ratios"; 6. "School District Debt Ratios"; 7. "School District Debt Trend"; 8. "School District Debt Service Requirements"; 9. "School District Property Valuation and Property Tax"; 10. "School District Top Taxpayers"; 11. "School District Fund Balances"; and 12. "County-Wide Local Sales Tax." Any or all of the items above may be incorporated by reference from other documents, including Official Statements in final form for debt issues of the District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final Official Statement, in final form, it will be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so incorporated by reference. Reporting of Significant Events The District will file notice regarding certain significant events with the MSRB and SID, if any, as follows: 1. Upon the occurrence of a Listed Event (as defined in (3) below), the District shall in a timely manner, but in no event more than ten (10) business days after the occurrence of such event, file a notice of such occurrence with the MSRB and SID, if any. Notwithstanding the foregoing, notice of Listed Events described in subsection (3)(h) and (i) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Resolution. 2. For Listed Events where notice is only required upon a determination that such event would be material under applicable Federal securities laws, the District shall determine the materiality of such event as soon as possible after learning of its occurrence. 3. The following are the Listed Events: 12

21 a. Principal and interest payment delinquencies; b. Non-payment related defaults, if material; c. Unscheduled draws on debt service reserves reflecting financial difficulties; d. Unscheduled draws on credit enhancements reflecting financial difficulties; e. Substitution of credit or liquidity providers, or their failure to perform; f. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form TEB) or other material notices or determinations with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; g. Modifications to rights of Bondholders, if material; h. Bond calls, if material, and tender offers; i. Defeasances; j. Release, substitution, or sale of property securing repayment of the securities, if material; k. Rating changes; l. Bankruptcy, insolvency, receivership or similar event of the obligated person; m. The consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and n. Appointment of a successor or additional trustee or the change of name of a trustee, if material. Termination of Reporting Obligation The District's obligations under the Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. Amendment/Waiver Notwithstanding any other provision of the Disclosure Certificate, the District may amend the Disclosure Certificate, and any provision of the Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions concerning the Annual Report and Reporting of Significant Events it may only be made in connection with a change in circumstances that 13

22 arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized Bond Counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Holders of the Bonds in the same manner as provided in the Resolution for amendments to the Resolution with the consent of the Holders, or (ii) does not, in the opinion of nationally recognized Bond Counsel, materially impair the interests of the Holders or beneficial owners of the Bonds. In the event of any amendment or waiver of a provision of the Disclosure Certificate, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Default In the event of a failure of the District to comply with any provision of the Disclosure Certificate, any Bondholder, or any Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under the Disclosure Certificate. A default under the Disclosure Certificate shall not be deemed an event of default, if any, under the Resolution, and the sole remedy under the Disclosure Certificate in the event of any failure of the District to comply with the Disclosure Certificate shall be an action to compel performance. Future Issues The District has no current plan to finance additional capital improvements. However, the need for additional capital improvements could arise in the event the District experiences greater-than-expected population and school enrollment growth. Litigation The District, like other similar bodies, is subject to a variety of suits and proceedings arising in the ordinary conduct of its affairs. Except as discussed below, after reviewing the current status of all pending and threatened litigation with its counsel, the District believes that, while the outcome of litigation cannot be predicted, the final settlement of all lawsuits which have been filed and of any actions or claims pending or threatened against the District or its officials in such capacity are adequately covered by insurance or by sovereign immunity or will not have a material adverse effect upon the District's financial condition. As of the date of this Official Statement, the District has no knowledge or information concerning any pending or threatened litigation contesting the authority of the District to issue, sell or deliver the Bonds or concerning the use of the proceeds of the Bonds or the source of payment of the Bonds. 14

23 Approval of Legal Proceedings Legal matters incident to the authorization and issuance of the Bonds are subject to the unqualified approving opinion of Bass, Berry & Sims PLC, Bond Counsel. A copy of the opinion will be delivered with the Bonds. (See Appendix A). Certain legal matters will be passed upon for the District by Bill R. Barron, Esq., Counsel to the District. Federal Taxes Tax Matters General. Bass, Berry & Sims PLC, Nashville, Tennessee, is Bond Counsel for the Bonds. Their opinion under existing law, relying on certain statements by the Issuer and assuming compliance by the Issuer with certain covenants, is that interest on the Bonds: is excluded from a bondholder s federal gross income under the Internal Revenue Code of 1986 (the Code ), is not a preference item for a bondholder under the federal alternative minimum tax, and is included in the adjusted current earnings of a corporation under the federal corporate alternative minimum tax. The Code imposes requirements on the Bonds that the Issuer must continue to meet after the Bonds are issued. These requirements generally involve the way that Bond proceeds must be invested and ultimately used. If the Issuer does not meet these requirements, it is possible that a bondholder may have to include interest on the Bonds in its federal gross income on a retroactive basis to the date of issue. The Issuer has covenanted to do everything necessary to meet these requirements of the Code. A bondholder who is a particular kind of taxpayer may also have additional tax consequences from owning the Bonds. This is possible if a bondholder is: an S corporation, a United States branch of a foreign corporation, a financial institution, a property and casualty or a life insurance company, an individual receiving Social Security or railroad retirement benefits, an individual claiming the earned income credit or a borrower of money to purchase or carry the Bonds. If a bondholder is in any of these categories, it should consult its tax advisor. Bond Counsel is not responsible for updating its opinion in the future. It is possible that future events or changes in applicable law could change the tax treatment of the interest on the Bonds or affect the market price of the Bonds. See also "Changes in Federal and State Tax Law" below in this heading. Bond Counsel expresses no opinion on the effect of any action taken or not taken in reliance upon an opinion of other counsel on the federal income tax treatment of interest on the Bonds, or under State, local or foreign tax law. Bond Premium. If a bondholder purchases a Bond for a price that is more than the principal amount, generally the excess is "Bond premium" on that Bond. The tax accounting treatment of Bond premium is complex. It is amortized over time and as it is amortized a bondholder s tax basis in that Bond will be reduced. The holder of a Bond that is callable before its stated maturity date may be required to amortize 15

24 the premium over a shorter period, resulting in a lower yield on such Bonds. A bondholder in certain circumstances may realize a taxable gain upon the sale of a Bond with Bond premium, even though the Bond is sold for an amount less than or equal to the owner s original cost. If a bondholder owns any Bonds with Bond premium, it should consult its tax advisor regarding the tax accounting treatment of Bond premium. Original Issue Discount. A Bond will have "original issue discount" if the price paid by the original purchaser of such Bond is less than the principal amount of such Bond. Bond Counsel s opinion is that any original issue discount on these Bonds as it accrues is excluded from a bondholder s federal gross income under the Internal Revenue Code. The tax accounting treatment of original issue discount is complex. It accrues on an actuarial basis and as it accrues a bondholder s tax basis in these Bonds will be increased. If a bondholder owns one of these Bonds, it should consult its tax advisor regarding the tax treatment of original issue discount Information Reporting and Backup Withholding. Information reporting requirements apply to interest on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with a Form W-9, "Request for Taxpayer Identification Number and Certification," or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to "backup withholding," which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a "payor" generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient. If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Bonds from gross income for Federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner s Federal income tax once the required information is furnished to the Internal Revenue Service. State Taxes Under existing law, the Bonds and the income therefrom are exempt from all present state, county and municipal taxes in Tennessee except (a) inheritance, transfer and estate taxes, (b) Tennessee excise taxes on interest on the Bonds during the period the Bonds are held or beneficially owned by any organization or entity, or other than a sole proprietorship or general partnership doing business in the State of Tennessee, and (c) Tennessee franchise taxes by reason of the inclusion of the book value of the Bonds in the Tennessee franchise tax base of any organization or entity, other than a sole proprietorship or general partnership, doing business in the State of Tennessee. Changes in Federal and State Tax Law From time to time, there are Presidential proposals, proposals of various federal and Congressional committees, and legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to herein or adversely affect the marketability or market value of the Bonds or otherwise prevent holders of the Bonds from realizing the full benefit of the tax exemption of interest on the Bonds. For example, various proposals have been made in Congress and by the President which, if enacted, would subject interest on bonds, such as the Bonds, that is otherwise excluded from gross income for federal income tax purposes, to a tax payable by certain bondholders with an adjusted gross income in excess of certain proposed thresholds. It cannot be predicted whether, or in what form, these proposals might be enacted or if enacted, whether they would apply to Bonds prior to 16

25 enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds would be impacted. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any proposed or pending legislation, regulatory initiatives or litigation. Municipal Advisor This Official Statement has been prepared under the direction of the District and with the assistance of Stephens Inc., Nashville, Tennessee, which has been contracted by the District to perform professional services in the capacity of municipal advisor. Underwriting Robert W. Baird & Co., Inc., Red Bank, New Jersey (the "Underwriter"), acting for and on behalf of itself and such other securities dealers as it may designate, will purchase the Bonds pursuant to an award at a competitive public sale on December 17, 2014 for an aggregate purchase price of $23,146,374.54, which is par, plus net original issue premium of $2,753,983.05, less underwriter s discount of $185,608.51, and less a bond insurance premium of $47, paid by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealer banks and dealers depositing the Bonds into investment trusts) and others at prices different from the public offering prices stated on the cover page of this Official Statement. Such initial public offering prices may be changed from time to time by the Underwriter. Miscellaneous The foregoing summaries do not purport to be complete and are expressly made subject to the exact provisions of the complete documents. For details of all terms and conditions, purchasers are referred to the Resolution, copies of which may be obtained from the District. Any statement made in this Official Statement involving matters of opinion and estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The execution and delivery of this Official Statement was duly authorized by the District. 17

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27 Certificate of Chairman The execution and delivery of this Official Statement was duly authorized by the District, and we hereby certify that to our best knowledge and belief, the information contained herein as of this date is true and correct. GIBSON COUNTY SPECIAL SCHOOL DISTRICT, TENNESSEE By:/s/ Treva Maitland Treva Maitland Chairman, Board of Trustees By:/s/ Eddie Pruett Eddie Pruett Director of Schools 18

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29 APPENDIX A Form of Legal Opinion of Bass, Berry & Sims PLC, Attorneys, Nashville, Tennessee, relating to the Bonds

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31 (Form of Opinion of Bond Counsel) Bass, Berry & Sims PLC 150 Third Avenue South, Suite 2800 Nashville, Tennessee January 15, 2015 We have acted as bond counsel to Gibson County Special School District (the "Issuer") in connection with the issuance of $20,625,000 School Refunding Bonds, Series 2015, dated the date above (the "Bonds"). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify such facts by independent investigation. Based on our examination, we are of the opinion, as of the date hereof, as follows: 1. The Bonds have been duly authorized, executed and issued in accordance with the constitution and laws of the State of Tennessee and constitute valid and binding general obligations of the Issuer. 2. The resolution (the Resolution ) of the Board of Trustees of the Issuer authorizing the Bonds has been duly and lawfully adopted, is in full force and effect and is a valid and binding agreement of the Issuer enforceable in accordance with its terms. 3. The principal of and interest on the Bonds are payable primarily from and secured by a continuing annual tax levied on all taxable property within the corporate boundaries of the Issuer, the rate of which has been set by the General Assembly of the State of Tennessee pursuant to Chapter 62 of the 1981 Private Acts of the State of Tennessee, as most recently amended by Chapter 68 of the 2010 Private Acts of the State of Tennessee, as such rate may be adjusted from time to time in accordance with the laws of the State of Tennessee, subject to the prior pledge of such revenues in favor of the Issuer s School Refunding Bonds, Series 2001, dated September 1, 2001; School Refunding and Improvement Bonds, Series 2009, dated December 9, 2009; School Bonds, Series 2012, dated May 30, 2012; School Bonds, Series 2013, dated May 29, 2013 and any unrefunded Outstanding Bonds (as such term is defined in the Resolution). In the event the revenues derived from said tax are insufficient to pay principal of and interest on the Bonds when due, any such deficiency is payable from funds received by the Issuer under the Tennessee Basic Education Program available to be used for capital outlay expenditures, as set forth in Section , et seq., Tennessee Code Annotated, and related sections, and the Issuer s share of the Local Option Sales and Use Tax now or hereafter levied and collected in Gibson County, Tennessee, pursuant to Section , Tennessee Code Annotated, subject to prior pledges in favor of the Prior Lien Bonds. In the event said property taxes and other funds hereinabove described shall not be sufficient to pay principal of and interest on the Bonds when due, the Issuer has covenanted to apply funds from operations or other available funds of the Issuer to the payment thereof when due. 4. Interest on the Bonds (including any original issue discount properly allocable to an owner thereof) is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings of certain corporations for purposes of alternative minimum tax on corporations. The opinion set forth in the

32 preceding sentence is subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements could cause interest on the Bonds to be so included in gross income retroactive to the date of issuance of the Bonds. The Issuer has covenanted to comply with all such requirements. Except as set forth in this Paragraph 4, we express no opinion regarding other federal tax consequences arising with respect to the Bonds. 5. Under existing law, the Bonds and the income therefrom are exempt from all present state, county and municipal taxes in Tennessee except (a) inheritance, transfer and estate taxes, (b) Tennessee excise taxes on all or a portion of the interest on any of the Bonds during the period such Bonds are held or beneficially owned by any organization or entity, other than a sole proprietorship or general partnership, doing business in the State of Tennessee, and (c) Tennessee franchise taxes by reason of the inclusion of the book value of the Bonds in the Tennessee franchise tax base of any organization or entity, other than a sole proprietorship or general partnership doing business in the State of Tennessee. It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds and the resolution authorizing the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and that their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement relating to the Bonds. This opinion is given as of the date hereof, and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Yours truly, Bass, Berry & Sims PLC

33 APPENDIX B Demographic and General Financial Information Related to the District

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35 THE DISTRICT The Gibson County Special School District (the District ) was created in 1981 by the Tennessee General Assembly, state legislative body, with the approval of Chapter 62 of the 1981 Private Acts (the Act ) of the State of Tennessee as amended since It was created as a local education agency (LEA) to provide public education for the students residing within the boundaries of the District. The District has about 3,814 students and is one of the total 141 local education agencies created in the State to provide public education for approximately 957,000 students. The District is about 15 miles north of Jackson/Madison County, Tennessee and about 100 miles northeast of Memphis, Tennessee. The District has been operational since 1981 and consists primarily of the communities of Dyer, Eaton, Gibson, Kenton, Medina, and Rutherford. The District, as created, is a body politic and corporate with full power of perpetual succession, but the power to levy or collect property taxes must be approved by the Tennessee General Assembly as specifically authorized by amending the Act. The other school systems in Gibson County are Humboldt City School System, Bradford Special School District, Trenton Special School District, and Milan Special School District. In addition to the special school districts in Gibson County, there are 16 other special districts with 6 newly authorized special school districts in Shelby County, Tennessee beginning with the current school year Powers of the District Pursuant to the Act as amended since 1981, the District is empowered, among other things, to control and operate schools within the boundaries of the District. The District has the authority to levy and collect taxes or to issue and sell bonds as specifically authorized by the Act as amended by the Tennessee General Assembly. The Refunding Bonds are being sold pursuant to the amended Act when the original bonds were issued and the taxes levied as hereafter provided are specifically authorized by the various Act amendments. To carry out such purposes, the District has the power and authority to sue and be sued, contract and be contracted with, to plead and be impleaded in all of the courts of the State, purchase, receive and hold real, personal and mixed property, and to release, grant and in any way dispose of the same for public school purposes. Powers of the General Assembly of the State of Tennessee Article XI, Section 12 of the Constitution of the State of Tennessee states that the General Assembly of the State of Tennessee shall provide for the maintenance, support and eligibility standards of a system of free public schools. Under the Tennessee Constitution, the General Assembly has created 20 Special School Districts in the State but has retained the power to authorize the levy of property taxes by enacting a private act whenever additional property taxes are needed and recommended by the Special School District Board of Education. The General Assembly has not enacted any generally applicable statutes which confer upon a special school district the power to authorize the issuance of new money bonds except by the Act amendments. As a result, the power to establish the tax rate for the District and authorize the issuance of bonds by the District resides solely with the General Assembly. Since the creation of the District by the General Assembly, the General Assembly has amended the Act to set property tax rates sufficient to operate and pay the debts of the District, establish procedures for collecting property taxes, establish requirements for annual budgeting, accounting, and auditing, and authorize the issuance of bonds as needed and as requested by the Board of Trustees of the District. The Refunding Bonds being sold hereunder, the levy of taxes described herein and the security for the payment of the Bonds as described herein are authorized by the amended Act. B-1

36 Board of Trustees All corporate powers of the District are vested in and exercised by its Board of Trustees (the Board ). The Board consists of seven members, serving staggered four-year terms or until their successors are elected and qualified. The members are elected at general elections of all qualified voters residing in the District pursuant to the general election of the State. Six members are elected from six separate districts with the seventh member being elected at-large. In the event of a vacancy on the Board, the remaining members shall fill the vacancy until the next regular election. Pursuant to the Act, the Board acts by a majority of its members. The Board has all the powers and authority given it both by the Act and under the general laws of the State to operate the schools of the District efficiently and economically and otherwise govern, regulate and control the affairs of the District. Current Members of the Board The current members of the Board of Trustees and the offices held by each are as follows: Member Office Term Expires Treva Maitland Chairman August 2015 Charles Scott Vice-Chairman August 2015 Benny Boals Member August 2017 Tom Lannom Member August 2018 Steven Tate Member August 2016 Eddie Watkins Member August 2017 Dana Welch Member August 2016 Eddie Pruett is the Director of Schools and serves as Secretary to the Board of Trustees. School System The District operates a school system of kindergarten through twelfth grades for children residing within the boundaries of the District. The District owns and operates nine schools -- five elementary schools, one middle school, one junior high school, and two high schools for grades The Southern Association of Colleges and Secondary Schools accredits the system. In Tennessee, there are three types of school systems providing public education in grades kindergarten through 12. Ninety-three (93) counties are authorized by general law to provide public education. Twenty-eight (28) cities are authorized by city charter approved by the Tennessee General Assembly as a private act. Twenty (20) Special School Districts have been created by the General Assembly in the form of a special act commonly referred to as a private act. As of June 30, 2013, the District was the largest of the fourteen special school districts operating at that time based on average daily membership. B-2

37 The enrollment and schools in the District for 2000 through 2013 are as follows: Average Daily Average Daily School Year Membership School Year Membership , , , , , , , , , , , , ,911 Sources: State of Tennessee Annual Statistical Reports and Gibson County Special School District. School Grades Medina Elementary PK-2 Medina Middle School 3-8 Spring Hill Elementary K-8 Dyer Elementary PK-8 Kenton Elementary PK-3 Rutherford K-8 Yorkville Elementary PK-8 Gibson County High School 9-12 South Gibson High School 9-12 Sources: State of Tennessee Annual Statistical Reports and Gibson County Special School District. Property Taxes Based on the most recent reappraisal of property values in Gibson County, the adjusted property tax of the District is $1.74 per $100 of assessed value of real and personal property located in the District to be used for the purpose of paying principal of and interest on the Bonds, any other indebtedness of the District, and the operational expenses of the school system. The District covenanted in the Resolution to take no action to rescind or reduce the Debt Service Tax or seek to have it rescinded or reduced or the legislation authorizing such Tax repealed or amended in such a way as to abolish the Tax or reduce the annual Tax to an amount less than that necessary to maintain funds sufficient to pay annual principal and interest requirements on the Bonds. The Debt Service Tax shall be used solely and is expressly and exclusively pledged for the purpose of paying principal of and interest on the Bonds and any other indebtedness of the District. The pledge of the Debt Service Tax in favor of the Bonds is subject to prior pledges in favor of the Prior Lien Bonds. Any surplus revenues arising from the Debt Service Tax and not required for the payment of debt service on the Bonds or other indebtedness may be used, at the discretion of the Board of Trustees, for the purpose of construction, improvement, renovation, expansion, furnishings, fixtures and equipping of school buildings and facilities, and additions B-3

38 thereto, in and for the District including the purchase of all property, real and personal, or interest therein, necessary in connection with said work, and the purchase of school buses and school transportation equipment and all other operations and maintenance of schools in the District. Notwithstanding the foregoing, pursuant to Section , Tennessee Code Annotated, if at any time the amount collected from said Debt Service Tax and maintained in a separate fund created for that purpose shall be equal to at least two hundred percent of the amount of principal and interest coming due on the Bonds and any other outstanding indebtedness of the District in the next succeeding twelve months, the District, by resolution, may, on or before September 1 of any year, certify to the County Trustee a tax rate, not to exceed the rate authorized by the General Assembly, necessary to produce taxes sufficient to maintain the fund during the succeeding year in an amount equal to at least two hundred percent of annual debt service requirements on the Bonds and any other outstanding indebtedness of the District, and, upon such certification being made to the County Trustee, the County Trustee shall levy and collect only the taxes based on the rate so certified. The Debt Service Tax is subject to adjustment from time to time in connection with county-wide reappraisal. Section , Tennessee Code Annotated, mandates that every six (6) or four (4) years, as determined by the county assessor of property, each county of the State shall conduct a reappraisal of all real property in the county and an equalization of assessments in the county. Section , Tennessee Code Annotated, requires that upon such reappraisal, the rate of all District taxes will be adjusted to provide the same ad valorem tax revenue as was levied the year immediately prior to the reappraisal, with appropriate adjustments to take into account new construction and deletions from the tax roll. In addition, in the event the total assessed value of all property subject to the Debt Service Tax declines by more than ten percent (10%) from January 1 of any year to January 1 of the next succeeding year or declines by more than fifteen percent (15%) from January 1 of any year to January 1 of the second succeeding year thereafter, at the request of the Board of Trustees, the county assessor of property shall certify to the County Trustee and the Board of Trustees of the District the total assessed value of taxable property within the District and furnish the County Trustee and the Board of Trustees an estimate of the total assessed value of all new construction and improvements not included on the assessment roll of the base year and all deletions from the assessment roll of the base year. Upon receipt of said information and certifications, the County Trustee shall adjust the Debt Service Tax rate to an adjusted rate which is estimated to provide to the District the same tax revenue as was provided by said tax in the base year, exclusive of such new construction, improvements and deletions, in accordance with policies established by the State Board of Equalization pursuant to Section (b), Tennessee Code Annotated, or any successor thereto. The Act provides that both the levies for operational expenses and debt service will be collected by the Trustee of the County as other County property taxes are collected and, when collected, paid by the Trustee to the District. The taxes constitute a lien upon the property so taxed and the basis of the assessment is the assessed value of the property as shown on the books of the County Trustee. Delinquent and unpaid taxes are subject to the same enforcement actions by the County as are general County taxes. In the event additional funding of the District is needed to pay debt service and operational expenses, the General Assembly of the State of Tennessee has the authority but not the requirement to increase the property tax rate and provide other additional funding to the District. B-4

39 Assessed Property Values According to the County Assessor of Property and the State Public Service Commission as reported in the Annual Tax Aggregate Report prepared by the State Division of Property Assessments, the taxable property within the District for tax years 2009 through 2013 are as follows: Fiscal Year Tax Year ASSESSED VALUES Residential & Farm (at 25%) $232,584,560 $228,794,750 $226,248,575 $222,327,075 $217,836,850 Commercial & Industrial (at 40%) 22,553,300 21,870,280 21,865,280 21,638,520 21,985,840 Personal Tangible Property (at 30%) 6,364,135 5,666,575 6,156,906 5,631,015 5,144,704 Public Utilities (at 30%-55%) 20,732,460 19,789,163 19,099,837 19,009,196 19,319,802 Total Assessed Values $282,234,455 $276,120,768 $273,370,598 $268,605,806 $264,287,196 Annual Percentage Change 2.21% 1.01% 1.77% 1.63% 15.83% Estimated Per Capita Amount $10,955 $10,671 $10,519 $10,379 $10,256 Sources: State Board of Equalization, Tax Aggregate Reports of Tennessee as provided by the State Division of Property Assessments Tennessee Basic Education Program During the 1992 session of the Tennessee General Assembly, an Educational Improvement Act was enacted to reform the organization and operation of public education in Tennessee. Included in the Act was a funding initiative called the Tennessee Basic Education Program ( BEP ), which, among other things, mandated smaller classrooms and sought to equalize educational funding between affluent and poor counties. To fund the programs mandated by the BEP and to otherwise improve the funding of public education, the State sales tax was increased by one-half percent (½%). The amounts received from BEP funding for fiscal years ended June 30, 2010 through June 30, 2014 are as follows: State of Tennessee Basic Education Program 06/30/14 06/30/13 06/30/12 06/30/11 06/30/10 Basic Education Program Funding $18,842,000 $18,090,502 $16,986,000 $16,342,000 $15,183,000 Annual Percentage Change 4.15% 6.50% 3.94% 7.63% 6.83% Sources: Financial Statements and Auditor's Reports for the for the fiscal years ended June 30, as prepared by Cowart Reese Sargent, Certified Public Accountants. [The Remainder of this Page Intentionally Left Blank] B-5

40 Local Option Sales and Use Tax Pursuant to Sections et seq., Tennessee Code Annotated, Gibson County is authorized to levy a county-wide local option sales and use tax not to exceed 2.75%. Currently, the County levies a local option sales tax of 2.75% that was increased from 2.25% following a March 2012 referendum. Pursuant to Sections et seq., Tennessee Code Annotated, half the revenues from the local option sales tax must be used for education and are distributed to all school systems in the County based on weighted average daily attendance. The local option sales tax revenues received by the District for fiscal years ended June 30, 2010 through June 30, 2014, are presented below: Local Option Sales and Use Tax 06/30/14 06/30/13 06/30/12 06/30/11 06/30/10 Local Option Sales and Use Tax $2,451,320 $2,266,381 (1) $1,841,762 $1,736,608 $1,615,140 Annual Percentage Change 8.16% 23.06% 6.06% 7.52% 1.24% (1) The County-wide sales tax increased from 2.25% to 2.75% Sources: Financial Statements and Auditor's Reports for the fiscal years ended June 30, as prepared by Cowart Reese Sargent, Certified Public Accountants. Security Description and Estimates According to State Authorization The table below presents the estimated funds available to the District to pay debt service on the District's bonded indebtedness. The property tax rate listed below includes tax levies used (together with certain other District revenues) to pay the District's operating costs, which are not reflected below. For a review of the total funds received by the District and how the proceeds are disbursed, and for details regarding the District's operating costs, see Appendix C Financial Statements and Other Information. Gibson County Special School District Pledged Revenues Compared to Debt Service Requirements Pledged Revenues Sources According to Private Act Ratio of Available General State Funds Purpose Fiscal BEP Total Debt To Debt School Year Property Local Property Other Capital Funds Service Service Fund Ending Tax Rate Option Taxes Local Outlay Included Require- Require- Fund June 30 Per $100 Sales Tax Collected Revenues (2) Funds In Pledge (1) ments ments Balance (1) 2014 $1.80 $2,451,320 $5,067,177 $278,721 $2,812,385 $10,609,603 $2,948, $7,184, ,266,381 5,025, ,392 2,432,735 10,010,209 2,588, ,878, ,841,762 4,987, ,278 2,291,352 9,448,995 2,493, ,254, ,736,608 4,844, ,179 2,344,256 9,224,928 2,471, ,048, ,615,140 4,774, ,138 2,001,335 8,715,399 2,597, ,398,508 (1) The estimated amount of funds pledged does not include the General Purpose School Fund Balance which is available for making annual payments. (2) Other Local Revenues include interest income from cash flow investments and child care. Sources: Financial Statements and Auditor's Reports for the fiscal years ended June 30, as prepared by Cowart Reese Sargent, Certified Public Accountants. B-6

41 GENERAL INFORMATION RELATING TO THE COUNTY Gibson County was established in 1823 and is located in the northwestern part of the state of Tennessee approximately 100 miles northeast of Memphis and 140 miles west of Nashville. A rich agricultural section that is very productive and well diversified surrounds the County. The economic base of the District largely consists of agricultural production and employment in various businesses and industries in Gibson County. Furthermore, the District lies only 15 minutes north of the Jackson/Madison County area that is known as the industrial hub of West Tennessee. State Highways 5, 43, 54, 76, 77, 89, 104, 105, 106, 152, 186, 187, 188, and 367 and Federal Highways 45E, 45W, 70A, and 79 serve the County providing an excellent transportation hub. The West Tennessee Railroad Corporation also serves the County. Humboldt Municipal Airport and Gibson County Airport provide municipal airport services, with the nearest commercial service in Jackson, Tennessee approximately 20 miles away. The County encompasses 603 square miles. Top Employers in Gibson County Company Employees Type of Company Gibson County Special School District 469 Education Ceco Door Products 420 Doors & Frames Gibson County 300 County Government Milan Special School District 289 Education Wal-Mart 250 Retail Kongsberg Automotive 234 Automotive Parts/Assembly Humboldt City Schools 232 Education MacLean Power Systems 214 Electrical Utility Components State of Tennessee 211 State Government Trenton Special School District 184 Education Dana Corporation 178 Axle Housings, Brakes Delta Contracting Company 137 Highway Construction NHC Healthcare 134 Nursing Home/Rehabilitation Pratt Industries 132 Corrugated Containers West Tennessee Healthcare 125 Hospital Save-A-Lot 124 Grocery Wholesale Distribution Smurfit Stone Container 118 Corrugated Containers Reinhausen Manufacturing 118 Tap Load Changers Jones Fiber Products 105 Bedding and Furniture Materials Dura Automotive Systems 83 Automotive Controls American Ordnance 72 Ammunition Storage Sources: Greater Gibson Couny, Milan, and Humboldt Chambers of Commerce and State of Tennessee. B-7

42 Employment and Unemployment Data Year Employment Unemployment Total Labor Force Unemployment Gibson County State U.S ,132 1,272 23, % 4.0% 4.0% ,883 1,778 22, % 4.7% 4.7% ,285 1,736 22, % 5.3% 5.8% ,034 1,917 21, % 5.7% 6.0% ,788 1,765 21, % 5.4% 5.5% ,128 1,780 20, % 5.6% 5.1% ,448 1,628 21, % 5.2% 4.6% ,529 1,486 21, % 4.8% 4.6% ,191 2,027 21, % 6.6% 5.8% ,291 3,177 21, % 10.6% 9.3% ,027 2,917 21, % 9.9% 9.6% ,173 2,850 22, % 9.3% 8.9% ,660 2,477 21, % 8.2% 8.1% ,746 2,598 20, % 8.2% 7.4% Oct ,219 1,779 18, % 7.1% 5.8% Source: Bureau of Labor Statistics [The Remainder of this Page Intentionally Left Blank] B-8

43 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SUMMARY OF OUTSTANDING DEBT Principal Amount Date Maturity Interest Outstanding Issued Issue Issued Date Rate 06/30/14 Bonds $6,350,000 School Refunding Bonds, Series /01/01 04/01/ % % $3,920,000 1,700,000 School Bonds, Series /26/05 04/01/ % 1,155,000 14,575,000 School Bonds, Series /27/07 04/01/ % % 13,975,000 7,100,000 School Bonds, Series /04/08 04/01/ % % 6,600,000 4,285,000 School Bonds, Series /09/09 04/01/ % % 2,940,000 3,200,000 School Bonds, Series /30/12 04/01/ % % 3,070,000 3,000,000 School Bonds, Series /29/13 04/01/ % % 2,875,000 Total Bonds $34,535,000 Total Current Outstanding Debt $34,535,000 SCHOOL DISTRICT DEBT STATEMENT (as of June 30, 2014) (1) Current Outstanding Debt $34,535,000 Less: Portion of School Bonds, Series 2005 to be Refunded (1,070,000) Less: Portion of School Bonds, Series 2007 to be Refunded (13,675,000) Less: Portion of School Bonds, Series 2008 to be Refunded (6,200,000) Plus: School Refunding Bonds, Series 2015 dated 1/15/ ,625,000 Net Direct Debt $34,215,000 Net Overlapping Debt (as of June 30, 2014, Unaudited) Gibson County, Tennessee (37.84% of $15,275,000 County G.O. Debt) $5,780,060 City of Dyer 190,212 Town of Gibson 70,555 Town of Kenton 1,669,000 City of Medina 4,589,588 Town of Rutherford 0 Total Net Overlapping Debt $12,299,415 Overall Net Debt $46,514,415 DEBT RECORD OF GIBSON COUNTY SPECIAL SCHOOL DISTRICT There is no record of a default on bond principal and interest from information available. (1) As of 6/30/2014 and adjusted for School Refunding Bonds, Series 2015 dated 1/15/2015. Sources: Financial Statements and Auditor's Reports for the fiscal year ended June 30, 2014 as prepared by Cowart Reese Sargent, Certified Public Accountants. [The Remainder of this Page Intentionally Left Blank] B-9

44 POPULATION School District (1) County Tennessee 1990 U. S. Census 18,435 46,315 4,877, U. S. Census 25,083 48,152 5,689, U. S. Census 25,881 49,683 6,346, U. S. Census Estimate 25,989 49,892 6,398, U. S. Census Estimate 25,875 49,672 6,454, U. S. Census Estimate 25,763 49,457 6,495,978 Source: U.S. Bureau of Census (2) SCHOOL DISTRICT PER CAPITA DEBT RATIOS Current Outstanding Debt (1) $1, Net Direct Debt (2) 1, Total Net Overlapping Debt (3) Overall Net Debt (2) 1, SCHOOL DISTRICT DEBT RATIOS Assessed Estimated Value Actual Value Current Outstanding Debt to (1) 12.24% 3.27% Net Direct Debt to (2) 12.12% 3.24% Total Net Overlapping Debt to (3) 4.36% 1.17% Overall Net Debt to (2) 16.48% 4.41% SCHOOL DISTRICT DEBT TREND 06/30/14 06/30/13 06/30/12 06/30/11 06/30/10 Bonded Debt $34,535,000 $35,930,000 $33,995,000 $31,795,000 $32,740,000 Total Net Debt $34,535,000 $35,930,000 $33,995,000 $31,795,000 $32,740,000 (1) As of 6/30/2014. According to the District, the District population in 2000 was 25,083. Population for subsequent years have been estimated by assuming the same ratio of District to County population. (2) As of 6/30/2014 and adjusted for School Refunding Bonds, Series 2015 dated 1/15/2015. (3) As of 6/30/2014, unaudited. Sources: Financial Statements and Auditor's Reports for the fiscal years ended June 30, as prepared by Cowart Reese Sargent, Certified Public Accountants. [The Remainder of this Page Intentionally Left Blank] B-10

45 PRINCIPAL SCHOOL DISTRICT DEBT SERVICE REQUIREMENTS (as of June 30, 2014) (1) Less: Less: Less: Plus: Series Less: Less: Less: Plus: Series Bonds Portion of Portion of Portion of 2015 Bonds Portion of Portion of Portion of 2015 Year Outstanding Series 2005 Series 2007 Series 2008 Refunding Percent Outstanding Series 2005 Series 2007 Series 2008 Refunding Total Year Ended as of to be to be to be Bonds dated Total Principal as of to be to be to be Bonds dated Total Debt No. June 30 6/30/2014 Refunded Refunded Refunded 1/15/2015 Principal Retired 6/30/2014 Refunded Refunded Refunded 1/15/2015 Interest Service $1,465,000 $1,465,000 $1,514,946 ($24,075) ($338,000) ($150,381) $184,110 $1,186,600 $2,651, ,550,000 (85,000) 100,000 1,565,000 1,458,671 (48,150) (676,000) (300,763) 872,100 1,305,859 2,870, ,650,000 (90,000) 100,000 1,660,000 1,396,534 (44,325) (676,000) (300,763) 870,100 1,245,546 2,905, ,750,000 (95,000) (100,000) 195,000 1,750,000 1,328,221 (40,275) (676,000) (300,763) 868,100 1,179,284 2,929, ,850,000 (100,000) (100,000) (100,000) 280,000 1,830, % 1,254,581 (36,000) (671,750) (300,763) 864,200 1,110,269 2,940, ,785,000 (105,000) (900,000) (400,000) 1,385,000 1,765,000 1,175,488 (31,500) (667,450) (296,388) 858,600 1,038,750 2,803, ,900,000 (110,000) (1,000,000) (400,000) 1,495,000 1,885,000 1,104,538 (26,775) (628,750) (278,388) 789, ,975 2,844, ,920,000 (115,000) (1,000,000) (400,000) 1,500,000 1,905,000 1,021,000 (21,825) (578,750) (259,988) 714, ,038 2,780, ,015,000 (120,000) (1,000,000) (475,000) 1,580,000 2,000, ,488 (16,650) (528,750) (241,388) 639, ,300 2,789, ,110,000 (125,000) (1,000,000) (550,000) 1,660,000 2,095, % 847,181 (11,250) (478,750) (218,825) 560, ,956 2,793, ,200,000 (125,000) (1,000,000) (625,000) 1,735,000 2,185, ,006 (5,625) (428,750) (192,425) 477, ,806 2,788, ,240,000 (1,000,000) (775,000) 1,785,000 2,250, ,925 (378,750) (162,113) 390, ,913 2,753, ,310,000 (1,000,000) (825,000) 1,835,000 2,320, ,470 (328,750) (123,750) 301, ,570 2,720, ,325,000 (1,000,000) (825,000) 1,835,000 2,335, ,543 (278,750) (82,500) 209, ,143 2,628, ,345,000 (1,000,000) (825,000) 1,800,000 2,320, % 336,655 (228,750) (41,250) 154, ,455 2,541, ,375,000 (1,000,000) 975,000 1,350, ,713 (178,750) 100, ,763 1,499, ,390,000 (1,000,000) 955,000 1,345, ,200 (128,750) 71, ,000 1,454, ,405,000 (1,000,000) 930,000 1,335, ,950 (78,750) 42,900 68,100 1,403, ,000 (575,000) 480, ,000 40,938 (28,750) 15,000 27, , , , % 6,175 6, ,175 $34,535,000 ($1,070,000) ($13,675,000) ($6,200,000) $20,625,000 $34,215,000 $15,322,221 ($306,450) ($7,978,950) ($3,250,444) $8,986,310 $12,772,688 $46,987,688 (1) As of 6/30/2014 and adjusted for School Refunding Bonds, Series 2015 dated 1/15/2015. Sources: Financial Statements and Auditor's Reports for the fiscal year ended June 30, 2014 as prepared by Cowart Reese Sargent, Certified Public Accountants. INTEREST B-11

46 SCHOOL DISTRICT PROPERTY VALUATION AND PROPERTY TAX Fiscal Year Tax Year ESTIMATED ACTUAL VALUES Residential & Farm $930,338,240 $919,685,459 $909,450,608 $889,308,300 $871,347,400 Commercial & Industrial 56,383,250 54,944,930 54,932,369 54,096,300 54,964,600 Personal Tangible Property 21,213,783 18,981,593 20,624,078 18,770,050 17,149,013 Public Utilities 47,497,045 45,559,238 43,972,250 43,549,112 44,260,715 Total Estimated Actual Values $1,055,432,318 $1,039,171,220 $1,028,979,305 $1,005,723,762 $987,721,728 Annual Percentage Change 1.56% 0.99% 2.31% 1.82% 1.68% Estimated Per Capita Amount $40,967 $40,162 $39,592 $38,860 $38,331 ASSESSED VALUES Residential & Farm (at 25%) $232,584,560 $228,794,750 $226,248,575 $222,327,075 $217,836,850 Commercial & Industrial (at 40%) 22,553,300 21,870,280 21,865,280 21,638,520 21,985,840 Personal Tangible Property (at 30%) 6,364,135 5,666,575 6,156,906 5,631,015 5,144,704 Public Utilities (at 30%-55%) 20,732,460 19,789,163 19,099,837 19,009,196 19,319,802 Total Assessed Values $282,234,455 $276,120,768 $273,370,598 $268,605,806 $264,287,196 Annual Percentage Change 2.21% 1.01% 1.77% 1.63% 15.83% Estimated Per Capita Amount $10,955 $10,671 $10,519 $10,379 $10,256 Appraisal Ratio % 99.51% 99.51% % % Assessed Values to Actual Values 26.74% 26.57% 26.57% 26.71% 26.76% Property Tax Rate General Purpose School $1.80 $1.80 $1.80 $1.80 $1.80 Total Property Tax Rate $1.80 $1.80 $1.80 $1.80 $1.80 Taxes Levied $5,080,220 $4,970,174 $4,920,671 $4,834,905 $4,757,170 Sources: State Board of Equalization, Tax Aggregate Reports of Tennessee as provided by the State Division of Property Assessments [The Remainder of this Page Intentionally Left Blank] B-12

47 SCHOOL DISTRICT TOP TAXPAYERS Tax Year 2013 Taxpayer Type of Taxpayer Assessed Value Gibson Electric Membership Electric Utility $12,827,816 Dyer Nursing Home Nursing Home 1,651,720 Schaefer Tennessee LLC Industrial Engines 1,484,120 Verizon Wireless Tennessee Telecommunications 1,536,900 Bellsouth Communications Telecommunications 4,769,080 Trinity Industries Leasing Rail Industry Services 2,464,191 Texas Gas Transmission, LLC Natural Gas Pipeline 1,042,783 CSX Transpostation, Inc Railway Transportation 2,544,014 Norfolk Southern IC BR Railway Transportation 3,288,401 West TN Telephone Comp. Telecommunications 1,055,890 Source: Gibson County Trustee's Office as a % of Total Assessment 4.55% 0.59% 0.53% 0.54% 1.69% 0.87% 0.37% 0.90% 1.17% 0.37% EDUCATION FUNDS SCHOOL DISTRICT FUND BALANCES 06/30/14 06/30/13 06/30/12 06/30/11 06/30/10 General Purpose School $5,740,786 $7,329,087 $5,974,536 $6,048,475 $5,398,508 Federal Projects ,888 9,888 Food Service 578, , , , ,680 Total Education Funds $6,319,253 $7,918,431 $6,472,681 $6,619,435 $5,912,076 Sources: Financial Statements and Auditor's Reports for the fiscal years ended June 30, as prepared by Cowart Reese Sargent, Certified Public Accountants. COUNTY WIDE LOCAL SALES TAX (1) FY FY FY FY FY Rate (Percent of retail sales) 2.75% 2.75% 2.25% (1) 2.25% 2.25% Distribution from County General Purpose School Fund $2,451,320 $2,266,381 $1,841,762 $1,736,608 $1,615,140 Annual Percent Increase 8.16% 23.06% 6.06% 7.52% 1.24% (1) The voters of the County approved a local option sales tax increase from 2.25% to 2.75% in March 2012 with collections to be received begining with fiscal year Sources: Financial Statements and Auditor's Reports for the fiscal years ended June 30, as prepared by Cowart Reese Sargent, Certified Public Accountants. [The Remainder of this Page Intentionally Left Blank] B-13

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49 APPENDIX C Comprehensive Annual Financial Report of Gibson County Special School District, Tennessee for the Year Ended June 30, 2014

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51 GIBSON COUNTY SPECIAL SCHOOL DISTRICT DYER, TENNESSEE AUDITED FINANCIAL STATEMENTS JUNE 30, 2014

52 GIBSON COUNTY SPECIAL SCHOOL DISTRICT DYER, TENNESSEE June 30, 2014 TABLE OF CONTENTS FINANCIAL SECTION Page Independent Auditors Report 1 Management s Discussion And Analysis 4 BASIC FINANCIAL STATEMENTS District-Wide Financial Statements: Statement of Net Position 8 Statement of Activities 9 Fund Financial Statements: Balance Sheet Governmental Funds 10 Reconciliation of Total Governmental Fund Balances to Net Position of Governmental Activities 11 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 12 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 13 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund 14 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Federal Projects Fund 20 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Cafeteria Fund 22 Notes to the Financial Statements 23 REQUIRED SUPPLEMENTARY INFORMATION SECTION Schedule of Funding Progress 37 OTHER SUPPLEMENTARY INFORMATION Schedule of Principal and Interest Requirements 38 Schedule of Official Bonds and Salaries of Principal Officials 45 Schedule of Expenditures of Federal Award Programs 46 INTERNAL CONTROL AND COMPLIANCE SECTION Report on Internal Control Over Financial Reporting and Compliance And Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 47 Report on Compliance with Requirements that could have a Direct and Material Effect on each Major Program on Internal Control over Compliance in Accordance with OMB Circular A Schedule of Findings and Questioned Costs 51

53 FINANCIAL SECTION

54 1 INDEPENDENT AUDITOR S REPORT Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund including budgetary comparisons for the general, federal projects and cafeteria funds of the Gibson County Special School District (District), Dyer, Tennessee, as of June 30, 2014, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. 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 entity'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 entity'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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

55 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund thereof and the budgetary comparisons for the general, federal projects and cafeteria funds of the District as of June 30, 2014, and the respective changes in financial position thereof and the budgetary comparisons for the general, federal projects and cafeteria funds for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United State of America require that the management s discussion and analysis and schedule of funding progress as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a required part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to an essential part of financial reporting for placing the basic financial statements in an appropriate, operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express and 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 schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the other information, such as the introductory and statistical section 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 and other information listed as other supplementary information in the table of contents is the responsibility of management and was derived from and relates 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 auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards and other information listed as other supplementary information in the table of contents is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

56 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 1, 2014 on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 District s internal control over financial reporting and compliance. Cowart Reese Sargent, CPAs Martin, TN December 1, 2014

57 Gibson County Special School District Management's Discussion and Analysis For the year ended June 30, This section of the Gibson County Special School District's (the District) annual financial report presents our discussion and analysis of the District's financial performance during the year ended June 30, 2014 and a comparison of financial information between the 2013 and 2014 fiscal years. The analysis focuses on significant financial position, budget changes and variances from the budget, and specific issues related to funds and the economic factors affecting the Gibson County Special School District. Management's Discussion and Analysis (MD&A) focuses on current year activities and resulting changes. Please consider the information presented here in conjunction with the District's financial statements, which immediately follow this section. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Gibson County Special School District financially as a whole. The District-wide Financial Statements provide information about the activities of the whole District, presenting both an aggregate view of the District's finances and a long-term view of those finances. The fund financial statements provide the next level of detail. For governmental activities, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements look at the District's operations in more detail than the districtwide financial statements by providing information about the District's funds which include the General Fund, Federal Projects Fund and the Cafeteria Fund. District-wide Financial Statements. The statement of net position and the statement of activities, which appear first in the District's financial statements, report information on the District as a whole and its activities in a way that provides readers with a broad overview of the District's finances, in a manner similar to a private-sector business. These statements include all assets and liabilities, using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the District's net position - the difference between assets and liabilities, as reported in the statement of net position - as one way to measure the District's financial health or financial position. Over time, increases or decreases in the District's net position - as reported in the statement of activities - are indicators of whether its financial health is improving or deteriorating. The relationship between revenues and expenses is the District's operating results. However, the District's goal is to provide services to our students, not to generate profits as commercial entities do. One must consider many other nonfinancial factors, such as the quality of the education provided and the safety of the schools, to assess the overall health of the District. The statement of net position and statement of activities report the governmental activities for the District, which encompass all of the District's services, including instruction, support services, community services, athletics, child care, and food services. Property taxes and state and federal grants finance most of these activities. Fund Financial Statements. The School District's fund financial statements provide detailed information about the funds that are maintained by the District. Some funds are required to be established by State law and by bond covenants. However, the District may establish other funds to help it control and manage money for particular purposes or to show that it's meeting legal responsibilities for using certain taxes, grants, and other money. All of the District's services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year end that are available for spending. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the operations of the District and the services it provides, Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs, We describe the relationship (or differences) between governmental activities (reported in the statement of net position and the statement of activities) and governmental funds in a reconciliation.

58 Gibson County Special School District Management's Discussion and Analysis For the year ended June 30, FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Recall that the statement of net position provides the perspective of the District as a whole. The table below provides a summary of the District's net position as of June 30, 2013 and June 30, 2014: STATEMENT OF NET POSITION Governmental Activities 6/30/2014 6/30/2013 Assets Current and other assets $ 14,865,710 $ 17,097,100 Capital assets, net of accumulated depreciation 44,641,978 41,490,792 Total assets 59,507,688 58,587,862 Liabilities Current liabilities 4,391,736 4,543,244 Long-term liabilities 33,140,000 36,365,046 Total liabilities 37,531,736 40,908,290 Deferred Inflows of Resources Deferred revenue $ 5,080,220 4,613,969 Net Position Net investment in capital assets 10,106,978 5,560,762 Restricted 640,895 1,221,822 Unrestricted 6,047,056 8,367,776 Total net position 16,895,732 15,150,360 Total liabilities and net position $ 59,507,688 $ 58,587,862 The above analysis focuses on the net position. The change in net position of the District's governmental activities is discussed below. The District's net position was $6,895,732 and $15,150,360 as of June 30, 2014 and 2013 respectively. Net investment in capital assets totaling $10,106,978 compares the original cost, less depreciation of the District's capital assets, to long-term debt, including accrued interest on capital appreciation bonds, used to finance the acquisition of those assets. Most of the debt will be repaid from property taxes collected as the debt service comes due. Restricted net position is reported separately to show legal constraints from debt covenants and enabling legislation that limit the District's ability to use that net position for day-to-day operations. The remaining amount of net position, $6,047,056, was unrestricted. The $6,047,056 in unrestricted net position of governmental activities represents the accumulated results of all past years' operations. The operating results of the General Fund will have a significant impact on the change in unrestricted net position from year to year. The results of this year's operations for the District as a whole are reported in the statement of activities, which shows the changes in net position for fiscal year The following schedule also provides the changes in net position for fiscal year 2013 so that comparisons can be made between the two years presented.

59 Gibson County Special School District Management's Discussion and Analysis For the year ended June 30, Governmental Activities 6/30/2014 6/30/2013 Revenues Program revenues: Charges for services $ 928,372 $ Operating grants and contributions 2,817,583 3,548,634 Capital grants and contributions - - General revenues: Property taxes 5,030,055 4,990,098 Local option sales taxes 2,451,320 2,266,381 Other taxes 79,366 13,354 Intergovernmental 20,034,039 18,924,777 Interest 19,560 19,718 Other sources 99, ,254 Total revenues 31,459,386 30,871,135 Function/Program Expenses Instruction 16,060,415 16,061,507 Support services 9,838,875 8,828,437 Food service 1,856,151 1,832,254 Other non-instructional services 404, ,817 Bond Issue Costs 0 67,109 Interest on debt 1,553,607 1,523,777 Total expenses 29,714,014 29,024,901 Change in net position 1,745,372 1,846,234 Net position, beginning 15,150,360 13,220,922 Restatement Adjustment ,204 Net position, beginning (restated) 15,150,360 13,304,126 Net position - ending $ 16,895,732 $ 15,150,360 As reported in the statement of activities, the cost of all of our governmental activities this year was $29,714,014 with an increase of $1,745,372 between the 2014 and 2013 fiscal years. Certain activities were partially funded from those who benefited from the programs ($928,372) or by other governments and organizations that subsidized certain programs with grants ($2,817,583). We paid for the remaining "public benefit" portion of our governmental activities with $7,560,741 in taxes, and with our other revenues, such as interest and general entitlements. The District experienced an increase in net position of $1,745,372 As discussed above, the net cost shows the financial burden that was placed on the State and the District's taxpayers by each of these functions. Since property taxes for operations and unrestricted State aid constitute the vast majority of the District's operating revenue sources, the Board of Education must annually evaluate the needs of the School District and balance those needs with State-prescribed available unrestricted resources.

60 Gibson County Special School District Management's Discussion and Analysis For the year ended June 30, FINANCIAL ANALYSIS OF THE DISTRICT'S FUNDS As noted earlier, the School District uses funds to help it control and manage money for particular purposes. Looking at funds helps the reader consider whether the District is being accountable for the resources taxpayers and others provide to it and may provide more insight into the District's overall financial health. As the District completed this year, the governmental funds reported a combined fund balance of $16,895,732, which is an increase of $1,745,372 from last year. In the General Fund, our principal operating fund, the fund balance decreased by $2,807,715, mainly due to construction costs associated with enlarging the middle school at Medina.. GENERAL FUND BUDGETARY HIGHLIGHTS Over the course of the year, the District revises its budget as it attempts to deal with changes in revenues and expenditures. A schedule showing the District's original and final budget amounts compared with amounts actually paid and received is provided in the basic financial statements section of these financial statements. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets. At June 30, 2014, the District had $44,641,978 invested in a broad range of capital assets, including buildings, furniture, and equipment. Additional information on the District's capital assets, including depreciation expense, can be found in Note 4 of the Notes to Financial Statements. Debt. At the end of the current fiscal year, the District had general long-term debt outstanding of $34,535,000 versus $35,930,000 at June 30, 2014, a change of 4%. We present more detailed information about our long-term liabilities in Note 4 of the Notes to Financial Statements. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the District's finances for all those interested parties and to show the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact: Gibson County Special School District 130 Highway 45 West P.O. Box 60 Dyer, Tennessee 38330

61 Basic Financial Statements

62 GIBSON COUNTY SPECIAL SCHOOL DISTRICT DISTRICT-WIDE STATEMENT OF NET POSITION June 30, ASSETS Cash $ 8,505,704 Investments 500,000 Accounts Receivable 71 Taxes Receivable 5,080,220 Due from other Governments 741,340 Inventory 38,375 Capital Assets: Land 124,936 Construction in Progress 8,947,294 Buildings and Improvements 52,474,977 Vehicles 3,447,918 Furniture and Equipment 1,559,945 Less: Accumulated Depreciation (21,913,092) Total Assets 59,507,688 LIABILITIES Accounts Payable 12,023 Accrued Liabilities 642,406 Accrued Payroll 1,482,176 Accrued Interest Payable 442,833 Long-term Liabilities: Net OPEB Obligation 417,298 Portion due or payable within one year: Bonds and notes payable 1,395,000 Portion due or payable after one year Bonds and notes payable 33,140,000 Total Liabilities 37,531,736 DEFERRED INFLOWS OF RESOURCES Deferred Revenue 5,080,220 NET POSITION Net investment in capital assets 10,106,978 Restricted for: Career Ladder 100,803 Cafeteria 540,092 Unrestricted 6,047,056 Total Net Position $ 16,895,732 See auditors' report and accompanying notes to financial statements.

63 GIBSON COUNTY SPECIAL SCHOOL DISTRICT DISTRICT-WIDE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, Net (Expense) Revenue and Changes in Net Program Revenues Position Capital Operating Charges for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Activities Governmental Activities: Instruction: Regular Education $ 12,850,720 $ - $ - $ 1,041,205 $ (11,809,515) Special Education 2,212, ,631 (1,575,580) Student Body Education 129, (129,940) Vocational Education 867, ,509 (834,035) Support Services: Attendence Services 60, (60,029) Health Services 292, (292,337) Other Student Support 614, (614,915) Regular Instruction 2,118, (2,118,653) Vocational Education 48, (48,923) Special Education 183, (183,757) Guidance 302, (302,500) Adult School 3, (3,000) Board of Education 397, (397,129) Office of Superintendent 199, (199,886) Office of the Principal 1,581, (1,581,872) Fiscal Services 159, (159,289) School Age Childcare 193, , (2,986) Operation of Plant 1,873, (1,873,570) Maintenance of Plant 432, (432,844) Transportation 1,376, (1,376,960) Non-Instructional Services: Food Service 1,856, ,147-1,106,238 (11,766) Community Services Early Childhood Education 404, (404,966) Capital Outlay Bond Issue Costs Interest on Debt 1,553, (1,553,607) Total District $ 29,714,014 $ 928,372 $ - $ 2,817,583 $ (25,968,059) General Revenues: Local Option Sales Tax 2,451,320 Property Taxes 5,030,055 Interstate Telecommunications Taxes 2,189 Other Taxes 79,366 Intergovernmental: Basic Education Program 20,034,039 Interest 19,560 Other Miscellaneous Revenues 96,902 Total General Revenues 27,713,431 Change in Net Position 1,745,372 Net Position, Beginning 15,150,360 Net Position, Ending $ 16,895,732 See auditors' report and accompanying notes to financial statements.

64 GIBSON COUNTY SPECIAL SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS June 30, Total Federal Governmental General Projects Cafeteria Funds ASSETS Cash $ 7,547,945 $ 392,685 $ 565,074 $ 8,505,704 Investments 500, ,000 Accounts Receivable Property Taxes Receivable 5,080, ,080,220 Due from Other Governments 271, ,226 79, ,340 Due from Other Funds 881,777 3, ,749 Inventory ,375 38,375 Total Assets $ 14,281,949 $ 786,883 $ 682,627 $ 15,751,459 LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable $ 2,757 $ 9,266 $ - $ 12,023 Accrued Liabilities 642, ,406 Accrued Payroll 1,482, ,482,176 Due To Other Funds 3, , , ,749 Deferred Revenue - Taxes 5,080, ,080,220 Total Liabilities 7,211, , ,160 8,102,574 Fund Balances: Nonspendable: Inventory ,375 38,375 Restricted for: Career Ladder 100, ,803 Federal Projects Cafeteria , ,092 Committed 1,443, ,443,908 Unassigned 5,525, ,525,707 Total Fund Balances 7,070, ,467 7,648,885 Total Liabilities and Fund Balances $ 14,281,949 $ 786,883 $ 682,627 $ 15,751,459 See auditors' report and accompanying notes to financial statements.

65 GIBSON COUNTY SPECIAL SCHOOL DISTRICT RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO STATEMENT OF NET POSITION JUNE 30, Amounts reported for governmental activities on the statement of net position are different because of the following: Fund balances - total governmental funds $ 7,648,885 Capital assets used in governmental funds are not financial resources and therefore are not reported as assets in governmental funds 44,641,978 Some payables are not due and payable in the current period and, therefore are not reported in the funds: Accrued interest (442,833) Net OPEB Obligation is considered a long-term liability and not due in the current period, therefore, is not reported in the funds (417,298) Long-term liabilities, including bonds, notes, and lease payables, are not due in the current period and, therefore, are not reported in the funds (34,535,000) Net position of governmental activities $ 16,895,732 The Notes to Basic Financial Statements are an integral part of this statement. See auditors' report and accompanying notes to financial statements.

66 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended June 30, Total General Federal Governmental Fund Projects Cafeteria Funds Revenues Taxes $ 7,590,007 $ - $ - $ 7,590,007 Intergovernmental 20,034,039 1,711,345 1,106,238 22,851,622 Miscellaneous 278, ,036 1,017,757 Total Revenues 27,902,767 1,711,345 1,845,274 31,459,386 Expenditures Current: Instruction 13,729,725 1,050,096-14,779,821 Student Support 9,010, ,713-9,659,159 Food Services - - 1,856,151 1,856,151 Operation of Non-Instructional Services 404, ,966 Capital Outlay 4,616,738 12,536-4,629,274 Debt Service: Principal 1,395, ,395,000 Interest 1,553, ,553,607 Total Expenditures 30,710,482 1,711,345 1,856,151 34,277,978 Excess Revenues Over (Under) Expenditures (2,807,715) - (10,877) (2,818,592) Fund Balance, Beginning 9,878, ,344 10,467,477 Fund Balance, Ending $ 7,070,418 $ - $ 578,467 $ 7,648,885 See auditors' report and accompanying notes to financial statements.

67 GIBSON COUNTY SPECIAL SCHOOL DISTRICT RECONCILIATION OF STATEMENT REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended June 30, Amounts reported for governmental activities in that statement of activities are different because: Net change in fund balances - total governmental funds $ (2,818,592) Governmental funds report capital outlay as expenditures. However, in the district-wide statement of activities and changes in net assets, the cost of those assets is allocated over their estimated useful lives as depreciation expense This is the amount of capital assets recorded in the current period. 4,903,002 The repayment of the principal of long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities on the statement of net assets. 1,395,000 Increase in the Net OPEB Obligation is reported in the district-wide statement of 17,750 activities and changes in net assets, but it does not require the use of current financial resources. Depreciation expense on capital assets is reported in the district-wide statement of activities and changes in net assets, but they do not require the use of current financial resources. Therefore, depreciation expense is not reported as an expenditure in the governmental funds. (1,751,788) Change in net position of governmental activitie $ 1,745,372 The Notes to Basic Financial Statements are an integral part of this statement. See auditors' report and accompanying notes to financial statements.

68 Fund Financial Statements

69 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL PURPOSE FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Revenues Taxes Real Estate Taxes $ 4,934,961 $ 4,963,470 $ 5,030,055 $ 66,585 In Lieu of Taxes - 10,045 10,045 - Penalties and Interest 20,000 27,077 27,077 - Local Sales Tax 2,200,000 2,200,000 2,451, ,320 Interstate Telecommunications 1,500 2,189 2,189 - Pick-Up Taxes 30,000 67,321 67,321 - Marriage License 1,400 1,400 1, Alcoholic Beverage Tax Total Taxes 7,188,361 7,272,002 7,590, ,005 Intergovernmental Revenues State of Tennessee - Basic Education Program 18,584,000 18,842,000 18,842,000 - State of Tennessee - Early Childhood Education 407, , ,966 (2,671) State of Tennessee - Career Ladder 97, , ,815 - State of Tennessee - Energy Efficient School - 16,082 14,300 (1,782) Federal Emergency Management Agency 415, , ,276 (300,941) Safe Schools- ARRA 20, State of Tennessee - Other 125, , ,682 33,518 Total Intergovernmental Revenues 19,649,354 20,305,915 20,034,039 (271,876) Miscellaneous Revenues Receipts From Individual Schools 43,904 69,825 69,825 - Interest Earnings 20,000 20,000 18,671 (1,329) School Age Childcare 205, , ,225 (15,059) Total Miscellaneous Revenues 269, , ,721 (16,388) Total Revenues 27,106,903 27,873,026 27,902,767 29,741 Expenditures Instruction Regular Instruction Program Salaries - Teachers 8,292,320 8,292,320 8,140, ,511 Salaries - Career Ladder 87,000 87,000 73,939 13,061 Salaries - Educational Assistants 312, , ,132 - Salaries - Substitute Teachers 85, , ,219 - Salaries - Homebound ISS 5,000 5,000 3,867 1,133 Social Security 544, , ,398 50,095 State Retirement 772, , ,157 28,319 Life Insurance 10,000 10,000 7,892 2,108 Medical Insurance 868, , ,512 41,893 Medicare 127, , ,083 11,258 Maintenance and Repair- Equipment 1,000 1,000-1,000 Other Contracted Services 87,000 87,000 80,540 6,460 Instructional Supplies 140, ,000 91,580 48,420 Other Supplies and Materials 75,000 75,000 38,021 36,979 Equipment 10,000 10,000 9, Textbooks 156,000 51,111 49,889 1,222 Total Regular Instructional Program 11,573,514 11,568,497 11,174, ,266 Special Education Program Salaries - Teachers 922, , ,658 28,663 Salaries - Career Ladder 3,000 3,000 2, Salaries - Homebound ISS 3,000 3,000 2, Salaries - Educational Assistants 291, , ,358 12,747 Salaries - Substitute Teachers 6,000 24,872 22,836 2,036 Social Security 75,976 76,596 66,718 9,878 See auditors' report and accompanying notes to financial statements.

70 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL PURPOSE FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) State Retirement 104, ,559 99,797 4,762 Medicare 17,769 17,914 15,629 2,285 Medical Insurance 168, , ,865 15,336 Contracted Services 7,000 7,000 2,228 4,772 Evaluation and Testing 38,000 48,000 26,950 21,050 Instructional Supplies 8,750 44,109 12,306 31,803 Maintenance and Repair 2,000 2, ,706 Other Supplies and Materials 2,000 12,000 2,781 9,219 Total Special Education Program 1,649,553 1,715,677 1,570, ,437 Student Body Education Program Salaries - Other 86,311 89,472 89,472 - Social Security 5,351 4,975 4,975 - State Retirement 7,342 7,621 7,621 - Medicare 1,252 1,164 1,163 1 Medical Insurance 9,881 9,043 9,043 - Communication 1,500 1,268 1, Travel 11,000 7,080 7,088 (8) Other Charges Other Supplies and Materials 2,363 8,810 8,809 1 Total Student Body Education Program 125, , , Vocational Education Program Salaries - Teachers 657, , ,694 - Salaries - Career Ladder 3,000 2,000 2,000 - Salaries - Substitute Teachers 10,000 10,293 10,293 - Other Charges 5,000 4,127 4,127 - Social Security 41,550 37,781 37,781 - State Retirement 58,622 57,037 57,037 - Medical Insurance 40,943 62,251 62,251 - Medicare 9,717 8,890 8,890 - Instructional Supplies 14,400 14,957 14,957 - Other Supplies and Materials Vocational Instruction Equipment 3, Total Vocational Education Program 843, , ,314 - Total Instruction 14,191,957 14,269,487 13,729, ,762 Student Support Student Support Attendance Services Salaries - Supervisor/Director 45,938 46,184 46,184 - Salaries - Career Ladder 1,000 1,000 1,000 - Social Security 2,848 2,848 2, State Retirement 4,079 4,190 4,190 - Medical Insurance 3,841 3,886 3,886 - Medicare Travel 2,800 2,397 1, Total Student Support Attendance Services 61,172 61,171 60,029 1,142 Health Services Medical Personnel 235, , ,161 8,908 Travel 7,500 7,500 3,686 3,814 Drugs and Medical Supplies 5,000 6,210 4,874 1,336 Social Security - 14,574 13,047 1,527 State Retirement 32,439 17,865 17, Medical Insurance 26,826 23,969 15,536 8,433 Medicare 3,409 3,409 3, Other Charges 5,630 7,276 7, Equipment 3,000 3,000 1,732 1,268 See auditors' report and accompanying notes to financial statements.

71 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL PURPOSE FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Total Student Support Health Services 318, , ,337 26,535 Other Student Support Salaries - Career Ladder - 2,000 2,000 - Salaries - Guidance Personnel 391, , ,025 3,126 Career Ladder 1,000 1,000-1,000 Social Security 24,313 24,313 22,239 2,074 Travel 1,200 1,285 1,285 - Medical Insurance 35,050 34,259 33,153 1,106 State Retirement 34,823 34,823 34, Medicare 5,686 5,686 5, Evaluation and Testing 68,000 64,842 64,842 - Instructional Supplies and Materials 2,700 2,700 2,700 - Contracts with Government Agencies 45,000 45,000 44, Contracted Services 3,000 4,865 4,865 - Total Student Support Other Services 611, , ,507 8,417 Regular Instruction Program Salaries - Supervisor/Director 232, , ,581 3,785 Salaries - Career Ladder 1,000 1,000 1,000 - Salaries - Librarians 260, , ,351 - Salaries - Other 234, , ,844 3,635 Medicare 10,557 10,772 10, Social Security 45,139 46,056 43,068 2,988 State Retirement 61,647 64,194 64,194 - Medical Insurance 63,921 65,321 57,228 8,093 Consultants 5,000 5,000-5,000 Maintenance and Repair 15,000 15,000 6,162 8,838 In-service Training 55,000 55,000 41,668 13,332 Equipment 245, , ,905 35,235 Travel 24,000 24,000 16,851 7,149 Contracted Services 338, , ,444 20,887 Other Supplies and Materials 40,000 40,000 23,329 16,671 Library Books/Media 31,500 32,397 32,397 - Total Regular Instruction Program 1,662,919 1,964,407 1,838, ,313 Special Education Program Salaries - Supervisor/Director 77,461 77,461 77,461 - Salaries - Career Ladder 1,000 1,000 1,000 - Salaries - Clerical Personnel 28,848 28,848 28,848 - Travel 6,000 7,000 4,109 2,891 Medical Insurance 8,765 8,765 8, Social Security 6,653 6,653 6, State Retirement 9,183 9,183 9, Other Supplies and Materials 1,000 4, ,010 Medicare 1,556 1,556 1, Maintenance and Repair- Equipment 1,000 1,000-1,000 In-service Training 10,000 12,395 12,395 - Equipment 1,000 13, ,845 Contracted Services 45,000 50,000 32,842 17,158 Total Special Education Program 197, , ,757 37,709 Vocational Education Program Salaries - Supervisor/Director 33,411 33,411 33,411 - Salaries - Career Ladder Medicare Medical Insurance 4,859 4,859 4, Social Security 2,102 2,102 1, State Retirement 3,011 3,011 3,011 - See auditors' report and accompanying notes to financial statements.

72 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL PURPOSE FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Travel 5,000 5,000 4, Total Vocational Education Program 49,375 49,375 48, Adult Education Other Contracted Services 4,000 4,000 3,000 1,000 Total Adult Education 4,000 4,000 3,000 1,000 Office of the Superintendent Salaries - Administrative Officer 96,900 97,900 97,900 - Salaries - Other 30,180 30,180 30,180 - Career Ladder 1, Social Security 7,941 7,941 7, State Retirement 15,882 15,882 15,882 - Medical Insurance 20,496 20,496 20,495 1 Dental Insurance 950 1,293 1,292 1 Vision Insurance Medicare 1,857 1,857 1, Communication 18,500 18,500 12,615 5,885 Travel 4,000 3,657 2,117 1,540 Office Supplies 13,000 13,000 7,211 5,789 Postal Charges 4,500 4,500 2,815 1,685 Total Office of the Superintendent 215, , ,886 15,645 School Age Childcare Supervisor/Director 29,326 30,188 30,188 - Educational Assistants 75,545 75,545 74, Social Security 6,735 6,735 6, State Retirement 2,046 2,046 1, Medicare 1,587 1,587 1, Travel Instructional Supplies 14, Other Supplies and Materials 52,485 70,771 70,771 - Other Charges 10,000 10,000 8,000 2,000 Regular Instruction Equipment 12,500 7,912-7,912 Total School Age Childcare 205, , ,211 12,073 Office of the Principal Salaries - Principals 642, , ,965 7,138 Salaries - Assistant Principals 426, , ,895 - Salaries - Career Ladder 14,500 14,500 14,500 - Salaries - Secretaries 203, , ,380 - Social Security 79,743 74,644 74, Medicare 18,650 18,650 17,343 1,307 State Retirement 111, , , Medical Insurance 95,069 97,469 97,469 - Total Office of the Principal 1,591,249 1,591,249 1,581,872 9,377 Fiscal Services Salaries - Supervisor/Director 85,989 85,989 85,989 - Salaries - Accountants/Bookkeepers 49,351 47,694 37,932 9,762 Internal Audit Personnel 1,000 1,000-1,000 State Retirement 11,386 11,386 10, Social Security 8,391 8,391 7,175 1,216 Medicare 1,962 1,962 1, Medical Insurance 3,988 5,524 5,524 - In-service Training 3,000 3, ,798 Travel 1,000 1,121 1,121 - Other Contracted Services 6,348 6, ,536 Data Processing Supplies 1,000 1, See auditors' report and accompanying notes to financial statements.

73 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL PURPOSE FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Other Equipment 10,000 10,000 7,817 2,183 Total Fiscal Services 183, , ,289 24,126 Maintenance of Plant Salaries - Maintenance Personnel 204, , ,526 18,401 Social Security 12,705 12,705 10,655 2,050 State Retirement 15,574 15,574 14,157 1,417 Medical Insurance 16,186 20,253 20,253 - Medicare 2,971 2,971 2, Other Supplies and Materials 110, ,000 81,482 28,518 Maintenance and Repairs 110, ,933 60,396 45,537 Other Contracted Services 68,000 68,000 52,561 15,439 Other Charges 8,000 8,000 4,322 3,678 Total Maintenance of Plant 548, , , ,519 Board of Education Board Fees 22,000 22,000 19,769 2,231 Social Security 1,364 1, ,004 Medicare Audit Service 34,000 34,000 33,000 1,000 Dues and Memberships 15,000 16,738 16,738 - Legal Services 45,000 36,106 27,300 8,806 Travel 8,000 8,000 2,739 5,261 Other Contracted Services 10,000 10,000 2,219 7,781 Insurance 58,666 58,666 58, Workers Compensation 79,290 81,759 81,759 - Trustee Commission 121, , ,678 - Premium on Bonds 4,080 4,667 4,667 - Unemployment Compensation 50,000 50,000 24,182 25,818 Total Board of Education 449, , ,129 52,168 Operation of Plant Contracted Services 782, , ,582 6,670 Disposal Fee 48,000 48,000 43,285 4,715 Electricity 675, , ,719 48,281 Natural Gas 175, , ,893 1,107 Water and Sewer 90,000 90,000 82,623 7,377 Other Supplies 20,000 20,000 15,047 4,953 Insurance 142, , ,421 1,646 Total Operation of Plant 1,932,237 1,948,319 1,873,570 74,749 Transportation Salaries - Supervisor/Director 22,934 22,728 22,728 - Salaries - Bus Drivers 332, , ,020 - State Retirement 27,309 22,855 22,855 - Social Security 22,039 18,482 18,482 - Medicare 5,154 5,115 5,115 - Medical Insurance 30,839 24,448 24,448 - Gasoline 206, , ,932 - Travel 2,000 1,564 1,564 - Contracts with Public Agencies 130, , ,510 - Other Contracted Services 2,250 2,250 2,250 - Vehicle and Equipment Insurance 40,849 40,849 40,849 - Equipment 284, , ,452 - Other Charges 15,000 16,793 16,793 - Total Transportation 1,121,404 1,142,998 1,142,998 - Total Student Support 9,152,508 9,515,671 9,010, ,225 See auditors' report and accompanying notes to financial statements.

74 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL PURPOSE FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Operation of Non-instructional Services Early Chidhood Education Salaries - Teachers 157, , ,446 - Salaries - Career Ladder - 1,000 1,000 - Salaries - Other 81,909 86,385 86,385 - Social Security 14,846 13,756 13,756 - State Retirement 20,549 20,549 20, Medical Insurance 23,754 20,809 20,809 - Medicare 3,472 3,227 3,227 - Travel 8, Other Contracted Services 40,000 42,675 42,675 - Other Supplies and Materials 45,561 49,872 49,872 - In-service Training 8,000 8,000 6,009 1,991 Equipment 2,000 1,977 1, Total Early Childhood Education 405, , ,966 2,672 Debt Services Principal 1,395,000 1,395,000 1,395,000 - Interest 1,553,663 1,553,663 1,553, Total Debt Services 2,948,663 2,948,663 2,948, Capital Outlay/Capital Projects Architects 23, , ,353 20,098 Other Contracted Services 450,807 4,179,303 4,179,303 - Furniture & Fixtures 57,200 63,446 63,446 - Instruction Equipment 76,300 69,188 42,489 26,699 Other Equipment 19,400 19,400-19,400 Other Capital Outlay 225, , ,147 84,259 Total Capital Outlay/Capital Projects 852,434 4,767,194 4,616, ,456 Total Expenditures 27,551,199 31,908,653 30,710,482 1,198,171 Excess of Revenues Over (Under) Expenditures (444,296) (4,035,627) (2,807,715) 1,227,912 and Other Financing Uses (444,296) (4,035,627) (2,807,715) 1,227,912 Fund Balance - Beginning 9,878,133 9,878,133 9,878,133 - Fund Balance - Ending $ 9,433,837 $ 5,842,506 $ 7,070,418 $ 1,227,912 See auditors' report and accompanying notes to financial statements.

75 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - FEDERAL PROJECTS FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Revenues State of Tennessee $ 1,794,382 $ 1,929,028 $ 1,711,345 $ (217,683) Total Revenues 1,794,382 1,929,028 1,711,345 (217,683) Expenditures Instruction Vocational Instruction Maintenance & Repair 948 1,985 1,985 - Instructional Supplies 8,201 8,648 8,648 - Equipment Capital Outlay 13,910 12,536 12,536 - Travel Total Vocational Instruction 24,765 24,766 24,766 - Regular Instruction Salaries - Teachers 85,880 85,810 85, Salaries - Educational Assistants 209, , ,820 8,754 Social Security 18,319 19,359 17,231 2,128 State Retirement 21,638 22,914 22, Medical Insurance 27,990 38,595 29,540 9,055 Medicare 4,284 4,528 4, Instructional Supplies 7,930 48,363 14,206 34,157 Other Charges Equipment 8,165 33,855 4,094 29,761 Total Regular Instruction 384, , ,895 85,603 Special Education Salaries - Teachers 112, , ,547 1,908 Salaries - Speech Pathologist 91,381 92,881 92, Salaries - Educational Assistants 231, , ,365 17,763 Social Security 26,968 27,775 24,125 3,650 State Retirement 35,666 36,655 34,636 2,019 Medical Insurance 55,466 55,466 54,367 1,099 Medicare 6,307 6,496 5, Maintenance and Repair- Equipment 1,000 1,000-1,000 Evaluation and Testing 18,500 19,751 18,130 1,621 Contracted Services 8,253 25,503 25,503 - Instructional Supplies 5,500 31,727 15,590 16,137 Equipment 3,700 30,443 30, Total Special Education 596, , ,971 46,309 Total Instruction 1,005,511 1,194,544 1,062, ,912 Other Student Support Regular Instruction Salaries - Supervisors 40,128 40,130 40, Salaries - Clerical Personnel 17,537 18,138 18,138 - Salaries - Other 101, , ,554 2,500 Social Security 9,306 10,510 9,374 1,136 State Retirement 12,536 14,782 14, Medical Insurance 7,426 12,836 10,597 2,239 Medicare 2,410 2,457 2, Travel 1,500 7,500 1,888 5,612 Other Supplies and Materials 3,052 45,162 45,162 - See auditors' report and accompanying notes to financial statements.

76 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - FEDERAL PROJECTS FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Equipment 2,521 13,522 6,491 7,031 In-Service Training 4,295 53,818 7,305 46,513 Other Charges 1,000 1, Other Equipment 11,731 16,110 16, Total Regular Instruction 215, , ,559 66,460 Community Service Salaries- Supervisor/Director 108, , ,491 - Salaries- Teachers 215,770 73,658 73,658 - Salaries- Assistants 56,831 35,337 35,337 Social Security 23,649 12,387 12,387 - State Retirement 31,931 15,297 15,297 - Medical Insurance 19,136 14,334 14,334 - Medicare 5,535 2,924 2,924 - Communication Maintenance and Repaor Travel 19,330 12,841 12,841 - Contracted Services 21,500 3,944 3,944 - Other Supplies and Materials 31,760 27,918 27,918 - Other Equipment 5, Total Community Service 540, , ,500 - Health Services Contracted Services - 10,458 1,005 9,453 Supplies & Materials - 31,124 21,266 9,858 Equipment - 9,615 9,615 - Total Health Services - 51,197 31,886 19,311 Other Student Support Travel 11,408 11,408 11,408 - Total Other Student Support 11,408 11,408 11,408 - Transportation Salaries - Bus Drivers 17,232 17,232 17,232 - Social Security 1,068 1,068 1,068 - State Retirement 1,310 1,310 1,310 - Medicare Gasoline 2,500 2,500 2,500 - Total Transportation 22,360 22,360 22,360 - Total Other Student Support 788, , ,713 85,771 Total Expenditures 1,794,382 1,929,028 1,711, ,683 Excess Revenues Over (Under) Expenditures Fund Balance - Beginning Fund Balance - Ending $ - $ - $ - $ - See auditors' report and accompanying notes to financial statements.

77 GIBSON COUNTY SPECIAL SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - CAFETERIA FUND For the Year Ended June 30, Budgeted Amounts Variance Favorable Original Final Actual (Unfavorable) Revenues Lunch Payment - Children $ 706,999 $ 706,999 $ 640,035 $ (66,964) Lunch Payment - Adults 51,627 51,627 44,485 (7,142) U.S.D.A. Reimbursments 1,132,091 1,132,091 1,086,096 (45,995) State School Matching 19,577 19,577 20, Interest A La Carte Sales 56,116 56,116 53,627 (2,489) Total Revenues 1,967,075 1,967,075 1,845,274 (121,801) Expenditures Food 862, , ,802 49,863 USDA Commodities 128, , ,807 9,163 Labor 509, , ,235 14,667 Supervisor 48,227 48,227 48,227 - Accountants 19,960 19,960 19, Other Contracted Services 9,500 12,883 12,883 - Social Security 34,793 34,793 30,742 4,051 State Retirement 42,464 42,464 40,176 2,288 Medical Insurance 97,752 97,752 72,763 24,989 Unemployment Employer Medicare 8,137 8,137 7, Communication Utilities 100, , ,160 - In-Service Training 3,058 3,058-3,058 Staff Development 2,292 7,159 7,159 - Equipment 24,250 29,058 29,058 - Non-Food Supplies 58,770 68,457 68,457 - Maintenance and Repair 8,500 8,862 8,862 - Travel 1,500 1,500 1, Uniforms 5,700 5,700 4, Total Expenditures 1,967,075 1,967,075 1,856, ,924 Excess Revenues Over (Under) Expenditures - - (10,877) (10,877) Fund Balance - Beginning 589, , ,344 - Fund Balance - Ending $ 589,344 $ 589,344 $ 578,467 $ (10,877) See auditors' report and accompanying notes to financial statements.

78 NOTES TO BASIC FINANCIAL STATEMENTS

79 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The Gibson County School District's Board of Education (the District) is an on-going board which has governance responsibilities over all activities related to the public elementary and secondary education within the jurisdiction of Gibson County exclusive of Special School Districts within the County. The Board is elected by the public and receives funding from local, state and federal government sources. It must therefore comply with the requirements of these funding entities. As required by generally accepted accounting principles, these financial statements present all funds, which comprise the District. These financial statements present the District as "The Primary Government" and there are no other component units, entities for which the District is considered financially accountable, which should be included. B. District-wide and Fund Financial Statements The district-wide financial statements (i.e., the statements of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of the interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues. The statement of activities demonstrates the degree to which the direct expenses of the given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. C. Measurement Focus, Basis of Accounting, and Financial Statements Presentation The district-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Gross receipt taxes, sales taxes, grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government.

80 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, C. Measurement Focus, Basis of Accounting, and Financial Statements Presentation (Continued) The District reports the following major governmental funds: The general fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The federal projects fund is used to account for the federal funding received and disbursed for educational purposes. The cafeteria fund is established to account for all funds received and disbursed relating to the operations of the cafeteria for each school in the district. As a general rule, the effect of interfund activity has been eliminated from the district-wide financial statements. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. When both restricted and unrestricted resources are available for use, it is the District's policy to use the restricted resources first, then unrestricted resources as they are needed. D. Assets, Liabilities, and Net Position or Equity Deposits and Investments The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with maturities of three months or less from the date of acquisition. State statutes authorize the District to invest in certificates of deposit, obligations of the U.S. Treasury, agencies and instrumentalities, obligations guaranteed by the U.S. government or its agencies, repurchase agreements and the state's investment pool. Investments for the District are reported at fair value. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to / from other funds" (i.e., the current portion of interfund loans) or "advances to / from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to / from other funds". Property taxes attach as an enforceable lien on property as of January 1. Taxes are levied on October 1, and become delinquent on March 1. The property taxes are collected by the Trustee of Gibson County and remitted to the District. District property tax revenues are recognized when levied to the extent the resources can be spent, otherwise the revenue is deferred to subsequent periods. Gibson county has a period public sales of delinquent tax properties. Accordingly, there is no allowance for uncollectibles recorded in the financial statements.

81 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, D. Assets, Liabilities, and Net Position or Equity (Continued) Non-current portions of long-term receivables due to governmental funds are reported on their balance sheets, in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered "available spendable resources", since they do not represent net current assets. Recognition of governmental fund type revenues represented by noncurrent receivables is deferred in the governmental fund statements until they become current receivables. For the purpose of operating and maintaining the District, the private act creating the District authorized an annual property tax on every one hundred ($100) assessment of real and personal property located within, the District. The current property tax is $1.80 on every $100 of real and personal property located within the District. Inventories and Prepaid Items Inventories are valued at cost, using the first-in/first-out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both district-wide and fund financial statements. Capital Assets Capital assets, which include buildings and improvements, vehicles, and furniture and equipment, are reported in the applicable district-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of $5,000 (amount not rounded) or more and an estimated useful life in excess of two years. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant, and equipment of the District is depreciated using the straight line method over the following useful lives: Buildings and improvements Machinery and equipment years 5-20 years Deferred Revenue Deferred revenue represents amounts that were receivable and measurable at June 30, 2014 but were not available to finance expenditures for the year ended June 30, Deferred revenues primarily include unearned or unavailable revenues. Compensated Absences The School District provides one day of vacation for each month of service for employees. employees receive one day of sick leave for each month of service. Any sick leave unused is not paid, but is used to increase retirement benefits.

82 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, D. Assets, Liabilities, and Net Position or Equity (Continued) Long-term Liabilities In the district-wide financial statements long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities statement of net position. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity The School System has implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This Statement provides defined fund balance categories to make the nature and extent of the constraints placed on a government s fund balances more transparent. The following classifications describe the relative strength of the spending constraints: Nonspendable fund balance amounts that are not in nonspendable form (such as inventory) or are required to be maintained intact. Restricted fund balance amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. Committed fund balance amounts constrained to specific purposes by the System itself, using its highest level of decision-making authority, the School Board. To be reported as committed, amounts cannot be used for any other purpose unless the Board takes the same highest level action to remove or change the constraint. Committed fund balance of $1,443,918 includes $1,387,181 committed for renovation of the Gibson County High School athletic complex and an addition of a FEMA safe space at Yorkville School. The remaining $56,737 is committed for the School Age Children program. Assigned fund balance amounts the System intends to use for a specific purpose. Intent can be expressed by the School Board or by an official or body to which the Board delegates the authority. Unassigned fund balance amounts that are available for any purpose. Positive amounts are reported only in the general fund. The Board establishes (and modifies or rescinds) fund balance commitments by passage of a resolution. This is typically done through adoption and amendment of the budget. A fund balance commitment is further indicated in the budget document as a designation or commitment of the fund (such as for special incentives). Assigned fund balance is established by School Board through adoption or amendment of the budget as intended for specific purpose (such as the purchase of capital assets, construction, debt service, or for other purposes). The details of the fund balances are included in the Governmental Funds Balance Sheet as listed in the table of contents. Restricted funds are used first as appropriate. Assigned Funds are reduced to the extent that expenditure authority has been budgeted by the School Board or the Assignment has been changed by the Superintendent. Decreases to fund balance first reduce restricted funds; then committed funds; then assigned funds and finally unassigned funds.

83 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, NOTE 2 - RECONCILIATION OF DISTRICT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the District-wide Statement of Net Position The governmental fund balance sheet includes reconciliation between fund balance - total governmental funds and net position - governmental activities as reported in the district-wide statement of net position. One element of that reconciliation explains that "long-term liabilities, including bonds, notes and capital leases payable, are not due and payable in the current period, and; therefore, are not reported in the funds." The details of this $34,535,000 are as follows: School Bonds Payable, Series 2001 $ 3,920,000 School Bonds Payable, Series ,155,000 School Bonds Payable, Series ,975,000 School Bonds Payable, Series ,600,000 School Bonds Payable, Series ,940,000 School Bonds Payable, Series ,070,000 School Bonds Payable, Series ,875,000 $ 34,535,000 Another element of that reconciliation explains that "capital assets used in governmental funds are not financial resources and therefore are not reported as assets in the governmental funds." The details of this $44,641,978 are as follows: Land $ 124,936 Construction in Progress 8,947,294 Buildings and Improvements 52,474,977 Vehicles 3,447,918 Furniture and Equipment 1,559,945 66,555,070 Less accumulated depreciation (21,913,092) Total capital assets, net of accumulated depreciation $ 44,641,978 B. Explanation of Certain Differences Between the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances and the District-wide Statement of Activities One element of that reconciliation states that, "the repayment of the principal of long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities on the statement of net assets." The details of this $1,395,000 are as follows: Principal repayments: School Bonds Payable, Series 2001 $ 545,000 School Bonds Payable, Series ,000 School Bonds Payable, Series ,000 School Bonds Payable, Series ,000 School Bonds Payable, Series ,000 School Bonds Payable, Series ,000 School Bonds Payable, Series ,000 $ 1,395,000

84 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, NOTE 3 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary Information The School District is required by State statute to adopt annual budgets. The annual budgets are prepared on the basis where current available funds must be sufficient to meet current expenditures. Expenditures may not legally exceed appropriations authorized by the School Board and any authorized revisions. Unencumbered appropriations lapse at the end of each fiscal year unless the Board authorizes retention. The School District's policy is not to allow expenditures to exceed budgetary amounts at the total fund expenditure level. NOTE 4 - DETAILED NOTES ON ALL FUNDS A. Deposits and Investments The School District has implemented GASB Statement No. 40, "Deposits and Investment Risk Disclosures" for financial reporting of deposit and investment risks. Investments were made up of certificates of deposits investments with the State of Tennessee Local Government Investment Pool. Custodial Credit Risk The School District's policies limit deposits and investments to those instruments allowed by applicable state laws and described in Note 1. State statute requires that all deposits with financial institutions must be collateralized by securities whose market value is equal to 105% of the value of uninsured deposits. The deposits must be collateralized by federal depository insurance of the Tennessee Bank Collateral Pool, by collateral held by the School District's agent in the School District's name, or by the Federal Reserve Banks acting as third party agents. State statutes also authorize the School District to invest in bonds, notes or treasury bills of the United States or any of its agencies, certificates of deposit at Tennessee state chartered banks and savings and loan associations and federally chartered banks and savings and loan associations, repurchase agreements utilizing obligations of the United States or its agencies as the underlying securities, the state pooled investment fund, and mutual funds. Statutes also require that securities underlying repurchase agreements must have a market value of at least equal to the amount of funds invested in the repurchase transaction. As of June 30, 2013, all bank deposits were fully collateralized or insured. B. Receivables General Federal Cafeteria Total Receivables: Property Taxes $ 5,080,220 $ - $ - $ 5,080,220 Accounts Intergovernmental 271, ,226 79, ,340 Total Receivables $ 5,352,257 $ 390,226 $ 79,178 $ 5,821,631 Amounts in the General Fund called due from other governments represent the normal amounts due from state and county governments for shared revenues and tax allocations.

85 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, C. Capital Assets Capital asset activity for the year ended June 30, 2014, was as follows: Capital Assets Beg Bal Increases Decreases End Bal Nondepreciable Assets Land 124, ,936 Construction in Progress 4,651,638 4,295,656-8,947,294 Depreciable Assets Buildings and Improvements 52,348, ,346-52,474,977 Vehicles 3,241, ,752 80,000 3,447,918 Furniture and Equipment 1,365, ,248-1,559,945 Total Capital Assets 61,732,068 4,903,002 80,000 66,555,070 Less: Accumulated Depreciation Buildings and Improvements 17,048,698 1,364,498-18,413,196 Vehicles 2,582, ,602 80,000 2,713,888 Furniture and Equipment 610, , ,008 Total Accumulated Depreciation 20,241,304 1,751,788 80,000 21,913,092 Net Capital Assets 41,490,764 3,151,214-44,641,978 Depreciation Expense was charged to function/programs of the primary government as follows: Governmental Activities: Regular Instruction $ 1,540,186 Transportation 211,602 Total Depreciation Expense- Governmental Activities $ 1,751,788 D. Interfund Receivables and Payables The composition of interfund balances as of June 30, 2014, is as follows: Receivable Fund Payable Fund Amount General Fund Federal Projects $ 777,617 General Fund Cafeteria Fund 104,160 Federal Projects General Fund 3,972 The outstanding balances between funds are basically due to timing differences between the dates that reimbursable expenditures occur and the payments between funds are made. The School District expects that all of the balances noted will be repaid within the next fiscal year.

86 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, E. Long-Term Debt Long-Term Debt consists of the following: During the year ended June 30, 2002, the School system issued $6,350,000 in School Refunding Bonds, Series 2001, that bears interest varying from 4.0% to 5.25% to advance refund $6,170,000 of outstanding 1999 Series bonds bearing interest in a range of 4.75% to 5.625%. The net proceeds of $6,543,491 (after payment of $125,975 in underwriting fees, insurance, and other issuance costs) were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the 1999 Series bonds. As a result, a portion of the 1999 Series bonds are considered to be defeased and the liability for those bonds has been removed from the financial statements. No principal payments were made on the defeased bonds during the year ended June 30, 2010, which resulted in a $6,225,000 balance. Principal payments of $2,595,000 were made on the remaining Series 1999 bonds during the year ended June 30, 2010 through the issuance of Series 2009 bonds.. Principal payments of $545,000 were made on the Series 2001 bonds during the year which resulted in a June 30, 2014 balance of $3,920,000. During the year ended June 30, 2006, the School system issued $1,700,000 in School Bonds, Series 2005, which bears interest at an average rate of 4.5%. The bonds are callable on April 1, 2015 at par for bonds maturing April 1, 2016 and thereafter. The current debt service schedule provides for the bonds to mature as of April 1, The proceeds of the bonds were used for building construction within the School system. Principal payments of $80,000 were made on the Series 2005 bonds during the year which resulted in a June 30, 2014 balance of $1,155,000. During the year ended June 30, 2008, the School system issued $14,575,000 in School Bonds, Series 2007, which bears interest at an average rate of 4.73%. The bonds are callable on April 1, 2017 at par for bonds maturing April 1, 2018 and thereafter. The current debt service schedule provides for the bonds to mature as of April 1, The proceeds of the bonds were used for building construction of a new high school within the School system. Principal payments of $100,000 were made on the Series 2007 bonds during the year which resulted in a June 30, 2014 balance of $13,975,000. During the year ended June 30, 2009, the School system issued $7,100,000 in School Bonds, Series 2008, which bears interest at an average rate of 4.83%. The bonds are callable on April 1, 2018 at par for bonds maturing April 1, 2019 and thereafter. The current debt service schedule provides for the bonds to mature as of April 1, The proceeds of the bonds were used for building construction of a new high school within the School system. Principal payments of $100,000 were made on the Series 2008 bonds during the year which resulted in a June 30, 2014 balance of $6,600,000. During the year ended June 30, 2010, the School system issued $4,285,000 in School Bonds, Series 2009, which bears interest at an average rate of 4.01%. The bonds are callable on April 1, 2018 at par for bonds maturing April 1, 2019 and thereafter. The current debt service schedule provides for the bonds to mature as of April 1, The proceeds of the bonds were used for building construction of a new high school within the School system and the refinance of Series 1993 & 1999 Bonds. Principal payments of $315,000 were made on the Series 2009 bonds during the year which resulted in a June 30, 2014 balance of $2,940,000.

87 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, E. Long-Term Debt (Continued) During the year ended June 30, 2012, the School system issued $3,200,000 in School Bonds, Series 2012, which bears interest at an average rate of 2.53%. The bonds are callable on April 1, 2022 at par for bonds maturing April 1, 2022 and thereafter. The current debt service schedule provides for the bonds to mature as of April 1, The proceeds of the bonds were used for building construction of an addition to Medina Middle School. Principle payments of $130,000 were made on the Series 2012 bonds during the year which resulted in a June 30, 2014 balance of $3,070,000. During the year ended June 30, 2013, the School system issued $3,000,000 in School Bonds, Series 2013, which bears interest at an average rate of 2.707%. The bonds are callable on April 1, 2023 at par for bonds maturing April 1, 2023 and thereafter. The current debt service schedule provides for the bonds to mature as of April 1, The proceeds of the bonds were used for capital improvements to South Gibson High School. Principle payments of $125,000 were made on the Series 2013 bonds during the year which resulted in a June 30, 2014 balance of $2,875,000. The annual requirements to amortize all long-term debt obligations outstanding as of June 30, 2014 are as follows: Year Ending Bonds June 30, Principal Interest Total 2015 $ 1,465,000 $ 1,514,946 $ 2,979, ,550,000 1,458,673 3,008, ,650,000 1,396,535 3,046, ,750,000 1,328,223 3,078, ,850,000 1,254,582 3,104, ,084,701 14,814, ,739,603 14,159, ,120, ,976 5,664,976 $ 34,535,000 $ 15,322,236 $ 49,857,236

88 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, E. Long-Term Debt (Continued) Following is a summary of long-term debt transactions for the year ended June 30, 2014: Governmental Activities Beg Bal Additions Retirements End Bal Bonds Payable: School Bonds, Series 2004, 4.50% interest interest, payable serially through 2019 $ 4,465,000 $ 545,000 $ - $ 3,920,000 School Bonds, Series 2005, 4.50% interest payable serially through ,235,000 80,000-1,155,000 School Bonds, Series 2007, 4.73% interest payable serially through ,075, ,000-13,975,000 School Bonds, Series 2008, 4.83% interest payable serially through ,700, ,000-6,600,000 School Bonds, Series 2009, 4.01% interest payable serially through ,255, ,000-2,940,000 School Bonds, Series 2012, 2.53% interest payable serially through ,200, ,000-3,070,000 School Bonds, Series 2013, 2.71% interest payable serially through ,000, ,000-2,875,000 $ 35,930,000 $ 1,395,000 $ - $ 34,535,000 NOTE 5 - OTHER INFORMATION A. Pensions Plan Description Non-Certified Employees of the Gibson County Special School District are members of the Political Subdivision Pension Plan (PSPP), an agent multiple-employer defined benefit pension plan administered by the Tennessee Consolidated Retirement System (TCRS). TCRS provides retirement benefits as well as death and disability benefits. Benefits are determined by a formula using the member's high five-year average salary and years of service. Members become eligible to retire at the age of 60 with five years of service or at any age with 30 years of service. A reduced retirement benefit is available to vested members at the age of 55. Disability benefits are available to active members with five years of service who become disabled and cannot engage in gainful employment. There is no service requirement for disability that is the result of an accident or injury occurring while the member was in the performance of duty. Members joining the system after July 1, 1979, become vested after five years of service and members joining prior to July 1, 1979 were vested after four years of service. Benefit provisions are established in state statute found in Title 8, Chapter of the Tennessee Code Annotated (TCA). State statutes are amended by the Tennessee General Assembly. Political subdivisions such as Gibson County Special School District participate in the TCRS as individual entities and are liable for all costs associated with the operation and administration of their plan. Benefit improvements are not applicable to a political subdivision unless approved by the chief governing body. The TCRS issues a publicly available financial report that includes financial statements and required supplementary information for the PSPP. That report may be obtained by writing to Tennessee Treasury Department, Consolidated Retirement System, 10th Floor Andrew Jackson Building, Nashville, TN or can be accessed at

89 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, A. Pensions (continued) Funding Policy Gibson County Special School District requires employees to contribute 5.0 percent of earnable compensation. Gibson County Special School District is required to contribute at an actuarially determined rate; the rate for the fiscal year ending June 30, 2014, was 9.04% for certified employees and 7.10% for classified employees of the annual covered payroll. The contribution requirement of plan members is set by state statute. The contribution requirement for Gibson County Special School District is established and may be amended by the TCRS Board of Trustees. Annual Pension Cost For the year ending June 30, 2014, Gibson County Special School District's annual pension cost of $98,988 to TCRS was equal to Gibson County Special School District's required and actual contributions. The required contribution was determined as part of the July 1, 2009 actuarial valuation using the frozen entry age actuarial cost method. Significant actuarial assumptions used in the valuation include (a) rate of return on investment of present and future assets of 7.5 percent a year compounded annually, (b) projected 3.0 percent annual rate of inflation (c) projected salary increases of 4.75 percent (graded) annual rate (no explicit assumption is made regarding the portion attributable to the effects of inflation on salaries), (d) projected 3.5 percent annual increase in the Social Security wage base, and (e) projected post retirement increases of 2.5 percent annually. The actuarial value of assets was determined using techniques that smooth the effect of short-term volatility in the market value of total investments over a five-year period. Gibson County Special School District's unfunded actuarial accrued liability is being amortized as a level dollar amount on a closed basis. The remaining amortization period at July 1, 2011 was 4 years. An actuarial valuation was performed as of July 1, 2011, which established contribution rates effective July 1, Trend Information Annual Pension Cost (APC) Percentage of A Contributed Net Pension Obligation Fiscal Year 6/30/2014 $ 98, % $ 0 6/30/ , % 0 6/30/ , % 0 Plan Description - Certified The Gibson County Schools contribute to the State Employees, Teachers, and Higher Education Employees Pension Plan (SETHEEPP), a cost-sharing multiple employer defined benefit pension plan administered by the Tennessee Consolidated Retirement System (TCRS). TCRS provides retirement benefits as well as death and disability benefits to plan members and their beneficiaries. Benefits are determined by a formula using the member's high five-year average salary and years of service. Members become eligible to retire at the age of 60 with five years of service or at any age with 30 years of service. A reduced retirement benefit is available to vested members who are at least 55 years of age or have 25 years of service. Disability benefits are available to active members with five years of service

90 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, 2014 who become disabled and cannot engage in gainful employment. There is no service requirement for disability that is the result of an accident or injury occurring while the member was in the performance of duty. Members joining the plan on or after July 1, 1979 are vested after five years of service. Members joining prior to July 1, 1979 are vested after four years of service. Benefit provisions are established in state statute found in Title 8, Chapters of the Tennessee Code Annotated (TCA). State statutes are amended by the Tennessee General Assembly. Cost of living adjustments (COLA) are provided to retirees each July based on the percentage change in the Consumer Price Index (CPI) during the previous calendar year. No COLA is granted if the CPI increases less than one-half percent. The annual COLA is capped at three percent. The TCRS issues a publicly available financial report that includes financial statements and required supplementary information for the SETHTTPP. The report may be obtained by writing to the Tennessee Treasury Department, Consolidated Retirement System, 10th Floor Andrew Jackson Building, Nashville, or can be accessed at Fundinq Policy Most teachers are required by state statute to contribute 5.0% of salary to the plan. The employer contribution rate for Gibson County Schools is established at an actuarially determined rate. The employer rate for the fiscal year ending June 30, 2013 was 9.04% for certified employees and 7.1% for classified employees of the annual covered payroll. The employer contribution requirement for Gibson County Schools is established and may be amended by the TCRS Board of Trustees. The employer's contributions to TCRS for the years ending June 30, 2014, 2013, and 2012 were $1,140,084, $1,303,969, and $1,063,401, respectively, equal to the required contributions for each year. B. Contingent Liabilities and Losses Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal and state governments. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantors cannot be determined at this time although the District's management expects such amounts, if any, to be immaterial. C. Risk Management The School Board has obtained insurance from the Tennessee Risk Management Trust (TRMT), which is a public entity risk pool established to provide insurance coverage to local school boards in Tennessee. The Board pays an annual premium to TRMT for insurance. The creation of TRMT provides for it to be self-sustaining through member premiums. The TRMT reinsures through commercial insurance companies for claims in excess of $100,000 for each insured event. It is the policy of the School to purchase commercial insurance for the risks of losses to which it is exposed. These risks include general liability, property and casualty, worker's compensation, employee health, public officials liability, accident and environmental. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. D. Postemployment Healthcare Plan Plan Description The Gibson County Special School District participates in the state-administered Teacher Group Insurance Plan for healthcare benefits. For accounting purposes, the plans are agent multiple-employer defined benefit OPEB plans. Benefits are established and amended by an insurance committee created by Tennessee Code Annotated (TCA) Prior to reaching the age of 65, all members have the option of choosing a preferred provider organization (PPO), point of service (POS), or health maintenance organization (HMO) plan for healthcare benefits. Subsequent to age 65, members who are also in the state s retirement system may participate in a state-administered Medicare supplement plan that does not include pharmacy. The plans are reported in the State of Tennessee Comprehensive Annual Financial 34

91 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, 2014 Report (CAFR). The CAFR is available on the state s website at 35 D. Postemployment Healthcare Plan (continued) Funding Policy The premium requirements of plan members are established and may be amended by the insurance committee. The plans are self-insured and financed on a pay-as-you-go basis with the risk shared equally among the participants. Claims liabilities of the plan are periodically computed using actuarial and statistical techniques to establish premium rates. The employers in each plan develop their own contribution policy in terms of subsidizing active employees or retired employees premiums since the committee is not prescriptive on that issue. The state does not provide a subsidy for local government participants, however, the state does provide a partial subsidy to Local Education Agency pre-65 teachers and a full subsidy based on years of service for post-65 teachers in the Medicare Supplement Plan. Annual OPEB Cost and Net OPEB Obligation Teacher Group (dollars in thousands) Plan. ARC $ 119,993 Interest on the NPO 17,402 Adjustment to the ARC (16,954). Annual OPEB cost: 120,441 Amount of contribution: (138,190) Increase/Decrease in NPO (17,750) Net OPEB obligation beginning of year 435,048. Net OPEB obligation end of year $ 417,298 Percentage of Annual Net OPEB OPEB Cost Obligation Year End Plan Annual OPEB Cost Contributed at Year End 6/30/2010 Teacher Group 247, ,870 ( 59.86%) 207,441 6/30/2011 Teacher Group 269, ,620 ( 56.24%) 295,849 6/30/2012 Teacher Group 246, ,241 (57.20%) 401,444 6/30/2013 Teacher Group 173, ,821 (80.62%) 435,048 6/30/2014 Teacher Group 120, ,190(114.73%) 417,298 Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Actuarial Methods and Assumptions Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of each valuation and on the pattern of sharing of costs between the employer and plan members to that point. Actuarial calculations reflect a long-term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets.

92 GIBSON COUNTY SPECIAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, D. Postemployment Healthcare Plan (continued) In the July 1, 2011, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.0 percent investment rate of return (net of administrative expenses) and an annual healthcare cost trend rate 9.25 percent for fiscal year The trend will decrease to 8.75 percent in fiscal year 2013 and then will be reduced by decrements to an ultimate rate of 5 percent by fiscal year The annual healthcare premium trend rate for the Medicare Supplement plan was 6.50 percent initially. The rate reduced to 6.25 percent for fiscal year 2013 and then will be reduced by decrements to an ultimate rate of 5 percent by fiscal year Both rates include a 2.5 percent inflation assumption, which also represent projected salary increase. The unfunded actuarial accrued liability is being amortized as a level percentage of payroll on a closed basis over a 30 year period beginning with July 1, NOTE 6 SUBSEQUENT EVENTS Management of the District has evaluated events and transactions through December 1, 2014, which is the earliest date the financials were available.

93 REQUIRED SUPPLEMENTARY INFORMATION

94 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULES OF FUNDING PROGRESS For the Year Ended June 30, Pension Plan (Dollar Amounts in Thousnads) Actuarial Valuation Date Actuarial UAAL as a Actuarial Value Accrued Unfunded Funded Covered Percentage of assets Liability AAL (UAAL) Ratio Payroll of Covered (a) (b) (b)-(a) (a/b) (c) ((b-a)/c) 07/01/11 $ 379 $ 703 $ % $ % 07/01/ % % 07/01/ % % The above schedules are designed to show the extent to which a pension plan has been successful over time in setting aside assets sufficient to cover its actuarial accrued liability. July 1, 2011 is the most recent actuarial valuation date. Postemployment Healthcare Plan (Dollar Amounts in Thousnads) Actuarial Valuation Date Actuarial UAAL as a Actuarial Value Accrued Unfunded Funded Covered Percentage of assets Liability AAL (UAAL) Ratio Payroll of Covered (a) (b) (b)-(a) (a/b) (c) ((b-a)/c) 7/1/2011 $ - $ 2,568 $ 2, % $ 15, % 07/01/09 $ - $ 2,537 $ 2, % $ 14, % 07/01/07-2,527 2, % 13, % The above schedules are designed to show the extent to which a pension plan has been successful over time in setting aside assets sufficient to cover its actuarial accrued liability. July 1, 2009 is the most recent actuarial valuation date. See auditors' report

95 OTHER SUPPLEMENTARY INFORMATION

96 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS SCHOOL BONDS - SERIES 2001 For the Year Ended June 30, Due Principal Interest Total Date Payment Rate Payment Payment 10/01/14 $ - $ 102,088 $ 102,088 04/01/15 650, , ,088 10/01/15 85,838 85,838 04/01/16 715, , ,838 10/01/16 67,069 67,069 04/01/17 785, , ,069 10/01/17 46,463 46,463 04/01/18 850, , ,463 10/01/18 24,150 24,150 04/01/19 920, , ,150 $ 3,920,000 $ 651,216 $ 4,571,216 See auditors' report

97 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS SCHOOL BONDS - SERIES 2005 For the Year Ended June 30, Due Principal Interest Total Date Payment Rate Payment Payment 10/01/14 $ - $ 25,988 $ 25,988 04/01/15 85, , ,987 10/01/15 24,075 24,075 04/01/16 85, , ,075 10/01/16 22,163 22,163 04/01/17 90, , ,162 10/01/17 20,138 20,138 04/01/18 95, , ,137 10/01/18 18,000 18,000 04/01/19 100, , ,000 10/01/19 15,750 15,750 04/01/20 105, , ,750 10/01/20 13,388 13,388 04/01/21 110, , ,387 10/01/21 10,913 10,913 04/01/22 115, , ,912 10/01/22 8,325 8,325 04/01/23 120, , ,325 10/01/23 5,625 5,625 04/01/24 125, , ,625 10/01/24 2,813 2,813 04/01/25 125, , ,812 $ 1,155,000 $ 334,350 $ 1,489,350 See auditors' report

98 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS SCHOOL BONDS - SERIES 2007 For the Year Ended June 30, Due Principal Interest Total Date Payment Rate Payment Payment 10/01/14 $ - $ 344,163 $ 344,163 04/01/15 100, , ,162 10/01/15 342, ,163 04/01/16 100, , ,162 10/01/16 340, ,100 04/01/17 100, , ,100 10/01/17 338, ,000 04/01/18 100, , ,000 10/01/18 335, ,875 04/01/19 100, , ,875 10/01/19 333, ,725 04/01/20 900, ,725 1,233,725 10/01/20 314, ,375 04/01/21 1,000, ,375 1,314,375 10/01/21 289, ,375 04/01/22 1,000, ,375 1,289,375 10/01/22 264, ,375 04/01/23 1,000, ,375 1,264,375 10/01/23 239, ,375 04/01/24 1,000, ,375 1,239,375 10/01/24 214, ,375 04/01/25 1,000, ,375 1,214,375 10/01/25 189, ,375 04/01/26 1,000, ,375 1,189,375 10/01/26 164, ,375 04/01/27 1,000, ,375 1,164,375 10/01/27 139, ,375 04/01/28 1,000, ,375 1,139,375 10/01/28 114, ,375 01/01/29 1,000, ,375 1,114,375 10/01/29 89,375 89,375 04/01/30 1,000, ,375 1,089,375 10/01/30 64,375 64,375 04/01/31 1,000, ,375 1,064,375 10/01/31 39,375 39,375 04/01/32 1,000, ,375 1,039,375 10/01/32 14,375 14,375 04/01/33 575, , ,375 $ 13,975,000 $ 8,341,800 $ 22,316,800 See auditors' report

99 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS SCHOOL BONDS - SERIES 2008 For the Year Ended June 30, Due Principal Interest Total Date Payment Rate Payment Payment 10/01/14 $ - $ 158,481 $ 158,481 04/01/15 100, , ,481 10/01/15 156, ,581 04/01/16 100, , ,581 10/01/16 154, ,581 04/01/17 100, , ,581 10/01/17 152, ,506 04/01/18 100, , ,506 10/01/18 150, ,381 04/01/19 100, , ,381 10/01/19 148, ,194 04/01/20 400, , ,194 10/01/20 139, ,194 04/01/21 400, , ,194 10/01/21 129, ,994 04/01/22 400, , ,994 10/01/22 120, ,694 04/01/23 475, , ,694 10/01/23 109, ,413 04/01/24 550, , ,413 10/01/24 96,213 96,213 04/01/25 625, , ,213 10/01/25 81,056 81,056 04/01/26 775, , ,056 10/01/26 61,875 61,875 04/01/27 825, , ,875 10/01/27 41,250 41,250 04/01/28 825, , ,250 10/01/28 20,625 20,625 04/01/29 825, , ,625 $ 6,600,000 $ 3,442,076 $ 10,042,076 See auditors' report

100 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS SCHOOL BONDS - SERIES 2009 For the Year Ended June 30, Due Principal Interest Total Date Payment Rate Payment Payment 10/01/14 $ - $ 52,139 $ 52,139 04/01/15 285, , ,139 10/01/15 47,864 47,864 04/01/16 300, , ,864 10/01/16 43,364 43,364 04/01/17 320, , ,364 10/01/17 38,564 38,564 04/01/18 345, , ,564 10/01/18 33,044 33,044 04/01/19 365, , ,044 10/01/19 26,884 26,884 04/01/20 110, , ,884 10/01/20 24,822 24,822 04/01/21 115, , ,822 10/01/21 22,666 22,666 04/01/22 120, , ,666 10/01/22 20,341 20,341 04/01/23 125, , ,341 10/01/23 17,919 17,919 04/01/24 130, , ,919 10/01/24 15,319 15,319 04/01/25 135, , ,319 10/01/25 12,619 12,619 04/01/26 140, , ,619 10/01/26 9,679 9,679 04/01/27 145, , ,679 10/01/27 6,634 6,634 04/01/28 150, , ,634 10/01/28 3,371 3,371 04/01/29 155, , ,371 $ 2,940,000 $ 750,453 $ 3,690,453 See auditors' report

101 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS SCHOOL BONDS - SERIES 2012 For the Year Ended June 30, Due Principal Interest Total Date Payment Rate Payment Payment 10/01/14 $ - $ 38,682 $ 38,682 04/01/15 130, , ,672 10/01/15 38,022 38,022 04/01/16 135, , ,022 10/01/16 37,347 37,347 04/01/17 135, , ,347 10/01/17 35,997 35,997 04/01/18 140, , ,997 10/01/18 34,597 34,597 04/01/19 145, , ,597 10/01/19 33,147 33,147 04/01/20 145, , ,147 10/01/20 31,697 31,697 04/01/21 150, , ,697 10/01/21 30,009 30,009 04/01/22 155, , ,009 10/01/22 28,266 28,266 04/01/23 160, , ,266 10/01/23 26,366 26,366 04/01/24 170, , ,366 10/01/24 24,241 24,241 04/01/25 175, , ,241 10/01/25 21,944 21,944 04/01/26 180, , ,944 10/01/26 19,469 19,469 04/01/27 190, , ,469 10/01/27 16,738 16,738 04/01/28 195, , ,738 10/01/28 13,812 13,812 04/01/29 205, , ,812 10/01/29 10,738 10,738 04/01/30 210, , ,738 10/01/30 7,456 7,456 04/01/31 220, , ,456 10/01/31 3,881 3,881 04/01/32 230, , ,881 $ 3,070,000 $ 904,808 $ 3,974,808 See auditors' report

102 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS SCHOOL BONDS - SERIES 2013 For the Year Ended June 30, Due Principal Interest Total Date Payment Rate Payment Payment 10/01/14 $ - $ 35,944 35,944 04/01/15 115, , ,944 10/01/15 34,794 34,794 04/01/16 115, , ,794 10/01/16 33,644 33,644 04/01/17 120, , ,644 10/01/17 32,444 32,444 04/01/18 120, , ,444 10/01/18 31,244 31,244 04/01/19 120, , ,244 10/01/19 30,044 30,044 04/01/20 125, , ,044 10/01/20 28,794 28,794 04/01/21 125, , ,794 10/01/21 27,544 27,544 04/01/22 130, , ,544 10/01/22 26,244 26,244 04/01/23 135, , ,244 10/01/23 24,894 24,894 04/01/24 135, , ,894 10/01/24 23,544 23,544 04/01/25 140, , ,544 10/01/25 21,969 21,969 04/01/26 145, , ,969 10/01/26 20,338 20,338 04/01/27 150, , ,338 10/01/27 18,275 18,275 04/01/28 155, , ,275 10/01/28 16,144 16,144 04/01/29 160, , ,144 10/01/29 13,744 13,744 04/01/30 165, , ,744 10/01/30 11,269 11,269 04/01/31 170, , ,269 10/01/31 8,719 8,719 04/01/32 175, , ,719 10/01/32 6,094 6,094 04/01/33 185, , ,094 10/01/33 3,088 3,088 04/01/34 190, , ,088 $ 2,875,000 $ 897,548 $ 3,772,548 See auditors' report

103 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCEDULE OF OFFICIAL BOND AND SALARIES OF PRINCIPAL OFFICIALS For the Year Ended June 30, Title Name Salary Official Bond Superintendent Eddie Pruett $ 96,000 $ 563,500 See auditors' report

104 GIBSON COUNTY SPECIAL SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARD PROGRAMS For the Year Ended June 30, Unearned Unearned CFDA (Due From) (Due From) Program Name Number Grantor Agency 07/01/13 Receipts Expenditures 6/30/2014. IDEA Part B State of Tennessee $ (196,120) $ 702,100 $ 653,874 $ (147,894) Dept. of Education Carl Perkins-Vocational Education State of Tennessee - 47,199 61,226 (14,027) Dept. of Education IDEA-Pre-school State of Tennessee (3,404) 10,808 10,481 (3,077) Dept. of Education ESEA-Title I * State of Tennessee (112,039) 612, ,167 (107,604) Dept. of Education 21st Century Community Learning * State of Tennessee (257,083) 306, ,954 (89,984) Dept. of Education Transition to Teaching State of Tennessee Dept. of Education Title II-Training State of Tennessee (24,715) 96,719 86,099 (14,095) Dept. of Education Youth Empowerment Initiative State of Tennessee ,545 (13,545) Dept. of Education First to the Top State of Tennessee (24,148) 24, Dept. of Education National School Lunch Program U.S. Dept of Agriculture - 721, ,549 (79,148) National School Breakfast Program U.S. Dept of Agriculture - 233, ,806 - National School Other U.S. Dept of Agriculture - 11,081 11,081 - USDA Commodity Supplemental TN Dept of Agriculture - 119, ,808 - $ (617,509) $ 2,885,725 $ 2,737,590 $ (469,374) This schedule of expenditures of federal awards includes the federal grant activity of Gibson County Special Schhol District and is presented on the modified accrual basis of accounting. The information on this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. * considered as major program See auditors' report

105 47 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Education Gibson County Special School District Dyer, Tennessee We have audited the financial statements of the governmental activities and each major fund including budgetary comparisons for the general, federal projects, and cafeteria funds of the Gibson County Special School District, as of and for the year ended June 30, 2014, and have issued our report thereon dated December 1, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Gibson County Special School District s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Gibson County Special School District s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Gibson County Special School District s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

106 48 Compliance and Other Matters As part of obtaining reasonable assurance about whether Gibson County Special School District s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report This report is intended for the information of management and the Board of Education, federal awarding agencies, pass through entities, and the State of Tennessee Office of the Comptroller and is not intended to be and should not be used by anyone other than those specified parties. Cowart Reese Sargent, CPAs. Martin, TN December 1, 2014

107 49 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Board of Education Gibson County Special School District Dyer, Tennessee Report on Compliance for Each Major Federal Program We have audited the District s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of The District s major federal programs for the year ended June 30, The District s major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of The District s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about The District s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of The District s compliance. Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2014.

108 50 Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered The District s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of The District s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Cowart Reese Sargent, CPAs Martin, TN December 1, 2014

109 GIBSON COUNTY SPECIAL SCHOOL DISTRICT GENERAL PURPOSE, FEDERAL PROJECTS, AND CAFETERIA FUNDS SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, A. Summary of Audit Results 1. The auditors report expresses an unqualified opinion on the basic financial statements of Gibson County Special School District. 2. No significant deficiencies were disclosed during the audit of the financial statements. 3. No instances of noncompliance material to the financial statements of Gibson County Special School District was disclosed during the audit. 4. No significant deficiencies were disclosed during the audit of internal control over major federal awards programs. 5. The auditors report on compliance for the major federal awards program for Gibson County Special School District expresses an unqualified opinion on all major federal programs. 6. Audit findings that are required to be reported in accordance with Section 510(a) of OMB Circular A-133 are reported in this Schedule. 7. The programs tested as a major programs were Program CFDA No. Title I Grants to Local Education Agencies Twenty-First Century Community Learning Centers The threshold for distinguishing Types A and B programs was $300, Gibson County Special School District was determined to be a low risk auditee.

110 GIBSON COUNTY SPECIAL SCHOOL DISTRICT GENERAL PURPOSE, FEDERAL PROJECTS, AND CAFETERIA FUNDS SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2014 B. Finding Financial Statement Audit 52 None Noted C. Finding Relative to Federal Grants None Noted

111 APPENDIX D Specimen Municipal Bond Insurance Policy

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