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PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 2, 2016
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NEW ISSUE-BOOK-ENTRY RATING: S&P: “__” (Insured)
Moody’s “__” (Underlying)
(See “RATINGS” herein)
In the opinion of Bond Counsel, assuming compliance by the Issuer with certain covenants and requirements of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable regulations thereunder, interest on and accruals of original issue discount with respect to the Bonds are
excluded from gross income for federal income tax purposes under existing law, as currently enacted and construed, and are not items of tax preference
for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest and accruals of original issue discount are taken into account in determining adjusted current earnings for
the purpose of the alternative minimum tax. This opinion of Bond Counsel is subject to continuing compliance by the Issuer with its covenants to comply
with requirements of the Code and applicable regulations thereunder. The Bonds have been designated, by the Issuer as “qualified tax-exempt obligations,” for purposes and effect contemplated by Section 265 of the
Internal Revenue Code of 1986, as amended (concerning interest expenses relating to tax-exempt income of certain financial institutions).
The Bonds are exempt from personal property taxes in Pennsylvania; and the interest on the Bonds is exempt from the Commonwealth of Pennsylvania’s Corporate Net Income Tax and from its Personal Income Tax, or by any of its political subdivisions, under present statutory and case
law (For further information concerning federal and state tax matters relating to the Bonds, see “TAX MATTERS” herein).
$7,160,000*
Clearfield Area School District Clearfield County, Pennsylvania
General Obligation Bonds, Series A of 2016
Dated: December 14, 2016 Principal Due: September 1, as shown on inside cover
Interest Due: March 1 and September 1 First Interest Payment: March 1, 2017
The General Obligation Bonds, Series A of 2016, in the aggregate principal amount of $7,160,000* (the “Bonds”) will be issued in registered
form in denominations of $5,000 or any integral multiple thereof. 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 only system maintained by DTC through its brokers and dealers who are, or act
through, DTC Participants. 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 general obligations of the Clearfield Area School District, Clearfield County, Pennsylvania (the “School District”) payable from its tax and other general revenues. The School District has covenanted that it will provide in its budget in each year, and will appropriate from its general
revenues in each such year, the amount of the debt service 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 revenues or funds the principal of every Bond and the interest thereon on the dates, at
the place, and in the manner stated on the Bonds, and for such budgeting, appropriation and payment the School District pledged its full faith, credit and
taxing power, within the limits provided by law (See “SCHOOL DISTRICT FINANCES” and “TAXING POWERS AND LIMITS” herein). Interest on each of the Bonds is payable initially on March 1, 2017, and thereafter semiannually on March 1 and September 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. The School District has appointed Bankers Trust Company (the “Paying Agent”), as paying agent and sinking fund depository for the Bonds. So long as Cede & Co., as nominee for DTC, is the registered owner of the Bonds, payments of the principal
of, redemption premium, if any, and interest on the Bonds, when due for payment, will be made directly to DTC by the Paying Agent, and DTC will in
turn remit such payments to DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. If the use of the book-entry only system for the Bonds is ever discontinued, the principal of and redemption premium, if any, on each of the Bonds will be payable, when due, upon
surrender of such Bond to the Paying Agent at its specified corporate trust office presently located in Camp Hill, Pennsylvania (or any successor paying
agent at its designated office(s)) and interest on such Bond will be payable by check mailed to the person(s) in whose name(s) such Bond is registered as of the Record Date with respect to the particular interest payment date (See “THE BONDS,” infra).
The Bonds are subject to optional redemption prior to maturity. (See “REDEMPTION OF BONDS,” infra). Proceeds of the Bonds will be used to currently refund the School District’s outstanding General Obligation Bonds, Series of 2011, and to pay the
cost of issuing and insuring the Bonds. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be
issued concurrently with the delivery of the Bonds by ____.
MATURITIES, AMOUNTS, RATES, YIELDS & PRICES
See Inside Front 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 Eckert Seamans Cherin & Mellott, LLC, Harrisburg, Pennsylvania, Bond Counsel to the School District, to be furnished upon delivery of the Bonds. Certain other legal matters will be passed upon for the School District by Beard Legal Group, P.C., Altoona, Pennsylvania, School District
Solicitor. PFM Financial Advisors LLC serves as the School District’s Financial Advisor in connection with the issuance of the Bonds. It is expected
that the Bonds will be available for delivery in New York, New York, on or about December 14, 2016.
PFM Financial Advisors LLC Financial Advisor to the School District
Dated:
*Estimated, subject to change
$7,160,000*
Clearfield Area School District Clearfield County, Pennsylvania
General Obligation Bonds, Series A of 2016
Dated: December 14, 2016 Principal Due: September 1, as shown below
Interest Due: March 1 and September 1 First Interest Payment: March 1, 2017
MATURITIES, AMOUNTS, RATES, YIELDS & PRICES
Maturity Date
(September 1) Principal Interest Initial Offering Initial Offering
Year Amount Rate Yield Price
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(A portion of the Bonds may be structured as Term Bonds. See “Invitation to Bid”.)
*Estimated, subject to change.
CLEARFIELD AREA SCHOOL DISTRICT Clearfield County, Pennsylvania
BOARD OF SCHOOL DIRECTORS
Larry A. Putt .............................................................................................................................. President
Mary Anne Jackson ................................................................................................................... Vice-President
Philip E. Carr ............................................................................................................................. Member
Susan E. Mikesell ...................................................................................................................... Member
Tim N. Morgan .......................................................................................................................... Member
Gail Ralston ............................................................................................................................... Member
Randy Pataky ............................................................................................................................. Member
Dr. Michael Spencer .................................................................................................................. Member
Jennifer Hughes ......................................................................................................................... Member
SUPERINTENDENT
TERRY W. STRUBLE
DIRECTOR OF BUSINESS AFFAIRS
SAMUEL J. MANEY, CPA
SCHOOL DISTRICT SOLICITOR
BEARD LEGAL GROUP, P.C.
Altoona, Pennsylvania
BOND COUNSEL
ECKERT SEAMANS CHERIN & MELLOTT, LLC
Harrisburg, Pennsylvania
FINANCIAL ADVISOR
PFM FINANCIAL ADVISORS LLC
Harrisburg, Pennsylvania
PAYING AGENT
BANKERS TRUST COMPANY
Camp Hill, Pennsylvania
SCHOOL DISTRICT ADDRESS
2831 Washington Ave, PO Box 710
Clearfield, Pennsylvania 16830
i
No dealer, broker, salesman or other person has been authorized by the School District to give information or to make any representations, other
than those contained in this Preliminary Official Statement, and if given or made, such other information or representations must not be relied upon. This
Preliminary Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds 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. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this
Preliminary 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.
TABLE OF CONTENTS
Page Page
INTRODUCTION .......................................................................... 1
PURPOSE OF THE ISSUE ........................................................... 1
Sources and Uses of Bond Proceeds ...................................... 1
THE BONDS ................................................................................... 2
Description ............................................................................ 2 Payment of Principal and Interest .......................................... 2 Transfer, Exchange and Registration of Bonds ...................... 2 Security .................................................................................. 3 Commonwealth Enforcement of Debt Service Payments....... 3 Pennsylvania Budget Adoption .............................................. 3 Sinking Fund ......................................................................... 3
BOOK-ENTRY ONLY SYSTEM ................................................. 4
REDEMPTION OF BONDS .......................................................... 6
Mandatory Redemption ......................................................... 6 Optional Redemption ............................................................. 6 Notice of Redemption ............................................................ 6 Manner of Redemption .......................................................... 6
THE SCHOOL DISTRICT ............................................................ 7
Introduction ........................................................................... 7 Administration ....................................................................... 7 School Facilities .................................................................... 7 Enrollment Trends ................................................................. 7
SCHOOL DISTRICT FINANCES ................................................ 8
Introduction ........................................................................... 8 Financial Reporting ............................................................... 8 Budgeting Process as modified by Act 1 of 2006 (Taxpayer
Relief Act) as amended by Act No. 25 of 2011 ..................... 8 Summary and Discussion of Financial Results ...................... 9 Revenue ................................................................................. 10
TAXING POWERS AND LIMITS ............................................... 13
In General .............................................................................. 13 The Taxpayer Relief Act (Act 1 of 2006) .............................. 14 Status of the Bonds under Act 1............................................. 14 Limitation on Estimated Ending Unreserved Undesignated Fund Balances ....................................................................... 15 Tax Rates ............................................................................... 16 Real Property Tax .................................................................. 16 Other Taxes ........................................................................... 18
COMMONWEALTH AID TO SCHOOL DISTRICTS .............. 19
General .................................................................................. 19 Current Lack of State Appropriations for Debt Service
Subsidies ................................................................................ 19
DEBT AND DEBT LIMITS ........................................................... 20
Debt Statement ...................................................................... 20 Debt Limit and Remaining Borrowing Capacity .................... 22 Debt Service Requirements.................................................... 22 Future Financing .................................................................... 24
LABOR RELATIONS ................................................................... 24
School District Employees .................................................... 24 Pension Program ................................................................... 24 Other Post-Employment Benefits (OPEB) ............................ 25
LITIGATION................................................................................. 25
DEFAULTS AND REMEDIES ..................................................... 25
TAX MATTERS ............................................................................ 26
Federal Tax Exemption ......................................................... 26 Pennsylvania Tax Exemption ................................................ 26 Internal Revenue Code Covenants ........................................ 26 Qualified Tax-Exempt Obligations ....................................... 26 Federal Alternative Minimum Tax Calculations ................... 27 Taxable Social Security and Railroad Retirement Benefits
Calculation ............................................................................ 27 Property and Casualty Insurance Company Income Taxes .... 27 Tax on Excess Passive Net Income of S Corporation ............ 27 Branch Profits Tax ................................................................ 27 Interest Reporting Requirements ........................................... 27 Market Discount .................................................................... 27 Original Issue Discount ......................................................... 28 Tax Treatment of Premium ................................................... 28
CHANGE IN LAW ........................................................................ 28
CONTINUING DISCLOSURE UNDERTAKING ...................... 29
RATINGS ....................................................................................... 31
UNDERWRITING ........................................................................ 31
LEGAL OPINION ......................................................................... 31
FINANCIAL ADVISOR ................................................................ 32
MISCELLANEOUS ...................................................................... 32
APPENDIX A - DEMOGRAPHIC AND ECONOMIC INFORMATION RELATING TO THE CLEARFIELD AREA SCHOOL DISTRICT
Population ............................................................................. A-1 Employment .......................................................................... A-2 Income .................................................................................. A-4 Commercial Activity ............................................................. A-5 Educational Institutions ......................................................... A-5 Transportation ....................................................................... A-5
APPENDIX B - FORM OF OPINION OF BOND COUNSEL
APPENDIX C - SPECIMEN MUNICIPAL BOND
INSURANCE POLICY
APPENDIX D - AUDITED FINANCIAL STATEMENTS
APPENDIX E - CONTINUING DISCLOSURE AGREEMENT
[THIS PAGE INTENTIONALLY LEFT BLANK]
1
PRELIMINARY OFFICIAL STATEMENT
$7,160,000*
Clearfield Area School District
Clearfield County, Pennsylvania General Obligation Bonds, Series A of 2016
INTRODUCTION
This Preliminary Official Statement, including the cover page hereof and the Appendices hereto, is furnished by Clearfield Area
School District, Clearfield County, Pennsylvania (the “School District”) in connection with the offering of $7,160,000* aggregate
principal amount of its General Obligation Bonds, Series A of 2016 (the “Bonds”), dated as of December 14, 2016. The Bonds are being
issued pursuant to a Resolution of the Board of School Directors of the School District adopted on October 24, 2016 (the “Resolution”),
and pursuant to the Local Government Unit Debt Act of the Commonwealth of Pennsylvania, Act of July 12, 1972, No. 185, P.L. 781, as
re-enacted, amended and revised by Act No. 1978-52, as amended, supplemented and codified by Act No. 177 of 1996, 53 Pa.
C.S.A.§8001 et seq. (the “Act”).
PURPOSE OF THE ISSUE
Proceeds of the Bonds will be used to currently refund the School District’s General Obligation Bonds, Series of 2011, currently
outstanding in the aggregate principal amount of $6,880,000 (the “2011 Bonds”), and to pay the costs and expenses related to the issuing
and insuring the Bonds.
Upon issuing of the Bonds, a portion of the proceeds of the Bonds will be irrevocably deposited with Bankers Trust Company, as
paying agent for the 2011 Bonds in the amount sufficient to redeem the 2011 Bonds, at a redemption price of 100% of the principal
amount redeemed plus accrued interest, on or about March 1, 2017, which is within 90 days of the issuance date of the Bonds.
Sources and Uses of Bond Proceeds
The following is a summary of the sources and uses of the proceeds from the issuance of the Bonds.
Sources of Funds
Bond Proceeds ..........................................................................................................
Net Original Issue Premium/(Discount) ....................................................................
Total Sources of Funds ............................................................................................
Uses of Funds
Deposit to Project Fund .............................................................................................
Costs of Issuance(1) ....................................................................................................
Total Uses of Funds .................................................................................................
(1)Includes legal, financial advisor, printing, rating, underwriter’s discount, municipal bond insurance, CUSIP, paying agent,
miscellaneous costs, and rounding.
*Estimated, subject to change
2
THE BONDS
Description
The Bonds will be issued in fully registered form, in denominations of $5,000 or any integral multiple thereof, will be in the
aggregate principal amount of $7,160,000*, will be dated as of December 14, 2016 and will bear interest at the rates and mature in the
amounts and at the times set forth on the inside cover page of this Preliminary Official Statement. Interest on the Bonds will be payable
initially on March 1, 2017, and thereafter, semiannually on March 1 and September 1, until the principal sum is paid.
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 Bonds certificates,
and beneficial ownership of the Bonds will be evidenced only by book entries. See “BOOK – ENTRY ONLY SYSTEM” herein.
Payment of Principal and Interest
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 the Bonds, when due upon maturity, will be paid to the registered owners of the Bonds, or registered assigns, upon
surrender of the Bonds to Bankers Trust Company (the “Paying Agent”), acting as paying agent and sinking fund depository for the
Bonds, at its designated corporate trust office in Camp Hill, Pennsylvania (or to any successor paying agent at its designated office(s)).
Interest is payable to the registered owner of a Bond from the interest payment date next preceding the date of registration and
authentication of the 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 March 1, 2017, in which event such Bond
shall bear interest from December 14, 2016, 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 shall be paid initially on
March 1, 2017, and thereafter, semiannually on March 1 and September 1 of each year, until the principal sum is paid. Interest on each
Bond is 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 (15th) fifteenth day (whether or not a day on which the Paying Agent is open for business) next
preceding the applicable interest payment date (the “Record Date”), on the registration books maintained by the Paying Agent,
irrespective of any transfer or exchange of the 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 the 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 owner of such Bond not less
than ten (10) days preceding such special record date.
If the date for payment of the principal of, premium, if any, or interest on such Bond shall be Saturday, Sunday, legal holiday or on
a day on which banking institutions in the municipality where the principal corporate trust office of the Paying Agent is located are
authorized by law or executive order to close, then the date of such payment shall be the next succeeding day which is not a Saturday,
Sunday, legal holiday or on a day on which such banking institutions are authorized to close (a “Business Day”), and payment on such
subsequent Business Day 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,” Bonds are transferable or exchangeable by
the registered owners thereof upon surrender of Bonds to the Paying Agent, at its principal corporate trust office duly endorsed by, or
accompanied by a written instrument or instruments of transfer in form and with guaranty of signature satisfactory to the Paying Agent,
duly executed by the registered owner of such Bond or his duly authorized agent or legal representative. The Paying Agent shall enter
any transfer of ownership of 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 maturity 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 any 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.
_____________________
*Estimated, subject to change
3
The School District and the Paying Agent shall not be required to issue, or register the transfer or exchange of, any Bond during the
period beginning at the opening of business on any Record Date for interest payments and ending at the close of business on such Interest
Payment Date. Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same
maturity and interest rate.
Security
The Bonds will be general obligations of the School District, payable from its tax and other general revenues. The School District
has covenanted 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 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 taxing power, which taxing power presently includes the power to levy ad valorem taxes on all taxable property
within the School District, within the limits provided by law (See “SCHOOL DISTRICT FINANCES” and “TAXING POWERS
AND LIMITS” herein). The Act presently provides for enforcement of debt service payments as hereinafter described (see
“DEFAULTS AND REMEDIES” 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 “Commonwealth Enforcement of Debt Service Payments” herein).
Commonwealth Enforcement of Debt Service Payments
Section 633 of the Pennsylvania Public School Code of 1949, as amended by Act 150 of 1975, and as further amended and
supplemented (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 on 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 Commonwealth 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 depositary 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.
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. There is no assurance that any payment pursuant to Section 633 will be made by the date such payments are due to
Bondholders. Enforcement may also be limited by bankruptcy, insolvency, or other laws or equitable principles affecting the
enforcement of creditors’ rights generally. But see “Pennsylvania Budget Adoption”.
Pennsylvania Budget Adoption
Over the past several years the Commonwealth of Pennsylvania has, from time to time, started its fiscal year without a fully
adopted state budget. Most recently, in the state’s 2015-16 fiscal year, a final budget was not enacted until 270 days following the
beginning of the fiscal year on March 27, 2016 when the Governor failed to sign or veto the state budget that was adopted by the General
Assembly on March 17, 2016.
For the current 2016-17 fiscal year, the state budget became law, known as Act 16A of 2016, on July 12, 2016 when the Governor
failed to sign or veto the state budget that was adopted by the General Assembly on July 1, 2016. On July 13, 2016, the General
Assembly adopted and Governor signed into law additional tax and revenue package, known as Act 85 of 2016, that was needed to
balance the 2016-17 state budget.
During a state budget impasse, school districts in Pennsylvania cannot be certain that state subsidies and revenues owed them from
the Commonwealth will become available. This includes many of the major state subsidies, and overall revenues, that a Pennsylvania
school district receives including basic education funding, special education funding, PlanCon reimbursements, and certain block grants,
among many others. Future budget impasses may affect the timeliness or amount of payments by the Commonwealth under the
withholding provisions of Section 633 of the Public School Code.
Sinking Fund
A sinking fund for the payment of debt service on the Bonds, designated “Clearfield Area School District, Series A of 2016 Bonds
Sinking Fund” (the “Sinking Fund”), has been created under the Resolution and is 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 so that on each payment date the Sinking Fund will contain an amount which, together with any other fund
available therein, is sufficient to pay, in full, interest and/or principal then due on the Bonds.
4
The Sinking Fund shall be held by the Paying Agent, as sinking fund depository, and invested by the Paying Agent in such
securities or shall be deposited in such funds or accounts as are authorized by the Debt Act, 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.
BOOK-ENTRY ONLY SYSTEM
The information in this section has been obtained from materials provided by DTC for such purpose. The School District
(herein referred to as the “Issuer”) and the Underwriter do not guaranty the accuracy or completeness of such information, and such
information is not to be construed as a representation of the School District or the Underwriter.
The Depository Trust Company (“DTC”), New York, NY, will act as bonds depository for the bonds (the “Bonds”). The Bonds
will be issued as fully-registered 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 Bond certificate will be issued for each maturity of the Bonds,
each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a
“banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System. a “clearing
corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of
U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that
DTC's participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of
sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between
Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both
U.S. and non-U.S. Bonds 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. Bonds
brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor's rating of AA+. The DTC Rules
applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the
Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase.
Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in 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 Bonds may wish to take certain steps to
augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and
proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee
holding the Bonds for their benefit bas 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 a series and maturity are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct Participant in such series and maturity to be redeemed.
5
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a
Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, interest and redemption 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 Agent, on payable date in accordance with their respective holdings shown on DTC's
records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case
with bonds held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such
Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, interest and redemption payments on the Bonds to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is the responsibility of Issuer or 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
Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be
printed and delivered.
Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository).
In that event, Bond certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes
to be reliable, but Issuer takes no responsibility for the accuracy thereof.
NEITHER THE ISSUER NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY
DTC PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1)
THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT
PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT
DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE
BONDS; (4) THE DELIVERY TO ANY BENEFICIAL OWNER BY DTC OR ANY DTC PARTICIPANT OR INDIRECT
PARTICIPANT OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE
GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT
OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER.
The Issuer and the Paying Agent cannot give any assurances that DTC or the Participants will distribute payments of the
principal or redemption price of and interest on the Bonds paid to DTC or its nominee, as the registered owner of the Bonds, or any
redemption or other notices, to the Beneficial Owners or that they will do so on a timely basis, or that DTC will serve and act in the
manner described in this Preliminary Official Statement.
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6
REDEMPTION OF BONDS
Mandatory Redemption
Bidders may elect to structure the issue to include term bonds, which term bonds, if selected by the bidder, will be subject to
mandatory redemption prior to maturity, in the years and amounts as shown in the Invitation to Bid, upon payment of the principal
amount of Bonds to be redeemed, together with accrued interest to the date fixed for redemption, or upon maturity, as applicable. Bonds
to be redeemed shall be selected by lot by the Paying Agent.
In lieu of such Mandatory Redemption, the Paying Agent, on behalf of the School District, may purchase from money in the
Sinking Fund, at a price not to exceed the principal amount plus accrued interest, or the School District may tender to the Paying Agent,
all or part of the Bonds subject to being drawn for redemption in any such year.
Optional Redemption
The Bonds stated to mature on or after September 1, 2022 shall be subject to redemption prior to maturity, at the option of the
School District, as a whole, or from time to time, in part (and if in part, in any order of maturity as selected by the School District and
within a maturity by lot), on March 1, 2022, or on any date thereafter, in either case upon payment of a redemption price of 100% of the
principal amount of such Bonds, together with accrued interest to the redemption date.
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)
days 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. Any notice of redemption of Bonds may state that the
redemption is conditioned upon the deposit of sufficient funds prior to the redemption date. If sufficient funds are not received, such
notice of redemption shall be of no effect.
If at the 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, 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 of a series 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 Bonds of authorized denominations in an aggregate principal amount equal to
the unredeemed portion of the principal amount thereof.
If the redemption date for 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 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.
7
THE SCHOOL DISTRICT
Introduction
The Clearfield Area School District, Clearfield County, Pennsylvania (the “School District”) is comprised of the Borough of
Clearfield and the Townships of Bradford, Covington, Girard, Goshen, Knox, Lawrence and Pine (collectively, the “Component
Municipalities”). The School District covers approximately 365 square miles with Cameron and Elk Counties to its north and Coopers
and Karthaus Townships to its west.
Administration
The School District is governed by a nine member Board of Directors (the “School Board”), elected for four-year terms. The
Superintendent is the chief administrative officer of the School District, with overall responsibility for all aspects of operations, including
education and finances. The Director of Business Affairs is responsible for budget and financial operations. Both of these officials are
appointed by the School Board.
School Facilities
The School District operates one elementary school and one junior-senior school, as shown on the following table.
TABLE 1
CLEARFIELD AREA SCHOOL DISTRICT FACILITIES
Original
Addition/
Rated
Construction
Renovation
Pupil
2016-17
Building
Date
Date(s)
Grades
Capacity
Enrollment
Elementary:
Centre Elementary .................
1962
2008
(1)
Clearfield Elementary ...........
1996
1996
K-6
1,831
1,218
Girard/Goshen Elementary ....
2001
-
(2)
Elementary/Secondary:
Clearfield Middle School ......
1956
2008
(3)
Secondary:
Clearfield Junior-Senior School
1975
-
7-12
1,792
1,101
(1)Building is currently being leased to a third party with a small portion of the building being used for storage by the District. (2)Building is currently vacant and the District is attempting to sell the property. (3)Building is currently vacant and the District is soliciting bids for its demolition.
Source: School District officials.
Enrollment Trends
The following Table 2 presents recent trends in school enrollment and projections of enrollment for the next five years, as prepared
by School District officials.
TABLE 2
CLEARFIELD AREA SCHOOL DISTRICT ENROLLMENT TRENDS
Actual Enrollments
Projected Enrollments
School
School
Year Elementary Secondary Total
Year Elementary Secondary Total
2012-13 1,148 1,151 2,299
2017-18 1,210 961 2,171
2013-14 1,165 1,135 2,300
2018-19 1,212 979 2,191
2014-15 1,190 1,073 2,263
2019-20 1,019 1,036 2,055
2015-16 1,156 1,076 2,232
2020-21 983 1,035 2,018
2016-17 1,208 1,088 2,296
2021-22 936 1,051 1,987
Source: School District officials. Enrollments include special education students.
8
SCHOOL DISTRICT FINANCES
Introduction
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 the Director of Business Affairs and submitted to the School Board for
approval prior to the beginning of the fiscal year on July 1.
Financial Reporting
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 Walter Hopkins & Company, LLP, serves as School District auditor.
Budgeting Process as modified by Act 1 of 2006 (Taxpayer Relief Act) as amended by Act No. 25 of 2011
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, 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 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 “The Taxpayer
Relief Act (Act 1 of 2006)” 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
“The Taxpayer Relief Act (Act 1 of 2006)” 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.
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9
Summary and Discussion of Financial Results
A summary of the General Fund balance sheet and changes in fund balances is presented in Tables 3 and 4 which follow. The
budget, as adopted June 27, 2016, budgeted revenues of $35,158,282 and expenditures of $39,837,184, which includes a budgetary
reserve of $200,000.
Table 5 shows audited revenues and expenditures for the past four years, estimated 2015-16, and the budget for 2016-17.
TABLE 3
CLEARFIELD AREA SCHOOL DISTRICT
SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET
2012
2013
2014
2015
ASSETS
Cash and Cash Equivalents .................
$9,733,060
$11,019,418
$13,727,047
$9,415,849
Investments .........................................
0
0
0
5,036,337
Taxes Receivable ................................
2,045,046
2,003,533
2,136,338
2,155,431
Due from Other Funds ........................
298,140
1,034,323
0
0
Due from Other Governmental Funds .
528,350
535,338
406,449
445,550
State Revenue Receivable ...................
311,720
425,484
561,970
781,375
Federal Revenue Receivable ...............
701,350
84,408
109,357
301,914
Other Receivables ...............................
560,082
410,783
485,867
136,112
Prepaid Expenses ................................
10,212
0
0
0
TOTAL ASSETS
$14,187,960
$15,513,287
$17,427,028
$18,272,568
LIABILITIES
Due to Other Funds .............................
$2,182,325
$250,000
$1,921,078
$181,029
Due to Other Governments .................
0
0
0
0
Accounts Payable ................................
689,480
456,520
595,975
646,480
Accrued Salaries and Benefits .............
1,618,659
1,719,896
1,569,676
1,904,202
Payroll Deductions and Withholdings .
578,622
648,531
835,222
1,616,496
Deferred Revenues ..............................
2,045,046
2,076,058
0
0
Unearned Revenues .............................
0
0
0
8,117
TOTAL LIABILITIES .....................
$7,114,132
$5,151,005
$4,921,951
$4,356,324
Deferred Inflows of Resources ...........
$0
$0
$2,142,795
$1,720,272
FUND EQUITIES
Restricted Fund Balance .....................
$1,914,030
$2,209,568
$2,815,136
$2,906,756
Committed Fund Balance ....................
2,809,144
4,300,659
3,339,573
2,037,916
Assigned Fund Balance .......................
0
0
400,663
402,188
Unassigned Fund Balance ...................
2,350,654
3,852,055
3,806,910
6,849,112
TOTAL FUND EQUITIES ................
$7,073,828
$10,362,282
$10,362,282
$12,195,972
TOTAL LIABILITIES
AND FUND EQUITIES ....................
$14,187,960
$15,513,287
$17,427,028
$18,272,568
Source: School District Annual Financial Reports.
10
TABLE 4
CLEARFIELD AREA SCHOOL DISTRICT GENERAL FUND
SUMMARY OF CHANGES IN FUND BALANCE*
Actual
Estimated
Budgeted
2012
2013
2014
2015
2016 (1)
2017 (2)
Beginning Fund Balance ................
$6,746,796
$7,073,828
$10,362,282
$10,362,282
$12,195,972
$10,823,288
Revenues over (under) Expenditure..
327,032
3,288,454
0
1,833,690
(1,372,684)
(4,678,902)
Other .................................................
0
0
0
0
0
0
Ending Fund Balance........................
$7,073,828
$10,362,282
$10,362,282
$12,195,972
$10,823,288
$6,144,386
*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budget, as adopted June 27, 2016.
Source: School District Annual Financial Reports, School District officials, and Budget.
Revenue
The School District received an estimated $35,141,162 of revenue in 2015-16 and has budgeted revenue of $35,158,282 in 2016-
17. Local sources have decreased as a share of the total revenue in the past five years, from 43.3 percent in 2011-12 to an estimated 43.1
percent in 2015-16. Revenue from State sources has increased as a share of the total revenue in the past five years from 52.1 percent in
2011-12 to an estimated 53.7 percent in 2015-16. Federal sources revenue has decreased as a share of total revenue in the past five years
from 4.5 percent in 2011-12 to an estimated 2.8 percent in 2015-16.
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11
TABLE 5
CLEARFIELD AREA SCHOOL DISTRICT
SUMMARY OF SCHOOL DISTRICT GENERAL FUND
REVENUES*
(Years Ending June 30)
REVENUE: Actual Estimated Budget
Local Sources: 2012
2013
2014
2015
2016
(1)
2017
(2)
Real Estate ........................................................................ $10,743,197
$10,876,077
$11,097,120
$11,228,607
$11,223,819
$11,232,710
Total Act 511 Taxes .......................................................... 1,551,123
1,985,875
1,702,312
1,737,055
1,606,859
1,494,000
Public Utility Taxes ........................................................... 16,398
16,859
17,072
17,699
16,100
16,000
Payment in Lieu of Taxes .................................................. 104,832
104,732
105,515
106,867
107,381
106,000
Delinquent Taxes .............................................................. 1,137,655
1,118,093
1,036,711
1,054,773
975,000
975,000
Earnings from Investments ................................................ 108,392
77,723
65,856
88,761
65,000
65,000
Rev. from Student/LEA Activities .................................... 41,941
56,570
50,304
45,919
50,600
43,000
Federal Rev. Rec'd from Other PA Schools ....................... 528,351
0
8,472
0
0
0
Federal IDEA Pass Through Revenue/Intermediary Sources 53,045
464,887
406,449
445,550
416,441
400,000
Rentals .............................................................................. 10,006
2,888
2,388
2,200
0
1,000
Contributions & Donations-Private Sources ...................... 5,739
74,600
24,213
6,350
2,100
0
Tuition .............................................................................. 16,307
6,127
9,922
19,260
3,000
67,000
Receipts from Other LEAS in PA – Education .................. 63,445
69,102
66,346
63,502
67,381
0
Refunds of Prior Years' Expenditures ................................ 121,986
191,665
118,664
115,932
153,817
0
Other Sources .................................................................... 14,289
9,610
172,728
435,814
440,688
12,500
Total Local Sources .......................................................... $14,516,705
$15,054,807
$14,884,070
$15,368,290
$15,128,186
$14,412,210
State Sources:
Instructional Subsidy ......................................................... $11,891,645
$11,891,170
$12,062,264
$12,062,264
$12,242,333
$13,004,137
Charter Schools ................................................................. 0
0
0
0
0
29,000
Tuition - Orphans & Children Placed in Priv. Homes....... 37,934
46,609
38,570
20,358
20,000
0
Vocational Education ........................................................ 64,032
32,388
12,440
18,051
10,473
13,965
Driver Ed ........................................................................... 2,870
2,170
2,275
0
0
0
Special Education .............................................................. 1,601,895
1,601,895
1,601,909
1,631,996
1,671,868
1,763,227
Transportation ................................................................... 1,123,507
1,203,945
1,278,086
1,241,786
1,200,000
1,250,000
Rentals and Sinking Fund Payments ................................. 283,242
210,130
95,998
96,155
90,000
90,000
Health Services ................................................................. 48,272
47,796
46,960
46,275
45,686
42,000
State Property Tax Reduction Allocation .......................... 860,082
860,049
860,188
860,400
860,644
861,207
Ready to Learn Block Grant .............................................. 0
0
0
381,448
471,734
0
PA Accountability Grant ................................................... 215,325
215,324
215,324
0
0
0
Revenue for Social Security .............................................. 581,914
574,887
575,624
576,930
585,509
631,625
Revenue for Retirement..................................................... 731,646
1,013,996
1,419,723
1,767,831
1,672,386
2,050,615
Other Sources .................................................................... 5,000
0
0
0
0
0
Total State Sources ........................................................... $17,447,364
$17,700,359
$18,209,362
$18,703,493
$18,870,633
$19,735,776
Federal Sources:
Total Federal Sources ...................................................... $1,517,825
$1,159,964
$1,307,947
$1,056,219
$977,401
$1,010,296
Other Sources:
Total Other Sources.......................................................... $8,961
$26,573
$37,538
$3,646
$164,942
$0
TOTAL REVENUE .......................................................... $33,490,855
$33,941,703
$34,438,917
$35,131,647
$35,141,162
$35,158,282
*Totals may not add due to rounding. (1)Estimated, subject to change and final audit.
(2)Budget, as adopted June 27, 2016. Source: School District Annual Financial Reports, School District officials and Budget.
12
TABLE 5
(cont.)
CLEARFIELD AREA SCHOOL DISTRICT
SUMMARY OF SCHOOL DISTRICT GENERAL FUND
EXPENDITURES*
(Years Ending June 30)
Actual Estimated Budget
2012
2013
2014
2015
2016
(1)
2017
(2)
EXPENDITURES:
Instruction ......................................................... $17,812,816
$16,906,913
$18,311,545
$18,867,509
$20,702,062
$22,892,326
Pupil Personnel ................................................. 905,541
937,275
958,820
972,283
1,048,624
1,131,312
Instructional Staff ............................................. 1,256,605
1,132,797
1,279,810
1,151,065
1,379,583
1,459,085
Administration .................................................. 1,745,650
1,766,701
1,760,002
1,772,932
1,949,457
1,807,242
Pupil Health ...................................................... 479,311
484,202
510,514
368,736
458,163
459,274
Business ............................................................ 375,720
342,712
372,676
396,721
484,591
742,394
Operation and Maintenance of Plant Services ... 2,820,963
2,745,705
3,098,339
2,815,240
2,855,864
3,490,564
Student Transportation ...................................... 1,673,901
1,853,416
1,852,186
2,000,007
2,321,887
2,330,721
Central .............................................................. 1,244,135
1,279,889
1,331,837
1,288,213
1,399,376
1,342,877
Other Support Services ..................................... 0
0
0
0
0
2,500
Operation of Noninstructional Services ............ 518,147
543,624
579,552
709,317
756,364
814,009
Fac. Acq., Constr. & Improv. ............................ 35,466
0
375,246
0
0
0
Refunds of Prior Years' Receipts ...................... 72,918
32,726
34,268
53,536
1,288
0
Debt Service ..................................................... 2,040,325
2,113,898
2,375,103
2,902,399
2,906,587
2,914,880
Fund Transfers .................................................. 2,182,325
513,393
1,599,019
0
250,000
250,000
Budgetary Reserve ............................................ 0
0
0
0
0
200,000
TOTAL EXPENDITURES .............................. $33,163,823
$30,653,249
$34,438,917
$33,297,958
$36,513,846
$39,837,184
SURPLUS OF REVENUES OVER
(UNDER) EXPENDITURES........................... $327,032
$3,288,454
$0
$1,833,690
($1,372,684)
($4,678,902)
*Totals may not add due to rounding. (1)Estimated, subject to change and final audit.
(2)Budget, as adopted June 27, 2016.
Source: School District Annual Financial Reports, School District officials and Budget.
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13
TAXING POWERS AND LIMITS
In General
Subject to certain limitations imposed by the Taxpayer Relief Act, Act No. 1 of the Special Session of 2006, as amended (see “The
Taxpayer Relief Act (Act 1 of 2006)” herein), the School District is empowered by the School Code and other statutes to levy the following
taxes:
1. A basic annual tax on all real 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 unlimited ad valorem tax on the property taxable for school purposes to provide funds:
a. for minimum salaries and increments of the teaching and supervisory staff;
b. to pay rentals due any municipality authority or non-profit corporation or due the State Public School Building
Authority;
c. to pay interest and principal on any indebtedness incurred pursuant to the Local Government Unit Debt Act, or any
prior or subsequent act governing the incurrence of indebtedness of the school district; and
d. to pay for the amortization of a bond or note issue which provided a school building prior to the first Monday of July,
1959.
3. An annual per capita tax on each resident or inhabitant over 18 years of age of not more than $5.00.
4. 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.
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14
The Taxpayer Relief Act (Act 1 of 2006)
Under Pennsylvania Act No. 1 of the Special Session of 2006, as amended by Act No. 25 of 2011 (“The Taxpayer Tax Relief Act”
or “Act 1”), a school district may not, in fiscal year 2007-2008 or in any subsequent fiscal year, levy any tax for the support of the public
schools which was not levied in the 2006-2007 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 summarized below is applicable and the use of such exception is approved by the Pennsylvania Department of
Education (PDE):
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 Act 1 Index applicable to the School District in the current and prior fiscal years are as follows:
Fiscal Year Index
2012-13 2.4%
2013-14 2.4%
2014-15 3.0%
2015-16 2.7%
2016-17 3.4%
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.
Status of the Bonds under Act 1
The Bonds described in this Preliminary Official Statement do not represent debt that was approved (“incurred”) by the board of
school directors prior to the effective date of Act. Therefore the board of school directors may not apply to the Pennsylvania Department
of Education (PDE) to use the Act 1 referendum exception for previously incurred debt if a tax increase greater than the Index is needed
to provide for payment of principal or interest on the Bonds. The School District, however, has included sufficient new millage in its
current year budget to cover the full amount of the debt service on the Bonds without exceeding the Act 1 Index (although the actual tax
increase may have exceeded the Index as a result of the application of other approved exceptions to the Index).
15
Limitation on Estimated Ending Unreserved Undesignated Fund Balances
Pennsylvania Act No. 2003-48 (enacted December 23, 2003) prohibits a school district from increasing real property taxes for the
school year 2005-2006 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 not more 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 $11,999,999 12.0%
Between $12,000,000 and $12,999,999 11.5%
Between 13,000,000 and $13,999,999 11.0%
Between $14,000,000 and $14,999,999 10.5%
Between $15,000,000 and $15,999,999 10.0%
Between $16,000,000 and $16,999,999 9.5%
Between $17,000,000 and $17,999,999 9.0%
Between $18,000,000 and $18,999,999 8.5%
Greater than or equal to $19,000,000 8.0%
“Estimated ending unreserved fund balance” is defined in Act 2003-48 as that portion of the fund balance which is appropriable for
expenditure or not legally or otherwise segregated for a specific or tentative future use, projected for the close of the school year for which a
school district’s budget was adopted and held in the general fund accounts of the school district.
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16
Tax Rates
Table 6 shows the recent trend of tax rates levied by the School District. Table 7 shows the comparative trend of real property tax
rates for the School District, Clearfield County, one borough and seven townships.
TABLE 6
CLEARFIELD AREA SCHOOL DISTRICT TAX RATES
Real Estate Wage Local Services
Real Estate
Transfer
and Income
Tax(1)
(mills)
(%)
(%)
($)
2012-13 92.84
0.5
0.5
10.00
2013-14 92.84
0.5
0.5
10.00
2014-15 92.84
0.5
0.5
10.00
2015-16 92.84
0.5
0.5
10.00
2016-17 94.84 0.5 0.5 10.00
(1)Subject to sharing with municipalities that levy the tax.
Source: Department of Community and Economic Development (Municipal Statistics) and Budget.
TABLE 7
CLEARFIELD AREA SCHOOL DISTRICT
COMPARATIVE REAL PROPERTY TAX RATES
(Mills on Assessed Value)
2012 2013 2014 2015 2016
School District .................................................. 92.84 92.84 92.84 92.84 94.84
Bradford Township ........................................... 6.00 6.00 7.00 8.50 8.50
Clearfield Borough ............................................ 25.00 25.00 25.00 25.00 25.00
Covington Township ......................................... 4.50 4.50 4.50 4.50 4.50
Girard Township ............................................... 3.40 3.40 3.40 3.40 3.40
Goshen Township ............................................. 4.50 4.50 4.50 4.50 4.50
Knox Township ................................................. 1.90 1.90 1.90 1.90 1.90
Lawrence Township .......................................... 16.00 16.00 16.00 18.00 18.00
Pine Township .................................................. 3.10 3.10 0.00 0.00 0.00
Clearfield County .............................................. 18.50 18.50 18.50 18.50 19.50
Source: Department of Community and Economic Development- Municipal Statistics
Real Property Tax
The real property tax (excluding delinquent collections) produced an estimated $11,223,819 in 2015-16, approximately 31.9
percent of total revenue. The tax is levied on July 1 of each year. Taxpayers who remit within 60 days receive a 2 percent discount.
After 60 days and before 120 days taxpayers pay face value. After 120 days and before 180 days taxpayers 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. The last countywide assessment in Clearfield County was in 1989.
17
TABLE 8
CLEARFIELD AREA SCHOOL DISTRICT
REAL PROPERTY ASSESSMENT DATA
Market Assessed
Year Value Value Ratio
2011-12 ...................................................................... $735,196,250 $138,684,005 18.86%
2012-13 ...................................................................... 742,393,719 139,259,025 18.76%
2013-14 ...................................................................... 755,140,963 142,058,289 18.81%
2014-15 ...................................................................... 768,016,287 142,201,010 18.52%
2015-16 ...................................................................... 774,749,303 143,021,998 18.46%
Compound Average Annual Percentage Change 1.05% n/a
Source: Pennsylvania State Tax Equalization Board (STEB).
TABLE 9
CLEARFIELD AREA SCHOOL DISTRICT
REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY
2014 2014 2015 2015
Market Assessed Market Assessed
Value Value Value Value
Clearfield Area School District .................. $768,016,287 $142,201,010 $774,749,303 $143,021,998
Bradford Township .................................... 125,609,235 25,486,319 126,605,071 25,643,867
Clearfield Borough ..................................... 215,671,686 39,535,528 216,781,183 39,854,092
Covington Township .................................. 30,061,997 4,063,864 30,681,032 4,144,786
Girard Township ........................................ 27,050,429 4,306,934 27,712,772 4,382,768
Goshen Township ...................................... 21,927,059 3,238,140 22,388,471 3,295,302
Knox Township .......................................... 21,750,605 4,043,223 22,206,535 4,120,609
Lawrence Township ................................... 318,163,900 60,498,165 320,636,877 60,554,856
Pine Township ........................................... 7,781,377 1,028,837 7,737,362 1,025,718
Clearfield County ....................................... 3,088,087,660 547,838,005 3,126,186,480 550,861,165
Source: Pennsylvania State Tax Equalization Board (STEB).
TABLE 10
CLEARFIELD AREA SCHOOL DISTRICT
ASSESSMENT BY LAND USE
2011 2012 2013 2014 2015
Residential...................... $74,324,342
$74,753,339
$75,163,881
$75,591,665
$73,637,051
Trailers ........................... 1,128,211
1,163,918
1,164,493
1,206,735
4,161,675
Lots ................................ 1,850,236
1,846,970
1,849,989
1,867,023
1,750,429
Industrial ........................ 8,499,082
8,634,542
9,672,475
9,743,020
9,815,975
Commercial .................... 40,100,357
39,814,853
40,950,771
40,512,580
40,832,652
Agriculture ..................... 9,101,054
9,266,755
9,420,451
9,450,412
8,813,013
Land ............................... 2,867,998
2,948,444
2,977,881
2,975,965
3,211,779
Mineral ........................... 812,725
830,204
858,348
853,610
799,424
Total ............................... $138,684,005
$139,259,025
$142,058,289
$142,201,010
$143,021,998
Source: Pennsylvania State Tax Equalization Board (STEB).
18
TABLE 11
CLEARFIELD AREA SCHOOL DISTRICT
REAL PROPERTY TAX COLLECTION DATA
Current Year Total
Collections
Total
Collections
Current
as Percent
Current
as Percent
Year
of Total
Plus
of Total
Assessed
Collections
Adjusted
Delinquent
Adjusted
Year Value
Levy
(July-June)
Flat Billing
Collections(1)
Flat Billing
2011-12 $138,573,355
$11,987,053
$10,743,197
89.62%
$11,880,852
99.11%
2012-13 139,451,987
12,042,683
10,876,077
90.31%
11,994,170
99.60%
2013-14 141,947,639
12,263,971
11,097,120
90.49%
12,133,831
98.94%
2014-15 142,143,935
12,320,912
11,228,607
91.13%
12,283,380
99.70%
2015-16 (est.) 142,089,935 12,370,061 11,220,102 90.70% 12,250,876 99.04%
(1)Delinquent real property tax collection.
Source: School District officials.
The ten largest real property taxpayers, together with 2016-17 assessed values are shown on Table 12 which follows. The
aggregate assessed value of these ten taxpayers totals approximately 13.8 percent total assessed value.
TABLE 12
CLEARFIELD AREA SCHOOL DISTRICT
TEN LARGEST REAL PROPERTY TAXPAYERS
2016-17
Assessed
Owner
Property
Value
Wal-Mart Stores, Inc
Distribution Warehouse
$6,002,400
Pennsylvania Grain Processing
Ethanol Plant
5,040,925
Shawville Lessor Genco LLC
Power Plant
1,760,000
Appalachian Wood Products, Inc
Wood Products Manufacturer
1,381,675
Wal-Mart Stores, Inc
Retail Store
1,207,318
Lowe's Home Centers, Inc
Retail Home Improvement
1,136,625
CNB Bank
Financial Institution
894,675
ZRAJ Clearfield LTD Partnership
Mall
825,008
EOG Resources
Gas Drilling
744,250
Mountain Laurel RE LP
Nursing Home
744,250
$19,737,126
Source: School District officials.
Other Taxes
Under Act 511, the School District collected an estimated $1,606,859 in other taxes in 2015-16. Its limit under Act 511, equal to
12 mills on the estimated market value of real property, was approximately $9,296,992. Among the Act 511 taxes collected are:
Wage & Income Tax. A tax of 0.5 percent is levied on the earned income of residents. In 2015-16 the School District’s share of
the current collected portion of this tax yielded an estimated $1,416,519 or 4.0 percent of total revenue.
Local Services Tax (formerly Emergency and Municipal Services Tax which replaced Occupational Privilege Tax.) A tax of
$10.00 is levied on each person with an occupation (subject to sharing with municipalities that levy the tax). In 2015-16 the collected
portion of this tax yielded an estimated $45,100 or less than one percent of total revenue.
Real Estate Transfer. The School District levies a tax of 0.5 percent of the value of real estate transfers. In 2015-16 the collected
portion of this tax yielded an estimated $145,240 or less than one percent of total revenue.
19
COMMONWEALTH AID TO SCHOOL DISTRICTS
General
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. Invigorating
The largest subsidy, the 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 are also received by the school district.
Current Lack of State Appropriations for Debt Service Subsidies
Commonwealth law presently provides that the School District will receive, subject to state legislative appropriation,
reimbursement from the Commonwealth for a portion of debt service paid on the Bonds following final approval by the Pennsylvania
Department of Education (“PDE”). Commonwealth reimbursement is calculated based on the “Reimbursable Percentage” assigned to the
Bonds by the PDE and the School District's permanent Capital Account Reimbursement Fraction (“CARF”) currently 55.18% or the
wealth based Market Value Aid Ratio (“MVAR”) currently 66.46%, whichever is higher. The Reimbursable Percentage is determined
through a process known as the “Planning and Construction Workbook” or “PlanCon”.
Based on the current PlanCon program, School District officials have estimated that the Reimbursable Percentage of the Bonds will
be 21.20% (there has been no determination by the PDE). The School District's MVAR (which is higher than the CARF) is 66.46%. The
product of these two factors is 14.09%, which is the estimated percentage of debt service which may be reimbursed by the
Commonwealth, subject to annual appropriation. In future years, this percentage may change as the School District’s MVAR changes, or
as a result of future legislation regarding changes to, or even elimination of, the PlanCon program.
On April 14, 2016 Pennsylvania House Bill 1589, that included an authorization for the Commonwealth to issue bonds to fully
fund its PlanCon appropriation for the 2015-16 fiscal year, became law when the Governor refused to sign the legislation. No such
borrowing was undertaken and there is no evidence that the 2015-16 PlanCon reimbursement due will be paid in time to be included in
the fiscal year 2016-17, or any other future fiscal years.
The Commonwealth enacted into law on July 12, 2016, its 2016-17 fiscal year budget which does not contain appropriations for
PlanCon reimbursements to any school districts in Pennsylvania through July 1, 2017.
Legislation has been introduced from time to time in the Pennsylvania legislature containing language that would revise or even
abolish the debt service reimbursement program for Pennsylvania school districts. As of the date hereof none of these proposals have
been signed into law. To the extent that any future legislation contains material changes to the PlanCon program as currently is
structured, the amount of PlanCon reimbursement to the School District may be positively or negatively affected, which could materially
impact the amount of local funds needed to be raised by the School District to pay debt service or its debt obligations.
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20
DEBT AND DEBT LIMITS
Debt Statement
Table 13 which follows shows the debt of the Clearfield Area School District as of October 25, 2016 including the issuance of the
Bonds.
TABLE 13
CLEARFIELD AREA SCHOOL DISTRICT
DEBT STATEMENT
(As of October 25, 2016)*
Gross
NONELECTORAL DEBT
Outstanding
General Obligation Bonds, Series A of 2016 (last maturity 2026) .................................................................
$7,160,000
General Obligation Bonds, Series of 2016 (last maturity 2038) ..................................................................... 9,470,000
General Obligation Bonds, Series of 2013 (last maturity 2038) .....................................................................
17,355,000
General Obligation Bonds, Series of 2012 (last maturity 2037) .....................................................................
9,810,000
General Obligation Note (SPSBA – QSCB), Series of 2010 (last maturity 2028)(1) ......................................
1,347,500
TOTAL NONELECTORAL DEBT ..............................................................................................................
$45,142,500
LEASE RENTAL DEBT
Guaranteed School Revenue Bonds, Series of 2011 (last maturity 2025)(2)(3) ................................................
$1,964,912
TOTAL LEASE RENTAL DEBT .................................................................................................................
$1,964,912
TOTAL PRINCIPAL OF DIRECT DEBT ...................................................................................................
$47,107,412
*Includes the estimated Bonds offered through this Preliminary Official Statement. Excludes the 2011 Bonds being refunded herein. (1)Qualified School Construction Bonds (“QSCB”), issued by the Pennsylvania State Public School Building Authority (“SPSBA”). (2)This is lease rental debt approved by the Pennsylvania Department of Community and Economic Development that constitutes the
School District’s guaranty of a portion of the Clearfield County Industrial Development Authority’s Guaranteed School Revenue Bonds,
Series of 2011, issued on December 15, 2011 in the aggregate principal amount of $7,760,000, on behalf of the Clearfield County Career
and Technology Center and applied by the Career Center toward the advance refunding, defeasance and redemption of certain prior
outstanding Career Center debt, a portion of which prior debt the School District had guaranteed. (3)On October 24, 2016, the School Board authorized its guaranty of a portion of debt to be issued by the State Public School Building
Authority the proceeds of which will currently refund this Series.
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21
Table 14 presents the overlapping indebtedness and debt ratios of the School District. After issuance of the Bonds, the principal of
direct debt of the School District will total $47,107,412. After adjustment for available funds and estimated State aid, the local effort of
direct debt will total $37,865,671.
TABLE 14
CLEARFIELD AREA SCHOOL DISTRICT
BONDED INDEBTEDNESS AND DEBT RATIOS*
(As of October 25, 2016)
Local Effort
or Net of
Available Funds
Gross
and Estimated
Outstanding
Commonwealth Aid(1)
DIRECT DEBT
Nonelectoral Debt ......................................................................................... $45,142,500
$35,900,759
Lease Rental Debt ......................................................................................... 1,964,912
1,964,912
TOTAL DIRECT DEBT .............................................................................. $47,107,412
$37,865,671
OVERLAPPING DEBT
Clearfield County, General Obligation(2) ...................................................... $115,411
$115,411
Municipal Debt ............................................................................................. 47,300,188
47,300,188
TOTAL OVERLAPPING DEBT ................................................................. $47,415,600
$47,415,600
TOTAL DIRECT AND OVERLAPPING DEBT ........................................ $94,523,012
$85,281,271
DEBT RATIOS
Per Capita (2010) .......................................................................................... $4,940.05
$4,457.05
Percent 2015-16 Assessed Value .................................................................. 66.09%
59.63%
Percent 2015-16 Market Value .................................................................... 12.20%
11.01%
*Includes the estimated Bonds offered through this Preliminary Official Statement. Excludes the 2011 Bonds being refunded herein. (1)Gives effect to current appropriations for payment of debt service and estimated future Commonwealth reimbursement on the Bonds
based on current Aid Ratio. See “COMMONWEALTH AID TO SCHOOL DISTRICTS”. (2)Pro rata 24.78 percent share of $465,696 estimated principal amount outstanding.
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22
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 2013-14 $ 34,305,381
Total Revenues for 2014-15 $ 35,031,846
Total Revenues for 2015-16 (estimated) $ 34,886,220
Total $104,223,446
Annual Arithmetic Average (Borrowing Base) $34,741,149
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 $78,167,585 $47,107,412 $31,060,173
*Includes the estimated principal amount of the Bonds described herein. Excludes the 2011 Bonds being refunded herein. Does not
reflect credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by
Commonwealth aid.
Debt Service Requirements
Table 15 presents the debt service requirements on the School District's outstanding general obligation and lease rental
indebtedness including debt service on the Bonds.
Table 16 presents data on the extent to which State Aid provides coverage for debt service and lease rental requirements.
The School District has never defaulted on the payment of debt service.
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23
TABLE 15
CLEARFIELD AREA SCHOOL DISTRICT
DEBT SERVICE REQUIREMENTS*
Other
Outstanding
Lease
General
Series
Rental
Obligation
A of 2016
Total
Year
Debt
Debt(1)
Principal
Interest
Subtotal
Requirements
2016-17
$409,693
$2,881,162
$3,290,854
2017-18
398,366
1,678,034
2,076,400
2018-19
394,933
1,970,364
2,365,296
2019-20
386,989
1,975,941
2,362,930
2020-21
380,736
1,980,869
2,361,605
2021-22
374,074
1,989,471
2,363,545
2022-23
367,001
1,995,524
2,362,525
2023-24
363,516
1,999,371
2,362,888
2024-25
355,419
2,002,464
2,357,883
2025-26
350,909
1,999,856
2,350,765
2026-27
2,001,549
2,001,549
2027-28
2,813,412
2,813,412
2028-29
2,840,654
2,840,654
2029-30
2,835,263
2,835,263
2030-31
2,837,591
2,837,591
2031-32
2,832,084
2,832,084
2032-33
2,838,452
2,838,452
2033-34
2,832,215
2,832,215
2034-35
2,832,638
2,832,638
2035-36
2,834,067
2,834,067
2036-37
2,836,991
2,836,991
2037-38 2,838,573 2,838,573
2038-39
2,224,330
2,224,330
Total
$3,781,635
$55,870,872
$59,652,507
*Totals may not add due to rounding. Excludes the debt service on the 2011 Bonds being refunded herein. (1)Includes QSCB debt service which is net of Federal Reimbursement Subsidy Rate of 4.830% as well as estimated sinking fund earnings
rate of 2.000%.
TABLE 16
CLEARFIELD AREA SCHOOL DISTRICT
COVERAGE OF DEBT SERVICE AND LEASE RENTAL
REQUIREMENTS BY STATE AID*
2015-16 (estimated) State Aid Received .............................................................................................................. $18,870,633
2015-16 (estimated) Debt Service Requirements ................................................................................................. 2,906,587
Maximum Future Debt Service Requirements after Issuance of Bonds ...............................................................
Coverage of 2015-16 (estimated) Debt Service Requirements ........................................................................... 6.49 times
Coverage of Maximum Future Debt Service Requirements after Issuance of Bonds............................................ times
*Assumes current State Aid Ratio. See “COMMONWEALTH AID TO SCHOOL DISTRICTS.”
24
Future Financing
The School District does not anticipate issuing additional new money long-term debt in in the next 3 years. If market conditions
are favorable, the School District may also refund portions of its outstanding general obligation bonds.
LABOR RELATIONS
School District Employees
There are presently 352 employees of the School District, including 186 teachers, 13 administrators, and 153 support personnel
including secretaries, custodial and maintenance staff, cafeteria staff, and teacher aides.
The School District's teachers are represented by the Clearfield Education Association, an affiliate of the Pennsylvania State
Education Association (PSEA), under a contract with the School District, which expires on June 30, 2019. Support staff (maintenance
staff and cafeteria workers) are represented by Clearfield Area Custodial, Maintenance, Cleaning and Food Service Technicians
Education Support Professionals, an affiliate of PSEA/NEA under a contract, which expires June 30, 2020. The Clearfield Area
Education Support Professionals Association, an affiliate of PSEA/NEA, under a contract, which expires June 30, 2018, represents
secretaries and teacher aides.
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(1) 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.
Beginning July 1, 1976, certain revisions were made in the pension program. The Retirement Board, previously under the
Department of Education of the Commonwealth, became an independent agency. However, the program is still guaranteed by the
Commonwealth. Currently, each party to the program contributes a fixed percentage of the employee's salary. Employees belonging to
the Public School Employees Retirement System (“PSERS”) prior to July 22, 1983 contribute 5.25% of their salary, and employees who
joined the PSERS on or after July 22, 1983 contribute 6.25% of their salary. On February 17, 2002, Governor Ridge signed Act 9 which
created a new membership class that sets the employee contribution rate at 7.50% of the employee’s salary for those employees hired on
or after July 1, 2001. Act 9 also provides 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, 1983. Act 120 of 2010 (“Act 120”) was passed by
the General Assembly on September 1 and signed by Governor Rendell on November 23, 2010. The benefit reductions contained in this
legislation will only impact individuals who become new members of PSERS on or after July 1, 2011. New members will have the
option of selecting one of 2 new classes. The members selecting 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%. Members selecting 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%.
The PSERS Board of Trustees certified an annual employer contribution rate of 25.84% for fiscal year 2015-16, which began on
July 1, 2015. The 25.84% employer contribution rate was composed of 0.84% for health insurance premium assistance and a pension rate
of 25.00%. The pension component of the rate was capped at a 4.50% increase from the previous year. This was the fifth year of
planned increases in the employer contribution rate under Act 120 of 2010 which were needed to raise the rate to the actuarially required
level. Based on projections, fiscal year 2015-16 would be the last fiscal year rate minimums and maximums would be in place. On
December 8, 2015 the Board of Trustees certified an annual employer contribution rate of 30.03% for fiscal year 2016-17, which
commenced July 1, 2016. The rate caps established under Act 120 of 2010 are no longer in effect. This year the increase in the pension
component of the rate was less than the 4.50% rate collar.
The School District and the Commonwealth are responsible for paying a portion of the employer’s share. School entities are
initially 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 for each paycheck and remitted quarterly. Recent School District payments have been as follows:
2011-12 .............................. $1,251,055
2012-13 .............................. 1,682,426
2013-14 .............................. 2,435,253
2014-15 .............................. 2,767,796
2015-16 (estimated) ............ 3,605,212
2016-17 (budgeted) ............ 4,569,203
The School District is current in all payments. The PSERS complete report is available on the PSERS website on the Internet:
www.psers.state.pa.us.
25
PSERS is also funded through investment earnings and mandatory member contributions. Investment earnings are the largest
source of funding for PSERS. For the most recent fiscal year ended June 30, 2015, PSERS’ investments added over $1.3 billion in
investment income (net of fees) to the fund. PSERS members contribute from 5.25% to 10.30% of payroll depending on their
membership class and when they joined PSERS. Members will contribute an average of 7.52% of their salary to fund their retirement
benefit in fiscal year 2016-17. Member contributions of approximately $1 billion are expected in fiscal year 2016-17.
In June 2012, the Government Accounting Standards Board (“GASB”) issued “Statement No. 68 Accounting and Financial
Reporting for Pensions – An Amendment of GASB Statement No 27.” The primary objective of this Statement is to improve accounting
and financial reporting by state and local governments for pensions. The new accounting standard will require the School District to
report in its government-wide financial statements its proportionate share of the new pension liability of the pension systems to which it
contributes. GASB 68 is effective for fiscal years beginning after June 15, 2014, which, in the case of the School District will begin with
fiscal year ending June 30, 2015. Please see the School District’s Audited Financial Statements for fiscal year ending June 30, 2015 in
Appendix D for the net effects of the implementation of GASB 68.
(1)Pennsylvania Sch. Boards Ass'n, Inc. v. Com., Pub. Sch. Employees' Ret. Bd., 580 Pa. 610, 612, 863 A.2d 432, 434 (2004).
Source: Pennsylvania School Board Association at www.PSBA.org and PSERS at www.PSERS.state.pa.us
Other Post-Employment Benefits (OPEB)
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 estimated net OPEB
Obligation for fiscal year ended June 30, 2015 was $1,553,711. The following tables show the Schedule of Funding Progress and
Schedule of Employer Contributions.
Unfunded
UAL as a
Actuarial
Actuarial
Accrued
Percentage
Valuation
Value of
Accrued
Liability
Funded
Covered
of Covered
Date
Assets
Liability
(UAL)
Ratio
Payroll
Payroll
July 1, 2014 $0 $9,636,000 $9,636,000 $0 $10,854,000 88.80%
July 1, 2012 0 6,421,000 6,421,000 0 14,341,000 44.80
July 1, 2010
0
7,961,400
7,961,400
0
15,677,000
50.80
July 1, 2008
0
6,260,600
6,260,600
0
15,543,000
40.30
Annual
Percentage of
Fiscal Year
OPEB
Annual OPEB Cost
Net OPEB
Ended
Cost
Contributed
Obligation
6/30/2015 $1,351,691 102.60% $1,553,711
6/30/2014
895,078
68.60
1,588,420
6/30/2013
875,238
72.10
1,307,142
6/30/2012
1,066,351
77.30
1,063,204
6/30/2011
1,040,706
71.20
821,053
For a full description of the School District’s OPEB plan, see Appendix D- Audited Financial Statements – Note 11.
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 said Bonds. Currently, there is no litigation pending or
threatened.
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, is the right of holders of the Bonds to recover the amount due by bringing an action in assumpsit
in the Court of Common Pleas. 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.
26
TAX MATTERS
Federal Tax Exemption
Bond Counsel is expected to issue its opinion that, under existing law, the interest on and accruals of original issue discount with
respect to the Bonds (a) are excluded from gross income for Federal income tax purposes and (b) are not items of tax preference within
the meaning of Section 57 of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of the federal alternative
minimum tax imposed by Section 55 of the Code on individuals and corporations; however, it should be noted: with respect to
corporations (as defined for federal income tax purposes), such interest and accruals are taken into account in determining adjusted
current earnings for the purpose of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations.
Accruals of original issue discount with respect to a Bond allocable to an owner of the Bond under a constant yield method of accrual (a)
are not included in gross income for federal income tax purposes, and (b) are added to such owner’s tax basis in the Bond for the purpose
of determining gain or loss for federal income tax purposes upon sale, exchange, redemption or other disposition of the Bond. The
opinions set forth in the preceding two sentences are subject to the condition that the Issuer comply with all requirements of the Code that
must be satisfied subsequent to the issuance of the Bonds in order that interest on and accruals of original issue discount with respect to
the Bonds be (or continue to be) excluded from gross income for federal income tax purposes. Failure to comply with such requirements
could cause the interest on and accruals of original issue discount with respect to the Bonds to be included in gross income retroactively
to the date of issuance of the Bonds. The Issuer has covenanted to comply with all such requirements. The Issuer has designated the
Bonds as Qualified Tax-Exempt Obligations within the meaning of Section 265(b)(3) of the Code. Bond Counsel expresses no opinion
regarding other federal tax consequences arising with respect to the Bonds.
The Issuer will issue its certificate to the effect that on the basis of the facts, estimates and circumstances in existence on the date of
delivery of the Bonds, it is not expected that proceeds of the Bonds will be used in a manner that would cause the Bonds to be or become
“arbitrage bonds” as described in Section 103(b)(2) and Section 148 of the Code, as contemplated by the United States Treasury
regulations relating to “arbitrage bonds.”
Pennsylvania Tax Exemption
Bond Counsel is also of the opinion that the Bonds are exempt from personal property taxes in Pennsylvania; and the interest on
the Bonds is exempt from Pennsylvania Corporate Net Income Tax and from personal income taxation by the Commonwealth of
Pennsylvania, or by any of its political subdivisions, under present statutory and case law.
Internal Revenue Code Covenants
The Code contains provisions relating to the tax-exempt status of interest on obligations issued by government entities which apply
to the Bonds. These provisions include, but are not limited to, requirements relating to the use and investment of the proceeds of the
Bonds and the rebate of certain investment earnings derived from such proceeds to the United States Treasury Department on a periodic
basis. These and other requirements of the Code must be met by the Issuer subsequent to the issuance and delivery of the Bonds in order
for interest thereon to be and remain exempt from federal income taxes. The Issuer has covenanted that it will make no use of the
proceeds of such issue which would cause the Bonds to be arbitrage bonds, and has further covenanted to comply with the rebate and
other requirements of Section 103 and 148 of the Code, and the regulations thereunder, during the term of such issue. Officers of the
Issuer will execute a certificate concerning the use of the Bonds in conformity with Section 103 and Section 141 through 150 of the Code
and the regulations thereunder.
Qualified Tax-Exempt Obligations
Under the Code, financial institutions will be denied 100% of their interest expenses deductions that are allocable, by formula, to
tax exempt obligations acquired after August 7, 1986; the former provisions of the Internal Revenue Code of 1954 with respect to a 20%
disallowance continues to apply with respect to tax-exempt obligations acquired on or before August 7, 1986. These provisions are
effective for tax years beginning after December 31, 1986.
The 20% disallowance rule applies in place of the 100% disallowance rule in the case of “qualified tax-exempt obligations” under
Section 265(b)(3) of the Code. The Issuer has designated the Bonds as Qualified Tax-Exempt Obligations within the meaning of Section
265(b)(3) of the Code. The Issuer reasonably anticipates that it, together with any subordinate entities, will not issue more than
$10,000,000, aggregate principal amount, of tax-exempt obligations during the calendar year 2013.
The Bonds described in this Preliminary Official Statement have been designated by the Issuer as “Qualified Tax-Exempt
Obligations” for purposes and effect contemplated by Section 265 of the Code (concerning expenses and interest relating to tax-
exempt income of certain financial institutions).
A financial institution purchasing or holding the Bonds may wish to consult its professional tax advisors to determine the effect on
the interest expense disallowance relating to tax-exempt obligations upon its federal income tax liability.
27
Federal Alternative Minimum Tax Calculations
Under the Code, the federal alternative minimum taxable income of a corporation is based in part upon the adjusted current
earnings of the corporation, which includes interest on and accruals of original issue discount with respect to the Bonds held by the
corporation, although such interest and accruals of original issue discount with respect to the Bonds may not be includable in gross
income for calculations of regular federal income tax liability.
A prospective corporate purchaser of the Bonds may wish to consult its professional tax advisors as to the potential impact upon its
income tax liability.
Taxable Social Security and Railroad Retirement Benefits Calculation
Interest on and accruals of original issue discount with respect to the Bonds are included in modified adjusted gross income in
determining the portion of Social Security or railroad retirement benefits to be included in an individual taxpayer's gross income for
federal income tax purposes.
A prospective purchaser of the Bonds who is receiving Social Security or railroad retirement benefits may wish to consult his or
her professional tax advisors as to the effect interest income derived from the Bonds may have upon his or her income tax liability.
Property and Casualty Insurance Company Income Taxes
Under the Code, a property and casualty insurance company, in any taxable year, must reduce its deduction for “losses incurred”
by a percentage of the tax-exempt interest received by such property and casualty insurance company during the taxable year.
In addition, a portion of the dividends received by a property and casualty insurer attributable to tax-exempt income is not
deductible by the insurer for federal income tax purposes.
The Code provides generally that these provisions are effective for tax years beginning after December 31, 1986, and with respect
to obligations acquired after August 7, 1986, but a property and casualty insurer should consult its professional tax advisors for a full
explanation of the effect of these provisions upon its income tax liability.
Tax on Excess Passive Net Income of S Corporation
An S Corporation may be subject to federal income taxation on passive investment income including interest on and accruals of
original issue discount with respect to the Bonds, if the S corporation has subchapter C earnings and profits at the close of the taxable
year and the S corporation's passive investment income exceeds 25% of its gross receipts for the taxable year.
A prospective purchaser of the Bonds which is an S Corporation should consult its professional tax advisors as to the effect of
interest income from the Bonds on its tax liability.
Branch Profits Tax
Interest on and accruals of original issue discount with respect to the Bonds held by a foreign corporation could be subject to a
branch profits tax imposed by Section 884 of the Code.
A prospective foreign corporate purchaser of the Bonds may wish to consult its professional tax advisors as to the impact of the
branch profits tax on its United States tax liability.
Interest Reporting Requirements
Under the Code, all taxpayers are required to report on their federal income tax returns the amount of interest received or accrued
during the year that is exempt from federal income tax. This provision applies to interest on all tax-exempt obligations including the
Bonds.
Market Discount
A tax-exempt bond such as a Bond if acquired by purchase, other than at original issuance, is a “market discount bond” if the bond
is purchased at a price less than its stated principal amount (or, in the case of a bond issued with original issue discount, its issue price
increased for accruals of original issue discount), with such difference being the amount of “market discount”. If a holder recognizes
gain on the disposition of a market discount bond (including by early redemption or gift), a portion of the gain (up to the amount of
market discount that accrued while the bond was held by such holder) will be treated as ordinary income and not as capital gain. For this
purpose, market discount accrues on a straight-line basis or, if elected by the holder, on a constant interest rate basis; the election, on a
bond-by-bond basis, is irrevocable once made.
28
The holder of a market discount bond may elect to include the market discount in income as taxable interest income as the market
discount accrues. The current inclusion election, once made, applies to all market discount obligations acquired by such holder on or
after the first day of the first taxable year in which the election applies, and may not be revoked without the permission of the Internal
Revenue Service. If the current inclusion election is made, the holder's tax basis in the market discount bond is increased by the amount
of market discount accruals included in income.
Original Issue Discount
The difference between the final offering price to the public of the Bonds maturing on _____ and (the “OID Bonds”) and the
maturity amount of such OID Bonds is treated as original issue discount.
Because of the possibility of transfers, redemption or other disposition prior to maturity, the Code provides rules for the accrual of
original issue discount on any tax-exempt obligation including any securities issued in the form of the Bonds. Original issue discount on
the OID Bonds is treated as accruing in the manner provided by the Code with respect to original issue discount on taxable securities,
except that the rules with respect to acquisition premium and de minimis original issue discount that apply to taxable securities will not
apply to tax-exempt securities. Generally, an appropriate portion (depending on the holding period of the OID Bond by each purchaser)
of the total amount of original issue discount payable at the maturity of the OID Bond will, upon disposition or payment of an OID Bond,
be treated as a return of capital, rather than as taxable gain, for federal income tax purposes. The portion so treated will be determined
by allocating the total original issue discount over the term of each OID Bond through a series of adjustments to the issue price for each
accrual period. The adjustment to the issue price for each accrual period is determined by multiplying the issue price at the beginning of
such accrual period (the issue price as increased by adjustments for all prior accrual periods) by the appropriate fraction of such OID
Bond's original yield to maturity and subtracting any current interest payment thereon during such accrual period.
Owners of OID Bonds should consult their professional tax advisors as to the precise determination for federal income tax
purposes for interest accrued on and original issue discount accrued with respect to such OID Bonds upon any purchase, sale, redemption
or other disposition or payment of such OID Bonds, and as to the state and local tax consequences of owning such OID Bonds.
Tax Treatment of Premium
The Bonds maturing on ___ will be reoffered at a price in excess of the principal amount thereof (the “Premium Bonds”). Under
the Code, the difference between the principal amount of a Premium Bond and the cost basis of such Premium Bond to an owner thereof
is “bond premium.” Under the Code, bond premium is amortized over the term of a Premium Bond (i.e., the maturity date of a Premium
Bond or its earlier call date) for federal income tax purposes. An owner of a Premium Bond is required to decrease his or her basis in
such Premium Bond by the amount of the amortizable bond premium attributable to each taxable year (or portion thereof) he or she owns
such Premium Bond. The amount of the amortizable bond premium attributable to each taxable year is determined on an actuarial basis
at a constant interest rate determined with respect to the yield on a Premium Bond compounded on each interest payment date. The
amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Owners of Premium Bonds
(including purchasers of Premium Bonds in the secondary market) should consult their own tax advisors with respect to the precise
determination for federal income tax purposes of the treatment of bond premium upon sale, redemption or other disposition of Premium
Bonds and with respect to the state and local consequences of owning and disposing of Premium Bonds.
THE FOREGOING IS NOT INTENDED AS AN EXHAUSTIVE LIST OF THE PROVISIONS OF FEDERAL TAX LAW WHICH MAY HAVE AN EFFECT ON
INDIVIDUALS AND CORPORATIONS HOLDING THE BONDS OR RECEIVING INTEREST THEREON. PROSPECTIVE PURCHASERS SHOULD CONSULT
WITH THEIR TAX ADVISORS REGARDING THE EFFECT OF HOLDING THE BONDS OR RECEIVING INTEREST THEREON MAY HAVE ON THEIR AFFAIRS,
INCLUDING, BUT NOT LIMITED TO, THE EFFECT OF STATE AND LOCAL TAX LAWS.
CHANGE IN LAW
From time to time, certain legislative proposals may be introduced, or may now be 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.
Bond Counsel gives no assurance that any future legislation or clarifications or amendments to the Code, if enacted into law, will
not cause the interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent any beneficial
owner of a Bond from realizing the full current benefit of the tax status of the interest on the Bonds. Prospective purchasers of the Bonds
are encouraged to consult their own tax advisors regarding any pending or proposed federal legislation, as to which Bond Counsel
expresses no view.
From time to time, certain legislative proposals may be introduced, or be pending, in the Pennsylvania General Assembly that if
enacted, could alter or amend the Issuer’s taxing authority. 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.
29
CONTINUING DISCLOSURE UNDERTAKING
In accordance with the requirements of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission, the School
District, being an “obligated person” within the meaning of the Rule, will execute and deliver a written continuing disclosure undertaking as set
forth in the form of the Continuing Disclosure Certificate (the “Disclosure Certificate”), attached hereto as Appendix E.
Under the terms of the Disclosure Certificate, the School District will undertake to file with the Municipal Securities Rulemaking Board
(MSRB), certain financial and other information concerning the School District; for example, annual audited financial statements (as and when
available) and notice of certain events affecting the School District. The School District’s obligations with respect to continuing disclosure as it
relates to the Bonds shall continue until the retirement of the Bonds, whether by redemption or upon final maturity.
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 (C) 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 (C) above, but the School District
does not commit to provide notice of the occurrence of any events except those specifically listed in (C) above.
The School District acknowledges that its undertaking pursuant to the Rule described herein is intended to be for the benefit of the
holders and beneficial owners of the Bonds and shall be enforceable by the holders and beneficial owners of the Bonds, but the right of the
holders and 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, 2009. 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 http://www.emma.msrb.org.
Certain operating data of the School District may be inherently included in the annual filings of financial statements, the summary of the
budget, contents in Official Statements of future bond issues as well as publicly available information.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}
30
Existing Continuing Disclosure Filing History
The School District has previously entered into Continuing Disclosure Agreements with respect to each one of its previously issued
bond issues that are currently outstanding. The School District’s filing history of its annual financial and operating information during
the past five (5) years is outlined in the table below.
Fiscal Year Filing Financial Statements Budget Operating Data
Ending Deadline [1] Filing Date EMMA ID [2] Filing Date EMMA ID [2] Filing Date EMMA ID [2]
6/30/2011 12/27/2011 3/13/2012 ER495453 9/7/2011 EP477500 Various[3] Various[3]
6/30/2012 12/27/2012 12/11/2012 [4]
EP590463 12/11/2012 EP590463 Various[5] Various[5]
6/30/2013 12/27/2013 12/20/2013
ER595408 12/19/2013 EA484739 Various[6] Various[6]
6/30/2014 12/27/2014 12/17/2014 [7]
ER658694 11/17/2014 EA548404 12/17/2014 ER658758
6/30/2015 12/27/2015 12/23/2015 [8]
ER741001 7/16/2015 ER718493 12/21/2015 EP714551
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: http://emma.msrb.org/ContinuingDisclosureView/ContinuingDisclosureDetails.aspx?submissionId=
[3] Operating data for the School District was posted under multiple submissions. The pupil enrollments, debt statement, tax rates, tax and millage rates,
tax collection data, debt service by state aid, and top ten taxpayers were submitted on October 11, 2011 (EMMA ID EP494692.) The Assessed and Market Values are included within the Budget which was posted to EMMA on September 7, 2011 (EMMA ID EP477500.)
[4] School District uploaded the PDE-2057 Annual Financial Report as an interim filing and the Audited Financial Statements were uploaded on February
19, 2013 (EMMA ID EP599197)
[5] Operating data for the School District was posted under multiple submissions. The Debt statement, coverage of debt service by state aid, and tax and
millage rates were included in an Official Statement posted to EMMA on September 6, 2012. A Notice of Reference to Other Submitted Documents was
filed by the School District on October 13, 2016 (EMMA ID ES669281.) The Assessed and Market Values are included within the Budget which was posted to EMMA on December 11, 2012 (EMMA ID EP590463.) The enrollment, tax collection, and top taxpayers were submitted on December 12, 2012
(EMMA ID ER528198.)
[6] Operating data for the School District was posted under multiple submissions. The tax and millage rates and assessed and market values were submitted on December 19, 2013 (EMMA ID EA484736.) The Debt statement and coverage of debt service by state aid were included in an Official
Statement posted to EMMA on December 12, 2013. A Notice of Reference to Other Submitted Documents was filed by the School District on October 13,
2016 (EMMA ID ES669291.). The enrollment, tax collection, and top taxpayers were submitted on December 19, 2013 (EMMA ID EA484735.)
[7] School District uploaded the PDE-2057 Annual Financial Report as an interim filing and the Audited Financial Statements were uploaded on January
30, 2015 (EMMA ID EA572302)
[8] School District uploaded the PDE-2057 Annual Financial Report as an interim filing and the Audited Financial Statements were uploaded on January
29, 2016 (EMMA ID ER742442)
Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can
be summarized as follows:
For fiscal year ending June 30, 2011, the School District filed its budget report, and operating data timely. The School District’s
audit report was filed late on March 13, 2012.
For fiscal year ending June 30, 2012, the School District filed its audit report, budget report, and operating data timely.
For fiscal year ending June 30, 2013, the School District filed its audit report, budget report, and operating data timely.
For fiscal year ending June 30, 2014, the School District filed its audit report, budget report, and operating data timely.
For fiscal year ending June 30, 2015, the School District filed its audit report, budget report, and operating data timely.
Failure to Provide Annual Financial Information
As outlined in the table above, the School District failed to provide certain annual financial information in a timely manner during
the past (5) five years. The School District filed a “Failure to Provide Annual Financial Information” notice to EMMA on October 13,
2016.
Pennsylvania Act 150 School District Intercept Program Enhanced Rating Downgrade July 2012
Certain bond issues of the School District received an enhanced rating downgrade from “Aa3” to “A1” from Moody’s Investors
Service on July 17, 2012 as a result of the downgrade of Pennsylvania Act 150 School District Intercept Program; however, a Notice of
Material Event was not posted to EMMA by the School District until October 13, 2016.
31
Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s
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 both S&P and 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 recently filed a summary of rating upgrades and downgrades relating to certain bond insurance companies.
Future Continuing Disclosure Compliance
The School District has conducted a thorough review of its continuing disclosure obligations and submissions. Upon discovering
any inadvertent omissions with respect to these filings, the School District, to the best of its knowledge, has attempted to bring its
continuing disclosure filings up to date.
In an effort to augment the School District’s procedures and policies to maintain future compliance, the School District has taken
additional steps intended to assure future compliance with its Continuing Disclosure Agreements. These steps include implementing the
MSRB’s EMMA’s internal notification system whereby the School District will receive timely email reminders a month in advance for
all of the School District’s annual disclosure filings and coordinating with the School District’s financial advisor to ensure all disclosure
obligations have been made on a timely basis and in all material respects.
A member of the School District’s business office will be responsible for ensuring ongoing continuing disclosure compliance.
Members of the School District’s business office will make an effort to participate in any ongoing continuing education regarding
continuing disclosure undertaking if offered by local groups or affiliated organizations such as MSRB, PASBO or GFOA. The School
District may communicate with its financial advisor, underwriter(s), bond counsel, or solicitor regarding any questions or concerns
regarding ongoing continuing disclosure compliance. The School District may also communicate with its local auditor and advise of the
School District’s need for financial statements in a timely manner. In the event audited financial statements are not available by the filing
deadline, the School District will file to EMMA, if available, its State Form PDE-2057 Annual Financial Report as an interim filing until
such audited financial statements are available. Some of the operating data requirements may be found contained within the School
District’s financial statements or budget filing and may not be filed explicitly by themselves.
RATINGS
Moody’s Investors Services, Inc. has assigned an underlying rating of “__” to the Bonds. Such rating reflects only the view of
such organization and any desired explanation of the significance of such rating should be obtained from the rating agency furnishing the
same, at the following address: Moody’s Investors Service, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007.
Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions
of its own. There is no assurance that any such rating will continue for any given period of time or that it will not be revised downward
or withdrawn entirely by the rating agency, if circumstances so warrant. Any such downward revision or withdrawal of such rating may
have an adverse effect on the market price of the Bonds.
S&P Global Ratings is expected to assign its municipal Bond rating of “___” to the Bonds, based upon the issuance by ___ of its
municipal bond insurance policy. Such rating reflects only the view of such organization and any desired explanation of the significance
of such rating should be obtained from the rating agency furnishing the same, at the following address: 55 Water Street, 38 th Floor, New
York, New York 10041.
UNDERWRITING
The Underwriter has agreed to purchase the Bonds from the School District, subject to certain conditions precedent, and will
purchase all of the Bonds if any of such Bonds are purchased. The Bonds will be purchased at a total purchase price of $____ which is
equal to the par value of the Bonds plus/less a net original issue premium/discount of $____ less underwriter’s discount of $____.
LEGAL OPINION
The Bonds are offered with the approving legal opinion of Eckert Seamans Cherin & Mellott, LLC, Harrisburg, Pennsylvania,
Bond Counsel. Certain legal matters will be passed upon for the School District by Beard Legal Group, P.C., Altoona, Pennsylvania,
School District Solicitor.
32
FINANCIAL ADVISOR
The School District has retained PFM Financial Advisors LLC, Harrisburg, Pennsylvania as financial advisor (the “Financial
Advisor”) in connection with the preparation, authorization and issuance of the Bonds. The Financial Advisor is not obligated to
undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or
fairness of the information contained in the Preliminary Official Statement. PFM Financial Advisors LLC is an independent advisory
firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. The
Financial Advisor's contract with the School District prohibits it from participating in the underwriting of any of the School District's
debt.
MISCELLANEOUS
This Preliminary Official Statement has been prepared under the direction of the School District by PFM Financial Advisors LLC,
Harrisburg, Pennsylvania, in its capacity as Financial Advisor to the School District. The information set forth in this Preliminary
Official Statement had 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 Financial Advisor upon request. The information
assembled in this Preliminary Official Statement is not to be construed as a contract with holders of the Bonds.
The School District has authorized the distribution of this Preliminary Official Statement.
CLEARFIELD AREA SCHOOL DISTRICT
CLEARFIELD COUNTY, PENNSYLVANIA
By:
President, Board of School Directors
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APPENDIX A
Demographic and Economic Information
Relating to the Clearfield Area School District
A-1
Population
Table A-1 which follows shows recent population trends for the School District, Clearfield County and the Commonwealth
of Pennsylvania (the “State”). The School District's population decreased from 20,230 to 19,134 between 2000 and 2010, a
decrease of 1,096 over this period. Table A-2 shows 2010 estimates of the age composition and average number of persons per
household in Clearfield County and for the State. Average household size for the County was smaller than the Statewide
average.
TABLE A-1
RECENT POPULATION TRENDS
Compound Average
Annual
Percentage Change
2000 2010 2000-2010
School District ................................................ 20,230 19,134 -0.56%
Clearfield County............................................. 83,382 81,642 -0.21%
Pennsylvania ................................................... 12,281,054 12,702,379 0.34%
Source: US Bureau of the Census, Decennial Census and Pennsylvania State Data Center, 2000 & 2010 General Population and
Housing Characteristics: Pennsylvania.
TABLE A-2
AGE COMPOSITION
0-17 18-64 65+ Persons Per
Years Years Years Household
Clearfield County.......................................................... 20.0% 62.6% 17.5% 2.37
Pennsylvania ................................................................. 22.0 62.6 15.4 2.45
Source: U.S. Bureau of the Census, 2010 Census Summary File 1.
A-2
Employment
Table A-3 shows the NonFarm jobs for the Clearfield Micropolitan Statistical Area (MSA) for July 2016.
TABLE A-3
DUBOIS MICROPOLITAN STATISTICAL AREA
July 2016
NONFARM JOBS
(CLEARFIELD COUNTY)
Industry Employment
Establishment Data Jul 2016 Jun 2016 May 2016 Jul 2015 Jun 2016 Jul 2015
TOTAL NONFARM.................................. 30,500 30,900 30,900 30,800 -400 -300
TOTAL PRIVATE .................................... 26,400 26,300 26,300 26,600 100 -200
GOODS-PRODUCING ............................. 4,000 3,900 3,800 4,200 100 -200
Mining, Logging, and Construction ........ 1,300 1,300 1,200 1,400 0 -100
Manufacturing ......................................... 2,700 2,600 2,600 2,800 100 -100
SERVICE-PROVIDING ........................... 26,500 27,000 27,100 26,600 -500 -100
Trade, Transportation, and Utilities ............. 8,600 8,600 8,800 8,600 0 0
Transportation, Warehousing, and Utilities 3,100 3,100 3,300 3,100 0 0
Trade ...................................................... 5,500 5,500 5,500 5,500 0 0
Wholesale Trade ................................ 1,000 1,000 1,000 1,000 0 0
Retail Trade ....................................... 4,500 4,500 4,500 4,500 0 0
Financial Activities .................................... 1,000 1,000 1,000 1,000 0 0
Professional and Business Services ........... 1,700 1,700 1,700 1,700 0 0
Education and Health Services ................. 6,500 6,500 6,500 6,400 0 100
Leisure and Hospitality ............................. 2,500 2,500 2,500 2,600 0 -100
Other Services ............................................ 1,900 1,900 1,800 1,900 0 0
Government ................................................ 4,100 4,600 4,600 4,200 -500 -100
Local Government .................................. 2,200 2,700 2,700 2,300 -500 -100
Data benchmarked to March 2015 ***Data changes of 100 may be due to rounding***
Source: Pennsylvania Center for Workforce Information & Analysis.
A-3
Table A-4 shows recent trends in labor force, employment and unemployment for Clearfield County and the State. The
unemployment rate for Clearfield County has been higher than the statewide average.
TABLE A-4
RECENT TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
(Clearfield County)
Compound
Average
Annual %
2011 2012 2013 2014 2015 2016(1) Rate
Clearfield County
Civilian Labor Force (000) 38.0 38.2 37.8 36.7 36.4 36.8 -0.43%
Employment (000) 34.5 34.7 34.4 34.0 34.1 34.0 -0.12%
Unemployment (000) 3.6 3.6 3.4 2.6 2.3 2.8 -4.38%
Unemployment Rate 9.4 9.4 9.0 7.2 6.4 7.6
Pennsylvania
Civilian Labor Force (000) 6,396.0 6,464.0 6,440.0 6,391.0 6,424.0 6,613.0 0.04%
Employment (000) 5,889.0 5,957.0 5,965.0 6,016.0 6,094.0 6,210.0 0.34%
Unemployment (000) 507.0 507.0 476.0 376.0 330.0 403.0 -4.20%
Unemployment Rate 7.9 7.8 7.4 5.9 5.1 6.1
(1)As of July 2016.
Source: Pennsylvania Center for Workforce Information & Analysis.
A-4
Major employers located within Clearfield County include:
Name
Industry Sector
Wal-Mart Associates Inc Transportation and Warehousing
Dubois Regional Medical Center
Health Care and Social Assistance
State Government Public Administration
Dubois Area School District
Educational Services
Cen-Clear Child Services Inc Health Care and Social Assistance
Clearfield Hospital
Health Care and Social Assistance
Paris Cleaners Inc Other Services
Clearfield Area School District
Educational Services
Christ the King Manor
Health Care and Social Assistance
Fayette Resources Incorporated
Residential Services
Source: Pennsylvania Department of Labor and Industry - Center for Workforce
Information & Analysis – 4th Quarter 2015.
Income
The data on Table A-5 shows trends in per capita income for Clearfield County and the State over the 2000-2010 period.
Per capita income in the County is somewhat lower than per capita income in the State over this period.
TABLE A-5
TRENDS IN PER CAPITA INCOME*
Compound
Average Annual
Percentage
Change
2000 2010 2000-2010
Clearfield County.................................................. $16,010 20,142 2.32%
Pennsylvania ......................................................... 20,880 26,678 2.48%
*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: Pennsylvania State Data Center and U.S. Census Bureau, 2006-2010 American Community Survey.
A-5
Commercial Activity
Table A-6 shows recent trends for retail sales estimates in Clearfield County and the State.
TABLE A-6
TOTAL RETAIL SALES
(Millions of Dollars)
2012 2013 2014 2015 2016
Clearfield County......... $1,283,977 $1,001,651 $1,447,172 $1,286,534 $1,335,370
Pennsylvania ............... 188,149,727 187,412,600 199,975,258 198,215,135 207,887,942
Source: The Nielsen Company.
Educational Institutions
Located in Clearfield County is the Pennsylvania State University, Dubois Campus in Dubois, about 20 miles west of the
School District. Pennsylvania State University main campus in State College, Pennsylvania is about 45 miles east of the School
District. Clarion State University in Clarion is about 40 miles west of the County. A branch campus of Lock Haven University is
located in Clearfield with an approximate enrollment of 300. Indiana University of Pennsylvania in Indiana is about 40 miles
southwest of the County.
Transportation
Clearfield County is served by about 42 miles of Interstate Highway 80, about 890 miles of State and Federal Highways,
and about 570 miles of secondary and municipal roads. Interstate 80, U.S. Route 322, State Routes 153, 879 and 970, traverse the
School District.
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APPENDIX B
FORM OF OPINION OF BOND COUNSEL
Eckert Seamans Cherin & Mellott, LLC 213 Market Street 8
th Floor
Harrisburg, PA 17101
TEL 717 237 6000 FAX 717 237 6019 www.eckertseamans.com
FORM OF OPINION OF BOND COUNSEL The form of the approving legal opinion of Eckert Seamans Cherin & Mellott, LLC, Bond Counsel, is set forth below. The actual opinion will be signed and delivered on the date of delivery of the Bonds and may vary from the form set forth to reflect circumstances both factual and legal at the time of such delivery. Recirculation of this Preliminary Official Statement or Official Statement shall create no implication that Eckert Seamans Cherin & Mellott, LLC, has reviewed any of the matters set forth in such opinion subsequent to the date thereof.
CLEARFIELD AREA SCHOOL DISTRICT Clearfield County, Pennsylvania
$_,___,___ General Obligation Bonds, Series A of 2016
To the Purchasers of the December __, 2016 Above-Described Bonds: We have acted as Bond Counsel in connection with the issuance and sale by the Clearfield Area School District, Clearfield County, Pennsylvania (the “Issuer”) of its $_,___,___, aggregate principal amount, General Obligation Bonds, Series A of 2016 (the “Bonds”). The Bonds have been issued pursuant to a Resolution (the “Resolution”) adopted by the Board of School Directors on October 24, 2016, are issuable in the denomination of $5,000 and whole multiples thereof and are in fully registered form. The Bonds are dated and bear interest from ___________, 2016. Interest on the Bonds is payable initially on March 1, 2017, and semiannually on each March 1 and September 1 thereafter, until payment of the principal thereof has been duly made or provided for. The Bonds were sold pursuant to the Proposal for the Purchase of Bonds, dated October 24, 2016 (the “Proposal for the Purchase of Bonds”), which Proposal for the Purchase of Bonds was approved by the Resolution and, further, the Bonds bear interest at the rates and mature on the dates and in the amounts as set forth in the winning bid (the “Addendum”), dated ________, 2016, which Addendum was authorized by and approved pursuant to the Resolution. The Bonds are subject to optional redemption and mandatory sinking fund redemption as set forth in the Addendum As Bond Counsel, we have examined, among other things, the proceedings related to the issuance and delivery of the Bonds, as filed with the Department of Community and Economic Development of the Commonwealth of Pennsylvania (the “Commonwealth”), an executed counterpart of the Resolution, the form of the Bonds, the Local Government Unit Debt Act, 53 Pa.C.S. § 8001 et seq., as amended, the Constitution of the Commonwealth and such other public records, certificates, instruments, and documents as we have deemed necessary or appropriate in order to enable us to render an informed opinion as to the matters set forth herein. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the Official Statement, dated ___________, 2016 (the “Official Statement”) or other offering material relating to the Bonds (except to the extent, if any, stated in the Official Statement) and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Official Statement).
To the Purchaser of the
Above-Described Bonds ____________, 2016
Page 2
655866
As to questions of fact material to our opinion, we have relied upon the representations of the Issuer contained in the certified proceedings relating to the issuance of the Bonds and other certifications of public officials, including the opinion of the Solicitor to the Issuer as to certain matters relating to the Issuer, furnished to us without undertaking to verify the same by independent investigation. The Issuer has certified, among other things, that it reasonably anticipates that it will not issue more than $10,000,000, principal amount, of tax exempt obligations during the current calendar year, and has designated the Bonds as Qualified Tax Exempt Obligations within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). Based on such examination and the certifications and representations of fact contained in the proceedings relating to the issuance of the Bonds, which we have not verified independently, we are of the opinion, as of the date hereof and under existing law, as follows: 1. The Bonds are valid and binding general obligations of the Issuer. 2. Pursuant to The Public School Code of 1946, as amended (the “School Code”) all
taxable real property in the territory of the Issuer is subject to ad valorem taxation without limitation as to rate or amount to pay debt service on the Bonds. However, under the Taxpayer Relief Act, Special Session Act 1 of 2006, as amended by Act 25 of 2011 (collectively, "Act 1"), an increase of the Issuer's ad valorem tax rate above an index established under Act 1, as amended, if necessary to fund debt service on the Bonds, may be imposed only upon either approval by the citizens within the geographical territory comprising the School District in a referendum vote or, if eligible pursuant to Act 1, as amended, approval by the Pennsylvania Department of Education.
3. The Issuer has effectively covenanted to include the amount of the debt service on the Bonds for each fiscal year in which such sums are due in its budget for that year, to appropriate such amounts to the payment of such debt service and to punctually pay or cause to be paid the debt service on the Bonds at the dates and places and in the manner stated in the Bonds. For such budgeting, appropriation and payment, the Issuer has pledged its full faith, credit and taxing power.
4. The interest on and accruals of original issue discount with respect to the Bonds (a) are
excluded from gross income for federal income tax purposes pursuant to the Code, and (b) are not items of tax preference within the meaning of Section 57(a)(5) of the Code for purposes of federal alternative minimum tax imposed by Section 55 of the Code on individuals and corporations; however, with respect to corporations (as defined in the Code for federal income tax purposes), such interest and accruals of original issue discount are taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations by Section 55 of the Code. Accruals of original issue discount with respect to a Bond allocable to a registered owner of the Bond (as defined therein) under a constant yield method of accrual (a) are not included in gross income for federal income tax purposes, and (b) are
To the Purchaser of the
Above-Described Bonds ____________, 2016
Page 3
655866
added to such registered owner’s tax basis in the Bond for the purpose of determining gain or loss for federal income tax purposes upon sale, exchange, redemption or other disposition of the Bond. The opinions set forth in the preceding two sentences are subject to the condition that the Issuer comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest on and accruals of original issue discount with respect to the Bonds be (or continue to be) excluded from gross income for federal income tax purposes. Failure to comply with such requirements could cause the interest on and accruals of original issue discount with respect to the Bonds to be included in gross income retroactive to the date of issuance of the Bonds. The Issuer has covenanted to comply with such requirements.
5. The Bonds are Qualified Tax-Exempt Obligations under Section 265(b)(3) of the Code. 6. The Bonds are exempt from personal property taxes in Pennsylvania; the interest on the
Bonds is exempt from Pennsylvania Corporate Net Income Tax and from Pennsylvania state and local personal income tax.
7. Under the Probate, Estates and Fiduciaries Code of Pennsylvania, the Bonds are an
authorized investment for fiduciaries and personal representatives, as defined in said Code, in Pennsylvania.
No opinion is expressed as to other tax consequences that may accrue to an owner of the Bonds as a result of purchase or ownership of the same except as specifically set forth herein. It is understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement also may be subject to the exercise of judicial discretion in appropriate cases. Very truly yours, ECKERT SEAMANS CHERIN & MELLOTT, LLC
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APPENDIX C
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
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APPENDIX D
AUDITED FINANCIAL STATEMENTS
CLEARFIELD AREA SCHOOL DISTRICTCleañeld, Pennsylvania
AUDITOR’S REPORTJune 30, 2015
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
JUNE 30, 2015
TABLE OF CONTENTS
EXHIBIT PAGE
INDEPENDENT AUDITORS REPORT A 1 —3
MANAGEMENTS DISCUSSION AND ANALYSIS (MD&A) (UNAUDITED) B 4—24
BASIC FINANCIAL STATEMENTS:
Statement of Net Position C 25 & 26
Statement of Activities 0 27 & 28
Balance Sheet — Governmental Funds E 29
Reconciliation of the Governmental Funds Balance Sheetto the Statement of Net Position F 30
Statement of Revenues, Expenditures and Changes inFund Balances — Governmental Funds G 31 & 32
Reconciliation of the Governmental Funds Statement of Revenues,Expenditures and Changes in Fund Balance to the Statementof Activities H 33 & 34
Statement of Net Position — Proprietary Fund I 35
Statement of Revenues, Expenses and Changes in Fund Net Position —
Proprietary Fund J 36
Statement of Cash Flows — Proprietary Fund K 37 & 38
Statement of Fiduciary Net Position — Fiduciary Funds L 39
Notes to Financial Statements M 40—63
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED): SCHEDULE
Schedule of the Districts Proportionate Share of the NetPension Liability 1 64
Schedule of District Contributions 2 65
Statement of Revenues, Expenditures and Changes inFund Balances — Budget and Actual — General Fund 3 66 & 67
PAGE
INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERSBASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED INACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 68 & 69
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJORPROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIREDBY 0MB CIRCULAR A-133 70 & 71
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 72—77
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 78 & 79
SCHEDULE OF FINDINGS AND QUESTIONED COSTS 60
WALTER HOPKINS & COMPANY, L.L.P. EXHIBITA
CERTIFIED PUBLIC ACCOUNTANTS
Walter Hopkins 1927- 1981Frank W. Fulton, CPA 1947-1978
Robert L. Mitchell, CPA 1951 - 1993Samuel P. Bachelier 1957-1995
Francis H. Elenskv, CPA 1969- 2012
Fred C. Lucas, Jr., CPAJohn H. Musser, CPA
Katherine B. Eckley, CPA&ik 3. Elensky, CPA
INDEPENDENT AUDITOR’S REPORT
To the Board of DirectorsClearfield Area School DistrictClearfield, Pennsylvania
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activity, each major fund, and the aggregate remaining fund information of Clearfield Area School District
as of and for the year ended June 30, 2015, and the related notes to the financial statements, which
collectively comprise the Clearfield Area 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
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
1
EXHIBIT A (Continued)
the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of significant accountingestimates made by management, as well as evaluating the overall presentation of the financialstatements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, therespective financial position of the governmental activities, the business-type activity, each major fund,and the aggregate remaining fund information of the Clearfield Area School District, as of June 30, 2015,and the respective changes in financial position, and, where applicable, cash flows thereof for the yearthen ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As disclosed in Note 1 to the financial statements, the District adopted the provisions of GovernmentalAccounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions — anamendment of GASB Statement No. 27 for the year ended June 30, 2Q15 to conform with accountingprinciples generally accepted in the United States of America. The District recognized its net positionliability, restated its beginning net position for this adoption, expanded its note disclosures and includedrequired supplementary information with respect to employees’ pension benefits. Our opinion was notmodified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’sDiscussion and Analysis on pages 4 through 24, budgetary comparison information on pages 66 through67, the schedule of the District’s proportionate share of the net pension liability on page 64 and theschedule of the District’s contributions on page 65 be presented to supplement the basic financialstatements. Such information, although not a part of the basic financial statements, is required by theGovernmental Accounting Standards Board, who considers it to be an essential part of financial reportingfor placing the basic financial statements in an appropriate operational, economic, or historical context.We have applied certain limited procedures to the required supplementary information in accordance withauditing standards generally accepted in the United States of America, which consisted of inquiries ofmanagement about the methods of preparing the information and comparing the information forconsistency with management’s responses to our inquiries, the basic financial statements, and otherknowledge we obtained during our audit of the basic financial statements. We do not express an opinionor provide any assurance on the information because the limited procedures do not provide us withsufficient evidence to express an opinion or provide any assurance.
Other In formation
Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the Clearfield Area School District’s basic financial statements. The accompanying schedule ofexpenditures of federal awards is presented for purposes of additional analysis as required by U.S. Officeof Management and Budget Circular A-133, Audits of States, Local Governments, and Non-ProfitOrganizations, and is not a required part of the basic financial statements. Such information is theresponsibility of management and was derived from and relates directly to the underlying accounting andother records used to prepare the basic financial statements. The information has been subjected to theauditing procedures applied in the audit of the basic financial statements and certain additionalprocedures, including comparing and reconciling such information directly to the underlying accounting
2
EXHIBIT A (Continued)
and other records used to prepare the basic financial statements or to the basic financial statementsthemselves, and other additional procedures in accordance with auditing standards generally accepted inthe United States of America. In our opinion, the schedule of expenditures of federal awards is fairlystated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 22,2016 on our consideration of the Clearfield Area School District’s internal control over financial reportingand on our tests of its compliance with certain provisions of laws, regulations, contracts, and grantagreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results of that testing, and not to providean opinion on internal control over financial reporting or on compliance. That report is an integral part ofan audit performed in accordance with Government Auditing Standards in considering Clearfield AreaSchool District’s internal control over financial reporting and compliance.
3L}c4 ‘%-QWALTER HOPKINS & COMPAN L. P.
Clearfield, PennsylvaniaJanuary22, 2016
3
EXHIBITS
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)Required Supplementary Information (RSI)
June 30, 2015
The discussion and analysis of Clearfield Area School District’s financial performance provides an overallreview of the District’s financial activities for the fiscal year ended June 30, 2015. The intent of thisdiscussion and analysis is to look at the District’s financial performance as a whole. Readers should alsoreview the financial statements and accompanying notes to the financial statements to enhance theirunderstanding of the District’s financial performance.
The Management’s Discussion and Analysis (MD&A) is an element of the reporting model adopted by theGovernmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements— and Management’s Discussion and Analysis — for State and Local Governments issued in June 1999.Certain comparative information between the current year and the prior year is required to be presentedin the MD&A.
FINANCIAL HIGHLIGHTS
The District’s financial statements for June 30, 2015 reflect the implementation of GovernmentalAccounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting forPensions. The primary objective of Statement No, 68 is to improve accounting and financial reporting bystate and local governments for pensions. Statement No. 68 requires the District to include itsproportionate share of the Public School Employees’ Retirement System (PSERS) net pension liability,pension expense, and pension deferred inflows and outflows of resources on government-wide financialstatements. As disclosed in the notes to the financial statements, the net position as of July 1, 2014 hasbeen adjusted to record the cumulative effect of this change in accounting principle.
In total, net position decreased by $42,317,999, which is primarily attributable to the implementation ofGASB No. 68. Of this total, $42,441,495 was the effect of the restatement of the beginning net positionfor the recognition of the net pension liability and $401,435 was the result of unrecorded depreciationexpense prior to the fiscal year ending June 30, 2015. The District’s net position from activities actuallyincreased by $524,931 for the 2014-2015 school year. The net position from governmental activitiesdecreased by $40,827,383 for the school year and net position from business-type activities decreasedby $1,490,616 for the school year.
As of the close of the current fiscal year, the Clearfield Area School District’s governmental fundsreported a combined ending fund balance of $15,320,664, a decrease of $4,030,292 from the prior year.Approximately $6,849,112 of this amount is available for spending at the government’s discretion while$3,124,692 must be used for capital projects in accordance with section 1432 of the municipal code,$2,906,756 is restricted to satisfy the subsequent year debt covenant obligations, $2,037,916 iscommitted for the scheduled increase in the PSERS retirement contribution rate, and $402,185 has beenassigned to satisfy any successful real estate tax appeals resulting in refunds filed by businesses andindividual taxpayers.
At the end of the current fiscal year, the unassigned fund balance for the general fund was $6,849,112, or18.73 percent of the 14-15 total budgeted general fund expenditures.
4
EXHIBIT B (Continued)
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts: management’s discussion and analysis (this section), thebasic financial statements, and the required supplementary information. The basic financial statementsinclude 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 theStatement of Activities. These provide both long-term and shod-term information about the District’soverall financial status.
The remaining statements are fund financial statements that focus on individual pads of the District’soperations in more detail than the government-wide financial statements. The governmental fundstatements tell how general district services were financed in the shod-term as well as what remains forfuture spending. Proprietary fund statements offer shod-term and long-term financial information aboutthe activities the District operates similar to a business in the private sector, which for this District is theFood Service Fund. Fiduciary fund statements provide information about financial relationships wherethe District acts solely as a trustee or agent for the benefit of others to whom the resources in questionbelong.
The financial statements also include notes that explain some of the information in the financialstatements and provide more detailed data.
Figure A-I shows how the required pads of the Financial Section are arranged and relate to one another
Figure A-IRequired Components of
Clearuield Area School District’sFinancial Report
Management BasicDiscussion Financial& Analysis Statements
RequiredSupplementary
Information
Government-Wide
FinancialStatements
FundFinancial
Statements
Notes to theFinancial
Statements
5
EXHIBIT B (Continued)
Figure A-2 summarizes the major features of the District’s financial statements, including the portion ofthe District they cover and the types of information they contain. The remainder of this overview sectionof management’s discussion and analysis explains the structure and contents of each of the statements.
Figure A-2Major Features of Clearfield Area School District’sGovernment-wide and Fund Financial Statements
Fund Statements
Government- Proprietary —
_______________
wide Statements FundsGovernmental
FundsFiduciary
FundsScope Entire District The activities of Activities the Instances in which the
(except the District that District operates District is the trustee orFiduciary funds) are not similar to private agent to someone else’s
proprietary or business — Food resources — Scholarships,fiduciary, such as Services Foundations, and StudentSeducation, Activity Accountsadministrationand studentactivities
Required Statement of Net Balance Sheet Statement of Net Statement of Fiduciaryfinancial Position Statement of Position Net Positionstatements Statement of Revenues, Statement of Statement of Changes in
Activities Expenses and Revenues, Fiduciary Net AssetsChanges in Fund Expenses andBalance Changes in Net
PositionStatement ofCash Flows
Accounting Accrual ‘ Modified accrual Accrual Accrual accounting andbasis and accounting and accounting and accounting and economic resources focusmeasurement economic current financial economicfocus resources focus resources focus resources focusType of All assets and Only assets All assets and All assets and liabilities,asseuliability liabilities, both expected to be liabilities, both both short-term and long-information financial and used up and financial and term
capital, and short- liabilities that capital, and short-term and long- come due during term and long-term the year or soon term
thereafter; nocapital assetsincluded
Type of inflow- All revenues and Revenue for All revenues and All revenues andoutflow expenses during which cash is expenses during expenses during year;information year, regardless received during or year; regardless regardless of when cash
of when cash is soon after the of when cash is is received or paidreceived or paid end of the year; received or paid
expenditureswhen goods orservices have
I been received‘ and payment is
due during theyear or soon
._thereafter6
EXHIBIT B (Continued)
Government-wide Statements
The government-wide statements report information about the District as a whole using accountingmethods similar to those used by private-sector companies. The statement of net position includes all ofthe government’s assets, deferred outflows of resources, deferred inflows of resources and liabilities. Allof the current year’s revenues and expenses are accounted for in the statement of activities regardless ofwhen cash is received or paid.
The two government-wide statements report the District’s net position and how it has changed. Netposition, the difference between the District’s assets plus deferred outflows of resources less liabilitiesplus deferred inflows of resources, are one way to measure the District’s financial health or position.
Over time, increases or decreases in the District’s net position is an indication of whether its financialhealth is improving or deteriorating, respectively.
To assess the overall health of the District, you need to consider additional non-financial factors, such aschanges 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 as well as grantsfinance 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 — notthe 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 the governmental funds, whichfocus on the determination of financial position and change in financial position, not on incomedetermination. They are reported using an accounting method called modified accrual accounting whichmeasures cash and all other financial assets that can readily be converted to cash. The governmentalfund statements provide a detailed short-term view of the District’s operations and the services itprovides. Governmental fund information helps the reader determine whether there are more or fewerfinancial resources that can be spent in the near future to finance the District’s programs. Therelationship (or differences) between governmental activities (reported in the Statement of Net Positionand the Statement of Activities) and governmental funds is reconciled in the financial statements.
Proprietary Funds — These funds are used to account for the District activities that are similar to businessoperations 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 Districtcharges 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’sproprietary fund and is the same as the business-type activities we report in the government-widestatements, but provide more detail and additional information, such as cash flows.
Fiduciary Funds — The District is the trustee, or fiduciary, for the student activity funds maintained in theDistrict. The District’s fiduciary activities are reported in a separate Statement of Fiduciary Net Position.We exclude these activities from the District’s other financial statements because the District cannot usethese assets to finance its operations.
7
EXHIBIT B (Continued)
GOVERNMENT-WIDE FINANCIAL ANALYSIS
The District’s Total Net Position was $(1I,056,225) at June 30, 2015 as compared to $31,261,774 atJune 30, 2014. Table A-I provides a condensed comparison of the years.
Table A-INet Position (Government-wide)
Fiscal Year Ended June 30,
2015 20fl
Governmental Business-type Governmental Business-typeActivities Activities Total Activities Activities Total
Assets:Current and otherAssets $ 21400017 $ 128,163 $ 21528,180 $ 25988,414 $ 254,307 $ 26,242,721
Non-current assets 64796,488 57,053 64,853,541 60,115,987 73,222 60,169,209
Total Assets $ 86,196,505 $ 185,216 $ 66,381,721 $ 86,104,401 $ 327,529 $ 86,431,930
Deferred Outflows 4,235,136 138,630 4,373,766 0 0 0
Total Assets andDef Outflows $ 90,431,641 $ 323,846 $ 90,755,487 $ 86,104,401 S 327,529 $ 86,431,930
Liabilities:Current and other
Liabilities $ 6,263,079 $ (162,091) $ 6,100,986 $ 6,536,599 $ (45,725) $ 6,490,874
Long-term liabilities 90,927,942 1,553,782 92,481,724 46,622,277 57,005 48,679,262
Total Liabilities 97,191,021 1,391,691 96,562,712 55,158,876 11,260 55,170,156
Deferred Inflows 3,122,478 106,522 3,229,000 0 0 0
Not Position:Invested in capitalassets, net ofrelated debt 18,897,966 57,053 16,955,019 18,363,114 73,222 16,436,336
Restricted 5,501,496 0 5,501,496 5,809,125 0 5,809,125
Unrestricted (34,281,320) (1,231,420) (35,512,740) 6,773,266 243,027 7,016,313
Total Net Position (9,861,858) (1,174,367) (11,056,225) 30,945,525 316,249 31,261,774
Total LiabilitiesDef Inflowsand Net Position $ 90,431,641 $ 323,846 $ 90,755,487 $ 86,104,401 s 327,529 $ 86,431,930
Total net position decreased $42,317,999 from previously issued June 30, 2014, financial statements, which is
primarily attributable to the implementation of GASB No. 68, Accounting and Financial Reporting for Pensions.Of this total, $42,441,495 was the effect of the restatement of the beginning net position for the recognition of
the net pension liability and $401,435 was the result of unrecorded depreciation expense prior to the fiscal year
ending June 30, 2015. The District’s net position from activities actually increased by $524,931 for the year
ended June 30, 2015.
8
EXHIBIT B (Continued)
The District’s net position consists of $18,955,019, invested in capital assets (buildings, land, landimprovements and equipment net of related debt). The restricted net position of $5,501,496 consists ofremaining capital project balances that must be used for capital assets and the 201 5-2016 debt covenantobligation payments of the District. The deficit unrestricted net position of $35,512,740 is a combinationof designated and undesignated amounts. The designated balance is the amount set aside for futureretirement rate increases. The undesignated amount includes the effect of the recognition of the District’sproportionate share of the PSERS net pension liability.
The results of this year’s operations as a whole are reported in the Statement of Activities. All expensesare reported in the first column. Specific charges, grants, revenues and subsidies that directly relate tospecific expense categories are presented to determine the final amount of the District’s activities thatare supported by other general revenues. The two largest general revenues are the Basic EducationSubsidy provided by the Commonwealth of Pennsylvania, and the local taxes assessed to communitytaxpayers.
Table A-2 takes the information from that statement and rearranges it slightly so you can see the totalrevenues for the year.
Table A-2Changes in Net Position (Government-wide)
Fiscal Year Ended June 30,
2214
Governmental Business -type Governmental B usi ness-type
Activities Activities Total Activities Activities Total
Revenues:
Program Revenues:
Charges for svcs $ 130,881 472,678 $ 603,559 $ 128,960 428,889 $ 557,849
Operating grants
and contributions 7,089,633 872,237 7,962,070
Capital grantsand contributions 96,155 0 96,155
General Revenues:
Property taxes 12,736,036 0 12,736,036
Othertaxes 1,861,622 0 1,861,622
Grants, Subsidies
and Contributions,unrestricted 12,062,264 0 12,062,264
Investment earnings 190,368 454 190,822
Transfers 0 0 0
6,822,542
95,998
13,124,1681,824,899
12,062,264165,107
0
OtherTotal Revenues
937,633 7,760,175
0 95,998
0 13,124,168
0 1,824,899
0 12,062,264
521 165,628
0 0
561,742 (6,178) 555,564
$ 34,728,901 $ 1,339,191 $ 36,068,092 $418,052 38 418,090
34,641,990 $ 1,367081 $ 36,009,071
9
EXHIBIT B (Continued)
Table A-2 also shows that total revenues exceeded total expenses for the District as a whole by$524,931 for the year ended June 3D1 2015. It should be noted that although the District is required topresent government-wide information using the accrual basis of accounting, as detailed in Table A-2, theDistrict must still prepare its general fund budget and report its operations under the modified accrualbasis of accounting used in the fund financial statements. Operations in relation to the District’s budgetwill be discussed later in this report under the “Significant Budget Variances” section.
Table A-2Changes in Net Position (Government-wide)
Fiscal Year Ended June 30,
2015
(Cont.)
2014
GovernmentalActivities
Business-typeActivities Total
GovernmentalActivities
Business-typeActivities Total
Expenses:Instruction $ 20,147,808 $ 0 $ 20,147,806 S 19,288,185 $ 0 $ 19,288,185
Instructional studentsupport
Admin & Fin’l
2,780122 0 2,780,122 2,864,688 0 2,864,688
supportOper and maint
of plant
Pupil transportation
Student activities
Community svcs
Interest on long-
term debtUnallocated
0 3,573409
0 3,220,3190 1,921,007
0 573,916
o 16,113
1,442,191 0 1,442,191
0 22,940
1,492232 1,492,232
S 1,492,232 $ 34,415000
Increase (decrease)In Net Position $ 615,435 $ (90,504) $ 524,931 $ 1,719,222 $ (125,151) $ 1,594,071
3,51 9292
3,123,4852,076,895
799,87113,661
1,634,701
17,6310
$ 34,113,466 $
depreciation exp
Food Services
Total Expenses
0 3,519,292
0 3,123,485
o 2,076,695
0 799,871
0 13,661
0 1,634,701
17,6311,429,695
35,543,161
3,220,319
1,921,007573,916
16,113
01,429,695
1,429,695 S $
22,9400
32,922,768
10
EXHIBIT B (Continued)
Tables A-3 and A-4 below present the expenses of both the Governmental Activities and the Business-
type Activities of the District.
Table A-3 shows the District’s eight largest functions — instructional programs, instructional student
support, administrative, operation and maintenance of plant, pupil transportation, student activities,
community services, and food services 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,
subsidies and contributions to show the remaining financial needs supported by local taxes and other
miscellaneous revenues.
Table A-3Governmental Activities
Fiscal Year Ended June 30,
ZPJA
Total Cost of Net Cost of Total Cost of Net Cost of
FunctionslPrograms Services Services Services Services
Instruction $ 20,147,808 $ 15135,374 $ 19.288,185 $ 14,693,457
Instructional studentsupport 2,780,122 2,335,735 2,864,688 2,239,886
Admin & Fin’l 3,519,292 3,261,369 3,573,409 3,353,920
Operation and maintof plant 3,123,485 2,957,152 3,220,319 3,078,256
PupilTransportation 2,076,895 835109 1,921,007 642,921
Student activities 799,871 709,506 573,916 488,356
Community services 13,661 6,175 16,113 9,339
Interest on long-termdebt 1,634,701 1,538,546 1,442,191 1,346,193
Unallocated depreciationexpense 17631 17,631 22,940 22,940
Total governmentalactivities $ 34,113,466 $ 26,796597 $ 32,922,768 $ 25,875,268
Less: Unrestricted grantsand subsidies 12,062,264 12,062,264
Total needed from localtaxes and otherrevenues $ 14,734,333 $ 13,813,004
The dependence upon local taxes for governmental activities is apparent. Program revenue provides
only 24.66% of the funding needed for instruction, the major program area of the District. Even if all of
the unrestricted grants, subsidies, and contributions are used toward instruction, there remains a need
for more than 15.26% of the funding for instruction to come from local taxes and other general revenues.
Table A-3 reveals that approximately 15.26% of every tax dollar is used to cover the cost of instruction.
The community, as a whole, provides financial support for the Clearfield Area School District students
and the percentage continues to grow.
11
EXHIBIT B (Continued)
rable A4 reflects the activities of the Food Service program, the only Business-type activity of the
District.
Table A-4Business-type Activities
Fiscal Year Ended June 30,
Total Cost Net Cost Total Cost Net Cost
2! 2! 2! 2!Functions!Programs Services Services Services Services
Food Services $ 1,429,695 $ 84,780 $ 1492,232 $ 125,710
Less:Investment earnings 454 521
Transfers 0 0
Miscellaneous (6,178) 38
Total Business-typeactivities $ 90,504 S 125,151
The Statement of Revenues, Expenses and Changes in Fund Net Position for this proprietary fund will
further detail the actual results of operations.
FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS
As noted earlier, the Clearfield Area School District uses fund accounting to ensure and demonstrate
compliance with finance-related legal requirements.
Governmental Funds — The focus of the Clearfield Area School District’s governmental funds is to
provide information on the near-term inflows, outflows, and balances of spendable resources. Such
information is useful in assessing the Clearfield Area School District’s financing requirements. In
particular, unassigned fund balance may serve as a useful measure of a government’s net resources
available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the Clearfield Area School District’s governmental funds reported
combined ending fund balances of $15,320,664 which is a decrease of $4,030,292, (20.83%), from the
prior year.
12
EXHIBIT B (Continued)
The General Fund is the chief operating fund of the Clearfield Area School District. At the end of thecurrent fiscal year, the unassigned fund balance of the general fund was $6,849,112. As a measure ofthe General Fund’s liquidity, it may be useful to compare the General Fund to total budgetedexpenditures of the next fiscal year. The unassigned fund balance represents 18.18 percent of the2015-2016 budgeted expenditures, which exceeds the recommended range of 5 to 10 percent. Theunassigned fund balance is the amount of ending fund balance remaining after removing substantialrestrictions explained previously in the report. The Clearifield Area School District originally projected adeficit for the current fiscal year and utilization of fund reserves in the amount of $3,310,631. However,during the current fiscal year the Clearfield Area School District’s general fund total fund balance actuallyincreased by $1,833,690. Key factors that contributed to this increase were as follows:
Revenues
Current and delinquent real estate tax collections exceeded the budgeted amounts resulting in$346,313 of additional real estate tax revenue.
Due to Act 32 and the appointment of a county-wide tax collector, earned income tax and localservices tax collections for the 2014-2015 school year exceeded budgeted amounts by $238,686.
Several large properties sold in the District during the 2014-2015 school year resulting inadditional real estate transfer tax revenue of $58,369.
The District invested $5,000,000 of reserve funds into a brokered certificate of deposit portfolioand investment income exceeded projections by $23,761.
Federal pass through revenues from the local intermediate unit were $45,550 higher thanexpected.
The District received $17,762 more in tuition revenues than was anticipated for 2014-201 5.
E-rate reimbursements accounted for a majority of the $115,932 of refunds of prior yearexpenditures.
The District received settlements of $395,000 from litigation filed against contractors whoconstructed the Girard-Goshen Elementary School.
Professional staff of the district filed applications and received $23,951 more in small grants thanwas anticipated for the 2014-2015 school year.
Additional special education funds in the amount of $30,101 were distributed after the Governor’sBudget was announced.
The transportation subsidy revenue is budgeted conservatively and resulted in a $41,786 positivevariance.
The District did not budget for $166,124 of additional Ready To Learn grant proceeds that itreceived during the 2014-2015 school year.
The retirement contribution rate is determined late in the budget process. The District received$289,146 more revenue than was anticipated.
Federal grant revenues are matched to expenditures in the current period. Existing federal grantrevenues had a $3,493 negative variance for the 2014-2015 school year.
13
EXHIBIT B (Continued)
The District received $121356 in Keystone to Opportunity grant monies not originally budgeted.
The District only received a small amount of ACCESS grant funds for the 2014-2015 school yearresulting in a $63209 negative variance.
Expenditures
The 2014-2015 budget included many positions that were not filled for the current school year asa result of significant retirements as well as substitute costs that were not needed. Also, theDistrict budgeted for an increase in hospitalization benefits that did not occur. This resulted in asavings of $1825087 in salaries and related benefits.
The District continues to take back professional services previously contracted through theCentral Intermediate Unit. For the 2014-2015 school year this resulted in a $37278 positivevariance,
Purchased Professional Services and Technical Services were budgeted but not needed for asavings of $23029.
Professional services for the Girard-Goshen Elementary litigation exceeded budgeted amountswhile professional services paid by the Keystone To Opportunity grant were not budgeted. Thesetwo items resulted in a negative variance of $268339.
Budgeted repairs and maintenance costs were not needed for a savings of $72052.
The District restructured its reproduction machinery contracts and didn’t use other budgetedrentals for a savings of $51,368.
Actual regular day transportation costs were $84,739 less than the 2014-2015 budgetedamounts.
Cyber/Charter tuition costs were under budget by $197035 for the current school year.
The Districts average daily membership percentage for calculating the operating expenditures ofthe CCCTC was lower than originally budgeted resulting in a savings of $247017.
Tuition costs for special need students are budgeted very conservatively. Actual costs for the2014-2015 school year resulted in a savings of $186,294.
General supply costs continue to be scrutinized on an individual basis resulting in a $196,829reduction of costs compared to budgeted amounts.
A reduction in the number of facilities and more efficient heating units resulted in a positivevariance in natural gas and oil costs of $98,259.
The District sets aside funds each year as a budgetary reserve which is used to coverunexpected expenditures that cannot be anticipated while developing the budget. The budgetaryreserve had $204337 of unused funds for the 2014-2015 school year.
The District may elect to transfer funds from the general fund to the capital projects funds to beused solely for capital additions or improvements. Due to the uncertainty of the State Budget theDistrict elected to not transfer the $250000 originally budgeted for the 2014-2015 school year.
14
EXHIBIT B (Continued)
The Clearfield Area School District also maintains three Capital Projects Funds which are authorizedunder section 1431 of the municipal code. Expenditures from these funds are limited to: capital outlays,including the acquisition or construction of capital facilities and other capital assets. Capital projectsfunds exclude those types of capital related outflows, financed by proprietary funds or for assets that willbe held in trust for individuals, private organizations, or other governments (Private-Purpose TrustFunds).
The District has a Capital Project Fund to track all the activity of the High School Renovation Project.The fund balance was $529,285 as of June 30, 2015. The District also has a Capital Project Fund totrack all the activity of the Clearfield Elementary School Renovation Project. The fund balance for theCES project was $667 as of June 30, 2015. The other Capital Project Fund of the District is used totrack all the remaining capital additions not accounted for in the Renovation Project Funds. The fundbalance at June 30, 2015 was $2,594,740 and decreased by $399,249, (1 3.34%), from the prior year.The funds will be used to help finance future projects.
GENERAL FUND BUDGET
During the fiscal year, the Board of School Directors (The Board) authorizes revisions to the originalbudget to accommodate differences from the original budget to the actual expenditures of the District. Alladjustments are again confirmed after the Annual Financial Report is substantially completed, which isafter the end of the fiscal year, as permitted by state law. A schedule showing the District’s original andfinal budget amounts compared with amounts actually paid and received is provided in the financialstatements.
The District applies for federal, state, and local grants and these grants cannot always be anticipatedduring the budget process. If additional grants are received during the year these grants are added tothe revenue and expenditure budgets.
Transfers between specific categories of expenditures and financing uses normally occur during theyear.
The Budgetary Reserve is used for opportunities or expenditures for improvements and enhancementsto District operations that were unforeseen at the time the budget was adopted. Fortunately none of thebudgetary reserve was used for these reasons during the 2014-2015 year.
15
EXHIBIT B (Continued)
SIGNIFICANT BUDGET VARIANCES
Table A-5General Fund
Actual to Budget VariancesFor the Fiscal Year Ended June 30, 2015
Account %ofNumber Name Budget Actual Difference Budget
Revenues:6000 Local Sources $ 14,087,867 $ 15,368,290 1280423 109.09%7000 State Sources 18,167,025 18,703,493 536468 102.95%8000 Federal Sources 994,915 1,056,219 61,304 106.16%9000 Other Sources 0 3,646 3,646 0.00%
Total Revenues and Sources 33,249,807 35,131,648 1,881,841 105.66%
Expenditures:1000 Instruction 20,383,716 18,867,509 1,516,207 92.56%2000 SupportServices 12,110,015 10,765197 1,344,818 88.89%3000 Non-instructional 714,207 709,317 4,890 99.32%4000 Capital Outlay 0 0 0 0.00%5000 Other Uses 3352,500 2,955,935 396,565 88.17%
Total Expenditures and Uses 36,560,438 33,297,958 3,262,480 91 .08%
Net Change in Fund Balance (3310,631) 1,833,690 5,144,321
REVENUES:
Local Revenues
Due to the installment method of paying real estate taxes, the District is receiving mare currentreal estate collections. Delinquent tax collections also exceeded anticipated amounts for the2014-15 school year.
Due to Act 32 and a county-wide tax collector, earned income tax and local services taxcollections exceeded expectations for the school year.
Several large properties sold in 2014-2015 resulting in additional real estate transfer tax revenue.
A brokered certificate of deposit portfolio provided additional investment income that was notbudgeted.
Federal pass through revenues from the local intermediate unit were higher than expected.
The District received more tuition from other LEA’s than was anticipated for the 2014-2015 schoolyear.
E-rate reimbursements accounted for a substantial amount of revenue.
16
EXHIBIT B (Continued)
The District received several financial settlements from litigation on the Girard-GoshenElementary School.
Professional staff flied applications and received several small grants that were not budgeted.
State Revenues
Special education funding exceeded the Governor’s Budget.
Conservative budgeting resulted in additional transportation subsidy revenue.
2014-2015 Ready To Learn grant proceeds were not budgeted.
The retirement contribution rate is set late in the budget process. The District received morerevenue than anticipated.
Federal Revenues
The District matches federal grant revenues to federal grant expenditures in each school year.There were less federal grant expenditures that resulted in less revenue recognized for the year.
2014-2015 Keystone to Opportunity grant proceeds were not budgeted.
The District received only minimal ACCESS reimbursement dollars during the school year.
EXPENDITURES:
The 2014-2015 budget included several positions that were not filled for the current school yearas well as substitute positions that were not needed.
The District continues to take back professional services previously contracted with the localintermediate unit.
During the 2014-2015 school year, the District did not need budgeted purchased professionalservices and technical services. However; Keystone To Opportunity grant professional serviceswere not budgeted but paid during the school year. Also, the costs of the Girard-GoshenElementary litigation exceeded anticipated amounts.
Budgeted repair and maintenance costs were not needed. Also, Xerox copying contracts wererestructured resulting in a savings for the District.
The District budgets transportation costs conservatively.
Tuition costs for cyber/charter, career and technology center, and special needs all ended with apositive variance for the 2014-2015 school year.
General supply costs are watched closely and are expended on an as-needed basis.
The reduction in the number of facilities and installation of more efficient heating systems resultedin a savings in natural gas and oil costs.
17
EXHIBIT B (Continued)
Budgetary Reserve funds were not utilized.
Transfers to the Capital Projects Fund were not made due to the uncertainty of the State Budget.
CAPITAL ASSET AND DEBT ADMINISTRATION
CAPITAL ASSETS
At June 30, 2015 the District had $64,690,137 invested in a broad range of capital assets, including land,land improvements, buildings, and furniture and equipment. Table A-S provides a breakdown of thevarious classes of capital assets for the years respectively.
Table A-6Governmental Activities
Capital Assets — net of depreciationFor the Fiscal Year Ended June 30,
2015 2014
Site Improvements $ 2,597,094 $ 2,680,107Buildings & Improvements 59,787,840 14,837,749Furniture & Equipment 2,298,753 1,452,611Construction in Progress 6,450 41,034,605
DEBT ADMINISTRATION
As of July 1, 2014, the District had total outstanding bonds payable of $48,115,000. During the periodJuly 1, 2014 to June 30, 2015 the District made principal payments toward its bonds in the amount of$1,332,500. Table A-7 lists the components of the District’s outstanding debt for the current and prioryears respectively.
Table A-7Outstanding Debt
For the Fiscal Year Ended June 30,
2015 2014
Bonds and Loans Payable $ 46,782,500 $ 48,115,000Compensated Absences 720,348 848,757
Total Outstanding Debt $ 47,502,848 $ 48,963,757
More detailed information about long-term liabilities is included in the Notes to the Financial Statements.
18
EXHIBIT B (Continued)
GASB 45 AND THE OPEB LIABILITY
The Governmental Accounting Standards Board issued Statement No. 45, Accounting and FinancialReporting by Employers for Postemployment Benefits Other Than Pensions, in June 2004. TheStatement establishes standards for the measurement, recognition, and display of OPEBexpense/expenditures and related liabilities (assets), note disclosures, and if applicable, requiredsupplementary information (RSl) in the financial reports of state and local governmental employers.Implementation is required in three phases based on a government’s total annual revenues in the firstfiscal year ending after June 15, 1999. The definitions and cutoff points for that purpose are the same asthose in GASB Statement No. 34. The Clearfield Area School District is considered a phase 2government for implementation purposes and was required to begin calculating any applicable liabilitybeginning in the 2008-09 fiscal year.
GASB 45 requires plan sponsors to perform periodic actuarial valuations to determine annual accountingcosts for OPEB plans and to keep a running tally of the extent to which these annual amounts are overor under funded. Statement 45 applies to just about any benefit that is provided after retirement exceptfor pension benefits: medical insurance, pharmacy, dental, vision, and hearing benefits plus lifeinsurance and long-term care insurance, when provided separately from a pension plan, The philosophydriving the accounting standard is that the postemployment benefits are part of the compensation that ispaid to employees in return for their services, and the cost of these benefits should be recognized whilethe employees are providing those services, rather than after they have retired.
The Annual OPEB Cost represents the cost to be expensed during the year for postemployment benefitsunder GASB 45. Currently, the District expenses the actual benefits paid during the year. Thecumulative difference between the Annual OPEB Cost and the benefits paid during the year resulted in aNet OPEB Obligation of $1,553,711 at June 30, 2015 and $1,588,420 at June 30, 2014 and is recordedas a liability on the balance sheet of the District for each year respectively.
GASB 68 AND THE NET PENSION LIABILITY
The primary objective of GASB Statement 68 is to improve accounting and financial reporting by stateand local governments for pensions. It also improves information provided by state and localgovernmental employers about financial support for pensions that is provided by other entities. TheStatement results from a comprehensive review of the effectiveness of existing standards of accountingand financial reporting for pensions with regard to providing decision-useful information, supportingmeasurements of accountability and inter-period equity, and creating additional transparency.
GASB 68 replaces the requirements of Statement No. 27, Accounting for Pensions by State and LocalGovernmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, asthey relate to pensions that are provided through pension plans administered as trusts or equivalentarrangements (hereafter jointly referred to as trusts) that meet certain criteria.
Statement No. 67, Financial Reporting for Pension Plans, revises existing standards of financial reportingfor most pension plans. Statement No. 68 and Statement No. 67 establish a definition of a pension planthat reflects the primary activities associated with the pension arrangement-determining pensions,accumulating and managing assets dedicated for pensions, and paying benefits to plan members asthey become due.
The scope of the Statement addresses accounting and financial reporting for pensions that are providedto the employees of state and local governmental employers through pension plans that are administeredthrough trusts that have the following characteristics:
19
EXHIBIT B (Continued)
Contributions from employees and nonemployer contributing entities to the pension plan andearnings on those contributions are irrevocable.
Pension plan assets are dedicated to providing pensions to plan members in accordance with thebenefit terms.
Pension plan assets are dedicated to providing pensions to plan members in accordance withthe benefit terms.
The Statement establishes standards for measuring and recognizing liabilities deferred outflows ofresources, and deferred inflows of resources, and expense/expenditures. For defined benefit pensions,the Statement identifies the methods and assumptions that should be used to project benefit payments,discount projected benefit payments to their actuarial present value, and attribute that present value toperiods of employer service.
Defined Benefit Pensions
Statement No. 68 requires the liability of employers and nonemployer contributing entities to employeesfor defined benefit pensions (net pension liability) to be measured as the portion of the present value ofprojected benefit payments to be provided through the pension plan to current active and inactiveemployees that is attributed to those employees’ past periods of service (total pension liability), less theamount of the pension plan’s fiduciary net position.
Actuarial valuations of the total pension liability are required to be performed at least every two years,with more frequent valuations encouraged. If a valuation is not performed as of the measurement date,the total pension liability is required to be based on update procedures to roll forward amounts from anearlier actuarial valuation (performed as of a date no more than 30 months and 1 day prior to theemployer’s most recent year-end). Unless otherwise specified by this Statement, all assumptionsunderlying the determination of the total pension liability and related measures set forth by this Statementare required to be made in conformity with Actuarial Standards of Practice issued by the ActuarialStandards Board.
Projections of benefit payments are required to be based on the benefit terms and legal requirementsexisting at the measurement date and to incorporate the effects of projected salary changes (if thepension formula incorporates future compensation levels) and service credits (if the pension formulaincorporates periods of service), as well as projected automatic postemployment benefit changes,including automatic cost-of-living-adjustments (COLAs). Projections are also required to include theeffects of ad hoc postemployment benefit changes (including ad hoc COLAs), if they are considered tobe substantially automatic.
Projected benefit payments are required to be discounted to their actuarial present value using the singlerate that reflects (1) a long-term expected rate of return on pension plan investments to the extent thatthe pension plan’s fiduciary net position is projected to be sufficient to pay benefits and pension planassets are expected to be invested using a strategy to achieve that return and (2) a tax-exempt, highquality municipal bond rate to the extent that the condition for use of the long-term expected rate ofreturn are not met.
The actuarial present value of projected benefit payments is required to be attributed to periods ofemployee service using the entry age actuarial cost method with each period’s service cost determinedas a level percentage of pay. The actuarial present value is required to be attributed for each employeeindividually, from the period when the employee first accrues pensions through the period when theemployee retires.
20
EXHIBIT B (Continued)
Cost-Sharing Employers
In financial statements prepared using the economic resources measurement focus and accrual basis ofaccounting, a cost-sharing employer that does not have a special funding situation is required torecognize a liability for its proportionate share of the net pension liability (of all employers for benefitsprovided through the pension plan)-the collective net pension liability. An employees proportion isrequired to be determined on a basis that is consistent with the manner in which contributions to thepension plan are determined, and consideration should be given to separate rates, if any, related toseparate portions of the collective net pension liability. The use of the employeCs projected long-termcontribution effort as compared to the total projected long-term contribution effort of all employers as thebasis for determining an employer’s proportion is encouraged.
A cost-sharing employer is required to recognize pension expense and report deferred outflows ofresources and deferred inflows of resources related to pensions for its proportionate share of collectivepension expense and collective deferred outflows of resources and deferred inflows of resources relatedto pensions.
In addition, the effects of (1) a change in the employer’s proportion of the collective net pension liabilityand (2) differences during the measurement period between the employer’s contributions and itsproportionate share of the total of contributions from employers included in the collective net pensionliability are required to be determined. These effects are required to be recognized in the employer’spension expense in a systematic and rational manner over a closed period equal to the average of theexpected remaining service lives of all employees that are provided with pensions through the pensionplan (active employees and inactive employees). The portions of the effects not recognized in theemployer’s pension expense are required to be reported as deferred outflows of resources or deferredinflows of resources related to pensions. Employer contributions to the pension plan subsequent to themeasurement date of the collective net pension liability also are required to be reported as deferredoutflows of resources related to pensions.
In governmental fund financial statements, the cost-sharing employer’s proportionate share of thecollective net pension liability is required to be recognized to the extent the liability is normally expectedto be liquidated with expendable available financial resources. Pension expenditures should berecognized equal to the total of (1) amounts paid by the employer to the pension plan and (2) the changebetween the beginning and ending balances of amounts normally expected to be liquidated withexpendable available financial resources.
The Statement requires that notes to financial statements of cost-sharing employers include descriptiveinformation about the pension plans through which the pensions are provided. Cost-sharing employersshould identify the discount rate and assumptions made in the measurement of their proportionateshares of net pension liabilities, similar to the disclosures about those items that should be made bysingle and agent employers. Cost-sharing employers, like single and agent employers, also shoulddisclose information about how their contributions to the pension plan are determined.
The Statement requires cost-sharing employers to present in required supplementary information 10-year schedules containing (1) the net pension liability and certain related ratios and (2) if applicable,information about statutorily or contractually required contributions, contributions to the pension plan, andrelated ratios.
The effective date for GASS No.68 is for fiscal years beginning after June 15, 2014. The Clearfield AreaSchool District has complied with the Statement and has disclosed the applicable information in thesefinancial statements.
21
EXHIBIT B (Continued)
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES
The tax base in Clearfield County has remained level with only minimal growth in the District’s tax base.Bionol Clearfield. LLC, a multi-building ethanol plant located in Clearfield Borough provided a large boostto the tax base in the 2011-2012 year. The property was determined to have an estimated market valueof $25750000 that generated approximately $465,000 of real estate tax revenue for the school district.In 2011, Bionol Clearfield, LLC declared bankruptcy; however, Pennsylvania Grain Processing, LLC(PGP) purchased the facility in 2012 and has continued to operate the facility as an ethanol plant. In thefall of 2012, PGP appealed their real estate assessment claiming that the real property’s value wasoverstated. Uncertain of the outcome of the appeal the District established an escrow account to coverprior year overpayments and would adjust future budgeted revenues to reflect assessment reductions ifnecessary. The District funded the escrow account with an initial contribution of $400000. In 2015 PGPrescinded its appeal; however, the District continues to maintain the escrow account for future taxappeals. The balance in the tax appeals savings account at June 30, 2015 was $402,188 and isclassified as assigned fund balance in the fund accounting financial statements and as part of theunrestricted net assets in the government-wide financial statements.
In an effort to promote economic development and growth, the Clearfield Area School District hasparticipated with the County to implement several programs that encourage employers to move theirfacilities into the area. The District is currently participating in the Local Economic Revitalization Tax Act(L.E.R.T.A.) and the Keystone Opportunity Zone programs (K.O.Z.). Both of these programs offer taxbreaks for new development in the county. The programs have been successful in bringing commercialbusiness into the area, and it appears that development is going to continue in these areas. In addition,the District has been working with several local organizations involved with promoting economicdevelopment. This has been labeled the “Yes We Can” initiative.
The District had experienced declining student enrollment during the last couple of years. However;enrollment has appeared to stabilize even though the declining trend is expected to continue based onenrollment projections by the Pennsylvania Department of Education. Due to past trends our District willcontinue to monitor our building capacity, participation in various programs, and class size when makingfacility, staffing and program decisions.
In years past the District has received at or near minimum state subsidy increases which do not coverthe increases in operating costs. The District is exploring all options in order to control cost increasesand reduce the increasing burden being placed on our community members. Staffing reductions, whenavailable, have been made as a result of this decline. The District will continue to evaluate staffingassignments in the future.
The general fund revenue budget for the 201 5-2016 year, $33,748,373 is $498,566 more than the finalbudget for 2014-2015. This represents a 1.50% increase in budgeted revenues. The budget does notinclude an increase in real estate taxes. The general fund expenditure budget for the 2015-2016 year,$37,682,631 is $1,122,193 more than the final budget for 2014-2015, which is an increase of 3.07%.The increase in expenditures is primarily the result of the launch of the PSERS employer contributionrate and increases in debt service requirements offset by savings in personnel casts. The 2015-2016budget required the use of $3,934,258 of unassigned fund balance to balance.
FUTURE CONSIDERATIONS
In November 2010 District Administration became aware that the roof at the Girard-Goshen ElementarySchool, 8962 Gillingham Road, Frenchville, Pennsylvania was deemed unsafe and immediatelyrelocated all students and staff to the Clearfield Elementary School, 700 High Level Road, Clearfield,
22
EXHIBIT B (Continued)
Pennsylvania. As of the statement date the Girard-Goshen Elementary School still remains vacant.Legal action was taken against all parties responsible for the construction defect. On January 5, 2016,the Board voted unanimously to accept the final global offer and end the legal proceedings on the case.The District has settled with all involved parties for a collective total of $957,500. The District received
$135,000 in settlements in the 2013-2014 school year and accepted additional settlements in the amount
of $395,000 during the 2014-2015 school year. The remaining settlements totaling $427,500 have either
already been received during the final six months of 2015 or are expected to be received by January 31,2016.
In July 2011 the Clearfield Area Board of School Directors approved a project to renovate the Clearfield
Area High School located at 2831 Washington Avenue, Clearfield, Pennsylvania. The project included a
complete building renovation as well as an addition to the existing structure. The site houses grades 7
through 12 and is renamed The Clearfield Area Junior Senior High School. The building is also the
home for the District’s Administration Offices and Technology Department. The total project is expected
to cost approximately $34,500,000 and it is being financed by general obligation bonds. Three separate
bond series were issued to finance the project. General Obligation Bonds, Series of 2011 in the amount
of $9,820,000 were settled October 31, 2011 with the first interest payment scheduled for March 1, 2012.
General Obligation Bonds, Series of 2012 in the amount of $9,995,000 were settled October 3, 2012 with
the first interest and principal payment scheduled for March 1, 2013. Finally, a portion of the General
Obligation Bonds, Series of 2013 in the amount of $18,650,000 settled March 28, 2013 with the first
interest and principal payment scheduled for September 1, 2013 were used to finance the balance of the
project. The building was rededicated and occupied as the Clearfield Junior-Senior High School
beginning with the 2014-2015 school year.
In September 2012 the Cleañeld Area Board of School Directors approved a project to renovate the
Clearfield Elementary School located at 700 High Level Road, Clearfield, Pennsylvania. The site houses
grades K through 6 and serves as the District’s only elementary school and is renamed Clearfield Area
Elementary. The remaining two elementary schools; Bradford Township Elementary and Centre
Elementary, were closed at the completion of the 201 3-2014 school year. The total project is expected
to cost approximately $11,600,000 and is being financed with general obligation bonds. Two separate
bond series were issued to finance the project. A portion of the General Obligation Bonds, Series of
2013 in the amount of $18,650,000 settled March 28, 2013 with the first interest and principal payment
scheduled for September 1,2013 were used to finance the initial costs of the project. General Obligation
Bonds, Series of 2014 in the amount to $9,365,000 were settled January 9, 2014 with the first interest
payment scheduled for March 15, 2014 were used to finance the balance of the project. The building
was rededicated and occupied as the Clearfield Area Elementary beginning with the 2014-2015 school
year.
Tuition costs for outside charter/cyber services have been rising at an alarming rate. Costs have risen
from $18,889 in 2001-2002 to a staggering $902,965 in 2014-2015. To complicate matters, the
Commonwealth has eliminated reimbursing LEfts for a percentage of their actual costs, To address this
issue, the District decided to start Clearfield Cyber Services, an alternative to outside cyber/charter
services. Clearfield Cyber Services allows a student to remain on the District’s rolls, take cyber
education courses, and receive a Clearfield Area School District diploma at the completion of the
program. The cost of the program is 50-70% less than outside cyber/charter services with the ultimate
goal being to bring the student back into the public education system.
23
EXHIBIT B (Continued)
During the summer of 2015 two major events took place in the Clearfleld Area School District, BradfordTownship Elementary School was sold and an auction selling the contents of all the vacant schools washeld. On July 28, 2015 Bradford Township Elementary School and all the accompanying propertylocated at 50 Bigler Road, BIgler, Pennsylvania was sold to Cen-Clear Child Services, Inc. for a cost of$70000. The location now serves as the central offices for Cen-Clear Child Services, Inc. DuringAugust 2015 Parkes Auctions & Appraisals conducted two auctions on all the contents of BradfordTownship Elementary, Centre Elementary, and the Clearfield Middle School. The auctions were heldAugust 15, 2015 and August 22, 2015 with gross proceeds totaling $126,096. The District realized aprofit of $94,657 from the sales after deducting all applicable costs.
The District is currently exploring plans to construct a new maintenance facility at the Junior-Senior HighSchool campus located at 2831 Washington Avenue, Clearfield, Pennsylvania. The Board is consideringa 7,500 square foot facility to house all the transportation vehicles of the District. Meetings witharchitects, engineers, and construction related companies are ongoing at this time.
Finally, as of the date of this report the Pennsylvania Legislators still have not adopted a 2015-2016State Budget. Due to the loss of state funding, many public schools throughout the Commonwealth wereforced to borrow monies to operate during the 201 5-2016 school year. Fortunately, the District is in goodfinancial condition and did not have to borrow any funds to operate. On December 23, 2015 theGovernor released billions in overdue payments for schools and social services while vetoing other itemsin the budget proposal. On January 5, 2016 the District received $8,492,954 in state funding of which
$8,013,608 was funding for the 2015-2016 school year. Although the budget impasse continues,
everyone is hopeful that a 2015-2016 State Budget will be adopted soon.
CONTACTING THE DISTRICT FINANCIAL MANAGEMENT
The Cleañeld Area School District 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 Board’s accountability for the money it receives. If you have questions about this report or wish to
request additional financial information, please contact Samuel J. Maney, CPA, Business Administrator
at the Clearuield Area School District, 2831 Washington Avenue, Clearfield, PA 16830, and (814) 765-
5511.
24
CLEARFIELD AREA SCHOOL DISTRICTClearfleld, Pennsylvania
STATEMENT OF NET POSITIONJUNE 30, 2015
EXHIBIT C
ASSETS:Current assets:Cash and cash equivalentsInvestmentsTaxes receivables - netDue from other governmentsState revenue receivableFederal revenue receivableOther receivablesInventories
GovernmentalActivities
$ 12,577,7035,036,3372,121,026
4451550781,375301,914136,112
0
43,669 $ 12,621,372o 5,035,3370 2,121,0250 445,550
1,081 782,45624,239 326,153
7,789 143,90151,385 51,385
Total Current Assets
Noncurrent Assets:Capital Assets:
Site improvements (net of accumulated depreciation)Building and building improvements
(net of accumulated depreciation)Furniture and equipment
(net of accumulated depreciation)Construction in progressLong-term prepayments
Total Noncurrent Assets
TOTAL ASSETS
DEFERRED OUTFLOWS OF RESOURCES
21,400,017
2,597,094
59,787,840
2,298,7536,450
105,351
64,796,488
85,196,505
4,235,136
128,163
0
0
57,05300
57,053
185,216
138,630
21,528,180
2,597,094
59,787,840
2,355,8066,450
106,351
64,853,541
85,381,721
4,373,766
TOTAL ASSETS AND DEFERRED OUTFLOWSOF RESOURCES $ 90,431,641 $ 323,846 $ 90,755,487
The accompanying notes are an integral part of these financial statements.
Business-TypeActivities Total
$
25
CLEARFIELD AREA SCHOOL DISTRICT
EXHIBIT C (Continued)
Clearfield, Pennsylvania
STATEMENT OF NET POSITIONJUNE 30, 2015
LIABILITIES:Current liabilities:
Internal balancesAccounts payableCurrent portion of long-term debtCurrent portion of compensated absencesAccrued salaries and benefitsPayroll deductions and withholdingsUnearned revenues
GovernmentalActivities
$ 181,0291,171,9821,362,500
18,7531,904,2021,616,496
8,117
Business-TypeActivities
$ (181,029)1,558
01,556
00
15,824
$
Total
01,173,5401,362.500
20,3091,904,2021,616,496
23,941
Total Current Liabilities 6,263,079 (162,091) 6,100,988
Noncurrent liabilities:Bonds and notes payable (net)Long-term portion of compensated absencesOther postemployment benefits (OPEB)Net pension liability
Total Noncurrent Liabilities 90,927,942 1,553,782 92,481,724
TOTAL LIABILITIES 97,191,021 1,391,691 98,582,712
DEFERRED INFLOWS OF RESOURCES
NET POSITION (DEFICIT):Invested in capital assets, net of related debtRestrictedUnrestricted (deficit)
TDTAL NET POSITION (DEFICIT)
TOTAL LIABILITIES, DEFERRED INFLOWSOF RESOURCES AND NET POSITION (DEFICIT) $ 90,431,641 $ 323,846 $ 90,755,487
The accompanying notes are an integral part of these financial statements.
45,065,974 0 45,065,974639,151 60,888 700,039
1,550,676 3,035 1,553,71 143,672,141 1,489,859 45,162,000
3,122,478
18,897,9665,501,496
(34,281,320)
(9,881,858)
3,229,000106,522
57,0530
(1,231,420)
(1,174,367)
18,955,0195,501,496
(35,512,740)
(11,056,225)
26
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2015
Program RevenuesIndirect Charges Operating Capital
Expenses For Grants and Grants andFunctions/Programs Expenses Allocation Services Contributions Contributions
Governmental Activities:Instruction $ 20147608 $ 0 $ 85,212 $ 4,927222 $ 0Instructional student support 2,760,122 0 0 444387 0Administrative and financial support services 3,519,292 0 0 257,923 0Operation and maintenance of plant services 3,123,485 0 2,200 164,133 0Pupil transportation 2,076,895 0 0 1241,786 0Student activities 799,871 0 43,469 46,896 0Community services 13661 0 0 7486 0Interest on long-term debt 1634,701 0 0 0 96,155Unallocated depreciation expense 17631 0 0 0 0
Total Governmental Activities 34,113,466 0 130,881 7,089,833 96,155
Business-Type Activities:Food services 1,429,695 0 472,678 872,237 0
Total Primary Government $ 35,543,161 $ 0 S 603,559 5 7,962,070 $ 96,155
General Revenues:Taxes:
Property taxes, levied for general purposes, netPublic utility realty, earned income and per capitataxes levied for general purposes, net
Grants, subsidies, and contributions not restrictedInvestment earningsMiscellaneous income
Total General Revenues, Special Items, ExtraordinaryItems and Transfers
Changes in Net Position
Net Position - July 1,2014:As previously reportedPrior period adjustment: Accumulated depreciation adjustmentEffect of adoption of GASS No. 68 - Net Pension Liability
Net Position (deficit) - July 1,2014, as restated
Net Position (deficit) - June 30, 2015
The accompanying notes are an integral part of these financial statements.
27
EXHIBIT D
Net (Expense) Revenue andChanges in Net Position
Business-Governmental Type
Activities Activities Total
$ (15135,374) $ 0 $ (15135,374)(2,335735) 0 (2335,735)(3,261,369) 0 (3261,369)(2957,152) 0 (2,957,152)
(835,109) 0 (835,109)(709,506) 0 (709,506)
(6175) 0 (6,175)(1,538,546) 0 (1,538546)
(17,631) 0 (17,631)
(26,796,597) 0 (26,796,597)
0 (84,780) (84,780)
(26,796,597) (84,780) (26,881,377)
12,736,036 0 12,736,036
1,861,622 0 1,861,62212,062,264 0 12,062,264
190,368 454 190,822561,742 (6,178) 555,564
27,412,032 (5,724) 27,406,308
615,435 (90,504) 524,931
30,945,525 316,249 31,261,774(401,435) 0 (401,435)
(41,041,383) (1,400,112) (42,441,495)
(10,497,293) (1,083,863) (11,581,156)
$ (9,881,858) $ (1,174,367) $ (11,056,225)
26
EXHIBIT E
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
BALANCE SHEETGOVERNMENTAL FUNDS
JUNE 30, 2015
TotalGeneral Capital Governmental
Fund Projects Funds
ASSETS:Cash and cash equivalents $ 9,415849 $ 3,161854 $ 12,577703Investments 5,036,337 0 5,036,337Taxes receivable, net 2,155,431 0 2,155,431Due from other governments 445,550 0 445,550State revenue receivable 781,375 0 781,375Federal revenue receivable 301,914 0 301,914Other revenue receivable 136,112 0 136,112
TOTALASSETS $ 18,272,568 S 3,161,854 $ 21,434,422
LIABILITIES, DEFERRED INFLOWS OFRESOURCES, AND FUND BALANCES:
LIABILITIES:Duetootherfunds S 181,029 $ 0 $ 181,029Accounts payable 646,480 37,162 683,642Accrued salaries and benefits 1,904,202 0 1,904,202Payroll deductions and withholdings 1,616,496 0 1,616,496Unearned revenues 8,117 0 8,117
TOTAL LIABILITIES 4,356,324 37,162 4,393,486
DEFERRED INFLOWS OF RESOURCES 1,720,272 0 1,720,272
FUND BALANCES:Restricted 2,906,756 3,124,692 6,031448Committed 2,037,916 0 2,037,916Assigned 402,188 0 402,188Unassigned 6,849,112 0 6,849,112
TOTAL FUND BALANCES 12,195,972 3,124,692 15,320,664
TOTAL LIABILITIES, DEFERRED INFLOWSOF RESOURCES AND FUND BALANCES $ 18,272,568 $ 3,161,854 $ 21,434,422
The accompanying notes are an integral part of these financial statements.
29
EXHIBIT F
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET POSITION
JUNE 30, 2015
TOTAL FUND BALANCES - GOVERNMENTAL FUNDS $ 15320664
Amounts reported for governmental activities in the statement ofnet 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 costof assets is $87,111,377 and the accumulated depreciation is $22,421,240. 64,690137
Long-term prepayments in governmental activities are not financial resources,and therefore, are not reported as assets in governmental funds. Long-termprepayments at year end consist of:
Bond insurance premium 106,351
Property taxes receivable will be collected this year, but are not availablesoon enough to pay for the current period’s expenditures and therefore,are deferred inflows of resources in the funds. 1,685,867
Deferred outflows of resources related to the net pension liability isincluded in the statement of net position. 4,235,136
Deferred inflows of resources related to the net pension liability isincluded in the statement of net position. (3,122,478)
Long-term liabilities, including bonds payable, are not due and payable inthe current period, and therefore, are not reported as liabilities in the funds.Long-term liabilities at year end consist of:
Bonds payable $ (46,782,500)Accrued interest on bonds (488,340)Bond premium/discount 354,026Other postemployment benefits (OPEB) (1,550,676)Compensated absences (657,904)Net pension liability (43,672,141) (92,797,535)
TOTAL NET POSITION (DEFICIT)- GOVERNMENTAL ACTIVITIES $ (9,881,858)
The accompanying notes are an integral part of these financial statements.
30
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2015
EXHIBIT G
Total
TOTAL REVENUES 35,128,002 35,132,999
EXPENDITURES:Current:
Total Current Expenditures 30,342,023 5,868,979 36,211,002
Debt Service:PrincipalInterest and fiscal charges
0 1,332,5001,569,899
Total Debt Service 2,902,399 0 2,902,399
Refund of prior year receipts 53,536 0 53,536
TOTAL EXPENDITURES 33,297,958 5,868,979 39,166,937
EXCESS (DEFICIENCY) OFOVER EXPENDITURES
REVENUES$ 1,830,044 $ (5,863,982) $ (4,033,938)
The accompanying notes are an integral part of these financial statements.
REVENUES:Local sourcesState sourcesFederal sources
General Capital GovernmentalProjectsFund
$ 15,368,29018,703,493
1,056,219
$
Funds
4,99700
$ 15,373,28718,703,493
1,056,219
Instruction 18,867,509 1,318 18,868,827Support services 10,765,197 745,721 11,510,918Noninstructional services 709,317 164,222 873,539Facility acq., const., and improvement 0 4,957,718 4,957,718
1,332,5001,569,899 0
31
EXHIBIT G (Continued)
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30. 2015
TDtalGeneral Capital Governmental
Fund Projects Funds
OTHER FINANCING SOURCES (USES):Sale of fixed assets 3646 0 3546
TOTAL OTHER FINANCINGSOURCES (USES) 3,646 0 3,646
NET CHANGE IN FUND BALANCES 1,833,690 (5,863,982) (4,030,292)
FUND BALANCE - JULY 1.2014 10,362,282 8,988,674 19,350,956
FUND BALANCE - JUNE 30. 2015 $ 12195,972 $ 3,124,692 $ 15,320,664
The accompanying notes are an integral part of these financial statements.
32
EXHIBIT H
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
RECONCILIATION OF THE GOVERNMENTAL FUNDSSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
TO THE STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2015
TOTAL NET CHANGE IN FUND BALANCE - GOVERNMENTAL FUNDS $ (4,030,292)
Amounts reported for governmental activities in the statement ofactivities are different because:
Capital outlays are reported in governmental funds as expenditures.However, in the statement of activities! the cost of those assets areallocated over their estimated useful lives as depreciation expense.This is the amount by which depreciation exceeded capital outlays inthe period. Capital outlays S 5,968,028
Depreciation expense 881,528 5,086,500
Because some property taxes will not be collected for several months after theDistrict’s fiscal year ends, they are not considered as “available” revenues in thegovernmental funds. Deferred inflows of resources decreased by this amount this year (407,744)
Repayment of bond principal and loans payable are expenditures in the governmentalfunds, but the repayment reduces long-term liabilities in the statement of net position. 1,332,500
In the statement of activities, certain operating expenses - compensatedabsences are measured by the amounts earned during the year. In thegovernmental funds, however, expenditures for these items are measuredby the amount of financial resources used. This amount represents thedifference between the amount earned versus the amount used. 128,820
The accompanying notes are an integral part of these financial statements.
33
EXHIBIT H (Continued)
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
RECONCILIATION OF THE GOVERNMENTAL FUNDSSTATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCE
TO THE STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2015
Bond insurance premiums are included as expenditures in the governmentalfunds. These costs are recorded as long-term prepayments in the statementof net position and are amortized over the term of the borrowing. $ (4,564)
Bond premiums/discounts are recorded as revenues/expenditures in thegovernmental funds. These costs are recorded as additions/reductions tobonds payable and amortized over the term of the borrowing. (13,416)
Interest on bonds and loans payable are recognized at the time of payment in thegovernmental funds but must be accrued at year end for the statement of net position. 6,714
OPEB liability is a required part of the government wide financial statements. 35,017
Pension expenses in the statement of activities differs from the amount reportedin the governmental funds because pension expenses are recognized on thestatement of activities based on the District’s proportionate share of the expensesof the cost-sharing pension plan, whereas pension expenditures are recognizedin the governmental funds when a requirement to remit contributions to the plan exists. (1,518,100)
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 615,435
The accompanying notes are an integral part of these financial statements.
34
EXHIBIT ICLEARFIELD AREA SCHOOL DISTRICT
Clearfleld, Pennsylvania
STATEMENT OF NET POSITIONPROPRIETARY FUND
JUNE 30, 2015
FoodService
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES:Current assets:Cash $ 43669Due from other funds 181,029Due from other governments 25,320Other receivables 7,789Inventories 51385
Total Current Assets 309192
Noncurrent assets:Machinery and equipment (net of accumulated depreciation) 57,053
Deferred outflows of resources 138,630
TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 504875
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION:Current liabilities:Accounts payable 1,558Current portion of compensated absences 1,556Unearned revenues 15,824
Total Current Liabilities 18,938
Noncurrent liabilities:Long-term portion of compensated absences 60,888Other postemployment benefits (OPEB) 3,035Net pension liability 1,489,859
Total Noncurrent Liabilities 1,553,782
TOTAL LIABILITIES 1,572,720
Deferred inflows of resources 106,522
NET POSITION (DEFICIT):Invested in capital assets, net of related debt 57,053Unrestricted (1,231,420)
TOTAL NET POSITION (DEFICIT) (1,174,367)
TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES,AND NET POSITION (DEFICIT) $ 504,875
The accompanying notes are an integral part of these financial statements.
35
EXHIBIT J
CLEARF1ELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
PROPRIETARY FUNDFOR THE YEAR ENDED JUNE 30, 2015
FoodService
OPERATING REVENUES:Food service revenue $ 472578
TOTAL OPERATING REVENUES 472,678
OPERATING EXPENSES:Salaries 451154
Employee benefits 374,039
Purchased property services 19,327
Other purchased service 3,664
Supplies 572,848
Depreciation 7,174
Duesandfees 1,415
Other operating expenditures 74
TOTAL OPERATING EXPENSES 1,429,695
OPERATING INCOME (LOSS) (957017)
NONOPERATING REVENUES (EXPENSES):
Earnings on investments 454
Gain (loss) on sale of fixed assets (6,494)
Refund of prior year expenditures 316
State sources 105,151
Federal sources 767,086
TOTAL NONOPERATING REVENUES (EXPENSES) 866,513
CHANGE IN NET POSITION (90,504)
TOTAL NET POSITION - JULY 1, 2014, as previously reported 316,249
Effect of adoption of GASB No. 68- net pension liability (1,400,112)
TOTAL NET POSITION (DEFICIT) - JUNE 30. 2015 $ (1,174,367)
The accompanying notes are an integral part of these financial statements.
36
EXHIBIT K
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF CASH FLOWSPROPRIETARY FUND
FOR THE YEAR ENDED JUNE 30. 2015
FoodService
CASH FLOWS FROM OPERATING ACTIVITIES:Cash received from users $ 483822Cash payments to employees for services (853891)Cash payments to suppliers for goods and services (595,705)
NET CASH (USED FOR) OPERATING ACTIVITIES (965,774)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:State sources 109980Federal sources 862,136Refund of prior year expenditures 316
NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 972,432
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:Gain (loss) on sale of fixed assets 2501
NET CASH PROVIDED BY CAPITAL AND RELATED FINANCING ACTIVITIES 2501
CASH FLOWS FROM INVESTING ACTIVITIES:Earnings on investments 454
NET CASH PROVIDED BY INVESTING ACTIVITIES 454
NETINCREASE INCASH 9,613
CASH - JULY 1,2014 34056
CASH - JUNE 30, 2015 $ 43,669
The accompanying notes are an integral pad of these financial statements.
37
EXHIBIT K (Continued)
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF CASH FLOWSPROPRIETARY FUND
FOR THE YEAR ENDED JUNE 30, 2015
FoodService
Reconciliation of operating income to net cash provided by (used for)operating activities:
OPERATING INCOME (LOSS) $ (957017)
Adjustments to reconcile operating income (loss) to net cash provided by (used for)operating activities:
Depreciation 7,174
(Increase) decrease in accounts receivable (73,157)
(Increase) decrease in inventories 65
Increase (decrease) in accounts payable 1,558
Increase (decrease) in accrued salaries and benefits (4,555)
Increase (decrease) in unearned revenue 1800
Increase (decrease) in long-term portion of compensated absences 411
Increase (decrease) in other postemployment benefits 308
Increase (decrease) in pension liability and deferred outflows/inflows 57,639
NET CASH (USED FOR) OPERATING ACTIVITIES $ (965,774)
The accompanying notes are an integral part of these financial statements.
38
EXHIBIT L
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF FIDUCIARY NET POSITIONFIDUCIARY FUNDS
JUNE 30, 2015
ActivityFund
ASSETS:Cash $ 102,948
TOTAL ASSETS $ 102,948
LIABILITIESDue to student groups $ 102,948
TOTAL LIABILITIES 102,948
NET POSITION 0
TOTAL LIABILITIES AND NET POSITION $ 102948
The accompanying notes are an integral part of these financial statements.
39
EXHIBIT Ni
CLEARRELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Districts financial statements are prepared in accordance with generally acceptedaccounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible forestablishing GAAP for state and local governments through its pronouncements (Statements andInterpretations). Governments are also required to follow the pronouncements of the Financial AccountingStandards Board (FASB) issued through November 30, 1989 (when applicable), that do not conflict with orcontradict GASB pronouncements, Although the District has the option to apply FASB pronouncementsissued after that date to its business-type activities and enterprise funds, the District has chosen not to doso. The more significant accounting policies established in G1AP and used by the District are discussedbelow.
A. Reporting Entity
The Board of Directors, a nine member group, is the level of government which hasgovernance responsibilities over all activities related to public elementary and secondary school educationwithin the jurisdiction of the local independent school district. The board receives funding from local, stateand federal government sources and must comply within the concomitant requirements of these fundingsource entities. However, the board is not included in any other governmental reporting entity” as definedin Section 2100, Codification of Governmental Accounting and Financial Reporting Standards, since boardmembers are elected by the public and have decision making authority, the power to designatemanagement, the responsibility to significantly influence operations and primary accountability for fiscalmatters.
Clearfield Area School District provides public education services to residents ofClearfield County. The district operates one elementary school and one Junior Senior High Schoolhousing seventh to twelfth grade students. Total enrollment for grades K-12 for the 2014-2015 schoolyear approximated 2,260 students.
B. Basic Financial Statements — Government-Wide Statements
The District’s basic financial statements include both government-wide (reporting theDistrict as a whole) and fund financial statements (reporting the District’s major funds). Both thegovernment-wide and fund financial statements categorize primary activities as either governmental orbusiness type.
In the government-wide statement of net position, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, (b) and are reported on a fullaccrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The District’s net position is reported in three parts — invested in capital assets,net of related debt; restricted; and unrestricted. The District first utilizes restricted resources to financequalifying activities.
Government-wide financial statements (i.e., the statement of net position and thestatement of activities) report information on all of the nonfiduciary activities of the school district. As ageneral rule, the effect of interfund activity has been eliminated from these statements. Governmentalactivities, which normally are supported by taxes and intergovernmental revenues, are reported separatelyfrom business-type activities, which rely, to a significant extent, on fees and charges for support.
40
EXHIBIT M (Continued)
The statement of activities demonstrates the degree to which the direct expenses of agiven function or segment are offset by program revenues. Direct expenses are those that are clearlyidentifiable within a specific function or segment. Program revenues include charges to customers whopurchase, use, or directly benefit from goods, services, or privileges provided by a given function orsegment. In addition, program revenues include grants and contributions that are restricted to meetingthe operational or capital requirements of a particular function or segment Taxes and other items notproperly included among program revenues are reported instead as general revenues.
C. Basic Financial Statements — Fund Financial Statements
The financial transactions of the District are reported in individual funds in the fundfinancial statements. Each fund is accounted for by providing a separate set of self-balancing accountsthat comprise its assets, liabilities, fund equity, revenues and expenditures/expenses.
The emphasis in fund financial statements is on the major funds in either thegovernmental or business-type activities categories. Nonmajor funds by category are summarized into asingle column. GASB No. 34 sets forth minimum criteria (percentage of the assets, liabilities, revenues orexpenditures/expenses of either fund category or the governmental and enterprise combined) for thedetermination of major funds.
1. Governmental Funds:
The focus of the governmental funds’ measurement (in the fund statements) is upondetermination of financial position and changes in financial position (sources, uses, and balances offinancial resources) rather than upon net income. The District reports these major governmental fundsand fund types:
a. The general fund is the District’s primary operating fund. It is used to account for andreport all financial resources except those required to be accounted for in anotherfund.
b. The capital projects funds account for transfers from other funds, bond proceeds forconstruction and related investment eamings for capital outlays not accounted for inanother fund.
The District has no non-major governmental funds.
The activities reported in these funds are reported as governmental activities in thegovernment-wide financial statements.
2. Proprietary Fund:
The focus of proprietary fund measurement is upon determination of operating income,changes in financial position, and cash flows. The generally accepted accounting principles applicable arethose similar to businesses in the private sector. The District reports the following proprietary fund type:
a. Enterprise funds are required to be used to account for operations for which a fee ischarged to external users for goods or services and the activity is flnanced with debtthat is solely secured by a pledge of the net revenues. The activities reported inthese funds are reported as business-type activities in the government-wide financialstatements. The District uses the enterprise fund to account for the operation of thecafeteria.
41
EXHIBIT M (Continued)
Proprietary funds distinguish operating revenues and expenses from nonoperating items.Operating revenues and expenses generally result from providing services and producing and deliveringgoods in connection with the proprietary fund’s principal ongoing operations. The principal operatingrevenues of the school district’s enterprise fund are food service charges. Operating expenses for theschool district’s enterprise fund include food production costs, supplies, administrative costs, anddepreciation on capital assets. All revenues or expenses not meeting this definition are reported asnonoperating revenues and expenses.
3. Fiduciary Funds:
Fiduciary Funds are used to report assets held in a trustee or agency capacity for othersand therefore are not available to support the District’s programs. The reporting focus is on net positionand changes in net position and is reported using accounting principles similar to proprietary funds,
The District’s fiduciary fund is presented in the fiduciary fund financial statements by type(pension, private purpose and agency). Because by definition these assets are being held for the benefitof a third party (other local governments, private parties, pension participants, etc.) and cannot be used toaddress activities or obligations of the government, these funds are not incorporated into the government-wide statements.
The fiduciary fund is used to account for the operation of the student activity accounts ofthe District.
D. Basis of Accounting
Basis of accounting refers to the point at which revenues or expenditures/expenses arerecognized in the accounts and reported in the financial statements. It is related to the timing of themeasurements made regardless of the measurement focus applied.
The government-wide financial statements are reported using the economic resourcesmeasurement focus and the accrual basis of accounting as are the proprietary fund and the fiduciary fundfinancial statements. Revenues are recorded when earned and expenses are redorded when a liability isincurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in theyear for which they are levied. Grants and similar items are recognized as revenue as soon as alleligibility requirements imposed by the provider have been met. Net position (total assets less totalliabilities) is used as a practical measure of economic resources and the operating statement includes alltransactions and events that increased or decreased net position. Depreciation is charged as expenseagainst current operations and accumulated depreciation is reported on the statement of net position.
The governmental fund financial statements are reported using the current financialresources measurement focus and the modified accrual basis of accounting. Revenues are recognizedas soon as they are both measurable and available. Revenues are considered to be available when theyare collectible within the current period or soon enough thereafter to pay liabilities of the current period.For this purpose, the government considers tax revenue to be available if collected within 60 days of theend of the fiscal period. Revenue from federal, state and other grants designated for payment of specificschool district expenditures is recognized when the related expenditures are incurred; accordingly, whensuch funds are received, they are recorded as unearned revenues until earned. Expenditures generallyare recorded when a liability is incurred, as under accrual accounting. However, debt serviceexpenditures related to compensated absences and claims and judgments, are recorded only whenpayment is due.
Proprietary fund operating revenues and expenses, such as charges for services,program services, and administrative expenses, result from exchange transactions associated with theprincipal activity of the fund. Exchange transactions are those in which each party receives and gives upessentially equal values. Nonoperating revenues and expenses, such as operating grants, subsidies,investment earnings, interest expense, and bond issuance costs, result from nonexchange transactions orancillary activities.
42
EXHIBIT M (Continued)
Amounts paid to acquire capital assets are capitalized as assets in the fund financialstatements, rather than reported as expenses. Proceeds of long-term debt are recorded as a liability inthe fund financial statements, rather than as revenue. Amounts paid to reduce long-term indebtednessare reported as a reduction of the related liabilities, rather than an expense.
E. Budgets and Budgetary Accounting
An operating budget is adopted prior to the beginning of each year for the General Fundon a modified accrual basis of accounting. The General Fund is the only fund for which a budget is legallyrequired.
The Pennsylvania School Code dictates specific procedures relative to adoption of theSchool District’s budget and reporting of its financial statements, specifically:
The School District, before levying annual school taxes, is required to prepare anoperating budget for the succeeding fiscal year.
The School District is required to publish notice by advertisement, at least once in twonewspapers of general circulation in the municipality in which it is located, and withinfifteen days of final action, that the proposed budget has been prepared and is availablefor public inspection at the administrative office of the School District.
Notice that public hearings will be held on the proposed operating budget must beincluded in the advertisement; such hearings are required to be scheduled at least tendays prior to when final action on adoption is taken by the Board.
Legal budgetary control is maintained at the sub-function/major object leveL The Boardof School Directors may make transfers of funds appropriated to any particular item of expenditure bylegislative action in accordance with the Pennsylvania School Code. Management may amend the budgetat the sub-function/sub-object level without Board approval. Appropriations lapse at the end of the fiscalperiod. Budgetary information reflected in the financial statements is presented at or below the level ofbudgetary control and includes the effect of approved budget amendments. The budget for the year endedJune 30, 2015 was approved by the Board of Directors on June 24, 2014 in the amount of $36,560,438with a tax millage of 92.84 mills for Clearfield County.
Included in the General Fund budget are program budgets as prescribed by the federaland state agencies funding the program. These budgets are approved on a program by program basis bythe federal and state funding agencies.
F. Financial Statement Amounts
1. Cash and Cash Equivalents;
The District has defined cash and cash equivalents to include cash on hand, demanddeposits, and all highly liquid investments with a maturity of three months or less when purchased to becash equivalents.
2. Receivables and Payables:
Activity between funds that are representative of lending/borrowing arrangementsoutstanding at the end of the fiscal year are referred to as ‘due to/from other funds”. Any residualbalances outstanding between the govemmentat activities and business-type activities are reported in thegovernment-wide financial statements as “internal balances.
43
EXHIBIT M (Continued)
Advances between funds, as reported in the fund financial statements, are offset by afund balance reserve account in applicable governmental funds to indicate that they are not available forappropriation and are not expendable available financial resources.
3. Inventories:
On government-wide financial statements, the district feels the inventory will beimmaterial in amount and has decided to remove it from the statement of net position.
A physical inventory of the Cafeteria Fund food and supplies was taken as of June 30,2015. The inventory consisted of government donated commodities which were valued at estimated fairmarket value, and purchased commodities and supplies, both valued at cost using the first-in, first-out(FIFO) method.
4. Caøital Assets:
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g.,roads, sidewalks, and similar items), are reported in the applicable governmental or business-typeactivities columns in the government-wide financial statements. Capital assets are defined by the schooldistrict as assets with an initial, individual cost of more than $1,500 and an estimated useful life in excessof one year. In addition, capital assets purchased with long-term debt may be capitalized regardless of thethresholds established. Such assets are recorded at historical cost or estimated historical cost ifpurchased or constructed. Donated capital assets are recorded at estimated fair market value at the dateof donation.
The costs of normal maintenance and repairs that do not add to the value of the asset ormaterially extend asset lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects areconstructed. Interest incurred during the construction phase of capital assets of business-type activities isincluded as part of the capitalized value of the assets constructed.
All reported capital assets are depreciated using the straight-line method over thefollowing estimated useful lives:
Assets Years
Buildings 20 to 40Building improvements 20 to 40Land improvements 20Furniture 20Equipment 5 to 20
Proprietary fund equipment purchases are capitalized in the proprietary fund at cost anddepreciated on a straight-line basis over 11 years.
5. Long-Term Obligations:
In the government-wide financial statements, and proprietary fund types in the fundfinancial statements, long-term debt and other long-term obligations are reported as liabilities in theapplicable governmental or business type activity columns in the statement of net position. Bondpremiums and discounts are deferred and amortized over the life of the bonds. Bonds payable arereported net of the applicable bond premium or discount.
In the fund financial statements, governmental fund types recognize bond premiums anddiscounts during the current period. The face amount of debt issued is reported as other financingsources while discounts on debt issuances are reported as other financing uses. Issuance costs, whetheror not withheld from the actual debt proceeds received, are reported as debt service expenditures.
44
EXHIBIT M (Continued)
6. Compensated Absences:
The District’s policies regarding vacation time under various contracts provide foremployees to accumulate sick days which they are paid for upon retirement or termination of service. Theamount the employee is compensated and the number of days varies based on their contract and theiryears of service
The entire compensated absence liability is reported on the government-wide financialstatements.
For governmental funds, the current portion of unpaid compensated absences is theamount that is normally expected to be paid using expendable available financial resources. In enterprisefunds, the entire amount of compensated absences is reported as a fund liability.
7. Government-wide and Proprietary Fund Net Position:
Government-wide and proprietary fund net position is divided into three components:
• Invested in capital assets, net of related debt — consist of the historical cost ofcapital assets less accumulated depreciation and less any debt that remainsoutstanding that was used to finance those assets.
• Restricted — consists of net position that is restricted by the District’s creditors (forexample, through debt covenants), by the state enabling legislation (throughrestrictions on shared revenues), by grantors (both federal and state), and byother contributors.
• Unrestricted — all other net position is reported in this category.
When both restricted and unrestricted resources are available for use, it is the District’spolicy to use restricted resources first, then unrestricted resources as they are needed.
8, Governmental Fund Balances:
Effective July 1, 2010, the District adopted the provisions of GASB Statement No. 54,Fund Balance Reporting and Govemmental Fund Type Definitions. The objective of the statement is toenhance the usefulness of fund balance information by providing clearer fund balance classifications thatcan be more consistently applied and by clarifying the existing governmental fund type definitions.
As prescribed by GASS Statement No. 54, governmental funds report fund balance inclassifications based primarily on the extent to which the District is bound to honor constraints on thespecific purposes for which amounts in the funds can be spent. Fund balance for governmental funds canconsist of the following:
Nonspendable Fund Balance — includes amounts that are (a) not in spendable form, or (b) legally orcontractually required to be maintained intact. The “not in spendable form” criterion includes items thatare not expected to be converted to cash, for example: inventories, prepaid amounts, and long-term notesreceivable.
Restricted Fund Balance — includes amounts that are restricted for specific purposes stipulated byexternal resources providers, constitutionally or through enabling legislation. Restrictions may effectivelybe changed or lifted only with the consent of resource providers.
45
EXHIBIT M (Continued)
Committed Fund Balance — includes amounts that can only be used for the specific purposes determinedby a formal action of the District’s highest level of decision-making authority, the District’s school board.Commitments may be changed or lifted only by the District taking the same formal action that imposed theconstraint originally (for example: resolution and ordinance).
Assigned Fund Balance — includes amounts intended to be used by the District for specific purposes thatare neither restricted nor committed. Intent is expressed by (a) the school board or (b) a body (a budget,finance committee, or business manager) to which the assigned amounts are to be used for specificpurposes. Assigned amounts also include all residual amounts in governmental funds (except negativeamounts) that are not classified as nonspendable, restricted, or committed.
Unassigned Fund Balance — this residual classification is used for all remaining amounts.
The District’s policy on fund balance does not dictate which category of unrestricted fundbalance is spent first, when resources are available to be spent in various categories. As such, committedamounts will be reduced first, followed by assigned amounts, and then unassigned amounts. TheDistrict’s policy also does not dictate whether restricted (nonspendable or restricted) or unrestricted(committed, assigned, and unassigned) is spent first when resources are available in both categories. Assuch, in these circumstances, restricted will be assumed to have been spent first followed by theunrestricted categories.
9. Pensions:
The District provides eligible employees with retirement benefits through the PublicSchool Employer’s Retirement System (“PSERS”), a governmental cost-sharing multiple-employer definedbenefit pension plan, PSERS was established as of July 18, 1917, under the provisions of Public Law1043, No. 343.
For purposes of measuring the net pension liability, deferred outflows of resources anddeferred inflows of resources related to pensions, and pension expense, information about the fiduciarynet position of PSERS and additions to/deductions from PSERS fiduciary net position have beendetermined 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 withthe benefit terms and investments are reported at fair value.
10. Eliminations and Internal Balances:
Transactions and balances between governmental activities have been eliminated in thegovernment-wide financial statements. Residual amounts due between governmental and business-typeactivities are labeled “internal balances” on the statement of net position.
11. Use of Restricted Net Position/Fund Balances:
When an expenditure is incurred that can be paid using either restricted or unrestrictedresources, the District’s policy is to use restricted amounts first, and then unrestricted amounts as needed.
12. Deferred Outflows/Inflows of Resources:
Deferred outflows of resources represent a consumption of net position that applies to afuture period and so will not be recognized as an outflow of resources (expense/expenditure) until then.The District has one type of item, deferred outflows of resources related to the net pension liability, thatqualifies for reporting in this category.
Deferred inflows of resources represent an acquisition of net position that applies to afuture period and so will not be recognized as an inflow of resources (revenue) until that time. Under themodified accrual basis of accounting, the District has a type of item that qualifies for reporting in thiscategory. Accordingly, the item, unavailable revenues, is reported only in the governmental funds balancesheet. The governmental funds report unavailable revenues from real estate taxes not yet collected
48
EXHIBIT M (Continued)
which are deferred and recognized as an inflow of resources in the period that the amounts becomeavailable. The District also reports certain changes in its net pension liability in the government-widestatement of net position in this category.
13, Use of Estimates:
The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenue and expenses during thereporting period. Actual results could differ from those estimates.
14. Prior Period Restatement:
The July 1, 2014 net position was restated to correct a depreciation error that resultedfrom unrecorded depreciation expense for prior years. The effect of this correction decreased theDistricts net position at July 1, 2014 by $401,435.
In addition, the July 1, 2014 net position was also decreased by $42,441,495 as a resultof the adoption of GASS Statement No. 68 detailed later.
G. Accounting Principles Adopted in 2015
The District adopted GASB Statement No. 68, Accounting and Financial Reporting forPensions — an amendment of GASB Statement No. 27, for the year ended June 30, 2015. This statementestablishes accounting and financial reporting standards for the activities of pension plans that areadministered through trusts and meet certain criteria. This statement replaces the requirements ofStatement No. 27, Accounting for Pensions by State and Local Governmental Employers, and StatementNo. 50, Pension Disclosures, as they relate to pension plans that are administered through trusts orequivalent arrangements that meet certain requirements. The effect of this adoption decreased theDistrict’s governmental activities net position at July 1, 2014 by $42,441,495 and expanded notedisclosures and required supplementary information.
The District adopted GASB Statement No. 71, Pension Transition for Contributions MadeSubsequent to the Measurement Date for the year ended June 30, 2015. The objective of this statementis to address an issue regarding application of the transition provisions of Statement No. 68. The issuerelates to amounts associated with contributions, if any, made by a state or local government employer ornon-employer contributing entity to a defined benefit pension plan after the measurement date of thegovernment’s beginning net pension liability. The provisions of GASB No. 71 were applied simultaneouslywith the provisions of GASB No. 68.
NOTE 2— RELATED ORGANIZATIONS:
Clearfield County Career and Technology Center:Clearfield Area School District and five neighboring districts jointly participate in the
operation of the Clearfield County Career and Technology Center. The purpose of the Clearfield CountyCareer and Technology Center (CCCTC) is to provide students with training in various fields of education.The Clearfield County Career and Technology Center Board is comprised of one member from eachsponsoring school for a total of six with another member from each school as alternates. This board,called the Joint Operating Committee, is the governing board for policy making decisions. The ClearfieldCounty Career and Technology Center receives its funding for operations from the member schools basedon the number of students in attendance times the money needed to operate. During the year ended June30, 2015, the Clearfield Area School District paid the Clearfield County Career and Technology Center$927,983 for operating expenses. The results of the operation of the Clearfield County Career andTechnology Center are not included with the audit report of the Clearfield Area School District,
47
EXHIBIT M (Continued)
Central Intermediate Unit #10:The school district is a participating member of the Central Intermediate Unit #10 (CIU).
The CIU is run by a joint committee of members from each of the 17 participating districts, Theparticipating districts annually approve the CIU’s annual operating budget, The CIU is a self-sustainingorganization that provides services for fees to participating districts. As such, the District has no on-goingfinancial interest or financial responsibility in the CIU. The CIU contracts with the participating districts tosupply special education services, computer services, and acts as a conduit for certain federal programs.
NOTE 3—CASH AND CASH EQUIVALENTS:
Pennsylvania statutes provide for investment of govemmental funds into certainauthorized investment types including U.S. Treasury bills, other short-term U.S. and Pennsylvaniagovernment obligations, and insured or collateralized time deposits and certificates of deposit. Thestatutes do not prescribe regulations related to demand deposits; however, they do allow the pooling ofgovernmental funds for investment purposes. In addition to the investments authorized for governmentalfunds, fiduciary fund investments may also be made in corporate stocks and bonds, real estate and otherinvestments consistent with sound business practice.
The deposit and investment policy of the District adheres to state statutes and prudentbusiness practice. Governmental funds are either maintained in demand deposits, highly liquid moneymarket funds, or pooled for investment purposes in the Pennsylvania School District Liquid Asset Fund(PSDLAF) or the Pennsylvania Local Government Investment Trust (PLGIT) and are captioned as “Cashand Cash Equivalents” in the Balance Sheet. These amounts are stated at cost, which approximatesmarket. There were no deposit transactions during the year that were in violation of either the statestatutes or the policy of the District.
Custodial Credit Risk — Deposits:
Custodial credit risk for deposits is the risk that, in the event of a bank failure, agovernment’s deposits may not be returned to it. The District’s policy is to collateralize deposits by statelaw.
At June 30, 2015 the District’s carrying amount of bank deposits was $12,342,809 and thebank balance was $13,131,736. Of the bank balance, $250,000 is covered by Federal DepositoryInsurance and $12,881,736 is collateralized in accordance with Act 72 of the Pennsylvania StateLegislature which requires the financial institutions to pool collateral for all government deposits and havethe deposits held by an approved custodian in the financial institution’s name.
As of June 30, 2015, $12,881,736 of the District’s bank balance of $13,131,736 wasexposed to custodial credit risk as follows:
Uninsured and uncollateralized $ 0Collateralized with securities held
by the pledging financial institution 0Uninsured and collateral held by the pledging 12.861.736
Bank’s trust department not in the District’s nameTotal
Reconciliation to Financial Statements
Uncollateralized amount above S12,881 736Plus: insured amount 250,000Less: outstanding checks (786,927)Plus: outstanding deposits 0Carrying amount — cash balances 0
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EXHIBIT M (Continued)
Plus: deposit in money market mutual fundsconsidered cash equivalents 381,511
Total cash per financial statements
Investments:
As of June 30, 2015, the District had the following investments:
Investment Fair Value
PLOIT/ARM $ 381,511Certificates of deposit - portfolio brokered account 5,036,337
Credit Risk
The District has no investment policy that would limit its investment choices to certaincredit ratings. As of June 30, 2015, the District’s investment in PLOIT was rated APA by Standard &Poor’s.
Custodial Credit Risk — Investments
Custodial credit risk for investments is the risk that, in the event of failure of thecounterparty, a government will not be able to recover the value of investment or collateral securities thatare in the possession of an outside party. The certificates of deposit, portfolio brokered account, is 100%FDIC insured. It consists of numerous certificates of deposit each less than $250,000 from separatebanks across the nation to ensure full FDIC insurance.
Reconciliation to Financial Statements
Total investment above $5,417,848Less: deposits in money market funds
considered cash equivalents (381,511)Total investments per financial statements
NOTE 4—REAL ESTATE PROPERTY TAXES:
Real Estate Property Taxes:
Real estate property taxes attach as an enforceable lien on property on January 1. Taxesare collected at a 2% discount through October 15; face amount due from October 16 through December15; and 10% penalty added after December 15. The County Assessment Office calculates the yearly taxlevy and distributes the individual tax duplicates to the school district’s appointed tax collectors. The taxcollectors are responsible for tax collections. Tax revenues are recognized in the period in which they areremitted by the tax collectors.
The school district, in accordance with GAAP, recognized the delinquent and unpaidtaxes receivable reduced by an allowance for uncollectible taxes as determined by the administration. Aportion of the net amount estimated to be collectible which was measurable and available within 60 dayswas recognized as revenue and the balance reported as a deferred inflow of resources in the fundfinancial statements.
Other Tax Revenues:
In addition to real estate taxes, the District imposes the following taxes:
Earned income tax 0.5%Real estate transfer tax 0.5%Local services tax $5.00
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EXHIBIT M (Continued)
The balances at June 30, 2015 are as follows:
Allowance for Net Estimated DeferredGross Taxes Uncollectible to be Tax Revenue InflowsReceivable Taxes Collectible Recognized of Resources
Real estate $2,125,556 $34,405 $2091181 $370,909 $1,720,272Earned income 16,135 0 16135 16,135 0Real estate transfers 13,240 0 13,240 13240 0Local services 470 0 470 470 0
$2 121.026 $400,754
NOTES—DUE FROM OTHER GOVERNMENTS:
Amounts due from other governments represent receivables for revenues earned by theschool district. At June 30, 2015, the foflowing amounts are due from other governmental units:
GovernmentalActivities
Central Intermediate Unit #10
NOTE 6— CHANGES IN CAPITAL ASSETS:
Capital asset activity for the year ended June 30, 2015 was as follows:
Beginning EndingBalance Increases Decreases Balance
Governmental Activities:Capital Assets Being Depreciated
Site Improvements $ 3,126,130 $ 62,270 $ 0 $ 3,188,400Building and Building Improvements 29,505,027 45,857,298 0 75,362,325Furniture and Equipment 7,477.587 1,076,615 0 8,554,202
Total Assets Being Depreciated 40,108,744 46.996.183 0 87.104,927
Less Accumulated Depreciation ForSite Improvements 446,023 145,283 0 591,306Building and Building Improvements 15,065,713 505,772 0 15,574,485Furniture and Equipment 6.024.976 230.473 0 6,255,449
Total Accumulated Depreciation 21,539,712 881.528 0 22,421,240
Total Capital Asset5Being Depreciated, Net $46114655 $ 0 $Z
Business-Tyøe Activities:Capital Assets Being Depreciated
Equipment $ 286,736 $ 0 $ (19,145) $ 267,591
Less Accumulated Depreciation For:Equipment 213,514 7,174 (10,150) 210,538
Business-Type ActivitiesCapital Assets, Net $ 73,222 $ (7.174) $ (8,995) $,,,,7.053
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EXHIBIT M (Continued)
Depreciation expense was charged to functions/programs of the primary government asfollows:
Governmental Activities:Instructional services $555362Support services 308535Unallocated depreciation expense 17,631
Total depreciation expense — governmental activities
Business-type Activities:Cafeteria $ 7,174
Total Depreciation expense — business-type activities $ 7174
Construction in progress consists of the following:
Maintenance Building $ 6.450
Costs will be accumulated until the assets are put in service and then will be reclassifiedto capital assets.
NOTE 7—GENERAL LONG-TERM DEBT:
On October 6, 2010, the Clearfield Area School District issued Qualified SchoolConstruction Bonds, Series of 2010, totaling $1,965,000. The purpose of this issue was to fund areroofing project at the Clearfield Area High School. The Series of 2010 has a scheduled maturity ofSeptember , 2027 and has interest at 5.00 percent.
On October 31, 2011, the Clearfield Area School District issued General ObligationsBonds, Series of 2011, totaling $9820000. Proceeds of the bonds will be applied toward payment of thecosts of the acquiring, designing, constructing, furnishing, and equipping alterations, additions,renovations to the Clearfield Area High School and other improvements to the District’s existing schoolbuildings. The Series of 2011 has a scheduled maturity of September 1 2026 and has interest at variousrates ranging from 2.00 to 3.00 percent depending on maturity.
On October 3, 2012, the Clearfield Area School District issued General Obligation Bonds,Series 2012, totaling $9,995,000. Proceeds of the bonds will be applied toward payment of the costs ofthe acquiring, designing, constructing, furnishing, and equipping alterations, additions, renovations to theClearfield High School and such other improvements to the School District’s existing school buildings andfacilities, and to pay the costs of issuing the bonds. The Series of 2012 has a scheduled maturity ofSeptember 1, 2037 and has interest at various rates ranging from .40 to 3.50 percent depending onmaturity.
On March 28, 2013, the Clearfield Area School District issued General Obligations Bonds,Series of 2013, totaling $18,650,000. Proceeds of the bonds will be applied toward payment of the costsof the acquiring, designing, constructing, furnishing, and equipping alterations, additions, renovations tothe Clearfield High School, the Clearfield Elementary School and such other improvements to the SchoolDistrict’s existing school buildings and facilities, and to pay the costs of issuing the bonds. The Series of2013 has a scheduled maturity of September 1, 2038 and has interest at various rates ranging from .30 to3.60 percent depending on maturity.
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EXHIBIT M (Continued)
On January 9, 2014, the Clearfield Area School District issued General ObligationsBonds, Series of 2014, totaling $9,365,000. Proceeds of the bonds will be applied toward payment of thecosts of the acquiring, designing, constructing, furnishing, and equipping alterations, additions,renovations to the Clearfield Elementary School and such other improvements to the School District’sother existing school buildings and facilities as funds may be available, and to pay the costs of issuing andinsuring the bonds. The Series of 2014 has a scheduled maturity of September 15, 2038 and has interestat various rates ranging from .35 to 4.60 percent depending on maturity.
The following is a schedule of the debt activity during the fiscal year ended June 30, 2015:
Total GeneralSeries of Series of Series of Series of Series of Long-Term
2010 2011 2012 2013 2014 Debt
Balance July 1,2014 $1,715,000 $8,590,000 $9,825,000 $18,620,000 $9,365,000 $48,115,000Borrowings 0 0 0 0 0 0Principal paid (122,500) (555,000) (5,000) (410,000) (240,000) (1,332,500)
Balance June 30, 2015 $JflQ $18210000 $4J6Z5QO
The following bond (premium) discounts are included in the long term bonds and notespayable listed on the statement of net position and are being amortized over the life of the bond.
Series of 2011 S (45,252)Series of 2012 103,506Series of 2013 200,476Series of 2014 95,296
Ss
The following is a schedule of the annual requirements to amortize the school district’sdebt and interest:
Year EndingJune 30 Principal Interest Total
2016 $ 1,362,500 $ 1449,346 $ 2,811,8462017 1,402,500 1417471 2,8199712018 1,432500 1383227 2,815,7272019 1,477,500 1,346,633 2,824,1332020 1,517500 1,308,983 2,826,4832021-2025 8,257,500 5,930,593 14,188,0932026-2030 9,572,500 4713,588 14,286,0882031-2035 11230,000 2,958,113 14,188,1132036-2039 10,530,000 881,952 11,411,952
Total $4ZZ2
Compensated Absences:Under the system of financial accounting and reporting for Pennsylvania School Systems,
the School District accrues for certain accumulated employee benefits, such as unpaid vacation and sickpay. Calculation of this amount is determined by the appropriate vacation, sick and retirement lump-sumpayments which would be available to employees if they would leave or retire from the School District andis adjusted for expected turnover rates of employees. Accrued benefit days, multiplied by appropriatesalary amounts, are reflected as a noncurrent liability unless retirements are likely within the upcomingfiscal year. Those costs are reflected as a liability of the General Fund under Governmental Activities andBusiness-Type Activities at June 30, 2015 and totaled $720,348.
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EXHIBIT M (Continued)
The entire compensated absence liability is reported on the government-wide financialstatements.
For governmental funds, the current portion of unpaid compensated absences is theamount that is normally expected to be paid using expendable available financial resources. In enterprisefunds, the entire amount of compensated absences is reported as a fund liability.
NOTES— NET POSITION: -
Net position reflected on the Statement of Net Position for the governmental activitiesconsist of the following items:
Invested in capital assets, net of related debt $18,897,966
Restricted:Amounts for capital projects 2594,740Debt obligatIons 2,906,756
Unrestricted (34.281320)$ t9.881.858)
NOTE 9—FUND BALANCES:
Fund balances reflected on the Balance Sheet for governmental funds consist of thefollowing items:
Restricted:Amounts for capital projects $ 3,124,692Debt obligations 2,906,756
Committed:Future retirement increase 2,037,916
Assigned:Future tax appeals cases 402,188
Unassigned 6.849,112$15320664
NOTE 10- RETIREMENT PLAN:
Plan Description
PSERS is a governmental cost-sharing multi-employer defined benefit pension plan thatprovides retirement benefits to public school employees of the Commonwealth of Pennsylvania. Themembers eligible to participate in the System include all full-time public school employees, part-timehourly public school employees who render at least 500 hours of service in the school year, and part-timeper diem public school employees who render at least 80 days of service in the school year in any of thereporting entities in Pennsylvania. PSERS issues a publicly available financial report that can be obtainedat www.psers.state.pa.us.
Benefits Provided
PSERS provides retirement, disability, and death benefits. Members are eligible formonthly retirement benefits upon reaching (a) age 62 with at least 1 year of credited service; (b) age 60with 30 or more years of credited service; or (c) 35 or more years of service regardless of age. Act 120 of
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EXHIBIT M (Continued)
2010 (Act 120) preserves the benefits of existing members and introduced benefit reductions forindividuals who become new members on or after July 1, 2011. Act 120 created two new membershipclasses, Membership Class T-E (Class T-E) and Membership Class T-F (Class T-F). To qualify fornormal retirement, Class T-E and Class T-F members must work until age 65 with a minimum of 3 yearsof service or attain a total combination of age and service that is equal to or greater than 92 with aminimum of 35 years of service. Benefits are generally equal to 2% or 2.5%, depending uponmembership class, of the member’s final average salary (as defined in the Code) multiplied by the numberof years of credited service. For members whose membership started prior to July 1, 2011, aftercompletion of five years of service, a member’s right to the defined benefits is vested and early retirementbenefits may be elected. For Class T-E and Class T-F members, the right to benefits is vested after tenyears of service.
Participants are eligible for disability retirement benefits after completion of five years ofcredited service. Such benefits are generally equal to 2% or 2.5%, depending upon membership class, ofthe member’s final average salary (as defined in the Code) multiplied by the number of years of creditedservice, but not less than one-third of such salary nor greater than the benefit the member would have hadat 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 62with at least one year of credited service (age 65 with at least three years of credited service for Class T-Eand Class T-F members) or who has at least five years of credited service (ten years for Class T-E andClass T-F members). Such benefits are actuarially equivalent to the benefit that would have beeneffective if the member had retired on the day before death.
Contributions
Member Contributions:
Active members who joined the System prior to July 22, 1983, contribute at 5.25%(Membership Class T-C) or at 6.50% (Membership T-D) of the member’s qualifying compensation.
Members who joined the System on or after July 22, 1983, and who were active orinactive as of July 1, 2001 • contribute at 6,25% (Membership Class T-C) or at 7.50% (Membership ClassT-D) of the member’s qualifying compensation.
Members who joined the System after June 30, 2001 and before July 1, 2011, contributeat 7.50% (automatic Membership Class T-D). For all new hires and for members who elected Class T-Dmembership, the higher contribution rates began with service rendered on or after January 1, 2002.
Members who joined the System after June 30, 2011, automatically contribute at theMembership Class T-E rate of 7.50% (base rate) of the member’s qualifying compensation. All new hiresafter June 30, 2011, who elect Class T-F membership, contribute at 10.30% (base rate) of the member’squalifying compensation. Membership Class T-E and Class T-F are affected by a “shared risk” provisionin Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate tofluctuate between 7.50% and 9.50% and Membership Class T-F contribution rates to fluctuate between10.30% and 12.30%.
District Contributions:
The District’s contractually required contribution rate for fiscal year ended June 30, 2015was 20.50% of covered payroll, actuarially determined as an amount that, when combined with employeecontributions, is expected to finance the costs of benefits earned by employees during the year, with anadditional amount to finance any unfunded accrued liability. Contributions to the pension plan from theDistrict were $2,767,796 for the year ended June 30, 2015.
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EXHIBIT M (Continued)
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows ofResources Related to Pensions
At June 30, 2015, the District reported a liability of $45162000 for its proportionate shareof the net pension liability. The net pension liability was measured as of June 30, 2014, and the totalpension liability used to calculate the net pension liability was determined by rolling forward the System’stotal pension liability as of June 30, 2013 to June 30, 2014. The District’s proportion of the net pensionliability was calculated utilizing the employer’s one-year reported covered payroll as it related to the totalone-year reported covered payroll. At June 30, 2014, the District’s proportion was .1141 percent, whichwas an increase from its proportion measured as of June 30, 2013 of .1093 percent.
For the year ended June 30, 2015, the District recognized pension expense of$4,342,535. At June 30, 2015, the District reported deferred oufflows of resources and deferred inflows ofresources related to pensions from the following sources:
Deferred Outflows Deferred Inflowsof Resources of Resources
Net difference between projected andactual investment earnings $ 0 $3,229,000
Changes in proportions 1583,000 0Difference between employer
contributions and proportionate shareof total contributions 22,970 0
Contributions subsequent to themeasurement date 2,767,796 0
—The amount of $2,767,796 reported as deferred outflows of resources related to pensions
resulting from District contributions subsequent to the measurement date will be recognized as a reductionof the net pension liability in the year ended June 30, 2015. Other amounts reported as deferred outflowsof resources and deferred inflows of resources related to pensions will be recognized in pension expense
as follows:
Year Ended June 30
2016 - $ 420,2692017 420,2692018 420,2692019 420,2692020 (58,046)
aActuarial Assumptions
The total pension liability as of June 30, 2014 was determined by rolling forward theSystem’s total pension liability as of the June 30, 2013 actuarial valuation to June 30, 2014 using thefollowing actuarial assumptions, applied to all periods included in the measurement:
• Actuarial cost method — Entry Age Normal — level Va of pay• Investment return — 7.50%, includes inflation at 3.00%• Salary increases — Effective average of 5.50%, which reflects an allowance for inflation of 3.00%,
real wage growth of 1%, and merit or seniority increases of 1.50%• Mortality rates were based on the RP-2000 Combined Healthy Annuitant Tables (male and
female) with age set back 3 years for both males and females. For disabled annuitants the RP2000 Combined Disabled Tables (male and female) with age set back 7 years for males and 3years for females.
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EXHIBIT M (Continued)
The actuarial assumptions used in the June 30, 2013 valuation were based on theexperience study that was performed for the five-year period ending June 30, 2010. The recommendedassumption changes based on this experience study were adopted by the PSERS Board at its March 112011 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 usinga building-block method in which best-estimate ranges of expected future real rates of return (expectedreturns, 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 expectedfuture real rates of return by the target asset allocation percentage and by adding expected inflation.
The pension plan’s policy in regard to the allocation of invested plan assets is establishedand may be amended by the PSERS Board, Plan assets are managed with a long-term objective ofachieving and maintaining a fully funded status for the benefits provided through the pension.
Long-termTarget Expected Real
Asset Class Allocation Rate of Return
Public markets global equity 19% 5.0%Private markets (equity) 21 6.5Private real estate 13 4.7Global fixed income 8 2.0U.S. long treasuries 3 1.4TIPS 12 1.2High yield bonds 6 1.7Cash 3 0.9Absolute return 10 4.8Risk parity 5 3.9MLP5/lnfrastructure 3 5.3Commodities 6 3.3Financing (LIBOR) __L) 1.1
The above was the PSERS Board’s adopted asset allocation policy and best estimates ofgeometric real rates of return for each major asset class as of June 30. 2014.
Discount Rate
The discount rate used to measure the total pension liability was 7.50%. The projection ofcash flows used to determine the discount rate assumed that contributions from plan members will bemade at the current contribution rate and that contributions from employers will be made at contractuallyrequired rates, actuarially determined. Based on those assumptions, the pension plan’s fiduciary netposition was projected to be available to make all projected future benefit payments of current planmembers. Therefore, the long-term expected rate of return on pension plan investments was applied toall periods of projected benefit payments to determine the total pension liability.
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EXHIBIT M (Continued)
Sensitivity of the District’s Proportionate Share of the Net Pension Liability to Changes in the DiscountRate
The following presents the net pension liability, calculated using the discount rate of7.50%, as well as what the net pension liability would be if it were calculated using a discount rate that is1-percentage point lower (6.50%) or 1-percentage point higher (8.50%) than the current rate:
CurrentDiscount
1% Decrease Rate 1% Increase6.50% 7.50% 8.50%
District’s proportionate share ofthe net pension liability $56,333,000 $45,162,000 $35,624,000
Pension Plan Fiduciary Net Position
Detailed information about PSERS’ fiduciary net position is available in PSERSComprehensive Annual Financial Report which can be found on the System’s website atwww.psers.state.pa.us,
NOTE 11 — OTHER POSTEMPLOYMENT BENEFIT OBLIGATION (OPEB):
GASB 45 requires plan sponsors to perform periodic actuarial valuations to determineannual accounting costs for OPEB plans, and to keep a running tally of the extent to which these annualamounts are over or under funded. GASB 45 was effective starting in fiscal year 2007-2008 for a Phase Igovernment1 fiscal year 2008-2009 for a Phase II government and fiscal year 2009-2010 for a Phase Illgovernment. OPEB accounting under GASB 45 was adopted for the 2008-2009 fiscal year by theClearfield Area School District.
The valuation date is the date that all participant and other pertinent information iscollected and liabilities are measured. This date may not be more than 24 months prior to the beginningof the fiscal year. This valuation date is July 1, 2014, which is coincident with the beginning of the 2014-2015 fiscal year. Furthermore, GASB 45 requires actuarial valuations to occur at least biennially forgovernmental entities with 200 or more plan participants. Therefore, the results of this valuation may beused for the 2014-2015 fiscal year and may also be the basis for the 2015-2016 fiscal year, unlesssignificant changes occur that would affect the results of this valuation.
GASB 45 applies to just about any benefit that is provided after retirement except forpension benefits: medical insurance, pharmacy, dental, vision, and hearing benefits plus life insuranceand long-term care insurance, when provided separately from a pension plan. The philosophy driving theaccounting standard is that the postemployment benefits are part of the compensation that is paid toemployees in return for their services, and the cost of these benefits should be recognized while theemployees are providing those services, rather than after they have retired. This philosophy has alreadybeen applied for years to defined benefit pensions; GASB 45 extends the same thinking to all otherpostemployment benefits.
The Annual OPEB Cost represents the cost to be expensed during the year forpostemployment benefits under GASB 45. Prior to GASB 45, the District expensed the actual benefitspaid during a year. The cumulative difference between the Annual OPEB Cost (new method) and thebenefits paid during a year (old method) results in a Net OPEB Obligation to be included on the statementof net position of the District.
Once all expected future benefit payments have been discounted to a liability as of thevaluation date, an actuarial cost method is applied to allocate the liability to past service (Accumulated
57
EXHIBIT M (Continued)
Postemployment Benefit Obligation, or APBO), the current year’s accrual (Normal Cost) and futureaccruals.
The Normal Cost, plus an amortization of the unfunded APSO, if any, comprise theAnnual Required Contribution (despite the name of this accounting term, contributions in excess of pay-as-you-go costs are optional, not required), or ARC. There are a variety of amortization methodologiesavailable to establish the recognition pattern of the unfunded APBO. The available methodologiesgenerate a wide range of results and have a significant impact on the ARC.
In the first year during which GASB 45 is effective, the Annual OPEB Cost equals theARC. In later years, if a Net OPEB Obligation exists due to cumulative employer contributions differingfrom cumulative Annual OPEB Costs, then an adjustment is made to the ARC in order to determine theAnnual OPEB Cost.
The estimated net OPEB obligation at June 30, 2015 was calculated as follows:
Fiscal Year2014-2015
Accumulated Postemployment Benefit Obligationas of July 1,2014
Normal Cost $ 274,251Amortization of unfunded liability 1,232,209
Annual Required Contribution forfiscal year ended June 30, 2015 1506,460
Adjustment to Annual Required Contribution (154,769)
Annual OPEB Costfor fiscal year ending June 30, 2015 $1 .351.691
Notes:
1. Amortization method is closed 15-year level dollar amortization, beginning in fiscalyear 2008-2009 (9 years remaining).
2. Annual OPEB Cost (AOC) is amount expensed under GASB 45.
Annual OPEB Cost for fiscal year ending June 30, 2015 $ 1,351,691Contributions for fiscal year ending June 30, 2015 (1,386.400)Annual expense difference (34,709)
Net OPEB Obligation as of July 1,2014 1,588,420
Net OPEB obligation as of June 30, 2015
Notes:
1. Contributions shown have been set equal to expected net claims paid.
2. The difference between the Annual OPEB Cost and the contributions represents theincrease in the annual expense from the current method (prior to GASB 45). Thecumulative sum of these annual differences over time is the Net OPEB Obligation andrepresents a liability on the statement of net position.
58
EXHIBIT M (Continued)
GASB 45 Schedule of Funding Progress:
Unfunded UAL as aActuarial Accrued Percentage of
Actuarial Value of Accrued Liability Funded Covered CoveredValuation Assets Liability (UAL) Ratio Payroll Payroll
Date (a) (b) (b—a) (a/b) (c) ((b—a)/c)
July 1,2014 50 $9,636,000 $9636000 $0 $10854000 88.8%July 1,2012 0 6,421,000 6421000 0 14,341000 44.8%July 1,2010 0 7,961,400 7,961,400 0 15,677000 50.8%July 112008 0 6,260,600 6,260,600 0 15,543,000 40.3%
GASB 45 Schedule of Employer Contributions:
Annual Percentage ofFiscal Year OPEB Annual OPEB Cost Net OPEB
Ended Cost Contributed Obligation
June 30, 2015 $1,351,691 102.6% $1,553,711
June 30, 2014 895,078 68.6% 1,588,420
June 30, 2013 875,238 72.1% 1,307142
June 30, 2012 1066351 77.3% 1,063,204
June 30, 2011 1,040,706 71.2% 821,053
June 30, 2010 808825 68.7% 520947
June 30, 2009 788000 66.0% 268,000
The summary of principal plan provisions is intended only to describe the essentialfeatures of the Plan for valuation purposes. Eligibility for benefits and benefit amounts are determined bythe Plan Administrator and are based on the full and complete plan provisions, not on this summary.
1. Type of plans covered: Medical and pharmacy benefits and cash payments arecovered by this valuation. The District self-insures healthcare benefits.
2. Eligibility for healthcare coverage:
Professional staff: Eligible for incentive upon retirement under PSERSsuperannuation or early retirement provisions after completing 25 years of PSERSservice, including 10 years with the District. Else, Act 110/43.
Support staff: Eligible to purchase coverage upon retirement under PSERSsuperannuation or early retirement provisions.
3. Duration of healthcare benefits:
Professional staff: Retiree coverage may continue until age 65, or death orqualification for Medicare if earlier. Spouse and surviving spouse coverage maycontinue until age 65, or death, or qualification for Medicare if earlier.
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EXHIBIT M (Continued)
Support staff: Retiree coverage may continue until age 65, or death or qualificationfor Medicare if earlier. Spouse and surviving spouse coverage may continue until age65, or death, or qualification for Medicare if earlier.
4. Participant contributions for healthcare coverage:
Professional staff: Retirees qualifying for the incentive receive a payment to a HealthReimbursement Account (HRA) at the time of retirement that can be used to payfuture premiums. If the HRA is exhausted prior to age 65, the retiree and/or spousemay purchase coverage by paying the full premium amount. Under Act 110/43 theretiree and/or spouse pay the full premium amount.
Support staff: The retiree and/or spouse pay the full premium amount.
5. Monthly premium rates used in the valuation:
PPO Group Retiree Retiree/Spouse
Teachers $542 $1,460Administrators 532 1,435Secretaries 560 1,510Maintenance 564 1,520
6. Cash payment:
Professional staff: Upon retirement under PSERS superannuation or early retirement,Act 93 participants receive a payment of $60 for each year of continuous employmentwith the District (maximum payment of $2,100).
Support staff: Upon retirement under PSERS superannuation or early retirement,participants receive a payment of $60 for each year of continuous employment withthe District (maximum payment of $2,100).
7. HRA payment:
Professional staff: Receive an HRA contribution of $12,000.
Act 93 members: Receive an HRA contribution of $15,000.
Support staff: None.
8. 2013-14 Early Retirement Incentive:
Members who retired under the incentive receive one year of incentive for each fiveyears of service. During the incentive period the retiree contributes the PSERSpremium assistance amount and all post-retirement inflationary increases in thepremium. Coverage for all family members ends upon the retiree attaining age 65.
NOTE 12— COMMITMENTS, CONTINGENCIES AND CONTRACTS:
Litigation:
The District is the defendant in tax appeal litigation arising principally in the normal courseof operations. In the opinion of the District, the outcome of these lawsuits will not have a materiallyadverse effect on the accompanying combined financial statements and accordingly, no provision for losshas been recorded.
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EXHIBIT M (Continued)
There was one large tax appeal litigation case that was disputing the appraised marketvalue of the property. The property is listed on the tax rolls at $25750000. The owner appealed that themarket value was substantially less. This property currently generates approximately $465000 in realestate tax revenue for the District per year. In 2015, the owner rescinded its appeal.
In November, 2010, the District became aware that the roof at the Girard-GoshenElementary School was deemed unsafe. The District experienced significant leaks, water penetration anddamage to the roof, structure and interior portions of the elementary school and was granted permissionfrom the Department of Education to close the school on an emergency basis. Legal proceedings againstthe contractors, subcontractors, professional engineers and architects involved in the design andconstruction of the elementary school are in progress. The District is aggressively prosecuting thoseclaims against more than twenty defendants who were involved, either through the provision of labor ormaterials, in the construction of this elementary school. The District is pursuing early mediation to resolveall or a portion of the claims and to recover its monetary damages.
Grant Programs:
The District participates in numerous state and federal grant programs, which aregoverned by various rules and regulations of the grantor agencies. Costs charged to the respective grantprograms are subject to audit and adjustment by the grantor agencies; therefore, to the extent that theDistrict has not complied with the rules and regulations governing the grants, refunds of any moneyreceived may be required and the collectibility of any related receivables at June 30, 2015 may beimpaired. In the opinion of the District, there are no significant contingent liabilities relating to compliancewith the rules and regulations governing the respective grants; therefore, no provision has been recordedin the accompanying combined financial statements for such contingencies.
Risk Management:
The District is exposed to various risks of losses related to torts, theft of, damage to, anddestruction of assets, errors, and omissions, injuries to employees and natural disasters. It is the policy ofthe District to purchase commercial insurance for the risks of loss to which it is exposed, includingworkers’ compensation and employee health and accident insurance. Settled claims resulting from theserisks have not exceeded commercial insurance coverage.
The District is a participating member of a medical and healthcare insurance consortium.The consortium is comprised of 10 members that include area school districts and related organizationswhich jointly self-assume their medical and healthcare liabilities. Each member is required to makecontributions to the consortium based on formulas set forth in the contract and the amount of claimsprocessed.
At June 30, 2015, the consortium did not have a deficit, in which the ultimate responsibilityto pay for a deficit belongs to the members of the consortium.
Renovation Projects:
The District is in the final stages of a $36,000,000 project that renovated the ClearfieldArea High School to become the District’s Junior — Senior High School and constructed the home for theDistrict’s administrative and technology departments.
In addition, the District completed a $10,000,000 project that expanded the ClearfieldElementary School to house all the District’s elementary students.
Unspent bond proceeds are being maintained in the PLGIT/ARM account and theconstruction funds general checking accounts in the amount of $529,952.
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EXHIBIT M (Continued)
Clearfield County Career and Technology Center:
As discussed in Note 2, the District participates in the joint operation of the ClearfieldCounty Career and Technology Center (CCCTC). Revenue bonds, Series of 2011, were issued inDecember 2011 in the principal amount of $7790000 to refund the Series of 2005 and 2006. Theproceeds of the 2005 and 2006 bonds were used to fund renovations and additions to the educationalfacilities of the CCCTC and the payment of all costs and expenses incurred in connection with theissuance and sale of the 2005 and 2006 bonds.
Repayment of the bonds will be made from revenues appropriated by the participatingmember districts pursuant to the cost sharing formula discussed in Note 2. Final maturity on the bonds isscheduled for March 15, 2026.
The District’s estimated share of the debt service is approximately 36%.
The amount of $927983 reported in Note 2 as operaUng expenses is comprised of thefollowing:
Series of 2011 debt service 5255,873General operating expenses 770592Rental subsidy reimbursement
from Commonwealth of Pennsylvania (98482)Sfl
NOTE 13— DEFICIT NET POSITION:
For governmental activities and business-type activities, the unrestricted net deficitamounts of 534,281,320 and $1,231,420, respectively, includes the effect of the deferring the recognitionof pension contributions made subsequent to the measurement date of the net pension liability, theunamortized portion of contributions made in excess of the District’s share of its proportionatecontributions to its pension plan, and the deferred outflows resulting from the change in the Districts shareof the net pension liability. This is offset by the District’s actuarially determined pension liability and thedeferred inflows resulting from the differences between projected and actual investment earnings.
NOTE 14— PENDING ACCOUNTING PRONOUNCEMENTS:
In February 2015, the GASS issued Statement No. 72, Fair Value Measurement andApplication. The objective of this Statement is to address accounting and financial reporting issuesrelated to fair value measurements and to provide guidance for applying fair value to certain investmentsand disclosures related to all fair value measurements. To the extent applicable, the District is required toadopt Statement No. 72 for its fiscal 2016 financial statements.
In June 2015, the GASO issued Statement No, 73, Accounting and Financial Reporting forPensions and Related Assets that are Not Within the Scope of GASB Statement 68, and Amendments toCertain Provisions of GASB Statements 67 and 68. The objective of this Statement is to improve theusefulness of information about pensions included in the general purpose external financial reports ofstate and local governments for making decisions and assessing accountability. To the extent applicable,the District is required to adopt Statement No. 73 for its fiscal 2017 financial statements.
In June 2015, the GASS issued Statement No. 75, Accounting and Financial Reporting forPostemployment Benefits Other Than Pensions. The objective of this Statement is to improve accountingand financial reporting by state and local governments for postemployment benefits other than pensions(OPEB). It also improves information provided by state and local governmental employers about financialsupport for OPEB that is provided by other entities. To the extent applicable, the District is required toadopt Statement No. 75 for its fiscal 2018 financial statements.
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EXHIBIT M (Continued)
In June 2015, the GASB issued Statement No. 76, Hierarchy of Generally AcceptedAccounting Principles for State and Local Government. The objective of this Statement is to identify in thecontext of the current governmental financial reporting environment, the hierarchy of generally acceptedaccounting principles (GMP). The “GAAP hierarchy” consists of the sources of accounting principles toprepare financial statements of state and local governmental entities in conformity with &AAP and theframework for selecting those principles. This Statement reduces the GAAP hierarchy to two categoriesof authoritative GEAAP and addresses the use of authoritative and nonauthoritative literature in the eventthat the accounting treatment for a transaction or other event is not specified within a source ofauthoritative GAAP. To the extent applicable, the District is required to adopt Statement No. 76 for itsfiscal 2016 financial statements.
In August 2015, the GASB issued Statement No. 77, Tax Abatement Disclosures. Thisstatement requires disclosure of tax abatement information about (1) a reporting government’s own taxabatement agreements and (2) those that are entered into by other governments and that reduce thereporting government’s tax revenues. To the extent applicable, the District is required to adopt StatementNo. 77 for its fiscal 2017 financial statements.
District management is in the process of analyzing these pending changes in accountingprinciples and the impact they will have on the District’s financial statements.
NOTE 15— SUBSEQUENT EVENTS:
The District receives approximately 53 percent of its general fund revenues from statesources (including federal funds passed through the state). As of the date of this report, theCommonwealth of Pennsylvania has not approved a budget for the 2015-2016 fiscal year and, as a result,appropriations of funds have not been released to Pennsylvania school districts. On December 23, 2015,some emergency amounts were released to school districts. The District received $8,492,954 in statefunding of which $8,013,608 was funding for the 2015-2016 school year. To ensure consistency andcomparability in financial reporting, receivables from the state which would normally be received within 60days of the fiscal year end but have not been received as a result of the budget impasse are consideredavailable under the modified accrual basis of accounting, as permitted by GASB.
On July 28, 2015, the District sold the Bradford Township Elementary School at auctionfor $70,000.
During August, 2015, the contents of Bradford Township Elementary, Centre Elementary,and the Clearfield Middle School were sold at auction. Profit was $94,657 after costs.
The District has evaluated all subsequent events through January 22, 2016, the date thefinancial statements were available to be issued.
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SCHEDULE 1
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
SCHEDULE OF THE DISTRICT’S PROPORTIONATE SHARE OFTHE NET PENSION LIABILITY (UNAUDITED)
YEAR ENDED JUNE 30, 2015
District’s proportion of the PSERS net pension liability 0.1141%
District’s proportionate share of the PSERS net pension liability $ 45,162,000
District’s covered-employee payroll -2014 $ 14,565,345
District’s proportionate share of the PSERS net pension liabilityas a percentage of its covered-employee payroll 310.06%
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SCHEDULE 2
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
SCHEDULE OF DISTRICT CONTRIBUTIONS (UNAUDITED)YEAR ENDED JUNE 30, 2015
Contractually required contribution $ 2868,149
Contributions in relation to the contractually required contribution 2,668149
Contribution deficiency (excess) $ 0
District’s covered-employee payroll -2015 $ 13,293,099
Contributions as a percentage of covered-employee payroll 20.07%
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SCHEDULE 3
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUALGENERAL FUND (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2015
Variance WithActual Final Budget
Budgeted Amounts (Budgetary PositiveOriginal Final Basis) (Negative)
REVENUES:Local sources $ 14,087,867 $ 14,087,867 $ 15,368,290 $ 1,280,423State program sources 18,167,025 18,167,025 18,703,493 536,468Federal program sources 994,915 994,915 1,056,219 61,304
TOTAL REVENUES 33,249,807 33,249,807 35,128,002 1,878,195
EXPENDITURES:Current:
Regular programs 12,654,385 12,663,862 11,790,058 873,804Special programs 5,539,210 5,539,210 4,986,209 553,001Vocational programs 1,823,275 1,819,275 1,675,310 143,965Other instructional programs 361,369 361,369 415,932 (54,563)
Support services:Pupil personnel services 987,864 987,864 972,283 15,581Instructional staff services 1,221,327 1,215,850 1,151,065 64,785Administrative services 2,034,479 2,034,479 1772,932 261,547Pupil health 540,894 540,894 368,736 172,158Business services 478,633 478,633 396,721 81,912Operation and maintenance ofplant services 3,441,454 3,441,454 2,815,240 626,214
Student transportation services 2,016,140 2,016,140 2,000,007 16,133Central and other support services 1,392,201 1,392,201 1,288,213 103,988Other support services 2,500 2,500 0 2,500
The accompanying notes are an integral part of these financial statements,
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SCHEDULE 3 (Continued)
CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUALGENERAL FUND (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2015
Variance WithActual Final Budget
Budgeted Amounts (Budgetary PositiveOriginal Final Basis) (Negative)
Operation of noninstructional services:Student activities $ 702507 $ 702507 $ 695656 $ 6,851Community services 11700 11,700 13,661 (1,961)Debt service 2,902,500 2,902,500 2,902,399 101Refund of prior year receipts 0 0 53,536 (53,536)
TOTAL EXPENDITURES 36,110,438 36,110,438 33,297,958 2,812,480
EXCESS (DEFICIENCY) OFREVENUES OVER EXPENDITURES (2,860,631) (2,860,631) 1,830,044 4,690,675
OTHER FINANCING SOURCES (USES):Transfers out (250,000) (250,000) 0 250,000Budgetary reserve (200,000) (200,000) 0 200,000
Sale of fixed assets 0 0 3,646 3,646
TOTAL OTHER FINANCINGSOURCES (USES) (450,000) (450,000) 3,646 453,646
NET CHANGE IN FUND BALANCES (3,310,631) (3,310,631) 1,833,690 5,144.321
FUND BALANCE-JULY 1,2014 6,782,474 6,782,474 10,362,282 3,579,808
FUND BALANCE-JUNE 30. 2015 $ 3,471,843 $ 3,471,843 $ 12,195,972 $ 8,724,129
The accompanying notes are an integral part of these financial statements.
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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ANDON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Board of DirectorsClearfield Area School DistrictClear-field, Pennsylvania
We have audited in accordance with the auditing standards generally accepted in theUnited States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards issued by the Comptroller General of the United States, the financial statements of thegovernmental activities, the business-type activities, each major fund! and the aggregate remaining fundinformation of Clearfield Area School District, as of and for the year ended June 30, 2015, and the relatednotes to the financial statements, which collectively comprise Clearfield Area School District’s basicfinancial statements and have issued our report thereon dated January 22, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered ClearfieldArea School District’s internal control over financial reporting (internal control) to determine the auditprocedures that are appropriate in the circumstances for the purpose of expressing our opinions on thefinancial statements, but not for the purpose of expressing an opinion on the effectiveness of ClearfieldArea School District’s internal control. Accordingly, we do not express an opinion on the effectiveness ofClearfield Area School District’s internal control.
A deficiency in internal control exists when the design or operation of a control does notallow 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, orcombination of deficiencies, in internal control such that there is a reasonable possibility that a materialmisstatement of the entity’s financial statements will not be prevented, or detected and corrected on atimely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal controlthat is less severe than a material weakness, yet important enough to merit attention by those chargedwith governance.
Our consideration of internal control was for the limited purpose described in the firstparagraph of this section and was not designed to identify all deficiencies in internal control that might bematerial weaknesses or, significant deficiencies. Given these limitations, during our audit we did notidentify any deficiencies in internal control that we consider to be material weaknesses. However, materialweaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Clearfield Area School District’sfinancial statements are free from material misstatement, we performed tests of its compliance withcertain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which couldhave a direct and material effect on the determination of financial statement amounts. However, providingan opinion on compliance with those provisions was not an objective of our audit, and accordingly, we donot express such an opinion. The results of our tests disclosed no instances of noncompliance or othermatters that are required to be reported under Government Auditing Standards.
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Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal controland compliance and the results of that testing, and not to provide an opinion on the effectiveness of theentity’s internal control or on compliance. This report is an integral pan of an audit performed inaccordance with Government Auditing Standards in considering the entity’s internal control andcompliance. Accordingly, this communication is not suitable for any other purpose.
UPWALTER HOPKINS & COMPANY, L.L.P.
Clearfield, PennsylvaniaJanuary 22, 2016
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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAMAND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY 0MB CIRCULAR A-133
To the Board of DirectorsClearfield Area School DistrictClearfield, Pennsylvania
Report on Compliance for Each Major Federal Program
We have audited Clearfield Area School District’s compliance with the types ofcompliance requirements described in the 0MB Circular A-133 Compliance Supplement that could have adirect and material effect on each of Clearfield Area School District’s major federal programs for the yearended June 30, 2015. Clearfield Area School District’s major federal programs are identified in thesummary of auditor’s results section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations,contracts, and grants applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of Clearfield AreaSchool District’s major federal programs based on our audit of the types of compliance requirementsreferred to above. We conducted our audit of compliance in accordance with auditing standards generallyaccepted in the United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States; and 0MBCircular A-i 33, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance aboutwhether noncompliance with the types of compliance requirements referred to above that could have adirect and material effect on a major federal program occurred. An audit includes examining, on a testbasis, evidence about Clearfield Area School District’s compliance with those requirements andperforming such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance foreach major federal program. However, our audit does not provide a legal determination of Clearfield AreaSchool District’s compliance.
Opinion on Each Major Federal Program
In our opinion, Cleartield Area School District complied, in all material respects, with thetypes of compliance requirements referred to above that could have a direct and material effect on each ofits major federal programs for the year ended June 30, 2015.
Report on Internal Control Over Compliance
Management of Clearfield Area School District is responsible for establishing andmaintaining effective internal control over compliance with the type of compliance requirements referred toabove. In planning and performing our audit of compliance, we considered Clearfield Area SchoolDistrict’s internal control over compliance with the types of requirements that could have a direct andmaterial effect on a major federal program to determine the auditing procedures that are appropriate in the
70
circumstances for the purpose of expressing an opinion on compliance for each major federal programand to test and report on internal control over compliance in accordance with 0MB Circular A-133, but notfor the purpose of expressing an opinion on the effectiveness of internal control over compliance.Accordingly, we do not express an opinion on the effectiveness of Clearfield Area School District’s internalcontrol over compliance.
A deficiency in internal control over compliance exists when the design or operation of acontrol over compliance does not allow management or employees, in the normal course of performingtheir assigned functions, to prevent, or detect and correct, noncompliance with a type of compliancerequirement of a federal program on a timely basis. A material weakness in internal control overcompliance is a deficiency, or combination of deficiencies, in internal control over compliance, such thatthere is a reasonable possibility that material noncompliance with a type of compliance requirement of afederal program will not be prevented, or detected and corrected, on a timely basis. A significantdeficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internalcontrol over compliance with a type of compliance requirement of a federal program that is less severethan a material weakness in internal control over compliance, yet important enough to merit attention bythose charged with governance.
Our consideration of internal control over compliance was for the limited purposedescribed in the first paragraph of this section and was not designed to identify all deficiencies in internalcontrol over compliance that might be material weaknesses or significant deficiencies, We did not identifyany deficiencies in internal control over compliance that we consider to be material weaknesses.However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe thescope of our testing of internal control over compliance and the results of that testing based on therequirements of 0MB Circular A-133. Accordingly, this report is not suitable for any other purposes.
WALTER HOPKINS & COMPANY, L.L.P.
Clearfield, PennsylvaniaJanuary 22, 2016
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CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30. 2015
Federal Pass Through Grant PeriodGrantor Program Source CFDA Grantor’s Beginningl
Title Code Number Number Ending DateUS. DEPARTMENT OF EDUCATION(Passed through the Pennsylvania
Department of Education):Title I Improving Basic Programs Indirect 84.010 013-150088A Aug. 14, 2014/
Sept. 30, 2015
Title I Improving Basic Programs Indirect 84,010 013-140088A July 8, 2013/Sept. 30, 2014
Keystone to Opportunity indirect 84.371 143-14-0088 Oct.11 2014Sept. 30, 2015
Keystone to Opportunity Indirect 84.371 143-13-0088 July 1,2013/Sept. 30, 2014
Title Il-A Improving Teacher Quality Indirect 84.367 020-150088A Aug. 14, 2014/Sept. 30, 2015
Title Il-A Improving Teacher Quality Indirect 84.367 020-140088A July 8, 2013/Sept. 30, 2014
Title VI Rural and Low Income Indirect 84.358 007-14-0088 Oct. 31, 2013/Sept. 30, 2014
Special Education - IDEAReceived from Central Intermediate Indirect 84.173 131-140010 July 1, 2014/Unit#10 . June 30, 2015
Special Education - IDEAReceived from Central Intermediate Indirect 84.027 062-1 50010 July 1,2014/
Unit #10 June 30, 2015
Special Education - IDEAReceived from Central Intermediate Indirect 84.027 062-140010 July 1,2013/
Unit #10 Sept. 30, 2014
TOTAL U.S. DEPARTMENT OF EDUCATION
See Auditor’s Report.
72
Accrued or Accrued orTotal (Deferred) (Deferred)
Program or Received Revenue at Revenue Revenue atAward Amount for the Year July 1, 2014 Recognized Expenditures June 30, 2015
$ 667,315 $ 524,319 $ 0 $ 667128 $ 667,128 $ 142,809
741,642 98862 59,846 39,016 39,016 0
109,959 36653 0 105,243 105,243 68,590
116,339 9,695 (6,418) 16,113 16,113 0
193,254 69,014 0 60,896 60,896 (8,118)
194,073 25,877 49,511 66,882 66,882 90516
43,981 0 (40) 40 40 0
6,040 0 0 6,040 6,040 6,040
439,510 0 0 439,510 439,510 439,510
406,449 406,449 406,449 0 0 0
$ 1,170,869 $ 509,348 $ 1,400,868 $ 1,400,868 $ 739,347
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CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2015
Federal Pass Through Grant Period
Grantor Program Source CFDA Grantor’s Beginning!
Title Code Number Number Ending DateUS. DEPARTMENT OF AGRICULTURE:(Passed through the Pennsylvania
Department of Education):Summer Food Indirect 10.559 264 July 1,2014/
June 30, 2015
Summer Food Indirect 10.559 264 July 1,2013!June 30, 2014
Lunch HI/LOW Indirect 10.555 362 July 1,2014/June 30, 2015
Lunch HI/LOW Indirect 10.555 362 July 1,2013!June 30, 2014
Fresh Fruit & Vegetable Indirect 10.582 362 July 1,2013/June 30, 2014
Severe Need Breakfast Indirect 10.553 365 July11 2014/June 30, 2015
Severe Need Breakfast Indirect 10553 365 July 1, 2013/June 30, 2014
See Auditor’s Report.
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Accrued Accrued orTotal (Deferred) (Deferred)
Program or Received Revenue at Revenue Revenue atAward Amount for the Year July 1, 2014 Recognized Expenditures June 30, 2015
N/A $ 12,985 $ 0 $ 19,539 $ 19,539 $ 6,554
N/A 6399 6,399 0 0 0
N/A 519,878 0 533,743 533743 13,865
N/A 82147 82,147 0 0 0
N/A 6860 6,860 0 0 0
N/A 134,350 0 138,171 138,171 3,821
N/A 23,884 23,884 0 0 0
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CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30. 2015
Federal Pass Through Grant PeriodGrantor Program Source CFDA Grantor’s Beginning?
Title Code Number Number Ending DateU.S. DEPARTMENT OF AGRICULTURE:
(Passed through the PennsylvaniaDepartment of Education):
Food Nutrition Service - Lunch Indirect N/A July 1,2014/June 30, 2015
Food Nutrition Service - Lunch Indirect N/A July 1 2013/June 30, 2014
Food Nutrition Service - Breakfast-Needy Indirect N/A July 1,2014?June 30, 2015
Food Nutrition Service - Breakfast-Needy Indirect N?A July 1,2013/June 30, 2014
(Passed through the PennsylvaniaDepartment of Agriculture)
National School Lunch Program Indirect 10.555 July 112014?June 30, 2015
TOTAL U.S. DEPARTMENT OF AGRICULTURE
TOTAL FEDERAL FINANCIAL ASSISTANCE
Footnotes: (a) Total amount of commodities received from Department of Agriculture.(b) Beginning inventory at July 1.(c) Total amount of commodities used.(d) Ending inventory at June 30.(1) State expenditure.
See Auditor’s Report.
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Accrued or Accrued orTotal (Deferred) (Deferred)
Program or Received Revenue at Revenue Revenue atAward Amount for the Year July 1,2014 Recognized Expenditures June 30, 2015
N/A 32,967 0 33,824 (i 33,824 857
N/A 5428 5,428 0 0 0
N/A 8,013 0 8,236 (1) 8,236 223
N/A 1,449 1,449 0 0 0
N/A (a) 75632 (b) 0 (c) 75,632 (c) 75,632 (d) 0
909,992 126,167 809145 809145 25320
$ 2,080861 $ 635,515 $ 2,210,013 $ 2,210,013 $ 764,667
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CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSJUNE 30, 2015
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES:
The accompanying schedule of expenditures of federal awards includes the federal grantactivity of the Clearfleld Area School District and is presented on the accrual basis of accounting. Theinformation in this schedule is presented in accordance with the requirements of 0MB Circular A-i 33,Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presentedin this schedule may differ from amounts presented in, or used in the preparation of, the general purposefinancial statements.
NOTE 2 — STATE MATCHING FUNDS:
State matching funds for the National School Lunch Program are included in the
Schedule of Federal Financial Assistance at the request of the Pennsylvania Department of Education,
NOTE 3- USDA COMMODITIES:
Nonmonetary assistance is reported in the Schedule at the fair market value of the USDA
commodities received and disbursed.
NOTE 4— RECONCILIATION OF REVENUE RECOGNIZED TO FINANCIAL STATEMENTS:
Federal Exoenditures Per Schedule of Expenditures of Federal Awards
Total expenditures $2,210,013Less: state share of National School Lunch Program (42,060)Total federal expenditures
General Fund
Revenue recognized per the Scheduleof Expenditures of Federal Awards:
U.S. Department of Education $1,400,868
Add: Medical assistance (Access) 4,291Qualified school construction bond (interest subsidy) 96,610
Total federal assistance — as adjusted
Total federal revenue — general fund — per fund financial statements $1,056,219
Add: federal revenue from other sources:Central Intermediate Unit — IDEA grants — federal 445,550
Total federal revenue — general fund
78
Food Service Fund
Revenue recognized per the Schedule of Expendituresof Federal Awards:
US, Department of Agriculture $809,145
Less: State share of revenue (42,060)
Plus: Rounding difference
Total federal revenue 5767 086
Total federal revenue — food service fund —
per basic financial statements
Consists of:Subsidy — federal $691,454Donated commodities 75,632
a
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CLEARFIELD AREA SCHOOL DISTRICTClearfield, Pennsylvania
SCHEDULE OF FINDINGS AND QUESTIONED COSTSJUNE 30, 2015
Section I - Summary of Auditor’s Results
Financial Statements
Type of auditors’ report issued: Unmodified
Internal control over financial reporting:Material weakness(es) identified?
____________
yes X noSignificant deficiency(ies) identified?
___________
yes X none reported
Noncompliance material to financial statements noted?
___________
yes X no
Federal Awards
Internal control over major federal programs:Material weakness(es) identified?
___________
yes X noSignificant deficiency(ies) identified?
___________
yes X none reported
Type of auditor’s report issued on compliance formajor federal programs: Unmodified
Any audit findings disclosed that are required to bereported in accordance with Section 510(a) of0MB Circular A-133?
__________
yes X no
Identification of major pro9rams:
CFDA Number(s)
_______
Name of Federal Program or Cluster
10.553/10555110.559 Child Nutrition Cluster
Dollar threshold used to distinguish between Type Aand Type B programs: $300,000
Auditee qualified as low-risk auditee? X yes no
Section II - Financial Statements Findings
None
Section Ill - Federal Award Findings and Questioned Costs
None
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APPENDIX E
CONTINUING DISCLOSURE AGREEMENT
[FORM OF CONTINUING DISCLOSURE CERTIFICATE]
CLEARFIELD AREA SCHOOL DISTRICT CLEARFIELD COUNTY, PENNSYLVANIA
$_,___,___ GENERAL OBLIGATION BONDS, SERIES A OF 2016
CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (this “Disclosure Certificate”) is made by Clearfield Area School District, Clearfield County, Pennsylvania (the “School District”) as of the ____ day of _________, 2016, in connection with the issuance of its $_,___,___, aggregate principal amount, General Obligation Bonds, Series A of 2016, dated _________, 2016 (the “Bonds”). The Bonds are being issued pursuant to Resolutions adopted by the Board of School Directors of the School District on October 24, 2016 (the “Resolution”). Capitalized terms used in this Disclosure Certificate that are not otherwise defined herein (including, without limitation, in Article IV hereof) shall have the meanings ascribed to such terms in the Resolution. In consideration of the purchase of the Bonds by the Underwriter (as defined below), the School District agrees as follows:
ARTICLE I The Undertaking
Section 1.1. Purpose. This Disclosure Certificate shall constitute a written undertaking for the benefit of the holders of the Bonds, and is being executed and delivered solely to assist the Underwriter in complying with subsection (b)(5) of the Rule. Section 1.2. Annual Financial Information. (a) The School District shall provide Annual Financial Information with respect to each fiscal year of the School District, commencing with fiscal year ended June 30, 2016, by no later than March 31st after the end of each respective fiscal year, to the MSRB through the EMMA System. (b) The School District shall provide, in a timely manner, notice of any failure of the School District to provide the Annual Financial Information by the date specified in subsection (a) above, in substantially the form attached as Exhibit A hereto, to the MSRB through the EMMA System. Section 1.3. Audited Financial Statements. If not provided as part of the Annual Financial Information by the date required by Section 1.2 hereof, the School District may provide State Form PDE-2057 Annual Financial Report, or such successor form, by such date and shall subsequently provide Audited Financial Statements when and if available, to the MSRB through the EMMA System. Section 1.4. Disclosure Event Notices. (a) If a Disclosure Event occurs, the School District shall provide, in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of such Disclosure Event to the MSRB through the EMMA System.
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(b) Any such notice of a defeasance of Bonds shall state whether the Bonds have been escrowed to maturity or to an earlier redemption date and the timing of such maturity or redemption. Section 1.5. Additional Disclosure Obligations. The School District acknowledges and understands that other state and federal laws, including, but not limited to, the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the School District and that, under some circumstances, additional disclosures or other action may be required to enable the School District to fully discharge all of its duties and obligations under such laws. Section 1.6. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the School District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Financial Information or notice of Disclosure Event hereunder, in addition to that which is required by this Disclosure Certificate. If the School District chooses to do so, the School District shall have no obligation under this Disclosure Certificate to update such additional information or include it in any future Annual Financial Information or notice of a Disclosure Event hereunder.
ARTICLE II Operating Rules
Section 2.1. Reference to Other Documents. It shall be sufficient for purposes of Section 1.2 hereof if the School District provides Annual Financial Information by specific reference to documents (i) either (1) provided to the MSRB through the EMMA System, or (2) filed with the SEC, or (ii) if such document is a Final Official Statement, available from the MSRB as a word-searchable pdf file. Section 2.2. Submission of Information. Annual Financial Information may be provided in one document or multiple documents, and at one time or in part from time to time. Section 2.3. Disclosure Event Notices. Each notice of a Disclosure Event hereunder shall be captioned “Notice of Disclosure Event” and shall prominently state the title, date and CUSIP numbers of the Bonds. Section 2.4. Transmission of Information and Notices. Unless otherwise required by law and, in the School District’s sole determination, subject to technical and economic feasibility, the School District shall employ such methods of information and notice transmission as shall be requested or recommended by the herein-designated recipients of the School District’s information and notices. Section 2.5. Fiscal Year. (a) The School District's current fiscal year is July 1 to June 30, and the School District shall promptly provide written notice of each change in its fiscal year. The School District shall provide such notice to the MSRB through the EMMA System. (b) Annual Financial Information shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months.
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ARTICLE III Effective Date, Termination, Amendment, Default and Enforcement
Section 3.1. Effective Date, Termination. (a) This Disclosure Certificate shall be effective upon the issuance of the Bonds. (b) The School District’s obligations under this Disclosure Certificate shall terminate upon a legal defeasance, prior redemption or payment in full of all of the Bonds or on the date that the School District shall no longer be deemed an “obligated person” with respect to the Bonds within the meaning of the Rule. (c) This Disclosure Certificate, or any provision hereof, shall be null and void in the event that (1) the School District receives an opinion of Counsel to the effect that those portions of the Rule which require this Disclosure Certificate, or such provision, as the case may be, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, or otherwise, as shall be specified in such opinion, and (2) the School District delivers a copy of such opinion to the MSRB through the EMMA System. Section 3.2. Amendment. (a) This Disclosure Certificate may be amended, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (1) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the School District or the type of business conducted thereby, (2) this Disclosure Certificate as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the School District shall have received an opinion of Counsel to the same effect as set forth in clause (2) above, (4) the School District shall have received an opinion of Counsel or a determination by a person, in each case unaffiliated with the School District (such as bond counsel or the paying agent) and acceptable to the School District, addressed to the School District, to the effect that the amendment does not materially impair the interests of the holders of the Bonds, and (5) the School District shall have delivered copies of such opinion(s) and amendment to the MSRB through the EMMA System. (b) In addition to subsection (a) above, this Disclosure Certificate may be amended without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (1) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date of this Disclosure Certificate which is applicable to this Disclosure Certificate, (2) the School District shall have received an opinion of Counsel to the effect that performance by the School District under this Disclosure Certificate as so amended will not result in a violation of the Rule and (3) the School District shall have delivered copies of such opinion and amendment to the MSRB through the EMMA System. (c) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Financial Information provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (d) If an amendment is made to the accounting principles to be followed by the School District in preparing its financial statements, the Annual Financial Information for the
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fiscal year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a qualitative and, to the extent reasonably feasible, quantitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. Section 3.3. Default. In the event of a failure of the School District to comply with any provision of this Disclosure Certificate, the rights of the holders of the Bonds to enforce the provisions of this Disclosure Certificate shall be limited solely to the right, by action in mandamus or for specific performance, to cause the School District to comply with obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the School District to comply with this Disclosure Certificate shall be an action to compel performance, and no person or entity shall be entitled to recover monetary damages under this Disclosure Certificate. Section 3.4. Benefit: Third-Party Beneficiaries: Enforcement. (a) The provisions of this Disclosure Certificate shall constitute a contract with and inure solely to the benefit of the Underwriter and the holders from time to time of the Bonds, except that beneficial owners of Bonds shall be third-party beneficiaries of this Disclosure Certificate and shall be deemed to be holders of Bonds for purposes of Section 3.4(b) hereof. The provisions of this Disclosure Certificate shall create no rights in any person or entity except as provided in this subsection (a). (b) The obligations of the School District to comply with the provisions of this Disclosure Certificate shall be enforceable in the case of enforcement of obligations to provide financial statements, financial information, operating data and notices, by any holder of the Bonds. The holders’ rights to enforce the provisions of this Disclosure Certificate shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the School District’s obligations under this Disclosure Certificate. (c) This Disclosure Certificate shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Disclosure Certificate shall be instituted in a court of competent jurisdiction in the State; provided, however, that to the extent this Disclosure Certificate addresses matters of federal securities laws, including the Rule, this Disclosure Certificate shall be construed in accordance with such federal securities laws and official interpretations thereof.
ARTICLE IV Definitions
Section 4.1. Definitions. The following terms used in this Disclosure Certificate shall have the following respective meanings: “Annual Financial Information” means, collectively,
(i) the Audited Financial Statements, (ii) the current budget (or summary of the budget) for each fiscal year; (iii) the total assessed value and market value of all taxable real estate for the most recent fiscal year;
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(iv) the taxes and millage rates imposed for the most recent fiscal year;
(v) the real property tax collection results for the most recent fiscal year, including (1) the real estate levy imposed (expressed both as a millage rate and an aggregate dollar amount), (2) the dollar amount of real estate taxes collected that represented current collections (expressed as an aggregate dollar amount), (3) the amount of real estate taxes collected that represented taxes levied in prior years (expressed as an aggregate dollar amount), and (4) the total amount of real estate taxes collected (expressed as an aggregate dollar amount);
(vi) a list of the ten (10) largest real estate taxpayers and, for each, the total
assessed value of real estate for the most recent fiscal year; and (vii) the information regarding amendments to this Disclosure Certificate required pursuant to Sections 3.2(c) and (d) of this Disclosure Certificate.
“Audited Financial Statements” means the annual financial statements, if any, of the School District, audited by the School District's independent public accountants. Audited Financial Statements shall be prepared in accordance with GAAP. “Counsel” means any nationally recognized bond counsel or counsel expert in federal securities laws. “Disclosure Event” means any of the following events with respect to the Bonds, whether relating to the School District or otherwise:
(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 security holders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Bonds; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the obligated person; (13) The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
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For the purposes of the event identified in paragraph (12) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.
“EMMA System” means the MSRB’s Electronic Municipal Market Access system (http://emma.msrb.org/), or such other electronic system designated by the MSRB. “Final Official Statement” means a “final official statement,” as defined in paragraph (f)(3) of the Rule. “GAAP” means generally accepted accounting principles as prescribed from time to time by the Financial Accounting Standards Board or any successor to the duties or responsibilities thereof. “MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934. “Rule” means Rule 15c2-12 promulgated by the SEC under the Securities Exchange Act of 1934 (17 CFR Part 240, §240.15c2-12), as in effect on the date of this Disclosure Certificate, including any official interpretations thereof issued either before or after the effective date of this Disclosure Certificate which are applicable to this Disclosure Certificate. “SEC” means the United States Securities and Exchange Commission. “Underwriter” shall have the meaning given thereto under Rule 15c2-12, or any successor to such underwriter or underwriters known to the School District.
ARTICLE V Miscellaneous
Section 5.1. Disclosure Dissemination Agent. The School District may appoint a disclosure dissemination agent to perform the responsibilities of the School District for compliance with disclosure requirements pursuant to the Rule performed by the School District under this Disclosure Certificate for the benefit of the holders of the Bonds and Underwriter. Section 5.2. Severability. If any provision hereof shall be held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions hereof shall survive and continue in full force and effect.
Section 5.3. Governing Law. This Disclosure Certificate shall be governed by and interpreted in accordance with the laws of the Commonwealth of Pennsylvania; provided, however, that, to the extent that the Securities and Exchange Commission, the MSRB or any other federal
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agency or regulatory body with jurisdiction shall have promulgated any rule or regulation governing the subject matter hereof, this Disclosure Certificate shall be interpreted and construed in a manner consistent therewith.
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IN WITNESS WHEREOF, the School District has caused its duly authorized representative to execute this Disclosure Certificate as of the day and year first written above. CLEARFIELD AREA SCHOOL DISTRICT President, Board of School Directors
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EXHIBIT A
FORM OF NOTICE OF FAILURE TO FILE ANNUAL FINANCIAL INFORMATION Name of Issuer: Clearfield Area School District, Clearfield County, Pennsylvania Name of Bond Issue: Clearfield Area School District, Clearfield County, Pennsylvania
$_,___,___ General Obligation Bonds, Series A of 2016 Date of Issuance: ___________, 2016 NOTICE IS HEREBY GIVEN that the above-named Issuer has not provided the Annual Financial Information with respect to the above-named Bonds as required by the Continuing Disclosure Undertaking dated ___________, 2016. Said Issuer anticipates that the Annual Financial Information will be filed by . Dated: CLEARFIELD AREA SCHOOL DISTRICT Clearfield County, Pennsylvania By:
