BOENNING & SCATTERGOOD INC.

Transcription

1 OFFICIAL STATEMENT NEW ISSUE BOOK-ENTRY-ONLY Ratings: Standard & Poor s AA (stable outlook) AGM Insured Underlying Rating A/Stable See RATING and MUNICIPAL BOND INSURANCE herein In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds (including, in the case of Bonds sold at an original issue discount, the difference between the initial offering price and par) is excluded from gross income for Federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under 57 of the Internal Revenue Code of 1986, as amended (the Code ) for purposes of Federal individual or corporate alternative minimum taxes. The Bonds, and the interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania. (See TAX MATTERS herein.) The School District has designated the Bonds as Qualified Tax-Exempt Obligations pursuant to 265(b)(3) of the Code (relating to the deductibility of interest expense by certain financial institutions). Dated: Date of Delivery Interest Due: May 1 and November 1 $9,195,000 Ambridge Area School District Beaver County, Pennsylvania General Obligation Bonds, Series C of 2017 Principal Due: As shown on inside cover First Interest Payment: May 1, 2018 The Ambridge Area School District s General Obligation Bonds, Series C of 2017 in the aggregate principal amount of $9,195,000, (the Bonds or 2017 Bonds ) will be issued as fully registered bonds. The Bonds will be registered in the name of Cede & Co., as the registered owner and nominee of The Depository Trust Company ( DTC ), New York, New York. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or any integral multiple thereof only under the book-entry system maintained by DTC through its brokers and dealers who are, or act through, DTC Participants. So long as Cede & Co. is the registered owner, reference herein to the registered owner of Bonds shall mean Cede & Co., and not the Beneficial Owners (as defined herein). DTC will act as securities depository of the Bonds, and purchases of beneficial ownership interests in the Bonds will be made in bookentry form only, in denominations of $5,000 or integral multiples thereof. Beneficial Owners will not receive certificates representing their interest in the Bonds. (See BOOK-ENTRY ONLY SYSTEM herein). Interest on the Bonds is payable initially on May 1, 2018 and semi-annually thereafter on May 1 and November 1 of each year until the principal sum thereof is paid. Principal of, and premium, if any, on the Bonds will be paid by U.S. Bank National Association (the Paying Agent ). So long as Cede & Co. is the registered owner, the Paying Agent will pay principal of, and interest on the Bonds to DTC, which will remit such principal and interest to its Direct or Indirect Participants (as defined herein), which will in turn remit such principal and interest to the Beneficial Owners of the Bonds, as more fully described herein. (See BOOK-ENTRY ONLY SYSTEM herein.) The Bonds are subject to redemption prior to their stated maturities, as more fully described herein. (See REDEMPTION OF BONDS herein.) The purchasers of the Bonds will not receive physical delivery of the Bonds. For so long as any purchaser is the beneficial owner of a Bond, that purchaser must maintain an account with a broker or a dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on the Bonds. See BOOK-ENTRY ONLY SYSTEM herein. If, under the circumstances described herein, Bonds are ever issued in certificated form, the Bonds will be subject to registration of transfer, exchange and payment as described herein. The Bonds are subject to redemption prior to maturity as more fully described herein. (See REDEMPTION OF BONDS herein.) The Bonds are general obligations of the Ambridge Area School District (the School District ), payable from local taxes, state subsidy and other general revenues. The School District has covenanted in the Resolution authorizing the Bonds, adopted by the Board of School Directors of the School District on October 18, 2017 (the Resolution ), that it will budget in each year, and will appropriate from its general revenues in each such year, the amount of the debt service due on the Bonds for such year and will duly and punctually pay or cause to be paid from the sinking fund established under the Resolution or any other of its legally available revenues or funds the principal of every Bond and the interest thereon on the dates, at the place and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the School District has irrevocably pledged its full faith, credit and available taxing power, which taxing power including the power to levy ad valorem taxes on all taxable real property within the School District, to the extent available by law. (See SECURITY FOR THE BONDS and PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS ), including the description of the Taxpayer Relief Act and other legislation described herein. Proceeds of the Bonds will be used to: (1) currently refund the District s outstanding General Obligation Bonds, Series D of 2012; and (2) pay all costs and expenses incident to the issuance of the Bonds. The Bonds are authorized investments for fiduciaries in the Commonwealth of Pennsylvania pursuant to the Pennsylvania Probate, Estate and Fiduciaries Code, Act of June 30, 1972, No. 164, P.L. 508, as amended and supplemented. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICIPAL CORP. MATURITIES, AMOUNTS, RATES AND YIELDS/PRICES See Inside Cover The Bonds are offered when, as and if issued, subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of Dinsmore & Shohl LLP, of Pittsburgh, Pennsylvania, Bond Counsel, to be furnished upon delivery of the Bonds. Certain other legal matters will be passed upon for the School District by Weiss Burkardt Kramer, LLC, of Pittsburgh, Pennsylvania, School District Solicitor. It is expected that the Bonds will be available for delivery in New York, New York, on or about December 28, Dated: November 20, 2017 BOENNING & SCATTERGOOD INC.

2 Assured Guaranty Municipal Corp. ( AGM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM 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 AGM supplied by AGM and presented under the heading MUNICIPAL BOND INSURANCE and Appendix C - Specimen Municipal Bond Insurance Policy. $9,195,000 Ambridge Area School District Beaver County, Pennsylvania General Obligation Bonds, Series C of 2017 Dated: Date of Delivery Principal Due: As shown below Interest Due: May 1 and November 1 First Interest Payment: May 1, 2018 MATURITY SCHEDULE Principal CUSIP Year Amount Coupon Yield Price (1) 11/1/2018 $130, % 1.350% % RM0 11/1/2019 $130, % 1.550% % RN8 11/1/2020 $130, % 1.650% % RP3 11/1/2021 $135, % 1.800% % RQ1 11/1/2022 $140, % 2.000% % RR9 11/1/2023 $140, % 2.150% % RS7 11/1/2024 $200, % 2.300% % RT5 11/1/2025 $125, % 2.450% % RU2 11/1/2026 $135, % 2.600% % RV0 11/1/2027 $755, % 2.750% % RW8 11/1/2034 $3,650, % 3.250% % RY4 $3,525, % Term Bond due November 1, 2033 at % to yield 3.200% - RX6 (1) The above CUSIP (Committee on Uniform Securities Identification Procedures) numbers have been assigned by an organization not affiliated with the School District or the Underwriter and such parties are not responsible for the selection or use of the CUSIP numbers. The CUSIP numbers are included solely for the convenience of bondholders and no representation is made as to the correctness of such CUSIP numbers. CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors including, but not limited to, the refunding or defeasance of such issue or the use of secondary market financial products. Neither the School District or the Underwriter has agreed to, and there is no duty or obligation to, update this Official Statement to reflect any change or correction in the CUSIP numbers set forth above. ii

3 Ambridge Area School District Beaver County, Pennsylvania 901 Duss Avenue Ambridge, PA Phone (724) Fax (724) BOARD OF SCHOOL DIRECTORS Scott Angus... Kelly Smith... Terry Mylan... Kelly Fischer... Robert Keber... Mary Jo Kehoe... Roger Kowal... Kimberly Locher... James Sas... President Vice President Treasurer Member Member Member Member Member Member ACTING SUPERINTENDENT L. JOAN WELTER DIRECTOR OF DISTRICT OPERATIONS DOUGLAS MCCAUSLAND SCHOOL DISTRICT SOLICITOR WEISS BURKARDT KRAMER, LLC Pittsburgh, Pennsylvania BOND COUNSEL DINSMORE & SHOHL LLP Pittsburgh, Pennsylvania PAYING AGENT U.S. BANK NATIONAL ASSOCIATION Pittsburgh, Pennsylvania UNDERWRITER BOENNING & SCATTERGOOD INC. Pittsburgh, Pennsylvania DISSEMINATION AGENT DIGITAL ASSURANCE CERTIFICATION (DAC) Orlando, Florida iii

4 No dealer, broker, salesperson or any other person has been authorized by the School District or the Underwriter to give any information or make any representation, other than those contained in this Official Statement, and if given or made, such other information and representation must not be relied upon as having been authorized by the School District or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of the Bonds by an person in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from the School District and from other sources which are believed to be reliable, but the School District does not guarantee the accuracy or completeness of information from sources other than the School District, Boenning & Scattergood Inc., Pittsburgh, Pennsylvania, as the Underwriter (the Underwriter ) has provided the following sentence for inclusion in this Official Statement in accordance with and as part of its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guaranty the accuracy or completeness of such information, which has been obtained from either the School District or from sources other than the School District. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement, nor any sale made hereunder shall, under any circumstances create any implication that there has been no change in any of the information set forth herein since the date hereof or the earliest date of which said information is given. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE PUBLIC OFFERING PRICES STATED ON THE COVER HEREOF MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS WITHOUT PRIOR NOTICE. THE ORDER AND PLACEMENT OF THE MATERIALS IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, ARE NOT TO BE DEEMED TO BE A DETERMINATION OF RELEVANCE, MATERIALITY OR IMPORTANCE, AND THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, MUST BE CONSIDERED IN ITS ENTIRETY. THE OFFERING OF THE BONDS IS MADE ONLY BY MEANS OF THIS ENTIRE OFFICIAL STATEMENT. THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, THEIR RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE RESOLUTION BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE BONDS OR THE RESOLUTION IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF CERTAIN STATES, IF ANY, IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF THIS PRELIMINARY OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THIS OFFICIAL STATEMENT IS SUBMITTED IN CONNECTION WITH THE SALE OF THE SECURITIES REFERRED TO HEREIN, AND MAY NOT BE REPRODUCED OR BE USED, IN WHOLE OR IN PART, FOR ANY OTHER PURPOSE. NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES AT ANY TIME IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. Neither the School District s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the forecasted information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the forecasted information. If and when included in this Official Statement, the words "expects," "forecasts," "projects," "intends," "anticipates," "estimates," "assumes" and analogous expressions are intended to identify forward-looking statements and any such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. Such risks and uncertainties which could affect the revenues and obligations of the School District include, among others, changes in economic conditions, mandates from other governments and various other events, conditions and circumstances, many of which are beyond the control of the School District. Such forward-looking statements speak only as of the date of this Official Statement. The School District disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any changes in the School District's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The School District does not generally publish its business plans and strategies or make external disclosures of its anticipated financial position or results of operations. Accordingly, the School District does not intend to update or otherwise revise the forecasted financial information to reflect circumstances existing since its preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, the School District does not intend to update or revise the forecasted financial information to reflect changes in general economic or industry conditions. Additional information relating to the principal assumptions used in preparing the projections is set forth herein. iv

5 SUMMARY STATEMENT This Summary Statement is subject in all respects to more complete information contained in this Official Statement. No person is authorized to detach this SUMMARY STATEMENT from this Official Statement or otherwise use it without the entire Official Statement. Issuer... The Bonds... Redemption Provisions... Form of Bonds... Application of Proceeds... Security for the Bonds... Credit Enhancement... Bond Rating... Continuing Disclosure Undertaking... Ambridge Area School District, Beaver County, Pennsylvania (the School District ). General Obligation Bonds, Series C of 2017 (the Bonds ), in the aggregate principal amount of $9,195,000. The Bonds are initially dated the Date of Delivery, and will mature as shown in the MATURITY SCHEDULE shown on the inside of the Cover Pages of this Official Statement. Interest on the Bonds will begin to accrue on the Date of Delivery, and is payable initially on May 1, 2018, and on each May 1 and November 1 thereafter. (See THE BONDS herein.) The Bonds are subject to mandatory and optional redemption prior to their stated dates of maturity. (See REDEMPTION OF BONDS herein.) Book-entry form only. The proceeds to be derived by the School District from the issuance and sale of the Bonds will be used to: (1) currently refund the District s outstanding General Obligation Bonds, Series D of 2012; and (2) pay all costs and expenses incident to the issuance of the Bonds. (See PURPOSE OF THE ISSUE, and Sources and Uses of Bond Proceeds herein.) The Bonds are general obligations of the School District, payable from local taxes, state subsidy and other general revenues. The School District has covenanted in the Resolution authorizing the Bonds adopted by the Board of the School District on October 18, 2017 (the Resolution ) that it will budget in each year, and will appropriate from its general revenues in each such year, the amount of the debt service due on the Bonds for such year and will duly and punctually pay or cause to be paid from the sinking fund established under the Resolution or any other of its legally available revenues or funds the principal of every Bond and the interest thereon on the dates, at the place and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the School District has irrevocably pledged its full faith, credit and available taxing power, which taxing power including the power to levy ad valorem taxes on all taxable real property within the School District, to the extent available by law. (See SECURITY FOR THE BONDS TAXING POWER AND LIMITS and PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS, including the description of The Taxpayer Relief Act, herein). The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. (See MUNICIPAL BOND INSURANCE herein.) The Bonds are expected to receive a credit rating of AA (Stable outlook) from S&P Global Ratings, New York, New York, ( S&P ) with the understanding that the above-described municipal bond insurance policy will be issued at the time of settlement of the Bonds. S&P Global Ratings has also assigned its underlying rating of A/stable to the Bonds (based upon the School District s financial condition). (See RATING herein.) The School District has agreed to provide, or cause to be provided, in a timely manner, certain information in accordance with the requirements of Rule 15c2-12, as promulgated under the Securities and Exchange Act of 1934, as amended and interpreted (the "Rule"). (See CONTINUING DISCLOSURE UNDERTAKING herein.) v

6 This Table of Contents is for convenience of reference only and does not list all of the subjects in this Official Statement. In all instances reference should be made to the complete Official Statement to determine the subjects discussed in it. The order and placement of material in the Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance and this Official Statement including Appendices must be considered in its entirety. TABLE OF CONTENTS INTRODUCTION... 1 PURPOSE OF THE ISSUE... 2 Sources and Uses of Bonds Proceeds... 2 THE BONDS... 2 Description Payment of Principal and Interest... 2 Transfer, Exchange and Registration of Bonds... 3 SECURITY FOR THE BONDS... 3 General Obligation Pledge Security... 3 Sinking Fund... 4 State Subsidy Intercept Under Section 633 of the Pennsylvania School Code... 4 Act 85 of Actions in the Event of Default on the Bonds... 5 INVESTMENT CONSIDERATIONS... 5 Economic and Other Factors Affecting the Financial Condition of the School District... 5 Pledged Taxes and Overlapping Entities... 5 Competing Commonwealth Intercept Authorities... 5 Commonwealth Failure to Appropriate... 6 No Assurance of Secondary Market for the Bonds... 6 MUNICIPAL BOND INSURANCE... 6 BOOK-ENTRY ONLY SYSTEM... 8 Disclaimer of Liability for Failures of DTC... 9 Discontinuance of Book-Entry Only System... 9 REDEMPTION OF BONDS... 9 Optional Redemption... 9 Mandatory Redemption Notice of Redemption Manner of Redemption THE SCHOOL DISTRICT Introduction Organization and Central Administration School Facilities Enrollment Trends SCHOOL DISTRICT FINANCES Introduction Financial Reporting Budgeting Process in School Districts under the Taxpayer Relief Act Summary and Discussion of Financial Results TAXING POWERS AND LIMITS PENNSYLVANIA ACTS AFFECTING LOCAL TAXING POWERS OF SCHOOL DISTRICTS The Taxpayer Relief Act, as Amended (Act 1) Status of the Bonds Under Act 1 The Bonds are Eligible for Act 1 Exception Act 24 0f Act 130 of Act 48 of Tax Levy Trends Real Property Tax Other Taxes Commonwealth Aid to School Districts DEBT AND DEBT LIMITS Debt Statement Debt Limit and Remaining Borrowing Capacity Debt Service Requirements Future Financing LABOR RELATIONS School District Employees Pension Program Other Post-Employment Benefits LITIGATION DEFAULTS AND REMEDIES TAX MATTERS State Tax Matters Federal Income Tax Matters Original Issue Discount Original Issue Premium Interest Expense Deductions for Financial Institutions Continuing Compliance Collateral Tax Liabilities Change in Law; Adverse Determinations CONTINUING DISCLOSURE UNDERTAKING COMPLIANCE WITH PREVIOUS CONTINUING DISCLOSURE UNDERTAKING UNDERWRITING RATING LEGAL OPINION MISCELLANEOUS APPENDIX A DEMOGRAPHIC AND ECONOMIC INFORMATION RELATING TO THE SCHOOL DISTRICT APPENDIX B 2016 AUDITED FINANCIAL STATEMENT APPENDIX C SPECIMEN MUNICIPAL BOND INSURANCE POLICY vi

7 OFFICIAL STATEMENT $9,195,000 Ambridge Area School District Beaver County, Pennsylvania General Obligation Bonds, Series C of 2017 INTRODUCTION This Official Statement, including the cover page hereof and Appendices hereto, is furnished in connection with the offering by the Ambridge Area School District, Beaver County, Pennsylvania (the "School District") of its General Obligation Bonds, Series C of 2017 in the aggregate principal amount of $9,195,000, the Bonds or the 2017 Bonds ), in fully registered form, without coupons, in the denomination of $5,000 and integral multiples thereof and registered in the name of Cede & Co., as the registered owner and nominee of The Depository Trust Company ( DTC ), New York, New York. The Bonds are being issued by the School District pursuant to a Resolution of the Board of School Directors of the School District adopted on October 18, 2017 (the "Resolution"), and pursuant to the Local Government Unit Debt Act of the Commonwealth of Pennsylvania (the Commonwealth ), 53 Pa. C.S. A et seq., as amended (the Act ). The approval of the Department of Community and Economic Development of the Commonwealth of Pennsylvania for the School District to issue and deliver the Bonds will have been duly given pursuant to the Debt Act; all acts, conditions and things required by the laws of the Commonwealth to exist, to have happened or to have been performed precedent to or in the issuance of the Bonds or in the creation of the debt of which any Bond is evidence, exist, will have happened, and will have been performed in regular and due form and manner as required by law; the Bonds, together with all other indebtedness of the School District, will be within every debt and other limit prescribed by the Constitution and the statutes of the Commonwealth; and the School District will have established with U.S. Bank National Association, Pittsburgh, Pennsylvania, or its designee, as the paying agent, transfer agent, bond registrar, and sinking fund depository for the Bonds, a Sinking Fund for the Bonds, as defined herein, and shall deposit therein amounts sufficient to pay the principal of and interest on the Bonds as the same shall become due and payable. (See THE BONDS herein.) The Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. Purchases of the Bonds can be made in book-entry only form and purchaser will not receive certificates representing their interest in the Bonds. So long as DTC, or its nominee Cede & Co., is the registered owner of the Bonds, payments of the principal of and interest on the Bonds will be made by the Paying Agent directly to Cede & Co. Disbursement of such payments to the DTC Participants is the responsibility of DTC, and disbursement of such payments to Beneficial Owners of the Bonds is the responsibility of the DTC Participants and the Indirect Participants. See THE BONDS and BOOK-ENTRY ONLY SYSTEM herein. The Bonds shall be issued in denominations of $5,000 or any integral multiple thereof. Interest on the Bonds is payable semiannually on May 1 and November 1 of each year, commencing May 1, Interest on any Bond is payable by check mailed to the registered owner at the address as it appears on the registration books on the appropriate Record Date as described below. The principal of the Bonds is payable at the corporate trust office of U.S. Bank National Association located in Pittsburgh, Pennsylvania (the "Paying Agent" or Sinking Fund Depository ). The Bonds are only transferable on the registration books maintained by the Paying Agent upon presentation and surrender thereof (See "THE BONDS - Description of the Bonds" herein.) The Bonds are subject to optional and mandatory redemption as stated herein. The information which follows contains summaries of the Resolution, certain provisions of state and federal laws, the School District's Budget and the School District's financial statements. Such summaries do not purport to be complete and reference is made to the Resolution, the School District's budget and the School District's financial statements, copies of which are on file and available for examination at the offices of the School District. Neither the delivery of this Official Statement nor any sale of the Bonds made hereunder shall, under any circumstances, create an implication that there have been no changes in the affairs of the School District, or in the communities or areas served by the School District, since the date of this Official Statement or the earliest date as of which certain information contained herein is given. 1

8 PURPOSE OF THE ISSUE Proceeds of the Bonds will be used to: (1) currently refund the District s outstanding General Obligation Bonds, Series D of 2012; and (2) pay all costs and expenses incident to the issuance of the Bonds. Sources and Uses of Bonds Proceeds The following is a summary of the sources and uses of the proceeds from the issuance of the Bonds. SOURCE OF FUNDS Total Bond Par Amount $9,195, Net Original Issue Discount (169,868.75) Total Source of Funds $9,025, USE OF FUNDS Redeem, Series D of 2012 Bonds $8,860, Costs of Issuance 155, Contingency 9, Total Source of Funds $9,025, (1) Includes, but not limited to; legal, bond discount, printing, rating, CUSIP, paying agent, insurance premium and miscellaneous costs. Description: Payment of Principal and Interest THE BONDS The Bonds will be issued in registered form, without coupons, in denominations of $5,000 principal amount and integral multiples thereof, will be in the aggregate principal amount of $9,195,000 (in the respective amounts for each series described herein) and will be dated the date of delivery, when interest begins to accrue. The Bonds will bear interest at the rates and mature in the amounts and on the dates set forth on the inside front cover of this Official Statement. Interest on each of the Bonds will be payable initially on May 1, 2018, and thereafter, semiannually on May 1 and November 1 of each year until the maturity date of such Bond or, if such Bond is subject to redemption prior to maturity, until the date fixed for redemption thereof, if payment of the redemption price has been duly made or provided for. When issued, the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company ( DTC ), New York, New York. Purchasers of the Bonds (the Beneficial Owners ) will not receive any physical delivery of bond certificates, and beneficial ownership of the Bonds will be evidenced only by book entries. Each Beneficial Owner of a Bond may desire to make arrangements with a DTC Participant to receive notices or communications with respect to matters described herein. See BOOK ENTRY ONLY SYSTEM herein. So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payments of principal of, redemption premium, if any, and interest on the Bonds, when due, are to be made to DTC, and all such payments shall be valid and effective to satisfy fully and to discharge the obligations of the School District with respect to, and to the extent of, principal, redemption premium, if any, and interest so paid. If the use of the Book-Entry Only System for the Bonds is discontinued for any reason, bond certificates will be issued to the Beneficial Owners of the Bonds and payment of principal, redemption premium, if any, and interest on the Bonds shall be made as described in the following paragraphs: The principal of certificated Bonds, when due upon maturity or upon any earlier redemption, will be paid to the registered owners of such Bonds, or registered assigns, upon surrender of such Bonds to U.S. Bank National Association, (the Paying Agent ), acting as paying agent and sinking fund depositary for the Bonds, at its specified corporate trust office (or to any successor paying agent or alternate designated office(s)); provided, however that while the Bonds are registered in the name of Cede & Co., the Paying Agent will pay principal and interest on the Bonds to DTC, which will remit such payment and interest to its Participants. Interest on each of the Bonds will be payable initially on May 1, 2018, and thereafter, semiannually on May 1 and November 1 of each year until the maturity date of such Bond or, if such Bond is subject to redemption prior to maturity, until the date fixed for redemption thereof, if payment of the redemption price has been duly made or provided for. Interest shall be computed on the basis of a 30-day month and a 360-day year. 2

9 Interest will be payable to the registered owner of a Bond from the interest payment date next preceding the date of registration and authentication of such Bond, unless: (a) such Bond is registered and authenticated as of an interest payment date, in which event such Bond shall bear interest from said interest payment date, or (b) such Bond is registered and authenticated after a Record Date (hereinafter defined) and before the next succeeding interest payment date, in which event such Bond shall bear interest from such interest payment date, or (c) such Bond is registered and authenticated on or prior to the Record Date preceding May 1, 2018, in which event such Bond shall bear interest from the date of delivery, or (d) as shown by the records of the Paying Agent, interest on such Bond shall be in default, in which event such Bond shall bear interest from the date to which interest was last paid on such Bond. Interest on each certificated Bond will be payable by check drawn on the Paying Agent, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the fifteenth (15 th ) day of the calendar month (whether or not a day on which the Paying Agent is open for business) next preceding each interest payment date (the Record Date ), on the registration books maintained by the Paying Agent, irrespective of any transfer or exchange of such Bond subsequent to such Record Date and prior to such interest payment date, unless the School District shall be in default in payment of interest due on such interest payment date. In the event of any such default, such defaulted interest shall be payable to the person in whose name such certificated Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Paying Agent to the registered owners of such Bonds not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the persons in whose names such Bonds are registered at the close of business on the fifth (5 th ) day preceding the date of mailing. If the date for payment of the principal of or interest on any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth are authorized or required by law or executive order to close, then the date for payment of such principal or interest shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized or required to close, and payment on such date shall have the same force and effect as if made on the nominal date established for such payment. Transfer, Exchange and Registration of Bonds Subject to the provisions described below under Book-Entry Only System, certificated Bonds are transferable or exchangeable upon surrender of such Bonds to the Paying Agent, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Paying Agent, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Paying Agent shall enter any transfer of ownership of certificated Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered bond or bonds of authorized denominations of the same series, maturity date and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The School District and the Paying Agent may deem and treat the registered owner of such Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the School District and the Paying Agent shall not be affected by any notice to the contrary. Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same series, maturity date and interest rate. Neither the School District nor the Paying Agent shall be required (a) to register the transfer of or exchange any Bonds then considered for redemption during a period beginning at the close of business on the fifteenth (15 th ) day next preceding any date of selection of Bonds to be redeemed and ending at the close of business on the day on which the applicable notice of redemption is mailed or (b) to register the transfer of or exchange any portion of any Bond selected for redemption until after the redemption date or (c) to register the transfer of or to exchange any Bond during the period beginning at the close of business on the fifteenth day preceding the date of maturity of the Bond and ending at the close of business on the date of maturity. Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same series, maturity and interest rate. General Obligation Pledge Security SECURITY FOR THE BONDS The Bonds are general obligations of the School District and are payable from its local taxes, state subsidies and other general revenues. The School District has covenanted in the Resolution that it will provide in its budget for each year, and will appropriate from its general revenues in each such year, the amount of the debt service due on the Bonds for such year, and will duly and punctually pay or cause to be paid from its Sinking Fund, as hereinafter defined, or any other of its revenues or funds, the principal of each of the Bonds and the interest thereon at the dates and place and in the manner stated on the Bonds, and for such budgeting, appropriation and payment the School District irrevocably has pledged its full faith, credit and available taxing power, which taxing power presently includes ad valorem taxes on all taxable property within the School District, within limitations provided by law (See TAXING POWERS AND LIMITS and PENNSYLVANIA ACTS AFFECTING LOCAL TAXING POWERS OF SCHOOL DISTRICTS herein.) 3

10 The Debt Act presently provides for enforcement of debt service payments as hereinafter described (see Actions in the Event of Default on the Bonds herein), and the Public School Code presently provides for the withholding and application of subsidies in the event of failure to pay debt service (see State Subsidy Intercept Under Section 633 of the Pennsylvania School Code herein). Sinking Fund A sinking fund for the payment of debt service on the Bonds, which may be designated Sinking Fund, General Obligation Bonds, Series C of 2017 (the Sinking Fund ), will be created in accordance with the Resolution and will be maintained by the Paying Agent, as sinking fund depository. The School District shall deposit in the Sinking Fund a sufficient sum not later than the date when interest and/or principal is to become due on the Bonds (or such earlier date as may be required by the Bond Insurer, hereinafter defined) (see MUNICIPAL BOND INSURANCE herein) so that on each payment date the Sinking Fund will contain an amount which, together with any other funds available therein, is sufficient to pay, in full, interest and principal then due on the Bonds. The Sinking Fund shall be held by the Paying Agent, as sinking fund depository, and invested by the Paying Agent as authorized by the Debt Act and upon direction of the School District. Such deposits and securities shall be in the name of the School District, but subject to withdrawal or collection only by the Paying Agent, as sinking fund depository, and such deposits and securities, together with the interest thereon, shall be a part of the Sinking Fund. The Paying Agent, as sinking fund depository, is authorized without further order from the School District to pay from the Sinking Fund the principal of and interest on the Bonds, as and when due and payable. State Subsidy Intercept under Section 633 of the Pennsylvania School Code Section 633 of the Pennsylvania Public School Code of 1949, as amended by Act 154 of 1998 (the Public School Code ), presently provides that in all cases where the board of school directors of any school district fails to pay or to provide for the payment of any indebtedness or the date of maturity or date of mandatory redemption or on any sinking fund deposit date, or any interest due on such indebtedness on any interest payment date or on any sinking fund deposit date, in accordance with the schedule under which the bonds were issued, the Secretary of Education shall notify such board of school directors of its obligation and shall withhold out of any State appropriation due such school district an amount equal to the sum of the principal amount maturing or subject to mandatory redemption and interest owing by such school district, or sinking fund deposit due by such school district, and shall pay over the amount so withheld to the bank or other person acting as sinking fund depository for such bond issue. These withholding provisions are not part of any contract with the holders of the Bonds, and may be amended or repealed by future legislation. There can be no assurance, however, that any payments pursuant to this withholding provision will be made by the date on which such payments are due to the Bondholders. The effectiveness of Section 633 of the Public School Code may be limited by the application of other withholding provisions contained in the Public School Code, such as provisions for withholding and paying over of appropriations for payment of unpaid teachers salaries. Enforcement may also be limited by bankruptcy, insolvency, or other laws or equitable principles affecting the enforcement of creditors rights generally. Act 85 of 2016 Act No. 85 of 2016, enacted July 13, 2016 ( Act 85 ), provides an intercept regime applicable only during a budget impasse. While there is a budget impasse (i.e., the annual appropriations for payment of Commonwealth money to school districts have not been enacted by July 1 and continue to be not enacted when a school district debt service payment is due), and the Secretary of Education is required to withhold money from payments due to a school district under the intercept program described above (see State Subsidy Intercept Under Section 633 of the Pennsylvania School Code ) but there are no payments or allocations due to be paid to the school district as of such payment date, and the Secretary has provided at least 10 days notice to Commonwealth legislative officials, then Act 85 requires (and provides an appropriation for) the Secretary to pay such amount to the fiscal agent for the school district debt obligations on the day the scheduled payment for principal and interest is due. The total amount of all impasse intercept payments to a school district may not exceed 50% of the total non-federal General Fund subsidy payments made to the school district in the prior fiscal year, and the appropriation is further limited to available cash balances in the Commonwealth s General Fund at the time the payment is due (and the Commonwealth may not issue tax anticipation notes or enter into a loan agreement with the Treasury Department to provide cash for impasse intercept payments). Once the annual budget appropriations are ultimately enacted, the impasse intercept amounts so expended by the Commonwealth Department of Education are to be withheld from subsidy payments due the school district. Debt obligations of a school district are eligible for the impasse intercept only if the school district within 30 days after receipt of the proceeds of the debt obligation provides to the Commonwealth Department of Education the final official statement or loan documents in such format as the Department prescribes, including a schedule of principal and interest payments. Act 85 is recent legislation. It is not clear how the Commonwealth Department of Education would apply Act 85 in the event of a budget impasse. In particular, in the absence of a fiscal agent agreement or other obligation to make a sinking fund deposit more than 10 days in advance of a debt service payment date, timely payment of the impasse intercept by the Commonwealth Department of Education does not appear to be possible in light of the required advance notice to legislative officials. 4

11 Actions in the Event of Default on the Bonds Subject to the exclusive representation of bondholders by a trustee appointed under the Act as described in the following paragraph, if the School District fails or neglects to pay principal or interest on any of the Bonds as it becomes due and payable, and such failure continues for thirty days, the holder of such bond may bring suit in the Court of Common Pleas of the county in which the School District is located (Beaver County) and any judgment recovered shall have an appropriate priority upon the money next coming into the treasury of the School District, all as provided in the Act. The Act also provides other remedies to Bondholders to enforce the School District's covenants in respect of payment of the Bonds. In the event the School District defaults in the payment of the principal of or the interest on any of the Bonds after the same shall become due, whether at the stated maturity or upon call for prior redemption, and such default shall continue for thirty days, or if the School District fails to comply with any provision of the Bonds or the Resolution, the Act provides that the holders of 25% in aggregate principal amount of the Bonds then outstanding may, upon appropriate action, appoint a trustee to represent the Bondholders. The trustee may, and upon request of the holders of 25% in principal amount of the Bonds then outstanding and upon being provided with indemnity satisfactory to it, shall, take such action on behalf of the Bondholders as is more specifically set forth in the Act. Such representation by the trustee shall be exclusive. INVESTMENT CONSIDERATIONS This Official Statement contains summaries of pertinent portions of the Resolution and the Bonds. Such summaries and references are qualified in their entirety by reference to the full text of such documents. The following discussion of some of the risk factors associated with the Bonds is not, and is not intended to be, exhaustive, and such risks are not necessarily presented in the order of their magnitude. This Official Statement does not describe all of the risks of an investment in the Bonds and the Underwriter disclaims any responsibility to advise prospective investors of such risks as they exist at the date of this Official Statement or as they change from time to time. Prospective investors should consult their own legal and tax advisors as to the risks associated with an investment in the Bonds and the suitability of investing in the Bonds in light of their particular circumstances. Prospective investors should be able to bear the risks relating to an investment in the Bonds and should carefully consider, among other factors, the matters described below and in other sections of this Official Statement. Economic and Other Factors Affecting the Financial Condition of the School District Future economic and other factors may adversely affect the School District s revenues and expenses and, consequently, the School District s ability to meet its operating expenses and pay debt service on the Bonds and other indebtedness. Among the factors that could have such adverse effects are: decreases in property tax collections; increases in unemployment in the School District, Beaver County (the County ), and the Commonwealth; the School District s future contract negotiations with unionized workers and the consequent impact on wage scales and operating costs of the School District; the School District s ability to access capital markets; adverse changes to Commonwealth budget and appropriations affecting crucial revenue streams from the Commonwealth to the School District; changes in demographic trends; and closure or disinvestment of key industries located in the School District. The School District cannot assess or predict the ultimate effect of these factors on its operations or financial results of its operations or on its ability to make debt service payments on the Bonds. Pledged Taxes and Overlapping Entities The availability of the revenue generated from the taxes received by the School District, which have been irrevocably pledged by the School District in its full faith, credit and taxing power the Pledged Tax Revenue ), in amounts sufficient to pay debt service on the Bonds when due is dependent on the tax base of real property within the School District and the ability of this tax base to support the tax burden imposed in any year by the Board of School Directors of the School District (the Board ) and overlapping taxing authorities such as the County, local municipalities, and the Commonwealth. The Board levies and collects Pledged Tax Revenues for its operations. The School District s assessed property valuations have increased modestly, for the most part, since fiscal year, see TABLE 6 REAL PROPERTY ASSESSMENT DATE herein. Overlapping governmental entities also levy property taxes for general operations and payment of their general obligation debt and may be dependent on property taxes to pay their pension obligations. Further financial information regarding the overlapping governmental entities may be obtained on their websites. None of the information on such websites are incorporated by reference into this Official Statement and neither the School District nor the Underwriter takes responsibility for the information contained therein nor have they attempted to verify the accuracy of such information. Competing Commonwealth Intercept Authorities Under current Pennsylvania law, Commonwealth subsidies to school districts can be intercepted for purposes other than to pay debt service than due and owing on school district debt. For example, Pennsylvania law authorizes the diversion of Commonwealth subsidies directly to charter schools if the relevant school districts fail to transfer such subsidies to the charter school. Additionally, Commonwealth law authorized the diversion of state subsidies to the Public School Employees Retirement System ( PSERS ) if a school district fails to fully fund its annual contribution to the retirement system. 5

12 There can be no assurance that Commonwealth subsidies subject to the Intercept Program will not be subject to prior diversion under competing Commonwealth intercept authorities. In addition, there can be no assurance that Commonwealth law will not change to authorize additional forms of diversion, eliminate or reduce existing reimbursement authority, or establish priorities among existing diversion programs. Commonwealth Failure to Appropriate The School District s appropriation of Commonwealth funds is dependent upon the adoption by the Commonwealth of its annual budget. The budget for the Commonwealth s fiscal year beginning July 1, 2015 was not enacted in full until April of There is no assurance that appropriations by the Commonwealth to the School District or to fund the Commonwealth s school district intercept programs will be made in any particular amount or on any particular time table, will be consistent with past levels of subsidy, or at levels needed or requested by the School District now or in the future. See STATE ENFORCEMENT OF DEBT SERVICE PAYMENTS hereto. No Assurance of Secondary Market for the Bonds There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that the Bonds can be sold for any particular price. Accordingly, purchasers of the Bonds should be prepared to have their funds committed until the Bonds mature. It is not the present practice of the Underwriter to make a secondary market in the bond issues for which it serves as Underwriter. Prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different than the original purchase price. Because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Bond Insurance Policy MUNICIPAL BOND INSURANCE Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. ("AGM") 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 C 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. Assured Guaranty Municipal Corp. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor s Financial Services LLC ( S&P ), AA+ (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM 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 relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On June 26, 2017, S&P issued a research update report in which it affirmed AGM s financial strength rating of AA (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On December 14, 2016, KBRA issued a financial guaranty surveillance report in which it affirmed AGM s insurance financial strength rating of AA+ (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take. On August 8, 2016, Moody s published a credit opinion affirming its existing insurance financial strength rating of A2 (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody s may take. 6

13 For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM At September 30, 2017: The policyholders surplus of AGM was approximately $2,322 million. The contingency reserves of AGM and its indirect subsidiary Municipal Assurance Corp. ( MAC ) (as described below) were approximately $1,371 million. Such amount includes 100% of AGM s contingency reserve and 60.7% of MAC s contingency reserve. The net unearned premium reserves of AGM and its subsidiaries (as described below) were approximately $1,681 million. Such amount includes (i) 100% of the net unearned premium reserves of AGM and AGM s wholly owned subsidiaries Assured Guaranty (Europe) plc, Assured Guaranty (UK) plc, CIFG Europe S.A. and Assured Guaranty (London) plc (together, the AGM European Subsidiaries ) and (ii) 60.7% of the net unearned premium reserve of MAC. The policyholders surplus of AGM and the contingency reserves and net unearned premium reserves of AGM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves of the AGM European Subsidiaries were determined in accordance with accounting principles generally accepted in the United States of America. Incorporation of Certain Documents by Reference Portions of the following documents filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (filed by AGL with the SEC on February 24, 2017); (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 (filed by AGL with the SEC on May 5, 2017); (iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 (filed by AGL with the SEC on August 3, 2017); and (iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (filed by AGL with the SEC on November 3, 2017). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption MUNICIPAL BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM 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 AGM supplied by AGM and presented under the heading MUNICIPAL BOND INSURANCE. 7

14 BOOK-ENTRY ONLY SYSTEM The information in this section has been provided by The Depository Trust Company, New York, New York ("DTC") and is not deemed to be a representation of the School District or the Underwriter. DTC, New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fullyregistered Bonds registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, respectively, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests 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 Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as if the case with securities held for the accounts of customers in 8

15 bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Issuer 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 Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. Disclaimer of Liability for Failures of DTC The School District and the Underwriters cannot and do not give any assurances that DTC, the Direct and Indirect Participants or others will distribute payments of principal, interest or premium with respect to the Bonds paid to DTC or its nominee as the owner of Bonds, or will distribute any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The School District and the Underwriters are not responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds, or any error or delay relating thereto. So long as Cede & Co. is the registered owner of the bonds, as nominee of DTC, references herein to the bondholders or registered owners of the bonds (other than under the caption TAX EXEMPTION AND CERTAIN OTHER TAX MATTERS - Federal Tax Exemption ) shall mean Cede & Co. and shall not mean the beneficial owners of the bonds. Payments made by the paying agent to DTC or its nominee shall satisfy the School District s obligations with respect to the bonds to the extent of such payments. Discontinuance of Book-Entry-Only System DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the School District and the Paying Agent. In addition, the School District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository). Under either of such circumstances, in the event that a successor Securities Depository is not obtained, Bond certificates are required to be printed and delivered, and the following provisions of the Paying Agent Agreement will apply: (i) principal or redemption price of the Bonds will be payable upon surrender of the Bonds at the designated corporate trust office of the Paying Agent located in Philadelphia, Pennsylvania; (ii) Bonds may be transferred or exchanged for other Bonds of authorized denominations at the designated office of the Paying Agent of the Bonds, without cost to the owner thereof except for any tax or other governmental charge; and (iii) Bonds will be issued in denominations as described above under "THE BONDS." Optional Redemption REDEMPTION OF BONDS The Bonds stated to mature on or after November 1, 2023, shall be subject to redemption prior to maturity, at the option of the School District, as a whole, on May 1, 2023, or on any date thereafter, or from time to time, in part (and if in part, in any order of maturity designated by the School District and within a maturity by lot) or on any date thereafter, in either case upon payment of a redemption price of 100% of the principal amount to be redeemed, together with accrued interest to the redemption date. 9

16 Mandatory Redemption The Bonds stated to mature on November 1, 2033 (the Term Bonds ) are subject to mandatory redemption prior to maturity in part, by lot, at a redemption price of 100% of the principal amount thereof plus accrued interest to the date fixed for redemption, on November 1, of each of the following years in the following aggregate principal amounts: * Stated Maturity Bonds Maturing November Principal Amount Redemption Date to be Redeemed 2028 $5, $5, $5, $5, $5, * $3,500,000 Such mandatory redemption shall be made upon payment of the principal amount of the Bonds being redeemed, plus accrued interest to the date fixed for redemption. In lieu of any such Mandatory Redemption the Paying Agent, on behalf of the District, may purchase from money in the Sinking Fund at a price not to exceed the principal amount plus accrued interest, or the District may tender to the Paying Agent, all or part of the Bonds subject to being drawn for mandatory redemption in any such year. Notice of Redemption So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, however, the School District and the Paying Agent shall send redemption notices only to Cede & Co. See BOOK-ENTRY ONLY SYSTEM herein for further information regarding conveyance of notices to Beneficial Owners. Notice of any redemption shall be given by depositing a copy of the redemption notice in first class mail not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption addressed to each of the registered owners of Bonds to be redeemed, in whole or in part, at the addresses shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein or in the mailing thereof, shall not affect the validity of any proceeding for redemption of other Bonds so called for redemption as to which proper notice has been given. On the date designated for redemption, notice having been provided as aforesaid, and money for payment of the principal and accrued interest being held by the Paying Agent, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and such Bonds or portions thereof shall cease to be entitled to any benefit or security under the Resolution, and registered owners of such Bonds or portions thereof so called for redemption shall have no rights with respect to such Bonds, except to receive payment of the principal of and accrued interest on such Bonds to the date fixed for redemption. If at time of mailing of a notice of redemption the School District shall not have deposited with the Paying Agent (or, in the case of a refunding, with another bank or depositary acting as refunding escrow agent) money sufficient to redeem all Bonds called for redemption, the notice of redemption may state that it is conditional, i.e., that it is subject to the deposit of sufficient redemption money with the Paying Agent not later than the opening of business on the redemption date, and such notice shall be of no effect unless such money is so deposited. Manner of Redemption So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, however, payment of the redemption price shall be made to Cede & Co. in accordance with the existing arrangements by and among the School District, the Paying Agent and DTC and, if less than all Bonds of any particular maturity are to be redeemed, the amount of the interest of each DTC Participant, Indirect Participant and Beneficial Owner in such Bonds to be redeemed shall be determined by the governing arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. See BOOK-ENTRY ONLY SYSTEM herein for further information regarding redemption of Bonds registered in the name of Cede & Co. If a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed. For the purposes of redemption, a Bond shall be treated as representing the number of Bonds that is equal to the principal amount thereof divided by $5,000, each $5,000 portion of such Bond being subject to redemption. In the case of partial redemption of a Bond, payment of the redemption price shall be made only upon surrender of such Bond in exchange for a Bond or Bonds, appropriate, of authorized denominations of the same series, maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the principal amount thereof. 10

17 If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth of Pennsylvania are authorized or required by law or executive order to close, then the date for payment of the principal, premium, if any, and interest upon such redemption shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized or required to close, and payment on such date shall have the same force and effect as if made on the nominal date of redemption. Introduction THE SCHOOL DISTRICT The School District is comprised of the Boroughs of Ambridge, Baden, Economy, and South Heights and the Township of Harmony (collectively, the Component Municipalities ). The School District borders Allegheny County to the south and east, and the Ohio River to the west and has an estimated population of 23,827. The School District is easily accessible by four-lane Route 65, to the business district of the City of Pittsburgh (15 miles), and the high speed four-six lane Beaver Valley-Airport Expressway. Interstate 79 is also within 10 minutes of the School District. The $1 billion passenger complex of the Pittsburgh International Airport is a fifteen minute drive from the School District. Access to the Airport s north side business, office, hotel, retail commercial complex, the expanded 24-hour cargo facilities and the world s largest jet engine test chambers operated by U.S. Airways at its Pittsburgh Maintenance Facility along the north runway is a fifteen minute drive. The Port Ambridge Industrial Business Park, which is located on the Ohio River fifteen miles northwest of Pittsburgh, is within the School District. Approximately 800,000 square feet of the available 1.3 million square feet of space is filled with industries employing approximately 195 people including World Class, Pittsburgh Intermodal Terminals, a transportation warehousing company, Federal Pipe and Steel Company, a steel processor and warehouse and Vincent Metal Service, which processes metal coils. The Port Ambridge Industrial and Business Park built a $4.2 million overpass bridge which provides direct access onto the Port Ambridge site crossing the four lanes of Route 65 and Conrail s main central rail line connecting the eastern part of the United States to the western part of the United States. Conrail s second largest railroad switching yard in the mid- Atlantic area is located at Conway adjacent to the School District. Also located within the School District is the Ambridge Regional Park which was developed by the Value Ambridge Associates, L.P. This industrial park, which replaced the Armco Steel facility in 1988, has 85 acres with over 1,000,000 sq. ft. under roof. Organization and Central Administration The Ambridge Area School District is a Local Education Agency and is a school district of the third class (school districts within the Commonwealth are classified as first, second, third and fourth class according to population), and operates under and pursuant to the School Code. The School District, fully accredited by the Middle States Association for Secondary Schools, enjoys an outstanding reputation throughout the public school system of the Commonwealth of Pennsylvania and has established a building program resulting in a continuously updated physical plant. The School District is governed by a nine member Board of School Directors, comprised of residents of the School District who are elected by region on a staggered basis for a four-year term of office. The daily operations and management of the School District are overseen by the Superintendent of Schools, who is the chief educational and financial officer of the School District. Budget preparation and control are overseen by the Business Manager. The current enrollment of the School District is 2,556 and the School District currently operates three elementary schools, one junior high school and one 1 senior high school facility. (See School Building Facilities herein). The budget for the fiscal year ending June 30, 2018, is $45,530,988, and the total employment of the School District is currently comprised of 336 administrative, professional/instructional and classified support personnel. (See Employment herein). 11

18 School Facilities The School District presently operates three elementary schools and one junior high school and one senior high school facility as described in the following table. TABLE 1 AMBRIDGE AREA SCHOOL DISTRICT FACILITIES Original Construction Date Addition/Renovation Date(s) Grades Rated Pupil Capacity Enrollment Building Elementary: State Street Elementary K Economy Elementary K Highland Elementary K Secondary: Ambridge Area Junior High Ambridge Area Senior High (New) , Source: School District Administrative Officials Enrollment Trends The following table presents recent trends in school enrollment and projections of enrollments. TABLE 2 AMBRIDGE AREA SCHOOL DISTRICT ENROLLMENT TRENDS Actual Enrollments Projected Enrollments School School Year Elementary Secondary Total Year Elementary Secondary Total ,443 1,181 2, ,340 1,215 2, ,305 1,220 2, ,787 1,301 3, ,308 1,229 2, ,307 1,182 2, ,346 1,210 2,556 Source: School District Officials and Pennsylvania Department of Education. Projected enrollments were compiled from the PA Department of Education and were compiled Introduction SCHOOL DISTRICT FINANCES The School District budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by the Superintendent and Business Manager and submitted to the School Board for approval prior to the beginning of each fiscal year on July 1. Financial Reporting The financial statements of the School District are prepared in accordance with accounting principles generally accepted in the United States of America. The School District s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide and proprietary fund financial statements apply Financial Accounting Standards Board pronouncements and Accounting Principles Board opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The government wide statements report using the economic resources measurement focus and the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). Its financial statements are audited annually by an independent certified public accountant, as required by Commonwealth law. 12

19 The School District keeps its books and prepares its financial reports according to a modified accrual basis of accounting. Major accrual items are payroll taxes and pension fund contributions payable, loans receivable from other funds, and revenues receivable from other governmental units. The School District s financial statements are audited annually by a firm of independent certified public accountants, as required by State law. The firm of Mark C. Turnley, Certified Public Accountant, Ambridge, Pennsylvania, currently serves as auditor for the School District. Budgeting Process in School Districts under the Taxpayer Relief Act In General. School districts budget and expend funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by school district administrative officials on a uniform form furnished by such Department and submitted to the board of school directors for approval prior to the beginning of the fiscal year on July 1. Procedures for Adoption of the Annual Budget. Under the Taxpayer Relief Act enacted in 2006, all school districts of the first class A, second class, third class and fourth class (except as described below) must adopt a preliminary budget proposal (which must include estimated revenues and expenditures and proposed tax rates) no later than 90 days prior to the date of the election immediately preceding the beginning of the new fiscal year. The preliminary budget proposal must be printed and made available for public inspection at least 20 days prior to its adoption; the board of school directors may hold a public hearing on the budget; and the board must give at least 10 days public notice of its intent to adopt the final budget. If the adopted preliminary budget includes an increase in the rate of any tax levy, the preliminary budget must be submitted to the Pennsylvania Department of Education (PDE) no later than 85 days prior to the date of the election immediately preceding the fiscal year. PDE is to compare the proposed percentage increase in the rate of any tax with the school district s Index (see Act 1 of 2006 (The Taxpayer Relief Act) herein) and within 10 days, but not later than 75 days prior to the upcoming election, inform the school district whether the proposed percentage increase is less than or equal to the Index. If PDE determines that a proposed tax increase will exceed the Index, the school district must reduce the proposed tax increase, seek voter approval for the tax increase at the upcoming election, or seek approval to utilize one of the referendum exceptions authorized under The Taxpayer Relief Act. With respect to the utilization of any of the Taxpayer Relief Act referendum exceptions for which PDE approval is required (see Act 1 of 2006 (The Taxpayer Relief Act ) herein), the school district must publish notice of its intent to seek PDE approval not less than one week before submitting its request for approval to PDE and, if PDE determines to schedule a public hearing on the request, a notice of the date, time and place of such hearing. PDE is required by the Taxpayer Relief Act to rule on the school district s request and inform the school district of its decision no later than 55 days prior to the upcoming election so that, if PDE denies the school district s request, the school district may submit a referendum question to the local election officials at least 50 days before the upcoming election, if it so chooses. If a school district seeks voter approval to increase taxes at a rate higher than the applicable Index, whether or not it first seeks approval to utilize one of the referendum exceptions available under the Taxpayer Relief Act, and the referendum question is not approved by a majority of the voters voting on the question, the board of school directors may not approve an increase in the tax rate greater than the applicable Index. Simplified Procedures in Certain Cases. The above budgetary procedures will not apply to a school district if the board of school directors adopts a resolution no later than 110 days prior to the election immediately preceding the upcoming fiscal year declaring that it will not increase any tax at a rate that exceeds the Index and that a tax increase at or below the rate of the Index will be sufficient to balance its budget. In that case, the Taxpayer Relief Act requires only that the proposed annual budget be prepared at least 30 days, and made available for public inspection at least 20 days, prior to its adoption, and that at least ten (10) days public notice be given of the board s intent to adopt the annual budget. No referendum exceptions are available to a school district adopting such a resolution. (THIS SECTION LEFT INTENTIONALLY BLANK) 13

20 Summary and Discussion of Financial Results A summary of comparative General Fund Balance Sheet and changes in fund balances is presented in Tables 3 and 4 which follows shows a summary of the District s General Fund Revenues and Expenditures. TABLE 3 AMBRIDGE AREA SCHOOL DISTRICT SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Years ending June 30) Draft ASSETS Cash and Cash Equivalents $ 808,895 $ 917,305 $ 1,753,951 $ 2,959,659 $ 1,353,345 Investments 4,470,754 5,403,024 6,615,196 5,662,001 2,758,657 Taxes Receivable (Net) 3,015,004 3,114,755 2,955,227 2,841,533 2,870,191 Due from Other Governments 828, ,956 1,083,476 1,271,635 1,798,082 Due from other Funds , ,508 Other Receivables 0 15, Prepaid Expenses , Total Assets $ 9,122,833 $10,080,349 $12,408,758 $12,936,891 $ 9,247,518 LIABILITIES AND FUND BALANCES Liabilities Due to Other Funds $ 276,860 $ 445,786 $ 4,083,232 $ 4,550,000 $ - Due to Other Governements 56, Deposits Payable Accounts Payable 513, , , , ,106 Other Current Liabilities 40,845 24,889 44, Retainage Payable Accrued Salaries and Benefits 1,348,551 1,058,810 1,110,396 1,241,981 1,473,538 Payroll Deductions and Withholdings 461, ,867 1,114, ,608 1,101,743 Defered Revenues 1,990, , Total Liabilities $4,688,526 $ 2,525,343 $ 6,863,759 $ 7,624,768 $ 2,932,387 DEFERRED INFLOW OF RESOURCES Delinquent Real Estate Taxes $0 $ - $ 2,104,995 $ 2,019,555 $ 1,989,479 TOTAL DEFERRED INFLOW OF RESOURCES $0 $ - $ 2,104,995 $ 2,019,555 $ 1,989,479 Fund Balances Unreserved - Undesignated: $ - $ - $ 3,440,004 $ 3,292,568 $ 4,325,652 General Fund Capital Projects Non-Major Governmental Funds Unreserved-Designated: 0 General Fund 4,434,307 5,352, ,292,568 4,325,652 Total Fund Balances 4,434,307 5,352,581 3,440,004 3,292,568 4,325,652 TOTAL LIABILITIES AND FUND BALANCES $ 9,122,833 $10,080,349 $12,408,758 $12,936,891 $ 9,247,518 Source: Ambridge Area School District Financial Statements for the years ended June 30, 2013, 2014, 2015, 2016 and Draft

21 TABLE 4 AMBRIDGE AREA SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES (Years ending June 30) Draft REVENUES Local Sources $22,622,825 $22,526,530 $22,780,773 $24,616,859 $25,272,886 State Sources 16,730,985 17,802,934 18,740,445 18,399,522 20,727,569 Federal Sources 1,093,842 1,269,630 1,108,788 1,150, ,490 Total Revenues $40,447,652 $41,599,094 $42,630,006 $44,166,871 $46,871,945 EXPENDITURES Instruction $22,528,895 23,746,212 24,674,891 25,962,530 27,230,657 Support Services 10,549,106 10,849,443 10,843,090 12,020,765 11,801,170 Non-Instructional Services 369, , , , ,349 Capital Outlay 151, Debt Service 5,122,940 5,634,821 4,458,423 4,760,980 5,171,983 Total Expenditures $38,721,330 $40,881,089 $40,624,481 $43,524,800 $45,021,159 Excess (Deficiency) of Revenue over Expenditures $ 1,726,322 $ 718,005 $ 2,005,525 $ 642,071 $ 1,850,786 Other Financing Sources (Uses) Refund Prior Year Receipts (51,578) (11,917) (136,102) (39,507) (68,291) Refund of Prior Year Expenses , Operating Transfer In 0 76,112 18, Operating Transfers Out 0 0 (3,800,000) (750,000) (750,680) Sale of Fixed Assets 114, ,269 Bond Proceeds Transfer to Bond Escrow Agent Total Other Financing Sources (Uses) $ 62, ,269 (3,918,102) (789,507) (817,702) Net Chanage in Fund Balances 1,789, ,274 (1,912,577) $ (147,436) $ 1,033,084 Fund Balance, July 1 2,645,017 4,434,307 5,352,581 3,440,004 3,292,568 Prior Period Adjutment Fund Balance, June 30 $ 4,434,307 $ 5,352,581 $ 3,440,004 $ 3,292,568 $ 4,325,652 Source: Ambridge Area School District Financial Statements for the years ended June 30, 2013, 2014, 2015, 2016 and Draft

22 AMBRIDGE AREA SCHOOL DISTRICT FINAL GENERAL FUND BUDGET SUMMARY FOR THE YEAR ENDING JUNE 30, 2017 ESTIMATED REVENUES AND OTHER FINANCING SOURCES Total Estimated Beginning Fund Balance - Unassigned... $3,440,004 Total Estimated Beginning Unreserved Fund Balance Available for, Appropriation and Reserves Scheduled for Liquidation During the Fiscal Year... $3,440,004 Revenues from Local Sources... $24,726,473 Revenues from State Sources... 19,730,852 Revenues from Federal Sources... 1,073,663 Other Financing Sources... 0 Total Estimated Revenues and Other Financing Sources... $45,530,988 Total Estimated Fund Balance, Revenues, and Other Financing Sources Available for Appropriation... $48,970,992 ESTIMATED EXPENDITURES AND OTHER FINANCING USES Other Financing Uses Instruction... $27,209,672 Support Services... 12,284,206 Operation of Non-instructional Services ,280 Debt Service/Other Expenditures and Financings Uses... 5,125,649 Interfund Transfers Out ,000 Transfers Involving Component Units... 0 Budgetary Reserve ,000 Total Other Expenditures and Financing Uses... $5,975,649 Total Estimated Expenditures and Other Financing Uses... $46,307,807 Source: Ambridge Area School District General Fund Budget for Fiscal Year Ended June 30,

23 TAXING POWERS AND LIMITS Subject to certain limitations imposed by the Taxpayer Relief Act, Act No. 1 of the Special Session of 2006, as amended (see PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS The Taxpayer Relief Act, as Amended (Act 1) herein), the School District is empowered by the School Code and other statutes to levy the following taxes: 1. An ad valorem tax on all property taxable for school purposes, not to exceed 25 mills on each dollar of assessed valuation, to be used for general school purposes. 2. An ad valorem tax on all property taxable for school purposes unlimited in rate, to provide funds for: a) salaries and increments for the teaching and supervisory staff; b) rentals due any municipal authority, or non-profit corporation, or due the State Public School Building Authority; c) interest and principal on any indebtedness incurred under the Debt Act or any prior or subsequent act governing the incurrence of indebtedness of the School District; and d) amortization of bonds or notes to finance construction of school facilities, if issued prior to the first Monday in July, An annual per capita tax on each resident over eighteen years old of not more than $ Additional taxes subject to division with other political subdivisions authorized to levy similar taxes on the same person, subject, business, transaction or privilege, under Act No. 511, enacted December 31, 1965, as amended (the Local Tax Enabling Act ). These taxes, which may include, among others, an additional per capita tax, a wage and other earned income tax, a real estate transfer tax, a gross receipts tax, a local services tax and an occupation tax, shall not exceed, in the aggregate, an amount equal to the product of the market valuation of real estate in the School District (as certified by the State Tax Equalization Board of the Commonwealth STEB ) multiplied by twelve mills. All local taxing authorities are required by the Local Tax Enabling Act to exempt disabled veterans and members of the armed forces reserve who are called to active duty at any time during the tax year from any local services tax and to exempt from any local services tax levied at a rate in excess of $10 those persons whose total income and net profits from all sources within the political subdivision is less than $12,000 for the tax year. The Local Tax Enabling Act also authorizes, but does not require, taxing authorities to exempt from per capita, occupation, and earned income taxes and any local services tax levied at a rate of $10 or less per year, any person whose total income from all sources is less than $12,000 per year. On July 2, 2008 the Pennsylvania legislature enacted an amendment of the Local Tax Enabling Act with the goal of consolidating and simplifying the collection of local earned income taxes on a countywide basis. Under the new law, effective January 1, 2012, the collection responsibility falls into one of sixty-six Tax Collection Districts ( TCD ). Each TCD has chosen a collector that will be responsible for collecting the local earned income tax for all school districts contained in the TCD. PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS The Taxpayer Relief Act, as Amended (Act 1) Pennsylvania Act No. 1 of the Special Session of 2006 ( Act 1 ), which became effective June 27, 2006 provides, inter alia, that a school district may not, in fiscal year or in any subsequent fiscal year, levy any tax for the support of the public schools which was not levied in the fiscal year, raise the rate of any earned income and net profits tax, if already imposed under the authority of the Local Tax Enabling Act (Act 511), or increase the rate of any tax for school purposes by more than the Index (defined below), unless in each case either (a) such increase is approved by the voters in the school district at a public referendum or (b) one of the exceptions provided below. On June 30, 2011, the General Assembly adopted legislation (Act 25 of 2011) amending Act 1, eliminating several exceptions previously permitted under Act 1 and providing for the rescission of certain prior approved referendum exceptions for disaster/emergency costs, implementation of a court order, school construction and non-academic school construction (effective after the last payment of principal and interest on debt incurred to finance same). (Act 1, together with Act 25 of 2011, will hereinafter be referred to as the Taxpayer Relief Act ). 17

24 The exceptions contained in Act 1 are: 1. to pay interest and principal on indebtedness incurred (i) prior to September 4, 2004, in the case of a school district which had elected to become subject to the provisions of the prior Homeowner Tax Relief Act, Act 72 of 2004, or (ii) prior to June 27, 2006, in the case of a school district which had not elected to become subject to Act 72 of 2004; to pay interest and principal on any indebtedness approved by the voters at referendum (electoral debt); and to pay interest and principal on debt refunding or refinancing debt for which one of the above exceptions is permitted, as long as the refunding or refinancing incurs no additional debt other than for costs and expenses related to the refunding or refinancing and the funding of appropriate debt service reserves; 2. to pay costs incurred in providing special education programs and services to students with disabilities, under specified circumstances; and 3. to make payments into the State Public School Employees Retirement System when the increase in the estimated payments between the current year and the upcoming year is greater than the Index, as determined by PDE in accordance with the provisions of Act 1. Any revenue derived from an increase in the rate of any tax allowed under the exception numbered 1 above may not exceed the anticipated dollar amount of the expenditure, and any revenue derived from an increase in the rate of any tax allowed pursuant to any other exception enumerated above may not exceed the rate increase required, as determined by PDE. If a school district s petition or request to increase taxes by more than the Index pursuant to one or more of the allowable exceptions is not approved, the school district may submit the proposed tax increase to a referendum. The Index (to be determined and reported by PDE by September of each year for application to the following fiscal year) is the average of the percentage increase in the statewide average weekly wage, as determined by the State Department of Labor and Industry for the preceding calendar year, and the employment cost index for elementary and secondary schools, as reported by the federal Bureau of Labor Statistics for the preceding 12-month period beginning July 1 and ending June 30. If and when a school district has a Market Value/Income Aid Ratio greater than 0.40 for the prior school year, however, the Index is adjusted upward by multiplying the unadjusted Index by the sum of 0.75 and such Aid Ratio. The Indexes applicable to the School District in the current and previous fiscal years (not including exemptions) are as follows: Fiscal Year Applicable (ending June 30) Index % % % % % % % In accordance with Act 1, the School District put a referendum question on the ballot at the May, 15, 2007, primary election seeking voter approval to levy (or increase the rate of) an earned income and net profits tax ( EIT ) or a personal income tax ( PIT ) and use the proceeds to reduce local real estate taxes by a homestead and farmstead exclusion. The referendum was NOT approved by the voters. A board of school directors may submit, but is not required to submit, a referendum question to the voters at the municipal election in 2009 or any later year seeking approval to levy or increase the rate of an EIT or a PIT for the purpose of funding homestead and farmstead exclusions, but the proposed rate of the EIT or PIT shall not exceed the rate that is required to provide the maximum homestead and farmstead exclusions allowable under law. This summary is not intended to be an exhaustive discussion of the provisions of Act 1 nor a legal interpretation of any provisions of Act 1, and a prospective purchaser of the Bonds should review the full text of Act 1 as a part of any decision to purchase the Bonds. Status of the Bonds Under Act 1 Payments of debt service on the Bonds described in this Official Statement ARE NOT eligible for exception from the provisions of Act 1 pursuant to the exceptions described above, subject to administrative review by PDE. Therefore, the debt service on the Bonds is ARE subject to the tax rate limitations of Act 1. Act 1 does not affect the School District s covenant under the Debt Act to budget, appropriate and pay debt service on the Bonds and all other outstanding debt of the School District. 18

25 Act 24 of 2001 Any increase in the rate of any tax pursuant to the above exceptions must be approved by the Pennsylvania Department of Education, and must not produce revenue in excess of the anticipated dollar amount of the expenditure for which the exception is allowed. If the Department of Education disapproves the school district s petition or request to increase taxes pursuant to one or more of the allowable exceptions, a school district may submit a referendum question to the voters at the election immediately preceding the start of the school district fiscal year in which the proposed tax increase would take effect. If the referendum is not approved, however, the board of school directors may not approve an increase in the tax rate of more than the Index. THE SUMMARY OF ACT 1, AS AMENDED, IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OR A LEGAL REPRESENTATION THEREOF, AND A PROSPECTIVE PURCHASER OF THE BONDS SHOULD REVIEW THE FULL TEXT OF ACT 1, AS AMENDED, AS PART OF ANY DECISION TO PURCHASE THE BONDS. Act 24 of 2001 Authorizing Replacement of the School District s Occupation Tax With an Increase in the Local Earned Income Tax Act 24 of 2001 of the Commonwealth (the Optional Occupation Tax Elimination Act) authorizes a board of school directors to schedule a public hearing and conduct a ballot referendum to approve replacement of the school district s occupation tax with an increase in the local earned income tax. Currently, school districts in Pennsylvania share a 1.0% local earned income tax (.5% Municipal and.5% School District) on the annual amount of residents wages and other earned income (which excludes unearned or investment income). The occupation tax is a flat amount for all employed individuals, or assessed by various trade, occupation and professional titles, regardless of income. Upon approval of a referendum, the occupation tax is authorized to be discontinued and the local earned income tax is permitted to be increased by the percentage necessary to generate revenue equal to the amount collected during the preceding year on the occupation tax. The restructured tax is designed to be revenue neutral to the school district The School District has not scheduled a public hearing or taken other action to conduct a referendum under Act 24 of SET FORTH ABOVE IS A SUMMARY OF PORTIONS OF ACT 24. THIS SUMMARY IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF THE PROVISIONS OF ACT 24 NOR A LEGAL INTERPRETATION OF ANY PROVISION OF ACT 24. A PROSPECTIVE PURCHASER OF THE BONDS SHOULD REVIEW THE FULL TEXT OF ACT 24 AS A PART OF ANY DECISION TO PURCHASE THE BONDS. Act 130 of 2008 Act 130 of 2008 of the Commonwealth amended the Local Tax Enabling Act so as to authorize school districts levying an occupation tax to replace that occupation tax with an increased earned income tax or, if the school district has implemented a personal income tax in accordance with the Taxpayer Relief Act, an increased personal income tax, in a revenue neutral manner. To so replace an occupation tax, by increasing the rate of income tax the board of school directors must first give public notice of its intent to adopt a resolution to place a referendum question on the ballot at the general or municipal election preceding the fiscal year when the maximum rate of the income tax will be increased, hold at least one public hearing on the matter and then place a binding referendum question on the ballot at a general or municipal election preceding the fiscal year when the maximum rate of the income tax will be increased for approval by the voters. The School district currently does not levy an occupation tax. 19

26 Act 48 of 2003 Pennsylvania Act No (enacted December 23, 2003) prohibits a school district from increasing real property taxes for the school year or any subsequent school year, unless the school district has adopted a budget for such school year that includes an estimated ending unreserved undesignated fund balance which is less than a specified percentage of the total budgeted expenditures, as set forth below: Total Budgeted Expenditures Estimated Ending Unreserved Undesignated Fund Balance as a Percentage of Total Budgeted Expenditures Less than or equal to $11,999, % Between $12,000,000 and $12,999, % Between $13,000,000 and $13,999, % Between $14,000,000 and $14,999, % Between $15,000,000 and $15,999, % Between $16,000,000 and $16,999, % Between $17,000,000 and $17,999, % Between $15,000,000 and $18,999, % Greater than or equal to $19,000, % Estimated ending unreserved, undesignated fund balance is defined in Act as that portion of the fund balance which is appropriable for expenditure or not legally or otherwise segregated for a specific or tentative future use, projected for the close of the school year for which a school district s budget was adopted and held in the General Fund accounts of the school district. The total budgeted expenditures in the School District s budget for the fiscal year are $41,599,094, and the School District s estimated ending unreserved undesignated fund balance is $5,532,581 as a percentage of total budgeted expenditures for the fiscal year is 13.30%. SET FORTH IN THE TWO IMMEDIATELY PRECEDING TWO SUBSECTIONS ARE SUMMARIES OF PORTIONS OF ACT 130 OF 2008 AND ACT 48 OF THESE SUMMARIES ARE NOT INTENDED TO BE EXHAUSTIVE DISCUSSIONS OF THE PROVISIONS OF ACT 130 OF 2008 OR ACT 48 OF 2003 NOR A LEGAL INTERPRETATION OF ANY PROVISIONS THEREOF. A PROSPECTIVE PURCHASER OF THE BONDS SHOULD REVIEW THE FULL TEXT OF ACT 130 OF 2008 AND ACT 48 OF 2003 AND CONSULT WITH HIS OR HER ATTORNEY AND/OR TAX ADVISOR AS PART OF ANY DECISION TO PURCHASE THE BONDS. Tax Levy Trends Table 5 shows the recent trend of tax rates levied by the School District. Table 7 shows the comparative trend of real property tax rates for the School District, the boroughs and municipalities that comprise the School District and Beaver County. TABLE 5 Real Estate (mills) (Based on Assessment) Ambridge Area S.D.... Beaver County (2005) mils 22.2 mils Per Capita Ambridge Area S.D.... $10.00 Real Estate Transfer Ambridge Area S.D % Borough % Earned Income Tax Ambridge Area School District % Borough and Townships % Source: School District Officials. 20

27 Real Property Tax The real property tax (excluding delinquent collections) produced $18,682,149 in , or approximately 40 percent of total revenue. The tax is levied on July 1 of each year. The tax bills are dated July 15 and taxpayers who remit within 60 days receive a 2 percent discount, and those who remit subsequent to 120 days after November 15 are assessed a 10 percent penalty. The following tables summarize recent trends of assessed and market valuations of real property and real property tax collection data. TABLE 6 AMBRIDGE AREA SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA Market Assessed Year Value Value Ratio $764,825,200 $258,101, % $777,102,000 $259,264, % $834,449,200 $259,997, % $877,633,535 $263,153, % $901,245,416 $269,316, % $924,200,735 $271,306, % $923,436,899 $236,926, % $956,337,298 $272,906, % $979,790,563 $278,691, % $1,016,976,076 $280,721, % Source: Pennsylvania State Tax Equalization Board. TABLE 7 AMBRIDGE AREA SCHOOL DISTRICT Market Assessed Market Assessed Value Value Value Value School District... $979,790,563 $278,691,900 $1,016,976,076 $280,721,540 Ambridge Borough ,090,096 57,910, ,355,317 58,230,919 Baden Borough ,401,571 36,592, ,030,100 36,583,815 Economy Borough ,078, ,266, ,567, ,784,110 Harmony Township ,302,291 41,382, ,253,410 41,582,910 South Heights Borough... 12,917,878 4,540,686 13,769,901 4,539,786 Source: Pennsylvania State Tax Equalization Board. 21

28 TABLE 8 AMBRIDGE AREA SCHOOL DISTRICT ASSESSMENT BY LAND USE Residential... $216,499,732 $218,924,267 $222,020,261 $222,990,561 $238,844,158 Lots... 6,217,731 6,205,731 6,254,731 6,261,681 3,019,586 Industrial... 9,454,112 9,454,112 9,461,662 9,435,712 9,765,645 Commercial... 31,545,999 27,756,849 27,596,444 32,432,761 26,116,210 Agriculture... 4,547,215 4,547,215 4,547,215 4,547, ,125 Land... 1,272,720 1,275,320 1,267,720 1,251, Mineral Trailers... 1,768,600 1,762,800 1,757,900 1,772,350 1,735,891 Total... $271,306,109 $269,926,394 $272,906,233 $278,691,900 $280,721,540 Source: Pennsylvania State Tax Equalization Board. TABLE 9 AMBRIDGE AREA SCHOOL DISTRICT REAL PROPERTY TAX COLLECTION DATA Real Estate Real Estate Collection Year Taxes Levied Taxes Collected Percentage $19,510,867 $19,008, % ,345,071 18,682, % ,028,657 17,231, % ,958,088 16,970, % ,788,796 18,541, % ,808,799 16,969, % ,634,878 15,094, % (1) Beginning in the amount of the Total Flat Billing is reduced by the amount of the Homestead/Farmstead Exemptions. The Total Flat Billing shown excludes the amount payable from the Property Tax and Rent Rebate Program funded pursuant to Act 1 of the Commonwealth. Source: School District officials. 22

29 TABLE 10 The largest top 10 Taxpayers located within Ambridge Area School District for include: Name Assessed Value Wal-Mart Real Estate Business Trust $3,046,400 PZ Northern Limited Partnership $2,165,918 Value Ambridge Associates $2,145,325 Anthony Wayne Terrace Housing Associates $1,652,350 Sippel Industries, LLC $1,192,675 Koppel Steel Corporation $1,158,500 O Neal Metals (PA) Inc. $790,500 RKW Real Estate $746,650 Motel Sleepers, Inc. $530,650 Bar Acquisitions, LLC $513,200 TOTAL $13,942,168 Source: School District Officials Other Taxes Under Act 511, the School District collected $3,411,005 in other taxes in Among the taxes authorized by Act 511, the Real Estate Transfer Tax, Wage and Other Earned Income Tax (including net profits), Per Capita Tax, Emergency and Municipal Services Tax and Amusement Tax are levied by the School District. Real Estate Transfer. The School District collects a tax of 0.5% of the value of real estate transfers. In , the collected portion of this tax yielded $299,737, or less than one percent of total revenue. Wage and Other Earned Income Tax (including net profits). The School District levies a tax of 0.5% of the earned income and net profits of residents. In the collected portion of this tax yielded $2,796,066 or 6.0% of total revenue. Per Capita Taxes. A tax of $5.00 ($5.00 under Act 511 and $5.00 under the Public School Code) on each resident over 18 years old yielded $44,929.38, or less than one percent total revenue. Mercantile Tax. A general tax of 0.05% and 0.075% levied on the gross receipts of retail businesses and wholesale businesses respectively located within the School District. In the collected portion of this tax yielded $196,854, or less than one percent of total revenue. Commonwealth Aid to School Districts Pennsylvania school districts receive financial assistance from the Commonwealth in a number of forms, all subject to statutory provisions and annual appropriation by the Pennsylvania General Assembly. A basic instructional subsidy is allocated to all school districts based on (1) the per pupil market value of assessable real property in the school district; (2) the per pupil earned income in the school district; and (3) the school district's tax effort, as compared with the tax effort of other school districts in the Commonwealth. School districts also receive subsidies for special education, pupil transportation, vocational education, health service, and debt service. 23

30 TABLE 12 AMBRIDGE AREA SCHOOL DISTRICT INDEBTEDNESS AND DEBT RATIOS (As of Date of Delivery) Gross Net DIRECT DEBT Outstanding Outstanding GOB, Series C of 2017 (this issue)... $9,195, $9,306, GOB, Series A of ,980, ,800, GOB, Series B of , ,177 GOB, Series of ,520,000 4,520,000 GOB, Series of ,510, ,213, GOB, Series of ,395, ,129, GOB, Series A of , , GROSS DIRECT DEBT... $72,300, $65,587, OVERLAPPING DEBT Borough of Ambridge (100%)... $2,500, $2,500, Borough of Baden (100%)... 1,495, ,495, Borough of Economy (100%) , , Township of Harmony (100%) South Heights (100%) Beaver County, General Obligation (12.5%)... $19,020, $19,020, TOTAL OVERLAPPING DEBT... $23,920, $23,920, TOTAL DIRECT AND OVERLAPPING DEBT... $96,220, $89,508, DEBT RATIOS Direct Debt to: Market Value % 6.69% Assessed Value % 23.53% Per Capita... $3,068 $2,753 Direct and Overlapping Debt to: Market Value % 9.14% Assessed Value % 32.12% Per Capita... $4,072 $3,757 Beaver County Assessed Value (2015)... $2,171,446,206 Ambridge Area School District Assessed Value (2015)... $278,691,900 Ambridge Area School District Market Value (2015)... $979,790,563 Population (2010)... 23,827 Source: School District, U.S. Census Bureau and the Pennsylvania State Tax Equalization Board. 24

31 Debt Limit and Remaining Borrowing Capacity The statutory borrowing limit of the School District under the Act is computed as a percentage of the School District's "Borrowing Base". The "Borrowing Base" is defined as the annual arithmetic average of "Total Revenues" (as defined by the Act), for the three full fiscal years ended next preceding the date of incurring debt. The School District calculates its present borrowing base and borrowing capacity as follows: Total Revenues for $41,599,094 Total Revenues for $42,630,006 Total Revenues for $44,166,871 Total Revenues, Past Three Years... $128,395,971 Annual Arithmetic Average (Borrowing Base)... $42,798,657 Under the Act as presently in effect, no school district shall incur any nonelectoral debt or lease rental debt, if the aggregate net principal amount of such new debt together with any other net nonelectoral debt and lease rental debt then outstanding, would cause the net nonelectoral debt plus net lease rental debt to exceed 225% of the Borrowing Base. The application of the aforesaid percentage to the School District's Borrowing Base produces the following product: Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $96,296,978 $72,300,000 $23,996,978 *Includes the Bonds offered through this Official Statement. [THIS SECTION LEFT INTENTIONALLY BLANK] 25

32 Debt Service Requirements Table 13 represents the debt service requirements on the School District's outstanding general obligation and lease rental indebtedness including debt service on the Bonds. Table 14 represents data on the extent to which Commonwealth Aid provides coverage for debt service and lease rental requirements. The School District has never defaulted on the payment of debt service. TABLE 13 AMBRIDGE AREA SCHOOL DISTRICT DEBT SERVICE REQUIREMENTS 30-Jun Oustanding Series of 2017C Total Year De bt Principal Interest Subtotal Requrim ents 2017 $ ,533, ,563 90,563 5,624, ,513, , , ,763 5,907, ,499, , , ,163 5,890, ,500, , , ,563 5,888, ,507, , , ,913 5,898, ,500, , , ,163 5,893, ,502, , , ,363 5,892, ,403, , , ,838 5,850, ,485, , , ,275 5,853, ,916, , , ,184 5,291, ,296, , , ,715 5,280, ,303,299 5, , ,825 4,527, ,303,343 5, , ,675 4,527, ,296,043 5, , ,525 4,519, ,291,072 5, , ,375 4,514, ,292,253 5, , ,225 4,515, ,249 3,500, ,650 3,665,650 4,408, ,613 3,650,000 56,575 3,706,575 4,450, ,609, ,609, Total $86,240,629 9,195,000 3,907,349 13,102,349 $99,342,978 * Totals may not add due to rounding. 26

33 TABLE 14 AMBRIDGE AREA SCHOOL DISTRICT COVERAGE OF DEBT SERVICE AND LEASE RENTAL REQUIREMENTS BY STATE AID* Estimated Commonwealth Aid Received... $19,730, Debt Service Requirements... $5,533,610 Maximum Future Debt Service Requirements after Issuance of Bonds... $5,907,290 Coverage of Debt Service Requirements times Coverage of Maximum Future Debt Service Requirements after Issuance of Bonds times *Assumes current State Aid Ratio. See "Commonwealth Aid to School Districts." Future Financing The School District does not anticipate issuing any additional long-term debt. School District Employees LABOR RELATIONS There are presently approximately 310 permanent employees of the School District, including approximately 185 teachers and 15 administrators and approximately 110 support personnel, including secretaries and teaching assistants, cafeteria staff, and custodial and maintenance staff. The professional/instructional employees of the School District are represented for purposes of collective bargaining by the Ambridge Area Education Association, an affiliate of the Pennsylvania State Education Association (the PSEA ). The current contract between the School District and the PSEA is in effect from July 1, 2015 through June 30, The secretarial support staff and teaching assistants are represented by the Ambridge Educational Support Personnel Association (AAESPA) an affiliate of the PSEA. The current collective bargaining agreement is in effect from July 1, 2016 through June 30, The cafeteria staff are represented by the Ambridge Educational Support Personnel Association Cafeteria Branch (AAESPA Cafeteria Branch), an affiliate of the PSEA. The current collective bargaining agreement is in effect from July 1, 2009 through June 30, Custodial and maintenance staff are represented by Local 248 Ambridge Area School Employees, an affiliate of AFSCME AFL CIO. The current collective bargaining agreement is in effect from July 1, 2009 through June 30, The parties are currently in negotiations for this contract. Pension Program School Districts in Pennsylvania are required to participate in a statewide pension program administered by the Public School Employees Retirement System ( PSERS ). All of the School District's full-time employees, part-time employees who work more than 80 days in a school year, and hourly employees who work over 500 hours a year participate in the program. However, please note a Pennsylvania Supreme Court decision has removed the hourly de minimis requirement for current members of PSERS regarding the purchase of credit for their part-time school service rendered prior to their being members of PSERS, for purposes of increasing their pension benefits. Currently, each party to the program contributes a fixed percentage of the employee's salary. Employees belonging to PSERS prior to July 22, 1983 contribute 5.25% of their salary, and employees who joined the PSERS on July 23, 1983 to June 30, 2001 contribute 6.25% of their salary. On February 17, 2002, Governor Ridge signed Act 9 which created a new membership class that set the employee contribution rate at 7.50% of the employee s salary for those employees hired on or after July 1, Act 9 also provided an option for those employees hired prior to July 1, 2001 to elect a contribution rate of 6.50%, if they were hired before July 22, 1983, or 7.50% if they were hired on or after July 22, An attempt at pension reform, Act 120 of 2010, was signed into law on November 23, The benefit reductions contained in this legislation only impact individuals who become new members of PSERS on or after July 1, New members have the option of selecting one of 2 new classes. The members in class T-E, will contribute a base rate of 7.5% with shared risk contribution levels between 7.5% and 9.5% and a pension multiplier of 2.0%. New members will automatically be enrolled in the T-E class and will have a one-time option within 45 days of employment to elect the T-F class. Members that select Class T-F will contribute a base rate of 10.3% with shared risk contribution levels between 10.3% and 12.3% and a pension multiplier of 2.5% 27

34 In December 2010, the PSERS board projected employer contribution rates of 29.46% in increasing annually to 30.61% in As a result of Act 120, however, the actual contribution rate was decreased to 12.36% in In , it was 16.93%, 21.40% in and 25.84% in In December 2015, the PSERS board revised the employee contributions and the rate is now projected at 34.2%. Both the School District and the Commonwealth are responsible for paying a portion of the employer s share. School entities are responsible for paying 100% of the employer share of contributions to PSERS. The Commonwealth reimburses the employer for one-half the payment for employees. The School District contributions are made on a quarterly basis and employee contributions are deducted monthly from each paycheck and remitted quarterly. Recent School District payments have been as follows: The School District is current in all payments. District Expense $1,848, $2,596, $3,848, $3,721, $4,637, (Budgeted)... $5,421,790 The Fund s complete report is available on the PSERS website on the Internet: Source: PSERS Financial Highlights. Other Post-Employment Benefits The School District is obligated under collective bargaining agreements to provide in the future health insurance coverage for current and future retired employees, and to provide retirement severance pay for existing employees. The School District has become subject to the requirements of GASB Statements No. 43 and 45 commencing with the School District s annual financial statements for the fiscal year ending June 30, The School District annually appropriates funds to meet its obligation to pay such benefits on a pay-as-you-go basis, and has not established any fund or irrevocable trust for the accumulation of assets with which to pay such benefits in future years. In the fiscal year ended June 30, 2017, the School District s OPEB liability was $1,099,921, for it s for its fiscal year the OPEB contribution was approximately $371,626. LITIGATION At the time of settlement, the School Board and the Solicitor will deliver a certificate stating that there is no litigation pending with respect to the Bonds, the Resolution or the right of the School District to issue the Bonds. DEFAULTS AND REMEDIES In the event of failure of the School District to pay or cause to be paid the interest on or principal of the Bonds, as the same becomes due and payable, the holders of the Bonds shall be entitled to certain remedies provided by the Act. Among the remedies, if the failure to pay shall continue for 30 days, holders of the Bonds shall have the right to recover the amount due by bringing an action in assumpsit in the Court of Common Pleas of the county in which the School District is located. The Act provides any judgment shall have an appropriate priority upon the funds next coming into the treasury of the School District. The Act also provides that upon a default of at least 30 days, holders of at least 25 percent of the Bonds may appoint a trustee to represent them. The Act provides certain other remedies in the event of default, and further qualifies the remedies hereinbefore described. State Tax Matters TAX MATTERS In the opinion of Bond Counsel, the Bonds, and the interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania. The residence of a holder of a Bond in a state other than Pennsylvania, or being subject to tax in a state other than Pennsylvania, may result in income or other tax liabilities being imposed by such other state or its political subdivisions based on the interest or other income from the Bonds. 28

35 Federal Income Tax Matters In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds (including, in the case of Bonds sold at an original issue discount, the difference between the initial offering price and par) is excluded from gross income for Federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under Section 57 of the Internal Revenue Code of 1986, as amended (the Code ) for purposes of Federal individual or corporate alternative minimum taxes. Original Issue Discount The Bonds that mature on November 1, 2023 through and including 2034 (collectively, the "Tax-Exempt Discount Bonds") are being offered and sold to the public at an original issue discount ("OID") from the amounts payable at their maturity. OID is the excess of the stated redemption price of a bond at maturity (par) over the price to the public at which a substantial amount of Bonds of the same maturity are sold pursuant to the initial offering. Under the Code, OID on each Tax- Exempt Discount Bond will accrue over its term and the amount of accretion will be based on the yield to maturity, compounded semi-annually. The amount of OID that accrues during each semi-annual period will do so ratably within that period on a daily basis. With respect to an initial purchaser of a Tax-Exempt Discount Bond at its initial offering price, the portion of OID that accrues during the period that such purchaser owns such Bond is added to the purchaser's tax basis for purposes of determining gain or loss at the maturity, redemption, sale, or other disposition of that Tax-Exempt Discount Bond and thus, in practical effect, is treated as stated interest, which is excludable from gross income for federal income tax purposes. Holders of Tax-Exempt Discount Bonds should consult their own tax advisors as to the effect of OID with respect to their federal tax liability. Original Issue Premium The Bonds that mature on November 1, 2018 through and including 2021 (the Premium Bonds ) were sold at an original issue premium ("OIP ). Under the Code, OIP is an adjustment to basis and must be amortized. The method of amortization may be the method regularly employed by the taxpayer if such method is reasonable, or, in all other cases, must be the method prescribed by applicable Treasury Regulations, which provide that the amortizable bond premium is an amount which bears the same ratio to the OIP as the number of months in the taxable year during which the bond was held by the taxpayer bears to the number of months from the beginning of the taxable year (or, if the Premium Bond was acquired in the taxable year, from the date of acquisition) to the date of maturity. The basis of the Premium Bond is reduced by the amount of the amortizable bond premium. The amortized bond premium is treated as a reduction in the tax-exempt interest received on the Premium Bond. No deduction is allowed on account of OIP. Holders of Premium Bonds should consult their own tax advisors as to the effect of such OIP with respect to their federal tax liability. Interest Expense Deductions for Financial Institutions Under Section 265 of the Code, financial institutions are denied any deduction for interest expenses that are allocable, by a formula, to tax-exempt obligations acquired after August 7, An exception, which permits a deduction for 80% of such interest expenses, is provided in respect of certain tax-exempt obligations issued by a qualified issuer that specifically designates such obligations as qualified tax-exempt obligations under Section 265 of the Code. The School District is a qualified issuer and the School District has designated the Bonds as qualified tax-exempt obligations for the purposes and effect contemplated by Section 265 of the Code. Financial institutions intending to purchase Bonds should consult their own tax advisors to determine the effect of the interest expense deduction on their federal tax liability. Continuing Compliance The Code imposes various terms, restrictions, conditions and requirements relating to the exclusion from gross income for Federal income tax purposes of interest on obligations such as the Bonds. The School District has covenanted to comply with all such requirements, including non-arbitrage requirements under Section 148 of the Code, that are necessary to ensure that interest on the Bonds will not be includable in gross income for Federal income tax purposes. Failure to comply with these covenants could result in interest on the Bonds being includable in gross income for Federal income tax purposes and such inclusion could be required retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with the aforesaid covenants. Moreover, Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the tax-exempt status of the interest on the Bonds. Certain requirements and procedures contained or referred to in the Resolution and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Such changes or actions could constitute an exchange or other tax event with respect to the Bonds, which could result in gain or loss to the holder of a Bond, and a consequent tax liability. 29

36 Pursuant to its continuing disclosure obligations made pursuant to SEC Rule 15c2-12 (see Continuing Disclosure Undertaking herein), the School District may be required to provide notice of such changes or actions, as Material Events under said Rule. However, holders of the Bonds should consult their own tax advisors as to the effect of such changes or actions with respect to their federal tax liability. Collateral Tax Liabilities Although Bond Counsel has rendered an opinion that interest on the Bonds is excludable from gross income for Federal and Pennsylvania income tax purposes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may result in other collateral effects on a Bondholder s Federal, state or local tax liabilities. The nature and extent of these other tax consequences may depend upon the particular tax status of the Bondholder or the Bondholder s other items of income or deduction. Bond Counsel expresses no opinions regarding any tax consequences other than what is set forth in its opinion; each Bondholder or potential Bondholder is urged to consult with its own tax advisors with respect to the effects of purchasing, holding or disposing of the Bonds on its tax liabilities. For example, corporations are required to include all tax-exempt interest in determining adjusted current earnings under Section 56(c) of the Code, which may increase the amount of any alternative minimum tax owed. For tax years beginning after 2012, interest on the Bonds may also be subject to a 3.8% Medicare tax applicable to net investment income for individual taxpayers whose adjusted gross incomes exceed certain threshold amounts. (taxable Bonds only). Other tax consequences for certain taxpayers include, without limitation, increasing the federal tax liability of certain foreign corporations subject to the branch profits tax imposed by Section 884 of the Code, increasing the federal tax liability of certain insurance companies under Section 832 of the Code, increasing the federal tax liability of certain S corporations subject to Sections 1362 and 1375 of the Code, increasing the federal tax liability of certain individual recipients of social security or railroad retirement benefits under Section 86 of the Code, limiting the use of the Earned Income Credit under Section 32 of the Code, and denying an interest expense deduction to certain financial institutions under Section 265 of the Code (unless, and in the circumstance when, the Bonds have been designated by the issuer as qualified tax-exempt obligations ). Change in Law; Adverse Determinations From time to time, certain legislative proposals may be introduced, or are pending, in the Congress of the United States, including some that carry retroactive effective dates, that, if, enacted, could alter or amend the federal tax matters described above or affect the market value of the Bonds. No prediction can be made whether or in what form any such proposal or proposals might be enacted into law or whether, if enacted, the same would apply to Bonds issued prior to enactment. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. The Internal Revenue Service (the Service ) regularly audits tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includible in the gross income of the owners thereof for federal income tax purposes. No prediction can be made whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures, the Service may treat the School District as a taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until such time as the audit is concluded, regardless of the ultimate outcome. Payments of interest on, and proceeds of the sale, redemption or maturity of, tax-exempt obligations, such as the Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Bondholder who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or to any Bondholder who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. THE FOREGOING IS NOT INTENDED AS AN EXHAUSTIVE LIST OF THE PROVISIONS OF FEDERAL, STATE AND LOCAL TAX LAWS WHICH MAY HAVE AN EFFECT ON INDIVIDUALS AND CORPORATIONS HOLDING THE BONDS OR RECEIVING INTEREST THEREON. PROSPECTIVE PURCHASERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE EFFECT ON THEIR FEDERAL, STATE OR LOCAL TAX LIABILITY AND GENERAL FINANCIAL AFFAIRS OF HOLDING THE BONDS OR RECEIVING INTEREST THEREON. CONTINUING DISCLOSURE UNDERTAKING In accordance with the requirements of the Rule 15c2-12 (the Rule ) promulgated by the Securities and Exchange Commission (the SEC ), the School District (being an obligated person with respect to the Bonds, within the meaning of the Rule), will agree to provide the following to the Municipal Securities Rulemaking Board (the MSRB ) in an electronic format as prescribed by the MSRB, either directly or indirectly through a designated agent: (A) Annually, not later than 270 days following the end of each fiscal year, beginning with the fiscal year ending June 30, 2017, the following financial information and operating data for the School District: Audited financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for local government units a summary of the budget for the current fiscal year 30

37 (B) In a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the School District; (13) the consummation of a merger, consolidation, or acquisition involving the School District or the sale of all or substantially all of the assets of the School District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; and (C) in a timely manner, notice of a failure of the School District to provide the required annual financial information specified above, on or before the date specified above. With respect to the filing of annual financial and operating information, the School District reserves the right to modify from time to time the specific types of information provided or the format of the presentation of such information to the extent necessary or appropriate as a result of a change in legal requirements or a change in the nature of the School District or its operations or financial reporting, but the School District will agree that any such modification will be done in a manner consistent with the Rule. The events listed in (B) above are those specified in the Rule, not all of which may be relevant to the Bonds. The School District may from time to time choose to file notice of the occurrence of other events, in addition to the events listed in (B) above, but the School District does not commit to provide notice of the occurrence of any events except those specifically listed in (B) above. The School District acknowledges that its undertaking pursuant to the Rule described herein is intended to be for the benefit of the Beneficial Owners of the Bonds and shall be enforceable by the Beneficial Owners of the Bonds, but the right of the Beneficial Owners of the Bonds to enforce the provisions of the School District s continuing disclosure undertaking shall be limited to a right to obtain specific enforcement, and any failure by the School District to comply with the provisions of the undertaking shall not be an event of default with respect to the Bonds. The School District s obligations with respect to continuing disclosure described herein shall terminate upon the prior redemption or payment in full of all of the Bonds or if and when the School District is no longer an obligated person with respect to the Bonds, within the meaning of the Rule. The MSRB has been designated by the SEC to be the central and sole repository for continuing disclosure information filed by issuers of municipal securities since July 1, Information and notices filed by municipal issuers (and other obligated persons with respect to municipal securities issues) are made available through the MSRB s Electronic Municipal Market Access (EMMA) System, which may be accessed on the internet at COMPLIANCE WITH PREVIOUS CONTINUING DISCLOSURE UNDERTAKINGS The School District has entered into prior undertakings to provide information pursuant to Continuing Disclosure Agreements for several outstanding bond issues. The requirements of the outstanding bond issues require the School District to submit information annually, with the shortest submission period being 180 days following the close of each fiscal year of the School District, which occurs on June 30th. The School District s filing history of its annual financial statements, budget and operating data during the past five (5) years is outlined in the table below: Financial Statements Budget Operating Data Fiscal Year Filing Ending Deadline (1) Filing Date EMMA ID (2) Filing Date EMMA ID (2) Filing Date EMMA ID (2) 6/30/ /27/ /26/2015 EP /03/2014 EP /09/2015 ER /30/ /27/ /26/2015 EP /03/2014 EP /09/2015 ER /30/ /27/ /26/2015 EP /03/2014 EP /09/2015 ER /30/ /27/ /09/2016 EP /15/2016 EP /15/2015 EP /30/ /27/ /23/2017 ES /27/2017 ES /21/2015 ER

38 Notes (1) For these purposes, assumes the shortest filing deadline of the School District s previous Continuing Disclosure Agreements (2) Submission ID is the EMMA Submission ID for each filing. To access a filing, insert the Submission ID to the end of the web address below: Some of the School District s bond issues that have been outstanding during the past five (5) years have been insured by various bond insurance companies that have received rating downgrades and upgrades by S&P and/or Moody s. This information was publicly available from widely accepted information sources at the time of their respective downgrades or upgrades. For informational purposes, the School District has uploaded a summary of these rating changes relating to certain bond insurance companies on August 26, The School District has engaged Digital Assurance Certification, LLC ( DAC ) as its Dissemination Agent for the purpose of complying with Rule 15c2-12, beginning with the issuance of the Bonds. UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the School District at an aggregate price of $8,956,168.75, (which represents par less underwriter s discount of $68,962.50, minus net original issue discount of $169, The Underwriter's obligations are subject to certain conditions precedent; however, the Underwriter will be obligated to purchase all such Bonds if any such Bonds are purchased. The Bonds may be offered and sold to certain dealers (including dealers depositing such Bonds into investment trusts) at prices lower than such public offering prices, and such public offering prices may be changed, from time to time, by the Underwriter. RATING The Bonds are expected to receive a rating of AA (stable outlook) by S&P Global Ratings, with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of the principal of and interest on the Bonds will be issued by AGM. S&P Global Ratings has also assigned an underlying rating of A/Stable to the Bonds. An explanation of the significance of such rating may be obtained only from the rating agency furnishing the same. There is no assurance that any such rating will be in effect for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency if, in the judgment of such agency, circumstances so warrant. Any such downward revision or withdrawal of any such rating may have an adverse effect on the market price of the 2016 Bonds. LEGAL OPINION The Bonds are offered subject to the receipt of the unqualified approving legal opinion of Dinsmore & Shohl LLP, Bond Counsel, of Pittsburgh, Pennsylvania. Certain legal matters will be passed upon for the School District by Weiss Burkardt Kramer, LLC, of Pittsburgh, Pennsylvania, School District Solicitor. MISCELLANEOUS This Official Statement has been prepared under the direction of the School District by Boenning & Scattergood, Inc., Pittsburgh, Pennsylvania, in its capacity as Underwriter to the School District. The information set forth in this Official Statement has been obtained from the School District and from other sources believed to be reliable. Insofar as any statement herein includes matters of opinion or estimates about future conditions, it is not intended as representation of fact, and there is no guarantee that it is, or will be, realized. Summaries or descriptions of provisions of the Bonds, the Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof. Reference is hereby made to the complete documents, copies of which will be furnished by the School District or the Underwriter upon request. The information assembled in this Official Statement is not to be construed as a contract with holders of the Bonds. The School District has authorized the distribution of this Official Statement. AMBRIDGE AREA SCHOOL DISTRICT Beaver County, Pennsylvania By: /s/ Scott Angus President, Board of School Directors 32

39 APPENDIX A Demographic and Economic Information Relating to the Ambridge Area School District

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41 Introduction The School District is comprised of the Boroughs of Ambridge, Baden, Economy, and South Heights and the Township of Harmony (collectively, the Component Municipalities ). The School District borders Allegheny County to the south and east, and the Ohio River to the west and has an estimated population of 23,827. The School District is easily accessible by four-lane Route 65, to the business district of the City of Pittsburgh (15 miles), and the high speed four-six lane Beaver Valley-Airport Expressway. Interstate 79 is also within 10 minutes of the School District. The $1 billion passenger complex of the Pittsburgh International Airport is a fifteen minute drive from the School District. Access to the Airport s north side business, office, hotel, retail commercial complex, the expanded 24-hour cargo facilities and the world s largest jet engine test chambers operated by U.S. Airways at its Pittsburgh Maintenance Facility along the north runway is a fifteen minute drive. The Port Ambridge Industrial Business Park, which is located on the Ohio River fifteen miles northwest of Pittsburgh, is within the School District. Approximately 800,000 square feet of the available 1.3 million square feet of space is filled with industries employing approximately 195 people including World Class, Pittsburgh Intermodal Terminals, a transportation warehousing company, Federal Pipe and Steel Company, a steel processor and warehouse and Vincent Metal Service, which processes metal coils. The Port Ambridge Industrial and Business Park built a $4.2 million overpass bridge which provides direct access onto the Port Ambridge site crossing the four lanes of Route 65 and Conrail s main central rail line connecting the eastern part of the United States to the western part of the United States. Conrail s second largest railroad switching yard in the mid-atlantic area is located at Conway adjacent to the School District. Also located within the School District is the Ambridge Regional Park which was developed by the Value Ambridge Associates, L.P. This industrial park, which replaced the Armco Steel facility in 1988, has 85 acres with over 1,000,000 sq. ft. under roof. Population Table A-1 shows recent population trends for the School District, the County, and the Commonwealth of Pennsylvania. The School District s population decreased from 25,424 to 23,827 between 2000 and Table A-2 shows age composition and average number of persons per household in Westmoreland County and for the State. Average household size for the County was slightly lower than the Statewide average. TABLE A-1 RECENT POPULATION TRENDS Annual Compound Area Average Percentage Change School District... 25,424 23, % Beaver County , , % Pennsylvania... 12,281,054 12,702, % Source: U.S. Bureau of the Census TABLE A-2 AGE COMPOSITION 18 Years and Over 21 Years and Over 65 Years and Over Beaver County % 75.9% 18.6% Pennsylvania % 73.5% 15.4% Source: U.S Bureau of the Census A-1

42 Table A-3 shows recent trends in labor force, employment, and unemployment for the County and the State. TABLE A-3 RECENT TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT (1) Beaver County. Civilian Labor Force (000) Employment (000) Unemployment (000) Unemployment Rate % 7.4% 7.3% 6.7% 6.4% 6.1% 5.7% 5.6% Pennsylvania Civilian Labor Force (000)... 6, , , , , , , ,443.0 Employment (000)... 5, , , , , , , ,114.0 Unemployment (000) Unemployment Rate % 7.9% 7.9% 6.9% 5.8% 5.4% 4.9% 5.1% (1) As of August 2017 Source: Pennsylvania State Employment Service: The largest employers located within Ambridge Area School District include: Name Employment Ambridge Area School District 489 Koppel Steel 250 R.J. Rhodes Transit, Inc. 225 Villa St. Joseph of Baden 220 Centria 100 Giant Eagle 87 Ryerson 82 Source: School District Officials A-2

43 Income The data in Table A-4 shows recent trends in per capita income for the School District, County, and the State over the Per capita income in the School District is higher than average per capita income in the County and the State. TABLE A-4 RECENT TRENDS IN PER CAPITA INCOME* Percentage Change Beaver County... $18,402 $25, % Pennsylvania... $20,880 $27, % *Income is defined by the Bureau of the Census as the sum of wage and salary income, non-farm self-employment income, net self-employment income, Social Security and Railroad retirement income, public assistance income, interest, dividends, pensions, etc. before deductions for personal income taxes, Social Security, etc. School District income is the population-weighted average for political subdivisions. Source: U.S. Census Bureau. Medical Facilities Heritage Valley Health System was formed in 1996 from the merger of The Medical Center of Beaver County and Sewickley Valley Hospital (which, although located in Allegheny County, serves the southern part of Beaver County). Heritage Valley Health System is a 689-bed teaching facility and serves the majority of Beaver County residents. Skilled and intermediate level nursing is available in the 676-bed Friendship Ridge which is located near Heritage Valley. County. The Aliquippa Hospital is a 183-bed acute care hospital serving local residents in the southern portion of the Transportation The County is traversed by several major highways including the Pennsylvania Turnpike and the Pittsburgh/Beaver Valley Expressway (PA Route 60). The Beaver County Airport, located in Chippewa Township, provides facilities for private and U.S. Air Force aircraft, while the Pittsburgh International Airport provides commercial service for approximately 20,000,000 passengers per year. Railroad transportation within the County is provided by the Consolidated Rail Corporation. The Conway Yards complex of the Consolidated Rail Corporation, located in Conway Borough in the County, is an extensive automated railway yard. Education Facilities The area is served by several colleges within the County, including the Beaver Campus of Penn State University and Beaver County Community College, both two-year colleges and Geneva College, a four-year college located in Beaver Falls, Pennsylvania. Trinity Episcopal School of Ministry, a 3-year Masters Program, is located in Ambridge, and Slippery Rock University is located in adjacent Butler County. Major colleges and universities located in Pittsburgh are within 30 to 60 minutes of automobile travel time from all Beaver County locations. Recreation Beaver County owns and operates four parks which provide more than 5,000 acres of open space for various outdoor recreational activities including boating, swimming, all-weather tennis courts, ice arena and regatta facilities. Also located in Beaver County is Pennsylvania s fifth largest state park, Raccoon Creek State Park, which encompasses more than 7,900 acres including a 100-acre lake. Cultural institutions in Beaver County include the Merrick Art Gallery and the Broadhead Cultural Center. The Merrick Gallery, established in 1880, maintains a permanent exhibit of over 200 nineteenth century paintings by European and American artists. The Broadhead Cultural Center, which is located on a seven-acre site adjacent to the Beaver Campus of Penn State University, is a cooperative effort between the University and the local community. The Center s functional facilities include an amphitheater, pavilion, exhibit areas, gazebo and museum. A-3

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45 APPENDIX B 2016 Audited Financial Statement

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47 AMBRIDGE AREA SCHOOL DISTRICT ~ ~ ~ ~ ~ FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016

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49 AMBRIDGE AREA SCHOOL DISTRICT BEAVER COUNTY, PENNSYLVANIA FINANCIAL STATEMENTS AND OTHER INFORMATION REQUIRED BY GOVERNMENT AUDITING STANDARDS AND UNIFORM GUIDANCE WITH REPORTS OF CERTIFIED PUBLIC ACCOUNTANT FOR THE YEAR ENDED JUNE 30, 2016

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51 AMBRIDGE AREA SCHOOL DISTRICT BEAVER COUNTY, PENNSYLVANIA TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR S REPORT... i-iii MANAGEMENT S DISCUSSION AND ANALYSIS... iv-xiv EXHIBIT A STATEMENT OF NET POSITION... 1 EXHIBIT B STATEMENT OF ACTIVITIES... 2 EXHIBIT C BALANCE SHEET Governmental Funds... 3 EXHIBIT D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION... 4 EXHIBIT E - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN IN FUND BALANCES- Governmental Funds... 5 EXHIBIT F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES... 6 EXHIBIT G - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN IN FUND BALANCES, BUDGET AND ACTUAL General Fund... 7 EXHIBIT H - STATEMENT OF NET POSITION Proprietary Funds... 8 EXHIBIT I - STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION Proprietary Funds... 9 EXHIBIT J - STATEMENT OF CASH FLOWS Proprietary Funds EXHIBIT K STATEMENT OF NET POSITION Fiduciary Funds NOTES TO THE FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION

52 AMBRIDGE AREA SCHOOL DISTRICT BEAVER COUNTY, PENNSYLVANIA TABLE OF CONTENTS PAGE INFORMATION REQUIRED BY GOVERNMENTAL AUDITING STANDARDS AND THE UNIFORM GUIDANCE Independent Auditor s 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 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance required by the Uniform Guidance Supplementary Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Management s Corrective Action Plan Status of Prior Audit Findings

53 Mark C. Turnley Certified Public Accountant rd Avenue New Brighton, Pennsylvania (724) FAX (724) To the Management and Board of Education Ambridge Area School District Report on Financial Statements Independent Auditor s Report I have audited the accompanying financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the Ambridge Area School District as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the School 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 My responsibility is to express opinions on these financial statements based on my audit. I conducted my 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 I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 Ambridge Area School District s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Ambridge Area School District s internal control. Accordingly, I 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions. i American Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants

54 Qualified Opinion In my opinion, the financials referred to above present fairly, in all material respects, the financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the Ambridge Area School District as of June 30, 2016 and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis on pages iv-xiv, the defined benefit pension plan information on page 39, and the schedule of funding progress for postemployment benefits other than pension on page 40, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. I 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 my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information My audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Ambridge Area School District s basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The schedule of expenditures of federal awards 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 my opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. ii

55 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated March 2, 2017 on my consideration of the Ambridge Area School District s internal control over financial reporting and on my 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 my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Ambridge Area School District s internal control over financial reporting and compliance. March 2, 2017 New Brighton, Pennsylvania Mark C. Turnley, CPA iii

56 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 The Ambridge Area School District s discussion and analysis provides a financial overview for the year ended June 30, The purpose of this discussion and analysis is to provide an easily readable analysis of the School District s financial activities based on currently known facts, decisions or conditions. Readers should also review the financial statements and notes to enhance their understanding of the School District s financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for 2016 are as follows: While still a deficit, net position did show a slight improved position by $51,045 over the 2015 fiscal year end. Net position of Governmental Activities increased by $244,282, while net position of Business- Type Activities decreased by $193,237. Total governmental activities revenues were $44,081,835. General Revenues accounted for $35,335,588, or 80.2% of all revenues. Program Revenues in the form of charges for services and operating and capital grants and contributions accounted for $8,746,247 or 19.8% of total revenues. The School District had $43,837,553 in expenses related to governmental activities; $8,501,965 of these expenses was generated by program specific charges for services and grants. General revenue (primarily taxes and basic subsidy) of $35,335,588 made up the remaining funds to cover expenses. The unassigned fund balance of the general fund grew from $1,587,365 at the end of the fiscal year to $5,352,581 at the end of the fiscal year. These increases in fund balance reflect the District s diligence in monitoring spending and the refinancing of bond issues which has reflected a savings in debt service expenses. The year-end unassigned fund balance of the general fund totaled $3,440,004, which reflects a net decrease from the prior year of $1,912,577. This decrease is the net effect of revenues exceeding expenditures in the amount $1,887,423 and a transfer out of the general fund balance of $3,800,000 to the capital reserve fund. In , unassigned fund balance decreased again by $147,436 as a result of an additional $750,000 that was transferred to the capital reserve fund. The District s total governmental activities liabilities and deferred inflows of resources exceeded total assets and deferred outflows of resources as of June 30, 2016 by $46,011,240 (net position - deficit). This was an increase of $244,282 over June 30, OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: management s discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the district: The first two statements are government-wide financial statements the Statement of Net Position and the Statement of Activities. These provide both long-term and short-term information about the District s overall financial status. iv

57 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) The remaining statements are fund financial statements that focus on individual parts of the District s operations in more detail than the government-wide statements. The governmental fund statements tell how general District services were financed in the short term as well as what remains for future spending. Proprietary fund statements offer short-term and long-term financial information about the activities the District operates like a business, which for this District is the Food Service Fund. Fiduciary fund statements provide information about financial relationships where the District acts solely as a trustee or agent for the benefit of others to whom the resources in question belong. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. Figure A-1 shows how the required parts of the Financial Section are arranged and relate to one another: Figure A-1 Required components of Ambridge Area School District s Financial Report Management Discussion and Analysis Basic Financial Statements Required Supplementary Information Governmentwide Financial Statements Fund Financial Statements Notes to the Financial Statements v

58 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) Figure A-2 summarizes the major features of the District s financial statements, including the portion of the District they cover and the types of information they contain. The remainder of this overview section of the management discussion and analysis explains the structure and contents of each of the statements. Figure A-2 Scope Required financial statements Accounting basis and measurement focus Type of asset/liability information Type of inflowoutflow information Major Features of Ambridge Area School District s Government-wide and Fund Financial Statements Fund Statements Governmentwide Governmental Proprietary Statements Entire District (except fiduciary funds) Statement of net position Statement of activities Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, and short-term and long-term All revenues and expenses during year, regardless of when cash is received or paid Funds The activities of the District that are not proprietary or fiduciary, such as education, administration and student activities Balance sheet Statement of revenues, expenditures, and changes in fund balance Modified accrual accounting and current financial resources focus Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter vi Funds Activities the District operates similar to private business Food Services Statement of net position Statement of revenues, expenses and changes in net position Statement of cash flows Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, and short-term and long-term All revenues and expenses during year, regardless of when cash is received or paid Fiduciary Funds Instances in which the District is the trustee or agent to someone else s resources Activity Funds Statement of fiduciary net position Statement of changes in fiduciary net position Accrual accounting and economic resources focus All assets and liabilities, both short-term and long-term All revenues and expenses during year, regardless of when cash is received or paid

59 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) Government-wide Statements The government-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the government s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the District s net position and how they have changed. Net position, the difference between the District s assets and liabilities, are one way to measure the District s financial health or position. Over time, increases or decreases in the District s net position are an indication of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the District, you need to consider additional non-financial factors, such as changes in the District s property tax base and the performance of the students. The government-wide financial statements of the District are divided into two categories: Governmental activities All of the District s basic services are included here, such as instruction, administration and student activities. Property taxes and state and federal subsidies and grants finance most of these activities. Business type activities The District operates a food service program and charges fees to staff, students and visitors to help cover the costs of operation. Fund Financial Statements The District s fund financial statements provide detailed information about the most significant funds not the District as a whole. Some funds are required by state law and by bond issue requirements. Governmental funds Most of the District s activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. 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 District s operations and the services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the financial statements. vii

60 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) Fund Financial Statements (Continued) Proprietary funds These funds are used to account for the District activities that are similar to business operations in the private sector; or where the reporting is on determining net income, financial position, changes in financial position, and a significant portion of funding through user charges. When the District charges customers for services it provides whether to outside customers or to other units in the District these services are generally reported in proprietary funds. The Food Service Fund is the District s proprietary fund and is the same as the business-type activities we report in the governmentwide statements, but provide more detail and additional information, such as cash flows. Fiduciary funds - The District is the trustee, or fiduciary, for a student activities fund in the secondary school. All of the District's fiduciary activities are reported in separate Statements of Fiduciary Net Position. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Table A-1 Fiscal Year ended June 30 Statement of Net Position JUNE 30, JUNE 30, GOVERNMENTAL BUSINESS-TYPE GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ACTIVITIES ACTIVITIES TOTAL Current Assets $ 12,443,682 $ 409,054 $ 12,852,736 $ 13,255,451 $ 183,469 $ 13,438,920 Capital Assets 70,525,962 26,858 70,552,820 68,435,966 57,457 68,493,423 Deferred Outflows of Resources 4,389,461-4,389,461 4,725,477-4,725,477 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 87,359,105 $ 435,912 $ 87,795,017 $ 86,416,894 $ 240,926 $ 86,657,820 Current Liabilities $ 6,020,519 $ 20,558 $ 6,041,077 $ 6,504,931 $ 18,809 $ 6,523,740 Long-Term Liabilities 124,111, ,111, ,508, ,508,203 Deferred Inflows of Resources 3,483,000-3,483,000 2,415,000-2,415,000 TOTAL LIABILITIES & DEFERRED INTFLOWS OF RESOURCES $ 133,614,627 $ 20,558 $ 133,635,185 $ 132,428,134 $ 18,809 $ 132,446,943 Net Investment in Capital Assets $ (5,073,259) $ 26,858 $ (5,046,401) $ (4,955,467) $ 57,457 $ (4,898,010) Restricted 318, , , ,560 Unrestricted (41,500,419) 388,496 (41,111,923) (41,374,333) 164,660 (41,209,673) TOTAL NET POSITION $ (46,255,522) $ 415,354 $ (45,840,168) $ (46,011,240) $ 222,117 $ (45,789,123) TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION $ 87,359,105 $ 435,912 $ 87,795,017 $ 86,416,894 $ 240,926 $ 86,657,820 The decrease in total liabilities and deferred inflows of resources is as a result of payment of long-term debt, although the District s recognition of their proportionate share of the Pennsylvania School Employees Retirement System (PSERS) overall net pension obligation total of $50,636,000 at June 30, 2016 is an increase of $2,213,000 from the June 30, 2015 balance of $48,423,000. The District's total net position was a deficit $46,011,240 at June 30, 2016 for the governmental activities. viii

61 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE (Continued) Some of the District's net position is invested in capital assets (buildings, land, land improvements and equipment). At June 30, 2016, the District maintained a deficit net positon of $4,898,010 in invested in capital assets. The District also has $318,560 in net position restricted for capital projects. The remaining is the deficit unrestricted net position of $41,209,673. The results of this year's operations as a whole are reported in the Statement of Activities. All expenses are reported in the first column. Specific charges, grants, revenues and subsidies that directly relate to specific expense categories are represented to determine the final amount of the District's activities that are supported by other general revenues. The two largest general revenues are the Basic Education Subsidy provided by the Commonwealth of Pennsylvania, and the local taxes assessed to community taxpayers. Table A-2 takes the information from that Statement and rearranges it slightly so you can see the total revenues for the year. Table A-2 Fiscal Year ended June 30 Changes in Net Position JUNE 30, JUNE 30, GOVERNMENTAL BUSINESS-TYPE GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ACTIVITIES ACTIVITIES TOTAL REVENUES Program Revenues: Charges for Services $ 238,766 $ 490,874 $ 729,640 $ 264,513 $ 423,632 $ 688,145 Operating Grants and Contributions 7,744, ,814 8,576,063 8,481, ,538 9,418,272 Capital Grants and Contributions 1,259,604-1,259, General Revenues: Property Taxes 18,534,411-18,534,411 20,037,697-20,037,697 Other Taxes 3,143,009-3,143,009 3,427,725-3,427,725 Grants, Subsidies and Contributions 11,304,910-11,304,910 11,513,797-11,513,797 Investment Earnings 6,550-6,550 11,502-11,502 Other 301, , , ,867 TOTAL REVENUES $ 42,532,735 $ 1,322,688 $ 43,855,423 $ 44,081,835 $ 1,360,170 $ 45,442,005 EXPENSES Instruction $ 27,709,169 $ - $ 27,709,169 $ 28,328,491 $ - $ 28,328,491 Instructional Student Support 1,576,909-1,576,909 1,491,603-1,491,603 Administrative and Financial Support 3,656,194-3,656,194 3,658,621-3,658,621 Operation and Maintenance of Plant 4,007,736-4,007,736 4,311,414-4,311,414 Pupil Transportation 2,472,331-2,472,331 2,642,589-2,642,589 Student Activities 669, , , ,880 Community Services 59,606-59,606 90,087-90,087 Interest on Long-term Debt 5,393,266-5,393,266 2,518,361-2,518,361 Refund of Prior Year Receipts 136, ,102 39,507-39,507 Food Services - 1,414,286 1,414,286-1,553,407 1,553,407 TOTAL EXPENSES $ 45,680,333 $ 1,414,286 $ 47,094,619 $ 43,837,553 $ 1,553,407 $ 45,390,960 CHANGE IN NET POSITION $ (3,147,598) $ (91,598) $ (3,239,196) $ 244,282 $ (193,237) $ 51,045 The decrease in expenses for the fiscal year is due in large part to the reduction of interest on longterm debt of approximately 2.9 million dollars. During the fiscal year the write-off of the loss on refunding accounted for 2.2 million dollars. During wage and benefit increases as well as cost for transportation and tuition costs continued to rise. ix

62 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE (Continued) The tables below present the expenses of both the Governmental Activities and the Business-type Activities of the District. Table A-3 shows the District's nine largest functions - instructional programs, instructional student support, administrative, operation and maintenance of plant, pupil transportation, student activities, community services, scholarships and awards, and food service as well as each program's net cost (total cost less revenues generated by the activities). This table also shows the net costs offset by the other unrestricted grants, subsides and contributions to show the remaining financial needs supported by local taxes and other miscellaneous revenues. Table A-3 Fiscal Year ended June 30 Governmental Activities JUNE 30, JUNE 30, TOTAL COST NET COST TOTAL COST NET COST OF SERVICE OF SERVICE OF SERVICE OF SERVICE EXPENSES Instruction $ 27,709,169 $ 21,683,293 $ 28,328,491 $ 21,600,415 Instructional Student Support 1,576,909 1,370,485 1,491,603 1,288,159 Administrative and Financial Support 3,656,194 3,464,192 3,658,621 3,413,051 Operation and Maintenance of Plant 4,007,736 3,771,253 4,311,414 4,031,423 Pupil Transportation 2,472,331 1,300,567 2,642,589 1,502,009 Student Activities 669, , , ,082 Community Services 59,606 56,160 90,087 84,299 Interest on Long-term Debt 5,393,266 4,133,662 2,518,361 2,518,361 Refund of Prior Year Receipts 136, ,102 39,507 39,507 TOTAL EXPENSES $ 45,680,333 $ 36,437,714 $ 43,837,553 $ 35,091,306 Less: Unrestricted Grants, Subsidies 11,304,910 11,513,797 TOTAL NEEDS FROM LOCAL TAXES AND OTHER REVENUES $ 25,132,804 $ 23,577,509 Table A-4 reflects the activities of the Food Service program, the only Business-type activity of the District. Table A-4 Fiscal Year ended June 30 Business-type Activities JUNE 30, JUNE 30, TOTAL COST NET COST TOTAL COST NET COST OF SERVICE OF SERVICE OF SERVICE OF SERVICE EXPENSES Food Service $ 1,414,286 $ (91,598) $ 1,553,407 $ (193,237) Investment Earnings - - TOTAL BUSINESS-TYPE ACTIVITIES NET INCOME <LOSS> $ (91,598) $ (193,237) The Statement of Revenues, Expenses and Changes in Fund Net Position for this proprietary fund will further detail the actual results of operations. x

63 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 GENERAL FUND BUDGETARY HIGHLIGHTS General Fund Revenues As reflected under the Statement of Revenues, Expenditures and Changes in Fund Balance, the General Fund revenue for the District during (excluding interfund transfers), totaled $44,166,871. Local sources of $24,616,859 accounted for 55.7% of total revenue; State sources of $18,399,522 accounted for 41.7%; and Federal sources of $1,150,490 accounted for 2.6%. Budgetary variances in General Fund revenues were mainly the result of the following: Current Real Estate tax collections were greater than anticipated. Traditionally the district anticipates a combined collection rate of 92%; but collected at a 93.5% rate in The district will monitor collections to determine if this rate should be adjusted for future projections. Earned Income taxes collected were significantly over anticipated revenue by $587,087. This collection rate will be more closely projected with the assistance of our EIT tax collector in future years. Delinquent tax collections were significantly exceeding anticipated revenue by $423,085 as a result of increased settlements on outstanding tax liabilities owed to the District. Revenue from IDEA grant monies handled as pass-thru funds from the Intermediate Unit was approximately $40,463 over the budgeted amount. This is a result of the conservative budgeting based on prior year decreases of the allotment from the Federal Government. Revenue from tuition was approximately $83,675 over the anticipated revenue budget. Rental sinking fund reimbursement was not paid by the PA Department of Education in to any school district in the Commonwealth of PA and therefore caused a shortfall of $ in funding, while retirement reimbursement was over by $250,905. Other state and federal subsidies were slightly higher than anticipated causing an increase in funding of $435,011. General Fund Expenses As reflected under the Statement of Revenues, Expenditures and Changes in Fund Balance, the General Fund expenditures for the District during (excluding interfund transfers and refund of prior year receipts), totaled $43,524,800. Total General Fund expenditures, before Inter-fund transfers, refund of prior year receipts and budgetary reserve were $466,903 under budget. Direct instructional costs were $25,962,530, while instructional support costs were $12,020,765. Non-instructional services totaled $780,525 and debt service was $4,760,980. Total General Fund costs reflect negotiated salary increases, increased health care premiums, and inflation in the cost of utilities, supplies and services. xi

64 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 DEBT ADMINISTRATION As of June 30, 2016, the District has $72,545,000 in General Obligation Bonds outstanding with principal and interest payments of approximately $5,074,647 scheduled for the fiscal year. The District issued General Obligation Bonds, Series of 2015 totaling $7,075,000 which currently refunded the School District s outstanding General Obligation Bonds, Series of 2010 and General Obligation Notes, Series of Detailed information regarding the District s long-term debt is detailed in Note 10 in the accompanying financial statements. The District s general obligation bonds rating are a Standard & Poor s: AA, (stable outlook) by Assured Guaranty Municipal Holdings Inc. The AA rating is based upon AGM and additional security for bonds provided by the Commonwealth of Pennsylvania, Act 150 School District Intercept Program. The Act provides for undistributed state aid to be diverted to bond holders in the event of default. The Ambridge Area School District is a full faith credit and taxing power. Other long-term obligations include accrued vacation pay and sick leave for specific employees of the District, as well as retirement incentive and retiree health insurance obligations. More detailed information about our long-term liabilities is included in Notes 10 and 13 of the financial statements. CAPITAL ASSETS As of June 30, 2016, the District had $68,435,966 in capital assets, net of depreciation reflected on Exhibit A in the governmental activities column. This amount represents a decrease of $2,089,996 or 3%. The decrease is the result of the district not making large asset purchases or improvements and continuing to depreciate its current assets. The Ambridge Area Junior High School will be undergoing some infrastructure improvements in It is currently the only building in our District that is not new or recently renovated. MAJOR FINANCIAL ISSUES Healthcare Health insurance costs remain a major concern for the District. The district saw an increase in health insurance costs of approximately 4.2% in the , 8% in the , and 2.25% in fiscal years respectively. The anticipated rate increase for is 2%. It is hoped that a larger percentage of these costs can be shared with employees in future years as contracts are renegotiated. Retirement Contribution The District s contribution rate to the State retirement system increased from 1.15% of compensation to 3.77% in , to 4.23% in , to 4.69% in , to 6.46% in , to 7.13% in and 4.76% in For the school year, the contribution rate was 4.78% of eligible compensation and it was 5.64% for and 8.65% for The increases over this time period have resulted in the District s contribution increasing over 300%. The contribution rate for the school year was 12.36%, the rate increased to 16.93%, 21.4% for the year, and 25.84% for the year. The rate for the fiscal year is 30.03%. xii

65 MAJOR FINANCIAL ISSUES (Continued) Act 1 of the Special Session of 2006 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 The methods of funding public schools in Pennsylvania changed as a result of legislation introduced in Harrisburg. This Act was signed into law in July It will provide property tax relief to residential property owners who qualify provided that the voters approve an increase in either the Earned Income Tax rate or approve a switch to a Personal Income Tax. The Ambridge Area School District appointed a nine member Tax Study Commission in September of 2006, as required by the provisions of Act 1, whose responsibility was to recommend to the School Board whether to increase the EIT or switch to a PIT. The Tax Study Commission recommended an increase in the EIT; however the School Board rejected that and put forth a switch to a PIT. This Referendum was voted on at the May Primary of 2007, where the constituents rejected this proposal. This action makes the district eligible to receive gaming revenues. A further condition of Act 1 means that limits will be placed on the district s ability to raise tax rates without seeking voter approval. The goal is to lessen the reliance on real estate taxes to fund public education; thus reducing the impact of tax increases on fixed income residents. However, the referendum requirements of the act have a significant impact on budgetary processes, and the district s ability to raise taxes. Payments will be made to school districts from state gaming revenues to offset their loss in local revenue. The district received its first distribution of gaming revenue during the school year and in each of the subsequent years the funding has remained level. These disbursements do not provide additional funding to school districts, but represent tax shifting. LABOR RELATIONS The District s teachers are represented by the Ambridge Area Education Association, an affiliation of the Pennsylvania State Education Association (PSEA). This group has the responsibility of bargaining for all District teachers, librarians, counselors, nurses and long-term substitutes. The current contract runs through the school year. As of this date, the contract has not been settled, after fact-finding, and ongoing negotiation meetings with the parties. The District s secretarial and support personnel are represented by the Ambridge Area Educational Support Personnel Association; also an affiliation of Pennsylvania State Education Association (PSEA). This group has the responsibility of bargaining for the district secretaries, teaching assistants, hourly nurses, and hall monitors. A current contract runs through the school year. To date, the contract has not been settled. The District s custodial and maintenance personnel are represented by Local 248, American Federation of State, County and Municipal Employees, AFL-CIO. The current contract runs through the school year. The District s cafeteria employees are represented by the Ambridge Educational Support Personnel Association Cafeteria Branch; also an affiliation of the Pennsylvania State Education Association (PSEA). The current contract runs through the school year. THE FUTURE Communication We implemented a telephone alert system Bridger Broadcast to communicate with parents via the telephone. EdLine will continue to be used for parents to inform them of their student s progress. ATLAS and OnHand will be again be utilized for curricular and data information. xiii

66 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) June 30, 2016 THE FUTURE (Continued) Cyber School The District partnered with Seneca Valley School District and began our own Cyber Academy. We formed various committees and researched best practices. We believe that an interactive program with video capabilities of individual teachers is very sound educationally. In the future, our goal is to video lessons and cyber students could interact with live viewings or view at other times. Assessment Data Teams will continue in each building in the District. On Hand will continue to be utilized as a data analysis tool. Atlas and Edline remain as a vital tool for all stakeholder of the Ambridge Area School District. CONTACTING THE DISTRICT FINANCIAL MANAGEMENT The financial report is designed to provide our citizens, taxpayers, parents, students, investors and creditors with a general overview of the District s finances and to show the School District s accountability for the money it receives. If you have questions about this report, or wish to request additional financial information, please contact the District s Director of District Operations, at Ambridge Area School District, 901 Duss Avenue, Ambridge, PA 15003, , Ext xiv

67 EXHIBIT A AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF POSITION JUNE 30, 2016 Governmental Business-Type Activities Activities Total ASSETS Current Assets: Cash and Cash Equivalents $ 2,959,659 $ 183,205 $ 3,142,864 Investments 5,980,561-5,980,561 Taxes Receivable, net 2,841,533-2,841,533 Internal Balances 124,029 (124,029) - Due From Other Governments 1,271, ,014 1,372,649 Other Receivables - 1,425 1,425 Inventories - 21,854 21,854 Prepaid Expenses 78,034-78,034 Total Current Assets $ 13,255,451 $ 183,469 $ 13,438,920 Noncurrent Assets: Land $ 149,750 $ - $ 149,750 Site Improvements (net) 811, ,646 Building & Building Improvements (net) 63,979,690-63,979,690 Furniture & Equipment (net) 3,494,880 57,457 3,552,337 Total Noncurrent Assets $ 68,435,966 $ 57,457 $ 68,493,423 TOTAL ASSETS $ 81,691,417 $ 240,926 $ 81,932,343 Deferred Outflows of Resources: Deferred Outflows Related to Pension $ 4,725,477 $ - $ 4,725,477 TOTAL DEFERRED OUTFLOWS OF RESOURCES $ 4,725,477 $ - $ 4,725,477 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 86,416,894 $ 240,926 $ 86,657,820 LIABILITIES Current Liabilities: Accounts Payable $ 911,158 $ 7,701 $ 918,859 Current Portion - Bonds 2,595,000-2,595,000 Current Portion Retiree Benefits 397, ,500 Current Portion - Lease Obligations 24,389-24,389 Accrued Interest 413, ,274 Accrued Salaries and Benefits 1,241,981-1,241,981 Payroll Deductions and Withholdings 921, ,608 Unearned Revenue - 11,108 11,108 Other Current Liabilities Total Current Liabilities $ 6,504,931 $ 18,809 $ 6,523,740 Noncurrent Liabilities: Long Term Portion - Bonds Payable (Net) $ 70,719,967 $ - $ 70,719,967 Long Term Portion - Lease Purchase Obligations 52,077-52,077 Long Term Portion - Retiree Benefits 330, ,000 Net OPEB Obligation 1,052,058-1,052,058 Net Pension Liability 50,636,000-50,636,000 Compensated Absences 718, ,101 Total Noncurrent Liabilities $ 123,508,203 $ - $ 123,508,203 TOTAL LIABILITIES $ 130,013,134 $ 18,809 $ 130,031,943 Deferred Inflows of Resources: Deferred Inflows Related to Pension $ 2,415,000 $ - $ 2,415,000 TOTAL DEFERRED INFLOWS OF RESOURCES $ 2,415,000 $ - $ 2,415,000 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES $ 132,428,134 $ 18,809 $ 132,446,943 NET POSITION Net Investment in Capital Assets (Deficit) $ (4,955,467) $ 57,457 $ (4,898,010) Restricted for Capital Projects 318, ,560 Unrestricted (41,374,333) 164,660 (41,209,673) TOTAL NET POSITION (Deficit) $ (46,011,240) $ 222,117 $ (45,789,123) TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION $ 86,416,894 $ 240,926 $ 86,657,820 The accompanying notes are an integral part of these financial statements 1

68 AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 EXHIBIT B Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: Instruction $ 28,328,491 $ 121,175 $ 6,606,901 $ - $ (21,600,415) $ (21,600,415) Instructional Student Support 1,491, ,444 - (1,288,159) (1,288,159) Administrative and Financial Support Services 3,658, ,570 - (3,413,051) (3,413,051) Operation and Maintenance of Plant Services 4,311,414 62, ,612 - (4,031,423) (4,031,423) Pupil Transportation 2,642,589-1,140,580 - (1,502,009) (1,502,009) Student Activities 756,880 80,959 61,839 - (614,082) (614,082) Community Services 90,087-5,788 - (84,299) (84,299) Interest on Long-Term Debt/Equipment Leases 2,518, (2,518,361) (2,518,361) Refund of Prior Year Receipts 39, (39,507) (39,507) Total Governmental Activities $ 43,837,553 $ 264,513 $ 8,481,734 $ - $ (35,091,306) $ (35,091,306) Business-Type activities: Food Service $ 1,553,407 $ 423,632 $ 936,538 $ - $ - $ (193,237) $ (193,237) Total Business-Type Activities $ 1,553,407 $ 423,632 $ 936,538 $ - $ - $ (193,237) $ (193,237) Total Primary Government $ 45,390,960 $ 688,145 $ 9,418,272 $ - $ (35,091,306) $ (193,237) $ (35,284,543) General Revenues: Taxes: Property Taxes Levied for General Purposes (net) $ 20,037,697 $ - $ 20,037,697 Other Taxes Levied for General Purposes 3,427,725-3,427,725 Property Tax Relief Payment 1,052,348-1,052,348 Grants and Contributions - Unrestricted 10,461,449-10,461,449 Investment Earnings 11,502-11,502 Miscellaneous Income 344, ,867 Total General Revenues $ 35,335,588 $ - $ 35,335,588 Change in Net Position $ 244,282 $ (193,237) $ 51,045 Net Position July 1, 2015 (Deficit) (46,255,522) 415,354 (45,840,168) Net Position June 30, 2016 (Deficit) $ (46,011,240) $ 222,117 $ (45,789,123) The accompanying notes are an integral part of these financial statements 2

69 AMBRIDGE AREA SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 EXHIBIT C CAPITAL TOTAL GENERAL PROJECTS GOVERNMENTAL FUND FUND FUNDS ASSETS: Cash and Cash Equivalents $ 2,959,659 $ - $ 2,959,659 Investments 5,662, ,560 5,980,561 Taxes Receivable, net 2,841,533-2,841,533 Due from Other Funds 124,029 4,550,000 4,674,029 Due From Other Governments 1,271,635-1,271,635 Prepaid Expenses 78,034-78,034 TOTAL ASSETS $ 12,936,891 $ 4,868,560 $ 17,805,451 LIABILITIES, DEFERRED INFLOW OF RESOURCES, AND FUND BALANCES: LIABILITIES: Due to Other Funds $ 4,550,000 $ - $ 4,550,000 Accounts Payable 911, ,158 Other Current Liabilities Accrued Salaries and Benefits 1,241,981-1,241,981 Payroll Deductions and Withholdings 921, ,608 TOTAL LIABILITIES $ 7,624,768 $ - $ 7,624,768 DEFERRED INFLOW OF RESOURCES: Delinquent Real Estate Taxes $ 2,019,555 $ - $ 2,019,555 TOTAL DEFERRED INFLOW OF RESOURCES $ 2,019,555 $ - $ 2,019,555 FUND BALANCES: Assigned $ - $ 4,868,560 $ 4,868,560 Unassigned 3,292,568-3,292,568 TOTAL FUND BALANCES $ 3,292,568 $ 4,868,560 $ 8,161,128 TOTAL LIABILITIES, DEFERRED INFLOW OF RESOURCES, AND FUND BALANCES $ 12,936,891 $ 4,868,560 $ 17,805,451 The accompanying notes are an integral part of these financial statements 3

70 EXHIBIT D AMBRIDGE AREA SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2016 Total Fund Balances - Governmental Funds $ 8,161,128 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported as assets in governmental funds. The cost of assets is $100,551,488 and the accumulated depreciation is $32,115, ,435,966 Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the funds. Deferred outflows of resources related to pensions (from pension schedule). 4,725,477 Deferred inflows of resources related to pensions (from pension schedule). (2,415,000) Property and wage taxes receivable in the statement of net position, which will not be available soon enough to pay for the current period's expenditures, are deferred and not recognized as revenue in governmental funds. 2,019,555 Long term liabilities, including bonds payable, are not due and payable in the current period, and therefore, are not reported as liabilities in the governmental funds. Long-term liabilities at year end consist of: Bonds Payable, Net $ (73,314,967) Leases Payable (76,466) Accrued Interest on Debt (413,274) Net Pension Liability (from pension schedule) (50,636,000) Net OPEB Obligation (1,052,058) Accrued Compensated Absences Accrued Retirement Incentives (718,101) (727,500) (126,938,366) TOTAL NET POSITION - GOVERNMENTAL ACTIVITIES $ (46,011,240) The accompanying notes are an integral part of these financial statements 4

71 EXHIBIT E AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 CAPITAL DEBT TOTAL PROJECTS SERVICE GOVERNMENTAL GENERAL FUND FUND FUND FUNDS REVENUES Local Sources $ 24,616,859 $ 404 $ - $ 24,617,263 State Sources 18,399, ,399,522 Federal Sources 1,150, ,150,490 Total Revenue $ 44,166,871 $ 404 $ - $ 44,167,275 EXPENDITURES Instruction $ 25,962,530 $ - $ - $ 25,962,530 Support Services 12,020, ,818 12,146,583 Noninstructional Services 780, ,525 Debt Service 4,760,980-6,992,270 11,753,250 Total Expenditures $ 43,524,800 $ - $ 7,118,088 $ 50,642,888 Excess ( Deficiency) of Revenue over Expenditures $ 642,071 $ 404 $ (7,118,088) $ (6,475,613) OTHER FINANCING SOURCES (USES) Operating Transfers In (Out) $ (750,000) $ 750,000 $ - $ - Bond Proceeds - - 7,075,000 7,075,000 Original Issue Premium ,088 43,088 Refund of Prior Year Receipts (39,507) - - (39,507) Total Other Financing Sources (Uses) $ (789,507) $ 750,000 $ 7,118,088 $ 7,078,581 NET CHANGE IN FUND BALANCES $ (147,436) $ 750,404 $ - $ 602,968 FUND BALANCE - JULY 1, ,440,004 4,118,156-7,558,160 FUND BALANCE - JUNE 30, 2016 $ 3,292,568 $ 4,868,560 $ - $ 8,161,128 The accompanying notes are an integral part of these financial statements 5

72 EXHIBIT F AMBRIDGE AREA SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENT FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 TOTAL NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS $ 602,968 Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation ($2,309,450) exceeded capital outlays ($219,455) during the fiscal year. (2,089,995) Governmental funds report district pension contributions as expenditures. However, in the statement of activities, the cost of pension benefits earned net of employees contributions is reported as pension expense. (508,984) Proceeds from long-term debt obligations are recorded as revenues in the governmental funds. However, in the statement of net position, these proceeds and related bond issue costs are recognized as long-term liabilities and contra-liabilities. (7,075,000) Repayment of bond, note and lease purchase obligation principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. 9,300,907 In the statement of activities, interest is accrued on outstanding bonds, whereas in governmental funds, an interest expenditure is reported when due. 16,662 Bond discount costs are reported in governmental funds as expenditures. However, in the statement of activities, these costs are capitalized and amortized over the life of the note as interest expense. (29,292) Bond premiums are reported in governmental funds as revenues. However, in the statement of activities, this amount is capitalized and is accreted over the life of the bond issue as interest expense. 11,172 Accrued compensated absences, retirement incentives and retiree health benefits are not due and payable with current financial resources and are not reported in the funds. This is the amount by which benefits paid exceeded benefits earned during the year. 101,284 Because certain property and wage taxes will not be collected for several months after the District's fiscal year ends, they are not considered as "available" revenues in the governmental funds. Deferred inflow of resources increased by this amount this year. (85,440) CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 244,282 The accompanying notes are an integral part of these financial statements 6

73 EXHIBIT G AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES, BUDGET AND ACTUAL GOVERNMENTAL FUNDS - GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 Variance with Budgeted Amounts Actual Final Budget Positive Original Final (Budgetary Basis) (Negative) REVENUES Local Sources $ 23,128,828 $ 23,128,828 $ 24,616,859 $ 1,488,031 State Sources 18,426,645 18,426,645 18,399,522 (27,123) Federal Sources 1,078,803 1,078,803 1,150,490 71,687 Total Revenues $ 42,634,276 $ 42,634,276 $ 44,166,871 $ 1,532,595 EXPENDITURES Regular Programs $ 18,203,024 $ 19,027,082 $ 18,640,445 $ 386,637 Special Programs 6,297,498 6,297,498 6,514,122 (216,624) Vocational Programs 1,493, , ,624 (10,624) Other Instructional Programs 161, , ,844 28,508 Non-Public School Programs 24,000 24,000 14,495 9,505 Pre-K Accounts 170, , ,205 (125,205) Pupil Personnel Services 769, , ,545 44,017 Instructional Staff Services 243, , ,289 35,021 Administrative Services 2,512,843 2,481,643 2,573,548 (91,905) Pupil Health 414, , ,452 19,089 Business Services 323, , ,584 (14,812) Operation & Maintenance of Plant Services 4,391,713 4,422,913 4,066, ,388 Student Transportation Services 2,620,277 2,620,277 2,642,589 (22,312) Central Services 668, , ,396 (67,621) Other Support Services ,632 (19,632) Student Activities 652, , ,086 (43,859) Community Services 90,134 90,134 84,439 5,695 Debt Service (Principal & Interest) 4,955,617 4,955,617 4,760, ,637 Total Expenditures $ 43,991,703 $ 43,991,703 $ 43,524,800 $ 466,903 Excess (Deficiency) of Revenues over Expenditures $ (1,357,427) $ (1,357,427) $ 642,071 $ 1,999,498 OTHER FINANCING SOURCES (USES) Refund of Prior Year Receipts $ - $ - $ (39,507) $ (39,507) Operating Transfers (Out) - - (750,000) (750,000) Budgetary Reserve (100,000) (100,000) - 100,000 Total Other Financing Sources (Uses) $ (100,000) $ (100,000) $ (789,507) $ (689,507) NET CHANGE IN FUND BALANCES $ (1,457,427) $ (1,457,427) $ (147,436) $ 1,309,991 FUND BALANCE - JULY 1, ,352,581 5,352,581 3,440,004 (1,912,577) FUND BALANCE - JUNE 30, 2016 $ 3,895,154 $ 3,895,154 $ 3,292,568 $ (602,586) The accompanying notes are an integral part of these financial statements 7

74 EXHIBIT H AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2016 FOOD SERVICES ASSETS Current Assets: Cash and Cash Equivalents $ 183,205 Intergovernmental Receivable 101,014 Other Accounts Receivable 1,425 Inventories 21,854 TOTAL CURRENT ASSETS $ 307,498 Noncurrent Assets: Furniture & Equipment $ 57,457 TOTAL NONCURRENT ASSETS $ 57,457 TOTAL ASSETS $ 364,955 LIABILITIES Current Liabilities: Accounts Payable $ 7,701 Due to Other Funds 124,029 Unearned Revenue 11,108 TOTAL CURRENT LIABILITIES $ 142,838 TOTAL LIABILITIES $ 142,838 NET POSITION Net Investment in Capital Assets $ 57,457 Unrestricted 164,660 TOTAL NET POSITION $ 222,117 TOTAL LIABILITIES AND NET POSITION $ 364,955 The accompanying notes are an integral part of these financial statements 8

75 EXHIBIT I AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 FOOD SERVICES OPERATING REVENUES Food Services Revenue $ 423,632 Total Operating Revenues $ 423,632 OPERATING EXPENSES Salaries $ 537,657 Employee Benefits 222,008 Other Purchased Services 609 Supplies 743,631 Depreciation 5,678 Equipment 12,614 Other Operating Expenditures 31,210 Total Operating Expenses $ 1,553,407 OPERATING INCOME/(LOSS) $ (1,129,775) NONOPERATING REVENUES (EXPENSES) State Sources $ 45,083 Federal Sources 891,455 Total Nonoperating Revenues (Expenses) $ 936,538 CHANGE IN NET POSITION $ (193,237) NET POSITION - JULY 1, ,354 NET POSITION - JUNE 30, 2016 $ 222,117 The accompanying notes are an integral part of these financial statements 9

76 EXHIBIT J AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 FOOD SERVICES CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Users $ 422,293 Cash Payments to Employees for Services (759,665) Cash Payments to Suppliers for Goods and Services (730,015) Net Cash Provided (Used) by Operating Activities $ (1,067,387) CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Capital Expenditures $ (36,277) Net Cash Provided (Used) by Capital Financing Activities $ (36,277) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Sources $ 44,983 Federal Sources 823,328 (Increase) Decrease in Due to/due from Other Funds 406,354 Net Cash Provided (Used) by Non-Capital Financing Activities $ 1,274,665 NET DECREASE IN CASH AND CASH EQUIVALENTS $ 171,001 CASH AND CASH EQUIVALENTS - JULY 1, ,204 CASH AND CASH EQUIVALENTS - JUNE 30, 2016 $ 183,205 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) $ (1,129,775) ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Depreciation 5,678 Donated Commodities 58,453 (Increase) Decrease in Accounts Receivable (517) (Increase) Decrease in Inventories 524 Increase (Decrease) in Accounts Payable 939 Increase (Decrease) in Unearned Revenue (2,689) Total Adjustments $ 62,388 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (1,067,387) NONCASH NONCAPITAL FINANCING ACTIVITIES: During the year, the District received $58,453 of food commodities from the U.S. Department of Agriculture The accompanying notes are an integral part of these financial statements 10

77 EXHIBIT K AMBRIDGE AREA SCHOOL DISTRICT STATEMENT OF NET POSITION FIDUCIARY FUNDS JUNE 30, 2016 AGENCY FUNDS ACTIVITY FUNDS ASSETS Cash and Cash Equivalents $ 18,027 $ 147,642 TOTAL ASSETS $ 18,027 $ 147,642 LIABILITIES Other Current Liabilities $ 18,027 $ 147,642 TOTAL LIABILITIES $ 18,027 $ 147,642 The accompanying notes are an integral part of these financial statements 11

78 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Ambridge Area School District was established under the authority of an act of the state legislature that designated a school board as the governing body. This district serves the surrounding municipalities which include the Boroughs of Ambridge, Baden, Economy and South Heights and the Township of Harmony. The School District operates under a locally-elected nine member Board form of government and provides educational services as mandated by the Commonwealth of Pennsylvania and selected federal agencies. The Board of Education has complete authority over the operations and administration of the school district's activities. The financial statements of the Ambridge Area School District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). During , Ambridge Area School District adopted the provisions of Government Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application ; Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments ; and Statement No 79, Certain External Investment Pools and Pool Participants. The most significant of the School District s accounting policies are as follows: REPORTING ENTITY A reporting entity is comprised of the primary government, component units and other organizations that are included to ensure the financial statements are not misleading. The primary government of the Ambridge Area School District consists of all funds, departments, boards and agencies that are not legally separate from the District. As defined by GASB Statement No. 14, component units are legally separate entities that are included in the School District s reporting entity because of the significance of their operating or financial relationships with the School District. Based on the application of these criteria, the Ambridge Area School District has no component units. The School District is associated with two jointly governed organizations (Note 11) and one public entity risk pool (Note 13): Jointly Governed Organizations: Beaver County Area Vocational-Technical School Beaver Valley Intermediate Unit Public Entity Risk Pool: Beaver County Health Care Insurance Consortium BASIS OF PRESENTATION GOVERNMENT-WIDE FINANCIAL STATEMENTS The statement of net position (Exhibit A) and the statement of activities (Exhibit B) display information about the School District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statements distinguish between those activities of the School District that are governmental and those that are considered business-type activities. The government-wide statements are prepared using the economic resources measurement focus. That is the same approach used in the preparation of the proprietary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. 12

79 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Governmental fund financial statements therefore include reconciliations (Exhibit D and F) with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. The government-wide statement of activities (Exhibit B) presents a comparison between direct expenses and program revenues for the District s business-type activities (food service operations) and for each function of the School District s governmental activities. Direct expenses are those that are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, and grants, subsidies and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the School District. The comparison of direct expenses with program revenues identifies the extent to which the business-type activity or government function is selffinancing or draws from the general revenues of the School District. FUND FINANCIAL STATEMENTS Fund financial statements report detailed information about the school District. The focus of governmental and enterprise fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are segregated and presented in a single column. Fiduciary funds are reported by fund type. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current financial resources measurement focus. The financial statements for governmental funds are a balance sheet, which generally includes only current assets and current liabilities, and a statement of revenues, expenditures and changes in fund balances, which reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. All proprietary fund types are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the statement of net position. The statement of changes in fund net position presents increases (revenues) and decreases (expenses) in net total assets. The statement of cash flows provides information about how the School District finances and meets the cash flow needs of its proprietary activities. Fiduciary funds are reported using the economic resources measurement focus. FUND ACCOUNTING The School District uses funds to report on its financial position and the results of its operations during the year. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain school district functions or activities. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. Funds are classified into three categories: governmental, proprietary and fiduciary. Fund categories are defined as follows: Governmental Funds Governmental funds focus on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the School District s major and non-major governmental funds: 13

80 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FUND ACCOUNTING (Continued) MAJOR GOVERNMENTAL FUNDS: GENERAL FUND - The general fund is used to account for all financial resources not required to be accounted for in some other fund. The general fund balance is available for any purpose provided it is expended according to the Commonwealth of Pennsylvania Public School Code. NON-MAJOR GOVERNMENTAL FUNDS: CAPITAL PROJECT FUND - The capital project fund accounts for financial resources used for the acquisition, construction, or improvement of capital facilities and other assets financed through the issuance of general obligation bonds. DEBT SERVICE FUND - The debt service fund accounts for proceeds from General Obligation Bonds Series of Proprietary Funds - used to account for activities similar to those found in the private sector, where the determination of net income is necessary and useful to sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies within the school district (internal service funds). The School District s major and sole enterprise fund is its Food Service Fund, which accounts for the financial transactions related to the food service operations of the District. Fiduciary Funds Fiduciary fund reporting focuses on net position and changes in net position. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds and agency funds. Trust funds are used to account for assets held by the School District under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the School District s own programs. The School District s trust fund (Stanley G. Polikowski College Scholarship Trust) is a private-purpose trust account for student scholarships. In August of 2002, the District entered into a Scholarship Fund Agreement with the Beaver County Foundation to act as custodian and administrator for the fund. Agency funds are custodial in nature and do not involve measuring income or any other results from operations. The District s Agency Fund is comprised of the various student organization activity accounts administered by the District on behalf of the various student organizations. BASIS OF ACCOUNTING AND MEASUREMENT FOCUS The basis of accounting determines when transactions are recorded in the financial records and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Proprietary and fiduciary funds use the accrual basis of accounting. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the School District, available means expected to be received within sixty days of fiscal year-end. 14

81 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) BASIS OF ACCOUNTING AND MEASUREMENT FOCUS (Continued) Revenue resulting from non-exchange transactions, in which the School District receives value without directly giving equal value in return, includes property taxes, grants and contributions. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from grants and contributions are recognized in the fiscal year in which all eligibility requirements have been satisfied. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. The management of the Ambridge Area School District has determined that the revenues most susceptible to accrual (measurable and available) at June 30, 2016 under the modified accrual basis are 1) delinquent real estate taxes collected by the district within 60 days following the close of the fiscal year, 2) certain Act 511 taxes, 3) federal and state subsidies earned in the fiscal year , and 4) other miscellaneous revenues earned in fiscal year but received subsequent to June 30, On the governmental fund financial statements, receivables that will not be collected within the available period have been reported as deferred inflows of resources. On the accrual basis of accounting, expenses are recognized at the time they are incurred. The fair value of donated commodities used during the year is reported in the operating statement as an expense with a like amount reported as part of federal source revenue. Unused donated commodities are reported as unearned revenue. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. The primary expenditures deemed susceptible to accrual at June 30, 2016 under the modified accrual basis are 1) salaries, retirement, and social security budgeted and pertaining to the fiscal year, but which were paid in July and August of 2016 in accordance with labor agreements 2) the district's share of retirement pay on salaries and wages earned during the second quarter of 2016 and 3) utility costs and purchase orders for school supplies and operations obligated prior to June 30, Allocations of cost, such as depreciation and amortization, are not recognized in governmental funds but are included as part of expenses in the government-wide statement of activities. BUDGETS In June of 2015, the Ambridge Area School District adopted its fiscal year June 30, 2016 annual budget for the general fund totaling $44,091,703 in accordance with the provisions of the Pennsylvania School Code. The budget is prepared utilizing the modified accrual method of accounting. Budgetary transfers among various expenditure line items can be performed by the district, as approved by the Board of Education, only during the last nine months of the fiscal year. The original and adjusted budgetary amounts are reflected in these financial statements (Exhibit G). All annual appropriations of the general fund lapse at fiscal year end. Actual expenditures exceeded budgeted expenditures for the fiscal year ended June 30, Actual expenditures exceeded budgeted expenditures for the fiscal year as reflected on Exhibit G. CASH AND CASH EQUIVALENTS Cash and cash equivalents include amounts in demand deposit accounts and any other highly liquid, shortterm investments, with original maturity terms of less than three months, with the exception of those shortterm investments through PSDLAF and INVEST. 15

82 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) INVESTMENTS Investments include deposits pooled for investment purposes with the Pennsylvania School District Liquid Asset Fund (PSDLAF) and the Commonwealth of Pennsylvania s INVEST Program for local governments. These investments in external investment pools are stated at amortized cost per the implementation of GASB 79. These investments are stated at fair value which approximates market value. State statutes authorize the School District to invest in: I. U.S. Treasury Bills. II. III. IV. Short-term obligations of the United States Government or its agencies or instrumentalities. Deposits in savings accounts, time deposits and share accounts of institutions insured by the Federal Deposit Insurance Corporation (FDIC), Federal Savings and Loan Insurance Corporation and National Credit Union Share Insurance Fund. Obligations of the United State of America, the Commonwealth of Pennsylvania or any political subdivision of the Commonwealth of Pennsylvania, or any of their agencies or instrumentalities backed by the full faith and credit of the governmental units. V. Shares of an investment company, registered under the Investment Company Act of 1940, and registered under the Securities Act of VI. Any investment authorized by 20 Pa. C.S. Ch. 73 relating to fiduciaries investments. Pooled investments (PSDLAF and INVEST) do not operate under the provisions of the Public School Code. These investments are authorized under the Intergovernmental Cooperation Act of SHORT-TERM INTERFUND RECEIVABLES/PAYABLES During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as 'due from/to other funds' on the governmental funds balance sheet. For the purposes of the government-wide statement of net position, governmental interfund receivables and payables have been eliminated. Amounts due between governmental activities and business-type activities, if any, are presented as off-setting internal balances on the statement of net position. INVENTORIES Inventories on the government-wide statement of net position (Exhibit A) and the proprietary fund statement of net position (Exhibit H) consists of purchased food and supplies, recorded at cost, and donated commodities from the U.S. Department of Agriculture, recorded at fair value, as part of the food service program. These inventories are consumed on a first-in first-out basis. The School District does not inventory the cost of such items as books and supplies, but rather records these items as expenditures in the governmental funds and an expense in the government-wide statement of activities at the time of purchase. 16

83 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) CAPITAL ASSETS AND DEPRECIATION General capital assets are those assets not specifically related to activities reported in the proprietary funds. These assets are reported in the governmental activities column of the government-wide statement of net position. Capital assets used by the proprietary fund are reported in both the business-type activity column of the government-wide statement of net position and on the proprietary fund statement of net position. All capital assets are recorded at cost (or estimated historical cost). Donated fixed assets are recorded at fair value at the time of receipt. The School District maintains a capitalization threshold of $2,500. The cost of infrastructure is included as part of site improvements in the government-wide statement of net position. Routine repair and maintenance costs that do not add to the value of the asset or extend its useful life are charged as an expense in the government-wide statement of activities. All reported capital assets, except land and construction in progress, are depreciated using the straight-line method over the following useful lives: BUSINESS GOVERNMENTAL TYPE CATEGORY ACTIVITIES ACTIVITIES Site Improvements 20 years N/A Buildings and Improvements 50 Years N/A Furniture and Equipment 5-20 years 5-15 years Vehicles 8 Years 8 Years The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. Capital assets purchased by governmental funds are recorded as expenditures in the fund financial statements (Exhibit E). The results of capitalizing fixed assets net of depreciation on the government-wide statement of net position and statement of activities, as opposed to recording these same assets as an expenditure in the fund financial statements (Exhibit E), is reflected in the required reconciliations of fund balance to net position (Exhibit D) and the changes in fund balances to the changes in net position (Exhibit F). LONG-TERM DEBT FINANCING COSTS Bond issue costs are recorded as expenditures in the governmental fund financial statements in the year paid. The School District paid $125,818 in bond issuance costs during the fiscal year related to General Obligation Bonds Series of PENSIONS For the purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Public School Employees Retirement System (PSERS), and additions to/deductions from PSERS s fiduciary net position have been determined on the same basis as they are reported by PSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investment assets are reported at fair value. More information on pension activity is included in Note

84 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) COMPENSATED ABSENCES The School District reports compensated absences in accordance with the provisions of GASB Statement No. 16, Accounting for Compensated Absences. Sick leave benefits are accrued as follows: Accumulated Time Teachers Custodians Administrators Secretaries Cafeteria Less than 100 days $15/day N/A N/A $20/day N/A 100 to days $25/day N/A N/A N/A N/A 150 to days $35/day N/A N/A N/A N/A 200 to days $45/day N/A N/A N/A N/A 250 or more days $50/day N/A N/A N/A N/A Up to 100 days N/A $20/day N/A N/A N/A 101 to 240 days N/A $30/day N/A N/A N/A Up tp 200 days N/A N/A N/A $30/day N/A Up to 250 days N/A N/A $75/day N/A N/A Unlimited N/A N/A N/A N/A $12/day The entire compensated absences liability of $718,101 is shown as a non-current liability in the governmentwide statement of net position. For governmental fund financial statements, compensated absences are recorded as expenditures when paid rather than accrued when earned as the likelihood of payment in the immediate fiscal year with available expendable resources is not assured. ACCRUED LIABILITIES AND LONG-TERM OBLIGATIONS All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements. For the business-type activities, these obligations and all similar obligations are reported again on the proprietary fund statement of net position (Exhibit H). In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, accrued compensated absences, retirement incentives and retiree health benefits that will be paid from governmental funds, are reported as a liability in the fund financial statements only to the extent that they will be paid with current, expendable, available financial resources. In general, liabilities that mature or come due for payment within 60 days of the end of the fiscal year-end, are considered to be paid with current available financial resources. Bonds and other long-term obligations that will be paid from governmental funds are not recognized as a liability in the fund financial statements when due. The District s General Fund is typically used to liquidate long-term liability obligations. The results of recognizing these long-term obligations as liabilities on the government-wide statement of net position and statement of activities, as opposed to recording these same obligations as an expenditure in the fund financial statements only when paid, is reflected in the required reconciliations of fund balance to net position (Exhibit D) and the changes in fund balances to the changes in net position (Exhibit F). 18

85 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) UNEARNED REVENUE Unearned revenue arises when the District receives resources before it has legal claim to them. This occurs when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the School District has a legal claim to the resources, the unearned revenue liability is removed and revenue is recognized. DEFERRED OUTFLOWS AND INFLOWS OF RESOURCES In addition to assets and liabilities, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred outflows and/or inflows of resources. These separate financial statement elements represent a decrease and/or increase in net position that applies to a future period and so will not be recognized as an outflow and/or inflow of resources (expense/expenditure or income/revenue) in the current period. NET POSITION Net position is classified into three categories according to external donor or legal restrictions or availability of assets to satisfy District obligations. Net position is classified as follows: Net Investment in Capital Assets This component of net position consists of capital assets net of accumulated depreciation, and reduced by the outstanding balances of debt that is attributable to the acquisition, construction and improvement of the capital assets, plus deferred outflows of resources less deferred inflows of resources related to those assets. Restricted Net Position This component of net position consists of restricted assets reduced by liabilities inflows related to those assets. Unrestricted Consists of net position that do not meet the definition of restricted or net investment in capital assets. When an expense is incurred that can be paid using either restricted or unrestricted resources (net position), the School District s policy is to first apply the expense toward restricted resources and then toward unrestricted resources. FUND EQUITY In the Balance Sheet Governmental Funds (Exhibit C), fund balances are reported in specific categories to make the nature and extent of the constraints placed on any entity s fund balance more transparent in accordance with GASB No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: Nonspendable fund balance amounts that are not in a spendable 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 high levels of government), through constitutional provisions, or by enabling legislation 19

86 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) FUND EQUITY (Continued) Committed fund balance amounts constrained to specific purposes by the School District itself, using its highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint Assigned fund balance amounts the School District intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority Unassigned fund balance amounts that are available for any purpose Act 48 of 2003 prohibits school districts from increasing real property taxes unless the School District has adopted a budget for such school year that includes an estimated ending unassigned fund balance which is not more than a specified percentage of the district s total budgeted expenditures. For the Ambridge Area School District, estimated ending unassigned fund balance must not exceed 8.0% of total budgeted expenditures. The School District establishes (and modifies or rescinds) fund balance commitments by passage of an ordinance or 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. The Board of Education has given authority to assign fund balance to the Business Manager. When expenditures/expenses are incurred for purposes for which unrestricted (committed, assigned, and unassigned) resources are available, and amounts in any of these unrestricted classifications could be used, it is the District s general policy to spend the committed resources first, followed by assigned amounts and then unassigned amounts. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the District's management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. OPERATING REVENUES AND EXPENSES Operating revenues are those revenues that are generated directly from the primary activity of the proprietary fund. For the Ambridge Area School District, these revenues are food service charges for lunch and breakfast service. Operating expenses are the necessary costs incurred to provide the aforementioned food service. Non-operating revenues of the District s food service proprietary fund are state and federal subsidies, including donated commodities, received from the U.S. Department of Agriculture. The District did not have non-operating expenses during the fiscal year. 20

87 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 2 - CASH DEPOSITS AND INVESTMENTS CASH DEPOSITS: The Ambridge Area School District had the following bank deposit balances and carrying values on its cash and cash equivalents at June 30, 2016: BANK CARRYING BALANCE VALUE General Fund $ 2,511,495 $ 2,959,659 Food Service Fund 183, ,205 Activity/Agency Funds 166, ,669 $ 2,862,215 $ 3,308,533 The difference between the bank balance and carrying value represents year-end reconciling items such as deposits in transit and outstanding checks. The first $250,000 of deposits in interest bearing accounts (time and savings deposits) is insured through the Federal Deposit Insurance Corporation (FDIC). Custodial Credit Risk: Custodial credit risk is the risk that in the event of a bank failure, the School District s deposits may not be returned to it. The School District s investment policy complies with Section of the Public School Code of 1949 with the primary objectives being safety, liquidity and yield. As of June 30, 2016, $2,612,215 of the School District s bank balance total is exposed to custodial credit risk as this amount represents uninsured deposits collateralized with securities held by the pledging financial institution or by its trust department or agent, but not in the School District's name. The District s investment policy requires a written safe keeping agreement and/or Act 72 agreement with each financial institution acting as depository. In accordance with Act Number Session of the Commonwealth of Pennsylvania, the aforementioned deposits, in excess of $250,000, are collateralized by securities pledged to a pooled public funds account with the Federal Reserve System. INVESTMENTS: The fair value and maturity term of the District s investments as of June 30, 2016 is as follows: Fair Value No Stated Maturity Credit Rating Governmental: PSDLAF $ 5,662,986 $ 5,662,986 AAAm PA INVEST 317, ,575 AAAm $ 5,980,561 $ 5,980,561 The purpose of the Pennsylvania school District Liquid Asset Fund (PSDLAF) and PA INVEST is to enable governmental units to pool their available funds for investments authorized under the Intergovernmental Cooperation Act of The funds operate in a manner consistent with the SEC s Rule 2(a)7 of the Investment Company Act of The funds use amortized cost to report net position to compute share prices. These funds maintain net asset values of $1 per share. Accordingly, the fair value of the position in these funds is the same as the value of these shares. These funds are rated by a nationally recognized statistical rating organization. PSDLAF and PA INVEST do not put any limitations or restrictions on withdrawals. 21

88 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 2 - CASH DEPOSITS AND INVESTMENTS INVESTMENTS (Continued): Custodial Credit Risk: For an investment, custodial credit risk is the risk that in the event of the counterparty, the School District will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. PSDLAF and PA INVEST have the characteristics of open-end mutual funds and are not exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. These Trusts purchase only money market instruments of the type in which Pa Local Governments are permitted to invest funds and comply with all regulations. Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District s investments in authorized instruments that are not backed by the full faith and credit of the federal or state government are limited to those with the highest two (2) credit ratings available for such instruments issued by the recognized organization. Interest Rate Risk: Interest rate risk is the risk that changes in interest rates may adversely affect the value of the investments. The School District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Concentration of Credit Risk: In order to limit the District s exposure to loss of principal due to market changes in interest rates, investments of this type shall be limited to not more than 10% of the District s funds available for investment on any single date. Fair Value Measurements: The Ambridge Area School District s investments are reported at fair value within the fair value hierarchy established by generally accepted accounting principles. GASB Statement No 72, Fair Value Measurement and Application, provides a framework for measuring fair value which establishes a threelevel fair value hierarchy that prioritizes the inputs to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable (level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Observable inputs that reflect quoted prices for identical assets or liabilities in active markets such as stock quotes Level 2 Includes inputs other than level 1 inputs that are directly or indirectly observable in the marketplace such as yield curves or other market data Level 3 Unobservable inputs which reflect the reporting entity s assessment of the assumptions that market participants would use in pricing the asset or liability including assumptions about risk such as bid/ask spreads and liquidity discounts. The following schedule presents the Investments of the District by level within the fair value hierarchy: 22

89 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 2 - CASH DEPOSITS AND INVESTMENTS INVESTMENTS (Continued): Fair Value Measurements: (Continued) Value at 6/30/16 Level 1 Fair Value Measurements Level 2 Level 3 PSDLAF $ 5,662,986 $ - $ - $ - PA INVEST 317, $ 5,980,561 $ - $ - $ - Investments held in external investment pools such as PSDLAF and PA INVEST are not subject to the provisions of fair value measurements as they are recorded at amortized cost. NOTE 3 - PROPERTY TAXES The Ambridge Area School District levies property taxes July 1 of each fiscal year. The tax millage assessment for the fiscal year was mills, which represents $ of revenue for every $1,000 of assessed property value. Taxpayers are entitled to a 2% discount if taxes are paid prior to September 1. Collections beginning November 1 are assessed a 5% penalty. Tax collectors are required under Act 169 of the Commonwealth of Pennsylvania to submit a reconciliation of their tax duplicate to the District by January 15 th of the year following levy. Unpaid taxes are submitted to the Beaver County Tax Claim Bureau for collection. Taxes receivable as shown in the government-wide statement of net position includes property taxes of $2,019,555 net of an allowance for doubtful accounts of $106,292. Management estimates that approximately 5% of prior year property taxes receivable will be uncollectible based on past collection experience. For purposes of the governmental fund financial statements, the above property taxes receivable, although measurable, does not meet the available criteria to finance current fiscal year operations. Accordingly, this amount is equally off-set as a credit to deferred inflows of resources in the fund financial statements. The effect of recognizing property tax revenue when taxes are levied, as opposed to when they are received using the measurable and available criteria under the modified accrual basis of accounting, is reflected in the required reconciliations of fund balance to net position (Exhibit D) and the changes in fund balances to the changes in net position (Exhibit F). Taxes receivable are comprised of the following at June 30, 2016: Delinquent Property Taxes, Net $ 2,019,555 Delinquent Property Taxes - Collected within 60 Days of Fiscal Year End 418,149 Wage Taxes 342,153 Mercantile Tax 36,518 Deed Transfer Tax 20,712 Local Service Tax $ 4,446 2,841,533 23

90 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 4 DUE FROM OTHER GOVERNMENTS The amount of due from other governments, as reflected on the government-wide statement of net position and the governmental funds balance sheet, is comprised of the following: Commonwealth of Pennsylvania: State Subsidies $ 811,581 Federal Pass-Through Grants 98,260 JROTC 84,300 BV Intermediate Unit $ 277,494 1,271,635 NOTE 5 OTHER ACCOUNTS RECEIVABLE Other accounts receivable of $1,425, as reflected on the proprietary funds statement of net position (Exhibit H) represents delinquent monies due from students as part of the District s National School Lunch Program. NOTE 6 UNEARNED REVENUE Unearned revenue totaling $11,108, as reflected on the statement of net position (Exhibit A), and the proprietary fund statement of net position (Exhibit H), is comprised of $8,124 in advance payments on student lunch and breakfast accounts and $2,984 of donated commodities inventory of the District s Food Service Fund. NOTE 7 INTER-FUND RECEIVABLES/PAYABLES AND TRANSFERS Inter-fund receivables and payables as reflected on the governmental funds balance sheet (Exhibit C) and the proprietary fund statement of net position (Exhibit H) are as follows: RECEIVABLE PAYABLE General Fund $ 759,665 $ 4,435,636 Capital Projects Fund 3,800,000 - Cafeteria Fund 635, ,665 $ 5,195,301 $ 5,195,301 Governmental type inter-fund obligations have been eliminated in the government-wide statement of net position. Inter-fund obligations between governmental activities and business-type activities are shown net on the statement of net position as part of the line-item internal balances. The inter-fund obligations between the Cafeteria Fund and General Fund represent federal and state subsidies deposited to the General Fund due to the Cafeteria Fund and wage and benefit expenses paid by the General Fund and owed from the Cafeteria Fund. 24

91 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 8 - CAPITAL ASSETS A summary of the governmental and business-type fixed asset activity for the fiscal year was as follows: Balance 6/30/2015 Additions Deductions Balance 6/30/2016 Governmental Activities Land $ 149,750 $ - $ - $ 149,750 Site Improvements 3,035, ,035,437 Building and Improvements 87,830, ,830,281 Furniture and Equipment 9,316, ,455-9,536,021 $ 100,332,034 $ 219,455 $ - $ 100,551,488 Less: Accumulated depreciation Site Improvements $ (2,099,823) $ (120,859) - $ (2,220,682) Building and Improvements (22,183,469) (1,704,264) - (23,887,733) Furniture and Equipment (5,522,780) (484,327) - (6,007,107) $ (29,806,072) $ (2,309,450) $ - $ (32,115,522) Governmental Activities Capital Assets, Net $ 70,525,962 $ (2,089,995) $ - $ 68,435,966 Balance 6/30/2015 Additions Deductions Balance 6/30/2016 Business Type-Activities Furniture and Equipment $ 565,687 $ 36,277 - $ 601,964 Less: Accumulated - - Depreciation (538,829) (5,678) - (544,507) Business-Type Activities Capital Assets, Net $ 26,858 $ 30,599 $ - $ 57,457 Depreciation expense was charged to governmental functions as follows: Instruction $ 1,761,835 Instructional Student Support 123,172 Administrative and Financial Support 196,361 Operation and Maintenance of Plant Services 174,006 Student Activities 49,448 Community Services 4,628 $ 2,309,450 25

92 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 9 - LONG-TERM LIABILITIES GENERAL OBLIGATION BONDS SERIES A and B of 2012 In January of 2012, the Ambridge Area School District issued General Obligation Bonds, Taxable Series A of 2012 and Tax-Exempt Series B of 2012 totaling $1,975,000 and $9,995,000 respectively. The purpose of the Series A 2012 Bond Issue is to currently refund a portion of the School District s outstanding General Obligation Bonds, Series of 2006, advance refund a portion of the School District s outstanding General Obligation Bonds, Series A of 2002 and pay the costs associated with issuing the Series A Bonds and pay a portion of the costs associated with the Series B Bonds. The purpose of the Series B 2012 Bond Issue is to currently refund a portion of the District s outstanding 2006 bonds and pay a portion of the costs associated with issuing the bonds. The bonds were issued in denominations of $5,000 with interest payable on May 1 and November 1 each year through maturity. Interest rates range between 1.342% and 4.125% with the bonds scheduled to mature on November 1, 2020 and November 1, 2035 respectively. The bonds provide for early redemption options for the school district for those bonds maturing on or after November 1, GENERAL OBLIGATION BONDS SERIES D of 2012 In August of 2012, the Ambridge Area School District issued General Obligation Bonds, Tax-Exempt Series D of 2012 totaling $9,085,000. The purpose of the bond issue is to currently refund a portion of the District s outstanding General Obligation Bonds Series of 2007 Bonds, currently refund a portion of the District s outstanding General Obligation Bonds, Series of 2002, and pay a portion of the costs associated with issuing the bonds. The bonds were issued in denominations of $5,000 with interest payable on May 1 and November 1 each year through maturity. Interest rates range between 1.5% and 3.75% with the bonds scheduled to mature on November 1, The bonds provide for early redemption options for the school district for those bonds maturing on or after November 1, GENERAL OBLIGATION BONDS SERIES of 2014 In August of 2014, the Ambridge Area School District issued General Obligation Bonds, Series of 2014 totaling $47,005,000. The purpose of the bond issue is to currently refund the School District s outstanding General Obligation Bonds, Series of 2005, and pay the costs associated with issuing the bonds. The bonds were issued in denominations of $5,000 with interest payable on May 1 and November 1 each year through maturity. Interest rates range between 1.0% and 4.0% with the bonds scheduled to mature on November 1, The bonds provide for early redemption options for the school district for those bonds maturing on or after November 1, GENERAL OBLIGATION BONDS SERIES of 2015 In September of 2015, the Ambridge Area School District issued General Obligation Bonds, Series of 2015 totaling $7,075,000. The purpose of the bond issue is to currently refund the School District s outstanding General Obligation Bonds, Series of 2010, to currently refund the School District s outstanding General Obligation Notes, Series of 2010, and pay the costs associated with issuing the bonds. The bonds were issued in denominations of $5,000 with interest payable on May 1 and November 1 each year through maturity. Interest rates range between 1.0% and 3.0% with the bonds scheduled to mature on November 1, The bonds provide for early redemption options for the school district for those bonds maturing on or after November 1,

93 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 9 - LONG-TERM LIABILITIES (Continued) A summary of the Ambridge Area School District's general obligation bonds and notes outstanding at June 30, 2016 is as follows: SERIES YEAR END 2012 A 2012 B 2012 D JUNE 30, PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL 2017 $ 725,000 $ - $ 70,000 $ 165,000 $ 1,635, ,000-75,000 1,440,000 1,370, ,000-75,000 2,840,000 25, ,000-75,000 2,935,000 25, ,000-75,000 3,030,000 30, ,025, ,000 14,820,000 1,635, ,295, ,000 14,935, , ,675,000 7,740,000 6,835,000 - $ 1,080,000 $ 9,995,000 $ 8,955,000 $ 47,000,000 $ 5,515,000 YEAR END JUNE 30, INTEREST TOTAL 2017 $ 2,479,647 $ 5,074, ,415,668 5,385, ,336,034 5,366, ,227,679 5,352, ,127,312 5,352, ,812,479 26,742, ,664,102 24,084, ,128,570 23,378,570 $ 28,191,491 $ 100,736,491 In connection with the School District s various general obligation bond issues, the District paid approximately $803,516 in bond discounts. These costs are being amortized on a straight-line basis over the life of the bond issue. The unamortized amount of bond discounts totaling $509,725 is reflected as a component of Long Term Portion Bonds Payable (Net) in the governmental activities column on the government-wide statement of net position. Amortization expense for the year ended June 30, 2016 was $29,292. This amount was charged to the Interest on Long-Term Debt expense category in the statement of activities. The School District s various general obligation bond issues were issued at premiums totaling $1,463,018. These premiums are being accreted as a component of interest expense on a straight-line basis over the life of the bond issue. The un-accreted amount of bond premiums totaling $1,279,692 is reflected as a component of Long Term Portion Bonds Payable (Net) in the governmental activities column on the government-wide statement of net position. Premium accretion for the year ended June 30, 2016 was $54,261. This amount was credited to the Interest on Long-Term Debt expense category in the statement of activities. 27

94 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 9 - LONG-TERM LIABILITIES (Continued) CAPITAL LEASE AGREEMENTS On June 15, 2015, the Ambridge Area School District entered into a capital lease agreement with Kansas State Bank for the purchase of a telephone system in the amount of $127, The terms of the lease call for five (5) annual payments of principal and interest totaling $27,785.90, with the last payment due on June 15, The following represents the principal and interest payments on the District s lease obligations: YEAR END JUNE 30, PRINCIPAL INTEREST TOTAL 2017 $ 24,389 $ 3,397 $ 27, ,473 2,313 27, ,604 1,182 27,786 $ 76,466 $ 6,892 $ 83,358 The following represents the changes in the District's long-term liabilities during the fiscal year: Balance Balance Due Within 7/1/2015 Additions Reductions 6/30/2016 One Year General Obligation Bonds $ 74,670,000 $ 7,075,000 $ 9,200,000 $ 72,545,000 $ 2,595,000 Lease Obligations 177, ,907 76,466 24,389 Compensated Absences 721,045 72,314 75, ,101 - Net Pension Liability 48,723,000 1,913,000-50,636,000 - Retiree Incentives 1,125, , , ,500 Net OPEB Obligation 752, ,161-1,052,058 - $ 126,169,315 $ 9,359,475 $ 9,773,665 $ 125,755,125 $ 3,016,889 NOTE 10 - PENSION PLAN The Ambridge Area School District participates in the Public School Employees' Retirement System (PSERS). PSERS is a component unit of the Commonwealth of Pennsylvania. A brief description of the plan, and summary of the plan's provisions, are as follows: Plan Description: PSERS is a governmental cost-sharing multiple-employer defined-benefit plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. The members eligible to participate in the System include all full-time public school employees, part-time hourly public school employees who render at least 500 hours of service in the school year, and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania. PSERS issues a publicly available financial report that can be obtained at 28

95 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 10 - PENSION PLAN (Continued) Benefits Provided: PSERS provides retirement, disability, and death benefits. Members are eligible for monthly retirement benefits upon reaching (a) age 62 with a least 1 year of credited service; (b) age 60 with 30 or more years of credited service; or (c) 35 or more years of service regardless of age. Act 120 of 2010 (Act 120) preserves the benefits of existing members and introduced benefit reductions for individuals who become new members on or after July 1, Act 120 created two new membership classes, Membership Class T-E (Class T-E) and Membership Class T-F (Class T-F). To qualify for normal retirement, Class T-E and Class T-F members must work until age 65 with a minimum of three years of service or attain a total combination of age and service that is equal to or greater than ninety two with a minimum of thirty-five years of service. Benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member s final average salary (as defined in the Code) multiplied by the number of years of credited service. For members whose membership started prior to July 1, 2011, after completion of five years of service, a member s right to the defined benefits is vested and early retirement benefits may be elected. For Class T-E and Class T-F members, the right to benefits is vested after ten years of service. Participants are eligible for disability retirement benefits after completion of five years of credited service. Such benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member s final average salary (as defined in the Code) multiplied by the number of years of credited service, but not less than one-third of such salary nor greater than the benefit the member would have had at normal retirement age. Members over normal retirement age may apply for disability benefits. Death benefits are payable upon the death of an active member who has reached age 62 with at least one year of credited service (age 65 with at least three years of credited service for Class T-E and Class T-F members) or who has at least five years of credited service (ten years for Class T-E and Class T-F members). Such benefits are actuarially equivalent to the benefit that would have been effective if the member had retired on the day before death. Health Insurance Premium Assistance Program: In addition, PSERS provides a Health Insurance Premium Assistance Program (Premium Assistance) for all eligible annuitants who qualify and elect to participate. Under this program, employer contribution rates for Premium Assistance are established to provide reserves in the Health Insurance Account that are sufficient for the payment of Premium Assistance benefits for each succeeding year. Effective January 1, 2002, under the provisions of Act 9 of 2001, participating eligible annuitants are entitled to receive Premium Assistance payments equal to the lesser of $100 per month or their out-of-pocket monthly health insurance premium. To receive Premium Assistance, eligible annuitants must obtain their health insurance through either their school employer or the PSERS Health Options Program. Premium Assistance Is not included in the calculation of the net pension liability as it does not qualify under the provisions of GASB Statement No. 68. Contribution Rates: Member Contributions - Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class TC) or at 6.5% (Membership Class TD) of the member s qualifying compensation. Members who joined the System on or after July 22, 1983 and who were active or inactive as of July 1, 2001, contribute 6.25% (Membership Class TC) or at 7.5% (Membership Class TD) of the members qualifying compensation. Members who joined the System after June 30, 2001 and before June 1, 2011, contribute at 7.5% (automatic Membership Class TD). 29

96 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 10 - PENSION PLAN (Continued) Contribution Rates: (Continued) For all new hires and for members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January 1, Members who joined the System after June 30, 2011 automatically contribute at the Membership Class T-E rate of 7.5% (base rate) of the member s qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at 10.30% (base rate) of the member s qualifying compensation. Membership Class T-E and Class T-F are affected by a shared risk provision in Act 120 of 2010 that in future years could cause the Membership Class T-E contribution rate to fluctuate between 7.50% and 9.50% and Membership Class T-F contribution rate to fluctuate between 10.3% and 12.30%. Employer Contributions The District s contractually required contribution rate for the fiscal year ended June 30, 2016 was 25.84% of covered payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The 25.84% is comprised of a pension contribution rate of 25.00% for pension benefits and.84% for healthcare insurance premium assistance. Contributions to the pension plan from the District were $3,799,955 for the year ended June 30, Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: At June 30, 2016, the School District reported a liability of $50,636,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by rolling forward the System s total pension liability as of June 30, 2014 to June 30, The School District s proportion of the net pension liability was calculated utilizing the employer s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2015, the School District s proportion was.1169%, which was a decrease of.0062% from its proportion measured as of June 30, For the year ended June 30, 2016, the School District recognized pension expense of $4,230,692 in the Statement of Activities (Exhibit B). At June 30, 2016, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual experience $ - $ 209,000 Changes in assumptions - - Net difference between projected and actual investment earnings - 102,000 Changes in proportions 1,027,000 2,104,000 Difference between employer contributions and proportionate share of total contributions 22,051 - Contributions subsequent to the measurement date 3,676,426 - $ 4,725,477 $ 2,415,000 30

97 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 10 - PENSION PLAN (Continued) Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: (Continued) The $4,725,477 reported as deferred outflows of resources related to pensions resulting from School District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred inflows/outflows of resources related to pensions will be recognized in pension expense as follows: Measurement Reporting Date Date Year ended Year ended June 30, June 30, Amount $ (460,949) (485,000) (485,000) ,000 Actuarial Assumptions: The total pension liability as of June 30, 2015 was determined by rolling forward the System s total pension liability as of the June 30, 2014 actuarial valuation to June 30, 2015 using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial cost method Entry Age Normal level % of pay Investment return 7.50%, includes inflation at 3% Salary increases Effective average of 5.5%, which reflects an allowance for inflation of 3%, real wage growth of 1%, and merit or seniority increases of 1.5% Mortality rates were based on the RP-2000 Combined Healthy Annuitant Tables (male and female) with age set back three (3) years for both males and females. For disabled annuitants the RP-2000 Combined Disabled Tables (male and female) with age set back seven (7) years for males and three (3) years for females The actuarial assumptions used in the June 30, 2014 valuation were based on the experience study that was performed for the five-year period ending June 30, The recommended assumption changes based on this experience study were adopted by the Board at its March 11, 2011 Board meeting, and were effective beginning with the June 30, 2011 actuarial valuation. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. 31

98 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 10 - PENSION PLAN (Continued) Investment Asset Allocation: The pension plan s policy in regard to the allocation of invested plan assets is established and may be amended by the Board. Plan assets are managed with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension. Target Expected Real Asset Class Allocation Rate of Return Public markets global equity 22.5% 4.80% Private markets (equity) 15.0% 6.80% Private real estate 12.0% 4.50% Global fixed income 7.5% 2.40% U.S. long treasuries 3.0% 1.40% TIPS 12.0% 1.10% High yield bonds 6.0% 3.30% Cash 3.0%.70% Absolute return 10.0% 4.90% Risk parity 10.0% 3.70% MLPs/Infrastructure 5.0% 5.20% Commodities 8.0% 3.10% Financing (LIBOR) -14.0% 1.10% 100% The above was the Board s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, Discount Rate: The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the School District s proportionate share of the net pension liability to changes in the discount rate: The following presents the net pension liability, calculated using the discount rate of 7.50%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate: 1% Current Discount 1% Decrease Rate Increase 6.50% 7.50% 8.50% School District's proportionate share of the net pension liability $ 62,413,000 $ 50,636,000 $ 40,736,000 32

99 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 10 - PENSION PLAN (Continued) Pension plan fiduciary net position: Detailed information about PSERS fiduciary net position is available in PSERS Comprehensive Annual Financial Report which can be found on the System s website at NOTE 11 JOINTLY GOVERNED ORGANIZATIONS BEAVER COUNTY AREA VOCATIONAL TECHNICAL SCHOOL The Ambridge Area School District, in conjunction with fourteen other Beaver County School Districts, fund the operating budget of the Beaver County Area Vocational Technical School. The technical school is designed to teach students trade related professions. Each district's share of the operating budget is based in proportionate shares according to the average daily membership of pupils in the program from each of the participating school districts. The Beaver County Area Vocational Technical School issues separate financial statements annually which can be obtained by contacting the Vo-Tech directly. BEAVER VALLEY INTERMEDIATE UNIT The Ambridge Area School District participates with 14 other School Districts located in the County of Beaver in the Beaver Valley Intermediate Unit (BVIU). The BVIU was established in 1970 by Act 102 of the Commonwealth of Pennsylvania to function as a regional educational service agency for 15 school districts, as well as nonpublic schools and other institutions, located within the aforementioned counties. The BVIU provides services relative to curriculum development, continuing education, educational planning, instructional materials, pupil personnel, state and federal agency liaison and managerial oversight. The Beaver Valley Intermediate Unit is governed by a fifteen (15) member board appointed by the 15 participating school districts on a rotating basis. The School District contributed $35,341 for operating contributions, transportation recovery, and institutionalized children to the BVIU through state subsidy withholdings for the year ended June 30, Beaver Valley Intermediate Unit issues separate financial statements annually which can be obtained by contacting the BVIU directly. NOTE 12 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSION HEALTH BENEFITS PLAN DESCRIPTION In accordance with the terms of prior year collective bargaining agreements, the Ambridge Area School District provides early retirement health care benefits for employees who have attained the age of fifty-five (55) and have completed twenty-five (25) or more years of service in the Ambridge Area School District as a professional full-time staff member covered by the PSERS (Note 10). The single-employer retiree benefit plan ( the Plan ) was established by the authority of the collective bargaining agreement between the Ambridge Area School District Board of Education and the Ambridge Area Education Association. 33

100 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 12 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued) HEALTH BENEFITS (Continued PLAN DESCRIPTION (Continued) The program entitles eligible employees to health care benefits (blue cross/blue shield), for a maximum of seven years, during the period between retirement and either attaining age 65 or becoming eligible for Medicare benefits. Any increase in the premium costs for the aforementioned insurance that occurs after retirement, shall be borne by the retired employee. The plan is unfunded and does not issue a publicly available financial report. These benefits are accounted for in accordance with GASB Statement No. 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other Than Pensions. FUNDING POLICY The contribution requirements of plan members and the School District are negotiated between the District and the union representatives and may be amended by the Ambridge Board of Education. The plan is funded on a pay-as-you-go basis, i.e. premiums are paid to fund the health care benefits provided to current retirees. There are no assets that have been segregated and restricted to provide for retiree medical benefits. During the fiscal year, the Ambridge Area School District contributed $267,812 for thirty eight (38) participants to the plan. ANNUAL OPEB COST AND NET OPEB OBLIGATION The District s annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following shows the components of the Ambridge Area School District s annual OPEB cost for the year, the amount actually contributed to the plan and changes in the Ambridge Area School District s net OPEB obligation: Annual required contribution $ 976,381 Interest on net OPEB obligation - Adjustment to annual required contribution (83,920) Annual OPEB cost (expense) 892,461 Contributions made (estimate) (593,300) Increase in net OPEB obligation 299,161 Net OPEB obligation at July 1, ,897 Net OPEB obligation at June 30, 2016 $ 1,052,058 34

101 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 12 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued) ANNUAL OPEB COST AND NET OPEB OBLIGATION (Continued) The District s annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation is as follows: FISCAL YEAR ENDED ANNUAL OPEB COST PERCENTAGE CONTRIBUTED NET OPEB OBLIGATION 6/30/2016 $ 892, % $ 1,052,000 6/30/ , % 753,000 6/30/ , % 459,000 6/30/ , % 177,000 6/30/ , % (42,000) 6/30/ , % (88,000) 6/30/ , % (153,000) 6/30/ , % (34,000) FUNDED STATUS AND FUNDING PROGRESS Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care cost trend. Actuarial amounts determined regarding the funded status of the plan and the annual required contributions of the school district are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about actuarial value of plan assets and actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used to include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The July 1, 2014 actuarial valuation report utilized the Unit Credit Actuarial Cost Method. The actuarial assumptions included a 3.25% investment rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer s own investments calculated based on the funded level of the plan at the valuation date. The UAAL, if any, is being amortized as a level dollar amount over 15 years. The remaining amortization period at June 30, 2016 was 8 years. 35

102 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 12 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued) RETIREE INCENTIVE The Ambridge Area School District approved an early retirement incentive packages for the fiscal year for employees who have completed sixteen (16) years of teaching service. The incentive calls for an $8,000 ($7,500 for the package approved in ) non-elective employer contribution into the employee s 403(b) account for a period of six years (five years for the package approved in ), with an additional two payments made directly to the retiree, in years seven and eight. The District approved a subsequent early retirement incentive package for the fiscal year The incentive calls for a $7,500 non-elective employer contribution into the employee s 403(b) account for a period of six years. The government-wide statement of net position includes an accrued liability $727,500 for the District s retiree incentive obligations, which extend through fiscal year ending June 30, 2020 as follows: RETIREMENT INCENTIVE $ 397, , , $ 105, ,500 NOTE 13 - RISK MANAGEMENT GENERAL INSURANCE The Ambridge Area School District is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets, errors and omissions; injuries to employees; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. Settled claims for these risks have not exceeded commercial insurance coverage for the past three years. HEALTH INSURANCE On July 1, 2003, the District entered into a consortium consisting of Ambridge Area School District and sixteen other area educational institutions. As of June 30, 2016, the consortium showed a net position balance of $4,309,125 which will be used to fund future benefits. However, member districts who withdraw from the Consortium in accordance with the provisions of the Articles of Agreement (Section 17) are entitled to their respective share of the Consortium s net position calculated by multiplying net position by the fraction of dividing the withdrawing member s total contributions over the last three years by the total of all member district contributions over that same time period. The distribution is required to be paid within one year of the date of withdrawal. 36

103 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 14 - CONTINGENCIES STATE AND FEDERAL SUBSIDIES The Ambridge Area School District state and federally funded programs are subject to audit by various governmental agencies. The district is potentially liable for any expenditure disallowed by the results of these audits. Management is not aware of any items of noncompliance which would result in the disallowance of program expenditures. NOTE 15 PENDING GASB PRONOUNCEMENTS In June of 2015, GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The primary objective of this Statement is to address reporting by governments that provide Other Post-Employment Benefits (OPEB) to their employees. The provisions of this Statement are effective for Ambridge Area School District s June 30, 2017 financial statements. In June of 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension. The primary objective of this Statement is to replace GASB 45 with a requirement to report a liability on the financial statements for the OPEB that governments provide to employees. The provisions of this Statement are effective for Ambridge Area School District s June 30, 2018 financial statements. In August of 2015, the Government Accounting Standards Board (GASB) issued Statement No. 77, Tax Abatement Disclosures. The primary objective of this Statement is the requirement of certain disclosures in regards to tax abatement agreements. The provisions of this Statement are effective for the Ambridge Area School District s June 30, 2017 financial statements. In March of 2016, the GASB issued Statement No. 82, Pension Issues. The primary objective of this Statement is to address for certain issues that have been raised with respect to GASB Statements No. 67, 68 and 73. The provisions of this Statement are effective for the Ambridge Area School District s June 30, 2017 financial statements. The effects of the implementation of these standards on Ambridge Area School District s financial statements have not yet been determined. NOTE 16 SUBSEQUENT EVENTS In July of 2016, the Ambridge Area School District issued General Obligation Bonds, Series of 2016 totaling $5,000,000. The purpose of the bond issue is to complete various capital projects including, but not limited to HVAC replacement at the junior high school, renovation of the track and athletic field facilities, various other capital improvements, and to pay the costs associated with issuing the bonds. The bonds were issued in denominations of $5,000 with interest payable on May 1 and November 1 each year through maturity. Interest rates range between.850% and 3.00% with the bonds scheduled to mature on November 1, The bonds provide for early redemption options for the school district for those bonds maturing on or after May 1,

104 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 SUBSEQUENT EVENTS (Continued) In connection with the Ambridge Area School District s general obligation bond indebtedness (Note 9), the District receives a reimbursement from the Pennsylvania Department of Education based on an approved calculated aid ratio as a percentage of its semi-annual debt payments to the Bond Trustee. For the school year, the District did not receive this reimbursement until November of The criteria for recognition of revenue under the modified accrual basis of accounting at fiscal year-end, is that the revenue must be both estimable and available. PDE has determined that although the rental subsidy is estimable, since funding at the Commonwealth of Pennsylvania had not been secured for this reimbursement, and is not guaranteed, it did not meet the availability criteria and therefore should not be recognized as revenue in the year. The effect of the General Fund balance of not reporting this revenue for the fiscal year was a reduction in fund balance of approximately $646,610. The School District evaluated its June 30, 2016 financial statements for other subsequent events through the date of the Independent Auditor s Report, which is the date the financial statements were available to be issued. The School District is not aware of any other subsequent events that would require recognition or disclosure in the financial statements. 38

105 REQUIRED SUPPLEMENTARY INFORMATION

106 AMBRIDGE AREA SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION DEFINED BENEFIT PENSION PLAN JUNE 30, 2016 SCHEDULE OF DISTRICT CONTRIBUTIONS: June 30, Contractually required contributions $ 3,799,955 $ 3,173,516 $ 2,596,579 $ 1,848,518 Contribution in relation to the contractually (3,799,955) (3,173,516) (2,596,579) (1,848,518) required contribution Contribution deficiency (excess) $ - $ - $ - $ - District's covered-employee payroll $ 14,897,663 $ 15,044,657 $ 15,705,575 $ 15,270,040 Contributions as a percentage of coveredemployee payroll 25.51% 21.09% 16.53% 12.11% SCHEDULE OF THE DISTRICT S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY: As of the measurement date of June 30, District's proportion of the net pension liability % % % District's proportionate share of the net pension liability $ 50,636,000 $ 48,723,000 $ 48,714,000 District's covered-employee payroll $ 15,044,657 $ 15,705,575 $ 15,270,040 District's proportionate share of the net pension liability as a percentage of its covered-employee payroll % % % Plan fiduciary net position as a percentage of the total pension liability 54.36% 57.24% 54.49% The amounts presented for each fiscal year were determined as of the measurement date, which is June 30 of the preceding fiscal year. This schedule is intended to illustrate information for a ten (10) year period. Information for that ten year period will be presented as information becomes available. 39

107 AMBRIDGE AREA SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS OTHER POSTEMPLOYMENT BENEFIT PLANS JUNE 30, 2016 The schedule of funding progress, as shown below, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. (A) (B) (B-A) (A/B) (C) (B-A)/C (UAAL) UNFUNDED UAAL AS A ACTUARIAL VALUATION DATE ACTUARIAL VALUE OF ASSETS ACTUARIAL ACCRUED LIABILITY ACTUARIAL ACCRUED LIABILITY FUNDED RATIO COVERED PAYROLL % OF COVERED PAYROLL 7/1/14 $ - $ 5,217,000 $ 5,217,000 0% to be determined n/a 7/1/12-4,648,000 4,648,000 0% to be determined n/a 7/1/10-5,058,000 5,058,000 0% 17,208, % 7/1/08-6,299,000 6,299,000 0% 16,713, % 40

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109 AMBRIDGE AREA SCHOOL DISTRICT AS REQUIRED BY GOVERNMENT AUDITING STANDARDS AND UNIFORM GUIDANCE Mark C. Turnley Certified Public Accountant

110 Mark C. Turnley Certified Public Accountant rd Avenue New Brighton, PA (724) FAX (724) INDEPENDENT AUDITOR S 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 To the Management and Board of Education Ambridge Area School District I have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standard issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Ambridge Area School District as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Ambridge Area School District s basic financial statements, and have issued my report thereon dated March 2, Internal Control over Financial Reporting In planning and performing my audit of the financial statements, I considered the Ambridge Area School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Ambridge Area School District s internal control. Accordingly, I do not express an opinion on the effectiveness of the Ambridge Area School District s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Ambridge Area School District s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. My consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during my audit I did not identify any deficiencies in internal control that I consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 41 American Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants

111 To the Management and Board of Education Ambridge Area School District Compliance and Other Matters As part of obtaining reasonable assurance about whether the Ambridge Area School District's financial statements are free of material misstatement, I 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 my audit, and accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Ambridge Area School District s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Ambridge Area School District s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Mark C. Turnley Certified Public Accountant March 2, 2017 New Brighton, Pennsylvania 42

112 Mark C. Turnley Certified Public Accountant rd Avenue New Brighton, Pennsylvania (724) FAX (724) INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Education Ambridge Area School District REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM I have audited the Ambridge Area School District s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Ambridge Area School District s major federal programs for the year ended June 30, The Ambridge Area School 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 federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility My responsibility is to express an opinion on compliance for each of the Ambridge Area School District s major federal programs based on my audit of the types of compliance requirements referred to above. I conducted my 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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that I 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 Ambridge Area School District s compliance with those requirements and performing such other procedures as I considered necessary in the circumstances. I believe that my audit provides a reasonable basis for my opinion on compliance for each major federal program. However, my audit does not provide a legal determination on the Ambridge Area School District s compliance. Opinion on Each Major Federal Program In my opinion, Ambridge Area School District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, American Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants

113 REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of Ambridge Area School 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 my audit of compliance, I considered the Ambridge Area School 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 my opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, I do not express an opinion on the effectiveness of the Ambridge Area School 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. My 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. I identified a deficiency in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as item (2016-1) that I consider to be a material weakness. Ambridge Area School District s response to the internal control over compliance finding identified in my audit is described in the accompanying schedule of findings and questioned costs. Ambridge Area School District s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, I express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of my testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Mark C. Turnley Certified Public Accountant March 2, 2017 New Brighton, Pennsylvania 44

114 AMBRIDGE AREA SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 FEDERAL GRANTOR / PROJECT TITLE FUNDING SOURCE FEDERAL CFDA NUMBER PASS- THROUGH GRANTOR NUMBER GRANT PERIOD BEGINNING / ENDING DATE PROGRAM AWARD AMOUNT TOTAL RECEIVED THIS PERIOD ACCRUED (DEFERRED) REVENUE JULY 1 REVENUE RECOGNIZED EXPENDITURES ACCRUED (DEFERRED) REVENUE JUNE 30 U.S. Department of Education: Passed through Pa. Dept. of Education: Title I Indirect /1/15-9/30/16 $ 731,889 $ 636,687 $ - $ 697,364 $ 697,364 (1) $ 60,677 Title I Indirect /1/14-9/30/15 776, ,320 (8,495) 200, ,815 (1) - Total Title I Cluster Subtotal $ 829,007 $ (8,495) $ 898,179 $ 898,179 $ 60,677 Title II Improving Teacher Quality Indirect /1/15-9/30/16 145, , , ,626 19,334 Title II Improving Teacher Quality Indirect /1/14-9/30/15 145,724 38,615 22,329 16,286 16,286 - Total Passed through Pa. Dept. of Education $ 993,914 $ 13,834 $ 1,060,091 $ 1,060,091 $ 80,011 Passed through Beaver Valley Intermediate Unit: (IDEA Cluster) IDEA Indirect /1/15-6/30/16 $ 438,649 $ 197,166 - $ 438,649 $ 438,649 (1) $ 241,483 IDEA Indirect /1/14-6/30/15 452, , , IDEA - Section 619 Indirect /1/15-6/30/16 6, ,870 6,870 (1) 6,870 IDEA - Section 619 Indirect /1/14-6/30/15 6,697 6,697 6, Total Passed through Beaver Valley Intermediate Unit $ 539,827 $ 342,661 $ 445,519 $ 445,519 $ 248,353 TOTAL DEPARTMENT OF EDUCATION $ 1,533,741 $ 356,495 $ 1,505,610 $ 1,505,610 $ 328,364 U.S. Department of Health and Human Services: Passed through Pa. Dept. of Public Welfare: Title XIX Indirect N/A 7/1/15-6/30/16 N/A $ 7,193 $ 2,181 $ 17,703 $ 17,703 $ 12,691 TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES $ 7,193 $ 2,181 $ 17,703 $ 17,703 $ 12,691 U.S. Department of Agriculture: Passed through Pa. Dept. of Education: National School Lunch Program Indirect N/A 7/1/15-6/30/16 N/A $ 543,178 $ - $ 630,141 $ 630,141 $ 86,963 Lunch Program Indirect N/A 7/1/14-6/30/15 N/A 68,606 68, Breakfast Program Indirect N/A 7/1/15-6/30/16 N/A 156, , ,347 8,813 Breakfast Program Indirect N/A 7/1/14-6/30/15 N/A 17,496 17, Summer Food Indirect N/A 7/1/15-6/30/16 N/A 12,852-12,852 12,852 - Passed through Pa. Dept. of Agriculture: National School Lunch Program Indirect N/A 7/1/15-6/30/16 N/A 58,453 * (4,852) ** 56,585 56,585 (2,984) *** Total Child Nutrition Program Cluster $ 857,119 $ 81,250 $ 864,925 $ 864,925 $ 92,792 Passed through Pa. Dept. of Education: Fresh Fruit and Vegetable Program Indirect N/A 7/1/15-6/30/16 N/A 24,662-24,662 24,662 - TOTAL DEPARTMENT OF AGRICULTURE $ 881,781 $ 81,250 $ 889,587 $ 889,587 $ 92,792 U.S. Department of Defense: Department of Army ROTC Direct N/A N/A 7/1/15-6/30/16 N/A $ 59,402 $ - $ 64,960 $ 64,960 $ 5,558 TOTAL DEPARTMENT OF DEFENSE $ 59,402 $ - $ 64,960 $ 64,960 $ 5,558 TOTAL FEDERAL ASSISTANCE $ 2,482,117 $ 439,926 $ 2,477,860 $ 2,477,860 $ 439,405 Per above $ 2,482,117 ** Represents beginning inventory - 7/1/15 IDEA (539,827) *** Represents ending inventory - 6/30/16 Pre-K Counts 335,890 Title XIX (7,193) Department of Defense (59,402) School Lunch/Breakfast matching subsidy 44,983 (1) Denotes Major Program Donated commodities (58,453) Per confirmation $2,198,115 45

115 AMBRIDGE AREA SCHOOL DISTRICT NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS JUNE 30, 2016 NOTE 1 BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule ) includes the federal grant activity administered by the Ambridge Area School District for the year ended June 30, The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Grant Guidance UGG). Because the Schedule presents only a selected portion of the operations of the School District, it is not intended to and does not present the financial position or changes in net position of the Ambridge Area School District. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING Expenditures reported on the Schedule are presented using the accrual method of accounting. Under this method, grant revenue is recognized to the extent expenditures are incurred. Expenditures are recognized when the liability for the expenditure is incurred rather than when the disbursement is actually made. The federal expenditures are recognized, as applicable, under the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or limited to reimbursement. NOTE 3 - RELATIONSHIP TO FINANCIAL STATEMENTS Federal financial award revenues are included in the financial statements as local source and 'federal source' revenues. NOTE 4 RECEIVABLES AND UNEARNED REVENUE Federal grants receivable are included as part of 'due from other governments' in Exhibit A and Exhibit C as referenced in Note 4 to the Financial Statements. Unearned federal grant revenue, if any, is included as part of 'unearned revenue' in Exhibit A and Exhibit C, and is referenced in Note 6 to the Financial Statements. NOTE 5 - NON-CASH ASSISTANCE The Ambridge Area School District received donated commodities from the Department of Agriculture in connection with its food service program. The amount of non-cash assistance expended in the accompanying schedule of expenditures of federal awards reflects the fair market value of the commodities used during the fiscal year. NOTE 6 INDIRECT COST RATE The District has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. 46

116 AMBRIDGE AREA SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2016 Section I Summary of Auditor s Results Financial Statements Type of auditor s report issued Unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X no Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X no Type of auditor s report issued on compliance for major programs Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR (a)? X yes no Identification of major programs: CFDA number(s) Name of Federal Program or Cluster Title I IDEA IDEA Section 619 The dollar threshold for distinguishing type A and type B programs: $750,000 Auditee qualified as low-risk auditee? yes X no Section II Financial Statement Findings Findings related to the financial statements which are required to be report in accordance with Government Auditing Standards. None 47

117 AMBRIDGE AREA SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2016 Section III Federal Award Findings and Questioned Costs Findings and questioned costs related to Federal Awards which are required to be reported in accordance with the Uniform Guidance 2 CFR (a): FINDING POLICIES AND PROCEDURES REQUIRED BY THE UNIFORM GUIDANCE CONDITION: Effective for the fiscal year, the School District was required to adopt applicable fiscal policies and procedures as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). These policies and procedures were not adopted and implemented by the School District during the fiscal year. CRITERIA: 2 CFR Part 200 of the Uniform Guidance requires non-federal agencies who receive federal funding to adopt and implement certain applicable fiscal policies and procedures related to internal control, cash management, conflict of interest, time and effort reporting, and travel which pertain to federal awards (grants and subsidies). CAUSE: Although District management recognized the requirement to adopt and implement these policies and procedures in the current fiscal year, discussions regarding the content of these policies and procedures has extended past the fiscal year, and consequently has delayed the District s ability to adopt and implement these required policies and procedures in a timely manner. EFFECT: The District is not in compliance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) with regard to the adoption and implementation of certain applicable fiscal policies and procedures related to federal awards (grants and subsidies). CONTEXT: As part of the audit process for the review and testing (as required) of the School District s internal controls relative to its federal awards, we requested copies of all required policies and procedures required under Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). RECOMMENDATION: Management and Board of Education of the School District need to continue the process of reviewing the language and content of these newly required policies and procedures, and subsequently adopt and implement these policies and procedures, so as to be in compliance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). 48

118 AMBRIDGE AREA SCHOOL DISTRICT MANAGEMENT S CORRECTIVE ACTION PLAN FOR THE YEAR ENDING JUNE 30, 2016 The District recognizes the importance that policy be in consort with Regulatory authorities and local governance. Toward that end the District is in the process of finalizing policies related to Uniform Grant Guidance (UGG). It is anticipated that UGG policies will be finalized before June 30,

119 AMBRIDGE AREA SCHOOL DISTRICT STATUS OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDING JUNE 30, 2016 The audit report of the Ambridge Area School District for the year ended June 30, 2015, dated January 15, 2016, contained the following audit findings. FINDING REAL ESTATE TAX COLLECTIONS CONDITION: I noted the following during my review of the records of the District s Tax Collector for the Borough of Baden: The Tax Collector did not provide the District with a final reconciliation of taxes collected in compliance with Act 169 of the Commonwealth of Pennsylvania. Supporting receipts from taxpayers evidencing payment of real estate taxes were not maintained as required by Public Record Retention Laws. Payments made by taxpayers for School District real estate tax obligations were comingled with real estate tax deposits made for Borough of Baden real estate tax obligations. Tax deposits were not made timely and did not follow traditional collection patterns for real estate tax collections during the discount, face and penalty collection periods. Real estate tax deposits applicable to the School District fiscal year were used to reconcile the Tax Collector s School District Tax Duplicate for the fiscal year. The listing of taxpayer names and amounts provided by the tax collector to support the amount of taxes deposited into the School District s depository in September of 2014, did not match the taxpayer names and amounts from the detail deposit information received from the School District s depository. Minimal amounts of cash were reflected on each deposit ticket reviewed. The amount of bond insurance coverage for the Tax Collector did not appear to be adequate based on the Tax Collector s total collection responsibilities. CRITERIA: The Tax Collector is required to follow the applicable sections of Act 169 of the Commonwealth of Pennsylvania, and applicable sections of the Public School Code and Borough Code as it relates to the collection of real estate taxes. As part of its prudent internal control over District assets, it is the School District s responsibility to monitor the Tax Collector s adherence to these aforementioned requirements. EFFECT: The lack of segregation of duties in the Tax Collector s office, and the resulting conditions noted above, presents a material weakness in the School District s internal control over financial reporting as it relates to collection of its real estate tax revenues. 50

120 AMBRIDGE AREA SCHOOL DISTRICT STATUS OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDING JUNE 30, 2016 FINDING REAL ESTATE TAX COLLECTIONS (Continued) RECOMMENDATION: I recommend that the School District establish a formal procedure for meeting with its appointed tax collectors, at least once annually, to review the financial recordkeeping and reporting requirements of the District and applicable Laws, including bonding requirements. In addition, due to the lack of segregation of duties normally associated with the real estate tax collection office as mentioned in previous management letters to the School District, collection patterns and deposits should be monitored closely for any irregularities and investigated immediately so as to minimize the potential loss of District assets through misappropriation or other means. Lastly, I would recommend that the School District extend its audit review of the operations of the Borough of Baden s Real Estate Tax Collector to determine the extent of any financial loss to the School District. CORRECTIVE ACTION PLAN: The District will establish formal procedures for meeting with its appointed tax collectors annually to review the financial recordkeeping and reporting requirements of the District for this position. Monthly collection patterns and deposits of the appointed tax collectors will be monitored on a monthly basis. In addition, the District is in the process of determining what audit procedures will be necessary to determine the extent of financial loss to the School District. CURRENT STATUS: Based on the performance of an extended audit review and investigation of the operations of the Borough of Baden s Real Estate Tax Collector via the involvement of Federal and Local Law Enforcement Authorities, it was determined that a misappropriation of District assets did occur. The criminal case related to loss has been completed. The Business Office has implemented procedures to review collection patterns and related deposits of all District tax collection agents. In addition, the District has revised its procedures for insuring that all tax collectors are adequately bonded in order to safeguard District assets. 51

121 APPENDIX C Specimen Municipal Bond Insurance Policy

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123 MUNICIPAL BOND INSURANCE POLICY ISSUER: BONDS: $ in aggregate principal amount of Policy No: -N Effective Date: Premium: $ ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the