STATE COLLEGE AREA SCHOOL DISTRICT Office of Finance and ... · The purpose of this letter (the "Engagement Letter") is to confirm our understanding of the terms and objectives of

STATE COLLEGE AREA SCHOOL DISTRICT

Office of Finance and Operations 240 VILLA CREST DRIVE • STATE COLLEGE PENNSYLVANIA • 16801

TELEPHONE: 814-231-1021 • FAX: 814-272-8790

To: Robert J. O’Donnell, Superintendent

From: Randy Brown

Donna Watson

Date: May 2, 2019

Subject: Appointment of Baker Tilly for Audit Services

Administration is requesting Board approval to extend audit services with Baker Tilly Virchow

Krause, LLP (Baker Tilly) for the 2018-19 fiscal year. The fee for audit services for the State

College Area School District totals $43,000, which is consistent with the prior year. The fee for

audit services and preparation of Federal Form 990 for the State College Area School District

Education Foundation, Inc. (“Foundation”) is an amount not to exceed $4,500. This is the first

year that the Foundation revenue is anticipated to exceed $750,000 (including pledges), thus

requiring audit, rather than review, services. Financial statement review and 990 services in the

prior year totaled $2,000. Engagement letters for audit services are attached for Board review

and approval.

On June 8, 2015 the board approved Baker Tilly to provide audit services for the District’s

financial records for the 2014-15, 2015-16 and 2016-17 fiscal years. The request for proposal

provided for retention of the awarded audit firm for up to two (2) additional contract years, given

mutual consent of both parties. This would therefore be the final extension year under the award.

Baker Tilly has notified the district that Rick Bair, who has served as the engagement partner for

the past several years, will be retiring prior to the issuance of the district’s audit statements. John

Compton will be the engagement partner for the 2018-19 audit.

V-A

Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP

Baker Tilly Virchow Krause, LLP1423 N Atherton StState College, PA 16803-3040

T: +1 (814) 238 8474F: +1 (888) 264 9617

bakertilly.com

April 26, 2019

State College Area School District240 Villa Crest DriveState College, Pennsylvania 16801

Thank you for using Baker Tilly Virchow Krause, LLP ("Baker Tilly" or "we" or "our") as your auditors.

The purpose of this letter (the "Engagement Letter") is to confirm our understanding of the terms and objectivesof our engagement and the nature of the services we will provide as independent accountants of State CollegeArea School District ("you" or "your").

Service and Related Report

We will audit the basic financial statements of State College Area School District as of and for the year endedJune 30, 2019, and the related notes to the financial statements. Upon completion of our audit, we will provideState College Area School District with our audit report on the financial statements referred to below. If, for anyreasons caused by or relating to the affairs or management of State College Area School District, we are unableto complete the audit or are unable to or have not formed an opinion, or if we determine in our professionaljudgment the circumstances necessitate, we may withdraw and decline to issue a report as a result of thisengagement.

The following supplementary information accompanying the financial statements and the schedule of federalawards required by the OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements forFederal Awards ("Uniform Guidance") will be subjected to the auditing procedures applied in our audit of thefinancial statements and certain additional procedures, including comparing and reconciling such informationdirectly to the underlying accounting and other records used to prepare the financial statements or to thefinancial statements themselves, and other additional procedures in accordance with auditing standardsgenerally accepted in the United States of America (GAAS), and our auditor’s report will provide an opinion on itin relation to the financial statements as a whole.

1. Schedule of Revenues, Expenditures, and Change in Fund Balance – General Fund

2. Schedule of Expenditures of Federal Awards

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State College Area School District

April 26, 2019Page 2

Accounting standards generally accepted in the United States of America provide for certain requiredsupplementary information ("RSI"), such as management’s discussion and analysis, to supplement the StateCollege School District's basic financial statements. Such information, although not a part of the basic financialstatements, is required by the Governmental Accounting Standards Board who considers it to be an essentialpart of financial reporting for placing the basic financial statements in an appropriate operational, economic, orhistorical context. As part of our engagement, we will apply certain limited procedures to the State CollegeSchool District's RSI in accordance with auditing standards generally accepted in the United States of America.These limited procedures will consist of inquiries of management regarding the methods of preparing theinformation and comparing the information for consistency with management's response to our inquiries, thebasic financial statements, and other knowledge we obtained during our audit of the basic financial statements.We will not express an opinion or provide any assurance on the information because the limited procedures donot provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI isrequired by generally accepted accounting principles and will be subjected to certain limited procedures, but willnot be audited:

Management's Discussion and Analysis

Schedule of District's Proportionate Share of the Net Pension Liability

Schedule of District Contributions (Pension)

Schedule of District's Proportionate Share of the Net OPEB Liability

Schedule of Changes in Total OPEB Liability and Related Ratios

Schedule of District's Contributions (OPEB)

Our Responsibilities and Limitations

The objective of a financial statement audit is the expression of an opinion on the financial statements. Theobjective also includes reporting on:

Internal control related to the financial statements and compliance with laws, regulations, and theprovisions of contracts or grant agreements, noncompliance with which could have a direct and materialeffect on the financial statements in accordance with Government Auditing Standards.

Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance withlaws, regulations, and the provisions of contracts or grant agreements that could have a direct and*canmaterial effect on each major program in accordance with the Single Audit Act Amendments of 1996and OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for FederalAwards ("Uniform Guidance").

The Government Auditing Standards report on internal control over financial reporting and on compliance andother matters will include a paragraph that states (i) that the purpose of the report is solely to describe the scopeof testing of internal control and compliance, and the results of that testing, and not to provide an opinion on theeffectiveness of the entity's internal control or on compliance, and (ii) that the report is an integral part of anaudit performed in accordance with Government Auditing Standards in considering the entity's internal controland compliance. The Uniform Guidance report on internal control over compliance will include a paragraph thatstates that the purpose of the report on internal control over compliance is solely to describe the scope of testingof internal control over compliance and the results of that testing based on the requirements of the UniformGuidance. Both reports will state that the report is not suitable for any other purpose.

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We will be responsible for performing the audit in accordance with auditing standards generally accepted in theUnited States of America ("GAAS"); the standards for financial audits contained in Government AuditingStandards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996;the Uniform Guidance, and will include tests of accounting records, a determination of major program(s) inaccordance with the Uniform Guidance, and other procedures we consider necessary to enable us to expresssuch opinions and to render the required reports.

These standards require that we plan and perform our audit to obtain reasonable, rather than absolute,assurance about whether the financial statements are free of material misstatement, whether from (i) errors, (ii)fraudulent financial reporting, (iii) misappropriation of assets, or (iv) violations of laws or governmentalregulations that are attributable to State College Area School District or to acts by management or employeesacting on behalf of State College Area School District. Because the determination of abuse is subjective,Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse.Our audit will include examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements, assessing accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. Our audit does not relieve management and theaudit committee or equivalent group charged with governance of their responsibilities.

The audit will include obtaining an understanding of State College Area School District and its environment,including internal controls, sufficient to assess the risks of material misstatement of the financial statements andto determine the nature, timing and extent of further audit procedures. An audit is not designed to provideassurance on internal control or to identify deficiencies in internal control. However, during the audit, we willcommunicate to management and the audit committee or equivalent group charged with governance internalcontrol matters that are required to be communicated under professional standards. We will also inform you ofany other matters involving internal control, if any, as required by Government Auditing Standards and theUniform Guidance.

As required by the Uniform Guidance, we will perform tests of controls over compliance to evaluate theeffectiveness of the design and operation of controls that we consider relevant to preventing or detectingmaterial noncompliance with compliance requirements applicable to each major federal award program.However, our tests will be less in scope than would be necessary to render an opinion on those controls and,accordingly, no opinion will be expressed in our report on internal control over compliance issued pursuant tothe Uniform Guidance.

We will design our audit to obtain reasonable, but not absolute, assurance of detecting errors or fraud thatwould have a material effect on the financial statements as well as other illegal acts having a direct and materialeffect on financial statement amounts. An audit is not designed to detect error or fraud that is immaterial to thefinancial statements. Our audit will not include a detailed audit of transactions, such as would be necessary todisclose errors or fraud that did not cause a material misstatement of the financial statements. It is important torecognize that there are inherent limitations in the auditing process. Audits are based on the concept ofselective testing of the data underlying the financial statements, which involves judgment regarding the areas tobe tested and the nature, timing, extent and results of the tests to be performed. Our audit is not a guarantee ofthe accuracy of the financial statements and, therefore, is subject to the limitation that material errors or fraud orother illegal acts having a direct and material financial statement impact or a direct and material effect on majorfederal programs, if they exist, may not be detected. Because of the characteristics of fraud, particularly thoseinvolving concealment through collusion, falsified documentation and management's ability to override controls,an audit designed and executed in accordance with GAAS and Government Auditing Standards, may not detecta material fraud. Further, while effective internal control reduces the likelihood that errors, fraud or other illegalacts will occur and remain undetected, it does not eliminate that possibility. For these reasons, we cannotensure that errors, fraud or other illegal acts or noncompliance, if present, will be detected. However, we willcommunicate to you, as appropriate, any such matters that we identify during our audit. Also, if required byGovernment Auditing Standards, we will report known or likely fraud, illegal acts, violations of provisions ofcontracts or grant agreements, or abuse directly to parties outside of State College Area School District.

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As part of obtaining reasonable assurance about whether the financial statements are free of materialmisstatement, we will perform tests of State College Area School District's compliance with the provisions ofapplicable laws, regulations, contracts, and agreements, including grant agreements. However, the objective ofthose procedures will not be to provide an opinion on overall compliance and we will not express such anopinion in our report on compliance issued pursuant to Government Auditing Standards.

The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance aboutwhether you have complied with applicable laws and regulations and the provisions of contracts and grantagreements applicable to major programs. Our procedures will consist of test of transactions and otherapplicable procedures described in the OMB Compliance Supplement for the types of compliance requirementsthat could have a direct and material effect on each of State College Area School District's major programs. Thepurpose of those procedures will be to express an opinion on your compliance with requirements applicable toeach of your major programs in our report on compliance issued pursuant to the Uniform Guidance.

We are also responsible for determining that the audit committee or equivalent group charged with governanceis informed about certain other matters related to the conduct of the audit, including (i) our responsibility underGAAS, (ii) an overview of the planned scope and timing of the audit, and (iii) significant findings from the audit,which include (a) our views about the qualitative aspects of your significant accounting practices, accountingestimates, and financial statement disclosures; (b) difficulties encountered in performing the audit; (c)uncorrected misstatements and material corrected misstatements that were brought to the attention ofmanagement as a result of auditing procedures; and (d) other significant and relevant findings or issues (e.g.,any disagreements with management about matters that could be significant to your financial statements or ourreport thereon, consultations with other independent accountants, issues discussed prior to our retention asindependent auditors, fraud and illegal acts, and all significant deficiencies and material weaknesses identifiedduring the audit). Lastly, we are responsible for ensuring that the audit committee or equivalent group chargedwith governance receives copies of certain written communications between us and management includingwritten communications on accounting, auditing, internal controls or operational matters and representationsthat we are requesting from management.

The audit will not be planned or conducted in contemplation of reliance of any specific third party or with respectto any specific transaction. Therefore, items of possible interest to a third party will not be specifically addressedand matters may exist that would be addressed differently by a third party, possibly in connection with a specifictransaction.

Management's Responsibilities

State College Area School District's management is responsible for the financial statements referred to above.Management is also responsible for identifying government award programs and understanding and complyingwith the compliance requirements, and for preparation of the schedule of expenditures of federal awards inaccordance with the requirements of the Uniform Guidance. In this regard, management is responsible forestablishing policies and procedures that pertain to the maintenance of adequate accounting records andeffective internal controls, including internal controls over compliance, and for evaluating and monitoringongoing activities; to help ensure that appropriate goals and objectives are met; following laws and regulations;and ensuring that there is reasonable assurance that government programs are administered in compliancewith applicable requirements; and ensuring that management is reliable and financial information is reliable andproperly reported. Management is also responsible for implementing systems designed to achieve compliancewith applicable laws, regulations, contracts, and grant agreements. Your responsibilities also include identifyingsignificant vendor relationships in which the vendor has responsibility for program compliance and for theaccuracy and completeness of that information. You are also responsible for the selection and application ofaccounting principles, the authorization of receipts and disbursements, the safeguarding of assets, the properrecording of transactions in the accounting records, for reporting financial information in conformity withaccounting principles generally accepted in the United States of America ("GAAP"), and for compliance withapplicable laws and regulations and the provisions of contracts and grant agreements.

Rev.Sept2016



Management is also responsible for the design and implementation of programs and controls to prevent anddetect fraud, and for informing us in the management representation letter (i) about all known or suspectedfraud affecting State College Area School District involving: (a) management, (b) employees who havesignificant roles in internal control over financial reporting, and (c) others where the fraud or illegal acts couldhave a material effect on the financial statements; and (ii) of its knowledge of any allegations of fraud orsuspected fraud affecting State College Area School District received in communications from employees,former employees, analysts, grantors, regulators, or others. In addition, you are responsible for identifying andensuring that the entity complies with applicable laws, regulations, contracts, agreements, and grants and fortaking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws, regulations,contracts or grant agreements, or abuse that we report. Additionally, as required by the Uniform Guidance, it ismanagement’s responsibility to follow up and take corrective action on reported audit findings and to prepare asummary schedule of prior audit findings and a corrective action plan. The summary schedule of prior auditfindings should be available for our review before we begin fieldwork.

Management is responsible for establishing and maintaining a process for tracking the status of audit findingsand recommendations. Management is also responsible for identifying for us previous financial audits,attestation engagements, performance audits or other studies related to the objectives discussed above. Thisresponsibility includes relaying to us corrective actions taken to address significant findings andrecommendations resulting from those audits, attestation engagements, performance audits or studies. You arealso responsible for providing management's views on our current findings, conclusions, and recommendations,as well as your planned corrective actions for the report, and for the timing and format for providing thatinformation.

Management is responsible for (i) adjusting the basic financial statements to correct material misstatements andfor affirming to us in a management representation letter that the effects of any uncorrected misstatementsaggregated by us during the current engagement and pertaining to the latest period under audit are immaterial,both individually and in the aggregate, to the basic financial statements taken as a whole, and (ii) notifying us ofall material weaknesses, including other significant deficiencies, in the design or operation of your internalcontrol over financial reporting that are reasonably likely to adversely affect your ability to record, process,summarize and report external financial data reliably in accordance with GAAP. Management is alsoresponsible for identifying and ensuring that State College Area School District complies with the laws andregulations applicable to its activities.

As part of management’s responsibility for the financial statements and the effectiveness of its system ofinternal control over financial reporting, management is responsible for making available to us, on a timelybasis, all of your original accounting records and related information and for the completeness and accuracy ofthat information and your personnel to whom we may direct inquiries. As required by GAAS, we will makespecific inquiries of management and others about the representations embodied in the financial statementsand the effectiveness of internal control over financial reporting. GAAS also requires that we obtain writtenrepresentations covering audited schedule of expenditures of federal and state awards, federal and state awardprograms, and compliance with laws, regulations, contracts and grant agreements from certain members ofmanagement. The results of our audit tests, the responses to our inquiries, and the written representations,comprise the evidential matter we intend to rely upon in forming our opinion on the financial statements.

Baker Tilly is not a municipal advisor as defined in Section 975 of the Dodd-Frank Wall Street Reform andConsumer Protection Act or under Section 15B of the Securities Exchange Act of 1934 (the "Act"). Baker Tilly isnot recommending an action to State College Area School District; is not acting as an advisor to you and doesnot owe a fiduciary duty pursuant to Section 15B of the Act to you with respect to the information and materialcontained in the deliverables issued under this engagement. You should discuss any information and materialcontained in the deliverables with any and all internal and external advisors and experts that you deemappropriate before acting on this information or material.

Rev.Sept2016



Nonattest Services

Prior to or as part of our audit engagement, it may be necessary for us to perform certain nonattest services. Forpurposes of this letter, nonattest services include services that Government Auditing Standards refers to asnonaudit services.

Nonattest services that we will be providing are as follows:

Proposing correcting and adjusting journal entries as considered necessary

Technical assistance with conversion of financial statements from fund basis to government-wide basis

Technical assistance with the preparation of the financial statements, required supplementaryinformation, and notes thereto

Technical assistance with the presentation of the auditee section of the Data Collection Form

None of these nonattest services constitute an audit under generally accepted auditing standards includingGovernment Auditing Standards.

We will not perform any management functions or make management decisions on your behalf with respect toany nonattest services we provide.

In connection with our performance of any nonattest services, you agree that you will:

Continue to make all management decisions and perform all management functions, includingapproving all journal entries and general ledger classifications when they are submitted to you.

Designate an employee with suitable skill, knowledge, and/or experience, preferably within seniormanagement, to oversee the services we perform.

Evaluate the adequacy and results of the nonattest services we perform.

Accept responsibility for the results of our nonattest services.

Establish and maintain internal controls, including monitoring ongoing activities related to the nonattestfunction.

On a periodic basis, as needed, we will meet with you to discuss your accounting records and the managementimplications of your financial statements. We will notify you, in writing, of any matters that we believe you shouldbe aware of and will meet with you upon request.

Rev.Sept2016



Other Documents

If you intend to reproduce or publish the financial statements in an annual report or other information (excludingofficial statements), and make reference to our firm name in connection therewith, you agree to publish thefinancial statements in their entirety. In addition, you agree to provide us, for our approval and consent, proofsbefore printing and final materials before distribution.

If you intend to reproduce or publish the financial statements in an official statement, unless we establish aseparate agreement to be involved in the issuance, any official statements issued by State College Area SchoolDistrict must contain a statement that Baker Tilly is not associated with the official statement, which shall read"Baker Tilly Virchow Krause, LLP, our independent auditor, has not been engaged to perform and has notperformed, since the date of its report included herein, any procedures on the financial statements addressed inthat report. Baker Tilly Virchow Krause, LLP, has also not performed any procedures relating to this officialstatement."

With regard to the electronic dissemination of audited financial statements, including financial statementspublished electronically on your Internet website, you understand that electronic sites are a means to distributeinformation and, therefore, we are not required to read the information contained in these sites or to considerthe consistency of other information in the electronic site with the original document.

At the conclusion of our engagement, we will complete the appropriate auditor sections of the Data CollectionForm that summarizes our audit findings. It is management’s responsibility to complete the auditee sections andto submit the reporting package (including financial statements, schedule of expenditures of federal awards,summary schedule of prior year audit findings, auditors' reports, and corrective action plan) along with the DataCollection Form to the federal audit clearinghouse. We will coordinate with you the electronic submission andcertification. If applicable, we will provide copies of our report for you to include within the reporting package youwill submit to pass-through entities. The Data Collection Form and the reporting package must be submittedwithin the earlier of thirty (30) days after receipt of the auditors’ reports or nine (9) months after the end of theaudit period.

We will provide copies of our reports to State College Area School District, however, management isresponsible for distribution of the reports and the financial statements. Copies of our reports are to be madeavailable for public inspection unless restricted by law or regulation or if they contain privileged and confidentialinformation.

The documentation for this engagement, including the workpapers, is the property of Baker Tilly and constitutesconfidential information. However, pursuant to authority given by law or regulation, we may be requested tomake certain audit documentation available to federal or state agencies for purposes of a quality review of theaudit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. Ifrequested, access to such audit documentation will be provided under the supervision of Baker Tilly personnel.Furthermore, upon request, we may provide copies of selected audit documentation to the aforementionedparties. These parties may intend, or decide, to distribute the copies or information contained therein to others,including other governmental agencies.

We may have a responsibility to retain the documentation for a period of time sufficient to satisfy any applicablelegal or regulatory requirements for records retention. If we are required by law, regulation or professionalstandards to make certain documentation available to regulators, State College Area School District herebyauthorizes us to do so.

Rev.Sept2016



Government Auditing Standards require that we provide you with a copy of our most recent external peer reviewreport and any subsequent peer review reports received during the period of the contract. Our most recent peerreview report accompanies this letter.

Timing and Fees

Completion of our work is subject to, among other things, (i) appropriate cooperation from State College AreaSchool District's personnel, including timely preparation of necessary schedules, (ii) timely responses to ourinquiries, and (iii) timely communication of all significant accounting and financial reporting matters. When and iffor any reason State College Area School District is unable to provide such schedules, information, andassistance, Baker Tilly and you will mutually revise the fee to reflect additional services, if any, required of us tocomplete the audit. Delays in the issuance of our audit report beyond the date that was originally contemplatedmay require us to perform additional auditing procedures which will likely result in additional fees.

Revisions to the scope of our work will be communicated to you and may be set forth in the form of an"Amendment to Existing Engagement Letter." In addition, if we discover compliance issues that require us toperform additional procedures and/or provide assistance with these matters, fees at our standard hourly ratesapply.

Our all-inclusive fee of $40,000 will include the audit of the federal awards program, including the preparation ofthe Data Collection Form. Our fee quote for the audit of the federal awards programs assumes that there arethree major programs and that there are no significant findings or questioned costs. Our fees for additionalmajor programs or internal control/compliance findings will vary depending on the number of major programsand/or the number of findings.

Our fees do not include bookkeeping or accounting assistance, if necessary, for preparation of auditworkpapers, the audit report, or adjusting jounral entries. Our fees for those services will vary depending on theamount of effort required to provide the accounting assistance.

Our fees, as summarized above, are based upon the current accounting and auditing standards that have beenissued and are effective as of the date of this letter. Should additional accounting or auditing standards beissued subsequent to, or become effective for the periods covered by this engagement, our estimated fees maybe adjusted accordingly.

Invoices for these fees will be rendered each month as work progresses and are payable on presentation. Acharge of 1.5 percent per month shall be imposed on accounts not paid within thirty (30) days of receipt of ourstatement for services provided. In accordance with our firm policies, work may be suspended if your accountbecomes thirty (30) days or more overdue and will not be resumed until your account is paid in full. If we elect toterminate our services for nonpayment, our engagement will be deemed to have been completed upon writtennotice of termination, even if we have not completed our report. You will be obligated to compensate us for alltime expended and to reimburse us for all out-of-pocket expenditures through the date of termination.

Additionally, we may from time to time, and depending on the circumstances, use service providers (e.g., to actas a specialist or audit an element of the financial statements) in serving your account. We may shareconfidential information about you with these service providers, but are committed to maintaining theconfidentiality and security of your information.

Any additional services that may be requested, and we agree to provide, may be the subject of a separateengagement letter.

Rev.Sept2016



We may be required to disclose confidential information to federal, state and international regulatory bodies or acourt in criminal or other civil litigation. In the event that we receive a request from a third party (including asubpoena, summons or discovery demand in litigation) calling for the production of information, we will promptlynotify State College Area School District, unless otherwise prohibited. In the event we are requested by StateCollege Area School District or required by government regulation, subpoena or other legal process to produceour engagement working papers or our personnel as witnesses with respect to services rendered to StateCollege Area School District, so long as we are not a party to the proceeding in which the information is sought,we may seek reimbursement for our professional time and expenses, as well as the fees and legal expenses,incurred in responding to such a request.

Our fees are based on known circumstances at the time of this Engagement Letter. Should circumstanceschange significantly during the course of this engagement, we will discuss with you the need for any revisedaudit fees. This can result from changes at State College Area School District, such as the turnover of keyaccounting staff, the addition of new funds or significant federal or state programs or changes that affect theamount of audit effort from external sources, such as new accounting and auditing standards that becomeeffective that increase the scope of our audit procedures. This Engagement Letter currently includes all auditingand accounting standards and the current single audit guidance in effect as of the date of this letter.

We would expect to continue to perform our services under the arrangements discussed above from year toyear, unless for some reason you or we find that some change is necessary. We will, of course, be happy toprovide State College Area School District with any other services you may find necessary or desirable.

Resolution of Disagreements

Both parties hereby waive trial by jury in any judicial proceeding involving, directly or indirectly, any matter(whether sounding in tort, contract or otherwise) in any way arising out of, related to, or connected with thisagreement or the relationship established hereunder. The parties agree that any disputes related to orconnected with this agreement shall be brought in the Court of Common Pleas of Centre County, Pennsylvania.

Our services shall be evaluated solely on our substantial conformance with the terms expressly set forth herein,including all applicable professional standards. Any claim of nonconformance must be clearly and convincinglyshown.

Limitation on Damages and Indemnification

The liability (including attorney's fees and all other costs) of Baker Tilly and its present or former partners,principals, agents or employees related to any claim for damages relating to the services performed under thisEngagement Letter shall not exceed $150,000 for the portion of the work to which the claim relates, except tothe extent finally determined to have resulted from the willful misconduct or fraudulent behavior of Bakery Tillyrelating to such services. This limitation of liability is intended to apply to the full extent allowed by law,regardless of the grounds or nature of any claim asserted, including the negligence of either party. Additionally,in no event shall either party be liable for any lost profits, lost business opportunity, lost data, consequential,special, incidental, exemplary or punitive damanges, delays or interruptions arising out of or related to thisEngagement Letter even if the other party has been advised of the possibility of such damages.

As Baker Tilly is performing the services solely for your benefit, you will indemnify Baker Tilly, its subisidiariesand their present or former partners, principals, employees, officers and agents against all costs, fees,expenses, damages and liabilities (including attorneys' fees and all defense costs) associated with any third-party claim, relating to or arising as a result of the services, or this Engagement Letter.

Rev.Sept2016



Because of the importance of the information that you provide to Baker Tilly with respect to Baker Tilly's abilityto perform the services, you hereby release Baker Tilly and its present and former partners, principals, agentsand employees from any liability, damages, fees, expenses and costs, including attornye's fees, relating to theservices, that arise from or relate to any information, including representations by management, provided byyou, District personnel or agents, that is not complete, accurate or current.

Each party recognizes and agrees that the warranty disclaimers and liability and remedy limitations in thisEngagement Letter are material bargained for bases of this Engagement Letter and that they have been takeninto account and reflected in determining the consideration to be given by each party under this EngagementLetter and in the decision by each party to enter into this Engagement Letter.

The terms of this section shall apply regardless of the nature of any claim asserted (including, but not limited to,contract, tort or any form of negligence, whether of you, Baker Tilly or others), but these terms shall not apply tothe extent finally determined to be contrary to the applicable law or regulation. These terms shall also continueto apply after any termination of this Engagement Letter.

You accept and acknowledge that any legal proceedings arising from or in conjunction with the servicesprovided under this Engagement Letter must be commenced within twelve (12) months after the performance ofthe services for which the action is brought, without consideration as to the time of discovery of any claim.

Other Matters

Neither this Engagement Letter, any claim, nor any rights or licenses granted hereunder may be assigned,delegated, or subcontracted by either party without the written consent of the other party. Either party mayassign and transfer this Engagement Letter to any successor that acquires all or substantially all of the businessor assets of such party by way of merger, consolidation, other business reorganization, or the sale of interest orassets, provided that the party notifies the other party in writing of such assignment and the successor agrees inwriting to be bound by the terms and conditions of this Engagement Letter.

Our dedication to client service is carried out through our employees who are integral in meeting this objective.In recognition of the importance of our employees, it is hereby agreed that State College Area School Districtwill not solicit our employees for employment or enter into an independent contractor arrangement with anyindividual who is or was an employee of Baker Tilly for a period of twelve (12) months following the date of theconclusion of this engagement. If State College Area School District violates this non-solicitation clause, StateCollege Area School District agrees to pay to Baker Tilly a fee equal to the hired person's annual salary at thetime of the violation so as to reimburse Baker Tilly for the costs of hiring and training a replacement.

Baker Tilly Virchow Krause, LLP, trading as Baker Tilly, is an independent member of Baker Tilly International.Baker Tilly International Limited is an English company. Baker Tilly International provides no professionalservices to clients. Each member firm is a separate and independent legal entity and each describes itself assuch. Baker Tilly Virchow Krause, LLP is not Baker Tilly International’s agent and does not have the authority tobind Baker Tilly International or act on Baker Tilly International’s behalf. None of Baker Tilly International, BakerTilly Virchow Krause, LLP, nor any of the other member firms of Baker Tilly International has any liability foreach other’s acts or omissions. The name Baker Tilly and its associated logo is used under license from BakerTilly International Limited.

This Engagement Letter constitutes the entire agreement between the State College Area School District andBaker Tilly regarding the services described in this Engagement Letter and supersedes and incorporates allprior or contemporaneous representations, understandings or agreements, and may not be modified oramended except by an agreement in writing signed between the parties hereto.

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The provisions of this Engagement Letter, which expressly or by implication are intended to survive itstermination or expiration, will survive and continue to bind both parties. If any provision of this EngagementLetter is declared or found to be illegal, unenforceable or void, then both parties shall be relieved of allobligations arising under such provision, but if the remainder of this Engagement Letter shall not be affected bysuch declaration or finding and is capable of substantial performance, then each provision not so affected shallbe enforced to the extent permitted by law or applicable professional standards.

If because of a change in the State College Area School District's status or due to any other reason, anyprovision in this Engagement Letter would be prohibited by, or would impair our independence under laws,regulations or published interpretations by governmental bodies, commissions or other regulatory agencies,such provision shall, to that extent, be of no further force and effect and this agreement shall consist of theremaining portions.

This agreement shall be governed by and construed in accordance with the laws of the Commonwealth ofPennsylvania, without giving effect to the provisions relating to conflict of laws.

We appreciate the opportunity to be of service to you.

If there are any questions regarding this Engagement Letter, please contact John Compton, the engagementpartner on this engagement who is responsible for the overall supervision and review of the engagement anddetermining that the engagement has been completed in accordance with professional standards. John isavailable at 570 651 1742, or at [email protected].

Sincerely,

BAKER TILLY VIRCHOW KRAUSE, LLP

Enclosure

The services and terms as set forth in this Engagement Letter are agreed to by:

__________________________________________________Official's Name

__________________________________________________Official's Signature

__________________________________________________Title

__________________________________________________Date

Rev.Sept2016

Rev.Sept2016



T: +1 (814) 238 8474F: +1 (888) 264 9617

bakertilly.com

May 1, 2019

State College Area School District 240 Villa Crest Drive State College, Pennsylvania 16801

Thank you for using Baker Tilly Virchow Krause, LLP ("we" or "our") as your accountants and business advisors.

We are pleased to confirm our understanding of the nature and limitations of the services we are to provide for State College Area School District (the "District").

Services and Related Report

We currently expect to apply the agreed-upon procedures listed in Appendix A that were specified and agreed to by the District on the subject matter described below.

The procedures will be applied to assist you in evaluating whether the State College Real Estate Tax Collectors complied with Pennsylvania local tax collection law (1998 P.L. 1294, No. 169) as amended, for the fiscal year ended June 30, 2019.

We expect to issue a written report upon completion of our engagement that lists the procedures performed and our findings. Our report will be addressed to the Board of Education of State College Area School District. You understand that the report is intended solely for the information and use of the specified parties and should not be used by anyone other than these specified parties.

Our report will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you. If, for any reason, we are unable to complete the procedures, or if we determine in our professional judgment the circumstances necessitate, we will describe any restrictions on the performance of the procedures in our report, or may withdraw and decline to issue a report as a result of this engagement.


Our engagement to apply agreed-upon procedures will be conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described in the attached schedule either for the purpose for which this report has been requested or for any other purpose.

State College Area School District May 1, 2019 Page 2 Because the agreed-upon procedures listed in the attached schedule do not constitute an examination, we will not express an opinion or conclusion on the tax collector compliance with local tax collection law (1998 P.L. 1924, No. 169). In addition, we have no obligation to perform any procedures beyond those listed in the attached schedule. An agreed-upon procedures engagement is not designed to detect instances of fraud or noncompliance with laws or regulations; however, we will communicate to you any known and suspected fraud and noncompliance with laws or regulations affecting the subject matter that comes to our attention. In addition, if, in connection with this engagement, matters come to our attention that contradict the subject matter, we will disclose those matters in our report. Such disclosures, if any, may not necessarily include all matters that might have come to our attention had we performed additional procedures or an examination or review. Management’s Responsibilities You are responsible for the subject matter and that it is in accordance with the criteria; and for selecting the criteria and procedures and determining that such criteria and procedures are appropriate for your purposes. You are also responsible for, and agree to provide us with, a written assertion about the subject mater. In addition, you are responsible for providing us with (1) access to all information of which you are aware that is relevant to the performance of the agreed-upon procedures on the real estate tax collection process, (2) additional information that we may request for the purpose of performing the agreed-upon procedures, and (3) unrestricted access to persons within the entity from whom we determine it necessary to obtain evidence relating to performing those procedures. At the conclusion of our engagement, we will require certain representations in the form of a representation letter from management that, among other things, will confirm management’s responsibility for the real estate tax collection process in accordance with the criteria. If the need for additional procedures arises, or the procedures need to be modified, our agreement with you will need to be revised. It is customary for us to enumerate these revisions in an addendum to this letter. If additional specified parties of the report are added, we will require that they acknowledge in writing their agreement with the procedures performed or to be performed and their responsibility for the sufficiency of procedures. Nonattest Services Prior to or as part of our engagement, it may be necessary for us to perform certain nonattest services. Nonattest services we will be providing include nonattest services provided to the District in connection with the June 30, 2019 single audit, as previously communicated to you. We will not perform any management functions or make management decisions on your behalf with respect to any nonattest services we provide.


May 1, 2019 Page 3


> Continue to make all management decisions and perform all management functions.

> Designate a competent employee with suitable skill, knowledge and/or experience, preferably withinsenior management, to oversee the services we perform.

> Evaluate the adequacy and results of the nonattest services we perform.

> Accept responsibility for the results of our nonattest services.

> Establish and maintain internal controls, including monitoring ongoing activities related to the nonattestfunction.

Timing and Fees

We plan to begin our procedures as soon as we received the necessary information and, unless unforeseeable problems are encountered, the engagement should be completed as soon as possible. Completion of our work is subject to, among other things, (i) appropriate cooperation from the District's personnel, including timely preparation of necessary schedules and (ii) timely responses to our inquiries. When and if for any reason the District is unable to provide such schedules, information and assistance, Baker Tilly and you will mutually revise the fee to reflect additional services, if any, required of us to complete the engagement.

Our fees for these services will be $3,000 for the agreed-upon procedures, and are based upon attestation standards established by the American Institute of Certified Public Accountants that have been issued and are effective as of the date of this letter. Should additional standards be issued subsequent to, or become effective for, the periods covered by this engagement, our estimated fees will be adjusted accordingly.

Any additional services that may be requested and we agree to provide will be the subject of separate arrangements.

In the event we are requested or authorized by the District, or required by government regulation, subpoena, or other legal process to produce our working papers or our personnel as witnesses with respect to our engagement for the District, the District will, so long as we are not a party to the proceeding in which the information is sought, reimburse us for our professional time and expenses, as well as the fees and expenses of our counsel, incurred in responding to such a request.


Both parties hereby waive trial by jury in any judicial proceeding involving, directly or indirectly, any matter (whether sounding in tort, contract or otherwise) in any way arising out of, related to, or connected with this agreement or the relationship established hereunder. The parties agree that any disputes related to or connected with this agreement shall be brought in the Court of Common Pleas of Centre County, Pennsylvania.

Our services shall be evaluated solely on our substantial conformance with the terms expressly set forth herein, including all applicable professional standards. Any claim of nonconformance must be clearly and convincingly shown.


May 1, 2019 Page 4


The liability (including attorney’s fees and all other costs) of Baker Tilly and its present or former partners, principals, agents or employees related to any claim for damages relating to the services performed under this Engagement Letter shall not exceed $150,000 for the portion of the work to which the claim relates, except to the extent finally determined to have resulted from the willful misconduct or fraudulent behavior of Baker Tilly relating to such services. This limitation of liability is intended to apply to the full extent allowed by law, regardless of the grounds or nature of any claim asserted, including the negligence of either party. Additionally, in no event shall either party be liable for any lost profits, lost business opportunity, lost data, consequential, special, incidental, exemplary or punitive damages, delays or interruptions arising out of or related to this Engagement Letter even if the other party has been advised of the possibility of such damages.

As Baker Tilly is performing the services solely for your benefit, you will indemnify Baker Tilly, its subsidiaries and their present or former partners, principals, employees, officers and agents against all costs, fees, expenses, damages and liabilities (including attorneys’ fees and all defense costs) associated with any third- party claim, relating to or arising as a result of the services, or this Engagement Letter.

Because of the importance of the information that you provide to Baker Tilly with respect to Baker Tilly’s ability to perform the services, you hereby release Baker Tilly and its present and former partners, principals, agents and employees from any liability, damages, fees, expenses and costs, including attorney’s fees, relating to the services, that arise from or relate to any information, including representations by management, provided by you, District personnel or agents, that is not complete, accurate or current.

Each party recognizes and agrees that the warranty disclaimers and liability and remedy limitations in this Engagement Letter are material bargained for bases of this Engagement Letter and that they have been taken into account and reflected in determining the consideration to be given by each party under this Engagement Letter and in the decision by each party to enter into this Engagement Letter.

The terms of this section shall apply regardless of the nature of any claim asserted (including, but not limited to, contract, tort or any form of negligence, whether of you, Baker Tilly or others), but these terms shall not apply to the extent finally determined to be contrary to the applicable law or regulation. These terms shall also continue to apply after any termination of this Engagement Letter.

You accept and acknowledge that any legal proceedings arising from or in conjunction with the services provided under this Engagement Letter must be commenced within twelve (12) months after the performance of the services for which the action is brought, without consideration as to the time of discovery of any claim.

Other Matters

The documentation for this engagement, including the working papers, is the property of Baker Tilly and constitutes confidential information. We may have a responsibility to retain the documentation for a period of time sufficient to satisfy any applicable legal or regulatory requirements for records retention. If we are required by law, regulation or professional standards to make certain documentation available to regulators, the District hereby authorizes us to do so.


May 1, 2019 Page 5

Neither this Engagement Letter, any claim, nor any rights or licenses granted hereunder may be assigned, delegated or subcontracted by either party without the written consent of the other party. Either party may assign and transfer this Engagement Letter to any successor that acquires all or substantially all of the business or assets of such party by way of merger, consolidation, other business reorganization, or the sale of interest or assets, provided that the party notifies the other party in writing of such assignment and the successor agrees in writing to be bound by the terms and conditions of this Engagement Letter.

Our dedication to client service is carried out through our employees who are integral in meeting this objective. In recognition of the importance of our employees to Baker Tilly, it is hereby agreed that the District will not solicit our employees for employment or enter into an independent contractor arrangement with any individual who is or was an employee of Baker Tilly for a period of twelve months following the date of conclusion of this engagement. If the District violates this non-solicitation clause, the District agrees to pay to Baker Tilly a fee equal to the hired individual's new annual salary at the time of the violation so as to reimburse Baker Tilly for the costs of hiring and training a replacement.

Baker Tilly Virchow Krause, LLP, trading as Baker Tilly, is an independent member of Baker Tilly International. Baker Tilly International Limited is an English company. Baker Tilly International provides no professional services to clients. Each member firm is a separate and independent legal entity and each describes itself as such. Baker Tilly Virchow Krause, LLP is not Baker Tilly International’s agent and does not have the authority to bind Baker Tilly International or act on Baker Tilly International’s behalf. None of Baker Tilly International, Baker Tilly Virchow Krause, LLP, nor any of the other member firms of Baker Tilly International has any liability for each other’s acts or omissions. The name Baker Tilly and its associated logo is used under license from Baker Tilly International Limited.

This Engagement Letter constitutes the entire agreement between the District and Baker Tilly regarding the services described in this Engagement Letter and supersedes and incorporates all prior or contemporaneous representations, understandings or agreements, and may not be modified or amended except by an agreement in writing signed between the parties hereto.

The provisions of this Engagement Letter, which expressly or by implication are intended to survive its termination or expiration, will survive and continue to bind both parties. If any provision of this Engagement Letter is declared or found to be illegal, unenforceable or void, then both parties shall be relieved of all obligations arising under such provision, but if the remainder of this Engagement Letter shall not be affected by such declaration or finding and is capable of substantial performance, then each provision not so affected shall be enforced to the extent permitted by law or applicable professional standards.

If because of a change in the District’s status or due to any other reason, any provision in this Engagement Letter would be prohibited by, or would impair our independence under laws, regulations or published interpretations by governmental bodies, commissions or other regulatory agencies, such provision shall, to that extent, be of no further force and effect and this agreement shall consist of the remaining portions.

This agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to the provisions relating to conflict of laws.


May 1, 2019 Page 6


If there are any questions regarding the Engagement Letter, please contact John Compton, the engagement partner on this engagement who is responsible for the overall supervision and review of the engagement and for determining that the engagement has been completed in accordance with professional standards. John is available at 570 651 1742.

Sincerely,


The services and terms set forth in the Engagement Letter are agreed to by:

__________________________________________________ Officer signature

__________________________________________________ Title

__________________________________________________ Date

Appendix A | Agreed Upon Procedures

We currently expect to perform the following procedures agreed to by the Disctrict:

The requirements of the Local Tax Collection Law, as amended (1998 P.L. 1924, No. 169), as it applies to the tax collector, the procedures performed, and the findings are as follows:

1. The tax collector shall keep a correct account of all moneys collected as taxes under the authority of any duplicateor duplicates in his possession. He/she shall mark “paid” on each duplicate, at the name of each taxable amount,the amount of taxes paid and date on which payment was made.

Procedure: If a computer report is not used, inspect duplicate for indication of “paid” status, name of taxpayer,amount of taxes paid and date on which payment was made. Otherwise, if a computer report is used, inspectprinted report of paid taxes, noting indication of the name of taxable amount of taxes paid and date on whichpayment was made.

2. The tax collector shall on or before the tenth of each month, or more frequently, if required by ordinance orresolution of the taxing district, provide a true, verified statement, in writing on a form approved by the Departmentof Community and Economic Development, to the secretary or clerk of the taxing district for all taxes collected forsuch taxing district during the previous month or period, giving the names of taxable’s, the amount collected fromeach, along with the discounts granted or penalties applied, if any, and the total amount of taxes received,discounts granted and penalties applied. The tax collector shall include with each statement made under thissection a reconciled monthly tax collector’s report for each type of tax collected for each each taxing district. Thereport shall be reconciled from the tax duplicates to the amount of taxes remaining to be collected.

Procedures: For each monthly remittance, inspect the completed DCED form for names of taxpayer, amountscollected from each, discounts granted or penalties applied.

3. The tax collector shall remit on or before the tenth day of each month, or more often if required by ordinance orresolution of the taxing district, to the treasurer of the taxing district all moneys collected as taxes during theprevious month or period end take his receipt for the same.

Procedures: Agree all payments to the school district and observe whether payment made by tenth day of month.

4. The tax collector shall, at any time on demand of any taxing district, exhibit any duplicate in his possessionshowing the uncollected taxes as of any date.

Procedures: Obtain duplicate from tax collectorand inspect duplicate for indication of unpaid taxes.

5. By January fifteenth, the tax collector shall make a complete statement of all taxes for the prior calendar year withthe proper authority of the taxing district, to be designated by the taxing district at such time as the said taxingdistrict may fix, but not later than the first day of July of the year succeeding the one for which the taxes werelevied, unless such time shall be extended by resolution of the taxing district. In the settlement of such taxes, thetax collector shall be allowed a credit for all collected and paid over, for all unpaid taxes upon real property, whichreal property shall have been returned to the county commissioners as provided by law, or shall have been certifiedto the taxing district, or its solicitor, for the entry of liens in the office of the Prothonotary, and in the case ofoccupation, poll or per capita taxes, for taxes accounted for by exonerations, which shall be granted by the taxingdistrict upon oath or affirmation that he has complied with Section 20 of this Act.

Procedures: Inspect the final settlement for completion date no later than January 15 for real estate taxes andMarch 15 for per capita taxes.

6. Upon final settlement of a tax dispute, a tax collector shall take an oath or affirmation in writing and subscribed bythe tax collector, that he/she has made a true and just return of all taxes collected by him/her. Such oath oraffirmation shall be administered by the officer of the taxing district empowered to make settlement, who shall havepower to administer the same, and shall be filed with such officer.

Procedure: Inspect the final settlement for signed oath or affirmation by the officer.



T: +1 (814) 238 8474F: +1 (888) 264 9617

bakertilly.com

May 1, 2019

Randy Brown, Business AdministratorState College Area School District Education Foundation, Inc.240 Villa Crest DriveState College, PA 16801

Dear Mr. Brown:

Thank you for using Baker Tilly Virchow Krause, LLP ("Baker Tilly" or "we" or "our") as your auditors.

The purpose of this letter (the "Engagement Letter") is to confirm our understanding of the terms and objectivesof our engagement and the nature of the services we will provide as independent accountants of State CollegeArea School District Education Foundation, Inc. (the "Organization" or "you").

Services and Related Report

We will audit the financial statements of the Organization as of June 30, 2019 and for the year then ending.

Upon completion of our audit, we will provide the Organization with our audit report on the financial statementsreferred to above. If, for any reasons caused by or relating to the affairs or management of the Organization, weare unable to complete the audit or are unable to or have not formed an opinion or if we determine in ourprofessional judgment the circumstances necessitate, we may withdraw and decline to issue a report as a resultof this engagement.


The objective of a financial statement audit is the expression of an opinion on the financial statements. We willbe responsible for performing the audit in accordance with auditing standards generally accepted in the UnitedStates of America. These standards require that we plan and perform the audit to obtain reasonable, rather thanabsolute, assurance about whether the financial statements are free of material misstatement, whether causedby error or fraud. The audit will include examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing accounting principles used and significant estimates made bymanagement and evaluating the overall financial statement presentation. Our audit does not relievemanagement or the Board of Directors of their responsibilities.

The audit will include obtaining an understanding of the Organization and its environment, including internalcontrols, sufficient to assess the risks of material misstatement of the financial statements and to design thenature, timing and extent of further audit procedures. An audit is not designed to provide assurance on internalcontrol or to identify deficiencies in internal control. However, during the audit, we will communicate tomanagement and the Board of Directors internal control matters that are required to be communicated underprofessional standards.

Rev.Sept2016

Randy Brown, Business AdministratorState College Area School District Education Foundation, Inc.

May 1, 2019Page 2

We will design our audit to obtain reasonable, but not absolute, assurance of detecting errors or fraud thatwould have a material effect on the financial statements as well as other illegal acts having a direct and materialeffect on financial statement amounts. An audit is not designed to detect error or fraud that is immaterial to thefinancial statements. Our audit will not include a detailed audit of all transactions, such as would be necessaryto disclose errors or fraud that did not cause a material misstatement of the financial statements. It is importantto recognize that there are inherent limitations in the auditing process. Audits are based on the concept ofselective testing of the data underlying the financial statements, which involves judgment regarding the areas tobe tested and the nature, timing, extent and results of the tests to be performed. Our audit is not a guarantee ofthe accuracy of the financial statements and, therefore, is subject to the limitation that material errors or fraud orother illegal acts having a direct and material financial statement impact, if they exist, may not be detected.Because of the characteristics of fraud, particularly those involving concealment through collusion, falsifieddocumentation and management's ability to override controls, an audit designed and executed in accordancewith auditing standards generally accepted in the United States of America may not detect a material fraud.Further, while effective internal control reduces the likelihood that errors, fraud or other illegal acts will occur andremain undetected, it does not eliminate that possibility. For these reasons, we cannot ensure that errors, fraudor other illegal acts, if present, will be detected. However, we will communicate to you, as appropriate, any suchmatters that we identify during our audit.

We are also responsible for determining that the Board of Directors is informed about certain other mattersrelated to the conduct of the audit, including (i) our responsibility under auditing standards generally accepted inthe United States of America; (ii) an overview of the planned scope and timing of the audit and (iii) significantfindings from the audit, which include (a) our views about the qualitative aspects of the Organization's significantaccounting practices, accounting estimates and financial statement disclosures, (b) difficulties encountered inperforming the audit, (c) uncorrected misstatements and material corrected misstatements that were brought tothe attention of management as a result of auditing procedures, and (d) other significant and relevant findings orissues (e.g., any disagreements with management about matters that could be significant to the Organization'sfinancial statements or our report thereon, consultations with other independent accountants, issues discussedprior to our retention as independent auditors, fraud and illegal acts and all significant deficiencies and materialweaknesses identified during the audit). Lastly, we are responsible for ensuring that the Board of Directorsreceives copies of certain written communications between us and management including writtencommunications on accounting, auditing, internal controls or operational matters and representations that weare requesting from management.

The audit will not be planned or conducted in contemplation of reliance by any specific third party or with respectto any specific transaction. Therefore, items of possible interest to a third party will not be specifically addressedand matters may exist that would be assessed differently by a third party, possibly in connection with a specifictransaction.

Management's Responsibilities

The Organization's management is responsible for the financial statements referred to above. In this regard,management is responsible for establishing policies and procedures that pertain to the maintenance ofadequate accounting records and effective internal controls over financial reporting, the selection andapplication of accounting principles, the authorization of receipts and disbursements, the safeguarding ofassets, the proper recording of transactions in the accounting records and for reporting financial information inconformity with accounting principles generally accepted in the United States of America. Management is alsoresponsible for the design and implementation of programs and controls to prevent and detect fraud, and forinforming us in the management representation letter (i) about all known or suspected fraud affecting theOrganization involving (a) management, (b) employees who have significant roles in internal control overfinancial reporting and (c) others where the fraud could have a material effect on the financial statements and (ii)of its knowledge of any allegations of fraud or suspected fraud affecting the Organization received incommunications from employees, former employees, analysts, regulators or others.

Rev.Sept2016


May 1, 2019Page 3

Management is responsible for (i) adjusting the financial statements to correct material misstatements and foraffirming to us in a management representation letter that the effects of any uncorrected misstatementsaggregated by us during the current engagement and pertaining to the year under audit are immaterial, bothindividually and in the aggregate, to the financial statements taken as a whole and (ii) notifying us of all materialweaknesses, including other significant deficiencies, in the design or operation of the Organization's internalcontrol over financial reporting that are reasonably likely to adversely affect the Organization's ability to record,process, summarize and report external financial data reliably in accordance with accounting principlesgenerally accepted in the United States of America. Management also is responsible for identifying andensuring that the Organization comply with the laws and regulations applicable to its activities.

As part of management's responsibility for the financial statements and the effectiveness of its system of internalcontrol over financial reporting, management is responsible for making available to us, on a timely basis, all ofthe Organization's original accounting records and related information and for the completeness and accuracyof that information and Organization' personnel to whom we may direct inquiries. As required by auditingstandards generally accepted in the United States of America, we will make specific inquiries of managementand others about the representations embodied in the financial statements and the effectiveness of internalcontrol over financial reporting. Auditing standards generally accepted in the United States of America alsorequire that we obtain written representations covering audited financial statements from certain members ofmanagement. The results of our audit tests, the responses to our inquiries and the written representationscomprise the evidential matter we intend to rely upon in forming our opinion on the financial statements.

Nonattest Services

Prior to or as part of our audit engagement, it may be necessary for us to perform certain nonattest services.

Nonattest services that we will be providing are as follows:

Propose adjusting or correcting journal entries, subject to management oversight and approval

Provide technical assistance with the preparation of the financial statements and related notes thereto

Preparation of the Form 990 and BCO-10

We will also provide certain nonattest services to the State College Area School District as indicated inout separate letter to the District.

We will not perform any management functions or make management decisions on your behalf with respect toany nonattest services we provide.


Continue to make all management decisions and perform all management functions, includingapproving all journal entries and general ledger classifications when they are submitted to you.

Designate an employee with suitable skill, knowledge and/or experience, preferably within seniormanagement, to oversee the services we perform.

Evaluate the adequacy and results of the nonattest services we perform.

Accept responsibility for the results of our nonattest services.

Rev.Sept2016


May 1, 2019Page 4

Establish and maintain internal controls, including monitoring ongoing activities related to the nonattestfunction.

On a periodic basis, as needed, we will meet with you to discuss your accounting records and the managementimplications of your financial statements. We will notify you, in writing, of any matters of which we believe youshould be aware and will meet with you upon request.

Other Documents

If you intend to reproduce or publish the financial statements, and make reference to our firm name inconnection therewith, you agree to publish the financial statements in their entirety. In addition, you agree toprovide us, for our approval and consent, proofs before printing and final materials before distribution.

With regard to the electronic dissemination of audited financial statements, including financial statementspublished electronically on your Internet website, you understand that electronic sites are a means to distributeinformation and, therefore, we are not required to read the information contained in these sites or to considerthe consistency of other information in the electronic site with the original document.

The Organization may wish to include our report on these financial statements in a registration statementproposed to be filed under the Securities Act of 1933, or in some other securities offering. You agree that theaforementioned audit report, or reference to Baker Tilly will not be included in such offering without our priorwritten permission or consent. Any agreement to perform work in connection with an offering, including anagreement to provide permission or consent, will be a separate agreement.

The documentation for this engagement, including the workpapers, is the property of Baker Tilly and constitutesconfidential information. We may have a responsibility to retain the documentation for a period of time sufficientto satisfy any applicable legal or regulatory requirements for records retention. If we are required by law,regulation or professional standards to make certain documentation available to regulators, the Organizationhereby authorize us to do so.

Timing and Fees

Completion of our work is subject to, among other things, (i) appropriate cooperation from Organization'personnel, including timely preparation of necessary schedules, (ii) timely responses to our inquiries and (iii)timely communication of all significant accounting and financial reporting matters. When and if for any reasonthe Organization are unable to provide such schedules, information and assistance, Baker Tilly and you willmutually revise the fee to reflect additional services, if any, required of us to complete the audit. Delays in theissuance of our audit report beyond the date that was originally contemplated may require us to performadditional auditing procedures which will likely result in additional fees. Revisions to the scope of our work willbe set forth in the form of an "Amendment to Existing Engagement Letter." In addition, if we discovercompliance issues that require us to perform additional procedures and/or provide assistance with thesematters, fees at our standard hourly rates apply.

Invoices for these fees will be rendered each month as work progresses and are payable on presentation. Acharge of 1.5 percent per month shall be imposed on accounts not paid within thirty (30) days of receipt of ourstatement for services provided. In accordance with our firm policies, work may be suspended if your accountbecomes thirty (30) days or more overdue and will not be resumed until your account is paid in full. If we elect toterminate our services for nonpayment, our engagement will be deemed to have been completed upon writtennotice of termination, even if we have not completed our report. You will be obligated to compensate us for alltime expended and to reimburse us for all expenditures through the date of termination.

Rev.Sept2016


May 1, 2019Page 5

We estimate that our fees for these services will not exceed $4,500 for the audit. In addition to our professionalfees, expenses for direct engagement support including travel and subsistence, production of reports, and otherdirect engagement expenses will be billed separately at our cost and stated separately on our invoices.

Any additional services that may be requested and we agree to provide will be the subject of a separateengagement letter.

We may be required to disclose confidential information to federal, state and international regulatory bodies or acourt in criminal or other civil litigation. In the event that we receive a request from a third party (including asubpoena, summons or discovery demand in litigation) calling for the production of information, we will promptlynotify the Organization, unless otherwise prohibited. In the event we are requested by the Organization orrequired by government regulation, subpoena or other legal process to produce our engagement workingpapers or our personnel as witnesses with respect to services rendered to the Organization, so long as we arenot a party to the proceeding in which the information is sought, we may seek reimbursement for ourprofessional time and expenses, as well as the fees and legal expenses, incurred in responding to such arequest.


Both parties hereby waive trial by jury in any judicial proceeding involving, directly or indirectly, any matter(whether sounding in tort, contract or otherwise) in any way arising out of, related to, or connected with thisagreement or the relationship established hereunder. The parties agree that any disputes related to orconnected with this agreement shall be brought in the Court of Common Pleas of Centre County, Pennsylvania.

Our services shall be evaluated solely on our substantial conformance with the terms expressly set forth herein,including all applicable professional standards. Any claim of noncomformance must be clearly and convincinglyshown.


The liability (including attorney’s fees and all other costs) of Baker Tilly and its present or former partners,principals, agents or employees related to any claim for damages relating to the services performed under thisEngagement Letter shall not exceed $150,000 for the portion of the work to which the claim relates, except tothe extent finally determined to have resulted from the willful misconduct or fraudulent behavior of Baker Tillyrelating to such services. This limitation of liability is intended to apply to the full extent allowed by law,regardless of the grounds or nature of any claim asserted, including the negligence of either party. Additionally,in no event shall either party be liable for any lost profits, lost business opportunity, lost data, consequential,special, incidental, exemplary or punitive damages, delays or interruptions arising out of or related to thisEngagement Letter even if the other party has been advised of the possibility of such damages.

As Baker Tilly is performing the services solely for your benefit, you will indemnify Baker Tilly, its subsidiariesand their present or former partners, principals, employees, officers and agents against all costs, fees,expenses, damages and liabilities (including attorney's fees and all defense costs) associated with any third-party claim, relating to or arising as a result of the services, or this Engagement Letter.

Because of the importance of the information that you provide to Baker Tilly with respect to Baker Tilly’s abilityto perform the services, you hereby release Baker Tilly and its present and former partners, principals, agentsand employees from any liability, damages, fees, expenses and costs, including attorney's fees, relating to theservices, that arise from or relate to any information, including representations by management, provided byyou, Company personnel or agents, that is not complete, accurate or current.

Rev.Sept2016


May 1, 2019Page 6

Each party recognizes and agrees that the warranty disclaimers and liability and remedy limitations in thisEngagement Letter are material bargained for bases of this Engagement Letter and that they have been takeninto account and reflected in determining the consideration to be given by each party under this EngagementLetter and in the decision by each party to enter into this Engagement Letter.

The terms of this section shall apply regardless of the nature of any claim asserted (including, but not limited to,contract, tort or any form of negligence, whether of you, Baker Tilly or others), but these terms shall not apply tothe extent finally determined to be contrary to the applicable law or regulation. These terms shall also continueto apply after any termination of this Engagement Letter.

You accept and acknowledge that any legal proceedings arising from or in conjunction with the servicesprovided under this Engagement Letter must be commenced within twelve (12) months after the performance ofthe services for which the action is brought, without consideration as to the time of discovery of any claim.

Other Matters

Neither this Engagement Letter, any claim, nor any rights or licenses granted hereunder may be assigned,delegated or subcontracted by either party without the written consent of the other party. Either party mayassign and transfer this Engagement Letter to any successor that acquires all or substantially all of the businessor assets of such party by way of merger, consolidation, other business reorganization or the sale of interest orassets, provided that the party notifies the other party in writing of such assignment and the successor agrees inwriting to be bound by the terms and conditions of this Engagement Letter.

Our dedication to client service is carried out through our employees who are integral in meeting this objective.In recognition of the importance of our employees it is hereby agreed that the Organization will not solicit ouremployees for employment or enter into an independent contractor arrangement with any individual who is orwas an employee of Baker Tilly for a period of twelve (12) months following the date of the conclusion of thisengagement. If the Organization violates this non solicitation clause, the Organization agrees to pay to BakerTilly a fee equal to the hired person's annual salary at the time of the violation so as to reimburse Baker Tilly forthe costs of hiring and training a replacement.

Baker Tilly Virchow Krause, LLP, trading as Baker Tilly, is an independent member of Baker Tilly International.Baker Tilly International Limited is an English company. Baker Tilly International provides no professionalservices to clients. Each member firm is a separate and independent legal entity and each describes itself assuch. Baker Tilly Virchow Krause, LLP is not Baker Tilly International’s agent and does not have the authority tobind Baker Tilly International or act on Baker Tilly International’s behalf. None of Baker Tilly International, BakerTilly Virchow Krause, LLP, nor any of the other member firms of Baker Tilly International has any liability foreach other’s acts or omissions. The name Baker Tilly and its associated logo is used under license from BakerTilly International Limited.

This Engagement Letter constitutes the entire agreement between the Organization and Baker Tilly regardingthe services described in this Engagement Letter and supersedes and incorporates all prior orcontemporaneous representations, understandings or agreements, and may not be modified or amendedexcept by an agreement in writing signed between the parties hereto.

The provisions of this Engagement Letter, which expressly or by implication are intended to survive itstermination or expiration, will survive and continue to bind both parties. If any provision of this EngagementLetter is declared or found to be illegal, unenforceable or void, then both parties shall be relieved of allobligations arising under such provision, but if the remainder of this Engagement Letter shall not be affected bysuch declaration or finding and is capable of substantial performance, then each provision not so affected shallbe enforced to the extent permitted by law or applicable professional standards.

Rev.Sept2016


May 1, 2019Page 7

If because of a change in the Organization's status or due to any other reason, any provision in thisEngagement Letter would be prohibited by, or would impair our independence under laws, regulations orpublished interpretations by governmental bodies, commissions or other regulatory agencies, such provisionshall, to that extent, be of no further force and effect and this agreement shall consist of the remaining portions.

This agreement shall be governed by and construed in accordance with the laws of the Commonwealth ofPennsylvania, without giving effect to the provisions relating to conflict of laws.


If there are any questions regarding the Engagement Letter, please contact John Compton, the engagementpartner on this engagement who is responsible for the overall supervision and review of the engagement and fordetermining that the engagement has been completed in accordance with professional standards. John isavailable at 570 651 1742.

Sincerely,


The services and terms as set forth in this Engagement Letter are agreed to by:

__________________________________________________Officer signature

__________________________________________________Title

__________________________________________________Date

Rev.Sept2016