$7,100,000* shikellamy school district · 2015. 5. 29. · $7,100,000* shikellamy school district...

PRELIMINARY OFFICIAL STATEMENT DATED MAY 29, 2015

NEW ISSUE—BOOK-ENTRY ONLY RATINGS: S&P: ____ (Insured) S&P: ___ (Underlying) (See “RATINGS” herein)

In the opinion of Bond Counsel, under existing Pennsylvania laws, the interest on the Bonds is exempt from the present Pennsylvania personal income tax. Conditioned upon compliance by the School District with all covenants and agreements contained in the Resolution and other documents relating to issuance of the Bonds, in the opinion of Bond Counsel interest on the Bonds will not be includible in gross income under the Internal Revenue Code of 1986, as amended (the “Code”) under present statutes, regulations and decisions nor an item of tax preference for purposes of computing the alternative minimum tax imposed on individuals and corporations under the Code.

The School District has designated each of the Bonds as a "qualified tax-exempt obligation," for purposes of and with the effect contemplated by Section 265(b) of the Code (relating to expenses and interest incurred to realize tax-exempt income by certain financial institutions).

$7,100,000* Shikellamy School District Northumberland County, Pennsylvania

$4,820,000* General Obligation Bonds, Series of 2015 $2,280,000* General Obligation Bonds, Series A of 2015

Dated: Date of Delivery Principal Due: September 1, as shown on inside cover

Interest Due: March 1 and September 1 First Interest Payment: September 1, 2015

The Bonds described herein are in the combined aggregate principal amount of $7,100,000* and consist of $4,820,000* General Obligation Bonds, Series of 2015 (the “2015 Bonds”) and $2,280,000* General Obligation Bonds, Series A of 2015 (the “2015A Bonds”). The 2015 Bonds and the 2015A Bonds are collectively referred to as the "Bonds". The Bonds will be registered in the name of Cede & Co., as the registered owner and nominee of The Depository Trust Company ("DTC"), New York, New York. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or any integral multiple thereof only under the book-entry 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 Shikellamy School District, Northumberland 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 fiscal year, the amount of the debt service on the Bonds for each fiscal 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 in the Bonds, and for such budgeting, appropriation and payment the School District irrevocably has pledged its full faith, credit and taxing power, within the limits provided by law. (See “Security” and “Taxing Powers of the School District” infra).

Interest on each of the Bonds is payable initially on September 1, 2015, 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 (the “Paying Agent”), as paying agent and sinking fund depositary for the Bonds. So long as Cede & Co., as nominee for DTC, is the registered owner of the Bonds, payments of the principal of 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 System for the Bonds is ever discontinued, the in principal of and on each of the Bonds will be payable, when due, upon surrender of such Bond to the Paying Agent at its corporate trust office located in , Pennsylvania (or any successor paying agent at its designated office(s)) and interest on such Bond will be payable by check and mailed to the person(s) 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 maturing on and after September 1, 2020 are subject to redemption prior to maturity as described herein.

Proceeds of the 2015 Bonds will be used: (1) to acquire, construct and equip a new middle school, (2) for additions, alterations, renovations and other improvements to (a) the School District athletic facilities and other school facilities (b) the Sun Area Technical School; and (3) pay the costs of issuing the 2015 Bonds.

Proceeds of the 2015A Bonds will be used to: (1) currently refund the School District’s outstanding General Obligation Bonds, Series of 2010; and (2) pay the costs of issuing the 2015A Bonds.

The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by .

MATURITIES, AMOUNTS, RATES AND YIELDS/PRICES {As Shown on Inside Cover}

The Bonds are offered when, as and if issued, subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of Mette, Evans and Woodside, Harrisburg, Pennsylvania, Bond Counsel, to be furnished upon delivery of the Bonds. Certain matters will be passed upon for the School District by Apfelbaum, Apfelbaum & Apfelbaum, of Sunbury, Pennsylvania, School District Solicitor. Public Financial Management, Inc., of Harrisburg, Pennsylvania, will act as Financial Advisor to the School District 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 July 16, 2015.

Public Financial Management, Inc. Financial Advisor to the School District

Dated:

*Estimated, subject to change.

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Dated: Date of Delivery Principal Due: September 1, as shown below Interest Due: March 1 and September 1 First Interest Payment: September 1, 2015

$4,820,000* General Obligation Bonds, Series of 2015

Maturity Date

(September 1) Principal Interest Initial Offering Initial Offering

Year Amounts Rates Yields* Prices CUSIP(1)

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

$2,280,000* General Obligation Bonds, Series A of 2015

Maturity Date

(September 1) Principal Interest Initial Offering Initial Offering

Year Amounts Rates Yields* Prices CUSIP(1)

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

(1)The above CUSIP (Committee on Uniform Securities Identification Procedures) numbers have been assigned by an organization not affiliated with the School District or the Underwriter, and such parties are not responsible for the selection or use of the CUSIP numbers. The CUSIP numbers are included solely for the convenience of bondholders and no representation is made as to the correctness of such CUSIP numbers. CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors including, but not limited to, the refunding or defeasance of such issue or the use of secondary market financial products. Neither the School District nor the Underwriter has agreed to, and there is no duty or obligation to, update this Official Statement to reflect any change or correction in the CUSIP numbers set forth above. *Estimated, subject to change.

Shikellamy School District Northumberland County, Pennsylvania

BOARD OF SCHOOL DIRECTORS

Wendy K. Wiest............................................................................................................ President

Dr. James P. Hartman ................................................................................................... Vice-President

Lori Garman ................................................................................................................. Secretary

David M. Sinopoli ........................................................................................................ Treasurer*

Kellie M. Cianflone ...................................................................................................... Member

James P. Garman .......................................................................................................... Member

C. Scott Karpinski ......................................................................................................... Member

Thomas L. Michaels ..................................................................................................... Member

Michael E. Stepp ........................................................................................................... Member

Dr. Jeffrey W. Walter ................................................................................................... Member

*Non-Voting member.

ACTING DISTRICT SUPERINTENDENT NED SODRICK

BUSINESS MANAGER DAVID M. SINOPOLI

SOLICITOR APFELBAUM, APFELBAUM & APFELBAUM

Sunbury, Pennsylvania

BOND COUNSEL METTE, EVANS & WOODSIDE

Harrisburg, Pennsylvania

FINANCIAL ADVISOR PUBLIC FINANCIAL MANAGEMENT, INC.

Harrisburg, Pennsylvania

PAYING AGENT

, Pennsylvania

SCHOOL DISTRICT ADDRESS 200 Island Boulevard

Sunbury, Pennsylvania 17801

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 State Enforcement of Debt Service Payments ...................... 3 Security .................................................................................. 3 Sinking Funds ........................................................................ 3

BOOK-ENTRY ONLY SYSTEM .................................... 4

REDEMPTION OF BONDS ............................................ 5

Mandatory Redemption ......................................................... 5 Optional Redemption ............................................................ 6 Notice of Redemption ........................................................... 6 Manner of Redemption .......................................................... 6

THE SCHOOL DISTRICT .............................................. 7

Introduction ........................................................................... 7 Administration ....................................................................... 7 School Facilities .................................................................... 7

SCHOOL DISTRICT FINANCES .................................. 8

Introduction ........................................................................... 8 Financial Reporting ............................................................... 8 Budgeting Process as modified by Act 1 of 2006 (Taxpayer Relief Act) .............................. 8 Summary and Discussion of Financial Results ..................... 9 Revenue ............................................................................... 10

TAXING POWERS OF THE SCHOOL DISTRICT ... 11

The Taxpayer Relief Act (Act 1) ........................................ 12 The Bonds are Not Eligible for Act 1 Exception ................ 13 State Law Authorizing Replacement of the School District’s Occupation Tax with an Increase in the Local Earned Income Tax ............ 13 Legislation Limiting Unreserved Fund Balances ............... 13 Tax Levy Trends ................................................................. 14 Real Property Tax ................................................................ 15 Other Taxes ......................................................................... 16 State Aid to School Districts ............................................... 17

DEBT AND DEBT LIMITS ........................................... 17

Debt Statement .................................................................... 17 Debt Limit and Remaining Borrowing Capacity ................ 19 Debt Service Requirements ................................................. 20 Future Financing.................................................................. 21

LABOR RELATIONS .................................................... 21

School District Employees .................................................. 21 Pension Program.................................................................. 21 Other Post-Employment Benefits ....................................... 22

LITIGATION ................................................................. 22

DEFAULTS AND REMEDIES ..................................... 23

EXEMPTION FROM TAXATION .............................. 23

Tax Exemption .................................................................... 23

CONTINUING DISCLOSURE UNDERTAKING ...... 24

RATINGS ....................................................................... 26

UNDERWRITING ......................................................... 26

LEGAL OPINION ......................................................... 26

FINANCIAL ADVISOR ................................................ 26

MISCELLANEOUS ....................................................... 26

APPENDIX A - DEMOGRAPHIC AND ECONOMIC

INFORMATION RELATING TO THE SHIKELLAMY SCHOOL

DISTRICT

Introduction ....................................................................... A-1 Population ......................................................................... A-1 Employment ...................................................................... A-2 Income ............................................................................... A-3 Commercial Activity ......................................................... A-3 Educational Institutions .................................................... A-4 Medical Facilities .............................................................. A-4 Utilities .............................................................................. A-4 Transportation ................................................................... A-4

APPENDIX B - OPINION OF BOND COUNSEL

APPENDIX C - CONTINUING DISCLOSURE CERTIFICATE 2

APPENDIX D - SPECIMEN MUNICIPAL BOND INSURANCE

POLICY

APPENDIX E - AUDITED FINANCIAL REPORT FOR

FYE JUNE 30, 2014

[THIS PAGE INTENTIONALLY LEFT BLANK]

1

PRELIMINARY OFFICIAL STATEMENT


$4,820,000* General Obligation Bonds, Series of 2015 $2,280,000* General Obligation Bonds, Series A of 2015

INTRODUCTION

This Preliminary Official Statement, including the cover page hereof, is furnished by the Shikellamy School District,

Northumberland County, Pennsylvania (the “School District”) in connection with the offering of $7,100,000* combined aggregate principal amount of general obligation bonds, which consist of $4,820,000* aggregate principal amount of General Obligation Bonds, Series of 2015 (the “2015 Bonds”) and $2,280,000* aggregate principal amount of General Obligation Bonds, Series A of 2015 (the “2015A Bonds”). The 2015 Bonds and the 2015A Bonds are collectively referred to as the "Bonds". The Bonds are being issued pursuant to a Resolution of the Board of School Directors of the School District adopted on June 11, 2015 (the “Resolution”), and pursuant to the Local Government Unit Debt Act of the Commonwealth of Pennsylvania (the “Commonwealth”), 53 Pa. C.S. Chs. 80-82 (the “Act”).

PURPOSE OF THE ISSUE

Proceeds of the 2015 Bonds will be used: (1) to acquire, construct and equip a new middle school, (2) for additions, alterations, renovations and other improvements to (a) the School District athletic facilities and other school facilities (b) the Sun Area Technical School; and (3) pay the costs of issuing the 2015 Bonds. Proceeds of the 2015A Bonds will be used to: (1) currently refund the School District’s outstanding General Obligation Bonds, Series of 2010 outstanding in the aggregate principal amount of $2,210,000 (the “2010 Bonds”); and (2) pay the costs of issuing the 2015A Bonds.

Upon issuance of the 2015A Bonds, a portion of the proceeds will be deposited with TD Bank, N.A. as paying agent for the 2010 Bonds, in an amount sufficient to redeem the 2010 Bonds at a redemption price of 100% of the principal amount plus accrued interest, on July 16, 2015.

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 2015 Bonds 2015A Bonds Total Proceeds of the Bonds ............................................. Net Original Issue Premium .................................... Total Sources of Funds ...................................... Uses of Funds

Construction Fund Deposit ..................................... Amount Required to Redeem the 2010 Bonds ........ Cost of Issuance(1) ................................................... Total Uses of Funds ............................................

(1)Includes total bond discount, legal, financial advisor, municipal bond insurance, printing, rating, paying agent and miscellaneous fees.

*Estimate, 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 $7,100,000*, will be dated as of the date of delivery 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 September 1, 2015, and thereafter semiannually on March 1 and September 1.

When issued, the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York. Purchasers of the Bonds (the “Beneficial Owners”) will not receive any physical delivery of bond certificates, and beneficial ownership of the Bonds will be evidenced only by book entries. 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 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 of 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 and interest on the Bonds shall be made as described in the following paragraphs:

The principal of the Bonds, when due upon maturity or upon any earlier redemption, will be paid to the registered owners

of the Bonds, or registered assigns, upon surrender of the Bonds to (the “Paying Agent”), acting as paying agent and sinking fund depositary for the Bonds, at its corporate trust office in , 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 September 1, 2015, in which event such Bond shall bear interest from the date of delivery, or (d) as shown by the records of the Paying Agent, interest on such Bond shall be in default, in which event such Bond shall bear interest from the date to which interest was last paid on such Bond. Interest shall be paid initially September 1, 2015, 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 first days of February and August, respectively (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 fifteen (15) days preceding such special record date. Such notice shall be mailed to the person in whose name such Bond is registered at the close of business on the fifth (5th) day preceding the date of mailing.

If the date for payment of the principal or interest on any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth of Pennsylvania are authorized by law or executive order to close, then the date for payment of such principal or interest shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized to close, and payment on such date shall have the same force and effect as if made on the nominal date established for such payment. Transfer, Exchange and Registration of Bonds

Subject to the provisions described below under “Book-Entry Only System,” Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Paying Agent, accompanied by a written instrument or instruments in form, with instructions, and duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Paying Agent shall enter any transfer of ownership of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered bond or bonds of authorized denominations of the same series, maturity 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. *Estimate, subject to change.

3

Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Paying Agent, at its specified corporate trust office accompanied by a written instrument or instruments in form, with instructions, satisfactory to the Paying Agent, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Paying Agent shall enter any transfer of ownership of 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, 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.

State Enforcement of Debt Service Payments

Section 633 of the Pennsylvania School Code of 1949, as amended by Act 150 of 1998, 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 at date of maturity or date of mandatory redemption, or any interest due on such indebtedness on any interest payment date, in accordance with the schedule under which the bonds were issued, the Secretary of Education shall notify such board of school directors of its obligation and shall withhold out of any State appropriation due such school district an amount equal to the sum of the principal amount maturing or subject to mandatory redemption and interest owing by such school district, and shall pay over the amount so withheld to the bank or other person acting as sinking fund depository for such bond issue. These withholding provisions are not part of any contract with the holders of the Bonds, and may be amended or repealed by future legislation.

There can be no assurance, however, that any payments pursuant to this provision will be made by the date on which such

payments are due to the Bondholders. The effectiveness of Section 633 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 and unpaid charter school tuition payments. Enforcement may also be limited by bankruptcy, insolvency, or other laws or equitable principles affecting the enforcement of creditors' rights generally.

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 fiscal year, and will appropriate from its general revenues in each such fiscal year, the amount of the debt service on the Bonds for such fiscal 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 includes the power to levy ad valorem taxes on all taxable property within the School District within the limits provided by law (see “Taxing Powers of the School District” 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). Sinking Fund The sinking fund for the payment of debt service on the Bonds, designated "General Obligation Bonds, Series of 2015 and Series A of 2015 - Sinking Fund" (the "Sinking Fund"), created under the Resolution shall be held 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 funds available therein, is sufficient to pay in full interest and/or principal then due on the Bonds. The Sinking Fund shall be held by the Paying Agent, as sinking fund depository, and funds deposited therein will be invested by the Paying Agent in such securities or shall be deposited in such funds or accounts as are authorized by law, 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.

4

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 securities depository for the Bonds (the "Bonds"). The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 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 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants'') deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has 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 of any particular maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

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).

5

Payments of Principal, interest and redemption premium, if any, on the Bonds, will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Issuer or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Issuer or the Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of Principal, interest and redemption premium, if any, on the Bonds, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The issuer may decide to discontinue use of the system of book-entry-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 ORDINANCE 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.

REDEMPTION OF BONDS Mandatory Redemption – 2015 Bonds

The 2015 Bonds stated to mature on September 1, and , are subject to redemption prior to maturity as required by the Resolution, in the amounts and on September 1 of the years shown below, from moneys in the Mandatory Sinking Fund created pursuant to the Resolution, upon payment of the principal amount thereof together with interest accrued to the date fixed for redemption.

2015 Bonds stated to mature September 1, :

*Final Maturity

In the case of any optional redemption in part of a 2015 Bond that is subject to future mandatory redemption pursuant to the operation of the Mandatory Sinking Fund, the School District shall be entitled to designate whether the principal amount of such 2015 Bond redeemed upon optional redemption shall be credited against the principal amount of such 2015 Bond to be paid by the School District at the stated maturity of such 2015 Bond or credited against the principal amount of such 2015 Bond scheduled to be called for mandatory sinking fund redemption on any particular date or dates, in each case in an integral multiple of $5,000 principal amount.

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Mandatory Redemption – 2015A Bonds

The 2015A Bonds stated to mature on September 1, and , are subject to redemption prior to maturity as required by the Resolution, in the amounts and on September 1 of the years shown below, from moneys in the Mandatory Sinking Fund created pursuant to the Resolution, upon payment of the principal amount thereof together with interest accrued to the date fixed for redemption.

2015A Bonds stated to mature September 1, :

*Final Maturity

In the case of any optional redemption in part of a 2015A Bond that is subject to future mandatory redemption pursuant to the operation of the Mandatory Sinking Fund, the School District shall be entitled to designate whether the principal amount of such 2015A Bond redeemed upon optional redemption shall be credited against the principal amount of such 2015A Bond to be paid by the School District at the stated maturity of such 2015A Bond or credited against the principal amount of such 2015A Bond scheduled to be called for mandatory sinking fund redemption on any particular date or dates, in each case in an integral multiple of $5,000 principal amount. Optional Redemption

The Bonds stated to mature on and after September 1, 2021, are subject to redemption prior to maturity, at the option of the School District, as a whole or, from time to time, in part, on September 1, 2020, or on any date thereafter, or from time to time in part, in each case upon payment of a redemption price of 100% of the principal amount thereof plus accrued interest to the date fixed for redemption. If less than all Bonds of any maturity are to be redeemed, the Bonds of such maturity to be redeemed shall be drawn by lot by the Paying Agent. Notice of Redemption

Notice of any redemption shall be given by mailing a copy of the redemption notice not less than 30 days nor more than 45 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 any Bonds called for redemption.

On the date designated for redemption, and money for payment of the principal and accrued interest being held by the Paying Agent, interest on the Bonds and portions thereof so called for redemption shall cease to accrue and such Bonds and portions thereof shall cease to be entitled to any benefit or security under the Resolution, and registered owners of such Bonds or portions thereof so called for redemption shall have no rights with respect to such Bonds, except to receive payment of the principal of and accrued interest on such Bonds to the date fixed for redemption.

If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth of Pennsylvania are authorized by law or executive order to close, then the date for payment of the principal, 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 to close, and payment on such date shall have the same force and effect as if made on the nominal date of redemption. Manner of Redemption

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 that number of Bonds which is obtained by dividing the principal amount thereof by $5,000, each $5,000 portion of such Bonds 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 aggregate principal amount equal to the unredeemed portion of the principal amount thereof.

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THE SCHOOL DISTRICT Introduction The School District is a school district of the third class organized under State Law and located in Northumberland County in central Pennsylvania. It covers approximately 70.7 square miles at the confluence of the North Branch and the West Branch of the Susquehanna River. The School District is comprised of the City of Sunbury, the Townships of Point, Rockefeller and Upper Augusta, and the Boroughs of Northumberland and Snydertown, all in Northumberland County. The 2010 population served by the School District was approximately 22,592. Administration

The present School District was organized in 1965 by a consolidation of a number of smaller school districts. It is governed by a nine-member Board of School 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 finance. The Business Manager, who also serves as Board Treasurer, is responsible for budget, financial and non-instructional aspects of operations. The Board of School Directors appoints both officials. School Facilities

The School District presently operates four elementary schools and a middle/high school all as described on the following table. Students in grades 10-12 also have the option of attending the Sun Area Technical Institute.

TABLE 1 SHIKELLAMY SCHOOL DISTRICT

SCHOOL FACILITIES

Original Addition/ Rated Construction Renovation Pupil 2014-15 Building Date Date(s) Grades Capacity Enrollment

Elementary: Beck ...................................................... 1982 --- K-6 624 360 Chief Shikellamy .................................. 2002 --- K-6 678 375 Oaklyn .................................................. 1939 1960/99 K-6 736 432 Priestley ................................................ 1926 2000 K-6 732 463

Secondary: Shikellamy Middle School .................... Under Construction --- 6-8 1,051 ---Shikellamy Middle/High ....................... 1934 1958/73/06 7-12 1,338 1,276

Source: School District Officials. Enrollments include vo-tech students.

The following Table 2 presents recent trends in school enrollment and projections of enrollment for the next 5 years, as prepared by the School District's administrative officials.


ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments

School School Year Elementary Secondary Total Year Elementary Secondary Total

2010-11 1,374 1,589 2,963 2015-16 1,699 1,304 3,003 2011-12 1,631 1,337 2,968 2016-17 1,711 1,316 3,027 2012-13 1,618 1,319 2,937 2017-18 1,726 1,344 3,070 2013-14 1,663 1,342 3,005 2019-20 1,744 1,358 3,102 2014-15 1,630 1,276 2,906 2020-21 1,729 1,340 3,069

Source: School District estimates. Enrollments include vo-tech 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 Business Manager and submitted to the School Board for approval prior to the beginning of the fiscal year. Financial Reporting The School District keeps its books and prepares its financial reports according to the modified accrual (less taxes) 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. Expenditures are recognized when liability for payment exists. The School District’s financial statements are audited annually by a firm of independent certified public accountants, as required by Commonwealth law. The firm of Forgett & Kerstetter, P.C. of Selinsgrove, Pennsylvania serve as School District’s auditor. Budgeting Process as modified by Act 1 of 2006 (Taxpayer Relief Act)

In General. School districts budget and expend funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by school district administrative officials on a uniform form furnished by such Department and submitted to the board of school directors for approval prior to the beginning of the fiscal year on July 1.

Procedures for Adoption of the Annual Budget. Under Pennsylvania Act No. 1 of the Special Session of 2006, as amended by Act 25 of 2011 (the “Taxpayer Relief Act” or “Act 1”), 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” 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” 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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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. Table 5 show revenues and expenditures for the past four years, unaudited 2013-14 and 2014-15 Budgeted. The Budget for 2014-15, as adopted June 17, 2014, had budgeted revenues of $41,118,480 and expenditures of $38,916,469.


SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Years Ending June 30)

2010 2011 2012 2013 2014

ASSETS Cash and Cash Equivalents .......................................... $4,346,047 $5,708,431 $8,444,262 $10,037,659 $10,936,741 Taxes Receivable ......................................................... 2,034,051 1,658,078 1,696,038 1,636,048 1,689,999 Interfund Receivable .................................................... 46,485 41,894 3,501 0 112,969 Intergovernmental Receivable ..................................... 1,764,544 5,613 1,161,996 1,242,284 1,751,405 Inventories .................................................................... 305,628 249,183 202,379 183,911 183,279 Prepaid Expenses/Expenditures ................................... 4,000 4,000 8,200 135,425 4,000 Other Receivables ........................................................ 27,227 43,936 38,511 19,791 12,664 State & Federal Receivable .......................................... 0 1,533,201 0 0 0 Other ............................................................................ 0 0 0 0 0 TOTAL ASSETS .................................................... $8,527,982 $9,244,336 $11,554,887 $13,255,118 $14,691,057

LIABILITIES Accounts Payable ......................................................... $431,763 $525,188 $692,293 $510,866 $502,193 Accrued Salaries and Benefits ..................................... 2,160,237 1,580,166 1,902,117 1,343,349 1,553,141 Due to Other Funds ...................................................... 20,704 0 0 6,158 7,436 Payroll Deductions and Withholdings ......................... 214,304 561,525 196,813 1,083,080 1,153,556 Compensated Absences ............................................... 127,562 128,638 101,928 103,578 86,610 Deferred Revenues ....................................................... 1,678,514 1,428,199 1,479,401 1,477,309 0 Other ............................................................................. 0 0 0 0 1,482 TOTAL LIABILITIES ........................................... $4,633,084 $4,223,716 $4,372,552 $4,524,340 $3,304,418 FUND EQUITIES Non-spendable Fund Balance ...................................... $305,628 $249,183 $202,379 $183,911 $183,279 Committed Fund Balance ............................................ 0 523,071 822,282 822,282 1,043,154 Assigned Fund Balance ................................................ 0 597,465 1,174,236 1,174,236 2,962,059 Unassigned Fund Balance ............................................ 3,589,270 3,650,901 4,983,438 6,550,349 5,680,399 TOTAL FUND EQUITIES ................................... $3,894,898 $5,020,620 $7,182,335 $8,730,778 $9,868,891

DEFERRED INFLOWS OF RESOURCES ............. $0 $0 $0 $0 $1,517,748 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND EQUITIES ........ $8,527,982 $9,244,336 $11,554,887 $13,255,118 $14,691,057

Source: School District Annual Financial Reports.


SUMMARY OF CHANGES IN FUND BALANCE*

Actual Budget

2010 2011 2012 2013 2014 2015(1) Beginning Fund Balance ........................ $3,508,904 $3,894,896 $5,020,621 $7,182,338 $8,730,782 $9,868,896 Revenues over (under) Expenditure ......... 385,992 1,122,564 2,161,717 1,548,444 1,138,114 2,202,011 Other ......................................................... 0 3,160 0 0 0 0 Ending Fund Balance ............................. $3,894,896 $5,020,621 $7,182,338 $8,730,782 $9,868,896 $12,070,907

*Totals may not add due to rounding. (1)Budget, as adopted June 17, 2014. See “Summary and Discussion of Financial Results" herein. Source: School District Annual Financial Reports and Budget.

10

Revenue

The School District received $40,054,073 in revenue in 2013-14 and has budgeted revenue of $41,118,480 in 2014-15. Local sources increased as a share of total revenues in the past five years, from 46.1 percent in 2009-10 to 49.4 percent in 2013-14. Revenue from Commonwealth sources increased as a share of total revenues in the past five years, from 45.6 percent in 2009-10 to 47.0 percent in 2013-14. Federal and other sources decreased as a share of total revenue during this period from 8.3 to 3.5 percent in 2013-14.


SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES*

(Years ending June 30)

REVENUE: Actual Budget Local Sources: 2010 2011 2012 2013 2014 2015(1) Real Estate Taxes ....................................................... $11,074,148 $11,676,901 $12,820,805 $12,811,415 $13,499,035 $13,572,619 Total Act 511 Taxes ................................................... 3,551,219 3,672,842 3,610,881 3,701,019 3,708,004 3,680,022 Payment in Lieu of Taxes ........................................... 25,146 29,250 28,333 38,325 36,754 36,750 Per Capita (Sec. 679) Taxes ....................................... 50,053 49,696 49,104 48,060 47,313 44,767 Public Utility Realty Tax ............................................ 22,179 22,492 22,693 23,430 22,763 22,000 Delinquency on Taxes Levied .................................... 1,532,764 1,726,725 1,428,784 1,497,991 1,439,324 1,611,575 Earnings from Investments ......................................... 120,402 92,450 70,917 56,319 39,305 50,010 Revenue from Student Activities ............................... 5,375 93,614 92,282 100,811 73,342 77,000 Federal Revenues - Other I.U.S ................................. 460,763 463,605 487,019 546,421 521,692 538,958 Federal Revenues - Other Public Schools .................. 1,563 7,124 10,000 7,872 0 0 Federal ARRA IDEA Pass Through Revenue ........... 304,374 242,657 0 0 0 0 Receipts from Other LEAS in PA-Education ............ 89,308 125,921 104,126 62,560 160,359 0 Other Revenue from Intermediate Sources ................ 42,716 44,480 22,360 23,644 14,689 23,237 Rentals ....................................................................... 14,510 14,562 10,534 6,609 5,122 5,000 Contributions and Donations from Private Source ... s 2,000 70,000 39,487 0 70,636 20,000 Refunds and Other Miscellaneous Revenue .............. 80,867 99,642 87,941 85,502 124,619 0 Tuition from Patrons .................................................. 19,778 13,930 29,307 6,426 8,850 197,479 Other Sources ............................................................. 4,380 10,548 10,491 12,367 14,730 100,000 Total Local Sources .............................................. $17,401,546 $18,456,438 $18,925,062 $19,028,770 $19,786,537 $19,979,417 State Sources: Basic Instructional Subsidy ........................................ $10,766,756 $10,382,221 $11,589,864 $11,589,052 $11,804,914 $11,804,912 Charter Schools .......................................................... 101,728 151,517 0 0 0 0 Rentals and Sinking Fund Payments .......................... 781,517 672,981 607,121 664,205 710,224 633,845 Special Education ....................................................... 1,782,389 1,769,952 1,769,952 1,769,952 1,769,952 1,769,952 Vocational Education ................................................. 0 0 0 942 0 0 Transportation ............................................................ 757,214 775,648 757,057 791,701 815,455 793,561 Other Program Subsidies ............................................ 131,915 111,348 0 0 0 0 Tuition for Orphans & Children in Private Homes .... 87,995 108,842 97,870 117,431 128,694 110,000 Revenue for Retirement ............................................. 518,779 622,991 841,573 1,240,856 1,717,972 2,105,864 Revenue for Social Security ....................................... 744,894 770,193 692,563 707,048 720,108 710,661 Health Services ........................................................... 59,836 58,117 57,410 56,090 56,407 58,000 Extra Grants ................................................................ 10,976 8,284 0 0 0 0 PA Accountability Grant ............................................ 565,158 529,971 208,219 208,219 208,219 208,219 State Property Tax Reduction Allocation .................. 895,101 895,034 895,013 894,898 895,193 896,033 Project 720/High School Reform ............................... 30,887 0 0 0 0 0 Classrooms for the Future .......................................... 0 0 0 0 0 0 Other Sources ............................................................. 318 0 431 0 140 500,847 Total State Sources .................................................... $17,235,464 $16,857,098 $17,517,073 $18,040,394 $18,827,277 $19,591,894 Federal Sources: Total Federal Sources .......................................... $3,142,299 $4,005,676 $1,458,870 $1,630,125 $1,367,325 $1,547,169

Other Sources: Total Other Sources .............................................. $760 $0 $22,256 $368 $54,494 $0 TOTAL REVENUE ......................................... $37,780,068 $39,319,213 $37,923,261 $38,699,657 $40,035,632 $41,118,480

EXPENDITURES: Instruction ................................................................... $24,151,155 $24,920,586 $23,138,345 $24,521,295 $25,563,063 $25,563,064 Pupil Personnel ........................................................... 973,334 1,050,079 1,001,160 1,112,712 1,065,582 1,013,714 Instructional Staff ....................................................... 1,471,846 1,108,468 993,421 928,263 990,490 1,042,358 Administration ............................................................ 1,908,938 2,037,957 1,839,957 1,934,919 2,050,797 2,050,797 Pupil Health ................................................................ 360,003 379,218 329,134 355,990 395,758 395,758 Business ...................................................................... 348,760 384,574 398,772 433,400 448,522 448,522 Operation and Maintenance ....................................... 3,669,468 3,427,463 3,012,426 2,914,893 2,772,921 2,772,921 Student Transportation ............................................... 1,254,948 1,295,164 1,333,058 1,328,470 1,387,914 1,387,914 Central ........................................................................ 125,529 134,298 131,791 136,901 142,633 142,633 Operation of Non-instructional Services .................... 131,925 539,040 545,859 557,302 544,205 544,716 Debt Service ............................................................... 2,649,481 2,904,372 2,829,797 2,920,342 3,375,560 3,375,560 Other Expenditures ..................................................... 21,250 0 2,218 0 2,637 21,076 Fund Transfers ............................................................ 327,440 15,429 205,606 6,726 157,436 157,436 TOTAL EXPENDITURES ............................. $37,394,077 $38,196,648 $35,761,544 $37,151,213 $38,897,518 $38,916,469

SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES ......... $385,992 $1,122,564 $2,161,717 $1,548,444 $1,138,114 $2,202,011

*Totals may not add due to rounding. (1)Budget, as adopted June 17, 2014. See “Summary and Discussion of Financial Results" herein. Source: School District Annual Financial Reports and Budget.

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TAXING POWERS OF THE SCHOOL DISTRICT 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)” 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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The Taxpayer Relief Act (Act 1)

Under Act 1, a school district may not levy any new tax for the support of the public schools which was not levied in a previous 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 % 2015-16 2.7 2014-15 3.0 2013-14 2.4 2012-13 2.3 2011-12 2.0

Source: Pennsylvania Department of Education website.

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. This referendum question 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 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.

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The Bonds are Not Eligible for Act 1 Exception

The Bonds do not qualify for an exception to the Index and referendum requirement for debt incurred prior to the effective date of Act 1 (or its predecessor statute Act 72). The School District must include any tax increases to pay debt service due on the Bonds within the Index applicable in each Fiscal Year. State Law Authorizing Replacement of the School District’s Occupation Tax with an Increase in the Local Earned Income Tax

Act 24 of 2001 of the Commonwealth of Pennsylvania, which became law on June 22, 2001, authorizes a Board of School Directors to schedule a public hearing and conduct a ballot referendum on replacing the school district’s occupation tax with an increase in the local earned income tax. Currently, school districts in Pennsylvania share a 1.0% tax on the annual amount of residents’ wages and other earned income (which excludes unearned or investment income), with the resident municipality. Under the new law, this tax could be increased by the percentage necessary to generate revenue equal to what was collected during the preceding year on the occupation tax. The occupation tax is a flat amount for all employed individuals, or assessed by various trade, occupation and professional titles, regardless of income. The restructured tax is designed to be revenue neutral at the time of implementation to the school district. Legislation Limiting Unreserved 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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Tax Levy Trends Table 6 which follows shows the recent trend of tax rates levied by the School District. Table 7 shows the comparative trend of real property tax rates for the School District, the City of Sunbury, three townships, two boroughs, and Northumberland County.


TAX RATES

Real Estate Wage and Real Estate Per Capita(1) Transfer(2) Income(2) Occupation (mills) ($) (%) (%) (mills) 2010-11........................ 72.50 10.00 1.00 1.00 428 2011-12........................ 78.00 10.00 1.00 1.00 428 2012-13........................ 78.00 10.00 1.00 1.00 428 2013-14........................ 81.00 10.00 1.00 1.00 428 2014-15........................ 83.25 10.00 1.00 1.00 428

(1)Includes School Code and Act 511 taxes. (2)Subject to sharing at the rate of 50% providing the municipality levies the tax.

Source: School District Officials.


COMPARATIVE REAL PROPERTY TAX RATES (Mills on Assessed Value)

2011 2012 2013 2014 2015 School District .......................................................... 72.500 78.000 78.000 81.000 83.250

Northumberland Borough ......................................... 14.625 19.800 18.500 19.500 28.000

Point Township ......................................................... 10.500 10.500 10.500 10.500 12.250

Rockefeller Township ............................................... 0.750 0.750 0.750 0.750 5.000

Snydertown Borough ................................................ 3.000 3.000 3.000 3.000 5.000

City of Sunbury ........................................................ 23.000 23.000 23.000 23.000 27.250

Upper Augusta Township ......................................... 0.500 0.500 0.500 0.500 0.500

Northumberland County ........................................... 18.368 18.368 20.318 23.268 24.768

Source: Local Government Officials.

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Real Property Tax The real property tax (excluding delinquent collections) is anticipated to produce an unaudited $13,499,035 in 2013-14, approximately 33.7 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, and those who remit subsequent to 120 days after July 1 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 re-assessment was in 2006.


REAL PROPERTY ASSESSMENT DATA

Market Assessed Year Value Value Ratio 2009-10 ....................................................................... $811,755,785 $187,140,320 23.05% 2010-11 ....................................................................... 853,337,160 183,255,800 21.48% 2011-12 ....................................................................... 858,651,238 185,271,335 21.58% 2012-13 ....................................................................... 880,143,359 188,023,145 21.36% 2013-14 ....................................................................... 886,900,065 189,100,005 21.32% Compound Average Annual Percentage Change ......... 1.79% 0.21%

Source: The Tax Equalization Division (TED) (formerly PA State Tax Equalization Board (STEB)


REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2012-13 2012-13 2013-14 2013-14 Market Assessed Market Assessed Value Value Value Value

Shikellamy School District ......................... $ 880,143,359 $ 188,023,145 $ 886,900,065 $189,100,005 Northumberland Borough ........................... 138,027,160 28,194,740 138,373,300 28,268,420 Point Township ........................................... 237,953,124 46,560,930 240,749,349 47,144,650 Rockefeller Township ................................. 124,035,473 24,263,330 128,067,573 24,973,890 Snydertown Borough .................................. 18,659,004 2,739,450 18,846,942 2,748,080 Sunbury City ............................................... 215,432,207 57,374,625 214,547,487 57,058,765 Upper Augusta Township ........................... 146,036,390 28,890,070 146,315,414 28,906,200 Northumberland County ............................. 2,932,853,878 1,071,390,447 3,489,301,150 752,152,019



ASSESSMENT BY LAND USE

2009-10 2010-11 2011-12 2012-13 2013-14

Residential ............................. $120,945,540 $121,480,530 $121,606,400 $121,897,300 $122,445,535

Lots ........................................ 1,309,720 1,295,960 1,232,410 1,439,710 1,452,805

Industrial ................................ 14,335,530 11,760,670 11,083,940 10,701,300 10,701,300

Commercial ........................... 35,573,650 33,305,850 35,298,025 37,429,105 37,734,735

Agriculture ............................. 13,742,410 14,168,590 14,230,020 14,329,650 14,453,190

Land ....................................... 1,233,470 1,244,200 1,245,190 1,673,220 1,782,280

Seasonal ................................. 0 0 86,500 86,500 86,500

Trailers ................................... 0 0 488,850 466,360 443,660

Total ................................. $187,140,320 $183,255,800 $185,271,335 $188,023,145 $189,100,005


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REAL PROPERTY TAX COLLECTION DATA

Current Year Total Collections Total Collections

Current as Percent Current as Percent Total Total Year of Total Plus of Total Flat Adjusted Collections Adjusted Delinquent Adjusted

Year Billing Flat Billing(1) (July-June) Flat Billing Collections(2) Flat Billing 2009-10 .................. $12,017,794 $11,912,502 $11,074,461 (3) 92.97% $12,017,293 100.88% 2010-11 .................. 12,565,766 12,445,140 11,677,849 (3) 93.83% 12,853,807 103.28% 2011-12 .................. 13,732,732 13,583,357 12,820,814 (3) 94.39% 13,695,761 100.83% 2012-13 .................. 13,762,611 13,629,225 12,811,373 (3) 94.00% 13,781,406 101.12% 2013-14 .................. 14,447,279 14,303,755 13,505,487 (3) 94.42% 14,391,902 100.62% 2014-15 (unaudited) 14,873,005 14,873,005 13,572,619 (3) 91.26% 14,625,194 98.33%

(1)Flat billing plus penalties, less discounts and exonerations. (2)Includes interest on delinquent real estate collections. (3)Excludes $895,414 (2008-09), $895,101 (2009-10), $895,034 (2010-11), $895,013 (2011-12), $894,898 (2012-13), $894,833 (2013-14) and $894,898 (2014-15 unaudited) for State Property Tax Allocation for these respective years.

Source: School District officials. The ten largest real property taxpayers, together with their assessed values are shown on Table 12. The aggregate assessed value of these ten taxpayers totals approximately 9.97 percent of total assessed value.


TEN LARGEST REAL PROPERTY TAXPAYERS

2014-15 Owner Property Assessed Value Nottingham Associates Retirement/Nursing Home $ 3,765,340 Weis Markets(1) Food Processing 3,464,940 Sunbury Community Hospital Medical 2,449,600 Furman Foods, Inc. Food Processing 1,785,520 River Front Apartments Housing 1,695,000 Earthgrains Food Processing 1,542,850 Sunbury Plaza Shopping Center 1,423,440 Sunbury Motors Co. Automobile Sales 992,490 Premdor Flush Door Co. Manufacturing 817,800 STM Acquisitions Manufacturing 527,700 Total $18,464,680

(1)Taxpayer currently under appeal. Source: School District officials.

Other Taxes Under Act 511, the School District anticipates collecting an unaudited $3,755,317 in other taxes in 2013-14. Among the taxes authorized by Act 511, the Real Estate Transfer Tax, Wage and Income Tax, Occupation Tax and Per Capita Tax are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property was $10,642,801. Real Estate Transfer. A tax of one percent (subject to sharing) of the value of real estate transfers is anticipated to yield an unaudited $194,886 in 2013-14 of total School District revenue. Wage & Income Tax. A tax of one percent (subject to sharing) is levied on the earned income of residents. In 2013-14 the collected portion of this tax is anticipated to yield an unaudited $2,058,013 in 2013-14 of total School District revenue. Per Capita Taxes. A tax of $10.00 ($5.00 under Act 511 and $5.00 under the School Code) is levied on each resident over 18 years old is anticipated to yield an unaudited $94,626 in 2013-14 of total School District revenue. Occupation Tax. The School District levies a tax of 428 mills of the assessed valuation. In 2013-14 this tax is anticipated to yield an unaudited $1,407,792 of total School District revenue.

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State Aid to School Districts Pennsylvania school districts receive financial assistance from the Commonwealth in a number of forms, all subject to statutory provisions and annual appropriation by the Pennsylvania General Assembly. A basic instructional subsidy is allocated to all school districts based on (1) the per pupil market value of assessable real property in the school district; (2) the per pupil earned income in the school district; and (3) the school district's tax effort, as compared with the tax effort of other school districts in the State. Subsidies for special education, pupil transportation, vocational education, health service and debt service are also received by the school district.

Commonwealth law presently provides that the School District will receive reimbursement from the Commonwealth for a portion of debt service on the Bonds after the Bonds financed have received final approval of the Department of Education. Commonwealth reimbursement is based on the "Reimbursable Percentage" assigned to the Bonds and the School District's Capital Account Reimbursement Fraction (“CARF”). The School District officials have estimated that the blended "Project Reimbursable Percentage" of the projects being financed by the 2015 Bonds will be a maximum of 33.62%. The School District CARF for the 2014-15 school year is currently 68.45%. The product of these two factors is 23.01% which is the estimated maximum percentage of debt service which will be reimbursed by the Commonwealth on the 2015 Bonds. The 2015A Bonds debt service is not expected to be reimbursable due to the nature of the projects financed. In future years, this percentage may change as the School District's CARF changes, or by future legislation. CARF is a function of the market value per weighted average daily membership of the School District relative to the other School Districts and the Commonwealth.

DEBT AND DEBT LIMITS Debt Statement Table 13 which follows shows the debt of the School District as of May 29, 2015, including the issuance of the Bonds.


DEBT STATEMENT (As of May 29, 2015)*

Gross

NONELECTORAL DEBT Outstanding

General Obligation Bonds, Series A of 2015 (last maturity 2024) ........... $ 2,280,000

General Obligation Bonds, Series of 2015 (last maturity 2024) ............... 4,820,000

General Obligation Bonds, Series A of 2014 (last maturity 2030) ........... 9,955,000

General Obligation Note, Series of 2014 (last maturity 2018) ................. 2,572,000


General Obligation Bonds, Series of 2013 (last maturity 2025) ............... 9,225,000


TOTAL NONELECTORAL DEBT ................................................... $41,222,000

LEASE RENTAL DEBT

TOTAL LEASE RENTAL DEBT ...................................................... $ 0

TOTAL PRINCIPAL OF DIRECT DEBT ............................................. $41,222,000

*Includes the estimated Bonds offered through this Preliminary Official Statement. Excludes the 2010 Bonds being refunded.

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Table 14 presents the overlapping indebtedness and debt ratios of the School District. After issuance of the Bonds, principal of direct debt of the School District will total $41,222,000. After adjustment for available funds and estimated Commonwealth aid, the local effort of direct debt will total $35,608,561.


BONDED INDEBTEDNESS AND DEBT RATIOS (As of May 29, 2015)*

Local Effort

or Net of Available Funds

Gross and Estimated Outstanding State Aid(1)

DIRECT DEBT Nonelectoral Debt ..................................................................................... $41,222,000 $35,608,561 Lease Rental Debt ..................................................................................... 0 0 TOTAL DIRECT DEBT ..................................................................... $41,222,000 $35,608,561

OVERLAPPING DEBT Northumberland County(2) ........................................................................ $8,015,471 $8,015,471 Municipal Debt ......................................................................................... 34,646,717 34,646,717 TOTAL OVERLAPPING DEBT ....................................................... $42,662,188 $42,662,188

TOTAL DIRECT AND OVERLAPPING DEBT.................................... $83,884,188 $78,270,749

DEBT RATIOS Per Capita (2010) .................................................................................... $3,713.00 $3,464.53 Percent 2013-14 Assessed Value ............................................................ 44.36% 41.39% Percent 2013-14 Market Value ............................................................... 9.46% 8.83%

*Includes the estimated Bonds offered through this Preliminary Official Statement. Excludes the 2010 Bonds being refunded. (1)Gives effect to current appropriations for payment of debt service and expected future Commonwealth reimbursement of School District sinking fund payments based on current Aid Ratio. See “State Aid to School Districts. (2)Pro rata share of 25.4 percent of $31,535,000 outstanding principal amount.


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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 2011-12 ............................................................................................................. $37,293,884 Total Revenues for 2012-13 ............................................................................................................. 38,035,085 Total Revenues for 2013-14 ............................................................................................................ 39,270,914 Total ............................................................................................................................................ $114,599,883

Annual Arithmetic Average (Borrowing Base) ................................................................................ $38,199,961

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 $85,949,912 $41,222,000 $44,727,912 *Includes the estimated Bonds described herein, excludes the 2010 Bonds being refunded and does not reflect credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by State aid.


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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.

TABLE 15

SHIKELLAMY SCHOOL DISTRICT DEBT SERVICE REQUIREMENTS*

Other

General Series of Series A of

Obligation 2015 2015 Total

Year Debt Principal Interest Subtotal Principal Interest Subtotal Requirements

2014-15 $ 2,891,692

2015-16 3,064,079

2016-17 3,072,007

2017-18 3,039,214

2018-19 2,675,791

2019-20 2,676,818

2020-21 2,669,458

2021-22 2,677,480

2022-23 2,671,138

2023-24 2,676,863

2024-25 2,674,679

2025-26 2,832,173

2026-27 2,699,500

2027-28 2,697,325

2028-29 2,701,425

2029-30 2,701,138

2030-31 239,700

Total $44,660,478

*Totals may not add due to rounding.


COVERAGE OF DEBT SERVICE AND LEASE RENTAL REQUIREMENTS BY STATE AID*

2013-14 State Aid Received ........................................................................................................ $18,827,277

2013-14 Debt Service Requirements ........................................................................................... 3,375,560

Maximum Future Debt Service Requirements after Issuance of Bonds .......................................

Coverage of 2013-14 Debt Service Requirements ....................................................................... 5.58 times

Coverage of Maximum Future Debt Service Requirements after Issuance of Bonds .................. times

*Assumes current State Aid Ratio. See "State Aid to School Districts."

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Future Financing

The School District does not contemplate issuing additional long-term debt within the next year.

LABOR RELATIONS School District Employees

There are presently 340 employees of the School District, including 211 teachers and administrators and 51 support personnel, in addition to 64 part time support personnel. The support personnel include secretaries, custodians, cafeteria employees, maintenance staff, and teacher’s aides.

The School District's teachers are represented by the Shikellamy Education Association (the "Association"), an affiliate of the Pennsylvania State Education Association under a contract, which expired on June 30, 2014, negotiations are currently underway. The Secretaries and Teacher Aides are represented by the Shikellamy Educational Support Personnel Association, under a contract which expires on June 30, 2015. Custodians, maintenance and cafeteria employees are represented by the International Brotherhood of Teamsters, under a contract which expires on June 30, 2015. Pension Program

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 as follows:

Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class T-C) or at 6.50%

(Membership Class T-D) of the member's qualifying compensation.

Members who joined the System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, contribute at 6.25% (Membership Class T-C) or at 7.50% (Membership Class T-D) of the member's qualifying compensation.

Members who joined the System after June 30, 2001 and before July 1, 2011, contribute at 7.50% (automatic Membership Class T-D). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January 1, 2002.

Members who joined the System after June 30, 2011, automatically contribute at the Membership Class T-E rate of 7.50% (base rate) of the member's qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at 10.30% (base rate) of the member's qualifying compensation. Membership Class T-E and Class T-F are affected by a "shared risk" provision in Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate to fluctuate between 7.50% and 9.50% and Membership Class T-F contribution rate to fluctuate between 10.30% and 12.30%.

The Public School Employees Retirement System (PSERS) Board of Trustees certified an annual employer contribution rate of 25.84% for fiscal year 2015-16, which begins on July 1, 2015. This marks the fifth year of planned increases in the employer contribution rate under Act 120 of 2010 which are needed to raise the rate to the actuarially required level.

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The 25.84% employer contribution rate is 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. The rate maximums established under Act 120 of 2010 remain in effect for the next fiscal year and continue to suppress the pension rate and underfund the System. Based on current projections, fiscal year 2015-16 would be the last fiscal year rate minimums and maximums will be in place. Total employer contributions of $3.45 billion are estimated in 2015-16. The Commonwealth reimburses school employers for not less than 50% of the total employer contribution rate. The net contributions for the School District are as follows:

2009-10 $ 367,772 2010-11 456,898 2011-12 628,520 2012-13 860,717 2013-14 1,124,606

2014-15 (budget) 1,524,936

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, 2014, PSERS’ investments added over $7.1 billion in net investment income to the fund. PSERS members contribute from 5.25% to 10.30% of pay depending on their membership class and when they joined PSERS. Members will contribute an average of 7.49% or approximately $1 billion in 2015-16. (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

The School District is obligated under collective bargaining agreements to provide in the future health insurance coverage for some current and future retired employees, and to provide retirement severance pay for some existing employees. The School District became subject to the requirements of GASB Statements No. 43 and 45 commencing with the School District’s annual financial statements for the fiscal year ending June 30, 2009.

LITIGATION

At the time of settlement, the President or Vice-President of the Board of School Directors of the School District will deliver a certificate dated as of the date of delivery of and payment for the Bonds, certifying that there is no litigation pending which challenges the validity or enforceability of the Bonds and there is no litigation pending which would materially affect the School District’s financial condition; or in the event that such litigation is pending, a description of the nature of such litigation, together with an opinion of legal counsel approved by the School District, to the effect that such litigation is without legal merit.

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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, the holders of the Bonds shall be entitled to certain remedies provided by the Act. If the failure to pay shall continue for 30 days, holders of the Bonds shall have the right to recover the amount due by bringing an action in assumpsit in the Court of Common Pleas of the county in which the School District is located; any judgment shall have an appropriate priority upon the moneys 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 herebefore described.

EXEMPTION FROM TAXATION

Tax Exemption

In the opinion of Bond Counsel, under existing Pennsylvania laws, the interest on the Bonds is exempt from the present Pennsylvania personal income tax. Conditioned upon compliance by the School District with all covenants and agreements contained in the Resolution and other documents relating to issuance of the Bonds, in the opinion of Bond Counsel interest on the Bonds will not be includible in gross income under the Internal Revenue Code of 1986, as amended (the “Code”), under present statutes, regulations and decisions nor an item of tax preference for purposes of computing the alternative minimum tax imposed on individuals and corporations under the Code; however, with respect to certain corporations (as defined for federal income tax purposes) such interset is 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.

No opinion is expressed by Bond Counsel as to other tax consequences that may accrue to an owner of the Bonds as a

result of purchase and/or ownership of the same except as specifically set forth above. The School District 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 will make no use of the proceeds of the Bonds if such use would cause the Bonds to be “arbitrage bonds” under Section 103(b) and Section 148 of the Internal Revenue Code of 1986, as amended, by the United States Treasury regulations relating to “arbitrage bonds” or corresponding provisions of any Federal tax laws from time to time proposed or enacted and at the time applicable or proposed to be applicable to the Bonds.

The School District has designated and determined under and for purposes of Section 265(b)(3) of the Internal Revenue

Code of 1986, as amended to qualify each of the Bonds as a “Qualified Tax-Exempt Obligation,” as such phrase is defined in the Code.


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CONTINUING DISCLOSURE UNDERTAKING

In accordance with the requirement of Rule 15-c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission (the “SEC”), the School District (being an “obligated person” with respect to the Bonds, within the meaning of the Rule), will agree to provide certain financial and operating information to the Municipal Rulemaking Board (the “MSRB”) in an electronic format as prescribed by the MSRB, either directly or indirectly through a designated agent as set forth in its Continuing Disclosure Certificate, substantially in the form attached hereto as Appendix C.

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 it 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 School District is required to give notice of certain events as set forth in Section 6 the Continuing Disclosure Certificate (not all of which will be relevant to the School District). The School District may from time to time choose to file notice of other events in addition to those specified in the Continuing Disclosure Certificate, but does not commit to provide notice of the occurrence of any events except those specifically listed in Section 6 of the Continuing Disclosure Certificate.

The School District acknowledges that its undertaking pursuant to the Rule described herein and in the Continuing Disclosure Certificate is intended to be for the benefit of the holders and beneficial owners of the Bonds and shall be enforceable by the older and beneficial owner 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 defined “obligated persons”) with respect to municipal securities issues) are made available through the MSRB’s Electronic Municipal Market Access (EMMA) System, which may be access on the internet at http://www.emma.msrb.org.

Existing Continuing Disclosure Filing History

The School District has entered into prior undertakings to provide information pursuant to continuing disclosure

certificates for several outstanding bond issues. The following table provides information regarding annual filing deadlines and history of filings for the financial information, operating data and material event notices specified in previous continuing disclosure undertakings during the past five years:

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] 6/30/2010 12/27/2010 3/11/2011 EP440459 3/11/2011 EP440459 3/11/2011 [3] EP440459 6/30/2011 12/27/2011 5/3/2012 EP531507 5/3/2012 EP531507 7/23/2012 EP555388 6/30/2012 12/27/2012 12/26/2012 [4] EP592050 12/26/2012 EP592050 12/5/2013 EA483815 6/30/2013 12/27/2013 12/5/2013 EA483815 12/5/2013 EA483815 11/6/2014 ER653212 6/30/2014 12/27/2014 12/12/2014 EP671635 12/12/2014 EP671512 12/12/2014 EP671644

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]The tax collection data for FY 2009-10 and FY 2010-11 can be found in the Preliminary Official Statement for the Series f 2013 Bonds. A Notice of Reference to Other Submitted Documents was filed to EMMA on November 6, 2014 (EMMA ID: ER653230) and (EMMA ID: ER653231)

[4]Interim filing of PDE-2057 AFR. Audited financial statements were filed on 3/14/2013 (EMMA ID: ER545078).

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:

25

For fiscal year ending June 30, 2010, the School District filed its audited financial statements, summary of the budget and

the majority of its operating data on March 11, 2011. The tax collection data for FY 2010-11 was available as part of an Preliminary Official Statement filed on February 21, 2013. A Notice of Reference to Other Submitted Documents providing reference to the tax collection operating data was filed on November 6, 2014.

For fiscal year ending June 30, 2011, the School District filed its audited financial statements and summary of the budget

on May 3, 2012. The other operating data was filed on July 23, 2012. For fiscal year ending June 30, 2012, the School District filed its PDE-2057 Annual Financial Report and summary of the

budget on December 26, 2012. Its audited financial statements were filed on March 14, 2013. The operating data was filed on December 5, 2013.

For fiscal year ending June 30, 2013, the School District filed its audited financial statements and summary of the budget

on December 5, 2013. The other operating data was filed on November 6, 2014. For fiscal year ending June 30, 2014, the School District filed its audited financial statements, the budget and other

operating data was filed on December 12, 2014. 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 November 6, 2014. 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.

26

RATINGS

Standard & Poor’s Ratings Group has assigned an underlying rating of “ ” to the Bonds. Standard & Poor’s

Ratings Group is expected to assign its municipal bond rating of “ ” to the Bonds with the understanding that upon delivery of the Bonds, a municipal bond insurance policy with respect to the Bonds will be issued by . 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, New York, New York 10041-0003. 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.

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 for a purchase price of $ , equal to the par value of the Bonds less an underwriters’ discount of $ , plus/less a net original issue premium/discount of $ , plus accrued interest from the dated date to the date of delivery of the Bonds.

LEGAL OPINION

The Bonds are offered with the approving legal opinion of Mette, Evans & Woodside, of Harrisburg, Pennsylvania, Bond Counsel. Certain legal matters will be passed upon for the School District by Apfelbaum, Apfelbaum & Apfelbaum, School District Solicitor of Sunbury, Pennsylvania.

FINANCIAL ADVISOR

The School District has retained Public Financial Management, Inc., 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. Public Financial Management, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

MISCELLANEOUS

This Preliminary Official Statement has been prepared under the direction of the School District by Public Financial Management, Inc., Harrisburg, Pennsylvania, in its capacity as Financial Advisor to the School District. The information set forth in this Preliminary Official Statement has been obtained from the School District and from other sources believed to be reliable. Insofar as any statement herein includes matters of opinion or estimates about future conditions, it is not intended as representation of fact, and there is no guarantee that it is, or will be, realized. Summaries or descriptions of provisions of the Bonds, the Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof. Reference is hereby made to the complete documents, copies of which will be furnished by the School District or the 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. SHIKELLAMY SCHOOL DISTRICT NORTHUMBERLAND COUNTY, PENNSYLVANIA By: /s/ Wendy K. Wiest President, Board of School Directors

[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX A Demographic and Economic Information Relating to the Shikellamy School District

A-1

Introduction The Shikellamy School District is in Northumberland County in Central Pennsylvania, within the Northumberland-Snyder-Union-Montour, PA Labor Market Area (“LMA”). It has a diverse economy of service, non-durable industries and farming activity. The School District is approximately 60 miles north of Harrisburg, approximately 80 miles east of Allentown, and approximately 40 miles south of Williamsport. Population Table A-1 which follows shows recent population trends for the School District, Northumberland County and the Commonwealth of Pennsylvania. Table A-2 shows age composition and average number of persons per household in Northumberland County and for the Commonwealth. Average household size was slightly larger for Northumberland County than the Commonwealth average.

TABLE A-1

RECENT POPULATION TRENDS

Compound Average AnnualPercentage Change

Area 2000 2010 2000-2010 School District .......................................... 23,180 22,592 -0.26% Northumberland County ........................... 94,556 94,528 0.00% Commonwealth ......................................... 12,281,054 12,702,379 0.34%

Source: U.S. Bureau of the Census, Decennial Census and Pennsylvania State Data Center, Census 2010.

TABLE A-2

AGE COMPOSITION

0-17 18-64 65+ Persons Per Years Years Years Household

Northumberland County ................................... 23.2% 57.9% 18.9% 2.46 Commonwealth ................................................. 23.5 61.1 15.4 2.57

Source: Pennsylvania State Data Center, 2000 General Population and Housing Characteristics: Pennsylvania.

A-2

Employment Overall employment data is not compiled for the School District or municipalities within it, but such data is compiled for the MSA (an area which includes the School District). Table A-3 shows the distribution of employment for the MSA.

TABLE A-3 DISTRIBUTION OF EMPLOYMENT BY INDUSTRY SUNBURY MICROPOLITAN STATISTICAL AREA

(Northumberland County) NONFARM JOBS – AS OF MARCH 2015

Industry Employment Net Change From: ESTABLISHMENT DATA Mar. 2015 Feb. 2015 Jan. 2015 Mar. 2014 Feb. 2015 Mar. 2014

Total Nonfarm .................................................. 28,300 28,200 28,100 28,000 100 300 Total Private ..................................................... 23,700 23,600 23,600 23,500 100 200 Goods-Producing .............................................. 5,700 5,700 5,800 5,700 - - Mining, Logging, and Construction .............. 1,200 1,200 1,200 1,200 - - Manufacturing ............................................... 4,500 4,500 4,600 4,500 - - Service-Providing ............................................. 22,600 22,500 22,300 22,300 100 300 Trade, Transportation, and Utilities............... 6,500 6,500 6,500 6,500 - - Transportation, Warehousing & Utilities ... 2,600 2,600 2,600 2,600 - - Trade .......................................................... 3,900 3,900 3,900 3,900 - - Wholesale Trade .................................... 1,100 1,100 1,100 1,100 - - Retail Trade .......................................... 2,800 2,800 2,800 2,800 - - Professional and Business Services ............... 1,600 1,600 1,600 1,600 - - Education and Health Services ...................... 5,700 5,700 5,600 5,600 - 100 Leisure and Hospitality ................................. 1,800 1,700 1,700 1,700 100 100 Other Services ............................................... 1,400 1,400 1,400 1,400 - - Government ................................................... 4,600 4,600 4,500 4,500 - 100 Local Government ....................................... 3,500 3,500 3,500 3,500 - -

Source: Pennsylvania Department of Labor and Industry, Center for Workforce Information and Analysis website. Table A-4 shows recent trends in labor force, employment and unemployment for Northumberland County and the Commonwealth.

TABLE A-4 TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT

NOT SEASONALLY ADJUSTED

Northumberland County Time Period Labor Force Employed Unemployed Unemployment Rate

2010 45,400 40,900 4,500 9.90% 2011 44,900 40,800 4,100 9.20% 2012 45,100 41,000 4,100 9.10% 2013 44,700 40,800 3,900 8.80% 2014 43,900 41,100 2,900 6.60%

March 2015 43,600 40,800 2,800 6.50%

Pennsylvania Time Period Labor Force Employed Unemployed Unemployment Rate

2010 6,392,000 5,851,000 541,000 8.50% 2011 6,397,000 5,885,000 512,000 8.00% 2012 6,466,000 5,954,000 513,000 7.90% 2013 6,460,000 5,982,000 478,000 7.40% 2014 6,378,000 6,009,000 370,000 5.80%

March 2015 6,323,000 5,976,000 347,000 5.50%

Source: Pennsylvania Department of Labor and Industry, Center for Workforce Information and Analysis website.

A-3

Major employers within a fifteen-mile radius of the School District include: Approximate Name Product or Service Employment Geisinger Health System Hospital 3,500 Weis Markets Headquarters 1,000 Bucknell University University 900 Cherokee Pharmaceuticals Drugs 560 Sunbury Community Hospital Hospital 520 Shikellamy School District Education 420 Butter Crust Bakery Bakery 400 Sunbury Textile Mills Fabric 350 Danville Area School District Education 350 Selinsgrove Area School District Education 300 Tyco Electronics (formerly AMP Incorporated) Electronics 280 Lewisburg Area School District Education 250 Susquehanna University University 250

Source: School District officials. Income The data on Table A-5 show recent trends in per capita income for the School District, the County and Commonwealth over the 2000-2010 period. Per capita income in the School District is higher than the County but is lower than the Commonwealth. Per capita income for the School District grew at a slower rate over this period than per capita income for the County.

TABLE A-5

RECENT TRENDS IN PER CAPITA INCOME*

Compound Average Annual

Percentage Change 2000 2010 2000-2010

School District .................................................... $16,810 $22,006 2.73% Northumberland County ..................................... 16,489 21,899 2.88% Commonwealth ................................................... 20,880 27,824 2.91%

*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: Census, Pennsylvania State Data Center Commercial Activity Table A-6 shows recent trends for retail sales in Northumberland County and the Commonwealth.

TABLE A-6

TOTAL RETAIL SALES (Millions of Dollars)

2011 2012 2013 2014 2015 Northumberland County ......... $ 899,346 $ 898,566 $ 1,201,076 $ 925,430 $ 867,185 Pennsylvania ........................... 188,193,104 188,149,727 187,412,600 199,975,257 198,215,135

Source: The Nielson Company.

A-4

Educational Institutions Although there are no post-secondary institutions in Northumberland County, there are excellent educational facilities within commuting distance. The closest, Susquehanna University in Selingsgrove and Bucknell University in Lewisburg are liberal arts colleges offering Bachelor’s degrees in a range of majors. Bucknell University also offers graduate programs. Medical Facilities Residents of the School District have access to a number of hospitals which provide regional medical services including: Geisinger Medical Center in Danville, Evangelical Community Hospital in Lewisburg, Geisinger Shamokin Area Community Hospital in Shamokin and Sunbury Community Hospital in Sunbury. They have a combined total of over 1,000 beds and approximately 4,300 employees. Utilities Utility services for the area covered by the School District are provided by Verizon, AT&T, UGI Penn Natural Gas and PPL Utilities Company. Water and sewer services are provided by the Sunbury Municipal Authority and other municipality’s municipal authorities within the School District. Transportation The School District is traversed by U.S. Routes 11 and 15, which runs north and south along the Susquehanna River. It is adjacent to Interstate 80 in the north. The latter highway bisects the School District from east to west. These roads provide access to all major population centers in eastern Pennsylvania, southeastern New York and northern New Jersey.

APPENDIX B Opinion of Bond Counsel

HOWELL C. METTE ROBERT MOORE CHARLES B. ZWALLY PETER J. RESSLER JAMES A. ULSH JEFFREY A. ERNICO MARY ALICE BUSBY KATHRYN L. SIMPSON

THOMAS F. SMIDA PAULA J. LEICHT TIMOTHY A. HOY THOMAS A. ARCHER* HENRY W. VAN ECK MARK D. HIPP RONALD L. FINCK HEATHER Z. KELLY

METTE, EVANS & WOODSIDE A PROFESSIONAL CORPORATION

Attorneys at law

3401 NORTH FRONT STREET

P.O. BOX 5950

HARRISBURG, PA 17110-0950

IRS NO.

23-1985005

TELEPHONE FACSIMILE

(717) 232-5000 (717) 236-1816

Toll Free: 1-800-962-5097 ______

http://www.mette.com

MARK S. SILVER BERNADETTE BARATTINI RANDALL G. HURST** MELANIE L. VANDERAU AARON T. DOMOTO BRIAN J. HINKLE KEVIN J. HAYES ERIN L. PENTZ

JAMES W. EVANS 1926 - 2008

_____

* NEW JERSEY BAR ** MARYLAND BAR

SHIKELLAMY SCHOOL DISTRICT

Northumberland County, Pennsylvania

$ General Obligation Bonds, Series of 2015

$ General Obligation Bonds, Series A of 2015

July 16, 2015

OPINION

Shikellamy School District, Northumberland County, Pennsylvania (the

"School District"), is a school district existing under laws of the Commonwealth of

Pennsylvania (the "Commonwealth").

The Board of School Directors of the School District by Resolution duly

adopted on June 11, 2015 (the "Resolution"), authorized and directed issuance of

$ aggregate principal amount of the School District's General

Obligation Bonds, Series of 2015, dated as of July 16, 2015 (the "Series of 2015

Bonds"). The proceeds from sale of the Series of 2015 Bonds are to be used for and

2

towards payment of costs and expenses of certain capital projects of the School

District and for and towards payment of costs and expenses of issuance of the Series

of 2015 Bonds.

The Board of School Directors of the School District by the Resolution also

authorized and directed issuance of $ aggregate principal amount of

the School District's General Obligation Bonds, Series A of 2015, dated as of

July 16, 2015 (the "Series A of 2015 Bonds"). The proceeds from sale of the Series A

of 2015 Bonds are to be used for and towards payment of costs and expenses related

to the current refunding of a prior series of general obligation bonds of the School

District and for and towards payment of costs and expenses of issuance of the Series

A of 2015 Bonds.

The Series of 2015 Bonds and the Series A of 2015 Bonds collectively are

referred to herein as the "Bonds".

Proceedings for authorization, issuance and sale of the Bonds have been

conducted in accordance with the Local Government Unit Debt Act, as amended, 53

Pa. C.S. Chs. 80-82 (the "Act"), of the Commonwealth.

The Bonds may be in the denomination of $5,000 or whole multiples thereof

and are fully registered as to principal and interest. The Bonds initially will be

registered in the name of the nominee of the Depository Trust Company under the

book entry system. The Series of 2015 Bonds mature on September 1 of each of the

years 2016 to 2029, inclusive. The Series A of 2015 Bonds mature on September 1

3

of each of the years 2015 to 2024, inclusive. The Bonds bear interest from July 16,

2015, at rates set forth in the Resolution, payable in the case of the Series A of 2015

Bonds maturing on September 1, 2015, upon maturity and in the case of all other

Bonds initially on September 1, 2015, and thereafter semiannually on March 1 and

September 1 in each year, beginning March 1, 2016, until maturity or, if

redeemable, until prior redemption.

The Bonds maturing on September 1, 2021, and thereafter are subject to

redemption prior to maturity, at the option of the School District, as a whole series

or, from time to time, in part, on September 1, 2020, or on any date thereafter, at

the price, in the manner, upon terms and conditions and with the effect provided in

the Resolution and in the Bonds.

has issued a municipal bond insurance policy with respect to the

Bonds.

The Pennsylvania Department of Community and Economic Development

(the "Department") has approved the proceedings for the increase of debt of the

School District and for the issuance and sale of the Bonds as authorized in the

Resolution, as required by the Act.

The School District has designated and determined under and for purposes of

Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), to

qualify each of the Bonds as a "qualified tax-exempt obligation", as such phrase is

4

defined in the Code.

In connection with the Bonds, we have examined, among other things: all

proceedings under the Act; approval of proceedings and facts related to the increase

of debt of the School District, as issued by the Department; an affidavit of no

litigation; a Non-Arbitrage Certificate of the School District and usual closing

certificates and documents.

We are of the opinion that:

1. The School District is authorized by laws of the Commonwealth to issue

the Bonds for the purposes hereinbefore set forth.

2. Proceedings for the increase of debt of the School District and for the

issuance and sale of the Bonds are in accordance with law.

3. The net nonelectoral debt of the School District, including the Bonds, and

the net lease rental debt of the School District presently outstanding is less than

the total allowable net nonelectoral debt plus net lease rental debt permitted by the

Act.

4. Under existing laws of the Commonwealth, the interest on the Bonds is

exempt from the present Pennsylvania personal income tax and the present

Pennsylvania corporate net income tax.

5. Conditioned upon compliance by the School District of all covenants and

5

agreements contained in the Resolution and in other documents relating to issuance

of the Bonds, we are of the opinion that interest on the Bonds will not be includible

in gross income under the Code and under present regulations and decisions nor an

item of tax preference for purposes of the alternative minimum tax imposed on

individuals and corporations under the Code; however, it should be noted with

respect to certain corporations (as defined for federal income tax purposes) such

interest with respect to the Bonds is 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.

No opinion is expressed as to other tax consequences that may accrue to a

registered owner of the Bonds as a result of purchase and/or ownership of the same

except as specifically set forth above.

6. The Bonds are authorized investments under the Pennsylvania Probate,

Estates and Fiduciaries Code, Chapter 73, Fiduciaries Investments, Act No. 164 of

1972, approved June 30, 1972, as amended and supplemented.

We also are of the opinion that: (1) the Bonds are valid and binding general

obligations of the School District; (2) the School District has effectively covenanted

to make payments out of its sinking fund or any other of its revenues or funds at

such times and in such annual amounts, specified in such covenant, as shall be

sufficient for the payment of the interest agreed to be paid on the Bonds and the

principal thereof when due; (3) the full faith, credit and taxing power of the School

6

District are pledged for payment of the principal of and interest on the Bonds within

limits permitted by law; and (4) the Bonds are enforceable against the School

District in accordance with their terms and in accordance with the Act; subject,

however, to any applicable bankruptcy, insolvency, reorganization, moratorium or

other laws or equitable principles affecting the enforcement of creditors' rights

heretofore or hereafter enacted.

We express no opinion with respect to the accuracy or completeness of any

Official Statement prepared with respect to the Bonds.

This Opinion is given as of the date hereof and we assume no obligation to

update or supplement this Opinion to reflect any facts or circumstances that

hereafter may come to our attention or any changes in law that hereafter may

occur.

Very truly yours,

/s/ Mette, Evans & Woodside

828845v1

APPENDIX C Continuing Disclosure Certificate

APPENDIX D Specimen Municipal Bond Insurance Policy

APPENDIX E Audited Financial Report for

FYE June 30, 2014

SHIKELLAMY SCHOOL DISTRICT

SUNBURY, PENNSYLVANIA

FINANCIAL STATEMENTS AND SINGLE AUDIT REPORT

For the year ended June 30, 2014

TITLE

Independent Auditor's Repmt

SHIKELLAMY SCHOOL DISTRICT SUNBURY, PENNSYLVANIA

For The Year Ended June 30,2014

TABLE OF CONTENTS

Management's Discussion and Analysis

BASIC FINANCIAL STATEMENTS: GOVERNMENT-WIDE FINANCIAL STATEMENTS:

Statement of Net Position

Statement of Activities

FUND FINANCIAL STATEMENTS:

PAGE

I

N

1

2

Balance Sheet- Govemmental Funds 3

Reconciliation of the Govemmental Funds Balance Sheet To the Statement of Net Position . 4

Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 5

Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 6

Statement ofNet Position- Proprietaty Fund 7

Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietaty Fund 8

Statement of Cash Flows- Proprietaty Fund 9

Statement of Fiducimy Net Position- Fiducimy Funds l 0

Statement of Changes in Fiduciaty Net Position- Fiduciary Funds 11

Notes to Financial Statements 12

REQUIRED SUPPLEMENTARY INFORMATION:

Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual- General Fund

Schedule of Funding Progress for Postemployment Benefits Other Than Pensions

33

34

TITLE

SINGLE AUDIT SECTION:



TABLE OF CONTENTS

Schedule of Expenditures of Federal and State Awards

Notes to Schedule of Expenditures of Federal and State Awards

Independent Auditor's Report on Internal Control over Financial Repmting and on Compliance and Other Matters Based on an Audit of Financial Statements Petformed in Accordance with Government Auditing Standards

Independent Auditor's Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133

Schedule of Findings and Questioned Costs

List ofRepmt Distribution

PAGE

35

36

37

39

41

42

FORGETT & KERSTETTER, P. C.

Susan Forget! Rlteam, CPA

E-Mail: [email protected]

CERTIFIED PUBLIC ACCOUNTANTS 10 Deday Alley

Selinsgrove, PA 17870 Telephone: (570) 743-4460

Fax: (570) 743-4666

Laura M. Kerstetter, CPA E-Mail: /[email protected]/

INDEPENDENT AUDITOR'S REPORT

To The Members of the Board of Directors of the Shikellamy School District Sunbmy, Pennsylvania

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund infonnation of the Shikellamy School District, Sunbmy, Pennsylvania as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Shikellamy 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 Standm·ds, issued by the Comptroller General of the United States. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or en·or. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

I

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Shikellamy School District as of June 30, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supp/ementmy Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetaty comparison infonnation, and the schedule of funding progress for postemployment benefits other than pensions on pages MD&A IV-X, 33 and 34 be presented to supplement the basic financial statements. Such infonnation, although not a pa11 of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementaty information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the infmmation for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the infonnation because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other hiformation

Our audit was conducted for the purpose of fmming opinions on the financial statements that collectively comprise the Shikellamy School District's basic financial statements. The schedule of expenditures of federal and state awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Govemments, and Non-Profit Organizations, and is also not a required pmt of the basic financial statements.

The schedule of expenditures of federal and state awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such infmmation has been subjected to the auditing procedures applied in the audit of the basic financial statements and ce1tain additional procedures, including comparing and reconciling such infmmation directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statement themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal and state awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

II

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued a repmt dated November 25, 2014 on our consideration of the Shikellamy School District's intemal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of intemal control over financial repmting and compliance and the results of that testing, and not to provide an opinion on internal control over financial repmiing or on compliance. That repmi is an integral part of an audit performed in accordance with Govemment Auditing Standards in considering Shikellamy School District's internal control over financial repmting and compliance.

JouuJ1; ~.P. c. FOifGETT & KERSTETTER, P.C. Selinsgrove, Pennsylvania November 25, 2014

III

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)

Management's Discussion and Analysis (MD&A) of the Shikellamy School District's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2014. The MD&A is to provide reader friendly insight into management's analysis of the audit. This MD&A looks at the District's financial performance as a whole, although readers should review the Independent Auditor's Report and notes to the financial statements to augment their understanding of the District's financial performance.

Background

Based on the volume of the Shikellamy School District's annual expenditures, 2002-03 was the first fiscal year the District's financial statements were required to meet the GASB 34 Accounting Standards. Where previous standards (pre GASB 34) required modified accrual (no receivables/accruals beyond 60 days), no capital asset depreciation and no reports of combined net position, GASB 34 requires fixed asset accounting, properly combining of multiple funds, and the realization of the depreciation expense as part of the Statement of Net Position and Statement of Activities.

For the Shikellamy School District, beginning in 2002-03, various statements required under GASB 34 are:

•!• Statement of Net Position •!• Statement of Activities •!• Balance Sheet of Governmental Funds •!• Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position •!• Statement of Revenues, Expenditures, and Changes in Fund Balances •!• Reconciliation of Governmental Fund Statement of Revenues, Expenditures and Changes in

Fund Balance to the Statement of Activities •!• Statement of Revenues, Expenditures and Changes in Fund Equity- Budget vs. Actual -

General Fund

The Statement of Net Position provides a consolidation of all governmental funds into one statement of activities with current and non-current assets, current and non-current liabilities, and displays the total net position of all governmental funds properly reconciled. It also provides the same for those business activities run by the district. In the Shikellamy School District only the cafeteria is structured as a business activity, subject to a business activity classification.

The Statement of Activities intends to display expenses net of program revenues and classifies revenues into the two general categories of program and general operating revenue. It identifies program revenue as charges; operating grants, capital grants, and then allocates them to particular expense categories where appropriate.

The Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position reconciles the Governmental Funds Balance Sheet to the Combined Balance Sheet for Governmental and Business Activities by outlining the accounting changes necessary to properly record consolidation of funds and present the entity-wide statements using the full accrual method of accounting.

IV

The Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities reconciles the change In fund balances of the governmental funds to the change in net position of all governmental activities.

Funds analyzed In this audit include:

•!• Governmental activities Including: • General Fund (including Athletic Fund) • Capital Projects Fund • Capital Reserve Fund

•!• Fiduciary Funds: • Private Purpose Trust Funds - Various small scholarship funds • Agency Fund - Student activity accounts

Financial Highlights

Key financial highlights for the year ending June 30, 2014, are as follows:

•!• Total fund balance of all governmental funds equals $19,492,240. •!• General fund balances:

Committed $1,043,154 Assigned $2,962,059 Unassigned $5,680,399

• Total general fund revenue was $556,077 or 1.4% under budget. • Total general fund expenses were $756,182 or 1.9% under budget.

•!• The District's Proprietary Fund/Business-Type Activity (Cafeteria) showed an unrestricted net position balance of $133,090.

Overview of the Financial Statements

This annual report consists of four parts-management's discussion and analysis (this section), the basic financial statements, fund financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District:

• The first two statements are district-wide financial statements that provide both short-term and longterm information about the District's overall financial status.

• The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District's operations in more detail than the district-wide statements.

• The governmental funds statements tell how basic services like regular and special education were financed in the short term as well as what remains for future spending.

• Proprietary funds statements offer short- and long-term financial information about the activities the District operates like businesses, such as food services.

• Fiduciary funds statements provide information about the financial relationships in which the District acts solely as trustee or agent for the benefit of others.

The financial statements also Include notes that explain some of the information In the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the District's budget for the year.

v

The major features of the District's financial statements, including the portion of the District's activities they cover and the types of Information they contain is summarized in the table that follows.

Major Features of District-Wide and Fund Financial Statements

Scope

District-wide Statements

Entire District (except fiduciary funds)

Required financial *Statement of net position statements *Statement of activities

Accounting basis measurement focus

Type of asset/ liability information

Type of inflow/ outflow information

Accrual accounting and economic resources focus

All assets and liabilities, both finandal and capital, short-term and long-term

All revenues and expenses during year, regardless of when cash is received or paid

Fund Finandal Statements

Governmental Funds

The activities of the district that are not proprietary or fiduciary1 such as special education and building maintenance

*Balance sheet *Statement of revenues

expenditures, and changes in fund balances

Modified accrual accounting and current finandal resources focus

Generally assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets or long-term liabilities included

Revenues for which cash is received during or soon after the end Of the year; expenditures when goods or services have been received and the related liability is due and payable

Proprietary Funds

Activities the district operates similar to private businesses: food seiVices and adult education

*Statement of net position *Statement of revenues,

expenses, and changes in fund net position

*Statement of cash flows


All assets and liabilities, both finandal and capital, and short-term and long-term

All revenues and expenses during the year, regardless of when cash is received or paid

Instances In which the district administers resources on behalf of someone else, such as scholarship programs and student activities monies

*Statement of fidudary net assets

*Statement of changes in fidudary net position


All assets and liabilities, both short-term and long-term

All additions and deductions during the year, regardless of when cash is received or paid

Analysis of Overall Financial Position and Results of Operations Over the Past Fiscal Year

Net Position -On June 30, 2014, the District has total net position from governmental activities of $11,305,290; which is an increase of 2,256,399 in the fiscal year. The Issue that most significantly affected the net position Increase in the 2013-14 fiscal year was the issuance of debt to begin the construction of the new middle school.

Business Type Activities (Food Service) has total net position of $271,133, a net position decrease of $49,054, due to a net loss in food service operations, however, this also includes depreciation expense of capital assets of $43,862. No General Fund subsidy was needed in 2013-14 and the food service operation continues to closely monitor the profit and loss situation.

VI

Table 1 summarizes the assets, liabilities, and net position of the District at June 30, 2014 and 2013.

Table 1 Condensed Statement of Net Position(in millions of dollars)

Governmental Business-Type Total Total Activities Activities School District %of Change

2014 2013 2014 2013 2014 2013 2013-14

Assets Current & other Assets $24,344 $14,232 $262 $152 $24,606 $14,384 71.0 Capital Assets 19,954 19,567 138 182 20,092 ~19,749 1.7 Total Assets $44,298 $33,799 $400 $334 $44,698 $34,133 30.9

Liabilities Current Liabilities $ 5,918 $ 5,623 $129 $14 $ 6,046 $ 5,637 7.2 Long-Term Liabilities 27,075 19,126 27,075 19,126 41.5 Total Liabilities $32,993 $24,750 $129 $14 $33,121 $24,764 33.7 Net Position Net Investments in

Capital Assets (531) (1,803) 138 182 (393) (1,621) 75.7 Restricted Unrestricted 11.837 10,852 133 138 11.970 10.990 8.9 Total Net Position $11.305 ~ $W, ~ $11 576 ~ 23.5

Note: Totals may not add due to rounding.

Net Position- Total net position of Governmental Funds equals $11,305,290. These balances consist of:

+ Construction Fund - $484,475. + Capital Reserve Fund - $951,924. + General Fund -Total net position equals $9,868,891; $5,680,399 is unassigned; $4,005,213 is

assigned or committed; $183,279 is reserved for Inventories.

VII

Table 2 summarizes the revenues, expenses, and changes in net position of the District for the year ended June 30, 2014 and 2013.

Table 2 Changes in Net Position (in millions of dollars)

Program Revenue Charges for Services Operating Grants and Contributions

General Revenue Property Taxes Taxes Levied for Specific Purposes Grants and Entitlements Investment Earnings Sale/Disposal of Assets Other

Total Revenues

Program Expense Instruction Instructional Student Support Administrative and Financial Operation and Maintenance Pupil Transportation Student Activities Community Services Facilities Improvements Interest and Fiscal Charges Food Service

Total Expenses

Increase (Decrease) Net Position Restated (Capital Assets) Increase (Decrease) in Net Position

Governmental Activities

2014 2013

$ 248 $ 262 8,031 7,765

13,559 5,239

12,700 40 54

264

26,718 2,548 2,871 2,881 1,388

508 36

134 794

12,902 5,215

12,484 57

25,528 2,494 2,827 3,033 1,328

530 27 66

472

Business-Type Activities

2014 2013

Total School District

2014 2013

Total %Change 2013-14

$ 432 $ 433 $ 680 $ 695 1,031 942 9,062 8,707

(2.2) 4.1

1

13,559 5,239

12,700 40 54

264

26,718 2,548 2,871 2,881 1,388

508 36

134 794

1.401 1.513

12,902 5.1 5,215 0.4

12,484 1.7 57 (29.2)

_____1J 1,976.8

25,528 2,494 2,827 3,033 1,328

530 27 66

472 1.401

3.8

4.6 2.1 1.5

(4.9) 4.4

(4.1) 31.8

102.1 68.3

8.0

4.4

2,256 2,392 (7.688)

$(5.296) $

( 49) {25) 2,207 2,367 105 - (7.583)

(49) $ 81 $ 2.207 $ (5 215)

(6.7)

142.3

Note: Totals may not add due to rounding.

As of June 30, 2014 and 2013, the District held the following other fund balances:

•:• Ending cash and cash equivalents in its proprietary fund (cafeteria) of $16,552 and $36,190 (out of total unrestricted net position of $133,090 and $138,282).

•:• Private Purpose Trust Fund balance totals of $44,249 and $46,672 in various small scholarship funds.

VITI

Budgetary Variances

•:• Total General Fund Revenues were under budget by $556,077 or 1.4%. •:• Total General Fund Expenditures were under budget by $756,182 or 1.9%.

• The majority of the variance in expenditures is due to the efforts of school district personnel who scrutinize purchase decisions and try to economize wherever possible. This is done by a wide-range of methods, from bidding to costjbenefit analysis of items or services. This continues to be done year-after-year.

•:• Business-Type Activities show a decrease of $(49,054). • Food service revenue decreased $88,136 or 6.4%, while federal and state subsidies

Increased $88,989 or 9.4%. These subsidies accounted for almost all of the Increase. • Meanwhile, food service expenses Increased $112,396 or 8.0%, primarily due to increased

benefit and food costs.

Significant Capital Activity

During the 2013-14 school year, the School District continues to move forward with its plans to construct a new middle school.

•:• According to the Official Statement for the District's General Obligation Bonds, Series A of 2013, the District's legal capacity for borrowing stands at $54,138,606.

IX

Currently Known Facts, Decisions or Conditions

The School District did not participate under Pennsylvania Act 72 of 2004 ("The Homeowner Tax Relief Act"). Only 111 of the state's 501 public school districts elected to participate under Act 72 by the May 30, 2005, deadline. In response, a number of Bills were introduced in the Pennsylvania General Assembly which variously would extend the date by which the board of school directors of a school district may elect to participate under Act 72; require non-participating districts to put the question of participating under Act 72 to the voters at a public referendum; subject tax increases in future fiscal years to public referendum regardless of whether a school district has elected to participate under Act 72; or amend Act 72 to make its Implementation mandatory for all school districts.

However, proposed taxpayer relief was state-mandated when Act 1 of Special Session 2006 created the "Taxpayer Relief Act/' which utilizes gaming dollars and a local shift to an earned or personal Income tax to fund the plan. There are a number of steps and requirements that school districts must follow In order to implement Act 1.

In general, Act lis Intended to:

•!• Provide every qualified owner-occupied home and farm with a potential school property tax reduction. Taxpayers, if they vote to do so, may pay some additional income tax to the school district which needs to be taken into account in terms of the "net" tax reduction to taxpayers.

•!• Facilitates a tax reduction and possibly a tax shift but does not directly provide additional revenue to school districts to fund academic programs.

•!• School districts will have limits on the ability to raise property tax rates without seeking voter approval.

•!• Provide for school district property tax reduction funded through gaming revenue allocated by the state.

•!• Citizens can have periodic opportunities to consider raising the initial local income-based taxes to provide for further property tax reduction.

Other then those issues listed in the MD&A or in the notes to the audited financial statements, there are no facts currently known to management that would materially impact the financial statements either favorably or unfavorably at this time.

Additional Financial Information

This financial report is designed to provide the district's citizens, taxpayers, customers, investors and creditors with a general overview of the district's finances and to demonstrate the district's accountability for the money it receives. Additional Information regarding the financial statements may be obtained from the Business Manager, Shikellamy School District, 200 Island Boulevard, Sunbury, Pennsylvania 17801.

X

BASIC FINANCIAL STATEMENTS


STATEMENT OF NET POSITION For The Year Ended June 30,2014

ASSETS GOVERNMENTAL BUSINESS-TYPE Current Assets ACTIVITIES ACTIVITIES TOTAL

Cash and Cash Equivalents $ 20,703,056 $ 16,552 $ 20,719,608 Taxes Receivable, net 1,689,999 0 1,689,999 Due From Other Governments 1,751,405 196,728 1,948,133 Internal Balances 0 0 0 Other Receivables 12,664 7,546 20,210 Inventories 183,279 40,844 224,123 Prepaid Expenses 4,000 0 4,000 Total Current Assets 24,344,403 261,670 24,606,073

Noncurrent Assets Capital Assets, Net of Accumulated Depreciation

Land 839,526 0 839,526 Site Improvements 893,824 0 893,824 Building and Building Improvements 15,594,355 0 I5,594,355 Construction in Progress 1,203,288 0 1,203,288 Furniture and Equipment 1,422,705 138,043 1,560,748

Total Noncurrent Assets 19,953,698 138,043 20,091,741

TOTAL ASSETS $ 44,298,101 $ 399,713 $ 44,697,814

LIABILITIES Current Liabilities

Internal Balances $ (112,969) $ 112,969 $ 0 Accounts Payable 652,595 139 652,734 Current Pmtion of Long-Term Debt 2,363,000 0 2,363,000 Current Portion of Capital Lease Liability 136,458 0 136,458 Accrued Salaries and Benefits 1,553,141 4,047 1,557,188 Payroll Deductions and Withholdings 1,153,556 0 1,153,556 Unearned Revenues 1,482 11,425 12,907 Other Cumnt Liabilities 170,268 0 170,268

Total Current Liabilities 5,917,531 128,580 6,046,111

Noncurrent Liabilities Bonds Payable 26,377,000 0 26,377,000 Capital Lease Payable 276,488 0 276,488 Long-Term Portion of Compensated Absences 185,637 0 185,637 Other Post Employment Benefits 236,155 0 236,155

Total Noncurrent Liabilities 27,075,280 0 27,075,280

TOTAL LIABILITIES 32,992,811 128,580 33,121,391

NET POSITION Net Investment in Capital Assets (531,486) 138,043 (393,443) Restricted 0 0 0 Unrestricted 11,836,776 133,090 11,969,866 TOTAL NET POSITION 11,305,290 271,133 11,576,423

TOTAL LIABILITIES AND NET POSITION $ 44,298,101 $ 399,713 $ 44,697,814

The Accompanying Notes Are An Integral Part OfThese Financial Statements.

-I-

Functions/Programs Ex(!enses

Governmental activities: Instruction $ 26,717,873 $

Instructional Student Support 2,547,631

Administrative and Financial Support Services 2,870,967

Operation and Maintenance of Plant Services 3,015,004

Pupil Transportation 1,387,914

Student Activities 508,180

Community Services 36,025

Interest and Fiscal Charges 794,111

0 Total Governmental Activities $ 37,877,705 $

Business-type activities:

Food Service 1.513.179 Total primary government $ 39.390,884 $

The Accompanying Notes Are An Integral Part Of These Financial Statements.

SHIKELLAMY SCHOOL DISTRICT SUNBURY. PENNSYLVANIA STATEMENT OF ACTMTIES

For The Year Ended June 30, 2014

Program Revenues

Operating Capital

Charges for Grants and Grants and Services Contributions Contributions

169,209 $ 5,873,159 $ 0

0 246,090 0

0 209,187 0

5,122 146,773 0

0 815.699 0

73,342 27,306 0

0 2,438 0

0 710.224 0

247,673 $ 8,030,876 $ 0

432,447 1,031.357 0 680,120 $ 9,062.233 $ 0

General revenues: Taxes:

Property taxes, levied for general purposes,net Taxes levied for specific purposes

Grants. subsidies. & contributions not restricted Investment Earnings Miscellaneous Income Sale/Disposal of Assets

Total general revenues, special items, extraordinary items and transfers

Change in Net Position

Net Position- July 1, 2013 Net Position- June 30, 2014

Net (Expense) Revenue and Changes in Net Position

Governmental Business-type Activities Activities Total

$ (20,675,505) $ 0 $ (20,675,505)

(2,301,541) 0 (2,30 I ,54!)

(2,661,780) 0 (2,661,780)

(2,863,109) 0 (2,863,1 09)

(572,215) 0 (572,215)

(407,532) 0 (407,532)

(33,587) 0 (33,587)

(83.887) 0 (83.887)

$ (29,599,156) $ 0 $ (29,599,156)

0 (49,375) (49.375) $ (29,599,156) $ (49,375) $ (29,648,531)

$ 13,558,552 $ 0 $ 13,558,552

5,238,542 0 5,238,542

12,700,106 0 12,700,106

40,289 321 40,610

264,479 0 264,479

53.587 0 53,587

31.855.555 321 31.855,876

2,256,399 (49,054) 2,207,345

9,048.891 320,187 9.369.078 $ 11,305,290 $ 271,133 $ 11,576,423

ASSETS Cash and Cash Equivalents Taxes Receivable (net) Due From Other Funds Due From Other Governments Other Receivables Inventories Prepaid Expenses

TOTAL ASSETS

LIABILITIES Due To Other Funds

Accounts Payable Compensated Absences Accrued Salaries and Benefits Payroll Deductions and Withholdings

Unearned Revenue TOTAL LIABILITIES

DEFERRED INFlOWS OF RESOURCES Unavailable Revenues- Delinquent Taxes


BALANCE SHEET GOVERNMENTAL FUNDS

June 30, 2014

CAPITAL GENERAL PROJECTS

FUND FUND

$ 10,936,741 s 9,762,652

1,689,999 0

112,969 7,436

1,751,405 0

12,664 0

183,279 0

4,000 0 $ 14,691,057 $ 9,770,088

$ 7,436 s 0

502,193 150,402

86,610 0

1,553,141 0

1,153,556 0

1,482 0

3,304,418 150,402

1,517,748 0

TOTAL DEFERRED INFlOWS OF RESOURCES 1,517,748 0

FUND BALANCES

Nonspendable Restricted For:

Debt Service Capital Projects

Committed For: Future Health Care and/or Pension Costs Future Debt Service or Costs for New Middle School

Assigned For: Future Salary, Health Care and/or Pension Costs Capital Projects I Equipment

Unassigned TOTAL FUND BALANCES

TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES


$

183,279 0

0 0

0 8,667,762

822,282 0

220,872 0

2,662,059 0

300,000 951,924

5,680,399 0

9,868,891 9,619,686

14,691,057 $ 9,770,088

-3-

NON TOTALS MAJOR GOVERNMENTAl FUND FUNDS

s 3,663 s 20,703,056

0 1,689,999

0 120,405

0 1,751,405

0 12,664

0 183,279

0 4,000

s 3,663 s 24,464,808

s 0 $ 7,436

0 652,595

0 86,610

0 1,553,141

0 I, 153,556

0 1,482

0 3,454,820

0 1,517,748

0 1,517,748

0 183,279

3,663 3,663

0 8,667,762

0 822,282

0 220,872

0 2,662,059

0 1,251,924

0 5,680,399

3,663 19,492,240

$ 3,663 $ 24,464,808


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION


Total Fund Balances - Governmental Funds

Amounts reported for governmental activities in the statement of net position are different because:

Capital Assets used in governmental activites are not financial resources and therefore are not reported as assets in governmental ftmds. The cost of assets is$ 42,596,159, and the accumulated depreciation is$ 22,642,461.

Property taxes receivable and Occupation/per capita taxes receivable will be collected this year, but are not available soon enough to pay for the cun·ent period's expenditures, and therefore are deferred in the funds.

Long-term liabilities, including bonds payable, are not due and payable in the current period, and therefore are not reported as liabilities in the funds. Long-term liabilities at year end consist of:

Bonds Payable $ Capital Lease Payable $

Accrued Interest on Bonds $ Other Postemployruent Benefits $

Compensated Absences $

TOTAL NET POSITION - GOVERNMENTAL ACTIVITIES


-4-

(28,740,000) (412,946)

(83,658) (236,155)

$ 19,492,240

19,953,698

1,517,748

(185,637) (29,658,396)

$ ][,305,290


STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS

REVENUES Local Sources State Sources Federal Sources

TOTAL REVENUES

EXPENDITURES Current Instruction Support Services Operation ofNoninstructional Services Facilities Acquisition, Construction and

Improvement Services Debt Service/Refund of Prior Year Receipts

TOTAL EXPENDITURES

EXCESS OF REVENUES OVER (UNDER) EXPENDITURES

OTHER FINANCING SOURCES (USES) Sale/Compensation for Capital Assets Bonds Issued Refunding Bonds Issued Bond Premium Bond Discount Debt Service- Refunded Bonds Interfund Transfers

TOTAL OTHER FINANCING SOURCES (USES)

Net Change in Fund Balances

Fund Balance- July 1, 2013

Fund Balance- June 30,2014


For The Year Ended June 30, 2014

CAPITAL GENERAL PROJECTS

FUND FUND

$ 19,786,537 $ 984 18,827,276 0

1,367,325 0

39,981,138 984

25,563,063 0 9,254,618 84,428

544,205 0

0 1,336,893 3,378,197 0

38,740,083 1,421,321

1,241,055 (I ,420,337)

54,494 116,398 0 9,835,000 0 0 0 61,549 0 (108,185) 0 0

(157,436) 157,436

(102,942) 10,062,198

1,138,113 8,641,861

8,730,778 977,825

$ 9,868,891 $ 9,619,686

-5-

NON TOTALS MAJOR GOV'TL FUND FUNDS

$ 0 $ 19,787,521

0 18,827,276 0 1,367,325

0 39,982,122

0 25,563,063 41,337 9,380,383

0 544,205

0 1,336,893

4,750 3,382,947

46,087 40,207,491

(46,087) (225,369)

0 170,892

0 9,835,000 3,330,000 3,330,000

0 61,549

0 (108, 185) (3,285,000) (3,285,000)

0 0

45,000 10,004,256

(1,087) 9, 778,887

4,750 9,713,353

$ 3,663 $ 19,492,240


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

TO THE STATEMENT OF ACTIVITIES For The Year Ended June 30,2014

Net Change in Fund Balances- Total Govemmental Funds

Amounts reported for governmental activities in the statement of activities are different because:

Capital outlays are reported in govermnental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated usefhllives as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the period.

Depreciation $ (I ,306,959) Disposal of Assets $ (62,811)

Capital outlays $ __ 1'-', 7.:c5:.:6z,2::.:8:.:5_

Because some taxes will not be collected for several months after the School District's fiscal year ends, they are not considered as "available" revenues in the goverrunental funds. Deferred inflow of resources increased by this amount this year.

Interest is reported as an expenditure when due in the governmental funds, but is accrued on outstanding debt on the statement of activities. Accrued interest increased by this amount this year.

Issuance oflong-term debt (e.g. bonds) provides current fmancial resources to governmental ftmds, while the repayment of the principal oflong-tenn debt consumes the current fmancial resources of governmental funds. However, neither transaction has any effect on net position. Also,

Increase in Other Postemployment Benefits $ (171,804) Decrease in Compensated Absences $ I 6,425

Bonds Issued $ (13, 165,000) Net Increase in Capital Lease Payable $ (412,946)

Repayment of Debt Principal/Refunding $_...:52,.:...79.:...52,0:::0::..:0:....

Change in Net Position of Governmental Activities


-6-

$ 9,778,887

386,515

43,901

(14,579)

(7,938,325)

$ 2,256,399

ASSETS Current Assets Cash and Cash Equivalents Due From Other Govermnents Accounts Receivable Inventories

Total Current Assets

Noncurrent Assets


STATEMENT OF NET POSITION PROPRIETARY FUND

June 30,2014

Capital Assets, Net of Accumulated Depreciation

Total Noncurrent Assets

TOTAL ASSETS

LIABILITIES Current Liabilities Accounts Payable Unearned Revenue Accrued Salaries Internal Balances

Total Current Liabilities

Noncurrent Liabilities

TOTAL LIABILITIES

NET POSITION Net Investment in Capital Assets Unrestricted

TOTAL NET POSITION

TOTAL LIABILITIES AND NET POSITION


-7-

ENTERPRISE

FUND

FOOD

SERVICE

$ 16,552 196,728

7,546 40,844

261,670

138,043

138,043

$ 399,713

$ 139 11,425 4,047

112,969

128,580

0

128,580

138,043 133,090

271,133

$ 399,713


STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUND


OPERATING REVENUES Food Service Revenue Total Operating Revenues

OPERATING EXPENSES Salaries Employee Benefits Purchased Professional and Technical Service Purchased Property Services Other Purchased Services Supplies Depreciation Other Operating Expenses Total Operating Expenses

OPERATING INCOME (LOSS)

NONOPERATING REVENUES (EXPENSES) Earnings On Investments State Sources Federal Sources Total Nonoperating Revenues (Expenses)

CHANGE IN NET POSITION

NET POSITION- JULY 1, 2013

NET POSITION- JUNE 30,2014

The Accompanyh1g Notes Are An Integral Part Of These Financial Statements.

-8-

ENTERPRISE

FUND

FOOD SERVICE

$ 432,447 432,447

426,105 294,876

1,350 15,124

989 728,388 43,862

2,485 1,513,179

(I ,080, 732)

321 108,885 922,472

1,031,678

(49,054)

320,187

$ 271,133


STATEMENT OF CASH FLOWS PROPRIETARY FUND


CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Users Cash Payments to Employees for Services Cash Payments to Suppliers of Goods and Services Cash Payments for Other Operating Expenses

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Sources Federal Sources

NET CASH PROVIDED BY (USED FOR) NONCAPITAL FINANCING ACTIVITIES

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Equipment Purchases, Net of Disposals NET CASH PROVIDED BY (USED FOR) CAPITAL AND

RELATED FINANCING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES Earnings on Investments NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS- JULY 1, 2013

CASH AND CASH EQUIVALENTS- JUNE 30, 2014

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES-Net Income (Loss) from Operations Depreciation Donated Commodities (Increase )/Decrease in Inventory (Increase )/Decrease in Accounts Receivable lncrease/(Decrease) in Accounts Payable Increasei(Decrease) in Accmed Salaries lncrease/(Decrease) in Internal Balances Increasei(Decrease) in Unearned Revenue

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES


-9-

$

ENTERPRISE FUND FOOD

SERVICE

434,982 (601,754) (672,926)

(2,485) (842,183)

103,010 719,214 822,224

0 0

321 321

(19,638)

36,190

$ ___ ..;;1.;;.:6,.;;.;55;.;;2_

$ (1,080,732) 43,862 98,924

(26, 138) 1,105

139 100

119,127 1,430

$ __ ...,:(.;;:.84.:.::2~, 1.:.::83:.:.)


STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS

June 30,2014

PRIVATE PURPOSE

TRUST AGENCY ASSETS Cash and Cash Equivalents

TOTAL ASSETS

LIABILITIES Accrued Salaries And Benefits Due to Student Groups

TOTAL LIABILITIES

NET POSITION Reserved For Scholarships

TOTAL NET POSITION

TOTAL LIABILITIES AND NET POSITION


$ 44,249 $ 208,275

44,249 208,275

0 0 0 208,275

0 208,275

44,249 0

44,249 0

$ 44,249 $ 208,275

-10-

TOTALS FIDUCIARY

FUNDS

$ 252,524

252,524

0 208,275

208,275

44,249

44,249

$ 252,524

SlllKELLAMY SCHOOL DISTRICT SUNBURY, PENNSYLVANIA

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS

ADDITIONS Gifts and Contributions Other Additions

Total Additions

DEDUCTIONS Scholarships Awarded I Other Deductions

CHANGE IN NET POSITION

NET POSITION- JULY 1, 2013

NET POSITION- JUNE 30,2014

The Accompanying Notes Are An Integral Part OfThese Financial Statements.


-II-

PRIVATE PURPOSE

TRUST

$ 500 8

508

2,931

(2,423)

46,672

$ 44,249


NOTES TO FINANCIAL STATEMENTS For The Year Ended June 30, 2014

NOTE I- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the District

The Shikellamy School District provides public education to the residents of one city, two boroughs and three townships with four elementary schools, one middle school, and one high school in Northumberland County, Pennsylvania. The District is managed under current standards prescribed by the Pennsylvania Depa1tment of Education in accordance with the provision of the School Laws ofPennsylvania. The District operates under a locally elected nine member Board form of government.

The financial statements of the District have been prepared in confmmity with generally accepted accounting principles (GAAP) as applied to govermnent units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing govermnental accounting and fmancial reporting principles. Following are the more significant of the School District's accounting policies.

The Reporting Entity

The Shikellamy School District Board of Education is the basic level of govermnent which has financial accountability and control over all activities related to the public school education in the City of Sunbury, Boroughs of Nmihumberland, and Snydertown, as well as the townships of Point, Rockefeller, Upper Augusta. The Board receives funding from local, state, and federal govermnent sources and must comply with the accompanying requirements of these funding source entities.

Governmental Accounting Standards Board (GASB) Statement No. 39, "Determining Whether Certain Organizations Are Component Units", an amendment of GASB Statement No. 14, "The Financial Reporting Entity" established the criteria for dete1mining the activities, organizations and functions of School Districts to be included in the financial statements of the repmting entity. GASB Statement No. 61, "The Financial Reporting Entity: Omnibus, an amendment ofGASB Statements No. 14 and No 34'' modifies certain requirements for inclusion of component units as if they were patt of the fmancial repmting entity. In evaluating the School District as a reporting entity, management has addressed all potential component units, which may or may not fall within the District's financial accountability. The criteria used to evaluate component units for possible inclusion as part of the District's reporting entity are financial accountability, fiscal dependency with a financial benefit or burden relationship, and the nature and significance of the relationship. This report includes all of the funds of the Shikellamy School District based on these criteria.

Joint Venture

The District patticipates in the SUN Area Technical Institute (SUN AT!) located in New Berlin, Pennsylvania. TI1is joint venture does not meet the criteria for inclusion within the reporting entity because the SUN AT! is separately chartered from the school districts it serves; its joint operating committee controls the employment of personnel; its joint operating conllllittee has the power to approve all operating expenditures of the SUN AT!; and the SUN AT! is maintained as a separate operating unit.

The District has one member on the joint operating connnittee which governs the SUN AT!. The cmmnittee is comprised of one member from each of the member school districts who are appointed annually. The SUN AT! provides vocational and technical education for students of the member school districts. Each member school district pays tuition to the SUN AT! based upon its enrollment percentage. At the end of each fiscal year, actual expenditures are divided among the member districts based upon the prior year's enrollment percentage. The excess of tuition paid over allocable expenditures is refundable by the SUN A TI to the member school districts. If allocable expenditures exceed the tuition paid by any member school district, the school district will pay the additional amount due to the SUN AT!. The member school districts approve the budget of the SUN AT!.

Audited fmancial statements for the year ended June 30,2014 for the SUN AT! are available at its business office.

-12-


NOTES TO FINANCIAL STATEMENTS For The Year Ended June 30,2014

NOTE I- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intermediate Unit

The Shikellamy School District is a participating member of the Central Susquehanna Intermediate Unit# 16 (CSIU) located in Montandon, Pennsylvania. The CSIU is a self-sustaining organization that provides services for fees to participating districts. Through their membership, Shikellamy School District is able to secure various special services including federal program assistance and special education services.

Basis of Pt·esentation

The School District's basic financial statements consist of government-wide statements, including a statement of net position and a statement of activities, and fund fipancial statements which provides a more detailed level of fmancial information.

Government-Wide Financial Statements

The Govermnent-Wide financial statements display infonnation about the School District as a whole. These statements include the financial activities of the primary govermnent, except for fiduciary funds. The statements distinguish between those activities of the School District that are govermnental in nature and those that are considered business-type activities.

The statement of net position presents the financial condition of the governmental and business-type activities of the School District at fiscal year end. The statement of activities presents a comparison between direct expenses and program revenues for each program or function of the School District's governmental activities and business-type activity. Direct expenses are those that are specifically associated with a service, program, or department and, therefore, clearly identifiable to a pat1icular function. Program revenues include charges paid by the recipient of the goods or services offered by the program and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the School District, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each govenm1ental function or business segment is self-fmancing or draws from the general revenues ofthe School District.

Fund Financial Statements

The financial transactions of the School are reported in individual funds in the fund fmancial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses.

Funds are organized into three major categories: govermnental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. Each mqjor fund is presented in a single colunm on the govermnental fund fmancial statements. Nomnajor funds by category are summarized into a single column. Fiduciary funds are reported by type.

Governmental Funds

Governmental funds are those through which most governmental functions of the School District are financed. Governmental funds reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are assigned to the various gove111lllental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between govennnental fund assets and liabilities is reported as fund balance. The following represents the School Districts major govermnental funds.

-13-



NOTE I- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Coutiuued)

General Fund - The General Fund constitutes the primary operating fund of the School District in that it includes all revenues and expenditures not required by law to be accounted for in other funds. The General Fund is always reported as a major fund.

Capital Projects Fund- The Capital Projects Fund is utilized to account for and report financial resources to be used for capital outlays including the acquisition or construction of major capital facilities and other capital assets. Capital Reserve Funds are included as part of the Capital Projects Fund. This fund is reported as a major fhnd.

Proprietary Fund

Proprietaty fund reporting focuses on the determination of operating income, changes in net position, financial position, and cash flows. The following is the School District's proprietary fund:

Enterprise Fund- The Enterprise Fund may be used to account for any activity for which a fee is charged to external users for goods and services.

Food Service - The Food Service enterprise fund accounts for the fmancial transactions related to the food service operations of the School District. This fund is the School District's only enterprise fund and it is reported as a major fund.

Fiduciary Funds

Fiduciary funds are used to report assets held in a tmstee or agency capacity for others and therefore are not available to support school district programs. The reporting focus is on net position and changes in net position.

The fiduciary fund category is split into two classifications: private purpose trust funds, and agency funds. Trust funds are used to account for assets held by the School District under a trust agreement for individuals, private organizations, or other governments and are not available to support School District's own programs. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The School District's agency f\md accounts for various student-managed activities.

Measurement Focus and Basis of Accounting

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as are the proprietary f\md and fiduciaty fund fmancial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Net position (total assets less total liabilities) is used as a practical measure of economic resources and the operating statement includes all transactions and events that increased or decreased net position. Depreciation is charged as expense against cmTent operations and accumulated depreciation is reported on the statement of net position.

The governmental fund financial statements are reported using the current fmancial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. When prope1ty taxes are measurable but not available, the collectible portion (taxes levied less estimated uncollectibles) is recorded as defened inflows of resources. Revenue f\·om federal, state and other grants designated for

-14-



NOTE I- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Coutiuued)

payment of specific school district expenditures is recognized when the related expenditures are incurred; accordingly, when such funds are received, they are recorded as defeiTed revenues until earned. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and clain1s and judgments, are recorded only when payment is due.

Budgets and Budgetary Accounting

The School Board approves, prior to the beginning of each year, an annual budget on the modified accmal basis of accounting for the General Fund. This is the only fund for which a budget is legally required and for which taxes may be levied.

The Pennsylvania School Code dictates specific procedures relative to adoption ofthe School District's budget and reporting of its financial statements, specifically:

The School District, before levying annual school taxes, is required to prepare an operating budget for the succeeding fiscal year.

The School District is required to prepare a proposed budget at least thirty days prior to the adoption of the annual budget. Final action shall not be taken on the proposed budget until after ten days' public notice. The proposed budget shall be printed, or otherwise made available for public inspection at least twenty days prior to the date set for the adoption of the budget.

Once a budget is approved, the Board may authorize the transfer of any unencumbered balance, or any p01iion thereof, from one class of expenditure or item, to another, by approval of a two-thirds vote of the members of the Board. Individual amendments during the year were not material in relation to the original appropriations. The Public School Code allows the School Board to authorize budget transfer amendments only during the last nine months of the fiscal year.

The budget data reflected in the combined fmancial statements includes the effect of such School Board approved budget transfer amendments and supplemental budgetary appropriations and, for comparative purposes, the actual amounts have also been presented. The School District expenditures may not legally exceed the revised budget amounts by function and object. Function is defmed as a program area such as instructional services, and object is defined as the nature of the expenditures such as salaries or supplies.

The School Board authorizes any application for grant funding. Upon application for funding, a project budget is submitted which is approved or rejected by the agency awarding the grant funds. Funds thus obtained are subject to the project budget, which supersedes local budgetary action and is excludable from budgetary operations by Section 609 of the school laws of Pennsylvania. The budget amounts reflected in the financial statements are the local budget increased by the individual project budgets.

Encumbrance Accounting

Encumbrances are not liabilities and, therefore, are not recorded as expenditures until receipt of material or service. For budgetary purposes, appropriations lapse at fiscal year-end and outstanding encumbrances at year-end are appropriated in the next year. Accordingly, no differences exist between actual results and the applicable budgetary data presented in the accompanying fmancial statements.

-15-


NOTES TO FINANCIAL STATEMENTS For The Year Ended June 30, 20I4

NOTE I- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

Cash and Cash Equivalents include amounts in demand and interest-bearing bank deposits and in petty cash and are carried at cost plus accrued interest, which is fair value.

Investments

In accordance with Government Accounting Standards Board (GASB) Statement No. 31, shot1-tetm money market investments and interest-bearing investment contracts are reported at amortized cost, provided that the remaining maturity is one year or less at the tin1e of purchase. Long-term investments (maturity of more than one year) are reportable at fair value.

Inventories

On govenm1ent -wide financial statements and in the proprietary fund, inventories are presented at the lower of cost or market on a first-in, first-out basis, and are expensed when used.

Inventories in govemmental funds are stated at cost by the first-in first-out method. Inventories in governmental funds consist of expendable supplies held for consumption. The purchase method is used to account for inventories. Under the purchase method, inventories are recorded as expenditures when purchased. The inventories in the General Fund are equally offset by a nonspendable equity classification as they do not constitute "available spendable resources". The General Fund is the only govemmental fund that has material inventory balances as of June 30, 2014.

A physical inventmy of the Food Service Fund food and supplies was taken as of June 30, 2014. The inventory consisted of govemment donated commodities and purchased food and supplies. Government donated cot1m1odities were valued at cost figures provided by the U.S. Department of Agriculture while purchased food and supplies were valued at cost, both using the first-in first-out (FIFO) method.

Prepaid Expenditures

Certain payments to vendors reflect costs applicable to fitture accounting periods and are recorded as prepaid items.

Capital Assets

Capital assets, which includes property, plant, equipment, and infl'astructure assets (e.g., roads, sidewalks, and similar items), are reported in the applicable govemmental or business-type activities columns in the government-wide fmancial statements. Capital assets are defined by the School District as assets with an initial, individual cost of more than $1,500 and an estimated useful life in excess of one year. Management has elected to include cet1ain homogeneous asset categories with individual assets less than $1,500 as composite groups for financial repm1ing purposes. In addition, capital assets purchased with long-term debt may be capitalized regardless of the thresholds established. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

The cost of nmmal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.

-16-



NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

All reported capital assets are depreciated using the straight-line method over the following estimated useful lives:

Buildings Building Improvements Land Improvements Furniture Vehicle Equipment Computer Software Textbooks Librmy/Workbooks

40 20 15 20

5 5 to 10

5 5

10

Proprietary fund equipment purchases are capitalized in the proprietary fund at cost and depreciated on a straight-line basis over their estimated useful lives of 5-l 0 years.

Deferred Outflows/Inflows of Resources

In addition to assets, the statement of financial position and or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District does not have any items that qualify for reporting in this category.

In addition to liabilities, the statement of financial position and or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has only one type of item, which arises only under a modified accrual basis of accounting, that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is repmted only in the governmental funds balance sheet. The amounts are deferred and recognized as an inflow of resources in the period in which the amounts become available. The goverlllllental funds report unavailable revenues from property and occupation/per capita taxes.

Long-Term Obligations

In the goverrunent-wide financial statements, and proprietary fund types in the fund fmancial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities or proprietmy fund statement of net position.

In the fund financial statements, govermnental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is repmted as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt services expenditures.

-17-



NOTE I- SUJ'<IMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Equity Classifications

In the governmental environment, management often commits or assigns resources to be used for specific purposes, indicating that those amounts are not considered to be available for general operations. Because different measurement focuses and bases of accounting are used in the government-wide statement of net position and in ·governmental fund statements, amounts reported as restricted fund balances in governmental funds may be different from amounts reported as restricted net position in the statement of net position.

The government-wide and proprietary fund net positions are classified as follows:

Net Investment in capital assets- consists of net capital assets reduced by outstanding balances of any related debt obligations attributable to the acquisition, construction, or improvement of those assets.

Restricted net position- net position is considered restricted if its use is constrained externally to a particular purpose.

Unrestricted net position -consists of all other net position that do not meet the defmition of the above two components and is available for general use by the school district.

In the govermnental ftmd financial statements, fund balances are classified as follows:

Nonspendablc- Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted -Amounts that can be spent only for specific purposes by external pmties, or by law through constitutional provisions or enabling legislation.

Committed -Amounts that can only be used for specific purposes determined by a formal action by the District's highest level of decision-making authority, the Board of Education. Committed fund balance may also include resources that have been specifically cormnitted for use in satisfying contractual requirements. A fund balance commitment may be established, modified, or rescinded by a resolution of the Board of Education.

Assigned- Amounts that are constrained by the school district's intent to be used for specific purposes, but is not restricted or committed.

Unassigned- All amounts not included in other spendable classifications.

The District would typically use restricted fund balance first, followed by committed resources, and then assigned resources as appropriate opportunities arise, but reserves the right to selectively spend unassigned.

Usc of Estimates

The preparation offmancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

-18-



NOTE 2- CASH AND CASH EQUIVALENTS AND INVESTMENTS

Under Section440.1 of the Public School Code of 1949, as amended, the District provides for an authorized investment program for School District Funds.

Cash equivalents are defined as short-tenn, highly liquid investments that are readily conve11ible to known amounts of cash and include investments with original maturities of one year or less. Cash and cash equivalents consist of demand deposits at various financial institutions, and the Pennsylvania Local Government Investment Tmst (PLGIT). The market values of deposits are equal to the cost of the deposits.

At June 30, 2014, the canying amount of the School District's cash and cash equivalents and investments was $20,972,132. The depository balances throughout the year were covered by federal depositmy insurance or by collateral held by the pledging banks trust department. These amounts are secured by the pledging of pooled assets as collateral in accordance with the Act of August 6, 1971 (P.L. 281, No. 72), relating to pledges of assets to secure deposits of pledged funds.

CASH AND CASH EQUIVALENTS:

Custodial Credit Risk- Deposits

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be retumed to it. The District has an investment policy that addresses credit risk in general terms. As of June 30, 2014, $11,488,335 of the District's bank balance of $1 I, 74 I ,998 was exposed to custodial credit risk as:

Uninsured and uncollateralized Uninsured and collateral held by the pledging bank's trust depmiment

Not in the District's name Total

Reconciliatiou to Fimmcial Statements

Collateralized Amount Above Plus: Insured Amount Plus: Deposits in Investment Pools Considered Cash Equivalents Plus: Deposits in Transit Less: Outstanding Checks Canying Amount- Bank balances Plus: Petty Cash

Total Cash and Cash Equivalents Per Financial Statements

INVESTMENTS:

As of June 30, 20 I 4, the School District had the following investments:

Investment

PA Local Government Investment Trust Total

Maturities

-19-

$ 0

11,488,335 $ 11488 335

$ 11,488,335 253,663

9,877,939 15,981

(664,836) 20,971,082

I 050 $ 20.972. I 32

Fair Value

$ 9,877,939 $~877,232



NOTE 2- CASH AND CASH EQUIVALENTS AND INVESTMENTS (Continued)

Custodial Credit Risk- Investments

For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. The District has no investment subject to custodial credit risk.

Reconciliations to Financial Statements

Total Investments Above Less: Deposits in Investment Pools Considered Cash Equivalents

Total Investments Per Financial Statements

$ 9,877,939 (9,877,939)

$ Q

Interest Rate Risk

The District does not have a formal investment policy that lin1its investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Credit Risk

The District has no investment policy that would limit its investment choices to ce1iain credit ratings. As of June 30, 2014, the District investments were rated as:

Investment PA Local Government Investment Trust

Concentration of Credit Risk

Standard & Poor's AAA

The District places no limit on the amount the District may invest in any one issuer. 100 percent of the District's investments are in PA Local Government Investment Trust.

NOTE3-PROPERTYTAXES

The School District's propetiy tax is levied each July 1, based upon assessed valuations provided by the county (approximately $189,469,905 for 2013-14). The municipal tax collector bills and collects property taxes on behalf of the School District. The tax rate for all expenditures in 2013-14 is 81.00 mills ($81.00 per $1,000 assessed valuation). The schedule for property taxes levied for.20 13-14 is as follows:

July I, 2013 through August 31,2013 September I, 2013 through October 31,2013 Beginning November I, 2013

2% discount period face payment period I 0% penalty period

Taxes become delinquent by December 31, 2013. Delinquent Property Taxes Receivable Net, at June 30, 2014 is $1,088,706.

-20-



NOTE 4- DUE FROM OTHER GOVERNMENTS

Amounts due fi·om other governments represent receivables for revenues earned by the school district. At June 30, 2013, the following amounts are due from other governmental units.

Federal Pass Through Funds State Funds Local Funds

Total

NOTE 5- INTERFUND ACTIVITIES

Iuternal Ba/auces:

General Fund

$ 984,216 761,425

5 764 $1751405

Due to/from Other Funds balances as of June 30,2014 are as follows:

Due From Due to Other Fund Other Funds

General Fund $ 112,969 $ 7,436 Capital Projects Fund 7,436 0 Enterprise Fund 0 112,969

Total $ 120 405 $ 120 405

Food Service Fund

$ 185,735 10,993

0 $196728

All interfund balances resulted from time lags between the dates that (I) interfund goods and services were provided or expenditures/expenses were reimbursed, (2) transactions were recorded in the accounting system, and (3) payments between funds were made. All balances are expected to be repaid within the following year.

Iuter(mul Trausfers:

General Fund Capital Projects Fund

Transfer To Other Funds $ 157,436

$ 157.436

Transfer from Other Funds

$ 157 436

$ 157 436

Transfers and payments within the School District are substantially for purposes of subsidizing operating functions, or funding capital projects and asset acquisitions. Resources are accumulated in funds to support and simplify the administration of various projects or programs.

NOTE 6- CAPITAL ASSETS

Capital Assets are recorded as expenditures in the Govemmental and Proprietmy Fund at the time of purchase. The amounts recorded for buildings, equipment and land in the financial statements are intended to be the original cost of the asset as of the date of the constmction or installation. During the fiscal year ended June 30, 2013, a fixed asset appraisal of assets held was perfonned and acquisition costs have either been furnished to the appraiser as representing actual dates of acquisition and costs, or have been estimated by the use of computerized reverse-trending techniques applied against the estimate of current reproduction cost.

Depreciation, where applicable, is straight line over the useful life of asset. Property additions made subsequent to the appraisal are recorded at cost.

-21-



NOTE 6- CAPITAL ASSETS (Collliuued)

A summary of Capital Asset transactions for the year ended June 30, 2014 is as follows:

GOVERNMENTAL ACTIVITIES

Land Site Improvements Building and Building Improvements Cons!Iuction in Progress Furniture & Equipment

Total at Cost

Less: Accumulated Depreciation: Site Improvements Building and Building Improvements Furniture and Equipment

Total Accum Depreciation Governmental Activities

Capital Assets, Net

BUSINESS-TYPE ACTIVITIES

Furniture and Equipment Less: Accumulated Depreciation Business-Type Activities

Capital Assets, Net

Balance at July I, 2013

$ 839,526 2,863,360

31,463,646 0

7 771 947 42,938,479

(1,826,412) (15,142,916)

( 6,40 I ,968) (23,371,296)

$ 19,567,183

$ 1,117,844 (935,939)

Additions 0 0 0

1,203,288 552,997

1,756,285

(143,124) (663,564) (500,271)

(1,306,959)

449 326

0 (43,862)

(43,8_22)

Deletions 0 0

(2,098,605) 0 0

(2,098,605)

0 2,035,794

0 2,035,794

(62,811)

0 0

0

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental Activities: Instruction Instructional Student Support Administrative and Financial Support Service Operation and Maintenance of Plant Service

Total Depreciation Expense- Govermnental Activities

NOTE 7-LONG-TERM DEBT

Bond Series of20IOA

$ 999,431 95,800

103,250 108,478

$1,306,959

Balance at June 30,2014

839,526 2,863,360

29,365,041 1,203,288 8,324,944

42,596,159

(1,969,536) (13,770,686) ( 6,902,239) (22,642,461)

19,953 698

1,117,844 (979,801)

138,043

During the fiscal year ended June 30, 2006, the School District issued General Obligation Bonds, Series of2006 in the amount of$10,000,000. Proceeds of the Bonds will be applied towards the completion of the School District's Capital Improvement Project of the existing high school; additions, alterations and renovations to the School District's other existing school buildings and other school facilities including the athletic facilities, and to currently refund School District's outstanding General Obligation Bonds, Series of200 I. On November 18, 20 I 0, the School District issued General Obligation Bonds, Series A of2010 in the amount of$6,200,000. The proceeds of the Bonds will be used to currently refund the School District's outstanding General Obligation Bonds, Series of2006 and to pay the costs and expenses related to the issuance of the bonds. Interest on the bonds is due and payable semi-annually on May 15 and November 15.

-22-


NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30,2014

NOTE 7- LONG-TERM DEBT (Coutinued)

Debt Service to maturity is as follows:

Date Rate Principal November 15, 2014 1.50% $ 850,000

May 15, 2015 November 15, 2015 1.50% 865,000

May 15, 2016 November 15, 2016 2.00% 875,000

May 15, 2017 November 15, 2017 2.00% 800,000

Total $3 390 000

Bond Series of2013

Interest $ 29,613

23,237 23,237 16,750 16,750 8,000 8,000

$125.587

During the fiscal year ended June 30, 2008, the School District issued General Obligation Bonds, Series of2008 in the amount of$10,000,000. Proceeds of the Bonds will be used to pmiiallyrefund the Schoo1District's outstanding Bonds Series of2002, 2003, and 2004. During the fiscal year ended June 30,2013, the School District refunded this Bond Series of2008 with General Obligation Bond Series of20 13 in the principal amount of$9,935,000. Interest on the bonds is due and payable semi-anuually on May 15 and November 15. Debt Service to maturity is as follows:

Date Rate Principal Interest November 15,2014 0.40% $ 560,000 $ 106,673

May 15,2015 105,552 November 15,2015 3.00% 490,000 105,553

May 15, 2016 98,202 November 15, 2016 3.00% 625,000 98,203

May 15, 2017 88,827 November 15,2017 3.00% 875,000 88,828

May 15, 2018 75,702 November 15, 2018 3.00% 440,000 75,703

May 15,2019 69,102

November 15,2019 2.00% 980,000 69,103

May 15,2020 59,302

November 15,2020 2.00% 995,000 59,303

May 15, 2021 49,352

November 15, 2021 2.00% 1,020,000 49,353 May 15,2022 39,152

November 15, 2022 2.00% 1,040,000 39,153

May 15,2023 28,752

November 15,2023 2.00% 1,065,000 28,753

May 15,2024 18,102

November 15,2024 2.10% 1,085,000 18,103

May 15,2025 6,7!0 November 15,2025 2.20% 610,000 6 710

Total $9.785.000 $1 384 193

-23-



NOTE 7- LONG-TERM DEBT (Coutimtet/) Bond Series of 2013A

During the fiscal year ended June 30, 2014, the School District issued General Obligation Bonds, Series of2013A in the amount of$9,835,000. Proceeds of the Bonds will be used (I) to demolish the existing C.W. Rice Middle School, (2) to acquire, design, construct, furnish and equip a new middle school, (3) for additions, alterations and renovations and other improvements to the School District's existing school buildings and related facilities; and (4) for paying the costs of issuing the Bonds. Interest on the bonds is due and payable semi-annually on May 15 and November 15. Debt Service to maturity is as follows:

Date Rate Principal Interest November 15,2014 2.000% $ 5,000 $ 147,593

May 15, 2015 147,544 November 15, 2015 2.000% 5,000 147,544

May 15,2016 147,494 November 15,2016 2.000% 5,000 147,494

May 15,2017 147,444 November 15,2017 2.000% 65,000 147,444

May 15, 2018 146,794 November 15,2018 4.000% 985,000 146,794

May 15,2019 127,094 November 15,2019 2.000% 1,010,000 127,094

May 15,2020 116,994 November 15, 2020 2.400% 1,030,000 116,994

May 15,2021 104,634 November 15,2021 2.700% 1,055,000 104,634

May 15,2022 90,391 November 15, 2022 3.000% 1,085,000 90,391

May 15,2023 74,116 November 15,2023 3.000% 1,120,000 74,116

May 15,2024 57,316 November 15, 2024 3.150% 1,155,000 57,316

May 15, 2025 39,125

November 15, 2025 3.350% 1,850,000 39,125 May 15,2026 8,137

November 15,2026 3.500% 465,000 8 137

Total $9 835.000 $2 561,759

-24-



NOTE 7- LONG-TERM DEBT (Continued) Bond Series of2014

During the fiscal year ended June 30, 2009, the School District issued General Obligation Bonds, Series of 2009 in the amount of$8,515,000. During the fiscal year ended June 30,2014, the School District refunded this Bond Series of 2009 with General Obligation Bond Series of2014 in the principal amount of$3,330,000. Interest on the bonds is due and payable semi-annually on March I and September 1. Debt Service to maturity is as follows:

Date Rate Principal Interest September I, 20 I 4 1.410% $ 758,000 $ 13,825

March l, 20I5 I8, 133 September I, 20I5 1.410% 825,000 I8, 132

March I, 20I6 12,316 September I, 20I6 I.410% 726,000 12,3I6

March 1, 2017 7,I98 September 1, 20 I7 1.410% 507,000 7,I98

March I, 20I8 3,624 September I, 20 I8 1.410% 5I4 000 3,624

March I, 2019 Total $ 3.330.000 $96 366

Bond Series of2010 During the fiscal year ended June 30, 2010, the School District issued General Obligation Bonds, Series of2010 in the amount of $3,000,000. Proceeds of the Bonds will be used for and towards alterations and improvements to various school buildings, including energy update and pay the costs and expenses of issuing the Bonds. Interest on the bonds is due and payable semi-annually on May 15 and November 15. Debt Service to maturity is as follows:

Date Rate Principal Interest November 15, 2014 2.000% $ 190,000 $ 36,925

May I5, 20I5 35,025 November 15, 2015 2.000% 195,000 35,025

May 15, 20I6 33,075 November 15, 2016 2.500% 195,000 33,075

May 15, 2017 30,637 November 15,2017 2.750% 200,000 30,637

May 15, 20I8 27,888 November 15,2018 3.000% 210,000 27,888

May 15, 2019 24,738 November I5, 20I9 3.250% 215,000 24,738

May I5, 2020 21,243 November 15,2020 3.375% 225,000 2I,243

May I5, 202I I7,447 November I5, 2021 3.500% 230,000 17,447

May 15, 2022 13,422 November 15, 2022 3.500% 240,000 13,422

May 15,2023 9,221 November 15, 2023 3.625% 245,000 9,221

May 15,2024 4,781 November 15, 2024 3.750% 255.000 4 781

May I5, 2025 Total $2 400 000 $471 879

-25-


NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, 2014

NOTE 7- LONG-TERM DEBT (Continued)

Summary of debt service requirements to maturity on the outstanding bonds as of June 30, 2014 is as follows:

Year Ending June 30 PrinciQal Interest Total 2014 $ 2,363,000 $ 664,120 $ 3,027,120 2015 2,380,000 637,329 3,017,329 2016 2,426,000 589,944 3,015,944 2017 2,447,000 536,115 2,983,115 2018 2,149,000 474,943 2,623,943 2019-2023 11,555,000 1,549,190 13,104,190 2024-2027 5,420,000 188 144 5,608,144 Totals $28 740 000 $4,639,785 $33,379,785

The following is a summary oflong-term debt transactions for the year ended June 30, 2014:

Balance Defeased/ Balance Description July I, 2013 Issued Decreased June 30, 2014 General Obligation Bonds:

Series of2009 $ 4,420,000 0 4,420,000 $ 0

Series of20 10 2,585,000 0 185,000 2,400,000

Series of20 I OA 4,430,000 0 1,040,000 3,390,000

Series of2013 9,935,000 0 150,000 9,785,000

Series of2013A 0 9,835,000 0 9,835,000

Series of2014 0 3,330,000 0 3,330,000 Total $ 21 3]0 000 13 165 000 5 795 000 $28 740 000

A summaty of changes in other long-term liabilities for the year ended June 30, 2014 is as follows:

Balance Balance July !, 20 13 Additions Reductions June 30, 2014

Capital Lease $ 0 552,927 14Q,Q5l $ 412 946

Compensated Absences $ 202 062 0 16 425 $ 185,637

Other PostEmployment Benefits $ 64 351 171,8Q4 0 $ 236 155

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NOTE 8- LEASES

Operating Leases



The School District leases its copiers under several lease agreements all having tenns of four to five years. It is the procedure of the School District to continually upgrade the copiers. These continually revolving copier leases are classified as operating leases. Current year rental costs approximate $170,000. Future annual lease payments are estimated for the next five years at approximately $120,000 per year.

Capital Leases

The School District has entered into a lease agreement as lessee for financing the acquisition of equipment (computer hardware). This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of its future minimum lease payments as of the inception date.

The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2014, are as follows:

Year Ending June 30 2015 2016 2017

Total Minimum Lease Payments

Less: Amount Representing Interest

Present Value of Minimum Lease Payments

$ 140,051 140,051 140,051

$ 420,152

( 7,206)

$ 412.946

Amortization expense for these assets is included in depreciation expense in the accompanying fmancial statements.

NOTE 9 - C01}/PENSATED ABSENCES

Act 93 Administration Upon retirement from public school service or death, provided the employee has spent the last five (5) years of service in the Shikellamy School District, the School District shall pay to said employee or designated beneficiary the sum of fifty dollars ($50.00) for each day of unused sick leave accumulated with the maximum amount paid not to exceed five thousand dollars ($5,000).

Teachers Upon retirement from public school service or death, provided the employee has spent the last fourteen (14) years of service in the Shikellamy School District, the School District shall pay to said employee or designated beneficiary the sum of twenty-five dollars ($25.00) for each day of unused sick leave accumulated with the maximum amount paid not to exceed two thousand dollars ($2,000).

Support Personnel Support personnel who work twenty-five (25) hours per week or more shall be entitled to two (2) days of paid sick leave after working one (1) year. Thereafter, these employees shall receive one (1) additional day per year to a maximum of five (5) days. Unused sick leave days shall be cumulative to a maximum of forty-five (45) days. Upon retirement, provided the ·employee has spent the last fourteen (I 4) years of service in the Shikellamy School District, the School· District shall pay to said employee the larger of a lump sum retirement allowance of five hundred dollars ($500) or the sum of twenty-five dollars ($25.00) for each day of unused sick leave accumulated with the maximum amount paid not to exceed two thousand dollars ($2,000).

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NOTE 9- COi'rlPENSATED ABSENCES (Continued)

Custodians, Food Service and Maintenance ITeamsters) Full-time employees will receive one sick day for each month worked and may accumulate sick days without limit. Part-time employees who work fifteen (15) hours per week or more shall be entitled to two (2) days of paid sick leave after working one (I) year. Thereafter, these employees shall receive one (I) additional day per year to a maximum of five (5) days. Unused sick leave days shall be cumulative to a maximum of forty-five (45) days.

Upon retirement, provided the employee has spent the last fourteen (14) years of service in the Shikellamy School District, the School District shall pay to said employee the larger of a lump sum retirement allowance of five hundred dollars ($500) or the sum of fifty dollars ($50.00) for each day of unused sick leave accumulated with the maximum amount paid not to exceed four thousand dollars ($4,000). The liability for compensated absences relating to employees paid from the governmental funds is payable from future resources. The estimated liability for compensated absences at June 30, 2014 is included in these financial statements.

NOTE 10- OTHER POSTEMPLOYMENT BENEFITS

Plan Description. In addition to providing pension benefits, the District provides other postemployment benefits to all teachers and ce1tain others who retire fi·om full or part-time status under qualifications of the Pe~msylvania School Employees' Retirement System. The School District funds all School District contributions on a pay-as-you-go basis. Such benefits are primarily funded through annual appropriations from the School District's General Fund. Other postemployment benefits provided by the Shlkellamy School District include a single-employer defmed benefit healthcare plan. The plan provides healthcare insurance for eligible retirees and their spouses through the School District's group health insurance plan, which covers both active and retired members. Employer contribution rates for retirees vary based on the type of retirement, years of service, and type of coverage.

Funding Policy. The School District's contribution is based on projected pay-as-you-go financing requirements.

Annual OPEB Cost. The School District's annual OPEB cost (expense) for the plan is calculated based on the a1mual required contribution of the employer(ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of fimding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thiity years.

Actuarial valuations of an ongoing plan involve estimates ofthe value of reported amounts and assumptions about the probability of occurrence of events for into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions. Projections for benefits for financial reporting proposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit cost between the employer and plan members to that point. The actuarial methods and assumptions used include teclmiques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

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NOTE 10- OTHER POSTE1llPLOYMENT BENEFITS (Continued)

The following table shows the components of the School Districts annual OPEB cost for the year, the amount actually contributed to the Plans, and changes in the School District's net OPEB obligations, as well as the assumptions used to calculate the net OPEB obligation:

Annual required contribution

Estimated Interest on net OPEB obligation

Estimated Adjustment to annual required contribution

Annual OPEB cost

Estimated Contributions made

Estimated Increase (decrease) in net OPEB obligation

Estimated· Net OPEB obligation (asset) beginning of year

Estimated Net OPEB obligation (asset) end of year

Actuarial valuation date

Actuarial cost method

Amortization method

Asset valuation method

Remaining amortization period

Actuarial assumptions:

Investment rate of return

Projected salary increases

Health care inflation rate

$

$

1,775,739

2,896

(10,920)

1,767,715

( 1,595,911)

171,804

64 351

236.155

7/l/2012

Entry Age, Normal

Level dollar

Nf A- the plans are unfunded

30 years

4.50%

3.00% Cost of Living Adjustment 1.00% real wage growth 3.0% to 0.25% merit increase (varies

by age) for teachers and administrators

7.5% in 2012, decreasing .5% per year to 5.5% in 2016. Rates gradually decrease fi·om 5.3% in 2017 to 4.2% in 2089 and later based on the Society of Actuaries Long-Run Medical Cost Trend Model.

For the Actuarial Valuation report dated 711/12, the actuarial value of assets is zero, the actuarial accrued liability is $9.306 million for a funded ratio of zero.

Three-Year Trend Infonnation

Year Ending June 30,2014 June 30,2013 June 30,2012

AnnualOPEB Cost(AOC)

$ 1,767,715 $ 1,769,931 $ 1,371,260

Percentage of AOC Contributed

90,2810% 98.9956% 99.8078%

-29-

NetOPEB Obligation (Asset) $ 236,155 $ 64,351 $ 46,573



NOTE 11- RETIRE!riENT PLAN

Plan Description. The District contributes to a governmental cost-sharing multiple-employer 401(a) defined benefit pension plan administered by Pennsylvania Public School Employees' Retirement System (PSERS). Benefit provisions of the plan are established under the provisions of the Pennsylvania Public School Employees' Retirement Code (the Code) and may be amended by an act ofthe Pennsylvania State Legislature. The plan provides retirement and disability, legislatively mandated ad hoc cost-of-living adjustments, and health care insurance premium assistance to qualifying annuitants. It also provides for refunds of a member's accumulated contribution upon termination of a member's employment in the public school sector. PSERS issues a Comprehensive Annual Financial Report (CAFR) that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to Beth Girman, Office of Financial Management, PSERS, 5 N s"' Street, Harrisburg, PA 17101-1905 or by etnailing Beth at [email protected]. The CAFR is also available on the Publications page of the PSERS website, www.psers.state.pa.us.

Funding Policy. The contribution policy is set by the Code and requires contributions by active member, employers and the commonwealth. Active members who joined the System prior to July 22, 1983, contribute at 5.25 percent (Membership Class T-C) or at 6.50 percent (Membership Class T-D) of the member's qualifying compensation. Members who joined the system on or after July 22, 1983 and who were active or inactive as of July I, 2001, contribute at 6.25 percent (Membership Class T-C) or at 7.50 percent (Membership Class T-D) of the member's qualifying compensation. Members who joined the system after June 30, 2001 and before July I, 2011, contribute at 7.50 percent (automatic Membership Class T-D). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January I, 2002. Members who joined the system after June 30, 20 II, automatically contribute at the Membership Class T -E rate of 7.50% (base rate) of the member's qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at 10.30% (base rate) of the member's qualifying compensation. Membership Class T,E and Class T-F are affected by a "shared risk" provision in Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate to fluctuate between 7.50% and 9.50% and Membership Class T-F contribution rate to fluctuate between 10.30% and 12.30%. The contributions required of employers are based on an actuarial valuation and is expressed as a percentage of annual covered payroll during the period for which the amount is determined. For fiscal year ended June 30, 2014, the rate of employer contribution was 16.93% of covered payroll. The 16.93% rate is composed of a pension contribution rate of 16.00% for pension benefits and .93% for health care insurance premium assistance. Before July I, 1995, school districts and the Commonwealth shared the employer contribution rate equally. Since July l, 1995, school districts are required to pay the entire employer contribution rate and are reimbursed by the Commonwealth's share as determined by the income aid ratio (as defined in A,ct 29 of 1994), which is at least one-half of the total employer rate. Shikellamy School District's contributions to PSERS for the years ending June 30, 2014, 2013, and 2012 were $1,155,626, $894,956, and $638,730, respectively. Those amounts are equal to the required contribution for each year.

NOTE 12- RISK MANAGEMENT

The District is exposed to various risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The District has purchased various insurance policies to safeguard its assets from risk ofloss. Insurance coverage appears to be consistent with previous years. During the year ended June 30, 2014 and the two previous fiscal years, no settlements exceeded insurance coverage.

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NOTE 13 - CONTINGENT LIABILITIES

Grant Programs The School District patticipates in state and federally assisted grant programs. These programs are subject to program compliance audits by the grantors or their representatives. The School District is potentially liable for any expenditure which may be disallowed pursuant to the terms of these grant programs. Management is not aware of any material items of noncompliance that may result in the disallowance of program expenditures.

Tax Revenue The School District is subject to real estate tax assessment appeals on an ongoing basis. If tax appeals are successful, the result is a loss oftax revenue to the School District. It is anticipated that any material loss oftax revenue on individual tax appeals will be offset with additional revenues from other propmties or other sources of revenue and would not create a fmancial hardship to the School District.

NOTE 14- CHANGES IN GOVERNMENTAL ACCOUNTING STANDARDS

In March 2012, the GASB issued Statement No. 65, "Items Previously Reported as Assets and Liabilities." This statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously repmted as assets and liabilities. The School District adopted Statement No. 65 for its fiscal year ended June 30, 2014 financial statements as required.

In March 2012, the GASB issued Statement No. 66, "Technical Corrections- 2012, an amendment ofGASB Statements No. 10 and No. 62." The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted fi·om the issuance of two pronouncements, Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and A/CPA Pronouncements. The School District adopted Statement No. 66 for its fiscal year ended June 30,2014 financial statements as required.

In June 2012, the GASB issued Statement No. 67, "Financial Reporting for Pension Plans, an amendment ofGASB Statement No. 25." The objective ofthis Statement is to improve fmancial reporting by state and local govermnental pension plans. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful infonnation, suppmting assessments of accountability and interperiod equity, and creating additional transparency. The School District adopted Statement No. 67 for its fiscal year ended June 30,2014 fmancial statements as required.

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NOTE 15- FUTURE CHANGES IN GOVERNMENTAL ACCOUNTING STANDARDS

In June 2012, the 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 govermnents for pensions. It also improves information provided by state and local govermnental employers about fmancial support for pensions that is provided by other entities. This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. The requirements of Statements No. 27 and No. 50 remain applicable for pensions that are not covered by the scope of this Statement. To the extent applicable, the School District is required to adopt Statement No. 68 for its fiscal year ended June 30, 2015 fmancial statements.

In January 2013, the GASB issued Statement No. 69, "Government Combinations and Disposals of Government Operations. " This statement establishes accounting and fmancial reporting standards related to govermnent combinations and disposals of govermnent operations. As used in this Statement, the term govermnent combinations include a variety of transactions referred to as mergers, acquisitions, and transfers of operations. To the extent applicable, the District is required to adopt Statement No. 69 for its June 30,2015 fmancial statements.

In April 2013, the GASB issued Statement No. 70, "Accounting and Financial Reporting/or Non-exchange Financial Guarantees." The objective of the Statement is to improve accounting and fmancial reporting by state and local govermnents that extend and receive nonexchange financial guarantees. To the extent applicable, the District is required to adopt Statement No. 70 for its June 30,2015 financial statements.

In November 2013, the GASB issued Statement 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment ofGASB Statement No. 68." The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No. 68. The issue relates to amounts associated with contributions, if any, made by a state or local govermnent employer or nonemployer contributing entity to a defmed benefit pension plan after the measurement date of the govermnent's beginning net pension liability. The provisions of the Statement are required to be applied simultaneously with the provisions of Statement No. 68 and are effective for the District's fiscal year ended June 30,2015.

District management is in the process of analyzing these pending changes in accounting principles and the impact they will have on the fmancial reporting process.

NOTE 16-SUBSEOUENT EVENTS

The School District has evaluated all events subsequent to the fmancial statement date of June 30, 2014, through November 25, 2014 which is the date these financial statements were available to be issued, and has detennined that there are the following subsequent events that require disclosure:

• In October 2014, the School District issued General Obligation Bonds, Series A of2014 h1 the amount of $9,955,000. The proceeds of the Bonds will be used: (l) to acquire, design, construct, furnish and equip a new middle school on the site of the fom1er C.W. Rice Middle School, (2) for additions, alterations and renovations and other improvements to the School District's existing school buildings and related facilities; and (3) for paying the costs of issuing the Bonds.

-32-

REQUIRED SUPPLEMENTARY

INFORMATION


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL

GENERAL FUND For The Year Ended Jurie 30,2014

Budgeted Amounts REVENUES

Variance with Final Budget

Actual Positive

Local Sources __ O:c;r:-;ig~in:;;:ac;;-1 :;-;:- ---;-:;F~in:':'a':-1 -;:;;;-::- (Budgetary Basis) _ _,(N..:.:•:..;ga':Ot':-iv:;;:e);:-;--

$ 19,259,819 19,264,786 19,786,537 521,751 State Sources Federal Sources TOTAL REVENUES

EXPENDITURES Instruction Regular Programs Special Programs Vocational Education Other Instructional Programs Nonpublic School Programs Adult Education Programs Support Services Pupil Persom1el Services Instructional Staff Services Administrative Services Pupil Health Business Services Operation and Maintenance of Plant Services Student Transportation Services Central Support Services Operation of Noninstructional Services Student Activities Community Services TOTAL EXPENDITURES EXCESS OF REVENUES OVER

(UNDER) EXPENDITURES

OTHER FINANCING SOURCES (USES) Sale/Compensation for Capital Assets Debt Service Refund of Prior Year Receipts Interfund Transfers In (Out) Transfers TOTAL OTHER FINANCING SOURCES (USES)

Net Change in Fund Balances

FUND BALANCE- JULY 1, 2013

FUND BALANCE- JUNE 30, 2014


18,688,863 18,688,863 18,827,276 138,413 1,401,899 1,525,906 1,367,325 (158,581)

39,350,581 39,479,555 39,981,138 501,583

17,034,234 16,931,378 5,722,660 6,174,425 1,433,055 1,433,187 1,553,453 1,398,363

0 10,849 1,588 1,588

1,078,527 1,080,374 1,435,618 1,082,602 2,122,992 2,167,494

400,913 400,931 458,851 458,851

2,911,345 2,823,836 1,411,383 1,433,294

152,136 152,137

528,207 528,537 41,489 40,225

36,286,451 36,118,071

3,064,130 3,361,484

16,672,789 6,114,719 1,432,660 1,332,022

10,873 0

1,065,583 990,491

2,050,797 395,758 448,521

2,772,921 1,387,914

142,633

508,180 36,025

35,361,886

4,619,252

258,589 59,706

527 66,341

(24) 1,588

14,791 92,lll

116,697 5,173

10,330 50,915 45,380

9,504

20,357 4,200

756,185

1,257,768

0 0 54,494 54,494 (3,087,578) (3,375,560) (3,375,560) 0

0 (2,637) (2,637) 0 (150,000) (157,436) (!57,436) 0

(19,140) (18,439) 0 18,439 (3 ,256, 718) ---:(::::-3,""'"55;:.:;4"-;;,o::0:72':t-) ---:(::::-3 ,-:c48;;-;I--:, I:;;-39:;,.-) ___ 7:.::2"'-,9.::.;33'--

$ =~(,;,l9;;,2:o;,5;;;88~) =~(,;,19;;,2:o;,5;;;88~)

-33-

1,138,113

8,730,778

9,868,891

1,330,701


REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS FORPOSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS


SCHEDULE OF FUNDING PROGRESS

Actuarial Actuarial Accrued UAAL Actuarial Value of Liability (AAL) Unfunded Funded Covered as a Percentage of Valuation Assets Entry Age AAL(UAAL) Ratio Payroll Covered Payroll

Date (a) (b) ( b-a) (alb) (c) [ ( b-a) I c]

7/l/2012 $0 $9,306,276 $9,306,276 0.0% $15,692,384 59.30% 7/112010 $0 $11,385,908 $11,385,908 0.0% $18,244,082 62.41% 1/l/2008 $0 $12,607,816 $12,607,816 0.0% $16,341,142 77.15%

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SINGLE AUDIT SECTION

~HIKEL!,AMY S!:HQQ!. DT~TRT!:T SlJNBliB Y PENNSY!, VANTA

S!:HEDULE QF EXPEND!Il!RliS QF FEDERAL AND STATE A WARQS For The Year Ended June 30, 2014

Accrued Accrued PASS Program <Unearned> <Unearned>

Federal Federal Through or Revenue Revenue Pro::=:ram Source CFDA Grantors Grant Award Total at Receipts at

Title Code Number Number Period Amount Received 7/1/2013 Recognized Expenditures 6130/2014 ll.S. ORPARTMF,NTOF EOIICATTON PASSED THROUGH PA DEPT. OF EDUCATION TITLE I, PART A CLUSTER Title I -Improving Basic Programs I 84.010 013-140386 13-14 $ 662,582 $ 177.345 $ 0 s 636,779 $ 636.779 $ 459,434 Title I -Improving Basic Programs I 84.010 013-130386 12-13 $ 727,626 137 430 137 430 0 0 0

Total Title I, Part A Cluster $ 314,775 s 137,430 $ 636.779 $ 636.779 $ 459.434

Title II- Improving Teacher Quality I 84.367 020-130386 12-13 $ I52,988 $ (599) s (599) s 0 $ 0 $ 0 Title II- Improving Teacher Quality I 84.367 020-140386 13-14 $ 145,959 38,899 0 145,959 145,959 107,060 Title m M Language Inst LEP I 84.365 010M130386 12-13 $ 10,592 3,531 (2.863) 6,394 6,394 0 Title m M Language Inst LEP I 84.365 010-140386 13-14 $ 11,026 2,940 0 1,272 1,272 (1,668) 21st Century Community Cohort #5 I 84.287 4100052392 12-13 $ 420,000 104,354 104,354 0 0 0 21st Century Community Cohort #6A I 84.287 4100060876 12-13 $ 399,317 155,595 62,177 93,418 93,418 0 21st Century Community Cohort #6A I 84.287 4100060876 13-14 $ 399,317 190.836 0 265,840 265.840 75.004

Total PA Dept. of Education $ 810,331 $ 300.499 $ 1.149.662 $ 1.149.662 $ 639,830

PASS ED THROUGH CENTRAL SUSQUEHANNA INTERMEDIATE UNIT SPECIAL EDUCATION CLUSTER Special Education- IDEA 611 I 84.027 062-130016 12-13 $ 534,870 $ 280,462 $ 280,462 $ 0 $ 0 $ 0 Special Education- IDEA 611 I 84.027 062-140016 13-14 $ 516,958 239,806 0 516,958 516,958 277,152 Special Education- Preschool- IDEA 619 I 84.173 131-120016 12-13 $ 11,551 11,551 11,551 0 0 0 Special Education- Preschool- IDEA 619 I 84.173 131-130016 13-14 $ 4,734 0 0 4,734 4.734 4,734

Total Special Education Cluster $ 531 819 $ 292 013 $ 521.692 $ 521.692 $ 281,886

Total U.S. Department of Education $ 1,342,150 $ 592,512 $ 1,671,354 $ 1,671.354 $ 921.716

w ll,S, Ol<;P~BTMF;J:ITOF Hf:(;\T!TH &NO IDTM&~ SF;RVT{;F.S Y' PASSED THROUGH PA DEPARTMENT OF PUBLIC WELFARE

Medical Assistance I 93.778 13-14 $ 47,334 $ 35 951 $ 0 $ 47.334 $ 47.334 $ 11.383 Total U.S. Dept of Health and Human Sen-ices $ 35.951 $ 0 $ 47.334 $. 47.334 $ 11,383

1T,S, O'F;PARTM'F;J:IT QF AQRT!]TLTllRF; CHILD NUTRITION CLUSTER PASSED THROUGH PA DEPT. OF EDUCATION National School Lunch Program I 10.555 362 13-14 N/A $ 595,681 $ 65,542 $ 683,176 $ 683,176 $ 153,037 School Breakfast Program I 10.553 365/367 13-14 N/A 123,534 15,858 140,373 140,373 32,697 PASSED THROUGH PA DEPT. OF AGRICULTURE NSLP- Donated Commodities I 10.555 N/A 13-14 N/A 98.924 0 98,924 98.924 0

Total Child Nutrition Cluster s 818.139 $ 81,400 $ 922.473 $ 922.473 $ 185 734

Total U.S. Dept of A~riculture s 818.139 $ 81.400 $ 922 473 $ 922.473 $ 185,734

TOTAL FEDERAL ASSISTANCE s 2196240 $ 673.912 $ 2.641.161 $ 2,641,161 $ 1.118,833

STATE SOllRCF.S

Food Nutrition I N/A 510/511 13-14 N/A $ 43.311 $ 5.119 $ 49.184 $ 49 184 $ 10.992 Total $ 43,311 $ 5.119 $ 49,184 $ 49,184 $ 10,992

Source Codes: Major Program Detennination

D- Direct Funding Total Federal Expenditures $ 2.641,161 I- Indirect Funding S M State Share Programs Selected for Testing:

Title II -Improving Teacher Quality 145,959

The Accompanying Notes Are An Integral 21st Century Conununity 359,258

Part OfThese Financial Statements, Child Nutrition Cluster 922.473 $ 1,427,690 I 2.641.161 .. 54.06%


NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS

For the Year Ended June 30, 2014

NOTE A- BASIS OF PRESENTATION

The accompanying schedule of expenditures of federal and state awards includes the federal and state grant activity of the Shikellamy School District and is presented on the accrual basis of accounting. The information in the schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and NonProfit Organizations. Therefore, some amounts presented in the schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.

NOTE B- UNEARNED REVENUES

Unearned Revenues arise when assets are recognized before revenue recognition criteria have been satisfied. Federal funds received before the eligibility requirements are met are recorded as unearned revenue.

NOTE C- MEDICAL ASSISTANCE- ACCESS REIMBURSEMENTS

Access reimbursements received under CFDA No. 93.778, Revenue Code 8810 are classified as fee-for-service revenues and are not recognized as federal and state awards for the purposes of the Schedule of Expenditures of Federal and State Awards.

NOTE D -PROGRAM DISCLOSURES

Title I, Part A Cluster • Title I grants under CFDA No. 84.010 are reported as the cluster program "Title I, Part A Cluster'' in

accordance with OMB Circular A-133 Compliance Supplement.

Special Education Cluster • The Special Education- Grants to States Program (IDEA, Part B I CFDA No. 84.027) and Special Education

Preschool Grants Program (IDEA 619, Preschool I CFDA No. 84.173) are reported as the cluster program "Special Education Cluster'' in accordance with OMB Circular A-!33 Compliance Supplement

Child Nutrition Cluster • The School Breakfast Program (CFDA No. 10.553) and National School Lunch Programs (CFDA No 10.555)

are reported as the cluster program "Child Nutrition Cluster'' in accordance with OMB Circular A-133 Compliance Supplement.

• Non-monetary assistance received from the U.S. Department of Agriculture is in the form of commodities. These commodities are reported in the schedule at the fair market value of the connnodities received and disbursed under CFDA number 10.555 titled National School Lunch Program. Donated commodities are recognized as revenue when received and not deferred.

• State matching funds for the National School Lunch Program are included on the Schedule of Expenditure of Federal and State Awards at the request of the Pellllsylvania Department of Education.

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FORGETT & KERSTETTER, P. C. CERTIFIED PUBLIC ACCOUNTANTS

I 0 Deday Alley

Susan Forgett Rfleam, CPA E-Mail: [email protected]


Fax: (570) 743-4666 Laura M. Kerstetter, CPA E-Mail: [email protected]

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To The Members of the Board of Directors ofthe Shikellamy School District Sunbury, Pennsylvania

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Govemment Auditing Standards issued by the Comptroller general of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Shikellamy School District, Sunbury, Pennsylvania as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Shikellamy School District's basic financial statements, and have issued our report thereon dated November 25,2014.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Shikellamy School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the fmancial statements, but not for the purpose of expressing an opinion on the effectiveness ofthe Shikellamy School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the Shikellamy School District's internal control.

A deficiency in intemal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and co!Tect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and co!Tected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph ofthis section and was not designed to identifY all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identifY any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

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Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Shikellamy School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of fmancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Govemment Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit perfonned in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Jot!jd1j ~.P. c. FORGETT & KERSTETTER, P.C. Selinsgrove, Pennsylvania November 25,2014

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FORGETT& KERSTETTER, P.C.

Susan Forget! Rheam, CPA

E-Mail: [email protected]

CERTIFIED PUBLIC ACCOUNTANTS 10 Deday Alley


Fax: (570) 743-4666

Laura M. Kerstetter, CPA E-Afail: [email protected]

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE

REQUIRED BY OMB CffiCULAR A-133

To The Members of the Board of Directors of the Shikellamy School District Sunbury, Permsylvania

Report on Compliance for Each Major Federal Progmm

We have audited Shikellamy School District's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Shikellamy School District's major federal programs for the year ended June 30, 2014. Shikellamy School District's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of fmdings and questioned costs.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of the Shikellamy School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a m>Uor federal program occurred. An audit includes examining, on a test basis, evidence about Shikellamy School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Shikellamy School District's compliance.

Opinion on Each Major Federal Program

In our opinion, the Shikellamy School District complied, in all material respects, with the types of compliance requirements refen·ed to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2014.

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Report on Internal Control over Compliance

Management of the Shikellamy School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Shikellamy School District's intemal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but pot for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe Shikellamy School District's internal control over compliance.

A deficiency in intemal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course ofperfonning their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in intemal control over compliance is a deficiency, or combination of deficiencies, in intemal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in intemal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements ofOMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

¥i~,P.C. FORGETT & KERSTETTER, P.C. Selinsgrove, Pennsylvania November 25, 2014

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS For The Year Ended June 30,2014

I. SUMMARY OF AUDITOR'S RESULTS:

Financial Statements

Type of auditors report issued: UtmJOdified

Internal control over financial reporting: • Material weaknesses identified? No • Significant deficiencies identified that are not considered to be material weaknesses? None reported

Noncompliance material to financial statements noted? No

Federal Awards

Internal control over major programs: • Material weaknesses identified? No • Significant deficiencies identified that are not considered to be material weaknesses? None reported

Type of auditor's report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133? No

Major program identification:

CFDA Number(s) 84.367 10.553, 10.555 84.287

Name of Federal Program or Cluster Title II, Improving Teacher Quality Child Nutrition Cluster 21 ''Century Community

Dollar threshold used to distinguish between Type A and Type B programs: $300,000

Auditee qualified as low-risk auditee? No

II. FINANCIAL STATEMENT FINDINGS:

None reported

III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS:

None repotted

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REPORT

Audit Report

Audit Report

Audit Report

Audit Repmt

Audit Report

Audit Report


LIST OF REPORT DISTRIBUTION For The Year Ended June 30,2014

TO WHOM DISTRIBUTED

Prothonotary Office -Northumberland County Courthouse Market Street Sunbury, PA 17801

Sun Area Technical Institute 815 East Market Street 21" Century Drive New Berlin, PA 17855

Central Susquehanna Intermediate Unit #16 90 Lawton Lane Milton, PA 17847

Shikellamy School District 200 Island Boulevard Sunbury, PA 17801

Bureau of Audits Electronic Submission [email protected]

Federal Audit Clearinghouse Bureau of Census Electronic Submission

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