$4,225,000* Neshannock Township School District€¦ · $4,225,000* Neshannock Township School District Lawrence County, Pennsylvania General Obligation Bonds, Series of 2014 Date

PRELIMINARY OFFICIAL STATEMENT DATED JUNE , 2014

NEW ISSUE—BOOK-ENTRY ONLY RATINGS: Standard &Poor’s: ____ (Insured)

____ (Underlying)

(See Ratings herein) In the opinion of Bond Counsel, under existing statutes, regulations and judicial decisions, interest on and accruals of original issue discount with

respect to the Bonds (a) are excludable from gross income for purposes of federal income taxation, and (b) are not items of tax preference within the meaning of

Section 57 of the Code for purposes of the federal alternative minimum tax imposed by Section 55 of the Code on individuals and corporations; however, it should

be noted with respect to corporations (as defined for federal income tax purposes), such interest and accruals are taken into account in determining adjusted

current earnings for the purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. This opinion of Bond

Counsel is given in reliance upon certain representations made by the School District and is subject to continuing compliance by the School District with its covenants in the Resolution and other documents to comply with requirements of the Internal Revenue Code of 1986, as amended, and applicable regulations

thereunder.

Bond Counsel is also of the opinion that under the laws of the Commonwealth of Pennsylvania (the “Commonwealth”), as presently enacted and

construed, the Bonds are exempt from personal property taxes in the Commonwealth, and the interest on the Bonds is exempt from the Commonwealth’s personal

income tax and the Commonwealth‘s corporate net income tax.

The School District has designated or deemed designated each of the Bonds as a “qualified tax-exempt obligation” within the meaning of Section

265(b)(3) of the Code and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Code), a deduction is allowed for 80% of that portion of such financial institutions’ interest expense allocable to interest on the Bonds. See “TAX MATTERS” herein.

$4,225,000*

Neshannock Township School District Lawrence County, Pennsylvania

General Obligation Bonds, Series of 2014

Dated: July 29, 2014 Principal Due: September 1, as shown on inside cover

Interest Due: March 1 and September 1 First Interest Payment: September 1, 2014

The General Obligation Bonds, Series of 2014 (the “Bonds”) in the aggregate principal amount of $4,225,000* will be issued in registered

form in denominations of $5,000 or any integral multiple thereof. The Bonds will be registered in the name of Cede & Co., as the registered owner and nominee of The Depository Trust Company ("DTC"), New York, New York. Beneficial ownership of the Bonds may be acquired in denominations of

$5,000 or any integral multiple thereof only under the book-entry only system maintained by DTC through its brokers and dealers who are, or act

through, DTC Participants. The purchasers of the Bonds will not receive physical delivery of the Bonds. For so long as any purchaser is the beneficial owner of a Bond, that purchaser must maintain an account with a broker or a dealer who is, or acts through, a DTC Participant to receive payment of

principal of and interest on the Bonds. See "BOOK-ENTRY ONLY SYSTEM" herein. If, under the circumstances described herein, Bonds are ever

issued in certificated form, the Bonds will be subject to registration of transfer, exchange and payment as described herein. The Bonds are general obligations of the Neshannock Township School District, Lawrence County, Pennsylvania (the "School District")

payable from its tax and other general revenues. The School District has covenanted that it will provide in its budget in each year, and will appropriate

from its general revenues in each such year, the amount of the debt service on the Bonds for such year and will duly and punctually pay or cause to be paid from the sinking fund established under the Resolution or any other of its revenues or funds the principal of every Bond and the interest thereon on

the dates, at the place and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the School District pledged its full faith,

credit and taxing power, within the limits provided by law (but see “Security” and “The Taxpayer Relief Act” herein). Interest on each of the Bonds is payable initially on September 1, 2014, 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 depository for the Bonds. So long as Cede & Co., as nominee for DTC, is the registered owner of the Bonds, payments of the principal of,

redemption premium, if any, and interest on the Bonds, when due for payment, will be made directly to DTC by the Paying Agent, and DTC will in turn

remit such payments to DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. If the use of the book-entry only system for the Bonds is ever discontinued, the principal of and redemption premium, if any, on each of the Bonds will be payable, when due, upon surrender of

such Bond to the Paying Agent at its specified corporate trust office presently located in , Pennsylvania (or any successor paying agent at its

designated office(s)) and interest on such Bond will be payable by check mailed to the person(s) in whose name(s) such Bond is registered as of the Record Date with respect to the particular interest payment date (see “THE BONDS” herein).

The Bonds are subject to optional redemption prior to maturity as described herein.

Proceeds of the Bonds will be used to currently refund all of the School District’s General Obligation Bonds, Series of 2009 and to pay the cost of issuing and insuring the Bonds.

The Bonds are an authorized investment for fiduciaries in the Commonwealth of Pennsylvania pursuant to the Pennsylvania Probate, Estate

and Fiduciaries Code, Act of June 30, 1972, No. 164, P.L. 508, as amended and supplemented.

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

concurrently with the delivery of the Bonds by _____.

MATURITIES, AMOUNTS, RATES AND PRICES/YIELDS

See Inside Front Cover

The Bonds are offered when, as and if issued, subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of Eckert Seamans Cherin & Mellott, LLC, of Pittsburgh, Pennsylvania, Bond Counsel, to be furnished upon delivery of the Bonds.

Certain other legal matters will be passed upon for the School District by Michael C. Bonner, Esquire, of New Castle, Pennsylvania, School District

Solicitor. Public Financial Management, Inc. serves as the School District’s Financial Advisor in connection with the issuance of the Bonds. It is expected that the Bonds will be available for delivery through DTC on or about July 29, 2014.

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

Dated:

*Estimated, subject to change

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$4,225,000*



Date of Delivery: July 29, 2014 Principal Due: September 1, as shown below

Interest Due: March 1 and September 1 First Interest Payment: September 1, 2014

MATURITIES, AMOUNTS, RATES AND PRICES/YIELDS

Year of Maturity

Principal Maturity

Interest

Initial Offering

(September 1)

Amount

Rate

Yields Prices

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

(A portion of the Bonds may be structured as Term Bonds. See "Invitation to Bid".)


[THIS PAGE INTENTIONALLY LEFT BLANK]

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Lawrence County, Pennsylvania

BOARD OF SCHOOL DIRECTORS

Karen Houk ............................................................................................................................................... President

James McFarland ....................................................................................................................................... Vice-President

P.J. Copple ................................................................................................................................................ Treasurer

Dave Antuono ........................................................................................................................................... Member

Mark Hasson ............................................................................................................................................. Member

Richard Loudon ......................................................................................................................................... Member

Amy Na ..................................................................................................................................................... Member

Cathy Snyder ............................................................................................................................................. Member

Jay Vitale ................................................................................................................................................... Member

SUPERINTENDENT

DR. MARY S. TODORA

BUSINESS MANAGER

JUSTIN DIMUCCIO

SOLICITOR TO THE SCHOOL DISTRICT

MICHAEL C. BONNER, ESQUIRE

New Castle, Pennsylvania

BOND COUNSEL

ECKERT SEAMANS CHERIN & MELLOTT, LLC

Pittsburgh, Pennsylvania

FINANCIAL ADVISOR

PUBLIC FINANCIAL MANAGEMENT, INC.

Harrisburg, Pennsylvania

PAYING AGENT

SCHOOL DISTRICT ADDRESS

3834 Mitchell Road

New Castle, Pennsylvania 16105

i

No dealer, broker, salesman or other person has been authorized by the School District to give information or to make any representations, other than

those contained in this Preliminary Official Statement, and if given or made, such other information or representations must not be relied upon. This Preliminary

Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is

unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from the School District and from other sources which are believed to be reliable but the School District does not guarantee the accuracy or completeness of information from sources other than the School District. The

information and expressions of opinion herein are subject to change without notice and neither the delivery of this Preliminary Official Statement nor any sale made

hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof.

TABLE OF CONTENTS

Page Page

INTRODUCTION .......................................................................... 1

PURPOSE OF THE ISSUE............................................................ 1

Sources and Uses of Bond Proceeds ...................................... 1

THE BONDS ................................................................................... 2

Description ............................................................................ 2 Payment of Principal and Interest .......................................... 2 Transfer, Exchange and Registration of Bonds ...................... 2 Security .................................................................................. 3 Commonwealth Enforcement of Debt Service Payments ....... 3 Sinking Fund ......................................................................... 3

REDEMPTION OF BONDS .......................................................... 4

Mandatory Redemption ......................................................... 4 Optional Redemption ............................................................. 4 Notice of Redemption ............................................................ 4 Manner of Redemption .......................................................... 4

BOOK-ENTRY ONLY SYSTEM ................................................. 5

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

Introduction ........................................................................... 7 Administration ....................................................................... 7 School Facilities .................................................................... 7 Enrollment Trends ................................................................. 7

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

Introduction ........................................................................... 8 Financial Reporting ............................................................... 8 Budgeting Process as modified by Act 1 of 2006 (Taxpayer

Relief Act) ............................................................................. 8 Summary and Discussion of Financial Results ...................... 9 Revenue ................................................................................. 11

TAXING POWERS ........................................................................ 12

In General .............................................................................. 12 The Taxpayer Relief Act (Act 1) ........................................... 13 Act 130 of 2008 ..................................................................... 14 Limitation on Estimated Ending Unreserved Undesignated Fund Balances................................................................................. 14 Tax Levy Trends .................................................................... 15 Real Property Tax .................................................................. 15 Other Taxes ........................................................................... 17 State Aid to School Districts .................................................. 18

DEBT AND DEBT LIMITS ........................................................... 18

Debt Statement ...................................................................... 18 Debt Limit and Remaining Borrowing Capacity .................... 20 Debt Service Requirements .................................................... 20 Future Financing .................................................................... 21

LABOR RELATIONS ................................................................... 22

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

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

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

TAX MATTERS ............................................................................ 23

Tax Exemption ...................................................................... 23 Federal Alternative Minimum Tax Calculations ................... 23 Taxable Social Security and Railroad Retirement Benefits

Calculation ............................................................................ 23 Financial Institutions’ Cost of Carrying Tax-Exempt Bonds . 23 Property and Casualty Insurance Company Income Taxes .... 24 Tax on Excess Passive Net Income of S Corporation ............ 24 Branch Profits Tax ................................................................ 24 Interest Reporting Requirements ........................................... 24 Market Discount .................................................................... 24 Original Issue Discount ......................................................... 24 Tax Treatment of Premium ................................................... 25

CONTINUING DISCLOSURE UNDERTAKING ...................... 25

RATING ......................................................................................... 26

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

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

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

MISCELLANEOUS ...................................................................... 27

APPENDIX A - DEMOGRAPHIC AND ECONOMIC

INFORMATIONRELATING TO THE NESHANNOCK TOWNSHIP SCHOOL

DISTRICT

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

APPENDIX B - OPINION OF BOND COUNSEL

APPENDIX C - AUDITED FINANCIAL STATEMENTS

APPENDIX D - CONTINUING DISCLOSURE AGREEMENT

APPENDIX E - SPECIMEN MUNICIPAL BOND INSURANCE POLICY


1

PRELIMINARY OFFICIAL STATEMENT

$4,225,000*



INTRODUCTION

This Preliminary Official Statement, including the cover page and inside cover page hereof and Appendices hereto, is furnished by

Neshannock Township School District, Lawrence County, Pennsylvania (the "School District"), in connection with the offering of $4,225,000*

aggregate principal amount of its General Obligation Bonds, Series of 2014 (the “Bonds”) dated as of July 29, 2014. The Bonds are being issued

pursuant to a Resolution of the Board of School Directors of the School District adopted on (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 Bonds will be used to currently refund all of the School District’s General Obligation Bonds, Series of 2009 currently

outstanding in the aggregate principal amount of $4,015,000 (the “2009 Bonds”) and paying the costs of issuing and insuring the Bonds.

Upon issuance of the Bonds, a portion of the proceeds of the Bonds will be irrevocably deposited with Manufacturers and Traders Trust

Company, the Paying Agent for the 2009 Bonds in an amount sufficient to redeem all of the 2009 Bonds being refunded at a redemption price of

100% plus accrued interest on September 1, 2014.

Sources and Uses of Bond Proceeds

Total

Source of Funds

Bond Proceeds .....................................................................................................................................

Net Original Issue Premium /(Discount) .............................................................................................

Total Source of Funds ....................................................................................................................

Use of Funds

Amount Required to Call the 2009 Bonds ...........................................................................................

Costs of Issuance(1) ..............................................................................................................................

Total Use of Funds .........................................................................................................................

(1)Includes Bond discount, legal, financial advisor, municipal bond insurance premium, printing, credit rating, paying agent/ redemption agent,

and miscellaneous fees.


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 dated as of July

29, 2014 and will bear interest at the rates and mature in the amounts and at the times set forth on the inside cover page of this Preliminary

Official Statement. Interest on the Bonds will be payable initially on September 1, 2014, and thereafter, semiannually on March 1 and September

1, until the principal sum is paid.

When issued, the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New

York, New York. Purchasers of the Bonds (the “Beneficial Owners”) will not receive any physical delivery of Bonds certificates, and beneficial

ownership of the Bonds will be evidenced only by book entries. See “BOOK – ENTRY ONLY SYSTEM” herein.

Payment of Principal and Interest

So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payments of principal of, redemption premium, if

any, and interest on the Bonds, when due, are to be made to DTC and all such payments shall be valid and effective to satisfy fully and to

discharge the obligations of the School District with respect to, and to the extent of, principal, redemption premium, if any, and interest so paid.

If the use of the Book-Entry Only System for the Bonds is discontinued for any reason, Bond certificates will be issued to the

Beneficial Owners of the Bonds and payment of principal, redemption premium, if any, and interest on the Bonds shall be made as described in

the following paragraphs:

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

surrender of the Bonds to (the “Paying Agent”), acting as paying agent and sinking fund depository for the Bonds, at its

designated 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, 2014, in which event such Bond shall bear interest from

July 29, 2014, 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, 2014, 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 fifteenth day 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 ten (10) nor more than fifteen (15) days preceding such

special record date.

If the date for payment of the principal of, premium, if any, or interest on such Bond shall be Saturday, Sunday, legal holiday or on a

day on which banking institutions in the Commonwealth of Pennsylvania are authorized by law or executive order to close, then the date of such

payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or on a day on which such banking institutions are

authorized to close (a “Business Day”), and payment on such subsequent Business Day shall have the same force and effect as if made on the

nominal date established for such payment.

Transfer, Exchange and Registration of Bonds

Subject to the provisions described below under “BOOK-ENTRY ONLY SYSTEM,” Bonds are transferable or exchangeable by the

registered owners thereof upon surrender of Bonds to the Paying Agent, at its designated corporate trust office duly endorsed by, or accompanied

by a written instrument or instruments of transfer in form and with guaranty of signature satisfactory to the Paying Agent, duly executed by the

registered owner of such Bond or his duly authorized agent or legal representative. The Paying Agent shall enter any transfer of ownership of

Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new

fully registered Bond or Bonds of authorized denominations of the same maturity and interest rate for the aggregate principal amount which the

registered owner is entitled to receive. The School District and the Paying Agent may deem and treat the registered owner of any Bond as the

absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest

and for all other purposes, and the School District and the Paying Agent shall not be affected by any notice to the contrary.


3

The School District and the Paying Agent shall not be required to issue, or register the transfer or exchange of, any Bond (a) in the case

of Bonds then considered for redemption, during a period beginning at the close of business on the fifteenth (15th) day next preceding any date of

selection of Bonds to be redeemed and ending at the close of business on the day on which the applicable notice of redemption is mailed; (b)

once selected for redemption in whole or in part; or (c) during the period beginning at the opening of business on any Regular Record Date for

interest payments and ending at the close of business on such Interest Payment Date. Bonds may be exchanged for a like aggregate principal

amount of Bonds of other authorized denominations of the same maturity and interest rate.

Security

The Bonds will be general obligations of the School District, payable from its tax and other general revenues. The School District has

covenanted that it will provide in its budget for each year, and will appropriate from its general revenues in each such year, the amount of the

debt service on the Bonds for such year, and will duly and punctually pay or cause to be paid from its Sinking Fund, as hereinafter defined, or

any other of its revenues or funds, the principal of each of the Bonds and the interest thereon at the dates and place and in the manner stated on

the Bonds, and for such budgeting, appropriation, and payment the School District irrevocably has pledged its full faith, credit and taxing power,

which taxing power presently includes the power to levy ad valorem taxes on all taxable property within the School District, within the limits

provided by law (See “SCHOOL DISTRICT FINANCES—The Taxpayer Relief Act” herein). The Act presently provides for enforcement of

debt service payments as hereinafter described (see “DEFAULTS AND REMEDIES” herein), and the Public School Code presently provides for

the withholding and application of subsidies in the event of failure to pay debt service (see “Commonwealth Enforcement of Debt Service

Payments” herein).

Commonwealth Enforcement of Debt Service Payments

Section 633 of the Public School Code presently provides that in all cases where the board of school directors of any school district

fails to pay or to provide for the payment of any indebtedness at date of maturity or date of mandatory redemption or on any sinking fund deposit

date, or any interest due on such indebtedness on any interest payment date or on any sinking fund deposit date, in accordance with the schedule

under which the Bonds were issued, the Secretary of Education shall notify such board of school directors of its obligation and shall withhold out

of any Commonwealth of Pennsylvania (the “Commonwealth”) appropriation due such school district an amount equal to the sum of the

principal amount maturing or subject to mandatory redemption and interest owing by such school district, or sinking deposit due by such school

district, and shall pay over the amount so withheld to the bank or other person acting as sinking fund depository for such Bond issue. These

withholding provisions are not part of any contract with the holders of the Bonds, and may be amended or repealed by future legislation.

There can be no assurance, however, that any payments pursuant to this 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. Enforcement may also be limited by bankruptcy, insolvency, or other laws or equitable principles affecting the enforcement of creditors'

rights generally.

Sinking Fund

A Sinking Fund for the payment of debt service on the Bonds, designated “Sinking Fund, General Obligation Bonds, Series of 2014”

(the “Sinking Fund”), have been created in accordance with the Resolution and will be maintained by the Paying Agent, as sinking fund

depository. The School District shall deposit in the Sinking Fund a sufficient sum not later than the date when interest and/or principal is to

become due on the Bonds so that on each payment date the Sinking Fund will contain an amount which, together with any other funds available

therein, is sufficient to pay, in full, interest and principal then due on the Bonds.

The Sinking Fund shall be held by the Paying Agent, as sinking fund depository, and invested by the Paying Agent as authorized by the

Debt Act and upon direction of the School District. Such deposits and securities shall be in the name of the School District, but subject to

withdrawal or collection only by the Paying Agent, as sinking fund depository, and such deposits and securities, together with the interest

thereon, shall be a part of the Sinking Fund.

The Paying Agent, as sinking fund depository, is authorized without further order from the School District to pay from the Sinking

Fund the principal of and interest on the Bonds, as and when due and payable.

4

REDEMPTION OF BONDS

Mandatory Redemption

Bidders may elect to structure the issue to include term Bonds, which term Bonds, if selected by the bidder, will be subject to

mandatory redemption prior to maturity, in the years and amounts as shown in the Invitation to Bid (subject to adjustment as permitted therein),

upon payment of the principal amount of Bonds to be redeemed, together with accrued interest to the date fixed for redemption, or upon maturity,

as applicable. Bonds to be redeemed shall be selected by lot by the Paying Agent.

In lieu of such Mandatory Redemption, the Paying Agent, on behalf of the School District, may purchase from money in the Sinking

Fund, at a price not to exceed the principal amount plus accrued interest, or the School District may tender to the Paying Agent, all or part of the

Bonds subject to being drawn for redemption in any such year.

In the case of any prior, optional redemption in part of a Bond that is subject to future mandatory redemption, the School District shall

be entitled to designate whether the principal amount of such Bond redeemed upon optional redemption shall be credited against the principal

amount of such Bond to be paid by the School District at the stated maturity of such Bond or credited against the principal amount of such 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 or after September 1, 2020, shall be subject to redemption prior to maturity, at the option of the School

District, as a whole, on September 1, 2019, or on any date thereafter, or from time to time, in part (and if in part, in any order of maturity as

selected by the School District and within a maturity by lot), in either case upon payment of a redemption price of 100% of the principal amount

of such Bonds, together with accrued interest to the redemption date.

Notice of Redemption

Notice of any redemption shall be given by depositing a copy of the redemption notice by first class mail not less than thirty (30) days

prior to the date fixed for redemption addressed to each of the registered owners of Bonds to be redeemed, in whole or in part, at the addresses

shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein or in the mailing thereof,

shall not affect the validity of any proceeding for redemption of other Bonds called for redemption as to which proper notice has been given.

On the date designated for redemption, notice having been provided as aforesaid, and money for payment of the principal and accrued

interest being held by the Paying Agent, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and such Bonds

or portions thereof shall cease to be entitled to any benefit or security under the Resolution, and registered owners of such Bonds or portions

thereof so called for redemption shall have no rights with respect to such Bonds, except to receive payment of the principal of and accrued

interest on such Bonds to the date fixed for redemption.

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 Bond being subject to redemption. In the case of partial redemption of a Bond, payment of the redemption price shall be made only upon

surrender of such Bond in exchange for Bonds of authorized denominations in an aggregate principal amount equal to the unredeemed portion of

the principal amount thereof.

If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the

Commonwealth of Pennsylvania are authorized by law or executive order to close, then the date for payment of the principal, premium, if any,

and interest upon such redemption shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such

banking institutions are authorized to close, and payment on such date shall have the same force and effect as if made on the nominal date of

redemption.

5

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 securities (the "Securities"). The

Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as

may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for the Securities, in the

aggregate principal amount of such issue, 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 Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the

Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner'') is in tum 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 Securities 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 Securities, except in the event that use of the

book-entry system for the Securities is discontinued.

To facilitate subsequent transfers, all Securities 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 Securities

with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC

has no knowledge of the actual Beneficial Owners of the Securities: DTC's records reflect only the identity of the Direct Participants to whose

accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain

responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by

Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or

regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the

transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed

amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the

Securities 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 Securities within an issue are being redeemed, DTC's practice is to

determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

6

Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as

may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds

and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC's

records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with

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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption

proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of

DTC) is the responsibility of Issuer or 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.

A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to Tender Agent, and

shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to

Tender Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed

satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit

of tendered Securities to Tender Agent's DTC account.

DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to

Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be

printed and delivered.

Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In

that event, Security certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to

be reliable, but Issuer takes no responsibility for the accuracy thereof.

NEITHER THE ISSUER NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC

PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE

BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT

PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO

ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE

DELIVERY TO ANY BENEFICIAL OWNER BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE

WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; (5) THE

SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE

BONDS; OR (6) ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER.

The Issuer and the Paying Agent cannot give any assurances that DTC or the Participants will distribute payments of the principal

or redemption price of and interest on the Bonds paid to DTC or its nominee, as the registered owner of the Bonds, or any redemption or

other notices, to the Beneficial Owners or that they will do so on a timely basis, or that DTC will serve and act in the manner described in this

Preliminary Official Statement.

{THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK}

7

THE SCHOOL DISTRICT

Introduction

The School District, a school district of the Third Class, is in Lawrence County, in western Pennsylvania. It is located 60 minutes north

of Pittsburgh, 30 minutes southeast of Sharon and 5 minutes north of New Castle. The School District is comprised of Neshannock Township in

Lawrence County.

Administration

The School District became effective prior to 1900. 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 aspect

of operations, including education and finance, budget and financial operations. The Superintendent is selected by the School Board.

School Facilities

The School District presently operates one elementary and one Junior/Senior High School, as described on the following table.

Students in grades 10 through 12 also attend the Lawrence County Vocational Technical School.

TABLE 1

NESHANNOCK TOWNSHIP SCHOOL DISTRICT FACILITIES

Original

Addition/

Construction

Renovation

Grades

Student

2013-14

Building

Date

Date(s)

Housed

Capacity

Enrollment

Elementary:

Neshannock Memorial..........................

1955

1964/1988/2004

K-6

850

661

High Schools:

Neshannock Junior-Senior ....................

1957

1966/1984

7-12

914

599

1995/2004/2007

Source: School District officials.

Enrollment Trends

Table 2 presents recent trends in school enrollment and projections of enrollment for the next 5 years, as prepared by School District

officials. The table shows a stable trend of enrollments.

TABLE 2

NESHANNOCK TOWNSHIP SCHOOL DISTRICT ENROLLMENT TRENDS

Actual Enrollments

Projected Enrollments

School

School

Year Elementary Secondary Total

Year Elementary Secondary Total

2009-10 713 612 1,325

2014-15 660 582 1,242

2010-11 717 614 1,331

2015-16 651 562 1,213

2011-12 721 599 1,320

2016-17 632 572 1,204

2012-13 690 610 1,300

2017-18 604 584 1,188

2013-14 661 599 1,260

2018-19 601 561 1,162


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 which begins on July 1.

Financial Reporting

The financial statements of the School District are prepared in accordance with accounting principles generally accepted in the United

States of America. The School District keeps its books and prepares its financial reports according to a modified accrual basis of accounting.

Major accrual items are payroll, taxes and pension fund contributions payable, loans receivable from other funds, and revenues receivable from

other governmental units. Although the School District’s financial statements, to date, have not been prepared in accordance with GASB, the

School District’s reporting entity will apply all relevant Governmental Accounting Standards Board (GASB) pronouncements in the future. Its

financial statements are audited by an independent certified public accountant, as required by Commonwealth law.

The School District books were prepared according to a modified accrual basis of accounting for 2009 through and including 2013.

The firm of Philip Weiner and Co., LTD, Certified Public Accountants, New Castle, Pennsylvania serves as School District 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

(“PDE”). An annual operating budget is prepared by school district administrative officials on a uniform form furnished by PDE and submitted to the

board of school directors for approval prior to the beginning of each fiscal year on which commences July 1.

Procedures for Adoption of the Annual Budget. Unless the Simplified Procedures described below are utilized, under Pennsylvania Act No.

1 of the Special Session of 2006, as amended by Act 25 of 2011 (together “The Taxpayer Relief Act” or “Act 1”) all school districts of the first class A,

second class, third class and fourth class must adopt a preliminary budget (which must include estimated revenues and expenditures and proposed tax

rates) no later than 90 days prior to the date of the primary election immediately preceding the beginning of each fiscal year. This preliminary budget

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 preliminary budget prior to its adoption. The board of

school directors shall print the final budget and make it available for public inspection at least 20 days prior to its adoption and shall give public notice

of its intent to adopt the final budget at least 10 days prior to adoption, and may hold a public hearing prior to adoption. Guidance from PDE suggests

that the preliminary budget be converted to a proposed budget adopted by the board of school directors at least 30 days prior to the adoption of the final

budget as required by the School Code. The School District follows the requirements of Act 1 and the guidance of PDE pursuant to the requirements of

the School Code.

If the adopted preliminary budget includes an increase in the rate of any tax levy, the preliminary budget must be submitted to PDE no later

than 85 days prior to the date of the election immediately preceding the fiscal year. PDE is to compare the proposed percentage increase in the rate of

any tax with the school district’s Index (see “The Taxpayer Relief Act (Act 1)” herein) and within 10 days of the receipt of the information about the

preliminary budget, but not later than 75 days prior to the upcoming election, inform the school district whether the proposed percentage increase is less

than or equal to the Index. If PDE determines that a proposed tax increase will exceed the Index, the school district must reduce the proposed tax

increase, seek voter approval for the tax increase at the upcoming election, or seek approval to utilize one of the referendum exceptions authorized

under The Taxpayer Relief Act.

With respect to the utilization of any of the Taxpayer Relief Act referendum exceptions for which PDE approval is required (see “The

Taxpayer Relief Act (Act 1)” 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 and approved 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.

9

Summary and Discussion of Financial Results

A summary of the General Fund Balance sheet and changes in fund balances is presented in Tables 3 and 4. Table 5 shows revenues

and expenditures for the past five years, and the 2013-14 budget. The budget for 2013-14 proposed revenues of $16,585,744 and expenditures of

$17,024,051, which included a budgetary reserve of $120,000.

TABLE 3

NESHANNOCK TOWNSHIP SCHOOL DISTRICT

SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET

(Years ending June 30)

2009

2010

2011

2012

2013

ASSETS

Cash and Cash Equivalents ........................................ $318,131

$379,004

$444,614

$2,343,445

$1,579,489

Investments ................................................................ 2,993,240

2,639,603

2,672,375

2,355,089

3,370,809

Taxes Receivable ........................................................ 558,731

1,017,096

849,447

760,132

734,399

Interfund Receivable .................................................. 290,440

0

497,707

715

0

Intergovernmental Receivable .................................... 275,214

590,995

0

414,416

400,917

Other Receivables ...................................................... 4,238

2,783

67,755

16,750

0

TOTAL ASSETS ........................................................ $4,439,994

$4,629,481

$4,531,898

$5,890,547

$6,085,614

LIABILITIES

Due to Other Funds .................................................... $26,924

$0

$0

$0

$0

Accounts Payable ....................................................... 198,973

204,406

260,174

309,296

175,257

Accrued Salaries and Benefits .................................... 634,058

698,293

720,376

747,162

814,800

Payroll Deducts & Withholdings ................................ 198,762

129,168

165,151

464,506

543,451

Deferred Revenues ..................................................... 429,540

762,160

513,561

522,532

11,584

Other Current Liabilities ............................................ 0

0

0

0

0

TOTAL LIABILITIES .............................................. $1,488,257

$1,794,027

$1,659,262

$2,043,496

$1,545,092

FUND EQUITIES

Assigned Fund Balance .............................................. $1,000,000

$502,786

$1,276,462

$2,275,658

$2,969,129

Unassigned Fund Balance .......................................... 1,951,737

2,332,668

1,596,174

1,571,393

1,571,393

TOTAL FUND EQUITIES ....................................... $2,951,737

$2,835,454

$2,872,636

$3,847,051

$4,540,522

TOTAL LIABILITIES

AND FUND EQUITIES ........................................... $4,439,994

$4,629,481

$4,531,898

$5,890,547

$6,085,614

Source: School District Annual Financial Reports.


10

TABLE 4

NESHANNOCK TOWNSHIP SCHOOL DISTRICT GENERAL FUND

SUMMARY OF CHANGES IN FUND BALANCE*

(Years Ending June 30)

Actual

Budget

2009

2010

2011

2012

2013

2014(1)

Beginning Fund Balance ............ $3,064,372

$2,951,737

$2,835,454

$2,872,635

$3,847,053

$4,540,522

Revenues over (under) Expenditure (112,637)

(116,283)

20,753

974,416

693,471

(438,307)

Other ............................................. 2

0

16,428

2

(2)

0

Ending Fund Balance ................. $2,951,737

$2,835,454

$2,872,635

$3,847,053

$4,540,522

$4,102,215

*Totals may not add due to rounding. (1)Budget, as adopted June 27, 2013.

Source: School District Annual Financial Reports and Budget.


11

Revenue

The School District received $16,718,390 in revenue in 2012-13 and budgeted revenue of $16,585,744 in 2013-14. Local sources

increased as a share of total revenue in the past five years, from 67.8 percent in 2008-09 to 69.6 percent in 2012-13. Revenue from State sources

decreased as a share of total revenue from 32.1 percent to 30.4 percent over this period. Revenue from Federal sources remained steady at .1

percent over this period.

TABLE 5


SUMMARY OF SCHOOL DISTRICT GENERAL FUND

REVENUES*

(For years ending June 30)

REVENUE:

Actual

Budget

Local Sources: 2009

2010

2011

2012

2013

2014(1)

Real Estate Taxes .................................................... $8,350,408

$8,317,649

$8,571,800

$8,691,389

$8,928,936

$8,900,009

Total Act 511 Taxes ................................................ 1,182,735

1,208,154

1,208,014

1,513,044

1,635,065

1,296,000

Per Capita (Sec. 679) Taxes .................................... 30,984

32,130

30,487

30,093

30,058

30,500

Payments in Lieu of Current Taxes/State & Local .. 197

197

197

197

197

200

Public Utility Realty Tax ......................................... 12,548

13,725

14,407

14,129

14,240

14,100

Delinquency on Taxes Levied ................................. 481,804

533,830

598,307

588,249

524,747

529,500

Earnings from Investments ...................................... 187,340

120,874

108,797

63,206

57,151

20,000

Tuition .................................................................... 1,929

782

4,233

12,357

18,120

51,000

Receipts frm Other LEAS in PA – Education .......... 61,061

41,109

38,266

55,169

24,301

0

Contributions & Donations from Private Sources.... 14,439

14,678

34,922

31,026

11,100

0

Federal Revenue Rec'd from other Public Schools .. 107,970

138,017

136,019

101,638

152,279

0

Federal IDEA Pass Through Revenue ..................... 141,314

218,389

337,378

159,356

159,421

293,228

State Revenue Rec'd -Intermediate Source .............. 32,877

0

25,000

0

0

0

Prior Year's Expenditures ........................................ 0

8

0

5,512

8,132

0

All Other Local Revenus not Specified ................... 33

0

44,061

397

785

0

Other Sources .......................................................... 6,500

7,805

3,596

337,667

64,457

66,091

Total Local ............................................................. $10,612,139

$10,647,347

$11,155,483

$11,603,430

$11,628,987

$11,200,628

State Sources:

Basic Instructional Subsidy ..................................... $2,990,290

$2,719,130

$2,634,430

$2,990,290

$2,990,290

$3,048,265

Charter Schools ....................................................... 33,643

34,645

47,947

0

0

0

Tuition - Orphans & Children Placed in Priv Homes 9,427

13,591

0

28,106

0

25,000

Driver Education ..................................................... 2,765

2,590

1,120

2,100

1,050

3,000

Special Education .................................................... 625,929

633,498

629,714

629,714

629,714

626,565

Transportation ......................................................... 182,905

199,868

214,987

253,300

240,258

240,149

Rentals and Sinking Fund Payments ....................... 268,224

171,357

190,202

194,758

182,204

182,198

Health Services ....................................................... 25,261

25,282

24,930

24,107

24,144

25,000

State Property Tax Reduction Allocation ................ 196,021

196,016

196,026

196,015

196,006

196,037

PA Accountability Grants ....................................... 125,867

125,867

118,031

46,373

46,373

46,373

Dual Grants not listed elsewhere ............................. 7,760

6,820

1,532

1,106

0

0

Additional .............................................................. 0

0

5,000

0

0

0

Classrooms for the Future ....................................... 74,691

0

0

0

0

0

Revenue for Social Security .................................... 298,984

309,768

313,956

297,439

297,224

306,542

Revenue for Retirement .......................................... 178,322

189,724

228,240

327,956

469,230

685,987

Other Sources .......................................................... 0

0

0

0

0

0

Total State Sources ................................................. $5,020,089

$4,628,156

$4,606,114

$4,991,263

$5,076,491

$5,385,116

Federal Sources:

Total Federal Sources ............................................ $9,713

$378,213

$631,845

$48,987

$7,912

$0

Other Sources:

Total Other Sources ............................................... $0

$0

$0

$4,650

$5,000

$0

TOTAL REVENUE ................................................ $15,641,941

$15,653,716

$16,393,442

$16,648,329

$16,718,390

$16,585,744

(1)Budget, as adopted June 27, 2013.


12

TABLE 5


SUMMARY OF SCHOOL DISTRICT GENERAL FUND

EXPENDITURES*

(For years ending June 30)

Actual

Budget

EXPENDITURES: 2009

2010

2011

2012

2013

2014(1)

Instruction ................................................................ $8,608,189

$8,808,304

$8,952,168

$8,633,016

$9,195,146

$9,826,656

Pupil Personnel ........................................................ 446,494

437,860

450,918

481,336

494,403

506,963

Instructional Staff ..................................................... 726,939

486,293

506,056

388,888

413,589

469,134

Administration ......................................................... 1,042,993

1,053,907

1,077,917

1,081,506

949,766

1,015,908

Pupil Health ............................................................. 162,603

165,409

216,235

204,882

194,984

208,175

Business ................................................................... 263,343

282,343

224,966

205,434

241,041

234,855

Operation and Maintenance ...................................... 1,441,945

1,418,983

1,483,051

1,431,364

1,495,556

1,519,691

Student Transportation ............................................. 781,261

791,731

917,419

840,889

819,739

810,508

Other Support Services ............................................. 20,921

212,168

281,925

195,476

206,478

259,832

Operation of Noninstructional Services .................... 324,736

321,284

469,868

435,507

525,667

500,629

Facilities, Acquisition, Construction ....................... 0

0

0

0

0

0

Debt Service ............................................................. 0

0

0

0

0

500

Fund Transfers ......................................................... 1,934,538

1,791,717

1,763,423

1,775,452

1,487,736

1,551,200

Refund of Prior Year Receipts.................................. 616

0

28,743

163

814

0

Budgetary Reserve ................................................... 0

0

0

0

0

120,000

TOTAL EXPENDITURES...................................... $15,754,578

$15,769,999

$16,372,689

$15,673,913

$16,024,919

$17,024,051

SURPLUS (DEFICIT)

OF REVENUES OVER

EXPENDITURES ................................................... ($112,637)

($116,283)

$20,753

$974,416

$693,471

($438,307)

(1)Budget, as adopted June 27, 2013.


TAXING POWERS

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 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.

13

The Taxpayer Relief Act (Act 1)

Under Pennsylvania Act No. 1 of the Special Session of 2006, as amended by Act 25 of 2011 (“The Taxpayer Tax Relief Act” or “Act

1”), a school district may not, in fiscal year 2007-2008 or in any subsequent fiscal year, levy any tax for the support of the public schools which

was not levied in the 2006-2007 fiscal year, raise the rate of any earned income and net profits tax if already imposed under the authority of the

Local Tax Enabling Act (Act 511), or increase the rate of any tax for school purposes by more than the Index (defined below), unless in each case

either (a) such increase is approved by the voters in the school district at a public referendum or (b) one of the exceptions summarized below is

applicable and the use of such exception is approved by the Pennsylvania Department of Education (PDE):

1. to pay interest and principal on indebtedness incurred (i) prior to September 4, 2004, in the case of a school district which

had elected to become subject to the provisions of the prior Homeowner Tax Relief Act, Act 72 of 2004, or (ii) prior to June

27, 2006, in the case of a school district which had not elected to become subject to Act 72 of 2004; to pay interest and

principal on any indebtedness approved by the voters at referendum (electoral debt); and to pay interest and principal on debt

refunding or refinancing debt for which one of the above exceptions is permitted, as long as the refunding or refinancing

incurs no additional debt other than for costs and expenses related to the refunding or refinancing and the funding of

appropriate debt service reserves;

2. to pay costs incurred in providing special education programs and services to students with disabilities, under specified

circumstances; and

3. to make payments into the State Public School Employees’ Retirement System when the increase in the estimated payments

between the current year and the upcoming year is greater than the Index, as determined by PDE in accordance with the

provisions of Act 1.

Any revenue derived from an increase in the rate of any tax allowed under the exception numbered 1 above may not exceed the

anticipated dollar amount of the expenditure, and any revenue derived from an increase in the rate of any tax allowed pursuant to any other

exception enumerated above may not exceed the rate increase required, as determined by PDE. If a school district’s petition or request to

increase taxes by more than the Index pursuant to one or more of the allowable exceptions is not approved, the school district may submit the

proposed tax increase to a referendum.

The Index (to be determined and reported by PDE by September of each year for application to the following fiscal year) is the average

of the percentage increase in the statewide average weekly wage, as determined by the State Department of Labor and Industry for the preceding

calendar year, and the employment cost index for elementary and secondary schools, as reported by the federal Bureau of Labor Statistics for the

preceding 12-month period beginning July 1 and ending June 30. If and when a school district has a Market Value/Income Aid Ratio greater

than 0.40 for the prior school year, however, the Index is adjusted upward by multiplying the unadjusted Index by the sum of 0.75 and such Aid

Ratio.

The Act 1 Index applicable to the School District in the current and prior fiscal years are as follows:

Fiscal Year

Index %

2013-14 1.7

2012-13 2.0

2011-12 1.7

2010-11 2.9

2009-10 4.9

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. The referendum was NOT approved by the voters.

A board of school directors may submit, but is not required to submit, a referendum question to the voters at the municipal election in

2009 or any later year seeking approval to levy or increase the rate of an EIT or a PIT for the purpose of funding homestead and farmstead

exclusions, but the proposed rate of the EIT or PIT shall not exceed the rate that is required to provide the maximum homestead and farmstead

exclusions allowable under law.

There can be no assurance; however, that approval will be given by the board of school directors to utilize a further referendum

question to the voters in any future fiscal year or years.

14

The Bonds are Not Eligible for Act 1 Exception

The Bonds which are refunding the 2009 Bonds are not eligible for the exception to the referendum requirement for debt incurred prior

to the Act 1 effective date and the School District cannot be granted an exception to the Act 1 referendum requirement if a tax increase greater

than the Index is needed to pay principal of and interest on the Bonds. The School District believes that it has included sufficient tax millage in

its 2013/14 budget to cover the full amount of the debt service on the Bonds without exceeding the 2013/14 Index (although the actual tax

increase may exceed the 2013/14 Index as a result of the other available and approved exceptions to the Index).

Act 130 of 2008

Act 130 of 2008 of the Commonwealth amended the Local Tax Enabling Act so as to authorize school districts levying an occupation tax

to replace that occupation tax with an increased earned income tax or, if the school district has implemented a personal income tax in accordance with

the Taxpayer Relief Act, an increased personal income tax, in a revenue neutral manner. To so replace an occupation tax, the board of school

directors must first hold at least one public hearing on the matter and then place a binding referendum question on the ballot at a general or municipal

election for approval by the voters.

As of this date, the Board of the School District has not authorized the public hearing or a ballot referendum with respect to the restructured

tax under Act 130 of 2008 (Act 24 of 2001).

Limitation on Estimated Ending Unreserved Undesignated Fund Balances

Pennsylvania Act No. 2003-48 (enacted December 23, 2003) prohibits a school district from increasing real property taxes 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(1)

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 Undesignated 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.

*Applicable to the School District. (1)Effective June 30, 2011, GASB 54 fund designations renamed.

15

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 Township, and the County.

TABLE 6


TAX RATES

Real Estate

Wage and

Local

Real Estate

Per Capita(1)

Transfer

Income

Services

(mills)

($)

(%)

(%)

($)

2009-10 13.6972

15.00

0.5

0.5

10.00

2010-11 14.0940

15.00

0.5

0.5

10.00

2011-12 14.0940

15.00

0.5

0.5

10.00

2012-13 14.3758

15.00

0.5

0.5

10.00

2013-14 14.3758

15.00

0.5

0.5

10.00 (1)The School District levies $10.00 under Act 511 and $5.00 under Section 679.


TABLE 7


COMPARATIVE REAL PROPERTY TAX RATES

(Mills on Assessed Value)

2010 2011 2012 2013 2014

School District 13.6972 14.0940 14.0940 14.3758 14.3758

Neshannock Township 0.8300 0.8300 1.4800 1.0300 1.0300

Lawrence County 6.2630 6.2630 6.2630 6.2630 6.6980

Source: Pennsylvania State Tax Equalization Board.

Real Property Tax

The real property tax (excluding delinquent collections) produced $8,928,936 in 2012-13, or approximately 53.4 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 after

November 1 are assessed a 10 percent penalty. Eligible property taxpayers could opt into the installment method of payment for their school

taxes. Installment payments are based upon four (4) payments of the base tax amount. The due dates for installment payments are August 31,

September 30 and October 31.

The last county-wide assessment occurred in Lawrence County and was implemented in the 2003 tax year.

16

TABLE 8


REAL PROPERTY ASSESSMENT DATA

Market Assessed Common Level

Year Value* Value Ratio

2008-09 ......................................................................................... $794,209,726 $665,547,750 83.80%

2009-10 ......................................................................................... $789,920,165 $669,852,300 84.80%

2010-11 ......................................................................................... $700,364,854 $669,548,800 95.60%

2011-12 ......................................................................................... $685,168,285 $663,242,900 96.80%

2012-13 ......................................................................................... $697,315,630 $675,001,530 96.80%

*Market Value calculated based on County Common Level Ratio.

Source: Pennsylvania State Tax Equalization Board

TABLE 9


REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2011 2011 2012 2012

Market Assessed Market Assessed

Value Value Value Value

School District .................................................................. $587,024,734 $663,242,900 $618,893,568 $675,001,530

Neshannock Township ..................................................... $587,024,734 $663,242,900 $618,893,568 $675,001,530

Lawrence County ............................................................. 3,388,868,539 3,447,728,200 3,519,058,168 3,476,366,498


TABLE 10


ASSESSMENT BY LAND USE

2008 2009 2010 2011 2012

Residential ........................................ $496,045,300 $500,073,300 $518,883,500 $515,097,000 $522,414,920

Trailers ............................................. 0 0 0 1,369,900 $1,385,010

Lots ................................................... 14,122,900 14,457,100 17,282,900 16,998,700 17,763,760

Industrial .......................................... 4,646,100 4,646,100 20,774,500 20,297,200 19,935,300

Commercial ...................................... 131,008,550 130,988,200 109,248,400 106,073,400 110,123,300

Agriculture ....................................... 17,462,400 17,299,500 705,300 705,300 608,000

Land ................................................. 2,262,500 2,388,100 2,654,200 2,701,400 2,771,240

Total ................................................. $665,547,750 $669,852,300 $669,548,800 $663,242,900 $675,001,530


17

TABLE 11


REAL PROPERTY TAX COLLECTION DATA

Total

Current Current Current

Gross Year Year Plus Total

Assessed Adjusted Collections Collections Delinquent Collections

Year Valuation Levy(1) (July-June) as Percent Collections(2) as Percent

2008-09(3) ...................................................... $8,890,885 $8,694,864 $8,350,718 96.04% $8,795,175 101.15%

2009-10 ......................................................... 8,907,345 8,711,329 8,317,649 95.48% 8,818,242 101.23%

2010-11 ......................................................... 9,233,651 9,037,625 8,571,800 94.85% 9,148,233 101.22%

2011-12 ......................................................... 9,327,066 9,131,040 8,691,389 95.19% 9,259,397 101.41%

2012-13 ......................................................... 9,703,687 9,507,681 8,928,936 93.91% 9,446,775 99.36% (1)Flat billing plus penalties, less discounts, rebates and exonerations. (2)Includes delinquent real estate only. (3)Beginning in 2008-09 the amount of the Total Flat Billing is reduced by the amount of the Homestead/Farmstead Exemptions. The Total Flat

Billing shown excludes the amount payable from the Property Tax and Rent Rebate Program funded pursuant to Act 1 of the Commonwealth.

Source: School District Financial Reports.

The ten largest real property taxpayers, together with 2013 assessed values, are shown on Table 12. The aggregate assessed value of

these ten taxpayers totals approximately 4.6 percent of the total assessed value of the School District.

TABLE 12


TEN LARGEST REAL PROPERTY TAXPAYERS, 2013

2013

Assessed

Owner

Property

Value

Garfield Club LP

Shopping Center

$5,318,000

UDE of Mitchell Rd

Apartments

4,105,700

Liberty Mutual

Insurance

3,816,000

New Castle Country Club

Country Club

3,108,300

BFH Development Co. Supermarket 2,950,000

Community Practice Development

Commercial

2,871,500

Measel-Bruce, Inc.

Offices

2,375,000

IPEC Property Mgmt, Inc.

Commercial

2,177,300

ALC Pennsylvania Inc.

Plastics

2,160,900

Lightner Green LLC Townhouses 1,850,000

Total

$30,732,700


Other Taxes

The School District under Act 511 collected $1,635,065 in other taxes in 2012-13. Of the various taxes authorized by Act 511, the

Earned Income, Real Estate Transfer, Local Services Tax (formerly Emergency and Municipal Services Tax) and Per Capita taxes are levied by

the School District. Its limit under Act 511, equal to 12 mills on the market value of real property, was $8,367,788.

18

Real Estate Transfer. A tax of one-half percent of the value of real estate transfers yielded $131,615 in 2012-13, or less than one

percent of total revenue.

Wage and Income Tax. A Tax of 1.0% is levied on which is shared at the rate of 50% on the earned income of residents of the School

District. In 2012-13, the School District collected $1,383,460 or 8.3 percent of total revenue.

Per Capita Taxes. The School District collects $10.00 under Act 511 and $5.00 under the School Code. The collected portion of this

tax in 2012-13 yielded $60,116 or less than one percent of total revenue.

Local Services Tax (formerly Emergency and Municipal Services Tax). A tax of $10.00 is levied on each person with an occupation.

In 2012-13 the collected portion of this tax yielded $59,874 or less than one percent of total revenue.

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. School districts also receive subsidies for special education, pupil transportation; vocational education, health

service and debt service.

The School District estimates the Bonds will not be subject to reimbursement by the Commonwealth.

DEBT AND DEBT LIMITS

Debt Statement

Table 13 which follows shows the debt of the School District as of June 2, 2014, including the issuance of the Bonds.

TABLE 13


DEBT STATEMENT

(As of June 2, 2014)*

Gross

Outstanding

NONELECTORAL DEBT

General Obligation Bonds, Series of 2014 (last maturity 2032) ........................................................ $4,225,000

General Obligation Bonds, Series A of 2013 (last maturity 2032) .................................................... 1,365,000

General Obligation Bonds, Series of 2013 (last maturity 2031) ........................................................ 8,630,000



General Obligation Bonds, Series A of 2009 (last maturity 2016) ................................................... 1,425,000

General Obligation Notes, Series of 2008 (last maturity 2024) ......................................................... 290,000

TOTAL NONELECTORAL DEBT $23,840,000

LEASE RENTAL DEBT

TOTAL LEASE RENTAL DEBT $0

TOTAL PRINCIPAL OF NONELECTORAL AND LEASE RENTAL DEBT ........................ $23,840,000

*Includes the estimated Bonds offered through this Preliminary Official Statement. Does not include the 2009 Bonds being refunded herein.

19

Table 14 presents the overlapping indebtedness and debt ratios of the School District. After issuance of the Bonds, the principal of

direct debt of the School District will total $23,840,000. After adjustment for available funds and estimated State Aid, and assuming approval by

the Department of Education, local effort of direct debt will total $21,265,102.

TABLE 14


BONDED INDEBTEDNESS AND DEBT RATIOS*

(As of June 2, 2014)

Local Effort

or Net of

Available

Funds

Gross

and

Estimated

Outstanding

State Aid(1)

DIRECT DEBT

Nonelectoral Debt .............................................................................................................................

$23,840,000

$21,265,102

Lease Rental Debt .............................................................................................................................

0

0

TOTAL DIRECT DEBT ...................................................................................................................

$23,840,000

$21,265,102

OVERLAPPING DEBT

Lawrence County, General Obligation(2) ...........................................................................................

$2,465,269

$2,465,269

Municipal Debt ..................................................................................................................................

14,015,000

14,015,000

TOTAL OVERLAPPING DEBT .....................................................................................................

$16,480,269

$16,480,269

TOTAL DIRECT AND OVERLAPPING DEBT ............................................................................

$40,320,269

$37,745,370

DEBT RATIOS

Per Capita (2010) ..............................................................................................................................

$4,196.09

$3,928.13

2012-13 Assessed Value ...................................................................................................................

5.97%

5.59%

2012-13 Market Value .......................................................................................................................

5.78%

5.41%

*Includes the estimated Bonds offered through this Preliminary Official Statement. Does not include the 2009 Bonds being refunded herein. (1)Gives effect to current appropriations for payment of debt service and expected future State Reimbursement of School District sinking fund

payments based on current Aid Ratio. See “State Aid to School Districts”. (2)Pro rata 17.6 percent of $14,017,634 principal amount outstanding.

20

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 2010-11 $ 16,203,240



Total $ 49,183,347

Annual Arithmetic Average (Borrowing Base) $ 16,394,449

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 $36,887,510 $23,840,000 $13,047,510

*Includes the estimated principal amount of the Bonds described herein; does not reflects credit against gross indebtedness that may be claimed

for the portion of principal of the Bonds to be reimbursed by Commonwealth aid.

Debt Service Requirements

Table 15 presents the debt service requirements on the School District's outstanding general obligation and lease rental indebtedness

including debt service on the Bonds.

Table 16 presents data on the extent to which State Aid provides coverage for debt service and lease rental requirements.

The School District has never defaulted on the payment of debt service.

21

TABLE 15


DEBT SERVICE REQUIREMENTS

Total

Series

Other

of 2014 Total

Year Debt

Principal

Interest

Subtotal Requirements

2013-14 $1,336,124

2014-15 1,041,457

2015-16 1,049,623

2016-17 1,044,984

2017-18 1,448,322

2018-19 1,446,845

2019-20 1,445,349

2020-21 1,444,852

2021-22 1,448,061

2022-23 1,444,274

2023-24 1,446,854

2024-25 1,445,972

2025-26 1,559,853

2026-27 1,558,017

2027-28 1,553,868

2028-29 1,570,953

2029-30 1,566,308

2030-31 1,572,797

2031-32 1,567,924

2032-33 1,579,703

Total $28,572,140

*Totals may not add due to rounding.

TABLE 16


COVERAGE OF DEBT SERVICE AND LEASE RENTAL

REQUIREMENTS BY STATE AID*

2012-13 State Aid Received ..............................................................................................................................

$4,991,263

2012-13 Debt Service Requirements .................................................................................................................

$1,775,452

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

Coverage of 2012-13 Debt Service Requirements .............................................................................................

2.81 times

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

times

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

Future Financing

The School District does not anticipate issuing additional long-term debt in the near future.

22

LABOR RELATIONS

School District Employees

There are presently 147 employees of the School District, including 86 teachers, 6 administrators and 55 support personnel. The

support personnel includes secretaries, custodial, transportation, maintenance, teachers’ aides, and business supervision.

The School District's teachers are represented by the Neshannock Township Education Association (the "Association"), an affiliate of

the Pennsylvania State Education Association (PSEA) under a contract which expires June 30, 2016. The School District’s transportation and

maintenance employees are represented by the Neshannock Education Support Personnel Association/PSEA under a contract which expires June

30, 2015.

Pension Program

School districts in Pennsylvania are required to participate in a statewide pension program administered by the State Public School

Employees Retirement Board. 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.

The PSERS Board of Trustees has set the fiscal year 2013-14 employer retirement contribution rate at 16.93% of qualified payroll. Both

the School District and the Commonwealth are responsible for paying a portion of the employer's share. Employers are divided into two groups;

school entities and non-school entities. School entities are responsible for paying 100% of the employer share of contributions to PSERS. The

Commonwealth reimburses the employer for one-half the payment for employees. Recent School District pension contributions to PSERS have

been as follows:

2008-09 $354,233

2009-10 $430,000

2010-11 $471,203

2011-12 $658,467

2012-13 $938,504

2013-14 (Budgeted) $1,371,976

The School District is current in all payments. Future projections are indicating increases in the contribution rate for future years. The

PSERS complete report is available on its website on the Internet: www.psers.state.pa.us.

Source: PSERS – Financial Highlights.

Other Post-Employment Benefits

The School District provides post-employment health care benefits to qualified teachers and administrative personnel, and/or their

spouses, who retire from the District as detailed in the collective bargaining agreement between the District and the Neshannock Area Education

Association.

A qualified employee is eligible for full postemployment health benefits until she/he becomes eligible for Medicare. If spouse is

younger than employee she/he remains eligible until she/he becomes eligible for Medicare.

If employee dies before she/he becomes eligible for Medicare, surviving spouse remains eligible for 5 years or until she/he becomes

eligible for Medicare whichever comes first. Children of employees are eligible until they are 26 years of age as long as they remain in school.

If children are not in school, they are ineligible when they become 19 years old.

The District’s net OPEB obligation for the year ended June 30, 2013 was $824,385. For a full description of the School District’s

OPEB plan, see Appendix C – Note 10.

LITIGATION

At the time of settlement, the School Board will deliver a certificate and the Solicitor will deliver an opinion stating that there is no

litigation pending with respect to the Bonds, the Resolution or the right of the School District to issue Bonds.

23

DEFAULTS AND REMEDIES

In the event of failure of the School District to pay or cause to be paid the interest on or principal of the Bonds, as the same becomes

due and payable, the holders of the Bonds shall be entitled to certain remedies provided by the Act. Among the remedies, if the failure to pay

shall continue for 30 days, holders of the Bonds shall have the right to recover the amount due by bringing an action in assumpsit in the Court of

Common Pleas of the county in which the School District is located. The Act provides any judgment shall have an appropriate priority upon the

funds next coming into the treasury of the School District. The Act also provides that upon a default of at least 30 days, holders of at least 25

percent of the Bonds may appoint a trustee to represent them. The Act provides certain other remedies in the event of default, and further

qualifies the remedies hereinbefore described.

TAX MATTERS

Tax Exemption

In the opinion of Bond Counsel, assuming compliance by the School District with the covenants referred to below, the interest on and

accruals of original issue discount with respect to the Bonds (a) are excluded from gross income for federal income tax purposes and (b) are not items

of tax preference within the meaning of Section 57 of the Internal Revenue Code for 1986, as amended (the "Code"), for purposes of the federal

alternative minimum tax imposed by Section 55 of the Code on individuals and corporations; however, it should be noted with respect to corporations

(as defined for federal income tax purposes), such interest and accruals are taken into account in determining adjusted current earnings for the purposes

of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. Accruals of original issue discount with respect to

a Bond allocable to an owner of the Bond under a constant yield method of accrual (a) are not included in gross income for federal income tax

purposes, and (b) are added to such owner's tax basis in the Bond for the purpose of determining gain or loss for federal income tax purposes upon sale,

exchange, redemption or other disposition of the Bond. The opinions set forth in the preceding two sentences are subject to the condition that the Issuer

comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest on and accruals of original

issue discount with respect to the Bonds be (or continue to be) excluded from gross income for federal income tax purposes. Failure to comply with

such requirements could cause the interest on and accruals of original issue discount with respect to the Bonds to be included in gross income

retroactive to the date of issuance of the Bonds. The Issuer has covenanted to comply with all such requirements.

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 is not expected that proceeds of the Bonds will be used in a manner that would cause the Bonds to be or become "arbitrage

bonds" as described in Section 103(b)(2) and Section 148 of the Code, as contemplated by the United States Treasury regulations relating to "arbitrage

bonds."

Bond Counsel is also of the opinion that the Bonds are exempt from personal property taxes in Pennsylvania; and the interest on the Bonds is

exempt from Pennsylvania Corporate Net Income Tax and from personal income taxation by the Commonwealth of Pennsylvania, or by any of its

political subdivisions, under present statutory and case law.

Federal Alternative Minimum Tax Calculations

Under the Code, the federal alternative minimum taxable income of a corporation is based in part upon the adjusted current earnings of the

corporation, which includes interest on the Bonds held by the corporation, although such interest with respect to the Bonds may not be includable in

gross income for calculations of regular federal income tax liability.

A prospective corporate purchaser of the Bonds should consult its professional tax advisors as to the potential impact upon its income tax

liability.

Taxable Social Security and Railroad Retirement Benefits Calculation

Interest on the Bonds is included in modified adjusted gross income in determining the portion of Social Security or railroad retirement

benefits to be included in an individual taxpayer’s gross income for federal income tax purposes.

A prospective purchaser of the Bonds who is receiving Social Security or railroad retirement benefits should consult his or her professional

tax advisors as to the effect interest income derived from the Bonds may have upon his or her income tax liability.

Financial Institutions’ Cost of Carrying Tax-Exempt Bonds

Under the Code, financial institutions will be denied 100 percent of their interest expense deductions that are allocable, by formula, to tax-

exempt obligations acquired after August 7, 1986 except for obligations designated Qualified Tax-Exempt Obligations under Section 265(b)(3) of the

Code.

The Bonds described in this Preliminary Official Statement have been deemed designated or have been designated by the School

District as "Qualified Tax-Exempt Obligations" for purposes and effect contemplated by Section 265 of the Code (concerning expenses and

interest relating to tax-exempt income of certain financial institutions).

A financial institution purchasing or holding the Bonds should consult its professional tax advisors to determine the effect of the interest

expense disallowance related to tax-exempt bonds upon its federal income tax liability.

24

Property and Casualty Insurance Company Income Taxes

Under the Code, a property and casualty insurance company, in any taxable year, must reduce its deduction for "losses incurred" by a

percentage of the tax-exempt interest received by such property and casualty insurance company during the taxable year.

In addition, a portion of the dividends received by a property and casualty insurer attributable to tax-exempt income is not deductible by the

insurer for federal income tax purposes.

The Code provides generally that these provisions are effective for tax years beginning after December 31, 1986, and with respect to

obligations acquired after August 7, 1986, but a property and casualty insurer should consult its professional tax advisors for a full explanation of the

effect of these provisions upon its income tax liability.

Tax on Excess Passive Net Income of S Corporation

An S corporation may be subject to federal income taxation on passive investment income including interest on the Bonds, if the S

corporation has subchapter C earnings and profits at the close of the taxable year and the S corporation's passive investment income exceeds 25% of its

gross receipts for the taxable year.

A prospective purchaser of the Bonds which is an S corporation should consult its professional tax advisors as to the effect of interest income

from the Bonds on its tax liability.

Branch Profits Tax

Interest on the Bonds held by a foreign corporation could be subject to a branch profits tax imposed by Section 884 of the Code.

A prospective foreign corporate purchaser of the Bonds may wish to consult its professional tax advisors as to the impact of the branch

profits tax on its U.S. tax liability.

Interest Reporting Requirements

Under the Code, all taxpayers are required to report on their federal income tax returns the amount of interest received during the year that is

exempt from federal income tax. This provision applies to interest on all tax-exempt bonds including the Bonds.

Market Discount

A tax-exempt bond such as a Bond if acquired by purchase after April 30, 1993, other than at original issuance, is a "market discount bond" if

the bond is purchased at a price less than its stated principal amount (or, in the case of a bond issued with original issue discount, its issue price

increased for accruals of original issue discount), with such difference being the amount of "market discount". If a holder recognizes gain on the

disposition of a market discount bond (including by early redemption or gift), a portion of the gain (up to the amount of market discount that accrued

while the bond was held by such holder) will be treated as ordinary income and not as capital gain. For this purpose, market discount accrues on a

straight-line basis or, if elected by the holder, on a constant interest rate basis; the election, on a bond-by-bond basis, is irrevocable once made.

The holder of a market discount bond may elect to include the market discount in income as taxable interest income as the market discount

accrues. The current inclusion election, once made, applies to all market discount obligations acquired by such holder on or after the first day of the

first taxable year in which the election applies, and may not be revoked without the permission of the Internal Revenue Service. If the current inclusion

election is made, the holder’s tax basis in the market discount bond is increased by the amount of market discount accruals included in income.

Original Issue Discount

The Bonds maturing on (the “Tax-Exempt Discount Bonds’) are being offered and sold to the public at original issue

discount (“OID”) from the amounts payable at their maturity. OID is the excess of the stated redemption price of a bond at maturity (the face

amount) over the “issue price” of such bond. The issue price is the initial offering price to the public (other than to bond houses, brokers or

similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of the same maturity are sold pursuant to that

initial offering. For Federal income tax purposes, OID on each bond will accrue over the term of the bond, and for the Tax-Exempt Discount

Bonds, the amount of accretion will be based on a single rate of interest, compounded semiannually (the “yield to maturity”). The amount of OID

that accrues during each semi-annual period will do so ratably over that period on a daily basis. With respect to an initial purchaser of a Tax-

Exempt Discount Bond at its issue price, the portion of OID that accrues during the period that such purchaser owns such Bond is added to the

purchaser’s tax basis for purposes of determining gain or loss at the maturity, redemption, sale, or other disposition of that Tax-Exempt Discount

Bond and thus, in practical effect, is treated as stated interest, which is excludable from gross income for federal income tax purposes.

Holders of Tax-Exempt Discount Bonds should consult their own tax advisors as to the treatment of OID and the tax consequences of

the purchase of such Tax-Exempt Discount Bonds other than at the issue price during the initial public offering and as to the treatment of OID for

state tax purposes.

25

Tax Treatment of Premium

The Bonds that mature on are being offered and sold to the public at a price in excess of the principal amount

thereof (the “Premium Bonds”). Under the Code, the difference between the principal amount of a Premium Bond and the cost basis of such

Premium Bond to an owner thereof is “bond premium.” Under the Code, bond premium is amortized over the term of a Premium Bond (i.e., the

maturity date of a Premium Bond or its earlier call date) for federal income tax purposes. An owner of a Premium Bond is required to decrease

his or her basis in such Premium Bond by the amount of the amortizable bond premium attributable to each taxable year (or portion thereof) he or

she owns such Premium Bond. The amount of the amortizable bond premium attributable to each taxable year is determined on an actuarial

basis at a constant interest rate determined with respect to the yield on a Premium Bond compounded on each interest payment date. The

amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes.

Owners of Premium Bonds (including purchasers of Premium Bonds in the secondary market) should consult their own tax advisors

with respect to the precise determination for federal income tax purposes of the treatment of bond premium upon sale, redemption or other

disposition of Premium Bonds and with respect to the state and local consequences of owning and disposing of Premium Bonds.

CONTINUING DISCLOSURE UNDERTAKING

In accordance with the requirements of the Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission (the

“SEC”), the School District (being an “obligated person” with respect to outstanding securities, including the Bonds, within the meaning of the Rule),

will agree to provide the following to the Municipal Securities Rulemaking Board (the “MSRB”) in an electronic format as prescribed by the

MSRB, either directly or indirectly through a designated agent:

(A) Annually, not later than 270 days following the end of each fiscal year, beginning with the fiscal year ending June 30, 2014, the

following financial information and operating information for the School District:

financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting

principles for local government units

a summary of the budget for the then current fiscal year

the total assessed value and aggregate market value of all taxable real estate for the then current fiscal year

the taxes and millage rates imposed for the then current fiscal year

the real property tax collection results for the most recent fiscal year, including (1) the real estate levy imposed

(expressed both as a millage rate and an aggregate dollar amount), (2) the dollar amount of real estate taxes collected

that represented current collections (expressed both as a percentage of such fiscal year’s levy and as an aggregate dollar

amount), (3) the amount of real estate taxes collected that represented taxes levied in prior years (expressed as an

aggregate dollar amount), and (4) the total amount of real estate taxes collected (expressed both as a percentage of the

current year’s levy and as an aggregate dollar amount)

a list of the ten (10) largest real estate taxpayers and, for each, the total assessed value of real estate for the then current

fiscal year

pupil enrollment figures, including enrollment at the end of the most recent fiscal year, current enrollment and projected

enrollment for the beginning of the next fiscal year, including a breakdown between elementary and secondary

enrollment (to the extent reasonably feasible);

(B) If not submitted as part of the annual financial information, then when and if available, audited financial statements for the School

District;

(C) In a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of the occurrence of any of the

following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if

material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit

enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse

tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed

Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material

events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond and note calls, if

material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if

material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the School District; (13) the

consummation of a merger, consolidation, or acquisition involving the School District or the sale of all or substantially all of the

assets of the School District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an

action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14)

appointment of a successor or additional trustee or the change of name of a trustee, if material; and

26

(D) in a timely manner, notice of a failure of the School District to provide the required annual financial information specified above, on

or before the date specified above.

With respect to the filing of annual financial and operating information, the School District reserves the right to modify from time to time the

specific types of information provided or the format of the presentation of such information to the extent necessary or appropriate as a result of a change

in legal requirements or a change in the nature of the School District or its operations or financial reporting, but the School District will agree that any

such modification will be done in a manner consistent with the Rule.

The events listed in (C) above are those specified in the Rule, not all of which may be relevant to the Bonds. The School District may from

time to time choose to file notice of the occurrence of other events, in addition to the events listed in (C) above, but the School District does not commit

to provide notice of the occurrence of any events except those specifically listed in (C) above.

The School District acknowledges that its undertaking pursuant to the Rule described herein is intended to be for the benefit of the holders

and beneficial owners of the Bonds and shall be enforceable by the holders and beneficial owners of the Bonds, but the right of the holders and

beneficial owners of the Bonds to enforce the provisions of the School District’s continuing disclosure undertaking shall be limited to a right to obtain

specific enforcement, and any failure by the School District to comply with the provisions of the undertaking shall not be an event of default with

respect to the Bonds.

The School District’s obligations with respect to continuing disclosure described herein shall terminate upon the prior redemption or payment

in full of all of the Bonds or if and when the School District is no longer an “obligated person” with respect to the Bonds, within the meaning of the

Rule.

The MSRB has been designated by the SEC to be the central and sole repository for continuing disclosure information filed by issuers of

municipal securities since July 1, 2009. Information and notices filed by municipal issuers (and other “obligated persons” with respect to municipal

securities issues) are made available through the MSRB’s Electronic Municipal Market Access (EMMA) System, which may be accessed on the

internet at http://www.emma.msrb.org.

A copy of the Continuing Disclosure Agreement of the School District to be signed in connection with the Bonds is attached hereto as

Appendix “D”.

The School District unintentionally failed to submit the necessary information for fiscal years ending June 30, 2009, 2010 and 2011.

The School District filed the required Annual Disclosure information for the year ending June 30, 2009 on October 6, 2010, and for the year

ending June 30, 2010 and the year ending June 30, 2011 on April 13, 2012 through the MSRB’s EMMA System. The School District has

procedures in place to ensure ongoing timely filings of their annual disclosure requirement going forward. The School District completed the

annual filings for fiscal year ending June 30, 2012 and 2013 in a timely manner.

RATING

Standard & Poor’s Ratings Group which is expected to assign its municipal bond rating of “__” to this issue of Bonds, has done so with

the understanding that upon delivery of the Bonds, the municipal bond insurance policy will be issued by ____. Standard & Poor’s Ratings

Group has also assigned the School District an underlying rating of “___” to the Bonds. Such rating reflects only the view of such organization

and any desired explanation of the significance of such rating should be obtained from the rating agency furnishing the same, at the following

address: Standard & Poor’s Ratings Group, 55 Water Street, 38th Floor, New York, New York 10041. 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 have 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 a net original issue premium of $_________, plus accrued interest from the dated

date to the date of delivery of the Bonds.

LEGAL OPINION

The Bonds are offered subject to the receipt of the qualified approving legal opinion of Eckert Seamans Cherin & Mellott, LLC, Bond

Counsel, Pittsburgh, Pennsylvania. Certain other legal matters will be passed upon for the School District by Michael C. Bonner, Esquire, New

Castle, Pennsylvania, School District Solicitor.

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

27

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.


Lawrence County, Pennsylvania

By: /s/

President, Board of School Directors


APPENDIX A

Demographic and Economic Information

Relating to the Neshannock Township School District

A-1

Introduction

The School District, a school district of the Third Class, is in Lawrence County, in western Pennsylvania. It is located 60

minutes north of Pittsburgh, 30 minutes southeast of Sharon and 5 minutes north of New Castle. The School District is comprised of

Neshannock Township in Lawrence County.

Population

Table A-1 shows population trends for the School District, Lawrence County, and the Commonwealth of Pennsylvania (the

“State”). The School District’s population increased from 9,216 to 9,609 between 2000 and 2010, an increase of 393 people in that

period. Table A-2 shows 2010 age composition and average number of persons per household in Lawrence County and for the State.

TABLE A-1

POPULATION TRENDS

Compound Average

Annual

Percentage Change

2000 2010 2000-2010

School District .......................................................... 9,216 9,609 0.42%

Lawrence County ...................................................... 94,643 91,108 -0.38%

Pennsylvania ............................................................ 12,281,054 12,702,379 0.34%

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

TABLE A-2

AGE COMPOSITION

0-17 18-64 65+ Persons Per

Years Years Years Household

Lawrence County 21.2% 60.0% 18.8% 2.39

Pennsylvania ..... 22.0 62.6 15.4 2.45

Source: U.S. Bureau of the Census, 2010 Census, Summary File 1.

A-2

Employment

Overall employment data is not compiled for the School District, but such data is compiled by the New Castle Micropolitan

Statistical Area, which includes the School District and its municipalities.

TABLE A-3

NEW CASTLE MICROPOLITAN STATISTICAL AREA

(LAWRENCE COUNTY, PA)

March 2014

NONFARM JOBS

Industry Employment Net Change From:

ESTABLISHMENT DATA Mar 2014 Feb 2014 Jan 2014 Mar 2013 Feb 2014 Mar 2013

Total Nonfarm 30,400 30,000 30,000 30,100 400 300

Total Private 26,600 26,300 26,300 26,200 300 400

Goods Producing 5,300 5,300 5,500 5,400 0 -100

Mining, Logging and Construction 1,700 1,700 1,800 1,700 0 0

Manufacturing 3,600 3,600 3,700 3,700 0 -100

SERVICE-PROVIDING 25,100 24,700 24,500 24,700 400 400

Trade, Transportation, and Utilities 5,600 5,400 5,400 5,400 200 200

Trade, 4,300 4,200 4,200 4,200 100 100

Wholesale trade 1,000 1,000 1,000 1,000 0 0

Retail trade 3,300 3,200 3,200 3,200 100 100

Financial Activities 1,500 1,500 1,400 1,500 0 0

Professional and Business Services 2,600 2,500 2,500 2,600 100 0

Educatonal and Health Services 7,400 7,300 7,200 7,100 100 300

Leisure and Hospitality 2,400 2,400 2,400 2,300 0 100

Other Services 1,500 1,500 1,500 1,500 0 0

Government 3,800 3,700 3,700 3,900 100 -100

Local Government 3,200 3,100 3,100 3,200 100 0

Data benchmarked to March 2013 ***Data changes of 100 may be due to rounding***

Source: Pennsylvania State Employment Service.

Major employers located within or near the School District include:

Name

Product or Service

Jameson Memorial Hospital

Hospital

New Castle Area School District

School District

Westminster College

Higher Education

Ellwood City Hospital Hospital

County of Lawrence

Government Agency

Commonwealth of Pennsylvania

Government Agency

Liberty Mutual Insurance

Tamarkin Company/Giant Eagle

Distribution

Wal-Mart Associates, Inc.

Distribution

Don Services Inc. Provider of Home & Community Based Services

Cennial Co Inc. Accommodation and Food Services

Source: Center for Workforce Information and Analysis – 3rd Quarter 2013

A-3

Table A-4 shows recent trends in labor force, employment and unemployment for Lawrence County and the State. The

unemployment rate for Lawrence County has been higher than the statewide average.

TABLE A-4

RECENT TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT*

(Lawrence County)

Compound

Average

Annual %

2009 2010 2011 2012 2013 2014(1) Rate

Lawrence County

Civilian Labor Force (000) 43.6 43.3 43.0 43.1 43.0 42.9 0.28%

Employment (000) 39.6 39.3 39.3 39.6 39.7 40.1 -0.05%

Unemployment (000) 4.0 4.0 3.6 3.5 3.3 2.8 3.92%

Unemployment Rate 9.2 9.2 8.5 8.1 7.7 6.6

Pennsylvania

Civilian Labor Force (000) 6,414.0 6,340.00 6,487.0 6,535.0 6,460.0 6,441.0 -0.14%

Employment (000) 5,985.0 5,791.00 5,973.0 6,016.0 5,982.0 6,052.0 0.01%

Unemployment (000) 519.0 549 513.0 519.0 478.0 390.0 1.66%

Unemployment Rate 8.1 8.7 7.9 7.9 7.4 6.0

(1)As of March 2014.

Source: Pennsylvania State Employment Service.

Income

The data on Table A-5 shows trends in per capita income for the School District, Lawrence County and the State over the 2000-

2010 period. Per capita income in the School District is higher than per capita income in the County and the State. Per capita income for

the School District increased at a slightly faster rate over this period than per capita income for the County and the State.

TABLE A-5

TRENDS IN PER CAPITA INCOME*

Compound

Average Annual

Percentage Change

2000 2010 2000-2010

School District .......................................................... $25,312 $32,741 2.61%

Lawrence County ...................................................... 16,835 21,427 2.44%

Pennsylvania ............................................................. 20,880 26,678 2.48%

*Income is defined by the Bureau of the Census as the sum of wage and salary income, non-farm self-employment income, net self-

employment income, Social Security and Railroad retirement income, public assistance income, interest, dividends, pensions, etc.

before deductions for personal income taxes, Social Security, etc. School District income is the population-weighted average for

political subdivisions.

Source: Pennsylvania State Data Center and U.S. Census Bureau, 2006-2010 American Community Survey.

A-4

Commercial Activity

Table A-6 shows recent trends for retail sales in Lawrence County and the State.

TABLE A-6

TOTAL RETAIL SALES

(Millions of Dollars)

2010 2011 2012 2013 2014

Lawrence County $951,776 $1,056,232 $1,055,762 $1,195,493 $1,075,827

Pennsylvania 174,483,292 188,193,104 188,149,728 187,412,600 199,975,258

NR: Not Reported.

Source: Sales and Marketing Management Magazine

Educational Institutions

Westminister College in New Wilmington and Butler County Community College in Lawrence County offer higher education

courses within the County. Approximately 20 miles from the School District, in Butler County is Slippery Rock State University along

with a number of colleges and universities located within the Pittsburgh area which are approximately 45 miles south of the School

District. In addition, Geneva College and Beaver Valley Community College are in nearby Beaver Falls and Youngstown State

University is located in Youngstown, Ohio.

Housing

According to the 2010 Census figures, there are 40,975 housing units in the County. 2000 figures for Lawrence County

showed 39,635 housing units.

Medical Facilities

New Castle, which is 5 miles south of the School District, has Jameson Health System (with two campuses) which provides

general health care services with approximately 1,500 employees. Ellwood City Hospital, a non-profit general hospital in the Borough of

Ellwood City, also provides health care services with approximately 450 employees.

Transportation

The School District is just north of the Pennsylvania Turnpike Route number 76 leading west into Ohio and southeast into the

suburbs of Pittsburgh. State Routes 108 and 19 traverse the School District. State Route 108 leads west to New Castle. Interstate Route

79 lies 8 miles west of the School District and leads north to Erie and south to Pittsburgh. New Castle city contains a small, commercial,

general service airport. Pittsburgh Airport is approximately 45 miles from the School District. State Route 60 leads from the Pittsburgh

Airport through the School District to Sharon, Pennsylvania.

Utilities

Electric is supplied throughout the School District by First Energy Corp, Columbia Gas of Pennsylvania, Inc. and Dominion

Peoples Gas of Western Pennsylvania provide natural gas and telephone service is supplied by Verizon.


APPENDIX B

Opinion of Bond Counsel

{J1845677.1}

FORM OF OPINION OF BOND COUNSEL

The form of the approving legal opinion of Eckert Seamans Cherin & Mellott, LLC, Bond

Counsel, is set forth below. The actual opinion will be delivered on the date of delivery of

the Bonds and may vary from the form set forth to reflect circumstances both factual and

legal at the time of such delivery. Recirculation of this Official Statement shall create no

implication that Eckert Seamans Cherin & Mellott, LLC, has reviewed any of the matters set

forth in such opinion subsequent to the date thereof.

We have acted as Bond Counsel in connection with the issuance by the Neshannock Township School

District (the “Issuer”) located in the County of Lawrence, Pennsylvania, of $4,225,000 aggregate principal

amount General Obligation Bonds, Series of 2014 (the “Bonds”). We have examined the law and such

certified proceedings and other papers as we deem necessary to render this opinion.

We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Official

Statement or other offering material relating to the Bonds, except to the extent, if any, stated in the Official

Statement, and we express no opinion relating thereto (excepting only the matters set forth as our opinion in

the Official Statement).

As to questions of fact material to our opinion we have relied upon the certified proceedings and other

certifications of public officials furnished to us without undertaking to verify the same by independent

investigation.

Based upon the foregoing, we are of the opinion, under existing law, as follows:

1. The Bonds are valid and binding general obligations of the Issuer.

2. The Issuer has effectively covenanted to include the amount of the debt service on the Bonds for

each fiscal year in which such sums are due in its budget for that year, to appropriate such amounts to the

payment of debt service, and to punctually pay or cause to be paid the principal of the Bonds and the interest

thereon at the dates and places and in the manner stated in the Bonds.

3. The interest on and accruals of original issue discount with respect to the Bonds (a) are excluded

from gross income for federal income tax purposes and (b) are not items of tax preference within the

meaning of Section 57 of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of the

federal alternative minimum tax imposed by Section 55 of the Code on individuals and corporations;

however, it should be noted with respect to corporations (as defined for federal income tax purposes), such

interest and accruals are taken into account in determining adjusted current earnings for the purposes of

computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. Accruals

of original issue discount with respect to a Bond allocable to an owner of the Bond under a constant yield

method of accrual (a) are not included in gross income for federal income tax purposes, and (b) are added to

such owner’s tax basis in the Bond for the purpose of determining gain or loss for federal income tax

purposes upon sale, exchange, redemption or other disposition of the Bond. The opinions set forth in the

preceding two sentences are subject to the condition that the Issuer comply with all requirements of the

Code that must be satisfied subsequent to the issuance of the Bonds in order that interest on and accruals of

original issue discount with respect to the Bonds be (or continue to be) excluded from gross income for

federal income tax purposes. Failure to comply with such requirements could cause the interest on and

accruals of original issue discount with respect to the Bonds to be included in gross income retroactive to the

date of issuance of the Bonds. The Issuer has covenanted to comply with all such requirements. The Issuer

has designated or deemed designated the Bonds as Qualified Tax-Exempt Obligations within the meaning of

{J1845677.1}

Section 265(b)(3) of the Code. We express no opinion regarding other federal tax consequences arising with

respect to the Bonds.

4. The Bonds are exempt from personal property taxes in Pennsylvania; and the interest on the Bonds

is exempt from Pennsylvania Corporate Net Income Tax and from Pennsylvania state and local personal

income tax.

5. Under the Probate, Estates and Fiduciaries Code of Pennsylvania (the “PEF Code”), the Bonds are

authorized investments for fiduciaries and personal representatives, as defined in said PEF Code, in

Pennsylvania.

6. The offering and sale of the Bonds is exempt from registration under the Securities Act of 1933 and

Pennsylvania securities law, and neither the Issuer’s Resolution adopted June 23, 2014 authorizing the

issuance of the Bonds nor any other document relating to the issuance of the Bonds need be qualified as an

indenture under the Trust Indenture Act of 1939, as amended.

It is understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to

bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights

heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also

be subject to the exercise of judicial discretion in appropriate cases.

APPENDIX C

Audited Financial Statements


AUDIT REPORT

June 30, 2013

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TABLE OF CONTENTS

Title Page

Table of Contents

Independent Auditor's Report

Management's Discussion and Analysis

Basic Financial Statements:

Statement of Net Position

Statement of Activities

Balance Sheet-Governmental Funds

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position

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

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

Statement of Net Position-Proprietary Funds

Statement of Revenues, Expenses, and Changes in Fund Net Position-Proprietary Funds

Statement of Cash Flows-Proprietary Funds

Statement of Net Position-Fiduciary Funds

Statement of Changes in Net Position-Fiduciary Funds

Notes to Financial Statements

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

REQUIRED SUPPLEMENTARY INFORMATION

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

Schedule of Funding Progress for Retiree Health Plan

SUPPLEMENTARY INFORMATION

Budgetary Comparison-Revenues and Expenditures-General Fund

Statement of Taxes

Statement of Receipts and Disbursements-Activity Fund

1

2

3-5

6-15

16-17

18-19

20

21

22

23-24

25

26

27

28

29

30-58

59-60

62

63

65-66

67

68


ORGANIZED 1944 INCORPORATED 1991

Board of Directors NEW CASTLE, PENNSYLVANIA

Neshannock Township School District New Castle, Pennsylvania

INDEPENDENT AUDITOR'S REPORT

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Neshannock Township School District, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as· evaluating the overall presentation of the financial statement.

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

Basis for Qualified Opinion

The basic financial statements referred to above include the local food service revenue of the food service fund and the activity fund revenue that are unaudited. The financial activities of the food service fund are included in the proprietary fund types and represent one hundred percent of the revenues of that fund type. The financial activities of the activity fund are included in the fiduciary fund types, as a separate column, and represent one hundred percent of the assets of that column.

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Qualified Opinion

In our opinion, except for the effects of the matter described in the "Basis for Qualified Opinion" paragraph, 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 Neshannock Township School District, as of June 30, 2013, 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.

Changes in Accounting Principle

As discussed in Note 15 to the financial statements, in 2013 the District adopted new accounting guidance, GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter.

Other Matters

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 6 through 15 and budgetary comparison information on page 62 and the schedule of funding progress on page 63 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Neshannock Township School District's basic financial statements. The supplementary information sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information sections are the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 26, 2013 on our consideration of the Neshannock Township School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.

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The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

~~~ New Castle, Pennsylvania November 26, 2013

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Neshannock Township School District 3 834 Mitchell Road New Castle, PA 16105-1089 Telephone: 724-658-4793 Fax: 724-658-1828

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

Required Supplementary Information (RSI)

June 30, 2013

The discussion and analysis of the Neshannock Township School District's financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, 2013. The intent of this discussion and analysis is to look at the District's financial performance as a whole. Readers should also review the transmittal letter, notes to the basic financial statements and financial statements to enhance their understanding of the District's financial performance.

FINANCIAL HIGHLIGHTS

The financial statements for the end of the 20 12/2013 fiscal year found that the District realized a general fund surplus of $670,881, and an ending fund balance of $4,517,932. The actual results came in significantly better than the budgeted deficit of $342,885. One reason for this savings is attributed to the continual monitoring by the Administration and Board of the District's controllable costs. The District realized $353,460 additional Earned Income Tax Revenue over budget due to Act 32 and an additional $108,889 additional Real Estate Taxes due to new additions to the tax rolls. Expense savings were achieved for utilities of approximately $48,000 under budget, mainly due to four day work weeks in the summer and continued monitoring of rates. Salary and benefits savings were $185,200 under budget due to unexpected retirements and family leaves. Additionally, we did not spend the $130,000 budgetary reserve.

The District spent $586,397 on equipment and vehicles during the 2012/2013 school year. Included in these capital expenditures were purchases of new staff desktops, classroom laptops/cmis, smartboards, network switch upgrade, wireless upgrade at the high school and laser engraver/printers for technical education, We have continued to update our vehicles used for student transpmiation, and purchased three new buses through a capital lease for $169,677.

Debt service annual payments continue to be reduced through re-amortization. Two of the existing bond issuances were refinanced to achieve a total interest savings of $1,353,043, of which $171,959 will be in the 2013/14 school year.

The Neshannock Township School District personnel have all helped to keep the expenditures under control. The 2012113 school year ended in the successful completion of the professional staffs' contract and the successful conclusion with the Act 93 employees. All professional staff members took actual pay freezes during the 2012/13 school year. Also, supplies were ordered based on need not want and monitoring of the finances was ongoing.

Enrollment continues to decrease and as Superintendent, I ordered an enrollment projection repmi covering the next ten years. Enrollment will drive the number of employees hired and the positions that will need to be filled in the upcoming years. Over the last few years, we have not replaced some staff that retired or have terminated employment. We continue to redistribute responsibilities, including those of the Assistant Superintendent that retired in 2012 and was not replaced.

All of the curriculum in reading/language arts and math have been aligned to the Core Curriculum. Our students continue to excel in and out of the classroom. We rank in the Top 100 of the best schools in Pennsylvania and in the top 5% of the nation. Our "Commitment to Excellence" is evident in all aspects of the organization. Labor relations meetings are always positive each looking for the best resolution to any situation.

The District also completed the Comprehensive Plan that was submitted to the state for approval. Once approved, this plan will drive the direction for spending, education, and school improvement.

My biggest concern as Superintendent continues to be the future funding of our schools. We have taken many steps to monitor spending, reduce staff and increase revenue. The State has continually cut education funding which has forced many Districts across the state to make drastic cuts in staffing and programs. The Act I Index continues to be low, forcing many districts to go on the ballot to generate additional funds. The Index established through Act I will not generate enough money to cover increased District expenses, so we are forced to explore other avenues to reduce costs and generate additional revenue.

USING ANNUAL FINANCIAL REPORT

The AFR consists of an Introductory Section, a Financial Section, and a Statistical Section that provide additional information regarding the District. Within this Financial Section are the Management Discussion and Analysis (this section) and a series of financial statements and notes to those statements. These statements are organized so that the reader can understand the Neshannock Township School District as an entire operating entity. The statements then proceed to provide an increasingly detailed look at the specific financial activities.

The first two statements are government-wide financial statements - the Statement of Net Position and the Statement of Activities. These provide both long-term and short-term information about the District's overall financial status.

The remaining statements are fund financial statements that focus on individual patts of the District's operations in more detail than the government-wide statements. The governmental funds statements tell how general District services were financed in the shott term as well as what remains for future spending. Proprietary fund statements offer shott and long-term financial information about the activities that the District operates like a business. For this District this is our Food Service Fund. Fiduciary fund statements provide information about financial relationships where the District acts solely as a trustee or agent for the benefit of others, to whom the resources in question belong.

The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data.

Figure A-1 shows how the required pa1ts of the Financial Section are arranged and relate to one another:

Figure A-1 Required components of

Neshannock Township School District's Financial Report

I I I I

Management Basic Required Discussion Financial Supplementary

and Analysis Statements Information -- --I

Government- Fund Notes to Wide Financial The

Financial Statements Financial Statements Statements

Figure A-2 summarizes the major features of the District's financial statements, including the pmtion of the District they cover and the type of information they contain. The remainder of this overview section of management discussion and analysis explains the structure and contents of each of the statements.

Scope

Required financial statements

Accounting basis and measurement focus

Type of asset/liability information

Type of inflow-outflow information

Figure A-2 Major Features of Neshannock Township School District's

Government-wide and Fund Financial Statements

GovernmentWide

Statements Entire District (except fiduciary funds)

Statement of net position Statement of activities

Accrual accounting anc economic resources focu All asset and liabilities, both financial and capital and shmi-term and long- term All revenues and expenses during year, regardless of when cash is received or paid

Fund Statements Governmental Proprietary

Funds Funds

The activities of the Activities the District that are not District operates proprietary or similar to private fiduciary, such as business- Food education, Services administration and communitv services Balance Sheet Statement of net Statement of position revenues, Statement of expenditures, and revenues, expenses changes in fund and changes in net balance position

Statement of cash flows

Modified accrual Accrual accounting accounting and and economic current financial resources focus resources focus Only assets expected All assets and to be used up and liabilities, both liabilities that come financial and due during the year or capital, and shmt-soon thereafter; no term and long-term capital assets included Revenues for which All revenues and cash is received expenses during during or soon after year, regardless of the end of the year; when cash is expenditures when received or paid goods or services have been received and payment is due during the year or soon thereafter -

Fiduciary Funds

Instances in which the District is the trustee or agent to someone else's resources-Scholarship Funds

Statement of fiduciary net position Statement of changes in fiduciary net position

Accrual accounting and economic resources focus

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

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

OVERVIEW OF FINANCIAL STATEMENTS

Government-wide Statements

The government-wide statements repm1 information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the government's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid.

The two government-wide statements repm1 the Districts net position and how they have changed. Net position, the difference between the District's assets and liabilities, are one way to measure the District's financial health or position.

Over time, increases or decreases in the District's net position is an indication of whether its financial health is improving or deteriorating, respectively.

To assess the overall health of the District, you need to consider additional non-financial factors, such as changes in the District's property tax base and the performance of the students.

The government-wide financial statements of the District are divided into two categories:

• Governmental activities - All of the District's basic services are included here, such as instruction, administration and community services. Property taxes and state and federal subsidies and grants finance most of these activities.

• Business type activities - The District operates a food service operation and charges fees to staff, students and visitors to help cover the costs of the food service operation.

Fund Financial Statements

The District's fund financial statements provide detailed information about the most significant funds -not the District as a whole. Some funds are required by state law and by bond requirements.

Governmental funds -Most of the District's activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. They are repm1ed using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The government fund statements provide a detailed shm1-term view of the District's operations and the services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. The relationship (or differences) between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the financial statements.

Proprietary funds- These funds are used to account for the District activities that are similar to business operations in the private sector; or where the reporting is on determining net income, financial position, changes in financial position, and a significant portion of funding through user charges. When the District charges customers for services it provides- whether to outside customers or to other units in the district -these services are generally repm1ed in proprietary funds. The Food Service Fund is the District's proprietary fund and is the same as the business-type activities we repm1 in the government-wide statements, but provide more detail and additional information, such as cash flows.

Fiduciary funds- The District is the trustee, or fiduciary, for the Student Activity Fund. All of the District's fiduciary activities are reported in separate Statements of Fiduciary Net Assets. We exclude these activities from the District's other financial statement because the District cannot use these assets to finance its operations.

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE

The District's total net position was $(2,658,645) at June 30, 2013. The reason for the large net position deficit balance is due to the long-term outstanding bonds issued for the additions and alterations construction project at the school facilities. These non-current liabilities will be paid with future years revenues.

Current and other assets Non-current assets

Total Assets

Current and other liabilities Non-current liabilities

Total Liabilities

Net Position Invested in capital assets,

Net of related debt Restricted Unrestricted

Total Net Position

Table A-I Fiscal Year ended June 30,2013

Net Position

Governmental Activities

$ 6,094,238 18,702,33 I 24,796,569

2,306,507 25,166,546 27,473,053

(6,356,739)

3,680,255 $(2,676,484)

Business-type Activities $ 73,576

__l,_LQ2 76,681

58,842

58,842

3,105

14 734 $17,839

Total $ 6,167,814

18,705,436 24,873,250

2,365,349 25,166,546 27,531,895

(6,353,634)

3,694,989 $(2,658,645)

The results of this year's operations as a whole are reported in the Statement of Activities. All expenses are reported in the first column. Specific charges, grants, revenues and subsidies that directly relate to specific expense categories are represented to determine the final amount of the District's activities that are suppmted by other general revenues. The two largest general revenues are local taxes assessed to community taxpayers, and the Basic Education Subsidy provided by the State of Pennsylvania.

Table A-2 takes the information from that Statement, rearranges it slightly, so you can see our total changes in net position.

Table A-2 Fiscal Year ended June 30,2013

Changes in Net Position

Governmental Business-type Activities Activities

Revenues Program revenues: Charges for services $ 115,795 $ 248,502 Operating grants and contributions 2,220,907 145,245 Capital grants and contributions General revenues: Property taxes 9,507,803 Other taxes I ,686,466 Grants, subsidies, and contributions 3,186,296 Investment earnings 57,151 Gas lease (Marcellus Shale) Gain on sale of assets 5,000 Transfers 15.000 Total revenues $16,779,418 $ 408,747

Expenses Instruction $ 9,263,218 Instructional student support 931,357 Administrative & financial supp011 1,621,217 Operation & maintenance of plant I ,535,599 Pupil transportation 829,407 Student activities 923,521 Community services Interest on long-term debt 910,990 Unallocated depreciation expense 645,301 Food service 414,639 Transfers 15,000 Refund of prior year expense Total expenses $16,675,610 $414,639

Increase/(Decrease) in net position $ 103,808 $ (5,892)

Total

$ 364,297 2,366,152

9,507,803 1,686,466 3,186,296

57,151

5,000 15 000

$17,188,165

$ 9,263,218 931,357

1,621,217 1,535,599

829,407 923,521

910,990 645,301 414,639

15,000

$17,090,249

$ 97,916

The tables below present the expenses of both the Governmental Activities and the Business-type Activities of the District.

Table A-3 shows the District's largest as well as each program's net cost (total cost less revenues generated by the activities). This table also shows the net costs offset by the other unrestricted grants, subsidies and contributions to show the remaining financial needs supported by local taxes and other miscellaneous revenues.

Table A-3 Fiscal Year ended June 30, 2013


Functions/Programs Expenses Instruction Instructional student support Administrative & financial supp01t Operation & maintenance of plant Pupil transportation Student activities Interest on long-term debt Unallocated depreciation expense Transfer to food service

Total governmental Activities

Less: Unrestricted grants, subsidies

Total needs from local Taxes and other revenues

Total Cost of Services

$9,263,218 931,357

1,621,217 I ,535,599

829,407 923,521 910,990 645,301

15 000

$16,675,610

Net Cost of Services

$ 7,696,558 852,274

I ,539,170 1,483,246

553,936 824,637 728,786 645,301

15 000

$14,338,908

3,186,296

$ 11,152,612

Table A-4 reflects the activities of the Food Service program, the only Business-type activity of the District.

Functions/Programs Food service Less: Investment earnings

Total needs

Table A-4 Fiscal Year ended June 30,2013

Business-type Activities

Total Cost of Services $414,639

Net Cost of Sen'ices $20,892

$20,892

The Statement of Revenues, Expenses and Changes in Fund Net Position for this proprietary fund will further detail the actual results of operations.

THE DISTRJCT FUNDS

At June 30, 2013, the District governmental funds repmted a combined fund balance of $4,526,556, which is an increase of $672,714. The primary reason for this increase is an increase in the general fund balance of $670,881.

CAPITAL ASSET AND DEBT ADMINISTRATION

CAPITAL ASSETS

At June 30, 2013, the District had $18,702,331 invested in a broad range of capital assets, including land, buildings, furniture and equipment, and vehicles in the governmental activities. This amount represents a net decrease (including additions, deletions and depreciation) of$438,748 from last year.

Land and improvements Construction in progress Site improvements Buildings Furniture & equipment Vehicles

DEBT ADMINISTRATION

Table A-5 Governmental Activities

Capital assets - net of depreciation

2013 $ 174,644

3,353,954 13,705,090

1,006,147 462 496

2012 $ 174,644

3,562,710 14,183,483

794,413 425 829

As of July I, 2012, the District had a total outstanding bond principal of $24,635,000. During the year, the District made payments against principal of $10,130,000 and issued a new note with the principal amount totaling $9,995,000 resulting in ending outstanding debt as of June 30, 2013 of $24,500,000.

Table A-6 Outstanding Debt

2013 2012 General Obligation Notes/Bonds:

Notes Series 2008 290,000 8,505,000 Notes Series 2008-A 1,315,000 Notes Series 2009 4,150,000 4,285,000 Notes Series 2009-A 1,880,000 2,320,000 Notes Series 20 I 0 4,095,000 4,100,000 Notes Series 2012 4,090,000 4, II 0,000 Notes Series 2013 8,630,000 Notes Series 2013-A I 365 000

Other obligations include capital leases payable, compensated absences, and post employment health care benefits for employees of the District. More detailed information about our long-term liabilities is included in the notes to the financial statements.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

The District is concerned about its future financial health due to several factors. The state of the economy has shown current and future insecurities, including the collection of real estate and other taxes. The level of state funding for future years is unpredictable. Long Term Pension costs are also questionable, with employer rates increasing from 12.36% in 2012113 to 16.93% in 2013/14 to expected rates over the next ten years of up to 30.93%. Unemployment costs are also expected to rise due to the number of layoffs resulting from state budget cuts. The District is also concerned about the rising cost of health insurance, and is exploring options to contain costs.

The revenue budget for the 2013/2014 fiscal year is $387,645 more than the original budget for 2012/2013. This represents a 2.4% increase in budgeted revenues. The expenditure budget for the 2013/2014 school year is $483,067 more than the original budget for 2012/2013 or an increase of 2.9%.

The comparison of revenue and expenditure categories is as follows:

Table A-7 Budgeted Revenues

2013/2014 Local 67.5% State 32.5% Federal 0.0%

Budgeted Expenditures

Instruction Support Services Non-Instructions/Community Fund Transfers/Debt/Budgetary Reserve

2013/2014 57.7% 29.5%

3:0% 9.8%

CONTACTING THE DISTRICT FINANCIAL MANAGEMENT

2012/2013 68.5% 31.5%

0.0%

2012/2013 57.5% 29.7%

2.9% 9.9%

Our financial report is designed to provide our citizens, taxpayers, parents, students, investors and creditors with a general overview of the District's finances and to show the Board's accountability for the money it received. If you have any questions about this report or wish to request additional financial information, please contact Melissa A. Morosky, Business Manager at Neshannock Township School District, 3834 Mitchell Road, New Castle, PA 16105-1089, (724) 658-4793.

1:M~r~:ar4 ~ Superintendent of Schools

ASSETS Current Assets:

Cash and Cash Equivalents Investments Taxes Receivable Due From Other Governments Other Receivables Inventory

Total Current Assets

Noncurrent Assets: Land Site Improvements (Net of

Accumulated Depreciation) Building and Building Improve

ments (Net of Accumulated Depreciation)

Furniture and Equipment (Net of Accumulated Depreciation)

Vehicles (Net of Accumulated Depreciation)

Total Noncurrent Assets

Total Assets

GOVERNMENTAL ACTIVITIES

$ 1,588,113 3,370,809

734,399 400,917

-0--0-

6,094,238

174,644

3,353,954

13,705,090

1,006,147

462 496

18,702,331

$ 24,796,569

NESHANNOCK TOWNSHIP Statement of

June

BUSINESS-TYPE ACTIVITIES TOTAL

$ 47,470 $ 1,635,583 -0- 3,370,809 -0- 734,399

18,874 419,791 1,933 1,933 5,299 5 299

73,576 6,167,814

-0- 174,644

-0- 3,353,954

-0- 13,705,090

3,105 1,009,252

-0- 462,496

3,105 18,705,436

$ 76,681 $ 24,873,250

The accompanying notes and auditor's report should be read with this financial statement.

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SCHOOL DISTRICT Net Position 30 2013

LIABILITIES Current Liabilities:

Accounts Payable Current Portion of Long-Term Debt:

Bonds Payable Lease Purchase Obligations Compensated Absences

Accrued Interest Payable Accrued Salaries and Benefits Other Current Liabilities

Total Current Liabilities

Noncurrent Liabilities: Bonds Payable (Net of Current Portion) Lease Purchase Obligations(Net of Current

Portion) Long Term Portion of Compensated Absences Net OPEB Obligation

Total Noncurrent Liabilities

Total Liabilities

NET POSITION Invested in Capital Assets Net of Related

Debt Unrestricted

Total Net Position

Total Liabilities and Net Position

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GOVERNMENTAL ACTIVITIES

$ 204,807

866,970 225,342 13,595

176,369 814,800

4,624

2.306,507

23,528,877

261,512 551,772 824,385

25.166,546

27.473,053

6,356,739) 3.680,255

2.676,484)

$ 24.796,569

BUSINESS-TYPE ACTIVITIES

$ 52,028

-0--0--0--0--o-

6,814

58,842

-0-

-0--0--0-

-0-

58,842

3,105 14,734

17,839

$ 76,681

$

TOTAL

256,835

866,970 225,342 13,595

176,369 814,800 11,438

2,365,349

23,528,877

261,512 551,772 824,385

25,166,546

27,531,895

6,353,634) 3,694,989

2,658,645)

$ 24,873,250

FUNCTIONS/PROGRAMS EXPENSES Governmental Activities:

NESHANNOCK TOWNSHIP Statement of

For The Year Ended

PROGRAM REVENUES

CHARGES FOR OPERATING GRANTS AND

CAPITAL GRANTS AND

SERVICES CONTRIBUTIONS CONTRIBUTIONS

Depreciation-Unallocated $ 645,301 9,263,218

$ -0-50,553

$ -0- $ -o-o-Instruction

Instructional Student Support

Administrative and Financial Support Services

Operation and Maintenance of Plant Services

Pupil Transportation Student Activities Interest on Long-Term Debt, Unallocated

Total Governmental Activity

Business-Type Activities Food Service

931,357

1,621,217

1,535,599 829,407 923' 521

910,990

16,660,610

414,639

Total Primary Government $ 17,075,249

-0-

4,010

1,000 -0-

60,232

-0-

115,795

248,502

$ 364,297

1,516,107

79,083

78,037

51,353 275,471

38,652

182,204

2,220,907

145,245

$ 2,366,152

-0-

-0-

-0--0--0-

-0-

General Revenues, Special and Extraordinary Items and Transfers:

Taxes: Property Taxes Taxes Levied for Specific Purposes

Grants, Subsidies, and Contributions not Restricted Investment Earnings Gain on Sale of Fixed Assets Transfers

Total General Revenues, Special and Extraordinary Items and Transfers

Change in Net Position

Net Position-Beginning (Restated-See Note 15)

Net Position-Ending


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SCHOOL DISTRICT Activities June 30, 2013

NET (EXPENSE) REVENUE AND CHANGES IN NET POSITION

GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL

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" .... 14,427,716 15,000 14,442,716 .... >-z 103,808 ( 5,892) 97' 916 <( .. ::E 0 2,780,292) 23,731 2 '756 ,561) u

" z $ ( 2 '676' 484) $ 17,839 $ ( 2,658,645) <(

0: w z w ;: .. :::; I ..

-19-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Balance Sheet

Governmental Funds June 30 2013

GENERAL

ASSETS Cash and Cash Equivalents $ 1,579,489 Investments 3,370,809 Taxes Receivable (Net) 734,399 Due from Other Governments 400,917

Total Assets $ 6,085,614

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable $ 204,807 Accrued Salaries and Benefits 814,800 Advance Payment 4 624

Total Liabilities 1, 024,231

Deferred Inflows of Resources Unavailable Revenue-Property Taxes 543,451

Fund Balances Restricted -0-Assigned 2,946,539 Unassigned 1,571,396

Total Fund Balances 4,517,932

Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 6,085,614

CAPITAL PROJECT

$ 7 -0--0--0-

$ 7

$ -0--0--0-

-0-

-0-

7 -0--0-

~

$ 7

DEBT SERVICE

$ 8,617 -0--0-

---=:.Q.::.

$ 8,617

$ -0--0-

---=:.Q.::.

---=:.Q.::.

---=:.Q.::.

8,617 -0-

---=:.Q.::.

8,617

$ 8,617

TOTAL GOVERNMENTAL

FUNDS

$ 1,588,113 3,370,809

734 '399 400,917

$ 6,094,238

$ 204,807 814,800

4,624

1,024,231

543,451

8,624 2,946,539 L57L393

4,526,556

$ 6,094,238


-20-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Reconciliation of the Governmental Funds Balance Sheet to the

Statement of Net Position June 30 2013

Total Fund Balance-Governmental Funds

Amounts reported for governmental activities in the Statement of Net Position are different because:

Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. The cost of assets is $33,583,369 and the accumulated depreciation is $14,881,038.

Property taxes receivable will be collected in future years, but are not available soon enough to pay for the current period's expenditures, and, therefore, are deferred in the funds.

Liabilities associated with the long-term debt, including bonds payable, are not recorded as liabilities in the Governmental Funds Balance Sheet. These liabilities at year end consist of:

Bond Payable Unamortized Bond Discounts and

Premiums Capital Leases Payable Accrued Interest Payable Compensated Absences (sick pay) Net OPEB Obligation

Total Net Position-Governmental Activities

$ 24,500,000

104,153) 486,854 176,369 565,367 824,385

$ 4,526,556

18,702,331

543,451

(26,448,822)

$( 2,676,484)


-21-

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds For the Year Ended June 30 2013

:!: z ~ J >Ul z z "' 11.

REVENUES

Local Sources State Sources Federal Sources

Total Revenues

"' EXPENDITURES J 1-~ Instruction u Support Services ~ Non Instructional Services "' z Capital Outlay

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Debt Service Refund of Prior Years Receipts

Total Expenditures

Excess (Deficiency)of Revenues over Expenditures

OTHER FINANCING SOURCES(USES)

Debt Service-Refunding Bond Issue Refunding Bonds Issued (Face) Bond Discount Interfund Transfers Transfers Out Sale of Fixed Assets

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances July 1, 2012

Fund Balances June 30, 2013

GENERAL FUND

$ 11' 628' 987 5,076,491

7 912

16,713,390

9,202,771 4,829,476

526,712 -0--0-814

14,559,773

2,153,617

-0--0--0--0-

1,487 '736) 5 000

1,482 '736)

670,881

3,847,051

$ 4,517,932

CAPITAL PROJECT

FUND

$ -0- $ -0--0-

-0--o--0--0--0--o-

-0--0--0--0--0--0-

-0-

_7

$ 7 $

DEBT SERVICE

FUND

TOTAL GOVERNMENTAL

FUNDS

-0- $ 11,628,987 -0- 5,076,491

__ _:-:..;Oc::- 7 912

-------~0~- 16,713,390

-o-109' 718

-0--0-

1,472,736 -0-

1. 582 '454

(1.582,454)

(9,737,277) 9,995,000

( 146,172) 1,472,736

-0--0-

1.584,287

1,833

9,202,771 4,939,194

526' 712 -0-

1,472,736 814

16,142,227

571,163

9' 737 '277) 9,995,000

146,172) 1,472,736 1,487 ,736)

5 000

101,551

672 '714

6 784 3,853,842

8 617 $ 4,526,556


-22-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances

to the Statement of Activities June 30 2013

Total net change in fund balances-governmental funds

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

Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets are allocated over their estimated useful lives as depreciation expense, This is the amount by which depreciation expense of $1,025,145 exceeds capital outlays of $45,697 in the period.

Bond and note issuance proceeds are a revenue in the governmental funds, but the issuance of bonds and notes increases the long-term liabilities in the statement of net assets.

Repayment of bond principal governmental funds, but the liabilities in the statement of

is an expenditure in the repayment reduces long-term net position.

Payment of the principal portion of capital leases is an expenditure in the governmental funds, but the payment reduces the current liability portion of lease purchase obligations in the statement of net position.

Because some property taxes will not be collected for sometime after the District's fiscal year ends, they are not considered "available" revenues and are deferred in the governmental funds. Deferred tax revenues increased by this amount this year.

In the statement of activities, compensated absences (sick pay) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This year, sick leave used exceeded the amounts earned by this amount.

In the statement of activities, postemployment benefits are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This year, amounts earned exceeded the amounts used by this amount.

Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The additional interest reported in the statement of activities is the result of accrued interest on bonds and leases decreasing by $105,512.

$ 672,714

979' 448)

( 9,995,000)

10,130,000

231,631

20,919

9,316

1,584,36)

105,512


-23-

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances

to the Statement of Activities June 30 2013

Total net change in fund balances-governmental funds (Continued)

In the statement of uncollectible accounts taxes. The uncollectible during the year.

activities, an allowance for is established for real estate amount decreased by this amount

In the statement of activities, bond discounts and bond premiums are amortized over the term of the bonds. In governmental funds, these amounts are expensed as they are incurred. This is the amount by which amounts incurred $146,172 exceeds amortization of $120,495.

Change in Net Position of governmental activities

40,923

25,677

$ 103,808


-24-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Net Position

Proprietary Funds

ASSETS Current Assets:

Cash and Cash Equivalents Due from Other Governments Other Receivables Inventory-Donated Commodities

Total Current Assets

Noncurrent Assets: Furniture and Equipment (Net)

Total Assets

LIABILITIES Current Liabilities:

Accounts Payable-Trade Advance Deposits (Sales)

Total Current Liabilities

NET POSITION Invested in Capital Assets Unrestricted

Total Net Position

June 30 2013


FOOD SERVICE

$ 47,470 18,874

1,933 5,299

73,576

3,105

$ 76,681

$ 52,028 6,814

58,842

3,105 14,734

17,839

$ 76,681


-25-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Revenues, Expenses, and Changes in Fund Net Position

Proprietary Funds

OPERATING REVENUES Food Service Revenue

OPERATING EXPENSES Salaries Employee Benefits

For The Year Ended June 30 2013

Purchased Professional and Technical Services Purchased Property Services Other Purchased Services Supplies Depreciation

Total Operating Expenses

Operating (Loss)

NONOPERATING REVENUES (EXPENSES) State Sources Federal Sources

Total Nonoperating Revenues

Income (Loss) Before Contributions and Transfers

CONTRIBUTIONS AND TRANSFERS Transfers In

Change in Net Position

Net Position-July 1, 2012

Net Position-June 30 1 2013

$

$

FOOD SERVICE

248,502

157,994 22,457

3,267 12,706 48,356

167,307 2,552

414,639

(166,137)

9,603 135,642

145,245

( 20,892)

15,000

5,892)

23,731

17,839


-26-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Cash Flows

Proprietary Funds For the Year Ended June 30, 2013

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

Net Cash (Used) for Operating Activities

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Sources Federal Sources Operating Transfers Excess Deposit from General Fund

Net Cash Provided By Non-Capital Financing Activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS-July 1, 2012

CASH AND CASH EQUIVALENTS-June 30, 2013

ADJUSTMENTS TO RECONCILE OPERATING LOSS TO NET CASH USED FOR OPERATING ACTIVITIES

Operating Loss Adjustments to Reconcile Operating Loss to Net Cash

Used by Operating Activities: Noncash Operating Expenses

Depreciation Value of Donated Commodities

Changes in Assets and Liabilities Decrease in Accounts Receivable Decrease in Inventories Increase in Accounts Payable Decrease in Advanced Deposits

Net Cash (Used) by Operating Activities

FOOD SERVICE

$ 250,116 (158' 696) (189' 632)

( 98,212)

10' 092 114,985

15,000 715)

139,362

41,150

6,320

$ 47 470

$ (166' 137)

2,552 18,221

1 ,846 3,613

42,362 669)

$( 98,212)


-27-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Net Position

Fiduciary Funds

ASSETS

Cash and Cash Equivalents Due from Other Funds

Total Assets

LIABILITIES AND NET POSITION

Liabilities Due to Student Groups

Net Position Reserved for Scholarships

June 30 2013


SCHOLARSHIP TRUST

FUND

$ 4,500 ~

ACTIVITY FUND

$ 42,403 -0-

$ 42,403

$ 42,403

-0-

$ 42,403

TOTAL FIDUCIARY

FUNDS

$ 46,903 -0-

$ 46,903

$ 42,403

4,500

$ 46,903


-28-

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ADDITIONS:

Donations

DEDUCTIONS:

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Changes in Net Position

Fiduciary Funds June 30 2013

SCHOLARSHIP TRUST

FUND

$ -0-

2,500

Changes in Net Position 2 '500)

NET POSITION-July 1, 2012 7,000

NET POSITION-June 30, 2013 $ 4,500

-29-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Notes to Financial Statements

June 30 2013

NOTE 1 - REPORTING ENTITY

Governmental Accounting Standards board Statement No. 14 "The Financial Reporting Entity", established the standards for defining and reporting on the financial. reporting entity. Neshannock Township School District's School Board is the basic level of government which has oversight responsibilities and control over all activities related to the public school education of Neshannock Township School District. The School District is a primary government that is a special purpose government that has a separately elected governing body ("Board") . It is legally separate, and it is fiscally independent of other state and local governments.

Component units are legally separate organizations for which the School District is financially accountable. The School District is financially accountable for an organization if the School District appoints a voting majority of the organization's governing board (1) the School District is able to significantly influence the programs or services performed or provided by the organization; (2) the School District is legally entitled to or can otherwise access the organization's resources; the School District is legally obligated or has otherwise assumed the responsibility to finance the deficits of, or provide financial support to, the organization; or the School District is obligated for the debt of the organization. Component units may also include organizations that are fiscally dependent on the School District in that the School District approves the budget, the issuance of debt or the levying of taxes. The School District has no component units.

The Neshannock Township School District, in conjunction with seven other Lawrence County School Districts are involved in a joint venture to fund the operating budget of the Lawrence County Career and Technical Center. The technical school is designed to teach students trade related professions. Each district's share of tuition is based on the percentage of the District's enrollment to the total enrollment at the Lawrence County Career and Technical Center. In addition to the operating subsidy, the District makes a debt service related payment to the Lawrence County Career and Technical Center based on the District's property market values as a percentage of the property market values of all participating districts. A representative from each district's school board sits on the board of the technical school. Financial statements for the joint venture may be obtained at the following address: 750 Phelps Way, New Castle, PA 16101.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Neshannock Township School District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to local governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial principles. The most significant of the School District's accounting policies are described below.

A. Basis of Presentation

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 financial statements which provide a more detailed level of financial information.

Government-Wide Financial Statements-The statement of net position and the statement of activities display information about the School District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statements distinguish between those activities of the School District that are governmental and those that are considered business-type activities.

-30-

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June 30 2013

NOTE 2 - Summary of Significant Accounting Policies (Continued)

A. Basis of Presentation (Continued)

The statement of net position presents the financial condition of the governmental and business-type activities of the School District at 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 for the business-type activities of the School District. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, grants and contributions that are restricted to meeting the operational or capital requirements of a particular program and interest earned on grants that is required to be used to support 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 business segment or governmental function is self-financing or draws from the general revenues of the School District.

Fund Financial Statements-During the year, the School District segregates transactions related to certain School District functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the School District at this more detailed level. The focus of governmental and enterprise fund financial statements is on major funds. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. The capital projects fund does not meet the major fund percentage criteria as per audits of state and local governments {GASB 34 Edition), and is not required to be reported as major fund. The School District voluntarily presents this fund separately as a major fund because of the public's interest in this activity of the District. The fiduciary fund is reported by type.

B. Fund Accounting

The School District uses funds to maintain its financial records during the year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. There are three categories of funds: governmental, proprietary and fiduciary .

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

General Fund-The general fund is the operating fund of the School District and is used to account for all financial resources except those required to be accounted for in another fund.

Capital Projects Fund-Used to account for financial resources related to general fixed assets acquisition, construction and improvements.

Debt Service Fund-Used to account for and accumulate resources for the payment of general long-term debt principal and interest.

-31-

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NESHANNOCK TOWNSHIP SCHOOL DISTRICT Notes to Financial Statement

June 30 2013

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Fund Accounting (Continued)

Proprietary Funds-Proprietary funds focus on the determination of changes in net position, financial position and cash flows. The funds included in this category are:

Enterprise Funds-Enterprise funds may be used to account for any activity for which a fee is charged to external users for goods or services. The School District's major enterprise fund is:

Food Service Fund-This fund accounts for the financial transactions related to the food service operations of the School District .

Fiduciary Funds-These are the funds that account for the assets held by the School District as a trustee or agent for individuals, private organizations and/or governmental units and are therefore not available to support the District's own programs. The funds included in this category are:

Trust Funds-Used to account for assets held by the School District in a trustee capacity.

Activitv and Agency Funds-These funds are custodial in nature (assets equal liabilities) and does not involve measurement of results of operations.

C. Measurement Focus

Government-Wide Financial Statements-The prepared using the economic resources liabilities associated with the operation statement of Net position.

government-wide financial statements measurement focus. All assets and of the School District are included on

are all the

Fund Financial Statements-All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances reports on the sources (i.e. , revenues and other financing sources) and uses (i.e. , expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds.

Like the government-wide statements, all proprietary funds are accounted for on a flow of economic resources measurement focus. All assets and all liabilities associated with the operation of these funds are included on the statement of net position. The statement of changes in fund net position presents increases (i.e., revenues) and decreases (i.e. expenses) in net total position. The statement of cash flows provides information about how the School District finances and meets the cash flow needs of its propriety activities .

Private-sector standards of accounting issued prior to December 1, 1989 are generally followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with the standards of the Governmental Accounting Standards Board. The School District has elected not to follow privatesector standards issued after November 30, 1989 for its business-type activities.

When both restricted and unrestricted resources are available for use, it is the School District's policy to use restricted resources first, then unrestricted resources as they are needed.

-32-

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June 30 2013


D. Basis of Accounting

Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds uses the modified accrual basis of accounting. Proprietary and fiduciary funds also use the accrual basis of accounting. Differences in the accrual and the modified accrual basis of accounting arise in the recognition of revenue, the recording of deferred inflows of resources, and in the presentation of expenses versus expenditures.

Revenues-Exchancre and Nonexchange Transactions-Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the School District, available means expected to be received within 60 days of fiscal year-end.

Nonexchange transactions, in which the School District receives value without directly giving equal value in return, include income taxes, property taxes, grants, entitlements and donations. Revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the School District must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the School District on a reimbursement basis. On a modified accrual basis, revenue from nonexchange transactions must also be available before it can be recognized.

Under the modified accrual basis, the following revenue sources are considered to be both measurable and available at year-end: property taxes available as an advance, interest, tuition, grants, fees and rentals.

Expenses/Expenditures-The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and amortization, are not recognized in governmental funds.

E. Budgets and Budgetary Accounting

An operating budget is adopted each year for the General Fund on a modified accrual basis of accounting. The General Fund is the only fund for which a budget is legally required.

The Pennsylvania School Code dictates specific procedures relative to adoption of the 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.

-33-

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June 30 2013


E. Budgets and Budgetary Accounting (Continued)

The School District is required to publish notice by advertisement, at least once in a newspaper of local circulation in the municipality in which it is located, and within thirty days of final action, that the proposed budget has been prepared and is available for public inspection at the administrative office of the School District. Final action shall not be taken on any proposed budget, until after ten days of public notice. The proposed budget shall be printed, or otherwise made available for public inspection to all persons who may interest themselves, at least twenty days prior to the date set for the adoption of the budget.

The Board of Directors may make transfers of funds appropriated to any particular item of expenditure by legislative action. An affirmative vote of two-thirds of all members of the Board is required.

Fund balances in Budgetary Funds may be appropriated based on resolutions passed by the Board of Education, which authorizes the School District to make expenditures. Appropriations lapse at the end of the fiscal period. In order to preserve a portion of an appropriation for which an expenditure has been committed by a purchase order, contract or other form of commitment, an encumbrance is recorded. Encumbrances outstanding at year end are reported as reservations of fund balances.

Included in the General Fund budget are program budgets as prescribed by the state and Federal agencies funding the program. These budgets are approved on a program by program basis by the state or Federal funding agency.

A budget is not adopted for the debt service fund because it is not legally required. The expenditures in the debt service fund are incorporated into the adopted general fund budget as a budgetary transfer.

An Enterprise Fund budget is not adopted; however, a formal budget is prepared and approved by management and expenditures are controlled on the basis of this budget.

F. Cash and Cash Equivalents

For purpose of the statement of cash flows, the proprietary fund type considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

G. Inventories

Inventories consist of the following items:

Food Service Fund Donated Commodities

Enterprise Fund (Food Service Fund) food commodities government are valued at an estimated market value.

H. Debt Premiums. Discounts. and Issuance Costs

donated by the Federal

On the government-wide statement of net position and the proprietary fund type statement of net position, debt premiums and discounts are netted against debt payable and debt issuance costs are recognized as an outflow of resources in the period incurred. On the government-wide and proprietary fund type statement of activities, unamortized debt premiums and discounts are deferred and amortized over the life of the debt using the straight-line method. For the fiscal year ended June 30, 2013, bond discount and premiums amortized were $125,554 and $5,059, respectively.

-34-

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June 30 2013


H. Bond Discounts. Premiums. and Issuance Costs (Continued)

At the government fund reporting level, debt premiums and discounts are reported as other financing sources and uses, separately from the face amount of the debt issued. Debt issuance costs are reported as debt service expenditures.

I. Capital Assets

General capital assets are those assets not specifically related to activities reported in the proprietary funds. These assets generally result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the government-wide statement of net position but are not reported in the fund financial statements. Capital assets utilized by the proprietary funds are reported both in the business-type activities column of the government-wide statement of net position and in the respective funds.

All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their fair market values as of the date received. The School District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not.

The District maintains a capitalization threshold as follows:

Land Improvements Building Building Improvements Machinery and Equipment Vehicle Portable Classroom Grouped Depreciable Capital Assets Leasehold Improvements

$ 25,000 $ 25,000 $ 25,000 $ 5,000 $ 10,000 $ 10,000 $ 25,000 $ 10,000

All reported capital assets except land, land improvements and construction in progress are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straightline method over the following useful lives:

Description Site Improvements Buildings and Improvements

·Furniture and Equipment Vehicles

J. Deferred Infows of Resources


Estimated Lives 20 years

20-50 years 5-20 years 5- 8 years

Business Type Activities

Estimated Lives N/A N/A

12 years N/A

In addition to liabilities, the statement of financial position 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 and so will not be recognized as an inflow of resources (revenue) until that time. The District has only one type of item, delinquent property taxes receivable from Lawrence County Tax Claim Bureau, which arise only under a modified accrual basis of accounting, that qualifies for reporting in this category.

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June 30 2013


J. Deferred Infows of Resources (Continued)

Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.

The amount of $721,106 which represents the delinquent real estate taxes at June 30, 2013 has been collected in the amount of $177,655 in the subsequent 60-day period following the balance sheet date. The amount of $543,451 represents the balance of delinquent real estate taxes, classified as a deferred inflows of resources in the governmental funds .

K. Compensated Absences

The School District reports compensated absences in accordance with the provisions of GASB No. 16, "Accounting for Compensated Absences". Sick leave benefits are accrued as a liability using the termination method. An accrual for earned sick leave is made to the extent that it is probable that benefits will result in termination payments. The liability is an estimate based on the School District's past experience of making termination payments.

The entire compensated absence liability is reported on the government-wide financial statements.

In the governmental fund financial statements, none of the liability is reported as it is not expected to be paid using expendable available resources.

L. Accrued Liabilities and Long-Term Obligations

All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements, and all payables, accrued liabilities and longterm obligations payable from proprietary funds are reported on the proprietary fund financial statements.

In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources, are reported as obligations of the funds. However, claims and judgments, compensated absences, special termination benefits and contractually required pension contributions that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they are due for payment during the current year. Bonds are recognized as a liability on the fund financial statements when due.

M. Net Position

Net position represent the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the School District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments.

The School District applies restricted resources first when an expense is incurred for purposes for which both restricted and unrestricted net position are available.

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June 30 2013


N. Fund Balances

Fund balances of the governmental funds are classified as follows:

Non-spendable-amounts that cannot be spent either because they are in non-spendable form or because they are legally or contractually required to be maintained-intact.

Restricted-amounts that can be spent only for specific purposes because of constitutional provisions, charter requirements or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributions, or the laws or regulations of other governments.

Committed-amounts that can be used only for specific purposes determined by a formal action of the Board of Directors. The Board of Directors is the highest level of decision making authority for the School District. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by the Board of Directors.

Assigned-amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used or specific purposes. Under the School Districts adopted policy, only the Board of Directors may assign amounts for specific purposes.

Unassigned-all other spendable amounts.

As of June 30, 2013, fund balances are composed of the following:

CAPITAL DEBT TOTAL GENERAL PROJECTS SERVICE GOVERNMENTAL

FUND FUND FUND FUNDS

Restricted: Capital Projects $ -0- $ 7 $ -0- $ 7 Debt Service -0- -0- 8,617 8,617

Assigned: Subsequent Years Budget 2,946,539 -0- -0- 2,946,539

Unassigned Funds 1. 571.393 -0- ~ 1. 571.393

Total Fund Balances $ 4,517,932 $ 7 $ 8,617 $ 4,526,556

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the School District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the School District considers the amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the Board of Directors has provided otherwise in its commitment or assignment actions .

I 0. Operating Revenues and Expenses .. Operating revenues are those revenues that are generated directly from the primary activity of the proprietary funds. For the School District, these revenues are sales for food service and related activities. Operating expenses are necessary costs incurred to provide the good or service that is the primary activity of the fund.

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June 30 2013


P. Interfund Activity

Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Advances between funds are accounted for in the appropriate due from other funds and due to other funds accounts. These advances (reported in "due from" asset accounts) are considered "available spendable resources 11

• These amounts are eliminated in the statement of net position, except for amounts due between governmental and business-type activities which, when present, are presented as internal balances. In the government-wide statement of activities, all internal activity is eliminated except for those amounts occurring between the governmental-types and the business-type activities .

Q. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

R. Cost Allocation Plan

The School District uses allocations with supporting documentation on file which identifies, accumulates, and distributes indirect costs to cost centers. The allocation methodology logically apportions indirect costs among services receiving a benefit. It results in a fair and equitable distribution of costs in direct relation to actual benefits accruing to the services to which costs are charged.

S. Advertising Policy

It is the policy of the District to expense all advertising costs in the year in which they are paid.

NOTE 3 - CASH, DEPOSITS AND INVESTMENTS

Pennsylvania statutes provide for investment of Governmental Funds into certain authorized investment types including United States Treasury, and short-term United States and Pennsylvania government obligations, and insured or collateralized time deposits and certificates of deposit. The statutes does not prescribe regulations related to demand deposits; however, they do allow the pooling of Governmental Funds for investment purposes.

The deposit and investment policy of the Neshannock Township School District adheres to state statutes and prudent business practice. Deposits of the Governmental Funds are maintained in demand deposits. There were no deposit or investment transactions during the year that were in violation of either the state statutes or the policy of the Neshannock Township School District.

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June 30 2013

NOTE 3 - CASH. DEPOSITS AND INVESTMENTS (Continued)

The Neshannock Township School District's cash, cash equivalents and investments on June 30, 2013 was as follows:

BANK BALANCE DEPOSITS

WITH OTHER CARRYING FINANCIAL AUTHORIZED

AMOUNT INSTITUTIONS DEPOSITS TOTAL Governmental Funds:

Cash and Cash Equivalents $ 1,588,063 $ 2,193,198 $ 18 $ 2,193,216 Investments-CO's 3,370,809 3,370,809 -0- 3,370,809

Proprietary Funds: Cash and Cash Equivalents 47,470 45,309 -0- 45,309

Fiduciary Funds: Cash and Cash Equivalents 46,903 48,005 -0- 48,005

$ 5,053,245 $ 5,657,321 $ 18 $ 5,657,339

A. DeBosits With Financial Institutions

Customer credit risk is the risk that in the event of a bank failure, the governments deposits may not be returned to it. Protection of district cash and certificates of deposit deposited with financial institutions is provided by the Federal Deposit Insurance Corporation (FDIC) as well as qualified securities pledged by the institution holding the assets. By law, all governmental deposits are collateralized by a pool of pledged assets that are maintained with the Federal Reserve System and Designated third party trustees of the financial institution.

For the deposits of custodial risk, all of the deposits with financial institutions including certificates of depo~it with maturities greater than three months classified as investments, are aggregated.

At June 30, 2013, the bank balance of the District's cash and investments deposited with financial institutions was $5,657,321, of this balance $508,617 was covered by FDIC Insurance and $5,148,704 was uninsured and collateralized with securities held by the pledging institutions trust department, but not in the District's name.

B. Other Authorized Deposits

A portion of the District's deposits are in the Pennsylvania School District Liquid Asset Fund (PSDLAF). Although not registered with the securities and exchange commission and not subject to regulatory oversight, PSDLAF acts like a money market mutual fund in that their objective is to maintain a stable net asset value of $1 per share. This investment is both uninsured and uncollateralized. The carrying value and market value of PSDLAF at June 30, 2013 is $18. As of June 30, 2013, the Pennsylvania School District Liquid Asset Fund was rated as AAAm by Standard and Poors, the highest rating Standard and Poors can extend to a local government investment unit.

C. Investments

Investments include certificates of deposit in financial institutions insured by the Federal Deposit Insurance Corporation with original maturity terms in excess of three months .

The following is a schedule of these investments:

INTEREST RATE OPENED MATURITY AMOUNT

a) Certificate of Deposit 1. 75% 8-22-11 2-22-14 $ 2 '065' 940 b) Certificate of Deposit .45% 8-20-12 8-20-13 1,304,869

$ 3,370,809

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June 30 2013

NOTE 4 - REAL ESTATE AND PER CAPITA TAXES AND DEFERRED INFLOWS OF RESOURSES

Based upon assessments provided by Lawrence County, the School District bills and collects its own property taxes, and an elected tax collector is responsible for collection. The School District tax rate for the year ended June 30, 2013 was 14.3758 mills ($14.3758 per $1,000 of assessed valuation) as levied by the Board of School Directors. The Board of School Directors also levies per capita taxes based on the census of residents in the School District. The tax rate under Section 679 is $5/person and under Act 511 is $10/person. The total per capita tax levied by the district is $15/person. The schedule for real estate and per capita taxes levied for each fiscal year is as follows:

July 1 July 1-August 31 September 1-0ctober 31 November 1- December 15 December 16

-Levy Date -2% Discount Period -Face Payment Period -10% Penalty Period -Lien Date

The School District, in accordance with GAAP, recognized the delinquent and unpaid taxes receivable as determined by the administration. A portion of the amount estimated to be collectible which was measurable and available within 60 days was recognized as revenue and the balance was recorded as deferred inflows of resources in the fund financial statements. All taxes are recognized in the period for which levied in the government-wide financial statements, regardless of when collected.

The balances at June 30, 2013 are as follows:

Governmental Funds Gross Tax Deferred Taxes Revenue Inflows of

Receivable Recognize Resources Per Capita $ 419 $ 419 $ -0-Real Estate 721,106 177,655 543,451 Earned Income Taxes 11' 668 11,668 -0-Local Services Tax 1,206 1,206 -0-

$ 734,399 $ 190,948 $ 543,451

NOTE 5 - INTERFUND BALANCES AND TRANSFERS

Interfund Transfers for the year ending June 30, 2013 consists of the following transfers from the General Fund:

Transfers to: Governmental Funds:

Debt Services Fund Proprietary Fund

Total

Transfer activities include:

$ 1,472,736 15,000

$ 1,487,736

Transfers from the General Fund to the Debt Service Fund represent principal and interest payments on long-term debt.

Transfers from the General Fund to the Food Service Fund represent General Fund subsidies for food service expenses.

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NOTE 6 - DUE FROM OTHER GOVERNMENTS

Amounts due from other governments represent receivables for revenues earned by the School District, collections made by another governmental unit on behalf of the School District or reimbursements for expenditures. At June 30, 2013, the following amounts are due from other governmental units:

DUE FROM

Federal State County Intermediate Units Other School Districts

Total

NOTE 7 - OTHER RECEIVABLES

Other Receivables consist of the following:

Accounts Receivable-Vending Accounts Receivable-Special Events Reimbursements for Expenses

Total

-41-

GENERAL FUND

$ -0-214,977

12,604 151,817 21.519

$ 400.917

FOOD SERVICE

$ 10 1,408 ___2_ld

$ 1,933

FOOD SERVICE FUND

FUND

$ 17,480 1,394

-0--0--0-

$ 18,874

NOTE 8 - CAPITAL ASSETS


June 30 2013

Capital Asset activity for the year ended June 30, 2013 was as follows:

Beginning Balances Increases Decreases

Ending Balances

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Capital Assets, not being Depreciated:

Land and Land Improvements Construction in Process

Total Capital Assets not being Depreciated

Capital Assets being Depreciated: Site Improvements Buildings Furniture & Equipment Vehicles

Total Capital Assets being Depreciated

Less Accumulated Depreciation: Site Improvements Buildings Furniture & Equipment Vehicles

Total Accumulated Depreciation

Total Capital Assets being Depreciated-Net

Governmental Activities Capital Assets-Net

Business TYJ2e Activities Furniture & Equipment Less: Accumulated Depreciation

Business Type Activities Capital Assets-Net

$ 174,644 -0-

174,644

4,640,917 22,335,394

4,406,143 1,525,874

32,908,328

1,078,207) 8,151,911) 3,611,730) L 100 ,045)

(13,941.893)

18,966,435

$ 19,141,079

$ 70,328 ( 64 671)

$ 5 657

$ -0- $ -0-

-0-

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416,720 169,677

586,397

( 208,756) ( 478,393) ( 204' 986) ( 133,010)

(1.025,145)

438,748)

$ ( 438,748)$

$ -0- $ ( 2,552)

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(86,000)

-0--0--0-

86,000

86,000

-0-

-0-

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$ 174,644 -0-

174,644

4,640,917 22,335,394

4,822,863 1.609,551

33,408,725

1,286,963) 8,630,304) 3,816, 716) L147,055)

(14 '881 '038)

18,527,687

$ 18,702,331

$ 70,328 ( _ ____,.6_,_7 ,.., 2,_.2"'3)

$ 3 105

NOTE: Total governmental activities depreciation expense for the year ending June 30, 2013 was charged to the following functions/programs:

Instruction Operation and Maintenance of Plant Services Pupil Transportation Student Activities Unallocated

Total

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$ 47,674 6,527

106,105 219,538 645,301

$ L025,145

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NOTE 9 - LONG-TERM DEBT


June 30 2013

During the fiscal year ended June 30, 2013, the District's long-term debt changed as follows:

Due Within June 30 1 2012 Additions Retirements June 30 '2013 One Year

Bonds and Notes Payable-Gross $ 24,635,000 $ 9,995,000 $(10,130,000) $ 241 5QQ 1 QQQ $ 870,000 Bond Premium (Net of

Amortization) 47,973 -o- 5,059) 42,914 5,059 Bond Discount (Net of

Amortization) 126' 449) 146,172) 125,554 147 067) 8 089) Bonds and Notes Payable-Net

of Bond Premiums and Discounts 24,556,524 9,848,828 (10,009,505) 24,395,847 866,970

Capital Leases Payable 177,785 540,700 ( 231,631) 486,854 225,342 Compensated Absences 574,683 -0- ( 9' 316) 565,367 13,595 Other Post Employment

Benefits 665,949 158' 436 -0- 824' 385 -0-

Long-Term Debt $ 25,974,941 $ 10,547,964 $(10,250,452) $ 26,272,453 $ 1 '105' 907

A. Bonds and Notes

The School District issued $8,520,000 General Obligation Notes, Series of 2008 dated October 15, 2008 due September 1, 2031. Interest is paid at various rates from 3% to 4.7% semiannually on March 1 and September 1 of each year. The proceeds of these notes was used to provide funds for and towards; (1) the current refunding of a portion of the School District's General Obligation Bonds, Series of 2002 outstanding in the aggregate principal amount of $7,315,000 (the "2002 Bonds") of which $3,900,000 will be refunded (the "Refunded 2002 Bonds") ; (2) the current refunding of a portion of the School District's General Obligation Bonds, Series of AA 2003 outstanding in the aggregate principal amount of $8,325,000 (the "2003AA Bonds") of which $4,365,000 will be refunded (the "Refunded 2003 Bonds"); and (3) paying the costs of issuing the 2008 Notes.

Upon issuance of the refunding Notes, a portion of the proceeds of the 2008 Notes will be irrevocably deposited with Manufactures and Traders Trust Company successor to First Commonwealth Trust Company, the Paying Agent for the 2002 Bond and for the 2003AA Bonds, in an amount sufficient to redeem the Refunded 2003 Bonds at a redemption price of 100% plus accrued interest on October 15, 2008. A portion of the 2002 Bonds maturing September 1, 2009 through and including September 1, 2016 in the amount of $3,415,000 shall remain outstanding. This outstanding portion was refunded with General Obligation Bonds, Series A of 2009 dated July 15, 2009. A portion of the 2003AA Bonds maturing September 1, 2016 through and including September 1, 2023 in the amount of $3,960,000 shall remain outstanding, this outstanding portion was refunded with General Obligation Bonds, Series of 2010 dated November 12, 2010.

The School District issued $8,630,000 General Obligation Bonds, Series of 2013 dated June 11, 2013 due September 1, 2031. Interest is paid at various rates from 1.25% to 3.15% semiannually on March 1 and September 1 of each year. The proceeds of these bonds was used to provide funds for and towards; (1) the current refunding of a portion of the School District's General Obligation Bonds, Series of 2008 outstanding in the aggregate principal amount of $8,500,000 of which $8,210,000 will be refunded. A portion of the General Obligation Notes, Series 2008 maturing September 1, 2024 in the amount of $290,000 shall remain outstanding; and (2) paying the cost of issuing the General Obligation Bonds, Series of 2013 Bonds.

-43-


June 30 2013

NOTE 9 - LONG-TERM DEBT (Continued)

A. Bonds and Notes (Continued)

The future annual payments required to amortize the General Obligation Notes, Series of 2008, excluding the redemption described above, as of June 30, 2013 are as

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YEAR ENDED SERIES of 2008 JUNE 30 PRINCIPAL INTEREST

2014 $ -0- $ 12,615 2015 -0- 12,615 2016 -0- 12,615 2017 -0- 12,615 2018 -0- 12,615 2019 -0- 12,615 2020 -0- 12,615 2021 -0- 12,615 2022 -0- 12,615 2023 -0- 12,615 2024 -0- 12,615 2025 290.000 6.308

Total $ 290.000 $ 145,073

The School District issued $1,330,000 General Obligation Notes, Series A of 2008 dated October 15, 2008 due September 1, 2032 interest is paid at various rates from 3% to 4.75% semiannually on March 1 and September 1 of each year.

Proceeds of the 2008A Notes will be used to provide funds for and towards the design, acquisition, construction furnishing and equipping renovations and additions to the School District's existing facilities, and towards paying the costs of issuance of the 2008A Notes.

The School District issued $1,365,000 General Obligation Bonds, Series A of 2013 dated June 11, 2013 due September 1, 2033. Interest is paid at various rates from 1.25% to 3.5% semiannually on March 1 and September 1 of each year. The proceeds of these bonds was used to provide funds for and towards; (1) the current refunding of the School District's General Obligation Notes 1 Series A of 2008 outstanding in the aggregate principal amount of $1,310 1 000 and (2) paying the cost of issuing the General Obligation Bonds, Series A of 2013 Bonds.

The School District issued $4,670 1 000 General Obligation Bonds, Series of 2009 dated July 15, 2009 due September 1, 2032. Interest is paid at various rates from 2% to 4.875% semiannually on March 1 and September 1 of each year.

Proceeds of the 2009 Bonds will be used to provide funds for and towards the design, acquisition, construction furnishing and equipping renovations and additions to the School District's existing facilities, and towards paying the costs of issuance of the 2009 Bonds.

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The future annual payments required to amortize this bond issue as of June 30, 2013, are as follows:


2014 $ 135,000 $ 170,047 2015 140,000 166,862 2016 145,000 163,119 2017 150,000 158,875 2018 160,000 154,025 2019 165,000 148,538 2020 170,000 142,569 2021 175,000 135,987 2022 185,000 128,787 2023 190,000 121,287 2024 200,000 113,238 2025 210,000 104,525 2026 215,000 95,225 2027 230,000 85,213 2028 235,000 74,603 2029 250,000 63,388 2030 260,000 51,594 2031 275,000 38,878 2032 285,000 25,228 2033 375.000 9 141

Total $ 4,150,000 $ 2,151,129

The School District issued $3,545,000 General Obligation Bonds, Series A of 2009 dated July 15, 2009 due September 1, 2016. Interest is paid at various rates from 2% to 3% semiannually on March 1 and September 1 of each year. The proceeds of these bonds will be used to provide funds for and towards; (1) the current refunding of the School District's General Obligation Bonds, Series of 2002 currently outstanding in the aggregate principal amount of $3,415,000 (the "2002 Bonds") and (2) paying the costs of issuing the 2009 Bonds.

Upon issuance of the Bonds, a portion of the proceeds of the 2009 Bonds will be irrevocably deposited with Manufacturers and Traders Trust Company, the Paying Agent for the 2002 Bonds in the amount sufficient to redeem the 2002 Bonds at a redemption price of 100% plus accrued interest on July 17, 2009.


YEAR ENDED SERIES A of 2009 JUNE 30 PRINCIPAL INTEREST

2014 $ 455,000 $ 45,569 2015 460,000 34,700 2016 470,000 21,900 2017 495,000 7,425

Total $ 1,880,000 $ 109,594

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The School District issued $4,100,000 General Obligation Bonds, Series of 2010 dated November 12, 2010 due September 1, 2023. Interest is paid at various rates from 2% to 3.35% semiannually on March 1 and September 1 of each year. Proceeds of the Bonds will be used to provide funds for and towards the current refunding of the School District's General Obligation Bonds, Series AA of 2003 currently outstanding in the aggregate principal amount of $3,950,000 (the "2003 AA Bonds") and paying the costs of issuing the Bonds.

Upon issuance of the Bonds 1 a portion of the proceeds of the Bonds will be irrevocably deposited with Manufacturers and Traders Trust Company (successor as paying agent to First Commonwealth Trust Company) , the Paying Agent for the 2003AA Bonds in the amount sufficient to redeem the 2003AA Bonds at a redemption price of 100% plus accrued interest on November 12, 2010.



2014 $ 5,000 $ 123,343 2015 20,000 123,093 2016 30,000 122,593 2017 25,000 122,043 2018 525,000 113' 918 2019 540,000 99,023 2020 550,000 84,303 2021 575,000 67,978 2022 590,000 50,060 2023 605,000 30,936 2024 630,000 10,553

Total $ 4,095,000 $ 947,843

The School District issued $4,110,000 General Obligation Bonds, Series of 2012 dated June 4, 2012 due September 1, 2025. Interest is paid at various rates from .25% to 2.8% semiannually on March 1 and September 1 of each year. Proceeds of the Bonds will be used to provide funds for and towards the current refunding of the School District's General Obligation Bonds, Series of 2007 currently outstanding in the aggregate principal amount of $3,940,000 (the "2007 Bonds") and paying the costs of issuing the Bonds .

Upon issuance of the Bonds, a portion of the proceeds of the Bonds will be irrevocably deposited with Manufacturers and Traders Trust Company the Paying Agent for the 2007 Bonds in the amount sufficient to redeem the 2007 Bonds at a redemption price of 100% plus accrued interest on September 1, 2012.

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2014 $ 275,000 $ 85,665 2015 285,000 82,128 2016 290,000 76,378 2017 295,000 70,528 2018 300,000 64,578 2019 305,000 58,528 2020 315,000 52,328 2021 315,000 46,028 2022 325,000 39,303 2023 335,000 31 '791 2024 340,000 23,605 2025 350,000 14,718 2026 360,000 5,040 Total $ 4,090,000 $ 650,618

The School District issued $8,630,000 General Obligation Bonds, Series of 2013 dated June 11, 2013 due September 1, 2031. Interest is paid at various rates from 1.25% to 3.15% semiannually on March 1 and September 1 of each year. The proceeds of these bonds was used to provide funds for and towards; (1) the current refunding of a portion of the School District's General Obligation Notes, Series of 2008 outstanding in the aggregate principal amount of $8,500,000 of which $8,210,000 will be refunded. A portion of the General Obligation Notes, Series 2008 maturing September 1, 2024 in the amount of $290,000 shall remain outstanding; and (2) paying the cost of issuing the General Obligation Bonds, Series of 2013 Bonds.

Upon issuance of the Bonds, a portion of the proceeds of the Bonds will be irrevocably deposited with Manufactures and Traders Trust Company, the Paying Agent for the 2008 Notes in an amount sufficient to redeem the 2008 Notes being refunded at a redemption price of 100% plus accrued interest on September 1, 2013.


2014 $ -0- $ 180,487 2015 5,000 249,874 2016 5,000 249,811 2017 5,000 249,749 2018 5,000 249,686 2019 5,000 249,624 2020 5,000 249,536 2021 5,000 249,424 2022 5,000 249,311 2023 5,000 249,199 2024 5,000 249,086 2025 320,000 245,430 2026 765,000 232,650 2027 1,165,000 208,325 2028 1,200,000 175,180 2029 1,235,000 138,655 2030 1,270,000 101,080 2031 1,315,000 61,648 2032 1,310,000 20,633 Total $ 8,630,000 $ 3,859,388

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The School District issued $1,365,000 General Obligation Bonds, Series A of 2013 dated June 11, 2013 due September 1, 2033. Interest is paid at various rates from 1.25% to 3.5% semiannually on March 1 and September 1 of each year. The proceeds of these bonds was used to provide funds for and towards; (1) the current refunding of the School District's General Obligation Notes, Series A of 2008 outstanding in the aggregate principal amount of $1,310,000 and (2) paying the cost of issuing the General Obligation Bonds, Series A of 2013 Bonds.

Upon issuance of the Bonds, a portion of the proceeds of the Bonds will be irrevocably deposited with Manufactures and Traders Trust Company, the Paying Agent for the 2008A Notes in an amount sufficient to redeem the 2008A Notes being refunded at a redemption price of 100% plus accrued interest on September 1, 2013.

YEAR ENDED SERIES A of 2013 JUNE 30 PRINCIPAL INTEREST

2014 $ -0- $ 33,475 2015 5,000 46,319 2016 5,000 46,256 2017 5,000 46,194 2018 5,000 46,131 2019 5,000 46,069 2020 5,000 45,981 2021 5,000 45,869 2022 5,000 45,756 2023 5,000 45,644 2024 5,000 45,531 2025 5,000 45,400 2026 5,000 45,250 2027 5,000 45,100 2028 5,000 44,950 2029 20,000 44,575 2030 20,000 43,960 2031 20,000 43,330 2032 60,000 42,070 2033 1,175,000 20,563 Total $ 1,365,000 $ 868,423

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Interest Original Balance Rate % PrinciQal June 30,2013

3.00-4.700 8,520,000 $ 290,000

2.00-3.000 3,545,000 1,880,000

2.00-4.875 4,670,000 4,150,000

2.00-3.350 4,100,000 4,095,000

.250-2.800 4,110,000 4,090,000

1. 25-3.15 8,630,000 8,630,000

1.25-3.15 1,365,000 1,365,000 $ 24,500,000

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B. Capital Leases

The School District entered into a $221,134 capital lease on March 20, 2010, through Huntington National Bank. This lease was entered into for the lease/purchase of three 2011 IC School Buses. Four annual payments of $59,546, including interest at 4.31%, are due July 15 of each year, beginning July 15, 2010. The future annual lease payments required to satisfy this capital lease are as follows:

YEAR ENDED JUNE 30

2014

PRINCIPAL

$ 56,609

INTEREST

$ 59,546

The School District entered into a $110,664 capital lease on April 1, 2009, through Huntington National Bank. This lease was entered into for the lease/purchase of NEC8100 VOIP Integrated Telephone System. Five annual payments of $26,261, including interest at 5.99%, are due April 1 of each year, beginning April 1, 2010. The future annual lease payments required to satisfy this capital lease are as follows:

YEAR ENDED JUNE 30

2014

PRINCIPAL

$ 24.778

INTEREST

$ 26,261

The School District entered into a $29,450 capital lease on November 7, 2011, through Laurel Capital Corporation. This lease was entered into for the lease/purchase of a 2011 GMC Sierra 3500 Truck. Three annual payments of $10,247, including interest at 4.5%, are due on November 15 of each year, beginning November 15, 2011. The future annual lease payments required to satisfy this capital lease are as follows:

YEAR ENDED JUNE 30

2014

PRINCIPAL INTEREST

$ 437 $ 10.247

The School District entered into a $169,677 capital lease on July 18, 2012, through Laurel Capital Corporation. This lease was entered into for the lease/purchase of three (3) buses, a 2012 Chevrolet Thomas ~notour 27 passenger bus, a 2012 Chevrolet Thomas ~notour 18 + 2 passenger bus, and a 2013 Thomas SAT-F-EINER C2 72 passenger bus. Four annual payments of $44,255, including interest at 2.9004%, are due on August 1 of each year, beginning August 1, 2012. The future annual lease payments required to satisfy this capital lease are as follows:

YEAR ENDED JUNE 30 PRINCIPAL INTEREST TOTAL

2014 $ 40,617 $ 3,638 $ 44,255 2015 41,795 2,460 44,255 2016 43,008 1.247 44,255

Total $ 125,420 $ 7,345 $ 132,765

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June 30 2013


B. Capital Leases (Continued)

The School District entered into a $170,356 capital lease on July 26, 2012, through Laurel Capital Corporation. This lease was entered into for the lease/purchase of various computer equipment. Three annual payments of $58,388, including interest at 2.8506%, are due on August 1 of each year 1 beginning August 1, 2012. The future annual lease payments required to satisfy this capital lease are as follows:

YEAR ENDED JUNE 30 PRINCIPAL INTEREST TOTAL

2014 $ 55,196 $ 3,192 $ 58,388 2015 56,770 L618 58,388 Total $ 111 '966 $ 4,810 $ 116' 776

The School District entered into a $200,667 capital lease on September 21, 2012, through Laurel Capital Corporation. This lease was entered into for the lease/purchase of various technology equipment. One annual payments of $42,394 due upon execution of lease schedule followed by four equal annual payments of $42,394, including interest at 2.99%, are due on August 1 of each year, beginning August 1, 2013. The future annual lease payments required to satisfy this capital lease are as follows:

YEAR ENDED JUNE 30

2014 2015 2016 2017 Total

PRINCIPAL $ 38,332

38,808 39,968 4L163

$ 158,271

INTEREST $ 4,062

3,586 2,426 L231

$ 1L305

TOTAL $ 52,394

42,394 42,394 42,394

$ 169,576

The future annual payments required to amortize all outstanding debt, except for compensated absences and postemployment healthcare benefits, as of June 30, 2013, including total interest payments, are as follows:

YEAR ENDED GENERAL OBLIGATION BONDS CAPITAL LEASES JUNE 30 PRINCIPAL INTEREST PRINCIPAL INTEREST TOTAL

2014 $ 870,000 $ 651,201 $ 225,342 $ 15,749 $ 1 '762 '292 2015 915,000 715' 591 137,373 7,664 1,775,628 2016 945,000 692,672 82,976 3,673 1,724,321 2017 975,000 667,429 41' 163 1,231 1,684,823 2018 995,000 640,953 -0- -0- 1,635,953 2019 1,020,000 614,397 -0- -0- 1,634,397 2020 1,045,000 587,332 -0- -0- 1,632,332 2021 1,075,000 557,901 -0- -0- 1' 632' 901 2022 1,110,000 525,832 -0- -0- 1,635,832 2023 1,140,000 491,472 -0- -0- 1,631,472 2024 1,180,000 454,628 -0- -0- 1,634,628 2025 1,175,000 416,381 -0- -0- 1,591,381 2026 1,345,000 378,165 -0- -0- 1,723,165 2027 1,400,000 338,638 -0- -0- 1,738,638 2028 1,440,000 294,733 -0- -0- 1,734,733 2029 1,505,000 246,618 -0- -0- 1,751,618 2030 1,550,000 196,634 -0- -0- 1,746,634 2031 1,610,000 143,856 -0- -0- 1,753,856 2032 1,655,000 87,931 -0- -0- 1,742,931 2033 1,550,000 29,704 -0- -0- 1,579,704

$ 24,500,000 $ 8,732,068 $ 486,854 $ 28,317 $ 33,747,239

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B. Capital Leases (Continued)

In the statement of activities, bond interest expense of $177,271 was charged directly to student activities and $910,990 was unallocated. Interest on capital leases was charged to instruction, pupil transportation, and administrative and financial support services in the amounts of $4,797, $7,020, and $4,384, respectively.

C. Compensated Absences

Vacation-School District employees who are required to work on a twelve-month schedule are credited with vacation at rates which vary with length of service or job classification. Vacation must be taken by June 30 of the fiscal year or it is forfeited.

Early Retirement Incentive-The School District periodically offers early retirement incentive programs to teacher personnel and to administrative and supervisory personnel. A single payment is made to the retiree during the year following the year of retirement. The early retirement incentive programs are subject to annual adoption by the Neshannock Township Board of School Directors.

Sick Leave and Personal Leave-Teachers and Clerical employees are credited with 12 days of sick leave and 3 days of personal leave annually with no maximum as to the number of days accumulated. Upon retirement or death, such employees are paid at the rate of $30 for each day of accumulated sick and personal leave at separation or at the rate of $250 for each year of accumulated service at the School District, whichever is the greater amount. In order to qualify for the option of $250 for each year of accumulated service, the employee must have completed fifteen years or more of service at the Neshannock Township School District as of June 30, 1997. Administrative employees are credited with 12 days of sick leave and 7 days of personal leave annually with no maximum as to the number of days accumulated. Upon reaching normal retirement, such employees are paid at 50% of their per diem rate for each unused day at separation . Custodial employees are credited with 12 days of sick leave annually with no maximum as to the number of days accumulated. Upon reaching normal retirement, the employee or his beneficiary will receive $35 per day of accumulated sick leave without limitations.

The amount of compensated absences, attributable to sick leave and personal days at June 30, 2013 to be provided from taxes and other revenue is $565,367.

NOTE 10 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS

A. Plan Description

In addition to the pension benefits described in Note 14, Neshannock Township School District provides postemployment health care benefits to qualified teachers and administrative personnel and/or their spouses, who retire from the District as detailed in the collective bargaining agreement between the District and the Neshannock Area Education Association.

A qualified employee is eligible for full postemployment health benefits until she/he becomes eligible for Medicare (age 65). If spouse is younger than employee she/he remains eligible until she/he becomes eligible for Medicare (age 65) .

If employee dies before she/he becomes eligible for Medicare (age 65), surviving spouse remains eligible for (5) years or until she/he becomes eligible for Medicare (age 65) whichever comes first. Children of employees are eligible until they are (26) years of age as long as they remain in school. If children are not in school, they are ineligible when they become 19 years old.

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NOTE 10 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (Continued)

B. Funding Policy

The obligations of the plan members, employers and other entities are established by action of the District pursuant to applicable collective bargaining and employment agreements. The required contribution rates of the employer and the members varies depending on the applicable agreement. The District currently contributes enough money to the plan to satisfy current obligations on a pay-as-you-go basis. The costs of administering the plan are paid by the District.

C. Accounting Policy

The accrual basis of accounting is used. determined by the market value of assets, seller.

The fair market value of assets, if any, is if any, paid by a willing buyer to a willing

D. Annual OPEB Cost and Net OPEB Obligation

The District's annual other post employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC) . The District has engaged an actuary to calculate the ARC and related information per the provisions of GASB Statement 45 for employers in plans with more than one hundred total plan members. The ARC represents a level of funding 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 thirty years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the plan, and the District's net OPEB obligation to the Retiree Health Plan at June 30, 2013.

FUNCTIONAL ALLOCATION

For Fiscal Year July 1. 2012 INSTRUCTION

ADMINISTRATIVE AND FINANCIAL

SUPPORT SERVICES to June 30. 2013 Annual Required Contribution (ARC) Estimated Interest on Net OPEB Obligation Adjustment to ARC

Annual OPEB Cost Contributions Made (Estimated)

Estimated Increase in Net OPEB Obligation Net OPEB Obligation-Beginning of Year Estimated Net OPEB Obligation-End Of Year

$ 302,699 24,474

( 33,388) 293,785

(164,394) 129,391 547,855

$677,246

$ 67,951 5,494 7 496)

65' 94 9 36,904) 29,045

118 '094 $ 147,139

TOTAL

$ 370,650 29,968

( 40,884) 359,734

(201 ,298) 158,436 665,949

$ 824,385

The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation is as follows:

FISCAL YEAR ANNUAL OPEB PERCENTAGE OF ANNUAL NET OPEB ENDED COST OPEB COST CONTRIBUTED OBLIGATION

June 30, 2013 $359,734 43.6% $ 824,385 June 30, 2012 362,679 50.4% 665,949 June 30, 2011 336,435 51.6% 486,290 June 30, 2010 339,059 52.8% 323,347 June 30, 2009 341,735 52.2% 163,233

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E. Funded Status and Funding Progress

As at July 1, 2011, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $3,368,693, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $6,721,346 and the ratio of the unfunded actuarial liability to the covered payroll was 50.12%.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the 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 liability for benefits.

F. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes 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 costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The following assumptions were made:

Interest Rate - 4.50%

Salary-An assumption for salary increases is used only for spreading contributions over future pay under the entry age normal cost method. For this purpose, salary increases are composed of a 3% cost of living adjustment, 1% real wage growth, and for teachers and administrators a merit increase which varies by age from 3% to 0.25%.

Withdrawal-Rates of withdrawal vary by age, gender, and years of service. Sample rates for employees with more than 10 years of service are shown below. Rates for new employees start at 14% for both men and women and decrease with age and service.

AGE MALE RATE FEMALE RATE AGE MALE RATE FEMALE RATE 25 1.4000% 4.0000% 45 0.5500% 0.5500% 30 1.4000% 4.0000% 50 1.7800% 1.5000% 35 1.1000% 2.0000% 55 1.7800% 3.0000% 40 0.8000% 1. 0000% 60 4.5000% 5.9000%

Mortality Separate rates are assumed preretirement and postretirement using the rates assumed in the PSERS defined benefit pension plan actuarial valuation.

Disability-No Disability was assumed.

Retirement-Assumed retirement rates are based on PSERS plan experience and vary by age, service, and gender.

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F. Actuarial Methods and Assumptions (Continued)

35 YEARS OF SERVICE, OR AGE 62 & 1 YEAR SERVICE, OR AGE

AGE 55 & 25 YEARS OF SERVICE 60 & 30 YEARS OF SERVICE AGE MALE FEMALE MALE FEMALE 55 10% 10% 24% 10% 56 15% 12% 24% 10% 57 15% 12% 24% 25% 58 15% 12% 24% 25% 59 18% 17% 28% 25% 60 10% 15% 28% 25% 61 30% 30% 50% 47% 62 30% 30% 30% 30% 63 28% 20% 28% 20% 64 28% 28% 28% 28% 65 100% 100% 100% 100%

Percent of Eligible Retirees Electing Coverage in Plan-100% of those eligible for a district subsidy and 50% of those not eligible for a district subsidy are assumed to elect coverage.

Percent Married at Retirement-50% of employees electing coverage at retirement are assumed to have a spouse covered by the plan.

Spouse Age-Wives are assumed to be two years younger than their husbands.

Per Capita Claims Cost-The per capita cost for medical and prescription drug is based on the expected portion of the group's overall cost attributed to individuals in the specified age and gender brackets. Dental and vision costs are assumed to not vary with age or gender. The resulting costs are as follows:

MEDICAL AND PRESCRIPTION DRUG COMBINED AGE MALES FEMALES

45-49 $ 4,477 $ 6,466 50-54 5,929 7,307 55-59 7,222 7' 646 60-64 9,424 8,784

Retiree Contributions-Retiree Contributions are assumed to increase at the same rate as the Health Care Cost Trend Rate.

Health Care Cost Trend Rate-8% in 2011, decreasing 0.5% per year to 5.5% in 2016. Rates gradually decrease from 5.3% in 2017 to 4.2% in 2089 and later based on the Society of Actuaries Long-Run Medical Cost Trend Model.

Actuarial Value of Assets-Equal to the Market Value of Assets.

Actuarial Cost Method-Entry Age Normal-Under the Entry Age Normal Cost Method, the Normal Cost is the present value of benefits allocated to the year following the valuation date. Benefits are allocated on a level basis over the earnings of an individual between the date of hire and the assumed retirement age. The Accrued Liability as of the valuation date is the excess of the present value of benefits over the present value of future Normal Cost. The Unfunded Accrued Liability is the excess of the Accrued Liability over the Actuarial Value of Assets. Actuarial gains and losses serve to reduce or increase the Unfunded Accrued Liability.

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June 30 2013 NOTE 10 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (Continued)

F. Actuarial Methods and Assumptions (Continued)

Participant Data-Based on census information provided as of June 2013. Due to the timing of the School District turnover, the data is believed to be representative of the population for the 2012-2013 school year.

NOTE 11 - OPERATING LEASES

Commitments under operating lease agreements for equipment provide minimum future rental payments as follows:

YEAR ENDED JUNE 30 2014 2015 2016 2017 2018 2019

$ 48,007 48,007 48,007 48,007 43,401

8.145 $ 243.574

Operating lease rental expenditures during 2012-2013 were $ 25,783

NOTE 12 - PENSION PLAN

A. Plan Description

Neshannock Township School District contributes to the Public School Employees' Retirement System, (the System), a cost sharing multiple-employer defined benefit pension plan administered in Pennsylvania, by the statewide, autonomous Commonwealth of Pennsylvania Public School Employees' Retirement System. The System provides retirement and disability benefits, legislative mandated ad hoc cost-of-living adjustments and healthcare insurance premium assistance to qualifying annuitants. The Public School Employees' Retirement Code (Act No. 96 of October 2, 1975, as amended) assigns the authority to establish and amend benefit provisions. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to Public School Employees' Retirement System, P.O. Box 125, Harrisburg PA 17108-0125.

B. Contributions and Funding Policy

The contribution policy is established in the Public School Employees' Retirement Code and requires contributions by active members, employers, and the Commonwealth. Active members who joined PSERS prior to July 22, 1983 contribute 5.25 percent of the member's qualifying compensation. For members joining PSERS on or after July 22, 1983, the contribution rate is 6. 25 percent. Contributions required of employees are based upon an actuarial valuation.

The State Legislature passed and on May 17, 2001, Governor Ridge signed Act 9, a major piece of pension legislation. Act 9 will have the following effects on member contribution rates:

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June 30 2013

NOTE 12 - PENSION PLAN (Continued)

B. Contributions and Funding Policy (Continued)

Active or inactive members of PSERS as of July 1, 2001 may elect a new membership class "TD" to receive a higher benefit formula. Upon qualifying and filing appropriate election forms, class TD members will make employee contributions of 6.50% (if they are currently contributing 5.25%) or 7.50% (if they are currently contributing 6.25%) effective January 1. 2002, provided the member continues as an active member after this date. Members not making the election will continue to contribute at rates identified in the paragraph of the ''Contributions and Funding Policy" section above.

On November 23, 2010, pension reform legislation, Act 120 of 2010, was signed into law, effectively suppressing the employer contribution rate by using rate caps in future years to keep the rate from rising too high, too fast for budgetary purposes.

This legislation included a series of actuarial and funding changes to PSERS and benefit reductions for individuals who become new members of PSERS on or after July 1, 2011.

Act 120 significantly impacted the funding issues at PSERS by:

• Reducing the employer normal cost for new PSERS members hired on or after July 1, 2011-As a result of the legislation, pension benefits earned by new members will be almost entirely funded by the member and over time the employer normal cost (the actual cost of the benefits being earned) will be dramatically reduced to nearly 3.00% as a result of the benefit reductions for new members. The employer normal cost for new members hired under Act 120 is 68% less than pre-Act 120 members.

• Putting a long-term plan in place to pay off existing pension liabilities-The actual changes in Act 120 also put a plan in place to pay off existing pension liabilities. Act 120 addressed the pending employer contribution rate spike projected for FY 2013 by smoothing the projected rate increases over a five to nine year time period. In addition, the benefit reductions and risk sharing provisions for new members on July 1, 2011 and thereafter have created a low employer cost structure for new members and shifted some of the investment risk to the members. PSERS' unfunded liabilities will be paid over a 24 year amortization period.

Any employee who becomes a member after June 30, 2011 would become a Class T-E member or, alternatively, elect to become a Class T-F member. The base contribution rate for Class T-E members is 7.50% of compensation. The base contribution rate for Class T-F members is 10.30% of compensation. Class T-E and Class T-F members are subject to a "shared-risk" employee contribution rate.

The results of the actuarial valuation as of June 30, 2011 determine the employee contribution rate for fiscal year 2012/2013. The calculated employer contribution rate for the 2012/2013 fiscal year is 12.36% and the Board of Trustees certified this rate at their December 2011 meeting. This rate consists of an 11.5% pension rate (fiscal year 2011/2012 rate of 8.00% plus the Act 120 3.50% collar, resulting in a deferral of 10.15% pension contribution) plus a 0.86% health insurance contribution rate.

The employer contribution rate for the fiscal year beginning July 1, 2013 has been recertified. The new contribution rate will be 16.93 percent of covered payroll.

Neshannock Township School District's contributions to PSERS for the years ended June 30, 2013, 2012, and 2011 were $936,585, $656,255 and $460,441 respectively, which were 100% of the required contributions.

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NOTE 12 - PENSION PLAN (Continued)

B. Contributions and Funding Policy (Continued)

According to requirements established in Act 29 of 1994, the Commonwealth reimburses school entity employers a portion of the employer contributions paid to the System. All school entity employers are reimbursed by the Commonwealth at least 50% of the total employer contributions based on the total contribution rate. The Commonwealth reimburses certain school entity employers at a rate greater than 50% based upon nonpension criteria which stipulate that the entity must have a Commonwealth Department of Education calculated Market Value/Personal Income Aid Ratio in excess of .5000.

NOTE 13 - CONTINGENT LIABILITIES

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 of loss. Insurance coverage appears to be consistent with previous years.

Grant Programs

The School District participates in both 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 expenditures which may be disallowed pursuant to the terms of these grant programs. Management is not aware of any material items of noncompliance which would result in the disallowance of program expenditures.

Litigation

In the normal course of operations, the School District is involved in various civil disputes, principally regarding property tax appeals. Management is of the opinion that any unfavorable outcome resulting from these actions would not have a material effect on the School District's financial position.

NOTE 14 - ACTIVITY FUND REVENUE

The nature of the Activity Fund is such that all of the receipts are collected from outside sources and these records are sent to the business office for recording and classification. Since these monies are not controlled by the School District at the source of receipt, that is, student activities such as dances, candy sales, etc., we have been unable to substantiate and audit these funds.

NOTE 15 - CHANGES IN ACCOUNTING PRINCIPLE

Effective July 1, 2012 the District adopted Governmental Auditing Standards Board Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and Statement No. 65, Items Previously Reported as Assets and Liabilities to be in conformity with generally accepted accounting principles. The statements implemented Concepts Statement 4 defining the five elements of the statement of financial position as : assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. The Statement also reclassified certain existing assets and liabilities to the new categories including reclassification to outflows of resources resulting in a restatement of the District's beginning net position for the governmental activities of $4 79,790. This amount represents bond issuance costs net of amortization as of June 30, 2013 that no longer meets the definition of an asset.

-57-

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"' -' .... <Jl z < 11.

" 0 u 0 z < "' "' z "' ;:: 11.

-' I 11.


June 30 2013

NOTE 15 - CHANGES IN ACCOUNTING PRINCIPLE (Continued)

The following is a schedule of this change:


Changes in Accounting Principles

Net Position-June 30, 2013

NOTE 16 - SUBSEQUENT EVENTS

Governmental Activities $(2,300,502)

479 '790)

$ (2 '780 ,292)

The School District has evaluated subsequent events through November 26, 2013, the date which the financial statements were available to be issued.

The Neshannock Township School District, in conjunction with the seven other Lawrence County School Districts are involved in a joint venture to fund the operating budget of the Lawrence County Career and Technical Center. Each District's share is based on the percentage of the District's enrollment to the total enrollment at the Lawrence County Career and Technical Center. Subsequent to the June 30, 2013 financial statements date, Lawrence County Career and Technical Center has revised their operating costs. For prior years, with the revised amount unknown at this time.

-58-


ORGANIZED 1944 INCORPORATED 1991

NEW CASTLE, PENNSYLVANIA

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

BOARD OF DIRECTORS NESHANNOCK TOWNSHIP SCHOOL DISTRICT NEW CASTLE, 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 Government 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 Neshannock Township School District, as of and for the year ended June 30, 2013 and the related notes to the financial statements, which collectively comprise Neshannock Township School District's basic financial statements and have issued our report thereon dated November 26, 2013.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Neshannock Township 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 financial statements, but not for the purpose of expressing an opinion on the effectiveness of Neshannock Township School District's internal control. Accordingly, we do not express an opinion on the effectiveness of Neshannock Township School District's internal control.

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

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during 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.

Compliance and Other Matters

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

-59-

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 performed 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

--~~ November 26, 2013

-60-

< z < :; >fll z z w 0.

w .... 1-fll z < 0.

" 0 u c z < 0: w z w ;: 0. ::; J: 0.

REQUIRED SUPPLEMENTARY INFORMATION

< z ~ -' >-"' z z "' "-w -' .... <II = z ::> 0 u u "-

" "' "->= 0:

"' u <

"

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Revenues 1 Expenditures, and Changes in Fund Balance

Budget and Actual General Fund

For the Year Ended June 30 2013

REVENUES Local Sources State Sources Federal Sources

Total Revenues

EXPENDITURES Regular Programs Special Programs Vocational Programs Other Instructional Programs Pupil Personnel Services Instructional Staff Services Administration Services Pupil Health Business Services Operation and Maintenance of

Plant Services

BUDGETED AMOUNTS ORIGINAL FINAL

$ 11,101,128 5,096,971

-0-

16,198,099

6,913,486 1,704,428

780,954 108,312 460,661 473,176 986,030 191,897 232,902

$ 11,101,128 5,096,971

-0-

16,198,099

6,913,486 1,654,028

780,954 112,312 508,561 425,276 986,030 195,897 241,902

Student Transportation Services Central and Other Support

1,489,030 821,727

1,496,030 821 '727

Services Other Support Services Student Activities Refund of Prior Years Receipts

Total Expenditures

Excess (Deficiency) of Revenues Over Expenditures

237,911 21,300

480,434 1 000

14,903,248

1.294,851

217,874 21,337

526' 834 1 000

14,903,248

1.294 '851

ACTUAL (BUDGETARY

BASIS)

$ 11,628,987 5,076,491

7 912

16,713,390

6,822,986 1,523,168

744,803 111,814 508,323 413,589 949,766 194,984 241,041

1,495,556 819,739

185,141 21,337

526,712 814

14,559,773

2,153,617

~ OTHER FINANCING SOURCES (USES) >z ~ ::E 0 u

" z < 0:

"' z

"' ;: ":::; :c "-

Sale of Fixed Assets Transfers Out Budgetary Reserve

Total Other Financing Sources (Uses)

Net Change in Fund Balance

Fund Balance July 1, 2012

Fund Balance June 30, 2013

$ (

-o-1,507,736)

130,000)

1,637,736)

342,885) $(

-0-1,507,736)

130 '000)

1.637,736)

342,885)

5,000 1,487 '736)

-0-

1,482 '736)

670,881

3,847,051

$ 4,517,932

VARIANCE WITH FINAL BUDGET

POSITIVE (NEGATIVE)

$ (

527,859 20,480)

7 912

515 '291

90 '500 130,860

36' 151 498 238

11,687 36,264

913 861

474 1,988

32,733 -0-122 186

343,475

858,766

5,000 20,000

130,000

155,000

$ 1,013,766


-62-

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z z w IL

ui _, .... <))

<: u ;; w z

" 0: u: "' z i= z :J 0 u u <: u :::; ID :J IL

" w u: i= 0: w u <:

" .... _, >-z <: IL

" 0 u

" z <: 0: w z w ;; IL _, J: IL

Total

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Schedule of Funding Progress for Retiree Health Plan

For the Year Ended June 30, 2013

ACTUARIAL ACCRUED

ACTUARIAL LIABILITY UNFUNDED ACTUARIAL VALUE OF (AAL)- AAL FUNDED VALUATION ASSETS ENTRY AGE (UAAL) RATIO

DATE !A) !B) !B-A) !A[ B)

7/1/2011 $ -0- $ 3,368,693 $ 3,368,693 0.00% $ 7/1/2008 -0- 2,755,026 2,755,026 0.00%

UAAL AS A PERCENTAGE

COVERED OF COVERED PAYROLL PAYROLL

!C) ! !B-A) [C)

6,721,346 50.12% 6,927,204 39 0 77%


-63-

SUPPLEMENTAL INFORMATION

< z ~ .... >-"' z z "' 11.

"' .... .... "' z ~ " 0 u 0 z <

"' "' z

"' ~ 11. .... I: 11.

ACCOUNT 6111 6113 6114 6120 6141 6143 6151 6153 6411 6420 6441 6451 6510

6710 6740 6740 6832 6839 6910 6920 6941 6944 6949 6991 6999

ACCOUNT 7110 7160

7240 7271 7310 7320 7330 7340 7501 7810 7820

ACCOUNT 8810 8820

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Budgetary Comparison-Revenues and Expenditures

General Fund For the Year Ended June 30, 2013

6000-REVENUE FROM LOCAL SOURCES Current Real Estate Taxes Public Utility Realty Tax Payments in Lieu of Current Taxes Current Per Capita Taxes, Section 679 Current Per Capita Taxes, Act 511 Current Local Services Taxes, Act 511 Current Earned Income Taxes, Act 511 Current Real Estate Transfer Taxes, Act 511 Delinquent Real Estate Taxes Delinquent Per Capita Taxes, Section 679 Delinquent Per Capita Taxes, Act 511 Delinquent Earned Income Taxes, Act 511 Interest on Investments and Interest Bearing

Checking Accounts Athletic Receipts Fees-Athletic Participation Fees-Parking Revenue From Intermediate Sources-IDEA Funds Revenue From Intermediate Sources-Federal Funds Rentals Contributions and Donations from Private Sources Tuition From Patrons Receipts From Other Lea's in PA Other Tuition Refunds of a Prior Year Expenditure Revenue From ~scellaneous Sources

7000-REVENUE FROM STATE SOURCES Basic Instructional Subsidy Tuition For Orphans and Children Placed in Private Homes

Driver Education-Student Special Education for School-Aged Pupils Transportation (Regular and Additional) Rentals and Sinking Fund Payments Health Services State Property Tax Reduction PA Accountability Grant State Share of Social Security and Medicare Taxes State Share of Retirement Contributions

8000-REVENUE FROM FEDERAL SOURCES Medical Assistance Reimbursements Medical Assistance Reimbursements for Health

Related Transportation and Administrative Costs

$

ORIGINAL BUDGET

8,820,047 14,100

200 30,500 61,000 58,000

1,030,000 100,000 510,000

2,200 4,400

20,000

40,000 37,800 20,000

-o-156,228 150,000

-o--o-

8,700 30,000

7,000 -0-953

11.101.128

2,990,290

38,000 4,459

629' 714 248,524 172,224

25,000 196,006

-o-311,379 481.375

5,096,971

-0-

-0--0-

ACCOUNT 9000-0THER FINANCING SOURCES 9400 Sale of Fixed Assets -0-

TOTAL REVENUE AND OTHER FINANCING SOURCES $ 16,198,099

$ ACTUAL

8,928,936 14,239

196 30,058 60,116 59,874

1,383,460 131,615 517,839

1,524 2,898 2,486

57,151 41,178 19' 054

3,225 159,421 152,279

1,000 11' 100 15,420 24,301

2,700 8,132

785 11,628,987

2,990,290

-o-1,050

629' 714 240,258 182,204

24,143 196,006

46,373 297,223 469,230

5,076,491

-0-

7 912 7 912

5 000

$ 16,718,390


-65-

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Budgetary Comparison-Revenues and Expenditures

General Fund

< z ~ .... >til z z "' .. "' .... ttl)

= "' z

:E 0: LL

" z 1-z :::> 0 u u .. 0

"' LL

For the Year Ended June 30. 2013

ACCOUNT lOCO-INSTRUCTION 1100 Regular Programs-Elementary/Secondary 1200 Special and Gifted Education 1300 Vocational Education Programs 1410 Other Instructional Programs-Elementary/Secondary

1430

1441 1442

Drivers Education Other Instructional Programs-Elementary/Secondary~

Homebound Instruction Other Instructional Programs-Court Placed Other Instructional Programs-Alternative Education

ACCOUNT 2000-SUPPORT SERVICES 2110 Pupil Personnel-Supervision 2120 Pupil Personnel-Guidance Services 2140 Pupil Personnel-Psychological Services 2200 Instructional Staff 2310 Administration-Board Services 2330 Administration-Tax Assessment and Collection Services 2350 Administration-Legal Services 2360 Administration-Office of the Superintendent Services 2380 Administration-Office of the Principal Services 2400 Pupil Health 2500 Business 2600 Operation and Maintenance of Plant Services 2700 Student Transportation Services 2800 Central and Other Support Services 2900 Other Support Services

~ ACCOUNT 3000-0PERATION OF NON-INSTRUCTIONAL SERVICES ~ 3200 Student Activities

<

0 I-'

ACCOUNT 4000-FACILITIES ACQUISITION, CONSTRUCTION AND IMPROVEMENT SERVICES

>- ACCOUNT 5000-DEBT SERVICE AND OTHER FINANCING USES z ~ :E 0 u 0 z < 0:

5130 5240 5250 5900

Refund of Prior Years Receipts Fund Transfers-Debt Service Fund Fund Transfers-Enterprise Fund Budgetary Reserve

$

ORIGINAL BUDGET

6,913,486 1,704,428

780,954

25,731

12,581 5,000

65,000 9,507,180

34,083 374,542

52,036 473,176

25,750 74,759 41,000

294,901 549,620 191,897 232,902

1,489,030 821,727 237' 911

21 300 4,914,634

480,434

-0-

1,000 1,472,736

35,000 130,000

1,638,736

$

ACTUAL

6,822,986 1' 523' 168

744,803

34 '507

2' 873 -0-

74,434 9.202. 771

35,325 402,433 70,565

413,589 26,114 77,981 31,922

247,850 565,899 194,984 241,041

1,495,556 819,739 185,141

21.337 4.829.476

526.712

-0-

814 1,472,736

15,000 -0-

1.488.550

"' TOTAL EXPENDITURES AND OTHER FINANCING USES z $ 16,540,984 $ 16.047,509

"' >= .. :::; J: ..


-66-

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z z w .. w .J >I))

: w z

::E

"' u: " z ;:: z :;)

0 u u z < .. ::E 0 u c z <

"' w z w >: .. :::; I ..


June 30 2013

NOTE 15 - CHANGES IN ACCOUNTING PRINCIPLE (Continued)

The following is a schedule of this change:


Changes in Accounting Principles

Net Position-June 30, 2013

NOTE 16 - SUBSEQUENT EVENTS

Governmental Activities $(2,300,502)

479,790)

$ (2 '780 ,292)

The School District has evaluated subsequent events through November 26, 2013, the date which the financial statements were available to be issued.

The Neshannock Township School District, in conjunction with the seven other Lawrence County School Districts are, involved in a joint venture to fund the operating budget of the Lawrence County Career and Technical Center. Each Districts' share is based on the percentage of the Districts' enrollment to the total enrollment at the Lawrence County Career and Technical Center. Subsequent to the June 30, 2013 financial statements date, Lawrence County Career and Technical Center has revised their operating costs for prior years. The amounts due this District or owed to the Center is unknown at this time.

-58-

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w -' fUl ..: u >= "' z

::; 0: u.

"' z ;: z ::> 0 u u ..: u :::; ., ::> 0.

" "' u. ;: 0:

"' u ..:

" f--' >z ..: 0. ::; 0 u

" z ..: 0:

"' z

"' >= 0. :::; J: 0.

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Taxes

For the Year Ended June 30, 2013

PER CAPITA TOTAL REAL ESTATE SECTION 679 ACT 511 PER CAPITA

Taxes Based on Original Assessment $ 9,812,090 $ 32,915 $ 65,830 $ 98,745 Additions 1,978 -0- -0- -0-Penalties 35 258 140 280 420

$ 9,849,326 $ 33,055 $ 66,110 $ 99,165

Net Collections $ 8,928,936 $ 30,067 $ 60,136 $ 90,203 Discount 153,047 508 1,014 1,522 Exonerations and Refunds 77,854 630 1,260 1,890 Homestead/Farmstead Exemptions 195,544 -0- -0- -0-Filed With County Commissioners -0- -0- -0- -0-Delinquent 493,945 1,850 3,700 5,550

$ 9,849,326 $ 33,055 $ 66,110 $ 99,165

Assessed Value (Face Amounts Adjusted for Additions and Deletions-~llage . 0143758) $ 677,264,152

Taxable Value $ 9,736,214

Number of Individuals-Per Capita Tax 6,583 6,583 6,583

Levy 5 10 15

Taxable Value $ 32,915 $ 65,830 $ 98,745

Exonerations and Additions of Individuals-Per Capita Tax (Net) 126 126 126

Levy 5 10 15

Exonerations and Refunds Net of Additions $ 630 $ 1,260 $ 1,890


-67-

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:; >-1})

z z "' 0.

.; -' II}) <( 0 ~ "' z

" "' u. (!) z 1-z :J 0 0 0 <(

0 -' Dl :J 0.

0

"' u. !-

"' "' 0 <(

0 1--' >z <( 0.

" 0 0 0 z <(

"' "' z

"' ~ 0.

-' I 0.

NESHANNOCK TOWNSHIP SCHOOL DISTRICT Statement of Receipts and Disbursements

Activity Fund For the Year Ended June 30, 2013

BALANCE JULY 1, 2012 RECEIPTS

BALANCE DISBURSEMENTS JUNE 30, 2013

Band Auxiliary Squads Fund French Club Future Business Leaders of America Junior High Student Advisory

Council Account Lance Fund Musical Account National Junior Honor Society Fund National Honor Society Fund School Store Ski Club Spanish Club Student Government Fund Senior High Choir Prom

Totals

$ 1,174 $ 1

2,566

5,070 2,863 2,583

648 881

3,149 882 146

4,357 111

16.550

$ 40,981 $

9,605 $ 6,174 $ 4,605 1,082 963 120

12,217 13,759 1,024

13,008 11,892 6,186 13,419 10,953 5,329 25,601 26,346 1,838

815 694 769 2,655 2,737 799 1,315 2,223 2,241

12,921 11' 007 2,796 3,550 3,372 324

25,188 21,378 8' 167 2,714 2,063 762

15,690 24.797 7,443

139,780 $ 138,358 $ 42,403


-68-

APPENDIX D

Continuing Disclosure Agreement

{J1847671.1}

1

CONTINUING DISCLOSURE AGREEMENT

On this July 27, 2014, this Disclosure Agreement (the “Disclosure Agreement”) is executed

and delivered by the Neshannock Township School District (the “Issuer”) in connection with the

issuance of $4,225,000 aggregate principal amount, General Obligation Bonds, Series of 2014 (the

“Bonds”). The Bonds are being issued pursuant to a Bond Resolution adopted by the Board of

School Directors of the Issuer on June 23, 2014 (the “Resolution”). The Issuer, intending to be

legally bound, hereby covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is the

written undertaking for the benefit of the beneficial holders of the Bonds required by Section

(b)(5)(i) of Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities

and Exchange Act of 1934, as the same may be amended from time to time (the “Rule”).

SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which

apply to any capitalized term used in this Agreement unless otherwise defined in this Section, the

following capitalized terms shall have the following meanings:

“Disclosure Agent” shall mean any agent of the Issuer designated in writing by the Issuer,

which agent has filed with the Issuer a written acceptance of such designation.

“MSRB” shall mean the Municipal Securities Rulemaking Board.

“Participating Underwriter” shall mean any of the original underwriters of the Bonds

required to comply with the Rule in connection with the offering of the Bonds.

“Submission Date” shall mean the date which is not later 270 days following after the end of

each fiscal year of the Issuer, commencing with the fiscal year ending June 30, 2014.

SECTION 3. Provision of Annual Reports.

(a)(i) The Issuer shall, or shall cause the Disclosure Agent to, on or before the

Submission Date, provide to the MSRB an annual report (the “Annual Report”) which contains or

incorporates by reference the following two components: (a) a copy of the Issuer’s annual financial

statements prepared in accordance with generally accepted accounting principles for governmental

units as prescribed by the Governmental Accounting Standards Board and audited by a certified

public accountant or independent public accountant in accordance with generally accepted auditing

standards and (b) the annual financial information or operating data set forth on Appendix A

attached hereto and made a part hereof.

(ii) The Annual Report may be submitted as a single document or as

separate documents comprising a package, and may cross-reference other information as provided

in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the

Issuer as referenced above in the first component of the Annual Report may be submitted separately

from the balance of the Annual Report, if and when available. Any or all of the items listed above

{J1847671.1}

2

may be incorporated by reference from other documents, including official statements of debt issues

with respect to which the Issuer is an “obligated person” (as defined by the Rule), which have been

filed with the MSRB or the Securities and Exchange Commission. If the document incorporated by

reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly

identify each such other document so incorporated by reference.

(b) If the Issuer on its own or through a Disclosure Agent, if any, is unable to

provide the annual financial information portions of the Annual Report to the MSRB by the

Submission Date, the Issuer shall file with the MSRB notice of such failure to file and the

anticipated date of filing.

(c) The Disclosure Agent, if any, shall:

(i) determine each year prior to the Submission Date the address of the

MSRB and the required mode of filing; and

(ii) file a report with the Issuer certifying that the Annual Report has

been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all

persons to which it was provided.

(d) If there is no Disclosure Agent, the Issuer shall determine each year prior to

the Submission Date the address of the MSRB and the required mode of filing.

(e) Audited financial statements of the Issuer not submitted as part of the

Annual Report shall be provided to the MSRB, if and when available to the Issuer, and in any event

not more than thirty (30) days after receipt thereof from the Issuer’s auditors. In the event that

audited financial statements are not submitted as part of the Annual Report, the Issuer shall provide

in lieu thereof unaudited financial statements meeting the description set forth in Appendix A

attached hereto.

(f) The Issuer shall promptly provide written notice of any change in its fiscal

year to the MSRB.

SECTION 4. Reporting of Material Events. The Issuer shall provide or cause the

Disclosure Agent to provide, in a timely manner (not in excess of (10) business days after the

occurrence of any of the following events), written notice to the MSRB of any of the following

events with respect to the Bonds:

(a) principal and interest payment delinquencies;

(b) non-payment related defaults, if material;

(c) unscheduled draws on the debt service reserves, if any, reflecting financial

difficulties;

{J1847671.1}

3

(d) unscheduled draws on credit enhancements, i.e., municipal bond insurance

or letters of credit, reflecting financial difficulties;

(e) substitution of credit or liquidity providers, i.e., municipal bond insurance

companies or letter of credit banks, or their failure to perform;

(f) adverse tax opinions, the issuance by the Internal Revenue Service of

proposed or final determinations of taxability, Notices of Proposed Issue

(IRS Form 5701-TEB) or other material notices or determinations with

respect to the tax status of the Bonds, or other material events affecting the

tax status of the Bonds;

(g) modifications to rights of holders of the Bonds, if material;

(h) Bond calls, if material, and tender offers;

(i) defeasance of the Bonds or any portion thereof;

(j) release, substitution or sale of property, if any, securing repayment of the

Bonds, if material;

(k) rating changes;

(l) bankruptcy, insolvency, receivership or similar event of the School District;

(m) the consummation of a merger, consolidation, or acquisition involving the

School District or the sale of substantially all of the assets of the School

District, other than in the ordinary course of business, the entry into a

definitive agreement to undertake such an action or the termination of a

definitive agreement relating to any such actions, other than pursuant to its

terms, if material; or

(n) appointment of a successor or additional trustee or the change of name of a

trustee, if material.

SECTION 5. Filing. Any filing under this Disclosure Agreement must be made in such

manner as may be prescribed by the MSRB, currently by uploading the filing in machine-readable

Adobe .pdf format to the MSRB’s Electronic Municipal Market Access system (“EMMA”)

Dataport, at http://emma.msrb.org/ .

SECTION 6. Amendment; Waiver. Notwithstanding any other provision of this

Disclosure Agreement, the Issuer may amend this Disclosure Agreement, and any provision of this

Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of

counsel expert in federal securities laws, acceptable to the Issuer to the effect that such amendment

or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such

{J1847671.1}

4

amendment or waiver had been effective on the date hereof but taking into account any subsequent

change in or official interpretation of the Rule.

SECTION 7. Default. In the event of a failure of the Issuer to comply with any provision

of this Disclosure Agreement, any Participating Underwriter or any beneficial holder of the Bonds

may take such actions as may be necessary and appropriate, including seeking a writ of mandamus

or specific performance by court order, to cause the Issuer to comply with its obligations under this

Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an event of

default under the Resolution, and the sole remedy under this Disclosure Agreement in the event of

any failure of any party to comply with this Disclosure Agreement shall be an action to compel

performance. Nothing herein shall be deemed to limit a Bondholder’s rights under any provisions

of the federal securities laws other than the Rule.

SECTION 8. Concerning the Disclosure Agent. The Issuer may from time to time, appoint

or engage a Disclosure Agent to assist it in carrying out its obligations under this Disclosure

Agreement, and may discharge any such agent, with or without appointing a successor Disclosure

Agent.

SECTION 9. Notices. All notices to be given to the Issuer shall be in writing and shall be

addressed as follows:

Superintendent

Neshannock Township School District

3834 Mitchell Road

New Castle, PA 16105

SECTION 10. Governing Law. This Disclosure Agreement shall by governed by and

interpreted in accordance with the laws of the Commonwealth of Pennsylvania; provided that, to the

extent that the Securities and Exchange Commission, the MSRB or any other federal or state agency

or regulatory body with jurisdiction of the Bonds shall have promulgated any rule or regulation

governing the subject matter hereof, this Disclosure Agreement shall be interpreted and construed in

a manner consistent therewith.

SECTION 11. Severability. If any provision hereof shall be held invalid or unenforceable

by a court of competent jurisdiction, the remaining provisions hereof shall survive and continue in

full force and effect.

SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of

the Participating Underwriter and the owners of the Bonds and shall create no rights in any other

person or entity.

SECTION 13. Termination of Reporting Obligation and Disclosure Agreement. This

Disclosure Agreement and the Issuer’s obligations hereunder shall terminate upon the legal

defeasance, prior redemption or payment in full of all of the Bonds. The Issuer shall provide timely

written notice to the MSRB of any termination of its obligations hereunder.

{J1847671.1}

5

IN WITNESS WHEREOF, the Issuer has caused its duly authorized officers to execute this

Disclosure Agreement as of the day and year first written above.


ATTEST:

By:

Secretary President

(SEAL)

{J1847671.1}

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APPENDIX A

The Issuer’s Annual Report shall contain or incorporate by reference the following:

(a) a copy of the School District’s annual financial statements prepared in accordance with generally

accepted accounting principles for governmental units as prescribed by the Governmental

Accounting Standards Board and audited by a certified public accountant or independent public

accountant in accordance with generally accepted auditing standards (if audited financial statements

are available); and

(b) the following annual financial information and operating data relating to the School District:

1. General purpose financial statements, including combined balance sheets of all fund

types and account groups, combined statements of revenues, expenditures and

changes in fund balances of all governmental fund types and combined statements of

revenue, expenditures and changes in fund balances - budget and actual (budgetary

basis) of general, certain special revenue and capital projects funds, combined

statements of revenues, expenses and changes in retained earnings for all proprietary

fund types and for fiduciary fund types and combined statement of cash flows for

enterprise and nonexpendable trust funds;

2. (A) a copy of (or a summary of) the budget for the current fiscal year

(B) the aggregate assessed value and market value of all taxable real estate for the

current fiscal year

(C) the taxes and millage rates imposed for the current fiscal year

(D) the real property tax collection results for the most recent fiscal year, including

(1) the real estate levy imposed (expressed both as a millage rate and an aggregate

dollar amount), (2) the dollar amount of real estate taxes collected that represented

current collections (expressed both as a percentage of such fiscal year’s levy and as

an aggregate dollar amount), (3) the amount of real estate taxes collected that

represented taxes levied in prior years (expressed as an aggregate dollar amount),

and (4) the total amount of real estate taxes collected (expressed both as a percentage

of the current year’s levy and as an aggregate dollar amount)

(E) a list of the ten (10) largest real estate taxpayers and, for each, the total aggregate

assessed value of real estate for the current fiscal year

(F) pupil enrollment figures, including enrollment at the end of the most recent fiscal

year, current enrollment and projected enrollment for the beginning of the next fiscal

year, including a breakdown between elementary and secondary enrollment (to the

extend reasonably feasible).

APPENDIX E

Specimen Municipal Bond Insurance Policy

Documents

$4,225,000* Neshannock Township School District€¦ · $4,225,000* Neshannock Township School District Lawrence County, Pennsylvania General Obligation Bonds, Series of 2014 Date