DATED JULY 13, 2017 NEW ISSUE RATING Electronic Bidding ... · 7/7/2018 · The Owensboro...

DATED JULY 13, 2017NEW ISSUE RATINGElectronic Bidding via Parity® Moody’s: " "Bank Interest Deduction EligibleBOOK-ENTRY-ONLY SYSTEM

In the opinion of Bond Counsel, under existing law (i) interest on the Bonds will be excludable from gross income of the holders thereof for purposesof federal taxation and (ii) interest on the Bonds will not be a specific item of tax preference for purposes of the federal alternative minimum tax imposed onindividuals and corporations, all subject to the qualifications described herein under the heading "Tax Exemption." The Bonds and interest thereon are exemptfrom income taxation and ad valorem taxation by the Commonwealth of Kentucky and political subdivisions thereof (see "Tax Exemption" herein).

$7,530,000*OWENSBORO INDEPENDENT SCHOOL DISTRICT

FINANCE CORPORATION SCHOOL BUILDING REVENUE BONDS,SERIES OF 2017

Dated: August 1, 2017 Due: as shown below

Interest on the Bonds is payable each February 1 and August 1, beginning February 1, 2018. The Bonds will mature asto principal on August 1, 2018, and each August 1 thereafter as shown below. The Bonds are being issued in Book-Entry-OnlyForm and will be available for purchase in principal amounts of $5,000 and integral multiples thereof.

Maturing Interest Reoffering Maturing Interest ReofferingAugust 1 Amount Rate Yield CUSIP August 1 Amount Rate Yield CUSIP

2018 $115,000 % % 2028 $150,000 % %2019 $105,000 % % 2029 $580,000 % %2020 $105,000 % % 2030 $590,000 % %2021 $115,000 % % 2031 $620,000 % %2022 $125,000 % % 2032 $650,000 % %2023 $130,000 % % 2033 $665,000 % %2024 $125,000 % % 2034 $655,000 % %2025 $135,000 % % 2035 $680,000 % %2026 $140,000 % % 2036 $840,000 % %2027 $145,000 % % 2037 $860,000 % %

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

Notwithstanding the foregoing, the Corporation reserves the right, upon thirty (30) days notice, to call the Bonds in wholeor in part on any date for redemption upon the total destruction by fire, lightning, windstorm or other hazard of any of the building(s)constituting the Project(s) and apply casualty insurance proceeds to such purpose.

The Bonds constitute a limited indebtedness of the Owensboro Independent School District Finance Corporation and arepayable from and secured by a pledge of the gross income and revenues derived by leasing the Project on an annual renewable basisto the Owensboro Independent Board of Education.

The Owensboro Independent (Kentucky) School District Finance Corporation will until July 20, 2017, at 11:00 A.M.,E.S.T., receive competitive bids for the Bonds at the office of the Executive Director of the Kentucky School Facilities ConstructionCommission, 229 West Main Street, Suite 102, Frankfort, Kentucky 40601.

*As set forth in the "Official Terms and Conditions of Bond Sale," the principal amount of Bonds sold to thesuccessful bidder is subject to a Permitted Adjustment by increasing or decreasing the amount not to exceed $1,505,000.

PURCHASER'S OPTION: The Purchaser of the Bonds, within 24 hours of the sale, may specify to the Financial Advisorthat any Bonds may be combined immediately succeeding sequential maturities into a Term Bond(s), bearing a single rate ofinterest, with the maturities set forth above (or as may be adjusted as provided herein) being subject to mandatory redemption insuch maturities for such Term Bond(s).

The Bonds will be delivered utilizing the BOOK-ENTRY-ONLY-SYSTEM administered by The Depository TrustCompany.

The Corporation deems this preliminary Official Statement to be final for purposes of the Securities and ExchangeCommission Rule 15c2-12(b)(1), except for certain information on the cover page hereof which has been omitted in accordancewith such Rule and which will be supplied with the final Official Statement.

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PRELIMINARY OFFICIAL STATEMENT

OWENSBORO INDEPENDENTBOARD OF EDUCATION

Dan Griffith, ChairmanNancy Eskridge, Member

Jeremy Edge, MemberMelissa Decker, Member

John Blaney, Member

Nick Brake, Superintendent/Secretary

OWENSBORO INDEPENDENT SCHOOL DISTRICTFINANCE CORPORATION

Dan Griffith, PresidentNancy Eskridge, Member

Jeremy Edge, MemberMelissa Decker, Member

John Blaney, Member

Nick Brake, SecretaryPaula Roberts, Treasurer

BOND COUNSEL

Steptoe & Johnson PLLCLouisville, Kentucky

FINANCIAL ADVISOR

Ross, Sinclaire & Associates, LLCLouisville, Kentucky

PAYING AGENT AND REGISTRAR

The Huntington National BankCincinnati, Ohio

BOOK-ENTRY-ONLY-SYSTEM

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REGARDING USE OF THIS OFFICIAL STATEMENT

This Official Statement does not constitute an offering of any security other than the original offering ofthe Owensboro Independent School District Finance Corporation School Building Revenue Bonds, Series of 2017,identified on the cover page hereof. No person has been authorized by the Corporation or the Board to give anyinformation or to make any representation other than that contained in the Official Statement, and if given or madesuch other information or representation must not be relied upon as having been given or authorized. This OfficialStatement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any saleof the Bonds by any person in any jurisdiction in which it is unlawful to make such offer, solicitation or sale.

The information and expressions of opinion herein are subject to change without notice, and neither thedelivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create anyimplication that there has been no change in the affairs of the Corporation or the Board since the date hereof.

Neither the Securities and Exchange Commission nor any other federal, state or other governmental entityor agency, except the Corporation will pass upon the accuracy or adequacy of this Official Statement or approvethe Bonds for sale.

The Official Statement includes the front cover page immediately preceding this page and all Appendiceshereto.

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TABLE OF CONTENTS Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Book-Entry-Only System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1The Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Kentucky School Facilities Construction Commission. . . . . . . . . . . . . . . . . . . . . 3Biennial Budget For Period Ending June 30, 2018. . . . . . . . . . . . . . . . . . . . . . . . 4Outstanding Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4The Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Registration, Payment and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5The Lease; Pledge of Rental Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 6

State Intercept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Commission’s Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6The Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Additional Parity Bonds for Completion of Project . . . . . . . . . . . . . . . . . . . . . . . 7Estimated Bond Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Estimated Use of Bond Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8District Student Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8State Support of Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Support Education Excellence in Kentucky (SEEK) . . . . . . . . . . . . . . . 8Capital Outlay Allotment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Facilities Support Program of Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . 9

Local Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Homestead Exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Limitation on Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Local Thirty Cents Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Additional 15% Not Subject to Recall . . . . . . . . . . . . . . . . . . . . . . . . . 10Assessment Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Special Voted and Other Local Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 11Local Tax Rates, Property Assessments, and Revenue Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Overlapping Bond Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11SEEK Allotment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13State Budgeting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Potential Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Continuing Disclosure; Exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Tax Exemption; Not Bank Qualified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Original Issue Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Original Issue Discount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Absence of Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Approval of Legality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16No Legal Opinion Expressed as to Certain Matters . . . . . . . . . . . . . . . . . . . . . . 16Bond Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Approval of Official Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Demographic and Economic Data . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX AFinancial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX BContinuing Disclosure Agreement . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX COfficial Terms & Conditions of Bond Sale. . . . . . . . . . . . . . . . . . . APPENDIX DOfficial Bid Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX E

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OFFICIAL STATEMENTRelating to the Issuance of

$7,530,000

OWENSBORO INDEPENDENT SCHOOL DISTRICT FINANCE CORPORATION SCHOOL BUILDING REVENUE BONDS,

SERIES OF 2017

* Subject to Permitted Adjustment

INTRODUCTION

The purpose of this Official Statement, which includes the cover page and Appendices hereto, is to setforth certain information pertaining to the Owensboro Independent School District Finance Corporation (the"Corporation") School Building Revenue Bonds, Series of 2017 (the "Bonds").

The Bonds are being issued to finance improvements at Newton Parrish Elementary School (the"Project").

The Bonds are revenue bonds and constitute a limited indebtedness of the Corporation. The Bonds willbe secured by a pledge of the rental income derived by the Corporation from leasing the Project to the OwensboroIndependent Board of Education (the "Board") on a year to year basis (see "Security" herein).

All financial and other information presented in this Official Statement has been provided by theOwensboro Independent Board of Education from its records, except for information expressly attributed to othersources. The presentation of financial and other information is not intended, unless specifically stated, to indicatefuture or continuing trends in the financial position or other affairs of the Board. No representation is made thatpast experience, as is shown by financial and other information, will necessarily continue or be repeated in thefuture.

This Official Statement should be considered in its entirety, and no one subject discussed should beconsidered more or less important than any other by reason of its location in the text. Reference should be madeto laws, reports or other documents referred to in this Official Statement for more complete information regardingtheir contents.

Copies of the Bond Resolution authorizing the issuance of the Bonds, the Participation Agreement andthe Lease Agreement dated August 1, 2017, may be obtained at the office of Steptoe & Johnson PLLC, BondCounsel, 700 N. Hurstbourne Parkway, Suite 115, Louisville, Kentucky 40222.


The Bonds shall utilize the Book-Entry-Only System administered by The Depository Trust Company(“DTC”).

The following information about the Book-Entry only system applicable to the Bonds has been suppliedby DTC. Neither the Corporation nor the Paying Agent and Registrar makes any representations, warranties orguarantees with respect to its accuracy or completeness.

DTC will act as securities depository for the Bonds. The Securities will be issued as fully-registeredsecurities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may berequested by an authorized representative of DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under the New YorkBanking Law, a "banking organization" within the meaning of the New York Banking Law, a member of theFederal 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 of1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues,corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants

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("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participantsof sales and other securities transactions in deposited securities, through electronic computerized book-entrytransfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement ofsecurities 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 TheDepository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participantsof DTC and Members of the National Securities Clearing Corporation, Government Securities ClearingCorporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC,and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American StockExchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is alsoavailable to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, andclearing corporations that clear through or maintain a custodial relationship with a Direct Participant, eitherdirectly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rulesapplicable to its Participants are on file with the Securities and Exchange Commission. More information aboutDTC can be found at www.dtcc.com.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which willreceive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Ownerswill not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected toreceive 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. Transfersof ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and IndirectParticipants acting on behalf of Beneficial Owners.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered inthe name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorizedrepresentative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or suchother DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actualBeneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whoseaccounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and IndirectParticipants 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 Participantsto Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governedby arrangements among them, subject to any statutory or regulatory requirements as may be in effect from timeto time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of noticesof significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendmentsto the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holdingthe Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,Beneficial Owners may wish to provide their names and addresses to the Paying Agent and Registrar and requestthat copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC's practiceis to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bondsunless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTCmails an Omnibus Proxy to the Corporation as soon as possible after the record date. The Omnibus Proxy assignsCede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on therecord date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and interest payments on the Bonds will be made to Cede & Co., orsuch other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit DirectParticipants' accounts upon DTC's receipt of funds and corresponding detail information from the Corporation orthe Paying Agent and Registrar, on payable date in accordance with their respective holdings shown on DTC'srecords. Payments by Participants to Beneficial Owners will be governed by standing instructions and customarypractices, as is the case with Bonds held for the accounts of customers in bearer form or registered in "street name"and will be the responsibility of such Participant and not of DTC or its nominee, the Paying Agent and Registraror the Corporation, subject to any statutory or regulatory requirements as may be in effect from time to time.Payment of redemption proceeds, distributions, and interest payments to Cede & Co. (or such other nominee asmay be requested by an authorized representative of DTC) is the responsibility of the Corporation or the PayingAgent and Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, anddisbursement of such payments to the Beneficial Owners will be the responsibility of Direct and IndirectParticipants.

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DTC may discontinue providing its services as depository with respect to the Bonds at any time by givingreasonable notice the Corporation or the Paying Agent and Registrar. Under such circumstances, in the event thata successor depository is not obtained, Bond certificates are required to be printed and delivered. The Corporationmay decide to discontinue use of the system of book-entry transfers through DTC (or a successor securitiesdepository). In that event, Bond certificates will be printed and delivered.

The information in this section concerning DTC and DTC's Book-Entry system has been obtained fromsources that the Corporation believes to be reliable but the Corporation takes no responsibility for the accuracythereof.

THE CORPORATION

The Corporation has been formed in accordance with the provisions of Sections 162.120 through 162.300and Section 162.385 of the Kentucky Revised Statutes ("KRS"), and KRS Chapter 273 and KRS 58.180, as anon-profit, non-stock corporation for the purpose of financing necessary school building facilities for and onbehalf of the Board. Under the provisions of existing Kentucky law, the Corporation is permitted to act as anagency and instrumentality of the Board for financing purposes and the legality of the financing plan to beimplemented by the Board herein referred to has been upheld by the Kentucky Court of Appeals (Supreme Court)in the case of White v. City of Middlesboro, Ky. 414 S.W.2d 569.

Any bonds, notes or other indebtedness issued or contracted by the Corporation shall, prior to the issuanceor incurrence thereon, be specifically approved by the Board. The members of the Board of Directors of theCorporation are the members of the Board. Their terms expire when they cease to hold the office and anysuccessor members of the Board are automatically members of the Corporation upon assuming their public offices.

KENTUCKY SCHOOL FACILITIES CONSTRUCTION COMMISSION

The Commission is an independent corporate agency and instrumentality of the Commonwealth ofKentucky established pursuant to the provisions of Sections 157.611 through 157.640 of the Kentucky RevisedStatutes, as repealed, amended, and reenacted (the "Act") for the purpose of assisting local school districts inmeeting the school construction needs of the Commonwealth in a manner in which will ensure an equitabledistribution of funds based upon unmet need.

The General Assembly of the Commonwealth adopted the State's Budget for the biennium ending June30, 2018. Inter alia, the Budget provides $121,610,900 in FY 2016-17 and $134,544,300 in FY 2017-18 to paydebt service on existing and future bond issues; $100,000,000 of the Commission's previous Offers of Assistancemade during the last biennium; and authorizes $91,000,000 in additional Offers of Assistance for the currentbiennium to be funded in the Budget for the biennium ending June 30, 2018.

The 1986, 1988, 1990, 1992, 1994, 1996, 1998, 2000, 2003, 2005, 2006, 2008, 2010, 2012, 2014 and2016 Regular Sessions of the Kentucky General Assembly appropriated funds to be used for debt service ofparticipating school districts. The appropriations for each biennium are shown in the following table:

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Biennium Appropriation1986-88 $18,223,2001988-90 14,050,7001990-92 13,542,8001992-94 3,075,3001994-96 2,800,0001996-98 4,996,0001998-00 12,141,5002000-02 8,100,000

2002-04 9,500,0002004-06 14,000,0002006-08 9,000,0002008-10 10,968,0002010-12 12,656,2002012-14 8,469,2002014-16 8,764,0002016-18 23,019,400Total $173,306,300

In addition to the appropriations for new financings as shown, appropriations subsequent to that for 1986included additional funds to continue to meet the annual debt requirements for all bond issues involvingCommission participation issue in prior years.

BIENNIAL BUDGET FOR PERIOD ENDING JUNE 30, 2018

The Kentucky General Assembly during its Regular Session, adopted a budget for the biennium endingJune 30, 2018 which was approved and signed by the Governor. Such budget was effective beginning July 1, 2016.

OUTSTANDING BONDS

The following table shows the outstanding Bonds of the Board by the original principal amount of eachissue, the current principal outstanding, the amount of the original principal scheduled to be paid with thecorresponding interest thereon by the Board or the School Facilities Construction Commission, the approximateinterest range; and, the final maturity date of the Bonds:

Current Principal Principal ApproximateBond Original Principal Assigned to Assigned to Interest Rate FinalSeries Principal Outstanding Board Commission Range Maturity

2008 $22,680,000 $2,240,000 $21,902,113 $777,887 3.750% - 4.000% 20182009-REF $3,260,000 $610,000 $988,576 $2,271,424 3.550% - 3.650% 20192012-REF $1,365,000 $955,000 $0 $1,365,000 2.000% - 2.500% 2024

2015 $6,190,000 $6,085,000 $5,435,683 $754,317 2.000% - 3.500% 20352016-REF $16,770,000 $16,595,000 $16,256,726 $513,274 2.000% - 4.000% 2028

Totals: $50,265,000 $26,485,000 $44,583,098 $5,681,902

AUTHORITY

The Board of Directors of the Corporation has adopted a Bond Resolution which authorized among otherthings:

i) the issuance of approximately $7,530,000 of Bonds subject to a permitted adjustment of $1,505,000;

ii) the advertisement for the public sale of the Bonds;

iii) the Official Terms and Conditions for the sale of the Bonds to the successful bidder; and,

iv) the President and Secretary of the Corporation to execute certain documents relative to the saleand delivery of the Bonds.

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THE BONDS

General

The Bonds will be dated August 1, 2017, will bear interest from that date as described herein, payablesemi-annually on February 1 and August 1 of each year, commencing February 1, 2018, and will mature as toprincipal on August 1, 2018, and each August 1 thereafter in the years and in the principal amounts as set forthon the cover page of this Official Statement.

Registration, Payment and Transfer

The Bonds are to be issued in fully-registered form (both principal and interest). The Huntington NationalBank, Cincinnati, Ohio, the Bond Registrar and Paying Agent, shall remit interest on each semiannual due dateto Cede & Co., as the nominee of The Depository Trust Company. Please see Book-Entry-Only-System. Intereston the Bonds will be paid at rates to be established upon the basis of competitive bidding as hereinafter set forth,such interest to be payable on February 1 and August 1 of each year, beginning February 1, 2018 (Record Dateis 15th day of month preceding interest due date).

Redemption

The Bonds maturing on or after August 1, 2028, are subject to redemption at the option of the Corporationprior to their stated maturity on any date falling on or after August 1, 2027, in any order of maturities (less thanall of a single maturity to be selected by lot), in whole or in part, upon notice of such prior redemption being givenby the Paying Agent in accordance with DTC requirements not less than thirty (30) days prior to the date ofredemption, upon terms of the face amount, plus accrued interest, but without redemption premium.

RedemptionRedemption Date Price

August 1, 2027 and thereafter 100%

Notwithstanding the foregoing, the Corporation reserves the right, upon thirty (30) days notice, to callthe Bonds in whole or in part for redemption on any day at par upon the total destruction by fire, lightning,windstorm or other hazard of any of the building(s) constituting the Project(s) and apply casualty insuranceproceeds to such purpose.

SECURITY

General

The Bonds are revenue bonds and constitute a limited indebtedness of the Corporation. The Bonds arepayable as to both principal and interest solely from the income and revenues derived from the leasing of theProject financed from the Bond proceeds from the Corporation to the Board. The Bonds are secured by a pledgeof revenue on and from the Project; provided, however, said lien and pledge are on parity with a similar lien andpledge securing the Corporation’s School Building Revenue Bonds previously issued to refinance the building(s)in which the Project is located (the “Parity Bonds”).

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The Lease; Pledge of Rental Revenue

The Board has leased the school Project securing the Bonds for an initial period from August 1, 2017,through June 30, 2018 with the option in the Board to renew said Lease from year to year for one year at a time,at annual rentals, sufficient in each year to enable the Corporation to pay, solely from the rental due under theLease, the principal and interest on all of the Bonds as same become due. The Lease provides further that so longas the Board exercises its annual renewal options, its rentals will be payable according to the terms and provisionsof the Lease until August 1, 2037, the final maturity date of the Bonds. Under the lease, the Corporation haspledged the rental revenues to the payment of the Bonds.

STATE INTERCEPT

Under the terms of the Lease and any renewal thereof, so long as the Bonds remain outstanding and inconformance with the intent and purpose of KRS 157.627(5) and KRS 160.160(5), in the event of a failure by theBoard to pay the rentals due under the Lease, and unless sufficient funds have been transmitted to the PayingAgent, or will be so transmitted, for paying said rentals when due, the Board has granted under the terms of theLease and Participation Agreement to the Corporation and the Commission the right to notify and request theKentucky Department of Education to withhold from the Board a sufficient portion of any undisbursed funds thenheld, set aside, or allocated to the Board and to request said Department or Commissioner of Education to transferthe required amount thereof to the Paying Agent for the payment of such rentals.

COMMISSION'S PARTICIPATION

The Commission has determined that the Board is eligible for an average annual participation equal toapproximately $90,333 from the Commission's appropriation by the Kentucky General Assembly which will beused to meet a portion of the debt service of the Bonds. The plan for financing the Project will require theCommission to pay sixteen percent (16%) of the debt service of the Bonds.

The Participation Agreement to be entered into with the Board will be limited to the biennial budgetperiod of the Commonwealth of Kentucky, with the first such biennial period terminating on June 30, 2018. Theright is reserved in the Commission to terminate the commitment to pay the agreed participation every two yearsthereafter. The obligation of the Commission to make payments of the agreed participation shall be automaticallyrenewed each two years thereafter unless the Commission gives notice to the Board of its intention not toparticipate not less than sixty days prior to the end of the biennium. However, the Commission has expressed itsintention to continue to pay the agreed participation in successive biennial budget periods until the Bonds areretired, but the Commission is not required to do so.

THE PROJECT

After payment of the Bond issuance costs, the Board plans to deposit the net Bond proceeds to financeimprovements at Newton Parrish Elementary School (the "Project").

The Board has reported construction bids have been let for the Project and approval of the KentuckyDepartment of Education, Buildings and Grounds, to award the construction contract is expected prior to the saleand delivery of the Bonds.

Contractors for the Project are required to furnish to the Board a one hundred percent completion bondto assure their performance of the construction contract.

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ADDITIONAL PARITY BONDS

The Corporation has reserved the right and privilege of issuing additional bonds from time to time payablefrom the income and revenues of said lands and school building Project and secured by a statutory mortgage lienand pledge of revenues, but only if and to the extent the issuance of such additional parity bonds are in accordancewith the plans and specifications which have been completed, approved by the Board, Commissioner of Education,and filed in the office of the Secretary of the Corporation and a Lease shall be entered into whereunder the annualrental payments during the life of such additional bonds shall be increased by the amount of the annual principaland interest requirements of such additional bonds.

ESTIMATED BOND DEBT SERVICE

The following table shows by fiscal year the current bond payments of the Board. The plan of financingprovides for the Board to pay 84% of the debt service of the Bonds.

Fiscal Current Series 2017 Revenue Bonds TotalYear Local Local

Ending Bond Principal Interest Total SFCC LOCAL BondJune 30 Payments Portion Portion Payment Portion Portion Payments

2018 $2,040,389 $125,346 $125,346 $20,055 $105,291 $2,145,680 2019 $2,036,514 $115,000 $250,118 $365,118 $58,419 $306,699 $2,343,213 2020 $2,041,271 $105,000 $248,886 $353,886 $56,622 $297,264 $2,338,535 2021 $2,042,244 $105,000 $247,443 $352,443 $56,391 $296,052 $2,338,296 2022 $2,038,538 $115,000 $245,649 $360,649 $57,704 $302,945 $2,341,483 2023 $2,028,962 $125,000 $243,393 $368,393 $58,943 $309,450 $2,338,412 2024 $2,030,131 $130,000 $240,680 $370,680 $59,309 $311,371 $2,341,502 2025 $2,031,749 $125,000 $237,655 $362,655 $58,025 $304,630 $2,336,379 2026 $2,024,995 $135,000 $234,236 $369,236 $59,078 $310,158 $2,335,153 2027 $2,022,878 $140,000 $230,280 $370,280 $59,245 $311,035 $2,333,913 2028 $2,029,960 $145,000 $226,005 $371,005 $59,361 $311,644 $2,341,604 2029 $2,020,402 $150,000 $221,393 $371,393 $59,423 $311,970 $2,332,372 2030 $700,683 $580,000 $209,530 $789,530 $126,325 $663,205 $1,363,888 2031 $707,770 $590,000 $189,780 $779,780 $124,765 $655,015 $1,362,785 2032 $698,717 $620,000 $168,605 $788,605 $126,177 $662,428 $1,361,145 2033 $688,812 $650,000 $146,380 $796,380 $127,421 $668,959 $1,357,771 2034 $697,661 $665,000 $123,368 $788,368 $126,139 $662,229 $1,359,890 2035 $723,611 $655,000 $99,940 $754,940 $120,790 $634,150 $1,357,760 2036 $723,270 $680,000 $75,740 $755,740 $120,918 $634,822 $1,358,091 2037 $723,270 $840,000 $47,790 $887,790 $142,046 $745,744 $1,469,013 2038 $723,270 $860,000 $16,125 $876,125 $140,180 $735,945 $1,459,215

Totals: $30,775,093 $7,530,000 $3,828,340 $11,358,340 $1,817,334 $9,541,006 $40,316,099

Notes: Based on a projected average interest rate of 3.5104%. Numbers are rounded to the nearest $1.00.

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ESTIMATED USE OF BOND PROCEEDS

The table below shows the estimated sources of funds and uses of proceeds of the Bonds, other thanany portions thereof representing accrued interest:

Sources:

Par Amount of Bonds $7,530,000.00

Total Sources $7,530,000.00

Uses:

Deposit to Construction Fund $7,321,030.00 Underwriter's Discount (2%) 150,600.00 Cost of Issuance 58,370.00

Total Uses $7,530,000.00

DISTRICT STUDENT POPULATION

Selected school census and average daily attendance for the Owensboro Independent School Districtis as follows:

Average Daily Average DailyYear Attendance Year Attendance

1990-91 4,052.9 2004-05 3,530.41991-92 4,045.3 2005-06 3,544.61992-93 4,085.8 2006-07 3,710.01993-94 4,122.8 2007-08 3,600.41994-95 4,123.0 2008-09 3,574.81995-96 4,027.1 2009-10 3,611.81996-97 3,974.8 2010-11 3,734.21997-98 3,938.1 2011-12 3,872.01998-99 3,938.1 2012-13 4,049.81999-00 3,651.0 2013-14 4,127.62000-01 3,651.0 2014-15 4,226.82001-02 3,549.6 2015-16 4,226.12002-03 3,530.0 2016-17 4,330.32003-04 3,561.3

_____________Source: Kentucky State Department of Education.

STATE SUPPORT

Support Education Excellence in Kentucky (SEEK). In determining the cost of the program to SupportEducation Excellence in Kentucky (SEEK), the statewide guaranteed base funding level is computed by dividingthe amount appropriated by the prior year's statewide average daily attendance. The SEEK fund is a guaranteedamount of money per pupil in each school district of Kentucky. The current SEEK allotment is $3,866 per pupil. The $100 capital outlay allotment per each average daily attendance is included within the guaranteed amounts.Each district's base funding from the SEEK program is adjusted for the number of at-risk students, the number andtypes of exceptional children in the district, and cost of transporting students from and to school in the district.

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Capital Outlay Allotment. The per pupil capital outlay allotment for each district from the public schoolfund and from local sources shall be kept in a separate account and may be used by the district only for capitaloutlay projects approved by the State Department of Education. These funds shall be used for the followingcapital outlay purposes:

a. For direct payment of construction costs.b. For debt service on voted and funding bonds.c. For payment or lease-rental agreements under which the board will eventually acquire ownership

of the school plant.d. For retirement of any deficit resulting from over-expenditure for capital construction, if such

deficit resulted from certain declared emergencies.e. As a reserve fund for the above named purposes, to be carried forward in ensuing budgets.

The allotment for each school board of education in the Commonwealth for fiscal year 1978-79 was$1,800 per classroom unit. The 1979 Session of the Kentucky General Assembly approved increases in thisallotment in 1979-80 to $1,900 per classroom unit. This rate remained unchanged in 1980-81. The 1981 Sessionof the Kentucky General Assembly decreased the allotment per classroom to $1,800 and this allotment rate didnot change from the 1981-82 rate, until the 1990-91 school year. Beginning with 1990-91, the Capital Outlayallotment for each district is based on $100 per average daily attendance.

The following table shows the computation of the capital outlay allotment for the Owensboro IndependentSchool District for certain preceding school years. Beginning 1990-91, the allotment is based on average dailyattendance as required by law.

Capital Outlay Capital OutlayYear Allotment Year Allotment

1990-91 405,290.0 2004-05 353,040.01991-92 404,530.0 2005-06 354,460.01992-93 408,580.0 2006-07 371,000.01993-94 412,280.0 2007-08 360,040.01994-95 412,300.0 2008-09 357,475.01995-96 402,710.0 2009-10 361,175.01996-97 397,480.0 2010-11 373,418.01997-98 393,810.0 2011-12 387,196.01998-99 393,810.0 2012-13 404,979.01999-00 365,100.0 2013-14 412,755.02000-01 365,100.0 2014-15 422,679.02001-02 354,960.0 2015-16 422,612.02002-03 353,000.0 2016-17 433,030.02003-04 356,130.0

If the school district has no capital outlay needs, upon approval from the State, the funds can be used forschool plant maintenance, repair, insurance on buildings, replacement of equipment, purchase of school buses andpurchase of modern technological equipment for educational purposes. If any district has a special levy for capitaloutlay or debt service that is equal to the capital outlay allotment or a proportionate fraction thereof, and spendsthe proceeds of the levy for eligible purposes, the State may authorize the district to use all or a proportionatefraction of its capital outlay allotment for current expenses (school districts which use capital outlay allotmentsto meet current expenses are not eligible to participate in the School Facilities Construction Commission funds).

Facilities Support Program of Kentucky. School districts may be eligible to participate in the FacilitiesSupport Program of Kentucky (FSPK), subject to the following requirements:

1) The district must have unmet needs as set forth and approved by the State Department ofEducation in a School Facilities Plan;

2) The district must commit to establish an equivalent tax rate of at least 5 cents, in addition to the

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30 cents minimum current equivalent tax rate; and,

3) The new revenues generated by the 5 cent addition, must be placed in a restricted account forschool building construction bonding.

LOCAL SUPPORT

Homestead Exemption. Section 170 of the Kentucky Constitution was amended at the General Electionheld November 2, 1971, to exempt from property taxes $6,500 of value of single unit residential property oftaxpayers 65 years of age or older. The 1972 General Assembly amended KRS Chapter 132 to permit countiesand school districts to adjust their local tax revenues lost through the application of this Homestead Exemption. The "Single Unit" qualification has been enlarged to subsequent sessions of the General Assembly to provide thatsuch exemption shall apply to such property maintained as the permanent resident of the owner and the dollaramount has been construed to mean $6,500 in terms of the purchasing power of the dollar in 1972. Every two yearsthereafter, if the cost of living index of the U.S. Department of Labor has changed as much as 1%, the maximumexemption shall be adjusted accordingly. Under the cost of living formula, the maximum was increased to $37,600effective January 1, 2017.

Limitation on Taxation. The 1979 Special Session of the Kentucky General Assembly enacted HouseBill 44 which provides that no school district may levy a general tax rate, voted general tax rate, or voted buildingtax rate which would generate revenues that exceeds the previous years revenues by four percent (4%).

The 1990 Regular Session of the Kentucky General Assembly in enacting the "School Reform" legislativepackage amended the provisions of KRS 160.470 which prohibited school districts from levying ad valoremproperty taxes which would generate revenues in excess of 4% of the previous year's revenues without said levysubject to recall to permit exceptions to the referendum under (1) KRS 160.470(12) [a new section of the statute]and (2) an amended KRS 157.440.

Under KRS 160.470(12)(a) for fiscal years beginning July 1, 1990 school districts are required to levya "minimum equivalent tax rate" of thirty cents ($.30) for general school purposes. The equivalent tax rate isdefined as the rate which results when the income collected during the prior year from all taxes (includingoccupational or utilities) levied by the district for school purposes divided by the total assessed value of propertyplus the assessment for motor vehicles certified by the State Revenue Cabinet. Failure to levy the minimumequivalent rate subjects the board of the district to removal.

The exception provided by KRS 157.440(1)(a) permits school districts to levy an equivalent tax rate asdefined in KRS 160.470(12)(a) which will produce up to 15% of those revenues guaranteed by the program tosupport education excellence in Kentucky. Levies permitted by this section of the statute are not subject to publichearing or recall provisions as set forth in KRS 160.470.

Local Thirty Cents Minimum. Effective for school years beginning after June 30, 1990, the board ofeducation of each school district shall levy a minimum equivalent tax rate of thirty cents ($0.30) for general schoolpurposes. If a board fails to comply, its members shall be subject to removal from office for willful neglect ofduty.

Additional 15% Not Subject to Recall. Effective with the school year beginning July 1, 1990, eachschool district may levy an equivalent tax rate which will produce up to 15% of those revenues guaranteed by theSEEK program. Effective with the 1990-91 school year, the State will equalize the revenue generated by this levyat one hundred fifty percent (150%) of the statewide average per pupil equalized assessment. For 1993-94 andthereafter, this level is set at $225,000. The additional 15% rate levy is not subject to the public hearing or recallprovisions.

Assessment Valuation. No later than July 1, 1994, all real property located in the state and subject tolocal taxation shall be assessed at one hundred percent (100%) of fair cash value.

Special Voted and Other Local Taxes. Any district may, in addition to other taxes for school purposes,

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levy not less than four cents nor more than twenty cents on each one hundred dollars ($100) valuation of propertysubject to local taxation, to provide a special fund for the purchase of sites for school buildings and the erection,major alteration, enlargement, and complete equipping of school buildings. In addition, districts may levy taxeson tangible and intangible property and on utilities, except generally any amounts of revenues generated abovethat provided for by House Bill 44 is subject to voter recall.

Local Tax Rates, Property Assessments and Revenue Collections

Combined Total PropertyTax Equivalent Property Revenue Year Rate Assessment Collections

1991-92 73.6 788,081,403 5,800,2791992-93 74.9 795,516,681 5,958,4201993-94 78 802,225,003 6,257,3551994-95 74.6 916,763,894 6,839,0591995-96 79.4 937,287,172 7,442,0601996-97 77.4 952,297,778 7,370,7851997-98 80.9 956,865,760 7,741,0441998-99 80.9 964,520,686 7,802,9721999-00 80.3 1,054,027,044 8,463,8372000-01 81 1,141,893,821 9,249,3402001-02 80.3 1,155,403,468 9,277,8902002-03 84.4 1,161,789,387 9,805,5022003-04 84.4 1,163,528,825 9,820,1832004-05 84.1 1,183,395,170 9,952,3532005-06 85.7 1,249,399,003 10,707,3492006-07 89.4 1,232,052,054 11,014,5452007-08 85.7 1,277,965,811 10,952,1672008-09 91.2 1,320,173,629 12,039,9832009-10 91.2 1,325,332,408 12,087,0322010-11 93.1 1,321,031,939 12,298,8072011-12 93 1,328,355,409 12,353,7052012-13 96.5 1,330,390,293 12,838,2662013-14 98 1,358,251,259 13,310,8622014-15 97.9 1,391,612,319 13,623,8852015-16 98 1,425,090,752 13,965,8892016-17 97.7 1,479,969,387 14,459,301

Overlapping Bond Indebtedness

The following table shows any other overlapping bond indebtedness of the Owensboro IndependentSchool District or other issuing agency within the County as reported by the State Local Debt Officer for theperiod ending June 30, 2013.

Original Amount CurrentPrincipal of Bonds Principal

Issuer Amount Redeemed OutstandingCounty of Daviess General Obligation $49,785,000 $9,695,000 $40,090,000 Hospital $60,445,000 $27,575,000 $32,870,000 Home Mortgage Revenue $54,285,000 $22,325,000 $31,960,000 Multi-Family Housing Revenue $4,155,000 $0 $4,155,000 Sewer Revenue $155,000,000 $0 $155,000,000 Court Facility Public Corporation $4,270,000 $3,550,000 $720,000 Building Lease Revenue $5,540,000 $585,000 $4,955,000 Detention Facility $1,000,000 $731,979 $268,021

City of Owensboro

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General Obligation $130,046,000 $7,676,000 $122,370,000 Electric & Water Revenue $179,359,359 $55,656,807 $123,702,552 Government Project Funding $3,871,113 $2,462,564 $1,408,549 Airport Revenue $7,900,000 $5,910,000 $1,990,000 Health Care Facility Revenue $201,425,000 $43,050,000 $158,375,000 Refinancing Refunding Revenue $12,990,000 $3,007,500 $9,982,500 Multiple Purposes Revenue $50,430,000 $0 $50,430,000 Golf Course Acquisition $855,000 $570,000 $285,000 Property Acquisition $357,000 $140,000 $217,000

City of Whitesville Water & Sewer $119,000 $65,500 $53,500 Refinancing Revenue $2,550,000 $0 $2,550,000 Health Care Facility Revenue $1,800,000 $0 $1,800,000

Special Districts Daviess County Extension Office $600,000 $319,068 $280,932 Daviess County Public Health Taxing Office $5,700,000 $2,341,545 $3,358,455 Daviess County Public Library $9,700,000 $1,125,000 $8,575,000 Green River Area Development District $1,025,000 $101,500 $923,500 Owensboro Riverport Authority $10,175,000 $3,670,000 $6,505,000 Owensboro-Daviess County Regional Water $7,640,000 $2,435,000 $5,205,000

Totals: $961,022,472 $192,992,463 $768,030,009____________Source: 2013 Kentucky Local Debt Report

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SEEK ALLOTMENT

The Board has reported the following information as to the SEEK allotment to the District, and asprovided by the State Department of Education.

Base Local Total State &SEEK Funding Tax Effort Local Funding

1991-92 10,616,813 5,800,279 16,417,0921992-93 10,634,941 5,958,420 16,593,3611993-94 10,940,925 6,257,355 17,198,2801994-95 10,855,770 6,839,059 17,694,8291995-96 11,078,776 7,442,060 18,520,8361996-97 11,506,801 7,370,785 18,877,5861997-98 11,875,878 7,741,044 19,616,9221998-99 11,899,729 7,802,972 19,702,7011999-00 12,162,343 8,463,837 20,626,1802000-01 12,264,629 9,249,340 21,513,9692001-02 12,118,755 9,277,890 21,396,6452002-03 12,618,389 9,805,502 22,423,8912003-04 13,394,833 9,820,183 23,215,0162004-05 13,622,755 9,952,353 23,575,1082005-06 14,675,741 10,707,349 25,383,0902006-07 16,099,010 11,014,545 27,113,5552007-08 17,228,326 10,952,167 28,180,4932008-09 17,433,430 12,039,983 29,473,4132009-10 16,316,366 12,087,032 28,403,3982010-11 16,560,209 12,298,807 28,859,0162011-12 18,248,730 12,353,705 30,602,4352012-13 19,031,679 12,838,266 31,869,9452013-14 19,396,698 13,310,862 32,707,5602014-15 20,108,357 13,623,885 33,732,2422015-16 21,024,076 13,965,889 34,989,9652016-17 21,151,267 14,459,301 35,610,568

(1) Support Education Excellence in Kentucky (SEEK) replaces the minimum foundation program and power equalization funding. Capital Outlay is now computed at $100 per average daily attendance (ADA). Capital Outlay is included in the SEEK base funding.

(2) The Board established a current equivalent tax rate (CETR) of $0.977 for FY 2016-17. The equivalenttax rate" is defined as the rate which results when the income from all taxes levied by the district forschool purposes is divided by the total assessed value of property plus the assessment for motor vehiclescertified by the Commonwealth of Kentucky Revenue Cabinet.

State Budgeting Process

i) Each district board of education is required to prepare a general school budget on formsprescribed and furnished by the Kentucky Board of Education, showing the amount of moneyneeded for current expenses, debt service, capital outlay, and other necessary expenses of theschool during the succeeding fiscal year and the estimated amount that will be received from allsources.

ii) By September 15 of each year, after the district receives its tax assessment data from theDepartment of Revenue and the State Department of Education, 3 copies of the budget areforwarded to the State Department for approval or disapproval.

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iii) The State Department of Education has adopted a policy of disapproving a school budget if itis financially unsound or fails to provide for:

a) payment of maturing principal and interest on any outstanding voted schoolimprovement bonds of the district or payment of rental in connection with anyoutstanding school building revenue bonds issued for the benefit of the school district;or

b) fails to comply with the law.

POTENTIAL LEGISLATION

No assurance can be given that any future legislation, including amendments to the Code, if enacted intolaw, or changes in interpretation of the Code, will not cause interest on the Bonds to be subject, directly orindirectly, to federal income taxation, or otherwise prevent owners of the Bonds from realizing the full currentbenefit of the tax exemption of such interest. In addition, current and future legislative proposals, if enacted intolaw, may cause interest on state or local government bonds (whether issued before, on the date of, or afterenactment of such legislation) to be subject, directly or indirectly, to federal income taxation by, for example,changing the current exclusion or deduction rules to limit the amount of interest on such bonds that may currentlybe treated as tax exempt by certain individuals. Prospective purchasers of the Bonds should consult their own taxadvisers regarding any pending or proposed federal tax legislation.

Further, no assurance can be given that the introduction or enactment of any such future legislation, orany action of the IRS, including but not limited to regulation, ruling, or selection of the Bonds for auditexamination, or the course or result of any IRS examination of the Bonds or obligations which present similar taxissues, will not affect the market price for the Bonds.

CONTINUING DISCLOSURE

As a result of the Board and issuing agencies acting on behalf of the Board offering for public salemunicipal securities in excess of $1,000,000, the Corporation and the Board will enter into a written agreementfor the benefit of all parties who may become Registered or Beneficial Owners of the Bonds whereunder saidCorporation and Board will agree to comply with the provisions of the Municipal Securities Disclosure Rules setforth in Securities and Exchange Commission Rule 15c2-12 by filing annual financial statements and materialevents notices with the Electronic Municipal Market Access (EMMA) System maintained by the MunicipalSecurities Rule Making Board.

The Board and Corporation have been late in making certain required filings under the terms of theContinuing Disclosure Agreements between the Board and the Corporation executed in connection with previousbond issues. The Board has filed Material Event Notices indicating its failure to file on a timely basis thefollowing information:

(1) An upgrade in Moody's rating of its bonds from "Aa3" to "Aa2";

(2) A downgrade in Moody's rating of its bonds from "Aa2" to Aa3";

(3) Failure to file Annual Financial Information on a timely basis for (2) years; and,

(4) Failure to file Annual Operating Data on a timely basis.

Annual Financial Information for FY ending June 30, 2011 was filed after the deadline (March 31st). Operating Data for FYs ending June 30, 2009, 2010, 2011, 2012 and 2013 was filed on July 18, 2014.

The Board has adopted new procedures to assure timely and complete filings in the future with regard tothe Rule in order to provide required financial reports and operating data or notices of material events.

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Financial information regarding the Board may be obtained from Superintendent, Owensboro IndependentSchool District Board of Education, 450 Griffith Avenue, Owensboro, Kentucky 42301, Telephone 270-686-1000.

TAX EXEMPTION; BANK QUALIFIED

Bond Counsel is of the opinion that the Bonds are "qualified tax-exempt obligations" within the meaningof the Internal Revenue Code of 1986, as amended, and therefore advises as follows:

(A) The Bonds and the interest thereon are exempt from income and ad valorem taxation by theCommonwealth of Kentucky and all of its political subdivisions.

(B) The interest income from the Bonds is excludable from the gross income of the recipient thereof forFederal income tax purposes under existing law; provided, that the corporate entities noted below are advised ofcertain tax consequences as follows:

(1) In the computation of the corporate minimum tax, earnings and profits may include otherwisetax-exempt interest on the Bonds; this provision applies to corporations only.

(2) Property and casualty insurance companies may be denied certain loss reserve deductions tothe extent of otherwise tax-exempt interest on the Bonds.

(C)As a result of designations and certifications by the Board and the Corporation, indicating the issuanceof less than $10,000,000 of tax-exempt obligations during the calendar year ending December 31, 2017, the Bondsare “qualified tax-exempt obligations” within the meaning of the Internal Revenue Code of 1986, as amended.

(D) The interest income from the Bonds is excludable from the gross income of the recipient thereof forFederal income tax purposes under existing law for individuals; however, said income must be included in thecalculation of "modified adjusted gross income" in the determination of whether and to what extent Social Securitybenefits are subject to Federal income taxation.

The Corporation will provide the purchaser the customary no-litigation certificate, and the final approvingLegal Opinion of Steptoe & Johnson PLLC, Bond Counsel, Louisville, Kentucky approving the legality of theBonds. These opinions will accompany the Bonds when delivered, without expense to the purchaser.

Original Issue Premium

Certain of the Bonds are being initially offered and sold to the public at a premium (“AcquisitionPremium” from the amounts payable at maturity thereon. "Acquisition Premium" is the excess of the cost of abond over the stated redemption price of such bond at maturity or, for bonds that have one or more earlier calldates, the amount payable at the next earliest call date. The Bonds that bear an interest rate that is higher than theyield (as shown on the cover page hereof), are being initially offered and sold to the public at an AcquisitionPremium (the "Premium Bonds"). For federal income tax purposes, the amount of Acquisition Premium on eachbond the interest on which is excludable from gross income for federal income tax purposes ("tax-exempt bonds")must be amortized and will reduce the bondholder's adjusted basis in that bond. However, no amount of amortizedAcquisition Premium on tax-exempt bonds may be deducted in determining bondholder's taxable income forfederal income tax purposes. The amount of any Acquisition Premium paid on the Premium Bonds, or on any ofthe Bonds, that must be amortized during any period will be based on the "constant yield" method, using theoriginal bondholder's basis in such bonds and compounding semiannually. This amount is amortized ratably overthat semiannual period on a daily basis.

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Holders of any Bonds, including any Premium Bonds, purchased at an Acquisition Premium shouldconsult their own tax advisors as to the actual effect of such Acquisition Premium with respect to their own taxsituation and as to the treatment of Acquisition Premium for state tax purposes.

Original Issue Discount

Certain of the Bonds (the "Discount Bonds") are being initially offered and sold to the public at a discount("OID") from the amounts payable at maturity thereon. OID is the excess of the stated redemption price of a bondat maturity (the face amount) over the "issue price" of such bond. The issue price is the initial offering price to thepublic (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers)at which a substantial amount of bonds of the same maturity are sold pursuant to that initial offering. For federalincome tax purposes, OID on each bond will accrue over the term of the bond. The amount accrued will be basedon a single rate of interest, compounded semiannually (the "yield to maturity") and, during each semi-annualperiod, the amount will accrue ratably on a daily basis. The OID accrued during the period that an initial purchaserof a Discount Bond at its issue price owns it is added to the purchaser's tax basis for purposes of determining gainor loss at the maturity, redemption, sale or other disposition of that Discount Bond. In practical effect, accrued OIDis treated as stated interest, that is, as excludible from gross income for federal income tax purposes.

In addition, original issue discount that accrues in each year to an owner of a Discount Bond is includedin the calculation of the distribution requirements of certain regulated investment companies and may result insome of the collateral federal income tax consequences discussed above. Consequently, owners of any DiscountBond should be aware that the accrual of original issue discount in each year may result in an alternative minimumtax liability, additional distribution requirements or other collateral federal income tax consequences although theowner of such Discount Bond has not received cash attributable to such original issue discount in such year.

Holders of Discount Bonds should consult their own tax advisors as to the treatment of OID and the taxconsequences of the purchase of such Discount Bonds other than at the issue price during the initial public offeringand as to the treatment of OID for state tax purposes.

ABSENCE OF MATERIAL LITIGATION

There is no controversy or litigation of any nature now pending or threatened (i) restraining or enjoiningthe issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of theBonds or any proceedings of the Board or Corporation taken with respect to the issuance or sale thereof or (ii)which if successful would have a material adverse effect on the financial condition of the Board.

APPROVAL OF LEGALITY

Legal matters incident to the authorization and issuance of the Bonds are subject to the approving legalopinion of Steptoe & Johnson PLLC, Bond Counsel. The form of the approving legal opinion of Bond Counselwill appear on each printed Bond.

NO LEGAL OPINION EXPRESSED AS TO CERTAIN MATTERS

Bond Counsel has reviewed the information contained in the Official Statement describing the Bonds andthe provisions of the Bond Resolution and related proceedings authorizing the Bonds, but Bond Counsel has notreviewed any of the financial data, computations, tabulations, balance sheets, financial projections, and generalinformation concerning the Corporation or District, and expresses no opinion thereon, assumes no responsibilityfor same and has not undertaken independently to verify any information contained herein.

16

BOND RATING

As noted on the cover page of this Official Statement, Moody’s Investors Service has given the Bondsthe indicated rating. Such rating reflects only the respective views of such organization. Explanations of thesignificance of the rating may be obtained from the rating agency. There can be no assurance that such rating willbe maintained for any given period of time or will not be revised or withdrawn entirely by the rating agency, ifin their judgement circumstances so warrant. Any such downward revision or withdrawal of such rating may havean adverse effect on the market price of the Bonds.

FINANCIAL ADVISOR

Prospective bidders are advised that Ross, Sinclaire & Associates, LLC ("Ross Sinclaire") has beenemployed as Financial Advisor in connection with the issuance of the Bonds. Ross Sinclaire's fee for servicesrendered with respect to the sale of the Bonds is contingent upon the issuance and delivery thereof. Bidders maysubmit a bid for the purchase of the Bonds at the time of the advertised public sale, either individually or as amember of a syndicate organized to submit a bid for the purchase of the Bonds.

APPROVAL OF OFFICIAL STATEMENT

The Corporation has approved and caused this "Official Statement" to be executed and delivered by itsPresident. In making this "Official Statement" the Corporation relied upon information furnished to it by theBoard of Education of the Owensboro Independent School District and does not assume any responsibility as tothe accuracy or completeness of any of the information in this Official Statement except as to copies of documentsdenominated "Official Terms and Conditions" and "Bid Form." The financial information supplied by the Boardof Education is represented by the Board of Education to be correct. The Corporation deems this preliminaryOfficial Statement to be final for purposes of Securities Exchange Commission Rule 15c2-12(b)(1) as qualifiedby the cover hereof.

No dealer, broker, salesman, or other person has been authorized by the Corporation, the OwensboroIndependent Board of Education or the Financial Advisor to give any information or representations, other thanthose contained in this Official Statement, and if given or made, such information or representations must not berelied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offerto sell or the solicitation of any person in any jurisdiction in which it is unlawful for such person to make suchoffer, solicitation or sale. Except when otherwise indicated, the information set forth herein has been obtainedfrom the Kentucky Department of Education and the Owensboro Independent School District and is believed tobe reliable; however, such information is not guaranteed as to accuracy or completeness by, and is not to beconstrued as a representation by the Financial Advisor or by Counsel. The delivery of this Official Statement atany time does not imply that information herein is correct as of any time subsequent to the date hereof.

This Official Statement does not, as of its date, contain any untrue statement of a material fact or omit tostate a material fact which should be included herein for the purpose for which the Official Statement is to be usedor which is necessary in order to make the statements contained herein, in the light of the circumstances underwhich they were made, not misleading in any material respect.

By /s/ President

By /s/ Secretary

17

APPENDIX A

Owensboro Independent School District Finance Corporation School Building Revenue Bonds

Series of 2017

Demographic and Economic Data

OWENSBORO, KENTUCKY

Owensboro, the county seat of Daviess County, is Kentucky's third largest city with a 2016 populationof 59,273. Located on the bank of the Ohio River in northwestern Kentucky, Owensboro, is 40 miles southeastof Evansville, Indiana; 110 miles southwest of Louisville, Kentucky; 132 miles north of Nashville, Tennessee;208 miles southeast of St. Louis, Missouri; and 211 miles southwest of Cincinnati, Ohio.

Daviess County covers a total land area of 462 square miles in the Western Kentucky Coal Field Region. The Ohio River forms the northern boundary of the county and the Green River flows along part of the westernborder. In 2016, Daviess County has a population of 99,674.

The Economic Framework

The total number of Daviess County residents employed in 2015 averaged 44,871. Manufacturing firmsin the county reported 5,565 employees; trade, transportation and utilities provided 9,370 jobs; 18,166 people wereemployed in service occupations; contract construction firms provided 1,849 jobs; 402 jobs were in the miningand quarrying industry; financial activities provided 3,471 jobs.

Labor Supply

There is a current estimated labor supply of 19,550 persons available for industrial jobs in the labormarket area. In addition, from 2014 through 2017, 25,289 persons in the area will become 18 years of age andpotentially available for industrial jobs.

Transportation

CSX Transportation provides Owensboro with mail line rail service and a variety of other servicesincluding piggyback facilities. Direct highway access to Owensboro is provided by the Audubon Parkway, theWilliam Natcher Parkway, and U.S. Highways 60, 231, and 431, all "AAA"-rated trucking routes. The WesternKentucky Parkway, the Pennyrile Parkway, Interstate 65 and Interstate 64 are all located within 70 miles ofOwensboro. Of the thirty-one common carrier trucking companies which serve Owensboro, four maintain localterminals. Commuter air carrier service is available at the Owensboro-Daviess County Airport, which has a 6,500-foot and a 3,700-foot paved runway. Scheduled commercial airline service is available at three airports within140 miles of Owensboro. The Owensboro Riverport, a public river terminal located on the Ohio River, providesexcellent water transportation facilities.

Power and Fuel

Electric power is provided to Owensboro and part of Daviess County by Owensboro Municipal Utilities. Daviess County is also provided electric power by Kenergy, a rural electric cooperative corporation, and byKentucky Utilities Company. Owensboro is provided natural gas service by Atmos Energy.

Education

Primary and secondary education is provided by the Owensboro Independent School System and theDaviess County School System, which are both accredited by the Southern Association of Colleges and Schools. Fifteen nonpublic schools also provide educational opportunities for approximately 4,000 kindergarten throughhigh school students. There are two fully-accredited, coeducational, senior colleges located in the city: BresciaUniversity College and Kentucky Wesleyan College. Both colleges confer associate and baccalaureate degreesand have graduate level course offerings in cooperation with Western Kentucky University and Murray StateUniversity. Two vocational training facilities are located in Owensboro - the Daviess County RegionalTechnology Center and the Owensboro Regional Technology Center.

(A-1)

LOCAL GOVERNMENTStructure

Owensboro is served by a mayor, four commissioners, and a city manager. The mayor serves a four-yearterm, while the commissioners each serve two-year terms. Daviess County is served by a county judge/executiveand three commissioners. The county judge/executive and commissioners all serve four-year terms.

Planning and Zoning

Joint agency - Owensboro Metropolitan Planning Commission (includes Daviess County)Participating cities - Owensboro, WhitesvilleZoning enforced - All areasSubdivision regulations enforced - All areasLocal codes enforced - Building (all areas), Housing ( Owensboro only)Mandatory state codes enforced - Kentucky Plumbing Code, National Electric Code, Kentucky Boiler Regulations and Standards, Kentucky Building Code (modeled after BOCA code)

Local Fees and Licenses

The city of Owensboro levies a one percent (1%) occupational license fee on all gross wages, salaries,commissions, and other compensation earned in the city. The one percent tax is also levied on net profits on salesof all businesses, professions or occupations for activities conducted inside the city limits.

State and Local Property Taxes

All property in Kentucky, except items exempted by the state constitution, is taxed by the state. Propertywhich also may be taxed by local jurisdictions includes land and buildings, finished goods inventories,automobiles, trucks, office furniture and office equipment. Local taxing jurisdictions in Kentucky includecounties, cities, and school districts. All property in Kentucky is assessed at 100 percent of fair cash value.

LABOR MARKET STATISTICS

The Owensboro Labor Market Area includes Daviess County and the adjoining Kentucky counties ofButler, Hancock, Henderson, McLean, Muhlenberg and Ohio. The Labor Market Area also includes the Indianacounties of Spencer, Warrick and a portion of Vanderburgh.

Population

Area 2014 2015 2016Labor Market Area 495,272 496,711 497,330Daviess County 98,416 99,333 99,674Owensboro 58,512 59,088 59,273

_____________Source: U.S. Department of Commerce, Bureau of the Census.

Population Projections

Area 2020 2025 2030Daviess County 102,214 104,393 106,153

_____________Source: Kentucky State Data Center, University of Louisville and Kentucky Cabinet for Economic Development.

(A-2)

EDUCATION

Public SchoolsOwensboro Ind. Daviess Co.

Total Enrollment (2015-2016) 4,776 11,102Pupil-Teacher Ratio (2015-2016) 14.7 - 1 16.2-1

Technical SchoolsEnrollment

Name Location (2015-2016)Ohio County ATC Hartford, KY 718Webster County ATC Dixon, KY 348Breckinridge County ATC Harned, KY 717Grayson County Area Vocational Ed. Center Leitchfield, KY 933Meade County ATC Brandenburg, KY 498Butler County ATC Morgantown, KY 467Henderson County ATC Henderson, KY 2,197Muhlenberg County CTC Greenville, KY 323Union County CTC Morganfield, KY 704

Area Colleges and Universities

EnrollmentName Location (Fall 2015)

Brescia University Owensboro, KY 1,060Kentucky Wesleyan College Owensboro, KY 693Owensboro Community & Tech College Owensboro, KY 3,974Henderson Community College Henderson, KY 1,561Madisonville Community College Madisonville, KY 4,261

FINANCIAL INSTITUTIONS

Institution Total Assets Total DepositsFirst Security Bank $ 638,890,000 $ 495,972,000Independence Bank 2,002,516,000 1,520,451,000

__________Source: McFadden American Financial Directory, July-December 2017 Edition.

(A-3)

EXISTING INDUSTRYTotal

Firm Product EmployedOwensboro

Boardwalk Pipeline Partners Headquarters; natural gas transmissions company 207Canteen Service Co. Headquarters; vending services and food service 275Daramic, LLC Automotive & industrial battery separators 158Dart Polymers, Inc. Polystyrene pellets & EPS 160Glenmore Distillery Whiskey, gin, vodka, wines, brandy & cocktail

bottling 400Kimberly-Clark Corporation Tissue paper & towels 340Messenger-Inquirer Newspaper publishing, commercial offset

printing & typesetting 140Metalsa Structural Products Inc. Steel pickup truck frames 211

Mizkan American Inc. Tomato-based pasta sauces, pizza sauces, dairy-based alfredo sauces 400

MPD, Inc. Commercial tubes & components, microwave & police radar equipment, breath analyzers, ceramics & ceramic to metal seals 210

Owensboro Grain Company LLC Soybean crude oil & meal; biodiesel 162Southern Star Central Gas Pipeline, Inc. Headquarters 478Specialty Foods Field Packing Div. Processed meat products 570Swedish Match North America Smokeless tobacco products 327Titan Contracting & Leasing Company Power plant construction and maintenance services 160Toyotetsu Mid America LLC Automotive stampings and welded assemblies 550Unifirst Uniform distribution 375US Bank Home Mortgage Loan processing and underwriting service center 2,120Yager Materials, Inc. Ready-mix concrete, crushed limestone, sand &

gravel 192Philpot

Hines Precision Precision metal stampings, deep draw stampings 146____________Source: Kentucky Cabinet for Economic Development (07/05/2017).

(A-4)

APPENDIX B


Series of 2017

Audited Financial Statement ending June 30, 2016

Owensboro Independent School District Independent Auditors’ Report on Basic Financial Statements and

Supplementary Information For the fiscal year ended June 30, 2016

Page(s)

Independent Auditors' Report 1 - 2 Management’s Discussion and Analysis 3 - 17

Financial Statements:

Government-Wide Financial Statements

Statement of Net Position 18

Statement of Activities 19

Fund Financial Statements

Governmental Funds

Balance Sheet - Governmental Funds 20

Reconciliation of Fund Balance to Net Position - Governmental Funds 21 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds 22

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds to the Statement of Activities 23 Proprietary Funds

Statement of Net Position - Proprietary Funds 24

Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds 25

Statement of Cash Flows - Proprietary Funds 26 - 27

Fiduciary Funds

Statement of Fiduciary Net Position - Fiduciary Funds 28

Statement of Changes in Fiduciary Net Position - Fiduciary Funds 29

Notes to Financial Statements 30 - 51

Contents

Required Supplementary Information:

Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 52

Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Special Revenue Funds 53

Schedule of the District's Proportionate Share of the Net Pension Liability - Kentucky Teachers' Retirement System 54

Schedule of District Contributions - Kentucky Teachers' Retirement System 55

Schedule of the District's Proportionate Share of the Net Pension Liability - County Employees' Retirement System 56

Schedule of District Contributions - County Employees' Retirement System 57

Notes to Required Supplementary Information 58

Other Supplementary Information: Statement of Receipts, Disbursements, and Due to Student Groups - Elementary, Middle, and Alternative Schools Activity Funds 59

Statement of Receipts, Disbursements, and Due to Student Groups - Owensboro High School Activity Funds 60 - 62

Contents, continued

1

INDEPENDENT AUDITORS' REPORT Dr. Nicholas Brake, Superintendent and Members of the Board of Education Owensboro Independent School District Owensboro, Kentucky We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of Owensboro Independent School District as of and for the year ended June 30, 2016 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, maintenance, and implementation of internal control relevant to the fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ 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; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements prescribed by the Kentucky State Committee for School District Audits in the Independent Auditor’s Contract. Those standards require that we plan the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of the Owensboro Independent School District as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

2

Emphasis of Matters As discussed in Note 1 to the financial statements, on-behalf payments from the Commonwealth of Kentucky have been reclassified on the statement of activities as general revenues rather than program revenues, as was done in prior years. Our opinions are not modified with respect to this matter.

As discussed in Note 16 to the financial statements, the June 30, 2015 financial statements have been restated to correct a misstatement. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 3 through 17, budgetary comparison information on pages 52 and 53, and schedules of the District's proportionate share of net pension liabilities and pension contributions on pages 54 through 57 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 or 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 Owensboro Independent School District's basic financial statements. The activity fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The activity fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to auditing procedures applied in our audit of the basic financial statements and certain other procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the activity fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 12, 2016 on our consideration of the Owensboro Independent School District’s internal control over financial reporting and on our test of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance.

Owensboro, Kentucky October 12, 2016

3

OWENSBORO INDEPENDENT SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (UNAUDITED)

For the Fiscal Year ended June 30, 2016 As management of the Owensboro Independent School District (District), we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented in Management’s Discussion and Analysis (MD&A) in conjunction with additional information found within the body of the audit. FINANCIAL HIGHLIGHTS

• The beginning General Fund balance at July 1, 2015 for the District was $13,501,273. The final ending General Fund balance at June 30, 2016 was $12,597,787. This decrease in the general fund balance is due to the allocation over the past two fiscal years of a portion of the District’s Unassigned Fund Balance to be utilized for projects submitted by the schools to the Board of Education for approval.

• The Annual Financial Report includes an increase in state revenue due to an increase in the state funds received for Support Education Excellence in Kentucky (SEEK) funding due to increased enrollment.

• The Commonwealth of Kentucky also makes payments on behalf of the District for Kentucky Teachers Retirement System (KTRS), Kentucky Retirement System (KRS County Employees Retirement System), health insurance premiums, life insurance premiums, administration fees, technology network cost and bond payments contributed by the Kentucky School Facilities Construction Commission (SFCC). The state’s contribution for on-behalf payments is included in both the District’s revenues and expenditures. The on-behalf expenditures are recorded within the appropriate funds and functions. The amount contributed for the fiscal year ended June 30, 2016 was $9,452,149 which was an increase of $154,869 over the previous fiscal year. This increase is due to additional state on-behalf payments for health and life insurance premiums, technology, and debt payments. It excludes the reporting change in KTRS pension on-behalf for FY 2016.

Overview of the Annual Financial Report (AFR) This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Owensboro Independent School District as an entire financial operating entity, in a manner similar to a private-sector business. The annual report consists of three parts: (a) Management’s Discussion and Analysis (this section) on pages 3-17, (b) the basic financial statements located on pages 18-29 and related notes located on pages 30-51, and (c) required and other supplemental information. The statements provide a detailed look at specific financial activities. The District’s basic financial statements are comprised of three components: (1) government-wide financial statements pages 18-19, (2) fund financial statements pages 20-29, and (3) notes to the basic financial statements, pages 30-51. In addition to the basic statements, this report also contains other supplementary information on pages 52-62.

4

Organization of the Annual Financial Report The Government-Wide Financial Statements have two sections (1) the Statement of Net Position and (2) the Statement of Activities. The Statement of Net Position and Statement of Activities provide information about the activities of the District as a whole, presenting both an aggregate view of the District’s finances and a long-term view of those finances. Fund financial statements provide an additional level of detail. For governmental funds, these statements tell how services were financed in the short-term, as well as what remains for future spending. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 30-51 of this report. Reporting the District as a Whole One of the most important questions asked about the District is, “How did we do financially during the current fiscal year?” The Statement of Net Position and the Statement of Activities, which appear first in the District’s financial statements, report information on the District as a whole and reflects its activities to help answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. The accrual basis of accounting takes into account all of the current year’s revenues and expenses, regardless of when cash is received or paid. The District’s net position and change in net position are reported on these two statements. This change in net position is important because it tells the reader that, for the District as a whole, the financial position of the District has improved or diminished. However, the District's goal is to provide services to our students, not to generate profits as commercial entities do. One must consider many other non-financial factors, such as Kentucky’s education funding formula, Support Educational Excellence in Kentucky (SEEK) and its adjustments, the District’s property tax base, required educational programs and other factors.

(A)

Management Discussion and

Analysis

(B)

Basic Financial Statements

(C)

Required Supplemental Information

(3) Notes to the

Basic Financial Statements

(2)

Fund Financial Statements

(1)

Government-Wide Financial Statements

5

In the Statement of Net Position and the Statement of Activities, the District is divided into two distinct kinds of activities:

• Governmental Activities – Most of the District’s programs and services are reported here including instruction, support services, plant operation and maintenance, pupil transportation and extra-curricular activities. The government-wide financial statements outline functions of the District that are principally supported by property taxes and intergovernmental revenues (governmental activities). Fixed assets and related debt are also supported by taxes and intergovernmental revenues.

• Business-Type Activities – These activities are Food Service and After-School Day Care.

The District’s responsibility to provide meals to our students through our food service program is reported as a part of business activities. The Food Service Program has met the requirements for the USDA federal program, Community Eligibility Provision. This program allows the school district to serve meals to all students at no cost to the student. The District also provides after-school day care programs for students on a fee basis that are also reported as a business activity. After-School Day Care operates on a charge for goods or services basis to recover all of the expenses of the goods or services provided. The food service program received federal commodities, and both Food Service and Day Care receive funding through program fees, as well as, state and federal grants.

Net position may serve over time as a useful indicator of a government’s financial position. The net position of the District shows total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $25,925,872 as of June 30, 2016. This was an increase of $638,238 over the previous fiscal year. The largest portion of the District’s net position is reflected in its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, furniture and equipment and construction in progress) less any related debt used to acquire those assets that is still outstanding. At June 30, 2016, the outstanding debt balance, including the SFCC debt portion, is $28,270,000. This was an increase over the previous fiscal year of $5,875,000 due to one new bond issue and partial refunding of an existing bond issue. The District uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although the District’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The District’s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets.

6

Reporting the District’s Most Significant Funds Fund Financial Statements After looking at the District as a whole, on the Government-Wide Financial Statements, the Fund financial reports provide detailed information about the District’s major funds. The District uses many funds to account for a multitude of financial transactions. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District’s fund accounting is a mandated state-wide uniform system and chart of accounts used by all Kentucky public school districts utilizing the MUNIS administrative and accounting software. The District uses fund accounting to ensure and demonstrate compliance with financial-related legal requirements. All of the funds of the District can be divided into three categories: governmental, proprietary and fiduciary funds. The proprietary funds are the school food service and day care funds. A proprietary fund is sometimes referred to as an enterprise fund. It is a fund that operates like a business with sales of goods and services. Fiduciary funds are assets that belong to others. The schools’ activity funds are reported as fiduciary funds, as well as the Scholarship Funds. All other activities of the District are included in the governmental funds. The major governmental funds for the Owensboro Independent School District are the General Fund, Special Revenue (Grant) Fund, the Facilities Support Program of Kentucky (FSPK Building Fund), and Construction Fund. Governmental Funds – Most of the District’s activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that is available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District’s general government operations and the basic services it provides. Governmental fund information helps determine whether there is an increase or decrease in financial resources that can be spent in the near future to finance educational programs. The relationship (or difference) between governmental activities reported in the Statement of Net Position and the Statement of Activities and governmental funds is reconciled in the financial statements. Proprietary Funds – Proprietary funds use the same basis of accounting as business-type activities; therefore, the statements for the proprietary funds will essentially match. The District’s school food service operations and day care operations are reported as proprietary or business-type activities. Fiduciary Funds – Fiduciary funds account for assets held by the District in a trustee capacity or as an agent on behalf of others. Trust funds account for assets held by the District under the terms of a formal trust agreement. The schools’ activity fund balances (or agency funds) at June 30, 2016 totaled $481,367, which is a decrease of $8,862 from the previous year. The balance held in trust for scholarship funds at June 30, 2016 is $423,931, which is an increase of $4,338 from the previous year.

7

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Government-Wide Financial Statements

Government-Wide Statement of Net Position

Comparison as of June 30, 2015 and June 30, 2016

Governmental Activities Business-Type Activities District Total

Total District

Percentage Change

As of 6/30/15 As of 6/30/16 As of 6/30/15 As of 6/30/16 As of 6/30/15 As of 6/30/16 As of 6/30/16

Assets Current and Other Assets $ 16,687,326 $ 21,124,544 $ 2,048,902 $ 1,283,934 $ 18,736,228 $ 22,408,478 19.6% Capital Assets 45,224,694 47,996,553 554,240 630,911 45,778,934 48,627,464 6.2% Total Assets $ 61,912,020 $ 69,121,097 $ 2,603,142 $ 1,914,845 $ 64,512,162 $ 71,035,942 10.1% Deferred Outflows Deferred outflows related to pension $ 938,747 $ 2,541,288 $ - $ - $ 938,747 $ 2,541,288 170.7% Bond discounts 224,182 - - - 224,182 - -100.0% Bond deferrals on refunding 113,480 1,549,117 $ - - $ 113,480 $ 1,549,117 1265.1% Total Assets and Deferred Outflows of Resources

$ 63,188,429 $ 73,211,502 $ 2,603,142 $ 1,914,845 $ 65,791,571 $ 75,126,347 14.2%

Liabilities

Long Term Liabilities $ 34,239,728 $ 43,273,780 $ - $ - $ 34,239,728 $ 43,273,780 26.4% Other Liabilities (current) 4,854,059 5,733,684 261,150 121,557 5,115,209 5,855,241 14.5% Total Liabilities $ 39,093,787 $ 49,007,464 $ 261,150 $ 121,557 $ 39,354,937 $ 49,129,021 24.8%

Deferred Inflows of Resources Deferred inflows related to pension liability

$ 1,149,000 $ 71,454 $ - $ - $ 1,149,000 $ 71,454 -93.8%

Total Liabilities and Deferred Inflows of Resources

$ 40,242,787 $ 49,078,918 $ 261,150 $ 121,557 $ 40,503,937 $ 49,200,475 21.5%

Net Position

Investment in capital assets (net debt) $ 22,829,694 $ 19,539,006 $ 554,240 $ 630,911 $ 23,383,934 $ 20,169,917 -14.0% Restricted 74,014 23,785 - 45,428 74,014 69,213 -6.0% Unrestricted 41,934 4,569,793 1,787,752 1,116,949 1,829,686 5,686,742 210.8% Total Net Position $ 22,945,642 $ 24,132,584 $ 2,341,992 $ 1,793,288 $ 25,287,634 $ 25,925,872 2.5% Total Liabilities and Net Position $ 63,188,429 $ 73,211,502 $ 2,603,142 $ 1,914,845 $ 65,791,571 $ 75,126,347 14.2%

8

Government-Wide Revenues Comparison for the fiscal years ended June 30, 2015 and June 30, 2016

Governmental Activities Business-Type Activities District Total Total

District Percentage

Change Revenues FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 FY 2016 Program Revenues: Charges for Services $ - $ 338,603 $ 324,879 $ 243,516 $ 324,879 $ 582,119 79.2%

Operating Grants and Contributions 14,548,839 7,664,662 3,756,736 4,250,132 18,305,575 11,914,794 -34.9% Capital Grants and Contributions 927,041 1,446,763 - - 927,041 1,446,763 56.1%

General Revenues: Property Tax 11,744,815 11,688,162 - - 11,744,815 11,688,162 -0.5% Utilities Tax 2,183,954 2,058,195 - - 2,183,954 2,058,195 -5.8% Federal & State Aid 21,201,735 29,722,800 - - 21,201,735 29,722,800 40.2% Investment Earnings 81,661 107,803 10,243 8,063 91,904 115,866 26.1%

Gain/Loss on Sale of Property and Equipment (103,895) 45,800 - - (103,895) 45,800 -144.1%

Miscellaneous 844,933 506,813 7,570 7,142 852,503 513,955 -39.7% Net transfers 220,044 207,836 (220,044) (207,836) - - 0.0% Total Revenues $ 51,649,127 $ 53,787,437 $ 3,879,384 $ 4,301,017 $ 55,528,511 $ 58,088,454 4.6%

Federal and state aid provided 51.3% of the government wide revenues; operating grants and revenues provided 20.5%; property taxes provided 20.0%; and utilities taxes provided 3.5%.

9

Government-Wide Expenditures Comparison for the fiscal years ended June 30, 2015 and June 30, 2016

Governmental Activities Business-Type Activities District Total Total

District Percentage

Change

% to Total Expenses

Expenditures FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 FY 2016 FY 2016

Instruction $29,289,933 $32,398,838 $ - $ - $29,289,933 $32,398,838 10.6% 56.4% Student Support Services 2,677,500 2,871,517 - - 2,677,500 2,871,517 7.2% 5.0% Instructional Staff Support Services 4,063,582 3,618,622 - - 4,063,582 3,618,622 -10.9% 6.3%

District Administration 1,157,233 1,125,133 - - 1,157,233 1,125,133 -2.8% 2.0% School Administration 2,739,180 2,776,305 - - 2,739,180 2,776,305 1.4% 4.8% Business Administration 1,780,905 1,734,504 - - 1,780,905 1,734,504 -2.6% 3.0% Plant Operations & Maintenance 4,100,302 4,362,076 - - 4,100,302 4,362,076 6.4% 7.6%

Student Transportation 2,110,371 1,788,471 - - 2,110,371 1,788,471 -15.3% 3.1% Other Day Care and Community Services 556,263 562,837 221,455 239,427 777,718 802,264 3.2% 1.4% Facilities acquisition & construction 592,560 - - - 592,560 - -100.0% 0.0% Interest/Amortization on long-term debt 974,707 1,362,192 - - 974,707 1,362,192 39.8% 2.4%

Food Service - - 3,840,737 4,610,294 3,840,737 4,610,294 20.0% 8.0% Total Expenditures $ 50,042,536 $ 52,600,495 $ 4,062,192 $ 4,849,721 $ 54,104,728 $ 57,450,216 6.2% 100 %

10

Analysis of Government Wide Revenue and Expenditures • Instruction, Instructional Staff Support, and Student Support Services comprised the majority of

Government Wide program expenses and accounted for 67.7% of the total. • The District’s FY 2016 total revenues were $58,088,454 and the total expenses were

$57,450,216. Revenues exceeded expenses by $638,238 for the fiscal year. • Revenues from federal and state aid accounted for 51.3% and local property and utilities taxes

accounted for 23.5% of the total governmental revenue. • Food service expenses exceeded revenues by $520,055 due to capital asset expenditures, in

accordance with directions from the state. During FY 2016, indirect costs of $207,836 were transferred to the General Fund from the Food Service Fund.

FINANCIAL ANALYSIS OF THE DISTRICT

Comments on Special Revenue Fund Budget • The Special Revenue Fund budget compared to the actual revenue will always differ slightly

because the state budget report only shows current fiscal year grant awards. The Special Revenue expenditures will include current year grant expenditures and previous year grant expenditures that were not completed at the end of the previous year.

• Fund Balances

Comparison of Fund Balances at June 30, 2015 and June 30, 2016

Changes in Fund Balances at June 30 FY 2015 FY 2016 Amount of

Change FY2016

Percent of Change FY 2016

General Fund $ 13,501,273 $ 12,597,787 $ (903,486) -6.7% Special Revenue Fund 74,014 23,785 (50,229) -67.9% School Construction Fund - 4,775,241 4,775,241 N/A Scholarship Fund 419,593 423,931 4,338 1.0% Food Service/Day Care Funds 2,341,992 1,793,288 (548,704) -23.4% Total $ 16,336,872 $ 19,614,032 $ 3,277,160 20.1%

11

$0$1,000,000$2,000,000$3,000,000$4,000,000$5,000,000$6,000,000$7,000,000$8,000,000$9,000,000

$10,000,000$11,000,000$12,000,000$13,000,000$14,000,000

General Fund

Special Revenue

Fund

School Building

Fund

Scholarship Fund

Food Service/Da

y Care Funds

FY 2015 $13,501,273 $74,014 $- $419,593 $2,341,992 FY 2016 $12,597,787 $23,785 $4,775,241 $423,931 $1,793,288

Dollars

Changes in Fund Balancesat June 30, 2015 and June 30, 2016

FY 2015

FY 2016

Analysis of Fund Balances • The fund balance in the General Fund decreased by $903,486. During the past two fiscal

years, the Board of Education allocated $1,000,000 in General Fund Unassigned Fund Balance to be used for projects submitted by the schools and approved by the Board.

• The Special Revenue Fund Balance decreased by $50,229, due to the change in fund balance which can be carried over for state technology funds.

• The Fund Balance in School Building Fund increased from the previous year by $4,775,241 due to a bond issued for construction work in progress at an elementary school.

• The Scholarship Fund Balance increased by $4,338 due to an increase in donations.

• The Food Service Fund Balance decreased by $520,055, due to capital asset expenditures. These expenditures were made in accordance with state guidelines to reduce the food service fund balance.

• The Day Care Program’s Fund Balance decreased by $28,649. This was due to a lower enrollment in the after school day care program, while salary and fixed costs remained steady.

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Financial Analysis of the General Fund General Fund Revenues The following table and chart present a summary of revenues of the General Fund for the fiscal year ended June 30, 2016.

General Fund Revenues Local Revenue % to Total Local revenue sources: Property Tax $ 9,246,726 Motor Vehicle Tax 1,016,346 Utilities Tax 2,058,195 Other Taxes 170,961 Investment earnings 107,803 Other Local Revenue (includes tuition) 389,695

Total Local Revenue sources $12,989,726 30.5% State revenue sources 29,277,310 68.8% Federal revenue sources 312,934 0.7% Total General Fund Revenues $ 42,579,970 100 %

The majority of General Fund revenue, 68.8%, was derived from state funding sources. Local revenue sources comprised 30.5% of total General Fund revenue, with the remaining 0.7% provided from federal revenue.

Local Revenue Sources in General Fund

The majority of Local Revenue received in the General Fund was generated from property taxes, 71.2%, and motor vehicle taxes, 7.8%. Utility taxes provided 15.9% of General fund local revenues.

13

General Fund Expenditures The following table and chart present a summary of expenditures of the General Fund for the fiscal year ended June 30, 2016.

General Fund Expenditures FY 2016 % to Total Instruction $24,000,970 58.5% Student Support Services 2,479,595 6.0% Instructional Staff Support 2,824,411 6.9% District Administration 1,137,212 2.8% School Administration 2,635,688 6.4% Business Administration 1,609,356 3.9% Plant Operations & Maintenance 4,388,067 10.7% Student Transportation 1,924,586 4.8% Total Expenditures $ 40,999,885 100 %

The areas of Instruction, Instructional Staff Support, and Student Support comprise the majority of General Fund expenditures, 71.4%. Other expenditure percentages were for District Administration 2.8%, Business Administration 3.9%, School Administration 6.4%, Student Transportation 4.8%, and Plant Operations and Maintenance expenditures of 10.7%.

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Comments on General Fund Budget

• The General Fund budget reflects a state mandated contingency amount of at least 2% of the fund balance. The contingency is not meant to be expended, but is to be used as the District’s beginning balance for the next year. The amount budgeted in the General Fund by the Board for contingency for FY 2016 was $3,000,000, which was 4.5% of the total budget, however there were $0 contingency expenses.

CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At June 30, 2016, the District has invested $48,627,464 in net capital assets for both governmental and business-type activities. This included land, school buildings, athletic facilities, maintenance facilities, computer equipment and administrative offices. The cumulative total cost of assets was $83,540,542 with accumulated depreciation of $34,913,078.

Summary of Capital Assets

Capital Assets Governmental Activities Business-Type Activities District Total

Total District

% Change

FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 FY 2016 Land &

Improvements $11,801,006 $11,890,027 $ 20,259 $ 20,259 $11,821,265 $11,910,286 0.8% Construction

in Progress - 4,203,035 - - - 4,203,035 N/A Buildings and

Improvements 54,542,509 54,295,181 12,067 12,067 54,554,576 54,307,248 - 0.5% Equipment,

Furniture & Vehicles

11,798,131 12,000,002 1,021,347 1,119,971 12,819,478 13,119,973 2.3%

Total Assets $78,141,646 $82,388,245 $ 1,053,673 $1,152,297 $79,195,319 $83,540,542 5.5% Long-Term Debt At June 30, 2016 the District had $28,270,000 in general obligation bonds outstanding (including the Kentucky School Facilities Construction-SFCC portion). The net increase of these general obligation bonds was $5,875,000. New bonds were issued for the gym and fine arts addition to Sutton Elementary School. The Series 2008 Bonds for the OHS gym and fine arts addition were refinanced to realize savings from lower interest rates. Principal bond payments made in FY 2016 were $1,455,000.

General Obligation Bonds FY 2015 FY 2016

Series 2008 OHS 19,900,000 3,275,000 Series 2009R (Ref 1996,98,99) 1,290,000 955,000 Series 2012R (Partial Refinancing 2004) 1,205,000 1,080,000 Series 2015 Sutton - 6,190,000 Series 2016 (Partial refinancing 2008) - 16,770,000 Total $ 22,395,000 $ 28,270,000

15

BUDGETARY IMPLICATIONS It is extremely important that the District continue to budget very conservatively. The District received 68.8% of its General Fund revenue for FY 2016 through state funding (which includes SEEK state funds). The forecasts from the state should be considered an estimate of state revenue. If the state does not receive the revenue from taxing sources, an adjustment will be made to the funding formula. The District should always be prepared for such reductions in funding. Approximately 30.5% of the General Fund revenue is from local revenue, of which 72.1% of the local revenue is from property tax. The major portion of the tax revenue does not come to the District until the fifth through seventh months. This means the General Fund’s beginning fund balance must be used to absorb much of the first four months of expenditures. Provisions must always be made to have a significant fund beginning balance to start each year. By law the budget must include a minimum 2% contingency. The District adopted a budget with $3,000,000 in contingency (4.5% of total budget). The beginning General Fund balance for fiscal year 2016 was $13,501,273. Significant Board action that impacted finances for this year

16

included a 2% pay raise for all Classified and Certified employees mandated by the general legislature, spending toward instructional and technology programs, and General Fund matching dollars for other grants. The District currently receives funds from more than fifty federal and state grants. The total budget for these grants for FY 2016 was approximately $6,452,058. Most of these grants are funded on a reimbursement basis. This requires the District to pay the expenses of the grant and then apply for reimbursement. The District must continue to monitor the grants constantly and request reimbursements in a timely manner. The District must also maintain a significant cash balance in order to pay the expenses of these grants while waiting for reimbursements. DISTRICT CHALLENGES FOR THE FUTURE The primary challenges facing Owensboro Independent School District include:

1. continuing to make strides toward graduating students college and/or career ready; 2. all schools meeting proficient or distinguished benchmarks as defined by Kentucky

Department of Education and Unbridled Learning; 3. maintaining our current facilities; 4. increasing the average daily attendance percentage; and, 5. increasing our high school graduation rate.

The District’s first challenge to reach the academic accountability goals established in Unbridled Learning will be accomplished by several methods. The primary goal is to employ quality teachers and support staff, provide enriching and relevant professional learning for all employees, maintain competitive salary schedules to attract and retain skilled leadership, and encourage teachers to pursue the National Board Certification. Maintaining beneficial programs will also help the District overcome this challenge. These programs include, but are not limited to: Northwest Evaluation Association Measure of Academic Progress (MAP) Assessment, customization of learning based on individual student needs utilizing a quality formative assessment process, full day kindergarten, an early learning academy to expand opportunities for preschool children, a blended PC and Mac learning environment in grades P-4, a one-to-one laptop integration in grades 5-12, Leader in Me Program in grades K-12, high-quality co-curricular and extra-curricular activities (fine arts, athletics, clubs, academic teams, etc.) and a college and career ready emphasis in grades P-12. The second challenge is to maintain our facilities. The District makes a major annual financial commitment in order to maintain our current and aging facilities. Each year the District budgets a portion of the General Fund revenues and utilizes Capital Outlay funds for maintenance items. These budgets help the District provide funds for any unforeseen major facility repairs, maintain our current facilities, and construct required facilities which are not large enough to require a bond sale. The District developed a long-range facility plan during FY 2014 for all of our facilities, seeking input from all stakeholders – staff, parents, community members, our board members, and the Kentucky Department of Education. In FY 2017, the District will construct a fine arts and gymnasium expansion at Newton Parrish Elementary School and collaborate with community partners to upgrade the track and football complex located on the middle school campus.

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The third challenge is increasing the average daily attendance count. The District receives funding through the SEEK formula based on this count. Due to city property boundaries, there are a limited number of new homes constructed within our District. Therefore, student population growth within the District is limited. It is vital that our schools have high attendance percentages and that parents and students continue to choose Owensboro Independent School District, when they could make a choice to attend school elsewhere. Maintaining excellence and emphasizing our service to the public are the main factors influencing this District challenge. In an effort to increase the District graduation rate, there will be continued partnerships with local colleges to increase vocational and technical education opportunities for our students as well as increased partnerships for dual high school and college credit courses. Additionally, we have partnered with the New Tech Network to open the Owensboro Innovation Academy which emphasizes contextual learning in a project-based environment. Enrollment for FY 2017 is approximately 160 students in ninth and tenth grades. Over the next two years, the school will expand to serve 350 to 400 students in all four high school grades. With careful planning and monitoring of our finances, the goal of Owensboro Independent School District is to continue to provide a quality education for our students and a secure financial future for our school district. This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the finances of the Owensboro Independent School District and to reflect the District’s accountability for the funds it receives. Questions regarding this report should be directed to: Paula Roberts Chief Finance and Operations Officer Owensboro Independent School District 450 Griffith Avenue Owensboro, KY 42301 Telephone: (270) 686-1000, extension # 2300 E-mail: [email protected] OPS Website: http://owensboro.kyschools.us

mailto:[email protected]

The accompanying notes are an integral part of these financial statements. 18

Governmental Business-typeActivities Activities Total

ASSETS: Cash and cash equivalents 19,820,339$ 1,139,634$ 20,959,973$ Accounts receivable: Taxes 554,198 - 554,198 Other 50,208 98,872 149,080 Intergovernmental - federal and state 699,799 - 699,799 Inventories - 45,428 45,428 Net capital assets 47,996,553 630,911 48,627,464

Total Assets 69,121,097 1,914,845 71,035,942 DEFERRED OUTFLOWS OF RESOURCES: Deferred outflows related to pension liability 2,541,288 - 2,541,288 Bond deferrals on refunding 1,549,117 - 1,549,117

Total Deferred Outflows of Resources 4,090,405 - 4,090,405

Total Assets and Deferred Outflows of Resources 73,211,502$ 1,914,845$ 75,126,347$

LIABILITIES: Accounts payable 595,446$ 116,707$ 712,153$ Accrued payroll and related expenses 1,669,171 - 1,669,171 Unearned revenue 1,263,114 4,850 1,267,964 Current portion of bond obligations 1,785,000 - 1,785,000 Current portion of accrued sick leave 200,000 - 200,000 Interest payable 220,953 - 220,953 Pollution remediation obligation 1,405,000 - 1,405,000 Unfunded pension liability - CERS 13,518,528 - 13,518,528 Noncurrent maturities of bond obligations 26,672,547 - 26,672,547 Noncurrent portion of accumulated sick leave 1,677,705 - 1,677,705

Total Liabilities 49,007,464 121,557 49,129,021

DEFERRED INFLOWS OF RESOURCES: Deferred inflows related to pension liability 71,454 - 71,454

Total Deferred Inflows of Resources 71,454 - 71,454

Total Liabilities and Deferred Inflows of Resources 49,078,918$ 121,557$ 49,200,475$

NET POSITION: Net investment in capital assets 19,539,006$ 630,911$ 20,169,917$ Restricted 23,785 45,428 69,213 Unrestricted 4,569,793 1,116,949 5,686,742

Total Net Position 24,132,584$ 1,793,288$ 25,925,872$

Owensboro Independent School DistrictGovernment-wide Financial Statements - Statement of Net Position

As of June 30, 2016


Charges Operating Capitalfor Grants & Grants & Governmental Business-type

Expenses Services Contributions Contributions Activities Activities TotalFUNCTIONS/PROGRAMS Governmental Activities: Instruction 32,398,838$ 228,244$ 5,190,692$ -$ (26,979,902)$ -$ (26,979,902)$ Support services: Student 2,871,517 - 694,569 - (2,176,948) - (2,176,948) Instruction staff 3,618,622 - 851,567 - (2,767,055) - (2,767,055) District administrative 1,125,133 - - - (1,125,133) - (1,125,133) School administrative 2,776,305 - 137,801 - (2,638,504) - (2,638,504) Business 1,734,504 - - - (1,734,504) - (1,734,504) Plant operation and maintenance 4,362,076 86,992 220,433 - (4,054,651) - (4,054,651) Student transportation 1,788,471 23,367 6,763 - (1,758,341) - (1,758,341) Facilities acquisition and construction - - - 1,446,763 1,446,763 - 1,446,763 Community service activities 562,837 - 562,837 - - - - Interest 1,362,192 - - - (1,362,192) - (1,362,192) Pollution remediation - - - - - - -

Total Governmental Activities 52,600,495 338,603 7,664,662 1,446,763 (43,150,467) - (43,150,467)

Business-type Activities: Food service 4,610,294 107,194 4,175,676 - - (327,424) (327,424) Day care 239,427 136,322 74,456 - - (28,649) (28,649)

Total Business-type Activities 4,849,721 243,516 4,250,132 - - (356,073) (356,073)

Total Activities 57,450,216$ 582,119$ 11,914,794$ 1,446,763$ (43,506,540)$

General Revenues: Taxes: Property tax 10,671,816$ -$ 10,671,816$ Motor vehicle tax 1,016,346 - 1,016,346 Utility tax 2,058,195 - 2,058,195 Investment earnings 107,803 8,063 115,866 State sources SEEK program 20,589,635 - 20,589,635 Other state revenues and grants 9,133,165 - 9,133,165 Other local revenues 506,813 7,142 513,955 Gain on sales of fixed assets 45,800 - 45,800 Transfers in/out 207,836 (207,836) - Total General Revenues 44,337,409 (192,631) 44,144,778 Change in net position 1,186,942 (548,704) 638,238 Net position - beginning, as restated 22,945,642 2,341,992 25,287,634 Net position - ending 24,132,584$ 1,793,288$ 25,925,872$

Owensboro Independent School DistrictGovernment-wide Financial Statements - Statement of Activities

For the fiscal year ended June 30, 2016Net (Expense) Revenue and

Changes in Net PositionProgram Revenues


General Fund

Special Revenue

Funds

Support Program (FSPK) Fund

School Construction

Fund

SEEK Capital

Outlay Fund

Debt Service Fund Total

ASSETS: Cash and cash equivalents 14,373,152$ 614,227$ -$ 4,832,960$ -$ -$ 19,820,339$ Receivables: Taxes - current 554,198 - - - - - 554,198 Other 50,208 - - - - - 50,208 Intergovernmental - federal and state - 699,799 - - - - 699,799

Total Assets 14,977,558$ 1,314,026$ -$ 4,832,960$ -$ -$ 21,124,544$

LIABILITIES AND FUND BALANCES:

LIABILITIES: Accounts payable 510,600$ 27,127$ -$ 57,719$ -$ -$ 595,446$ Accrued payroll and related expenses 1,669,171 - - - - - 1,669,171 Unearned revenue - 1,263,114 - - - - 1,263,114 Current portion of accrued sick leave 200,000 - - - - - 200,000

Total Liabilities 2,379,771 1,290,241 - 57,719 - - 3,727,731

FUND BALANCES: Restricted for:

Grants - 23,785 - - - - 23,785 Capital expenditures - - - 4,775,241 - - 4,775,241

Committed for: Future sick leave 366,107 - - - - - 366,107 Future technology 3,512,484 - - - - - 3,512,484 Assigned to purchase obligations 750 - - - - - 750 Unassigned 8,718,446 - - - - - 8,718,446

Total Fund Balances 12,597,787 23,785 - 4,775,241 - - 17,396,813

Total Liabilities and Fund Balances 14,977,558$ 1,314,026$ -$ 4,832,960$ -$ -$ 21,124,544$

Owensboro Independent School DistrictBalance Sheet - Governmental Funds

As of June 30, 2016


Total fund balance - governmental funds 17,396,813$

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

Capital assets used in governmental activities are not current financialresources and therefore are not reported as assets in governmental funds:

Gross Fixed Assets 82,388,245$ Accumulated Depreciation (34,391,692) 47,996,553

and gains resulting from the refunding of debt are not recorded in the fund financial statements since they are not current deferred outflows of resources:

Deferred outflows related to pension liability 2,541,288$ Bond deferrals on refunding 1,549,117 4,090,405

Bonds payable, including current portions of obligations, are not reported in the governmental fund balance sheet because they are not due and payable inthe current period, but they are presented in the statement of net position:

Bonds payable (28,270,000)$ Unamortized bond discounts and (premiums) (187,547) (28,457,547)

Noncurrent portion of accumulated sick leave is not reported in the governmentalfund balance sheet because it is not due and payable in the current period,but it is presented in the statement of net position. (1,677,705)

Interest payable is not reported in the governmental fund balance sheetbecause it is not due and payable in the current period, but it is presentedin the statement of net position. (220,953)

Pollution remediation obligation is not reported in the governmentalfund balance sheet because it is not due and payable in the current period,but it is presented in the statement of net position. (1,405,000)

The unfunded pension liability - CERS is not reported in the governmentalfund balance sheet because it is not due and payable in the current period,but it is presented in the statement of net position. (13,518,528)

are not recorded in the fund financial statements since they are not currentdeferred inflows of resources. (71,454)

Net position for governmental activities 24,132,584$

Owensboro Independent School DistrictReconciliation of Fund Balance to Net Position - Governmental Funds

As of June 30, 2016

Deferred outflows of resources associated with the implementation of GASB 68

Deferred inflows of resources associated with the implementation of GASB 68


General Fund

Special Revenue

Fund

Facility Support Program (FSPK)

School Construction

Fund

SEEK Capital

Outlay Fund

Debt Service Fund

Total Governmental

Funds REVENUES: From local sources Taxes: Property 9,246,726$ -$ 1,425,090$ -$ -$ -$ 10,671,816$ Motor vehicle 1,016,346 - - - - - 1,016,346 Utilities 2,058,195 - - - - - 2,058,195 Other 170,961 - - - - - 170,961 Earnings on investments 107,803 - - - - - 107,803 Other local revenues 389,695 797,534 - - - - 1,187,229 Intergovernmental - state 29,277,310 2,686,546 913,686 - 434,441 482,374 33,794,357 Intergovernmental - federal 312,934 3,929,401 - - - - 4,242,335

Total Revenues 42,579,970 7,413,481 2,338,776 - 434,441 482,374 53,249,042

EXPENDITURES: Instruction 24,000,970 6,181,174 - - - - 30,182,144 Support services: Student 2,479,595 390,771 - - - - 2,870,366 Instruction staff 2,824,411 788,693 - - - - 3,613,104 District administrative 1,137,212 - - - - - 1,137,212 School administrative 2,635,688 137,801 - - - - 2,773,489 Business 1,609,356 - - - - - 1,609,356 Plant operation and maintenance 4,388,067 220,433 - - - - 4,608,500 Student transportation 1,924,586 6,762 - - - - 1,931,348 Community service activities - 562,837 - - - - 562,837 Facilities acquisition and construction - - - 4,125,610 - - 4,125,610 Debt service - - - - - 2,423,358 2,423,358 Bond issuance costs - - - 52,260 - 47,632 99,892

Total Expenditures 40,999,885 8,288,471 - 4,177,870 - 2,470,990 55,937,216

Excess (Deficit) of Revenues over Expenditures 1,580,085 (874,990) 2,338,776 (4,177,870) 434,441 (1,988,616) (2,688,174)

OTHER FINANCING SOURCES (USES): Proceeds from sale of fixed assets 71,019 - - - - - 71,019 Operating transfers in 566,820 976,788 - 2,871,636 - 1,940,984 6,356,228 Operating transfers out (3,121,410) (152,027) (2,338,776) (101,738) (434,441) - (6,148,392) Refunded bond escrow agent - - - - - (16,919,828) (16,919,828) Premium (discount) on bonds - - - (6,787) - 197,460 190,673 Bond principal proceeds - - - 6,190,000 - 16,770,000 22,960,000

Total Other Financing Sources (Uses) (2,483,571) 824,761 (2,338,776) 8,953,111 (434,441) 1,988,616 6,509,700

Net change in fund balances (903,486) (50,229) - 4,775,241 - - 3,821,526

Fund balances, beginning of year 13,501,273 74,014 - - - - 13,575,287 Fund balances, end of year 12,597,787$ 23,785$ -$ 4,775,241$ -$ -$ 17,396,813$

Owensboro Independent School DistrictStatement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds

For the fiscal year ended June 30, 2016


Net change in fund balance - governmental funds 3,821,526$

Amounts reported for governmental activities in the statementof changes in net position are different because:

Capital outlays are reported as expenditures in the governmental fundfinancial statements because they use current financial resources, but are presented as assets in the statement of net position and depreciated overthe estimated useful lives and reported as depreciation expense in thestatement of activities. The difference is the amount by which capital outlayexceeds depreciation:

Depreciation expense (2,091,003)$ Capital outlay 4,888,084 2,797,081

Gains and losses on the disposal of property and equipment are not recorded in the governmental fund financial statements, only the cash proceeds received from the sale or disposal are recorded in the governmental fund financial statements. (25,219)

Deferrals resulting from bond refundings are not included in the governmental fundfinancial statements since these amounts are not current deferred outflows of resources:

Bond refunding 1,483,806$ Amortization expense (48,169) 1,435,637

Bond proceeds and payments are recognized as other financing sources and expenditures of cur of current financial resources in the governmental fund financial statements, but arereductions of liabilities in the statement of net position. Additionally, related bonddiscounts and premiums are not recognized in the governmental fund financialstatements, but offset the related bond obligation in the statement of net position:

Bond proceeds (6,190,000)$ Bond proceeds - refunding (16,770,000) Bond principal payments 1,455,000 Bond principal payments - refunding 15,630,000 Bond premiums and discounts from bond issuance (190,673) Bond discount write off (211,355) Amortization expense (9,701) Change in interest payable 66,064 (6,220,665)

Difference between actuarially determined net pension costs and amount paid to CERS:

Actuarially determined pension expense (1,492,007)$ Amounts paid to CERS 944,566 (547,441)

Accumulated sick leave is recognized by the amount earned in the statement ofnet position, but the governmental fund financial statements only recognize the obligations anticipated to be retired from existing financial resources:

Beginning balance 1,803,728$ Ending balance (1,877,705) (73,977)

Change in net position - statement of activities 1,186,942$

Owensboro Independent School DistrictReconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance

- Governmental Funds to the Statement of ActivitiesFor the fiscal year ended June 30, 2016


SchoolFood Day Total

Service Care Proprietary Fund Fund Fund

ASSETS:Current Assets: Cash and cash equivalents 1,042,536$ 97,098$ 1,139,634$ Accounts receivable 96,897 1,975 98,872 Inventories 45,428 - 45,428

Total Current Assets 1,184,861 99,073 1,283,934

Noncurrent Assets: Capital assets 1,083,806 68,491 1,152,297 Less: accumulated depreciation (485,492) (35,894) (521,386)

Total Noncurrent Assets 598,314 32,597 630,911

Total Assets 1,783,175$ 131,670$ 1,914,845$

LIABILITIES:Current Liabilities: Accounts payable 115,803$ 904$ 116,707$ Unearned revenue 4,850 - 4,850

Total Current Liabilities 120,653 904 121,557

NET POSITION: Net investment in capital assets 598,314 32,597 630,911 Restricted to nonspendable inventories 45,428 - 45,428 Unrestricted 1,018,780 98,169 1,116,949

Total Net Position 1,662,522 130,766 1,793,288

Total Liabilities and Net Position 1,783,175$ 131,670$ 1,914,845$

Owensboro Independent School DistrictStatement of Net Position - Proprietary Funds

As of June 30, 2016


School Food Day

Service Care Fund Fund Total

OPERATING REVENUES: Lunchroom sales 107,194$ -$ 107,194$ Other operating revenues - 136,322 136,322

Total Operating Revenues 107,194 136,322 243,516

OPERATING EXPENSES: Salaries, wages, and benefits 1,501,707 180,835 1,682,542 Contract services 470,490 33,523 504,013 Materials and supplies 2,548,381 16,351 2,564,732 Depreciation 64,900 7,413 72,313 Other operating expenses 24,816 1,305 26,121

Total Operating Expenses 4,610,294 239,427 4,849,721

Operating Loss (4,503,100) (103,105) (4,606,205)

NON-OPERATING REVENUES (EXPENSES): Federal grants 3,527,140 - 3,527,140 State grants 442,232 74,456 516,688 Donated commodities 206,304 - 206,304 Interest income 8,063 - 8,063 Other 7,142 - 7,142

Total Non-Operating Revenues (Expenses) 4,190,881 74,456 4,265,337

Net Income (Loss) Before Other Financing Sources (312,219) (28,649) (340,868)

OTHER FINANCING SOURCES (USES): Operating transfers out (207,836) - (207,836)

Total Other Financing Sources (Uses) (207,836) - (207,836)

Change in Net Position (520,055) (28,649) (548,704)

Net Position, Beginning of Year 2,182,577 159,415 2,341,992

Net Position, End of Year 1,662,522$ 130,766$ 1,793,288$

Owensboro Independent School DistrictStatement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds



SchoolFood Day

Service CareFund Fund Total

CASH FLOWS FROM OPERATING ACTIVITIES: Cash receipts from: Lunchroom sales 82,800$ -$ 82,800$ Tuition and fees - 137,535 137,535 Cash payments for: Employees (1,501,707) (180,835) (1,682,542) Contract services (470,490) (26,110) (496,600) Materials and supplies (2,682,872) (24,675) (2,707,547) Other (24,816) - (24,816)

Net cash used by operating activities (4,597,085) (94,085) (4,691,170)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchases of capital assets (148,984) - (148,984)

Net cash used by capital and related financing activities (148,984) - (148,984)

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES: Government grants 3,976,514 74,456 4,050,970 Donations 206,304 - 206,304 Transfers out (207,836) - (207,836)

Net cash provided by non-capital financing activities 3,974,982 74,456 4,049,438

CASH FLOWS FROM INVESTING ACTIVITIES: Receipt of interest income 8,063 - 8,063

Net cash provided by investing activities 8,063 - 8,063

Net decrease in cash and cash equivalents (763,024) (19,629) (782,653)

Cash and cash equivalents, beginning of year 1,805,560 116,727 1,922,287

Cash and cash equivalents, end of year 1,042,536$ 97,098$ 1,139,634$

Owensboro Independent School DistrictStatement of Cash Flows - Proprietary Funds



SchoolFood Day

Service CareFund Fund Total

RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Operating loss (4,503,100)$ (103,105)$ (4,606,205)$

ADJUSTMENTS TO RECONCILE OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Depreciation 64,900 7,413 72,313 Changes in operating assets and liabilities: Accounts receivable (20,422) 1,213 (19,209) Inventories 1,524 - 1,524 Accounts payable (136,015) 394 (135,621) Unearned revenue (3,972) - (3,972)

Net cash used by operating activities (4,597,085)$ (94,085)$ (4,691,170)$

SCHEDULE OF NON-CASH FINANCING ACTIVITIES Donated commodities received from federal government 206,304$ -$ 206,304$ State on-behalf payments 442,232$ 74,456$ 516,688$

Owensboro Independent School DistrictReconciliation of Operating Loss to Net Cash Used in Operating Activities



Student Total Activity Scholarship Fiduciary

Fund Fund FundsASSETS:Cash and cash equivalents 481,357$ 423,931$ 905,288$ Accounts receivable 270 - 270

Total Assets 481,627 423,931 905,558

LIABILITIES:Accounts payable 260 - 260 Due to Student groups 481,367 - 481,367

Total Liabilities 481,627 - 481,627

NET POSITION:Held in trust for scholarships -$ 423,931$ 423,931$

Owensboro Independent School DistrictStatement of Fiduciary Net Position - Fiduciary Funds

As of June 30, 2016


Additions: Contributions 6,676$ Interest income 2,531

Total Additions 9,207

Deductions: Other 4,869

Changes in net position 4,338

Net position, beginning of year 419,593

Net position, end of year 423,931$

Scholarship Fund

Owensboro Independent School DistrictStatement of Changes in Fiduciary Net Position - Fiduciary Funds


Owensboro Independent School District Notes to Financial Statements

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY The Owensboro Independent Board of Education (Board), a five member group, is the level of government which has oversight responsibilities over all activities related to public elementary and secondary school education within the jurisdiction of the Owensboro Independent School District (District). The District receives funding from local, state, and federal government sources and must comply with the commitment requirements of these funding source entities. However, the District is not included in any other governmental reporting entity, and its Board members are elected by the public and have decision making authority, the power to designate management, the responsibility to develop policies which may influence operations, and primary accountability for fiscal matters. The District, for financial purposes, includes all of the funds relevant to the District’s operation. The basic financial statements presented herein do not include funds of groups and organizations, which although associated with the school system, have not originated within the Board itself such as Band Boosters, Parent-Teacher Associations, etc. The District’s basic financial statements include those of separately administered organizations that are controlled by or dependent on the Board. Control or dependence is determined on the basis of budget adoption, funding, and appointment of the respective governing board. Based on the foregoing criteria, the basic financial statements of the following organization are included in the accompanying basic financial statements: OWENSBORO INDEPENDENT SCHOOL DISTRICT FINANCE CORPORATION The Owensboro Independent Board of Education established the Owensboro Independent School District Finance Corporation (Corporation) (a nonprofit, non-stock, public, and charitable corporation organized under the School Bond Act, KRS 273, and KRS Section 58.180) as an agency of the Board for financing the costs of school building facilities. The Board Members of the Owensboro Independent Board of Education also comprise the Corporation’s Board of Directors. BASIS OF PRESENTATION Government-wide Financial Statements – The statement of net position and the statement of activities display information about the 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 District that are governmental and those that are considered business-type activities. The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. The District activities are generally financed through state funding, property and utility taxes, and federal, state, and local grants. Revenues are recorded when earned and expenses are recorded at the time the liability is incurred, regardless of when the related cash flows take place. Revenues from grants are recognized in the fiscal year in which eligibility requirements are met. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each segment of business-type activities of the District and for each function or program of the District’s governmental activities. Direct expenses are those that are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues of the 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 District.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BASIS OF PRESENTATION Fund Financial Statements – Fund financial statements report detailed information about the District. The focus of governmental and enterprise fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Fiduciary funds are reported by fund type. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. State and other governmental revenues applicable to the current fiscal year and collected within 60 days of year end are recognized as revenue. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and payments for compensated absences which are recognized as expenditures when they come due for payment. General capital asset acquisitions are reported as expenditures in governmental funds, and proceeds of general long-term debt are reported as other financing sources. Under the terms of the District’s grant agreements, certain programs are funded by specific cost-reimbursement grants and general revenues. Generally, the District applies cost-reimbursement funds first to finance such programs with remaining costs paid for with general revenues. Proprietary funds utilize the economic resource measurement focus and the accrual basis of accounting. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues generally result from providing services in connection with the fund’s principal operations. The funds’ principal operating revenues are food service charges and childcare fees. Operating expenses include food production costs, material and supplies, administrative costs, and depreciation on capital assets. Fiduciary funds utilize the economic resources measurement focus and the accrual basis of accounting. Accounting principles generally accepted in the United States of America require that the General Fund be reported as a major fund. All other governmental and proprietary funds whose assets, liabilities, revenues, or expenditures comprise at least 10% of the total for the relevant fund category and at least 5% of the corresponding total for all governmental and proprietary funds combined must also be reported as major funds. Additionally, the District has determined certain other funds should be reported as major funds. The District has the following funds:

I) Government Fund Types

A) The General Fund is the District’s general operating fund and accounts for and reports all District revenues and expenditures not accounted for or reported in other funds. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures and capital improvement costs that are not paid through other funds are paid from the General Fund.

B) The Special Revenue Fund is used to account for and report the proceeds of

specific revenue sources restricted to expenditures for specified purposes other than debt or capital projects. This is a major fund of the District.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C) Capital Project Funds are used to account for and report financial resources restricted for capital outlays, including the acquisition or construction of capital facilities or other capital assets, and to provide financial resources for debt service requirements. Capital Project Funds exclude those types of capital-related outflows financed by proprietary funds or for assets that are held in trust.

1) The Support Education Excellence in Kentucky (SEEK) Capital Outlay

Fund receives those funds designated by the state as Capital Outlay Funds and is generally restricted for use in financing projects identified in the District’s facility plan (including payment of bonded lease obligations). This is a major fund of the District.

2) The Facility Support Program of Kentucky (FSPK) Fund accounts for

and reports funds generated by the building tax levy required to participate in the School Facilities Construction Commission’s construction funding and state matching funds, where applicable. Funds may be used for projects identified in the District’s facility plan. This is a major fund of the District.

3) The School Construction Fund includes capital projects fund accounts

for and reports proceeds from sales of bonds and other revenue to be used for authorized construction. This is a major fund of the District.

D) Debt Service Funds

The Debt Service Fund is used to account for and report the accumulation of resources for, and the payment of, bonded debt and lease obligations, interest, and related costs.

II) Proprietary Fund Types A) The School Food Service Fund accounts for and reports school food service

activities, including the National School Lunch Program and the National School Breakfast Program, which are conducted in cooperation with the U. S. Department of Agriculture (USDA). Amounts have been recorded for in-kind contributions of commodities from the USDA. This is a major fund of the District.

B) The Day Care Fund is used to account for and report after-school and summer

day care services where a fee is charged for participating. III) Fiduciary Fund Types

A. Student Activity Funds account for and report activities of student groups and

other types of activities requiring clearing accounts. These funds comply with Accounting Procedures for Kentucky School Activity Funds.

B. The Scholarship Fund accounts for and reports principal and income used to

benefit individuals by providing scholarships.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BUDGETARY PROCESS The District’s budgetary process accounts for transactions on the modified accrual basis of accounting which is consistent with accounting principles generally accepted in the United States of America. In accordance with state law, the District prepares a general school budget based upon the amount of revenue to be raised by local taxation, including the rate of levy, and from estimates of other local, state, and federal revenues. The budget contains estimated expenditures for current expenses, debt service, capital outlay, and other necessary expenses. The budget must be approved by the Board. The District budgets for on-behalf payments in the General Fund, School Food Service Fund, and Day Care Fund. On-behalf payments are reported with the General Fund, the School Food Service Fund, and the Day Care Fund in the fund financial statements and the budgetary comparison supplementary information. The District must formally and publicly examine estimated revenues and expenses for the subsequent year by January 31st of each year. Additionally, the District must prepare an annual allocation to schools by March 1st of each year for the following fiscal year. This allocation must include the amount for certified and classified staff based on the District’s staffing policy and the amount for the instructional supplies, materials, travel, and equipment. Additionally, the District must adopt a tentative working budget for the subsequent fiscal year by May 30th of each year. This budget must contain a 2% reserve. Finally, the District must adopt a final working budget and submit it to the Kentucky Department of Education by September 30th of the current fiscal year. The Board has the ability to amend the working budget. The working budget was amended during the year. INVENTORIES Supplies and materials are charged to expenditures when purchased (purchases method) with the exception of the proprietary funds, which record inventories at the lower of cost, determined by the first-in first-out (FIFO) method, or market. PREPAID EXPENSES Payments made that will benefit periods beyond the end of the fiscal year are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of the purchase and an expenditure/expense is reported in the year in which services are consumed. No prepaid expenses were recorded as of June 30, 2016. BOND ISSUE COSTS Pursuant to GASB 65, costs associated with the issuance of bond obligations, including underwriter fees, fiscal and rating agency fees, paying agent fees, and attorney fees, are reported as expenditures in the governmental funds financial statements and the government-wide financial statements. BOND DEFERRALS ON REFUNDING The difference between the reacquisition price to refund existing (old) debt and the net carrying amount of the old debt is reported as deferred outflows on the government-wide financial statements. This asset is amortized over the remaining life of the old debt or the life of the refunding debt, whichever is shorter.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BOND DISCOUNTS Underwriter’s discounts on bond issues are reported as reductions to bond proceeds in the governmental fund financial statements. These costs are capitalized and amortized over the lives of the respective bonds on the government-wide financial statements. INTERFUND BALANCES On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as due from or due to other funds. These amounts are eliminated in the governmental and business-type activities columns of the statements of net position, except for the net residual amounts due between governmental and business-type activities, which are presented as interfund balances. 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 and 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 fund. All capital assets and work-in-progress are stated at cost (or estimated historical cost based on independent appraisals) and updated for additions and retirements during the year. Donated capital assets are recorded at their fair market values as of the date received. The District maintains a capitalization threshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the cost of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life are not. All reported capital assets except land and construction in progress are depreciated. Depreciation on capital work-in-progress commences when the assets are ready for their intended use. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives for both general capital assets and proprietary fund assets:

Land improvements 20 yearsBuilding and improvements 25-50 yearsTechnology equipment 5 yearsVehicles 5-10 yearsAudio-visual equipment 15 yearsFood service equipment 10-12 yearsFurniture and fixtures 20 yearsOther 10-15 years

Estimated LivesDescription


35

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 long-term obligations payable from proprietary funds are reported in the proprietary fund financial statements. In general, payables and accrued liabilities that will be paid from government funds are reported on the governmental fund financial statements if they will be liquidated with current resources. In general, payments made within 60 days after year-end are considered to have been made with current available financial resources. Bonds and other long-term obligations that will be paid from governmental funds are not recognized as a liability in the fund financial statements until due.

UNEARNED REVENUE Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before the eligibility requirements are met are recorded as unearned revenue. In addition, certain amounts received under a lease agreement are being recognized over the 20-year lease term resulting in unearned revenue.

ACCUMULATED SICK LEAVE Sick leave benefits are calculated using the vesting method, and accrued based on the District’s estimates using historical trend information. The current portion of the liability is estimated based on the anticipated payouts in the succeeding fiscal year.

FUND BALANCES The District classifies its governmental fund balances as follows:

Non-spendable - This category includes funds that are not available to be spent because they are not in spendable format, or because they are legally required to remain intact. The District has $45,428 in non-spendable funds in Food Service as of June 30, 2016.

Restricted - This category includes resources that are restricted by state law to be used for certain purposes. The SEEK Capital Outlay Fund, the FSPK Fund, and the Debt Service Fund are restricted to be used for future debt service or future construction projects. The School Construction Fund is restricted for future construction projects.

Committed - This category includes funds that have been designated for future projects by the Board. Only Board action may commit funds and modify or rescind the commitment. As of June 30, 2016, the District committed $366,107 for future sick leave and $3,512,484 for future technology projects.

Assigned - This category represents funds that have been designated for existing purchase obligations. Assignments can be made by authorized members of management. As of June 30, 2016, the District has $750 in assigned purchase obligations.

Unassigned - This category represents the remainder of the governmental fund balances that do not belong in any other fund balance classifications.


36

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FUND BALANCES (CONTINUED) When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the 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 District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, unless the District provides otherwise in its committed or assigned actions.

NET POSITION Net position represents 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 borrowings 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 District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments.

CONTRIBUTIONS OF CAPITAL Contributions of capital in propriety fund financial statements arise from outside contributions of capital assets, or from grants or outside contributions of resources restricted to capital acquisition and construction.

INTER-FUND ACTIVITY Flows of cash from one fund to another without a requirement for repayment are reported as inter-fund transfers. Inter-fund transfers are reported as other financing sources/uses in governmental funds, and after non-operating revenues/expenses in proprietary funds. These transactions are eliminated in the governmental and business - type activities columns of the statement of activities.

ENCUMBRANCE ACCOUNTING Encumbrances are not liabilities, and therefore are not recorded as expenditures until receipt of material or service. For budgetary purposes, appropriations lapse at fiscal year-end and outstanding encumbrances at year-end are re-appropriated in the next fiscal year.

ESTIMATES The preparation of basic financial statements requires the District’s management to make estimates and assumptions that affect reported amounts of assets, liabilities, fund balances, and disclosure of contingent assets and liabilities at the date of the basic financial statements, and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates.

ON-BEHALF PAYMENTS

The District receives on-behalf payments for fringe benefits, bond debt, and technology from the Commonwealth of Kentucky. In prior years, these payments were included on the statement of activities as program revenues but have been reclassified as general revenues for the fiscal year ended June 30, 2016.


37

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RETIREMENT BENEFITS

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net positions of the Teachers' Retirement System of the Commonwealth of Kentucky (KTRS) and the County Employees' Retirement System (CERS) and additions to/deductions from KTRS and CERS' fiduciary net positions have been determined on the same basis as they are reported by KTRS and CERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

SUBSEQUENT EVENTS The District’s management has evaluated subsequent events through October 12, 2016, the date which the financial statements were available to be issued.

LEASE COMMITTMENT

As of July 1, 2016, the District entered into a lease agreement with Apple Inc. (Lessor) by which the District agreed to lease, purchase and acquire computer hardware for a total commitment of $2,495,288 to be paid in four annual installments of $623,822 due July 15, 2016, 2017, 2018, and 2019. The lease implies an interest rate of 1.95% per annum and will result in total interest expense of $33,188.

NOTE 2 - DEPOSITS WITH FINANCIAL INSTITUTIONS As of June 30, 2016, the carrying amount of the District’s deposits with financial institutions was $21,865,261. Of the total bank balances, $250,000 was covered by federal depository insurance, with the remainder covered by a collateral agreement with pledged securities.

Cash is commingled in various bank accounts. Due to the nature of the accounts and limitations imposed by bond issue requirements, construction projects, federal financial assistance programs, and donor restrictions, each cash amount within the following funds is considered to be restricted:

Special Revenue Fund Facility Support Program (FSPK) Fund School Construction Fund Student Activity Funds Scholarship Fund

District funds are considered to be public funds and therefore their investment is limited by statute to certain obligations of the United States or similar government agencies, cash instruments, and certain pooled investments.

NOTE 3 - TAXES

The District’s ad valorem property tax is levied each September 30 on the assessed value listed as of the prior January 1 for all real and personal property located in the District. Taxes are due on January 2 and become delinquent after January 31 following the September 30 levy date.


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NOTE 3 - TAXES (CONTINUED)

The property tax rates assessed for the year ended June 30, 2016 were $.850 per $100 valuation for real property, $.850 per $100 valuation for business personal property, and $.641 per $100 valuation for motor vehicles.

The District levies a utility gross receipts license tax in the amount of 3% of the gross receipts derived from the furnishings, within the District, of the telephonic and telegraphic communications services, cablevision services, electric power, water, and natural, artificial, and mixed gas.

NOTE 4 - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2016 is as follows:

Balance July 1, 2015 Additions Dispositions

Balance June 30, 2016

Land 7,175,604$ -$ -$ 7,175,604$ Land improvements 4,625,402 91,590 (2,569) 4,714,423 Buildings and

improvements 54,542,509 195,754 - 54,738,263 Technology equipment 6,829,111 - (443,082) 6,386,029 Vehicles 3,694,241 392,267 (175,014) 3,911,494 General equipment 1,274,780 5,438 (20,821) 1,259,397 Construction work in progress - 4,203,035 - 4,203,035

78,141,647 4,888,084 (641,486) 82,388,245

Land improvements (3,059,227) (168,734) 2,569 (3,225,392) Buildings and improvements (20,513,383) (1,103,579) - (21,616,962) Technology equipment (6,098,373) (507,151) 436,547 (6,168,977) Vehicles (2,535,368) (220,979) 157,698 (2,598,649) General equipment (710,602) (90,560) 19,450 (781,712)

(32,916,953) (2,091,003) 616,264 (34,391,692)

45,224,694$ 2,797,081$ (25,222)$ 47,996,553$

Balance July 1, 2015 Additions Dispositions

Balance June 30, 2016

Land improvements 20,259$ -$ -$ 20,259$ Buildings and improvements 12,067 - - 12,067 Technology equipment 50,794 - (3,225) 47,569 Vehicles 19,705 19,950 - 39,655 General equipment 950,849 129,033 (47,135) 1,032,747

1,033,415 148,983 (50,360) 1,152,297

Land improvements (4,389) (1,013) - (5,402) Buildings and improvements (2,564) (376) - (2,940) Technology equipment (38,007) (5,775) 3,225 (40,557) Vehicles (19,705) (2,660) - (22,365) General equipment (434,768) (62,061) 46,707 (450,122)

(499,433) (71,885) 49,932 (521,386)

533,982$ 77,098$ (428)$ 630,911$

Totals at historical costs

Less: accumulated depreciation

Business-type activities, net

GOVERNMENTAL ACTIVITIES:

Governmental activities, net

BUSINESS TYPE ACTIVITIES:

Less: accumulated depreciation

Totals at historical costs


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NOTE 4 - CAPITAL ASSETS (CONTINUED)

Governmental activities depreciation expense is allocated to specific functions or programs on the statement of activities as follows:

Instruction 1,707,244$ Student 1,151 Instructional staff 5,518 District administration 13,761 School administration 2,816 Business 125,148 Plant operations and management 40,088 Student transportation 195,277 Community services -

Total depreciation expense 2,091,003$

Construction Commitments The District has active construction projects as of June 30, 2016. The projects include renovations and site improvements. A list of significant commitments as of June 30, 2016, are as follows:

Project Spent-to-DateRemaining

Commitment

Sutton Project 4,123,731$ 2,071,310$ OMS Track Project 12,972 2,856,845 Band Tower Project 4,675 37,325 Estes Pavement Replacement Project 37,956 353,405 Foust Reroofing and Masonry Repair 23,701 210,231

4,203,035$ 5,529,116$

NOTE 5 - BONDED DEBT AND LEASE OBLIGATIONS The amounts shown in the accompanying basic financial statements as bond obligations represent the District’s future obligations to make lease payments relating to the bonds issued by the Owensboro Independent School District Finance Corporation. The original amount of each issue, the issue date, and interest rate are summarized below:

Issue Proceeds Interest Rates22,680,000$ 3.25 - 4.500%

3,260,000 2.00 - 3.650%1,365,000 2.00 - 2.500%6,190,000 2.00 - 3.500%

16,770,000 2.00 - 4.000%

2008

2016R

2012R2009R

2015

The District, through the General Fund, the Facility Support Program (FSPK) Fund, and the SEEK Capital Outlay Fund, is obligated to make payments in amounts sufficient to satisfy debt service requirements on bonds issued by the Owensboro Independent School District Finance Corporation to construct school facilities. The District has an option to purchase the property under lease at any time by retiring bonds then outstanding.


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NOTE 5 - BONDED DEBT AND LEASE OBLIGATIONS (CONTINUED) For the 2008, 2009, 2012, 2015 and 2016 bond issues, the District entered into “participation agreements” with the School Facility Construction Commission (Commission). The Commission was created by Kentucky General Assembly for the purpose of assisting local school districts in meeting school construction needs. The participation agreements generally provide for the Commission to assist the District in meeting bond obligations and are renewable, at the Commission’s option, bi-annually. Should the Kentucky General Assembly choose not to fund the Commission in the future, the District would be responsible for meeting the full requirements of the bond issues. The table below sets forth the amount to be paid by the District and the Commission for each year until maturity of all bond issues.

The bonds may be called prior to maturity with redemption premiums specified in each issue. Assuming no bonds are called prior to scheduled maturity, the District’s minimum obligations, including amounts to be paid by the Commission, as of June 30, 2016 for debt service (principal and interest) are as follows:

FiscalYear

Ending Principal Interest Principal Interest Total

2017 1,342,596$ 683,547$ 442,404$ 84,911$ 2,553,458$ 2018 1,355,847 684,542 454,153 73,162 2,567,704 2019 1,403,827 632,687 406,173 59,326 2,502,013 2020 1,465,866 575,405 214,134 46,989 2,302,394 2021 1,525,297 516,947 219,703 41,422 2,303,369 2022 1,574,668 463,870 225,332 35,793 2,299,663 2023 1,604,401 424,561 230,599 30,526 2,290,087 2024 1,638,977 391,154 236,023 25,103 2,291,257 2025 1,676,935 354,814 83,065 19,561 2,134,375 2026 1,710,538 314,457 84,462 17,531 2,126,988 2027 1,751,699 271,179 88,301 15,371 2,126,550 2028 1,807,656 222,304 87,344 13,009 2,130,313 2029 1,852,741 167,661 77,259 10,644 2,108,305 2030 568,791 131,892 36,209 9,022 745,914 2031 592,726 115,044 37,274 7,956 753,000 2032 601,590 97,127 38,410 6,821 743,948 2033 610,319 78,493 49,681 5,465 743,958 2034 638,688 58,973 46,312 3,965 747,938 2035 686,714 36,897 48,286 2,391 774,288 2036 710,830 12,440 44,170 773 768,213

25,120,706$ 6,233,994$ 3,149,294$ 509,741$ 35,013,735$

School DistrictKentucky School FacilityConstruction Commission

Owensboro Independent


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NOTE 5 - BONDED DEBT AND LEASE OBLIGATIONS (CONTINUED)

A summary of the changes in the outstanding bonds during the fiscal year ended June 30, 2016 is as follows:

IssueBalance

July 1, 2015 Additions ReductionsBalance

June 30, 2016 Current PortionSchool Building

Revenue Bonds:2008 19,900,000$ -$ (16,625,000)$ 3,275,000$ 1,035,000$

2009 R 1,290,000 - (335,000) 955,000 345,000 2012 R 1,205,000 - (125,000) 1,080,000 125,000 2015 - 6,190,000 - 6,190,000 105,000

2016 R - 16,770,000 - 16,770,000 175,000

22,395,000 22,960,000 (17,085,000) 28,270,000 1,785,000 Less deferred amounts:

(224,182) 200,374 211,355 187,547 -

22,170,818$ 23,160,374$ (16,873,645)$ 28,457,547$ 1,785,000$

Issuance premiums and discounts

Total governmental bonds payable

Refunded Debt

2009 R On February 26, 2009, the District issued $3,260,000 in general obligation bonds for the purpose of refunding the Series 1996, 1998, and 1999. The interest rate on the bonds ranges from 2.00% to 3.65% over the term of the obligation with a final maturity due June 1, 2019. Debt service payments are scheduled semi-annually at amounts that range from $5,110 to 412,288. The economic gain resulting from this refunding is $119,973 (based upon NPV from delivery date). The difference in cash flow requirements to service the old debt of $3,115,000 and the cash flows to service the new debt of $3,260,000 is $136,340. This refunding will reduce overall debt service payments by $136,340 over the term of the debt. 2012 R On April 3, 2012, the District issued $1,365,000 in general obligation bonds for the purpose of refunding the Series 2004 bonds. The interest rate on the bonds ranges from 2.00% to 2.50% over the term of the obligation with a final maturity due April 1, 2024. Debt service payments are scheduled semi-annually at amounts that range from $1,812 to $148,813. The economic gain resulting from this refunding is $76,291 (based upon NPV from delivery date). The difference in cash flow requirements to service the old debt of $1,250,000 and the cash flows to service the new debt of $1,365,000 is $91,523. This refunding will reduce overall debt service payments by $91,523 over the term of the debt. 2016 R On March 17, 2016, the District issued $16,770,000 in general obligation bonds for the purpose of partially refunding the Series 2008 bonds. The interest rate on the bonds ranges from 2.00% to 4.00% over the term of the obligation with a final maturity due September 1,2028. Debt service payments are scheduled semi-annually at amounts that range from $363,011 to $1,837,150. The economic gain resulting from this refunding is $770,042 (based upon NPV from delivery date). The difference in cash flow requirements to service the old debt of $15,630,000 and the cash flows to service the new debt of $16,770,000 is $928,739. This refunding will reduce overall debt service payments by $928,739 over the term of the debt.


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NOTE 6 - ACCUMULATED UNPAID SICK LEAVE BENEFITS Upon retirement from the school system, eligible employees will receive from the District an amount equal to 30% of the value of accumulated sick leave.

The entire compensated absence liability is reported on the government-wide financial statements. For governmental fund financial statements, the current portion of unpaid accumulated sick leave is the amount expected to be paid using expendable available resources. These amounts are recorded in the accumulated sick leave payable account in the General Fund. The noncurrent portion of the liability is not reported.

A summary of the changes in the accumulated sick leave benefits during the fiscal year ended June 30, 2016 is as follows:

Balance as of July 1, 2015 1,803,728$

Additions 73,977

Decreases -

Balance as of June 30, 2016 1,877,705

Less current portion (200,000)

Noncurrent portion 1,677,705$

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The District receives funding from federal and state government agencies and private contributions. These funds are to be used for designated purposes only. For government agency grants, if based on the grantor’s review the funds are considered not to have been used for the intended purpose, the grantor may request a refund of funds advanced, or refuse to reimburse the District for its disbursements. The collectability of any related receivables as of June 30, 2016 may be impaired. The amount of such refunds and unreimbursed disbursements, if any, is not expected to be significant. Continuation of the District’s grant programs is predicated upon the grantors’ satisfaction that the funds provided are being spent as intended and the grantors’ intent to continue their programs.

NOTE 8 - RETIREMENT PLANS

Teachers' Retirement System of the Commonwealth of Kentucky General Information about the Pension Plan Plan description: Teaching-certified employees of the District are provided pensions through the Teachers' Retirement System of the Commonwealth of Kentucky (KTRS), a cost-sharing multiple-employer defined benefit plan with a special funding situation established to provide retirement annuity plan coverage for local school districts and other public educational agencies in the state. KTRS was created by the 1938 General Assembly and is governed by Chapter 161 Section 220 through Chapter 161 Section 990 of the Kentucky Revised Statutes (KRS). KTRS is a blended component unit of the Commonwealth of Kentucky and therefore is included in the Commonwealth's financial statements. KTRS issues a publicly available financial report that can be obtained at https://ktrs.ky.gov. Benefits provided: KTRS administers retirement and disability annuities, and death and survivor benefits to employees and beneficiaries of employees of the public school systems and other public educational agencies in Kentucky. KRS requires that members of KTRS occupy a position requiring either a four year college degree or certification by the Kentucky Department of Education (KDE).


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NOTE 8 - RETIREMENT PLANS (CONTINUED)

Contributions: Contribution rates are established by Kentucky Revised Statutes (KRS). Members are required to contribute 12.855% of their salaries to KTRS. The Commonwealth of Kentucky is required to contribute 16.105% of salaries. The federal program for any salaries paid by that program pays the matching contributions. Additional benefits: In addition to the pension benefits described above, KRS 161.675 requires KTRS to provide post-retirement healthcare benefits to eligible members and dependents. The KTRS medical insurance benefit is a cost-sharing, multiple-employer defined benefit plan. Changes made to the medical plan may be made by the KTRS Board of Trustees, the Kentucky Department of Employee Insurance, and the General Assembly. To be eligible for medical benefits, the member must have retired either for service or disability. The KTRS Medical Insurance Fund offers coverage to members under age 65 through the Kentucky Employees' Health Plan administered by the Kentucky Department of Employee Insurance. Once retired members and eligible spouses attain age 65 and are Medicare eligible, coverage is obtained through the KTRS Medicare Eligible Health Plan. In order to fund the post-retirement healthcare benefit, 6.44% of the gross annual payroll of employees is contributed. The member contributes 3.75%, the District contributes 3.00%, and the State contributes (0.31)%. Also, the premiums collected from retirees, as described in the plan description, and investment interest help with the medical expenses of the plan.

Pension Liabilities, Pension Expense, and Deferred Inflows of Resources Related to Pensions

At June 30, 2016, the District reported no liability for its proportionate share of the net pension liability recognized by the State for pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the District were as follows:

District's proportionate share of the net pensionliability -$

State's proportionate share of the net pensionliability associated with the District 166,918,340

Total 166,918,340$

The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014. The District's proportion of the net pension liability was based on the actual liability of the employees and former employees relative to the total liability of the System as determined by the actuary. At June 30, 2015, the District's proportion was 0.717302 percent. For the year ended June 30, 2016, the District recognized pension expense of $3,452,098 and revenue of $3,452,098 for on-behalf support provided by the State.


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Actuarial assumptions: The total pension liability in the June 30, 2014 actuarial valuation was determined using the following actuarial assumptions, applied to all periods in the measurement:

Inflation 3.50 percent Salary increases, including inflation 4.00 - 8.20 percent Long-Term Investment Rate of Return, net of pension plan investment expense, including inflation

7.50 percent

Municipal Bond Index Rate

Prior Measurement Date 4.35 percent Measurement Date 3.82 percent Year FNP is projected to be depleted 2039 Single Equivalent Interest Rate, net of pension plan investment expense, including inflation

Prior Measurement Date 5.23 percent Measurement Date 4.88 percent Post-Retirement Benefit Increases 1.50% annually

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on a projection of Scale AA to 2020 with a set back of 1 year for females. The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2005 - June 30, 2010. The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return be weighting the expected future real rate of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class, and provided by KTRS's investment consultant, are summarized in the following table.

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return

U.S. Equity 45.0% 6.4% Non U.S. Equity 17.0% 6.5% Fixed Income 24.0% 1.6% High Yield Bonds 4.0% 3.1% Real Estate 4.0% 5.8% Alternatives 4.0% 6.8% Cash 2.0% 1.5% Total 100%


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Discount rate: The discount rate used to measure the total pension liability as of the measurement date was 4.88%. The projection of cash flows used to determine the discount rate was performed in accordance with GASB 67 and assumed that member contributions will be made at the current contribution rates and that employer contributions will be made at statutorily required rates. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of plan members until the 2039 plan year end and, as a result, the Municipal Bond Index Rate was used in the determination of the single equivalent interest rate. There was a change in the Municipal Bond Index Rate from the prior measurement date to the measurement date, so as required under GASB 68, the single equivalent interest rate at the measurement date of 4.88% was calculated using the Municipal Bond Index Rate as of the measurement date (3.82%). This change in the discount rate is considered a change in actuarial assumptions or other inputs under GASB 68. Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued Teachers Retirement System of the Commonwealth of Kentucky financial report.

County Employees' Retirement System General Information about the Pension Plan

Plan description: Substantially all other employees (classified personnel) participate in the County Employees' Retirement System (CERS), a multi-employer, cost sharing, defined benefit plan administered by the Board of Trustees of Kentucky Retirement Systems. Kentucky Retirement Systems issues a publicly available financial report that includes financial statements and supplementary information for CERS. That report can be obtained at https://kyret.ky.gov. Benefits provided: CERS provides retirement, disability, and death benefits to plan members. Retirement benefits may be extended to beneficiaries of plan members under certain circumstances. Cost-of-living adjustments (COLA) are provided at the discretion of the State legislature. Kentucky Revised Statute 61.645 assigns the authority to establish and amend benefit provisions to the Kentucky Retirement Systems Board of Trustees. Contributions: Plan members participating in CERS on or before August 31, 2008, are required to contribute 5% of the annual creditable compensation. For plan members who began participating in CERS on or after September 1, 2008, the contribution rate is 6%. The District is required to contribute at an actuarially determined rate. As of June 30, 2016, the District's required contribution rate was 12.42% of annual covered payroll. The contribution requirements of plan members and the District are established and may be amended by the Kentucky Retirement Systems Board of Trustees. Contributions to CERS from the District were $944,566 for the year ended June 30, 2016. Pension Liabilities, Pension Expense, and Deferred Inflows of Resources Related to Pensions

At June 30, 2016, the District reported a liability of $13,518,528 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2015, the District's proportion was 0.314419 percent.


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For the year ended June 30, 2016, the District recognized pension expense of $1,492,007. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows ofResources Resources

Differences between expected and actual experience 112,344$ -$

Changes of assumptions 1,363,195 -

Net difference between projected andactual investment earnings on pensionplan investments 121,183 -

Changes in proportion and differences between District contributions and proportional share of contributions - 71,454

District contributions subsequentto the measurement date 944,566 -

Total 2,541,288$ 71,454$

Deferred outflows of resources of $944,566 related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended June 30:2017 589,693$ 2018 589,693 2019 315,588 2020 30,295 2021 - Thereafter -

Actuarial assumptions: The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3.25% Salary increases 4.0%, average, including inflation Investment rate of return 7.50%, net of pension plan expense, including inflation


47


The mortality table used for active members is RP-2000 Combined Mortality Table projected with Scale BB to 2013 (multiplied by 50% for males and 30% for females). For healthy retired members and beneficiaries, the mortality table used is the RP-2000 Combined Mortality Table projected with Scale BB to 2013 (set back one year for females). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale BB to 2013 (set back four years for males) is used for the period after disability retirement. There is some margin in the current mortality tables for possible future improvement in mortality rates and that margin will be reviewed again when the next experience investigation is conducted. The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2008 - June 30, 2013. The long-term expected return on plan assets is reviewed as part of the regular experience studies prepared every five years for Kentucky Retirement Systems. The most recent analysis, performed for the period covering fiscal years 2008 through 2013, is outlined in a report dated April 30, 2014. Several factors are considered in evaluating the long-term historical data, estimates inherent in current market data, and a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected return, net of investment expense and inflation) were developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The capital market assumptions developed by the investment consultant are intended for use over a 10-year horizon and may not be useful in setting the long-term rate of return for funding pension plans which covers a longer timeframe. The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years.

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return

Combined Equity 44% 5.4% Combined Fixed Income 19% 1.5% Real Return (Diversified Inflation Strategies)

10%

3.5%

Real Estate 5% 4.5% Absolute Return (Diversified Hedge Funds)

10%

4.25%

Private Equity 10% 8.5% Cash Equivalent 2% -0.25% Total 100%

Discount rate: The projection of cash flows used to determine the discount rate assumed that local employers would contribute the actuarially determined contribution rate of projected compensation over the remaining 28 year amortization period of the unfunded actuarial accrued liability. The discount rate determination does not use a municipal bond rate. Projected future benefit payments for all current plan members were projected through 2117.


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Sensitivity of the Commission's proportionate share of the net pension liability to changes in the discount rate: The following presents the Commission's proportionate share of the net pension liability calculated using the discount rate of 7.5%, as well as what the Commission's proportionate share of the net pension liability would be if it were calculated using a discount rate the is one percentage point lower (6.5%) or one percentage point higher (8.5%) than the current rate:

1% Current 1%Decrease Discount Rate Increase(6.5%) (7.5%) (8.5%)

District's proportionate shareof the net pension liability as of June 30, 2016 17,258,079$ 13,518,528$ 10,315,932$

Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued Kentucky Retirement Systems financial report. Postemployment Healthcare Benefits

Plan description: In addition to the pension benefits described above, KRS provides postemployment healthcare benefits through the Kentucky Retirement Systems Insurance Fund (Insurance Fund). The Insurance Fund was established to provide hospital and medical insurance for those receiving benefits from the Kentucky Employees' Retirement System (KERS), the County Employees' Retirement System (CERS), and the State Police Retirement System (SPRS). The Insurance Fund pays a prescribed contribution for whole or partial payment of required premiums to purchase hospital and medical insurance. For the fiscal year ended June 30, 2015 (the date of the latest available information), insurance premiums withheld from benefit payments for these benefits from CERS were $22.6 million and $1.7 million for non-hazardous and hazardous employees, respectively. For the fiscal year ended June 30, 2014, insurance premiums withheld from benefit payments for those receiving benefits from CERS were $24.2 million and $1.9 million for non-hazardous and hazardous employees, respectively. The Insurance Fund pays the same proportion of hospital and medical insurance premiums for the spouse and dependents of retired hazardous employees killed in the line of duty. As of June 30, 2015, the Insurance Fund had 108,952 retirees and beneficiaries for whom benefits were available. The amount of contributions paid by the Insurance Fund is based on years of service. For employees participating prior to July 1, 2003, years of service and respective percentages of the maximum contribution are shown below:

Years of Service % Paid by Insurance Fund 20 or more 100%

15 - 19 75% 10 - 14 50%

4 - 9 25% Less than 4 0%

As a result of House Bill 290 (2004 Kentucky General Assembly), medical insurance benefits are calculated differently for those who began participating on or after July 1, 2003. Once employees reach a minimum vesting period of ten years, non-hazardous employees whose participation began on or after July 1, 2003 earn $10 per month for insurance benefits at retirement for every year of earned service without regard to a maximum dollar amount. Hazardous employees whose participation began on or after July 1, 2003 earn $15 per month for insurance benefits at retirement for every year of earned service without regard to a maximum dollar amount. Upon death of a hazardous employee, the employee's spouse receives $10 per month for insurance benefits for each year of the deceased employee's earned hazardous service. This dollar amount is subject to adjustment annually based on the retiree COLA, which is updated annually due to changes in the Consumer Price Index for all urban consumers.


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This benefit is not protected under the inviolable contract provisions of Kentucky Revised Statute 16.652, 61.692, and 78.852. The Kentucky General Assembly reserves the right to suspend or reduce this benefit if, in its judgment, the welfare of the Commonwealth so demands. Funding policy: In prior years, the employer's required medical insurance contribution rate was being increased annually by a percentage that would result in advance-funding the medical liability on an actuarially determined basis using the entry age normal method within a 20 year period measured from 1987. In November 1992, the Board adopted a fixed percentage rate and suspended future increases under the current medical premium funding policy until the next experience study could be performed. In May 1996, the Board adopted a policy to increase the insurance contribution rate by the amount needed to achieve the target rate for full entry age normal funding within 20 years. The District is required to contribute at an actuarially determined rate. As of June 30, 2016, 2015, and 2014, the District's required contribution rate was 4.64%, 4.92%, and 5.15%, respectively, of annual covered payroll. The contribution requirements of plan members and the District are established and may be amended by the Kentucky Retirement Systems Board of Trustees. Contributions to the Insurance Fund from the District were $352,882, $361,937, and $371,775 for the years ended June 30, 2016, 2015, and 2014, respectively. On August 6, 2012, the Board voted to cease self-funding of healthcare benefits for most Medicare eligible retirees. The Board elected to contract with Humana Insurance Company to provide healthcare benefits to retirees through a fully insured Medicare Advantage Plan. The Humana Medicare Advantage Plan became effective January 1, 2013. NOTE 9 - ON-BEHALF PAYMENTS FOR FRINGE BENEFITS

The District receives on-behalf payments for fringe benefits, bond debt, and technology from the Commonwealth of Kentucky. The following amounts are included as revenues and expenses/expenditures on the statement of activities, and the statement of revenues, expenditures, and changes in fund balances - governmental funds, and the statement of revenues, expenses, and changes in net position - proprietary funds:

Retirement contributions to the Teachers'Retirement System of Kentucky 3,452,098$

Health, life insurance, and HRA 5,568,638 Administrative Fees 64,702 Less: District Reimbursement for Federal Funded Benefits (201,596)

Total On-Behalf Payments for Fringe Benefits 8,883,842 School Finance Corporation On-Behalf Bond Payments 482,374 Technology On-Behalf Payments 85,933

9,452,149$

NOTE 10 - INSURANCE, RISK MANAGEMENT, AND RELATED ACTIVITIES

The District is exposed to various forms of loss of assets associated with the risks of fire, personal liability, theft, vehicular accidents, errors and omissions, fiduciary responsibility, etc.; and risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, natural disasters, workers compensation, unemployment, etc. Each of these risk areas is covered through the purchase of commercial insurance.


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NOTE 10 - INSURANCE, RISK MANAGEMENT, AND RELATED ACTIVITIES (CONTINUED)

The District has purchased certain policies which are retrospectively rated which include workers’ compensation insurance. Premiums are accrued based on the ultimate cost of the experience to date of a group of entities.

Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

NOTE 11 - DEFICIT OPERATING/FUND BALANCES

There are no District funds that currently have a deficit fund balance.

NOTE 12 - COBRA

Under COBRA, employers are mandated to notify terminated employees of available continuing insurance coverage. Failure to comply with this requirement may put the District at risk for a substantial loss contingency.

NOTE 13 - TRANSFER OF FUNDS

The following transfers were made during the year ended June 30, 2016:

From Fund To Fund Purpose Amount

General Construction Construction 2,291,445$ General Special Revenue Grants Transfer 576,938 General Special Revenue Grants Transfer 253,026 Special Revenue Special Revenue Grants Transfer 146,823 Special Revenue General Indirect costs 5,204 Food Service General Indirect costs 207,836

Capital OutlayGeneral and Construction Capital outlay 434,441

BuildingGeneral and Construction Capital outlay 397,792

Construction General Capital outlay 101,738

4,415,243$

NOTE 14 - INTERFUND RECEIVABLES AND PAYABLES There were no inter-fund receivables or payables as of June 30, 2016. NOTE 15 - POLLUTION REMEDIATION OBLIGATION The Owensboro Independent School District identified a pollution remediation obligation related to asbestos in a property purchased during the fiscal year ended June 30, 2013. The District accrued a liability for this remediation, which is reported on the government-wide financial statements. The accrued amount of $1,405,000 was determined using a quote from a reputable industrial environmental services company. There were no known potential changes in estimate or estimated recoveries reducing the liability at the date of this report.


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NOTE 16 - RESTATEMENT OF BEGINNING NET POSITION The beginning governmental net position was restated due to revisions in the prior year deferred outflows of resources related to the implementation of GASB Statement No. 68:

As ofJuly 1, 2015

Beginning net position 23,306,777$ Change in deferred outflows of resources (361,135)

Beginning net position, restated 22,945,642$

See Independent Auditors' Report. 52

Variancewith Final

Original Final Actual BudgetREVENUES: From local sources: Taxes Property 9,128,380$ 9,128,380$ 9,246,726$ 118,346$ Motor vehicle and watercraft 915,000 915,000 1,016,346 101,346 Utilities 1,725,631 1,725,631 2,058,195 332,564 Other 169,781 169,781 170,961 1,180 Earnings on investments 107,803 107,803 107,803 - Other local revenues 315,780 315,780 389,695 73,915 Intergovernmental - state 28,424,959 28,424,959 29,277,310 852,351 Intergovernmental - federal 304,741 304,741 312,934 8,193

Total Revenues 41,092,075 41,092,075 42,579,970 1,487,895

EXPENDITURES: Instruction 27,871,272 27,871,272 24,000,970 3,870,302 Support services: Student 2,438,035 2,438,035 2,479,595 (41,560) Instruction staff 2,779,666 2,779,666 2,824,411 (44,745) District administrative 1,390,347 1,390,347 1,137,212 253,135 School administrative 2,594,501 2,594,501 2,635,688 (41,187) Business 1,548,430 1,548,430 1,609,356 (60,926) Plant operation & maintenance 4,409,963 4,409,963 4,388,067 21,896 Student transportation 2,072,250 2,072,250 1,924,586 147,664 Contingency 3,000,000 3,000,000 - 3,000,000 Facilities acquisition and construction 165,000 165,000 - 165,000

Total Expenditures 48,269,464 48,269,464 40,999,885 7,269,579

Excess (deficit) of revenues over expenditures (7,177,389) (7,177,389) 1,580,085 8,757,474

OTHER FINANCING SOURCES (USES): Proceeds from sale of fixed assets 71,454 71,454 71,019 435 Operating transfers in 566,820 566,820 566,820 - Operating transfers out (3,122,419) (3,122,419) (3,121,410) (1,009)

Total Other Financing Sources (2,484,145) (2,484,145) (2,483,571) (574)

Net change in fund balance (9,661,534) (9,661,534) (903,486) 8,758,048

Fund balance, beginning of year 13,501,273 13,501,273 13,501,273 -

Fund balance, end of year 3,839,739$ 3,839,739$ 12,597,787$ 8,758,048$

Owensboro Independent School DistrictStatement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund


BUDGETED AMOUNTS


BUDGETED AMOUNTS Variancewith Final

Original Final Actual BudgetREVENUES: From local sources: Earnings on investments -$ -$ -$ -$ Other local revenues 244,828 244,828 797,534 552,706 Intergovernmental - state 2,606,206 2,606,206 2,686,546 80,340 Intergovernmental - federal 2,883,566 2,883,566 3,929,401 1,045,835

Total Revenues 5,734,600 5,734,600 7,413,481 1,678,881

EXPENDITURES: Instruction 5,007,258 5,007,258 6,181,174 (1,173,916) Support services: Student 354,919 354,919 390,771 (35,852) Instruction staff 410,502 410,502 788,693 (378,191) School administrative 137,801 137,801 137,801 - Plant operation & maintenance 75,902 75,902 220,433 (144,531) Student transportation 6,762 6,762 6,762 - Community services 548,914 548,914 562,837 (13,923)

Total Expenditures 6,542,058 6,542,058 8,288,471 (1,746,413)

Excess (deficit) of revenues over expenditures (807,458) (807,458) (874,990) (67,532)

OTHER FINANCING SOURCES (USES): Operating transfers in 976,788 976,788 976,788 - Operating transfers out (152,027) (152,027) (152,027) -

Total Other Financing Sources 824,761 824,761 824,761 -

Net change in fund balance 17,303 17,303 (50,229) (67,532)

Fund balance, beginning of year 74,014 74,014 74,014 -

Fund balance, end of year 91,317$ 91,317$ 23,785$ (67,532)$

Owensboro Independent School DistrictStatement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Special Revenue Funds


See Independent Auditors' Report and Notes to Required Supplementary Information. 54

2016 2015

District's proportion of the net pension liability 0.00% 0.00%

District's proportionate share of the net pension liability -$ -$

State's proportionate share of the net pension liability associated with the District 166,918,340 146,800,321

Total 166,918,340$ 146,800,321$

District's covered-employee payroll 22,481,915$ 23,605,765$

District's proportionate share of the net pension liability as a percentage of its covered-employee payroll 0.00% 0.00%

Plan fiduciary net position as a percentage of the total pension liability 42.50% 45.59%

*Information for years prior to 2015 is not available.

Owensboro Independent School DistrictSchedule of the District's Proportionate Share of the Net Pension Liability

Kentucky Teachers' Retirement SystemLast 10 Fiscal Years*


2016 2015

Statutorily required contribution -$ -$

Contributions in relation to the statutorily required contribution - -

Contribution deficiency (excess) -$ -$


Contributions as a percentage of covered-employee payroll 0.00% 0.00%


Owensboro Independent School DistrictSchedule of District Contributions

Kentucky Teachers' Retirement SystemLast 10 Fiscal Years*


2016 2015

District's proportion of the net pension liability 0.314419% 0.317190%

District's proportionate share of the net pension liability 13,518,528$ 10,291,000$


District's proportionate share of the net pension liability as a percentage of its covered-employee payroll 177.75% 139.89%

Plan fiduciary net position as a percentage of the total pension liability 59.97% 66.80%


Owensboro Independent School DistrictSchedule of the District's Proportionate Share of the Net Pension Liability

County Employees' Retirement SystemLast 10 Fiscal Years*


2016 2015 2014 2013

Statutorily required contribution 944,566$ 937,945$ 991,880$ 860,242$

Contributions in relation to the statutorily required contribution (944,566) (937,945) (991,880) (860,242)

Contribution deficiency (excess) -$ -$ -$ -$

Commission's covered-employee payroll 7,605,201$ 7,356,431$ 7,218,923$ 6,816,498$

Contributions as a percentage of covered-employee payroll 12.42% 12.75% 13.74% 12.62%

*Information prior to 2013 is not available.

Owensboro Independent School DistrictSchedule of District Contributions

County Employees' Retirement SystemLast 10 Fiscal Years*

Owensboro Independent School District Notes to Required Supplementary Information


Kentucky Teachers' Retirement System

Changes of assumptions: The following changes in actuarial assumptions were made for amounts reported in fiscal year 2016:

FY 2016 Prior Period Municipal Bond Index Rate 3.82% 4.35% Single Equivalent Interest Rate 4.88% 5.23%

There was a change in the Municipal Bond Index Rate for the prior measurement date to the measurement date, so as required under GASB 68, the Single Equivalent Interest Rate was calculated using the Municipal Bond Index Rate as of the measurement date.

County Employees' Retirement System

Changes of assumptions: The following changes in actuarial assumptions were made for amounts reported in fiscal year 2016:

FY 2016 Prior Periods Inflation 3.25% 3.50% Salary Increase 4.00% 4.50% Investment Rate of Return 7.50% 7.75%

For amounts reported in fiscal year 2016, the mortality table used for active members is RP-2000 Combined Mortality Table projected with Scale BB to 2013 (multiplied by 50% for males and 30% for females). For healthy retired members and beneficiaries, the mortality table used is the RP-2000 Combined Mortality Table projected with Scale BB to 2013 (set back one year for females). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale BB to 2013 (set back four years for males) is used for the period after disability retirement. For periods prior to fiscal year 2016, the rates of mortality for the period after service retirement are according to the 1983 Group Annuity Mortality Table for all retired members and beneficiaries as of June 30, 2006 and the 1994 Group Annuity Mortality Table for all other members. The Group Annuity Mortality Table set forward 5 years is used for the period after disability retirement.


Due toStudent Groups

Cash Receipts Disbursements Cash Accounts Accounts June 30,July 1, 2015 For Year For Year June 30, 2016 Receivable Payable 2016

SCHOOL ACTIVITY FUNDS:Hager Preschool 18,548$ 13,389$ (24,185)$ 7,752$ -$ -$ 7,752$ Cravens Elementary School 21,437 32,076 (24,271) 29,242 - - 29,242 Estes Elementary School 30,066 45,908 (59,267) 16,707 - - 16,707 Foust Elementary School 12,574 35,303 (43,602) 4,275 - - 4,275 Newton Parrish Elementary School 4,624 22,765 (25,691) 1,698 - - 1,698 Sutton Elementary School 4,851 31,056 (29,141) 6,766 - - 6,766 Owensboro Middle School - South 50,982 70,051 (64,173) 56,860 - - 56,860 Owensboro Middle School - North 77,801 229,817 (227,148) 80,470 270 (260) 80,480 Gateway Academy 950 1,242 (1,663) 529 - - 529 Owensboro Innovation Academy - 4,981 (4,666) 315 - - 315

Totals 221,833$ 486,588$ (503,807)$ 204,614$ 270$ (260)$ 204,624$

School

Owensboro Independent School DistrictStatement of Receipts, Disbursements, and Due to Student Groups - Elementary, Middle, and Alternative Schools Activity Funds




Cash Receipts Disbursements Interfund Cash June 30,Activity Fund July 1, 2015 For Year For Year Transfers June 30, 2016 2016

Athletics 34,214$ 196,157$ (176,352)$ (17,663)$ 36,356$ 36,356$ District Athl. Activity - - (16,000) 16,000 - - District Activity Funds - - (25,600) 25,600 - - Football Booster Club 9,268 26,103 (25,250) 4,651 14,772 14,772 Soccer Booster Club 410 - - (410) - - Girls Soccer Support 3,716 1,320 (5,432) 1,617 1,221 1,221 Boys Soccer Support 7,316 1,034 (2,728) 1,567 7,189 7,189 Intramurals 299 - (130) - 169 169 Bowling Support - 175 (125) - 50 50 Swim Team Fund 846 295 (1,072) 37 106 106 Dance 921 - - - 921 921 Girls Basketball Funds 1,760 10,876 (13,112) 3,464 2,988 2,988 Girls Track Fundraising 316 2,058 (1,999) - 375 375 Devilettes (Cheer) 12,000 91,104 (97,487) 1,233 6,850 6,850 Boys Basketball Funds 1,217 2,464 (2,980) - 701 701 Softball Fundraising 5,201 14,571 (12,568) 1,201 8,405 8,405 Baseball Fundraising 8,032 10,840 (9,782) 1,176 10,266 10,266 Cross Country Invitational 9,719 6,443 (8,088) (7,775) 299 299 Girls CC Support 899 - (484) 4,000 4,415 4,415 Boys CC Support 1,971 - (484) 4,000 5,487 5,487 Wrestling Invitational 1,511 450 (1,363) (25) 573 573 Dance Class 376 1,182 (1,300) - 258 258 Instructional Fees 28,416 14,158 (2,974) (6,893) 32,707 32,707 Art Fees 472 1,905 (1,927) - 450 450 Business Education 1,659 - - (1,659) - - Driver's Ed Fees 7,348 1,506 - (7,853) 1,001 1,001 English 2,452 9 - (2,461) - - Foreign Language 865 - (551) (314) - - Family and Consumer 420 470 (738) - 152 152 Math 937 - (444) (493) - - Science 1,920 - (278) (1,642) - - Special Education 157 - - (157) - - Step Team 435 - - 200 635 635

Owensboro Independent School DistrictStatement of Receipts, Disbursements, and Due to Student Groups - Owensboro High School Activity Funds





Social Studies 1,594$ 1,850$ (575)$ (2,869)$ -$ -$ PE Fees 9th Grade 2,311 3,653 (3,968) - 1,996 1,996 Laptop Fees 10 41,944 (41,954) - - - Vending - Student 1,655 4,499 (4,323) 1,807 3,638 3,638 Vending - Adult 1,778 2,634 (2,812) 880 2,480 2,480 Volleyball Fundraiser 6,873 8,352 (10,052) 1,052 6,225 6,225 OHS Academic 187 - - (187) - - Magazine Sales 3,791 18,532 (11,806) (8,400) 2,117 2,117 OHS Concessions 8,948 76,157 (37,262) (18,505) 29,338 29,338 School Store Athletics 6,681 13,852 (11,857) (3,685) 4,991 4,991 Knotholes 304 - - - 304 304 Yearbook 3,219 12,879 (9,519) 105 6,684 6,684 Scoop 18 - - - 18 18 Co-Ed-Y Club 77 6,139 (5,944) - 272 272 Academic Team - 5,760 (4,586) (25) 1,149 1,149 GSA 195 - - (25) 170 170 FBLA 513 10 (356) (50) 117 117 FHA/FCCLA 102 - - - 102 102 HOSA 197 910 (760) - 347 347 National Honor Society 1,460 2,749 (2,922) 25 1,312 1,312 JROTC 12,796 9,508 (6,139) (25) 16,140 16,140 Tennis Fundraising 890 - - (50) 840 840 Foreign Language Club 281 - - - 281 281 SIA/Interact 2,414 2,040 (1,595) 82 2,941 2,941 Student Council 5,980 2,450 (2,633) (1,499) 4,298 4,298 Chess Club 30 - - (30) - - AOK 386 10 - (49) 347 347 Band 6,842 24,312 (30,734) 4,190 4,610 4,610

Owensboro Independent School DistrictStatement of Receipts, Disbursements, and Due to Student Groups - Owensboro High School Activity Funds - Continued





Orchestra 1,815$ 336$ (2,000)$ (86)$ 65$ 65$ Chorus 1,266 7,101 (5,593) 86 2,860 2,860 PSTO 4,502 2,898 (5,035) 1,592 3,957 3,957 Class of 2016 4,745 - - (4,745) - - Class of 2017 1,662 5,579 (2,840) 500 4,901 4,901 Class of 2018 411 746 (535) 1,000 1,622 1,622 Class of 2019 - 1,272 (666) - 606 606 Quill and Scroll 183 - - - 183 183 Flower Fund 313 425 (70) - 668 668 Drama Foundation 10,087 13,824 (18,636) (75) 5,200 5,200 Youth Service Center 4,115 1,027 (1,165) - 3,977 3,977 Project Prom/Graduation 771 2,145 (4,231) 4,430 3,115 3,115 Champion (SADD) 303 - (140) (163) - - Junior Class/Prom 7,062 6,110 (6,308) - 6,864 6,864 Social Studies Trip 6,877 27,042 (30,703) 850 4,066 4,066 Senior Activities 156 7,112 (8,993) 3,133 1,408 1,408 Media Center 1,396 49 - - 1,445 1,445 World of Work 1 - - (1) - - Textbook Rental - 16,254 (16,254) - - - Textbook Lost and Damage - - - - - - Renaissance 2,789 1,500 (3,835) 3,337 3,791 3,791 In and Out 5,334 10,540 (10,922) - 4,952 4,952

Totals 268,393$ 725,320$ (716,971)$ 1$ 276,743$ 276,743$

Owensboro Independent School DistrictStatement of Receipts, Disbursements, and Due to Student Groups - Owensboro High School Activity Funds - Continued


Owensboro Independent School District

Independent Auditors’ Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance

Independent Auditors' 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

Schedule of Expenditures of Federal Awards


Table of Contents Page(s)

Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance

1 - 2

Independent Auditors' 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

3 - 4

Schedule of Expenditures of Federal Awards 5 - 6

Notes to the Schedule of Expenditures of Federal Awards 7

Schedule of Findings and Questioned Costs I. Summary of Audit Results 8 II. Findings - Financial Statement Audit - June 30, 2016 9 III. Findings and Questioned Costs - Major Federal Programs Audit 10 IV. Status of Prior Year Findings - June 30, 2015 11

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Independent Auditors' Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance

Dr. Nicholas Brake, Superintendent and Members of the Board of Education Owensboro Independent School District Owensboro, Kentucky Report on Compliance for Each Major Federal Program We have audited Owensboro Independent School District's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Owensboro Independent School District's major federal programs for the year ended June 30, 2016. Owensboro Independent School Districtt's major federal programs are identified in the summary of the auditors’ results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of Owensboro Independent School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial statement audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). These standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Owensboro Independent School District's compliance with these requirements and performing such other procedures as we considered necessary in the circumstances. We believe that out audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Owensboro Independent School District's compliance. Opinion on Each Major Federal Program In our opinion, Owensboro Independent School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016.

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Report on Internal Control Over Compliance Management of Owensboro Independent School District is responsible for establishing and maintaining effective internal control over compliance with the requirements referred to above. In planning and performing our audit of compliance, we considered Owensboro Independent School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Owensboro Independent School District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business type activities, and each major fund of Owensboro Independent School District for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the District's financial statements. We have issued our report thereon dated October 12, 2016, which contained an unmodified opinion on these financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for the purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditure of Federal Awards is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Myriad CPA Group, LLC October 12, 2016

3

Independent Auditors' 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 Dr. Nicholas Brake, Superintendent and Members of the Board of Education Owensboro Independent School District Owensboro, Kentucky We have audited, in accordance with the auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States of America; and the audit requirements prescribed by the Kentucky State Committee for School District Audits as defined in the Independent Auditors' Contract, the financial statements of the governmental activities, the business type activities, and each major fund of Owensboro Independent School District, as of and for the year ended June 30, 2016, and the related notes to the financial statements,, which collectively comprise Owensboro Independent School District's basic financial statements, and have issued our report thereon dated October 12, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Owensboro Independent 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 Owensboro Independent School District’s internal control. Accordingly, we do not express an opinion on the effectiveness of Owensboro Independent 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 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 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 the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in the internal control over financial reporting 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 Owensboro Independent School District’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. In addition, the results of our tests disclosed no instances of material noncompliance of specific

4

state statutes or regulations identified in Appendix II to the Independent Auditors’ Contract - State Audit Requirements. We noted certain other matters that we reported to management of Owensboro Independent School District in a separate letter dated October 12, 2016. 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 result of that testing, and not to provide an opinion on the effectiveness of 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.

Owensboro, Kentucky October 12, 2016

5

Owensboro Independent School District Schedule of Expenditures of Federal Awards For the year ended June 30, 2016

Grant/ProjectProgram CFDA No. Number Amount

United States Department of Agriculture:Passed through the Commonwealth of KentuckyDepartment of Education School Breakfast Program 10.553 7760005 918,823$ National School Lunch Program 10.555 7750002 2,393,266 Summer Food Service Program for Children 10.559 7690024 14,703 Summer Food Service Program for Children 10.559 7740023 141,270 State Administrative Expenses for Child Nutrition 10.560 7700001 2,481 Commodity Supplemental Food Program 10.565 4950 206,304 Fresh Fruit and Vegetable Program 10.582 7720012 59,077

Total United States Department of Agriculture 3,735,924

United States Department of Defense: ROTC 2016 12.000 504B 55,352

United States Department of Education:Passed through the Commonwealth of KentuckyDepartment of Education Title I - Part A 2014 84.010 3100002-13 4,442 Title I - Parental Involvement 2014 84.010 3100002-13 127 Title I - Part A 2015 84.010 3100002-14 545,024 Title I - Parental Involvement 2015 84.010 3100002-14 5,159 Title I - Part A 2016 84.010 3100002-15 1,256,989 Title I - Parental Involvement 2016 84.010 3100002-15 9,067 Title I - Part D Neg. & Del. 2016 84.010 3100102-15 9,841 Total Title 1 1,830,649

IDEA B - Regular 2014 84.027 3810002-13 790 IDEA B - Non Public 2014 84.027 3810002-13 19,190 IDEA B - Regular 2015 84.027 3810002-14 389,671 IDEA B - Non Public 2015 84.027 3810002-14 4,559 IDEA B - Regular 2016 84.027 3810002-15 813,950 Total IDEA B 1,228,160

Voc Ed Basic 2015 84.048 3710002-14 1,862 Voc Ed Basic 2016 84.048 3710002-15 52,743 Total Vocational Education 54,605

Special Ed Preschool 2016 84.173 3800002-15 50,012

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Owensboro Independent School District Schedule of Expenditures of Federal Awards For the year ended June 30, 2016

Grant/ProjectProgram CFDA No. Number Amount

21st Century Learning Center 2014 84.287 3400002-13 22,757 21st Century Learning Center 2014 84.287 3400002-13 2,000 21st Century Learning Center 2014 84.287 3400002-13 5,000 21st Century Learning Center 2015 84.287 3400002-14 7,000 21st Century Learning Center 2015 84.287 3400002-14 104,751 Total 21st Century Learning Centers 141,508

Title III - ESL 2016 84.365 3300002-15 28,911 Title III - Immigrant 2016 84.365 3300002-15 17,930 Total Title III 46,841

Title II - Part A Teacher Quality 2015 84.367 3230002-14 704 Title II - Part A Teacher Quality 2016 84.367 3230002-15 316,549 Total Title II 317,253

Race to the Top 2012 84.413 3960002-11 20,444

Total passed through the Commonwealth of Kentucky Department of Education 3,689,472

Passed through Daviess County Public Schools Migrant Program 2015 84.011 007A 13,028 Migrant Program 2016 84.011 007B 8,961 Total Migrant Program 21,989

Passed through the Commonwealth of KentuckyOffice of Vacational RehabilitationCommunity Based Work Transition 84.126 371B 27,969

Passed through Green River Regional Educational Cooperative RTT-D College & Career Readiness 2014 84.416 4364 4,924 RTT-D College & Career Readiness 2015 84.416 436A 20,327 RTT-D College & Career Readiness 2016 84.416 436B 131,357 Total RTT-D College & Career Readiness 156,608

Total United States Department of Education 3,896,038

Total Federal Awards Expended 7,687,314$

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Owensboro Independent School District Notes to the Schedule of Expenditures of Federal Awards For the year ended June 30, 2016 Note 1 Basis of Presentation:

The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of Owensboro Independent School District, and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Note 2 Commodities Donation:

Nonmonetary assistance for commodities donated is reported at the fair value of the commodities disbursed.

Note 3 Program Clusters:

The following programs are considered clusters and are considered in the aggregate for the purpose of major program determination

Grant/Project

Program CFDA No. Number Amount

United States Department of Agriculture:Passed through the Commonwealth of KentuckyDepartment of Education School Breakfast Program 10.553 7760005 918,823$ National School Lunch Program 10.555 7750002 2,393,266 Summer Food Service Program for Children 10.559 7690024 14,703 Summer Food Service Program for Children 10.559 7740023 141,270

Total Child Nutrition Cluster 3,468,062$

United States Department of Education:Passed through the Commonwealth of KentuckyDepartment of Education IDEA B - Regular 2014 84.027 3810002-13 790$ IDEA B - Non Public 2014 84.027 3810002-13 19,190 IDEA B - Regular 2015 84.027 3810002-14 389,671 IDEA B - Non Public 2015 84.027 3810002-14 4,559 IDEA B - Regular 2016 84.027 3810002-15 813,950 Special Ed Preschool 2016 84.173 3800002-15 50,012

Total Special Education Cluster (IDEA) 1,278,172$

8

Owensboro Independent School District Schedule of Findings and Questioned Costs For the fiscal year ended June 30, 2016 I. Summary of Audit Results:

Results

a. Type of report issued on financial statements. Unmodified

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

c. Non-compliance material to financial statements noted? No

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

e. Type of auditors' report issued on compliance formajor program? Unmodified

f. Any audit findings that are required to be reportedin accordance with 2 CFR 200.516(a)? No

g. Identification of major programs:

Child Nutrition Cluster School Breakfast Program - 10.553 918,823$ National School Lunch Program - 10.555 2,393,266 Summer Food Service Program for Children - 10.559 14,703 Summer Food Service Program for Children - 10.559 141,270 Total Child Nutrition Cluster 3,468,062$

h. Dollar threshold used to distinguish between Type Aand Type B programs. 750,000$

i. Does Owensboror Independent School District qualify asa low risk auditee? Yes

9

II. Findings - Financial Statement Audit - June 30, 2016: There were no findings or questioned costs resulting from the audit of Owensboro Independent School District for the fiscal year ended June 30, 2016.

10

III. Findings and Questioned Costs - Major Federal Programs Audit: None: There were no material findings or questioned costs related to major federal programs of Owensboro Independent School District for the fiscal year ended June 30, 2016.

11

IV. Status of Prior Year Findings - June 30, 2015: There were no reportable findings for the fiscal year ended June 30, 2015.

1

Dr. Nicholas Brake, Superintendent and Members of the Board of Education Owensboro Independent School District Owensboro, Kentucky Ladies and Gentlemen: In planning and performing our audit of the financial statements of Owensboro Independent School District (the "District") for the year ended June 30, 2016, we considered the District's internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. However, during our audit we became aware of a few matters that are opportunities for strengthening internal controls and operating efficiency. The following communication summarizes our comments and suggestions regarding those matters. A separate report dated October 12, 2016 contains our report on the District's internal control. This letter does not affect our report dated October 12, 2016 on the financial statements of the District.

Comments and Recommendations School Food Service Fund Procedures:

Cash Receipts:

• During our testing of cash receipts for this fund, we noted three instances where the deposit ticket only had one set of initials indicating approval, rather than two as required by District policies.

• We also noted three instances where the deposit count form only had one set of initials indicating approval, rather than two as required by District policies.

• Additionally, we noted two instances of deposit count forms not agreeing. In both instances, the variance was minor and the deposit agreed with the larger of the two deposit count forms. This condition increases the risk of cash being misappropriated.

Recommendations:

While the above matters all appear to be isolated incidences, we recommend that the District take steps to ensure that cafeteria managers are properly trained in food service accounting procedures and, furthermore, that the District emphasize to all cafeteria managers the importance of always following those procedures.

http://www.myriadcpa.com/

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Management Response:

Management concurs with our recommendations and will take steps to ensure that all cafeteria managers are properly trained in food service accounting procedures. Furthermore, management will emphasize to all cafeteria managers the importance of always following those procedures. Food service staff at District central office will review the deposit count forms and deposit tickets monthly and address any missing items with cafeteria managers at that time.

School Activity Fund Procedures:

Cash Receipts: • During our testing of cash receipts, we noted one instance where a ticket sales report was

used but not completed correctly, and another instance where a ticket sales report should have been used but was not.

Cash Disbursements: • During our testing of cash disbursements, we noted the following issues related to purchase

orders:

• At one school, we noted two purchase orders that were approved by the bookkeeper rather than the principal.

• At one school, we noted that purchase orders were being approved electronically by the principal. We would recommend that the principal either sign the purchase order or that a copy of the email containing approval of the purchase order be retained in the file.

• At one school, we noted one purchase order that had only one signature, but

should have had two, one for authorizer and one for approver.

• We also noted three instances where only one person signed a school check, rather than the two signatures required. This condition increases the risk an unauthorized disbursement could occur and not be detected.

• Additionally, we noted one instance of an invoice that was not properly cancelled with the payor's initials, check number, and date paid.

Recommendations:

While the above matters all appear to be isolated incidences, we recommend that the District take steps to ensure that school finance personnel are properly trained in Red Book procedures and, furthermore, that the District emphasize to all school finance personnel the importance of always following those procedures.

3

Management Response:

Management concurs with our recommendations and will take steps to ensure that all school finance personnel are properly trained in Red Book procedures. Furthermore, management will emphasize to all school finance personnel the importance of always following proper Red Book procedures.

Status of Prior-Year Comments and Recommendations School Activity Fund Procedures:

Cash Receipts:

• During our testing of the cash receipts of this fund, we noted one instance where the multiple receipt form was not used as required; therefore, segregation of duties was not evident. Secondly, by not using this form, it is difficult to determine the source of the money. Status: This matter does not exist for the fiscal year ended June 30, 2016.

• In another instance, we noted that two multiple receipt forms were used for an event, but only

one was properly dated. Status: This matter does not exist for the fiscal year ended June 30, 2016.

Cash Disbursements: • During our testing of cash disbursements, we noted several instances where the check number

and date paid were missing from the invoice. This condition increases the risk that an invoice will be paid twice. Status: This matter still exists for the fiscal year ended June 30, 2016. Refer to Comments and Recommendations, above. Corrective Action: Management has conducted additional training for all staff responsible for handling activity funds.

• We also noted one instance where only one person signed a school check, rather than the two signatures required. This condition increases the risk an unauthorized disbursement could occur and not be detected. Status: This matter still exists for the fiscal year ended June 30, 2016. Refer to Comments and Recommendations, above. Corrective Action: Management has conducted additional training for all staff responsible for handling activity funds.

• Additionally, we noted one instance where the supporting documentation (receipts) did not agree with the amount of the check issued. Incomplete supporting documentation could be an indication of unauthorized purchases.

4

Status: This matter does not exist for the fiscal year ended June 30, 2016.

Myriad CPA Group Owensboro, Kentucky October 12, 2016

APPENDIX C


Series of 2017

Continuing Disclosure Agreement

CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Undertaking Agreement ("Agreement") made and entered into as of the 1stday of August, 2017 by and between the Board of Education of Owensboro Independent School District ("Board");the Owensboro Independent School District Finance Corporation, an agency and instrumentality of the Board("Corporation") and the Registered and Beneficial Owners of the Bonds hereinafter identified as third partybeneficiaries to this Agreement. For the purposes of this Agreement "Beneficial Owner" means the person orentity treated as the owner of the Bonds for federal income tax purposes and "Registered Owner" means the personor entity named on the registration books of the bond registrar.

W I T N E S S E T H:

WHEREAS, the Corporation has acted as issuing agency for the Board pursuant to the provisions ofSection 162.385 of the Kentucky Revised Statutes ("KRS") and the Corporation's Bond Resolution in connectionwith the authorization, sale and delivery of $7,530,000 of the Corporation's School Building Revenue Bonds,Series of 2017, dated August 1, 2017 ("Bonds"), which Bonds were offered for sale under the terms and conditionsof a Final Official Statement ("FOS") prepared Ross, Sinclaire & Associates, LLC, Lexington, Kentucky("Financial Advisor") and approved by the authorized representatives of the Board and the Corporation, and

WHEREAS, the Securities and Exchange Commission ("SEC"), pursuant to the Securities and ExchangeAct of 1934, has amended the provisions of SEC Rule 15c2-12 relating to financial disclosures by the issuers ofmunicipal securities under certain circumstances ("Rule"), and

WHEREAS, it is intended by the parties to this Agreement that all terms utilized herein shall have thesame meanings as defined by the Rule, and

WHEREAS, the Board is an "obligated person" as defined by the Rule and subject to the provisions ofsaid Rule, and

WHEREAS, failure by the Board and the Corporation to observe the requirements of the Rule will inhibitthe subsequent negotiation, transfer and exchange of the Bonds with a resulting diminution in the market valuethereof to the detriment of the Registered and Beneficial Owners of said Bonds and the Board;

NOW, THEREFORE, in order to comply with the provisions of the Rule and in consideration of thepurchase of the Bonds by the Registered and Beneficial Owners, the parties hereto agree as follows:

1. ANNUAL FINANCIAL INFORMATION

The Board agrees to provide the annual financial information contemplated by Rule 15c2-12(b)(5)(i)relating to the Board for its fiscal years ending June 30 of each year to (a) the Municipal Securities RulemakingBoard ("MSRB"), or any successor thereto for purposes of its Rule, through the continuing disclosure serviceportal provided by the MSRB's Electronic Municipal Market Access ("EMMA") system as described in 1934 ActRelease No. 59062, or any similar system that is acceptable to the Securities and Exchange Commission and (b)the State Information Depository ("SID"), if any (the Commonwealth of Kentucky has not established a SID asof the date of this Agreement) within nine (9) months of the close of each fiscal year.

For the purposes of the Rule "annual financial information" means financial information and operatingdata provided annually, of the type included in the FOS with respect to the Board in accordance with guidelinesestablished by the National Federation of Municipal Analysts, and shall include annual audited financialstatements for the Board in order that the recipients will be provided with ongoing information regarding revenuesand operating expenses of the Board and the information provided in the FOS under the headings"OUTSTANDING BONDS", "BOND DEBT SERVICE", "DISTRICT STUDENT POPULATION", "LOCALSUPPORT - Local Tax Rates, Property Assessment and Revenue Collections and SEEK Allotment". If auditedfinancial statements are not available when the annual financial information is filed, unaudited financial statementsshall be included, to be followed by audited financial statements when available.

The audited financial statements shall be prepared in accordance with Generally Accepted AccountingPrinciples, Generally Accepted Auditing Standards or in accordance with the appropriate sections of KRS orKentucky Administrative Regulations.

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The parties hereto agree that this Agreement is entered into among them for the benefit of those whobecome Registered and Beneficial Owners of the Bonds as third party beneficiaries to said Agreement.

2. MATERIAL EVENTS NOTICES

Under the Rule, Section 15c2-12(b)(5)(i)(C), the following fifteen (15) events must be disclosed withinten (10) business days following the occurrence of said event to MSRB via EMMA and the SID, if any:

(1) Principal/interest payment delinquency;

(2) Nonpayment related default, if material;

(3) Unscheduled draw on debt service reserve reflecting financial difficulties;

(4) Unscheduled draw on credit enhancement reflecting financial difficulties;

(5) Substitution of credit or liquidity provider, or its failure to perform;

(6) Adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability,Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations withrespect to the tax status of the securities, or other material events affecting the tax status of thesecurity;

(7) Modifications to rights of security holders, if material;

(8) Bond call, if material;

(9) Defeasance;

(10) Tender offers;

(11) Release, substitution or sale of property securing the repayment of the security, if material;

(12) Rating change;

(13) Merger, consolidation, acquisition or sale of all or substantially all assets of an obligated person,other than in the ordinary course of business, and the entry into a definitive agreement toundertake such action or the termination of a definitive agreement relating to such action, otherthan pursuant to its terms, if material;

(14) Bankruptcy, insolvency, receivership or similar event; and

(15) Successor, additional or change in trustee, if material.

Notice of said material events shall be given to the entities identified in this Section by the Board on atimely basis (within ten (10) business days of the occurrence). Notwithstanding the foregoing, the provisions ofthe documents under which the Bonds are authorized and issued do not provide for a debt service reserve, creditenhancements or credit or liquidity providers.

In accordance with Rule Section 15c2-12(b)(5)(i)(D), the Board agrees that in the event of a failure toprovide the Annual Financial Information required under Section 1 of this Agreement, it will notify MSRB viaEMMA of such failure in a timely manner.

The Finance Officer of the Board shall be the responsible person for filing the annual financialinformation and/or notices of the events set forth above within the time prescribed in this Agreement. The Boardshall cause the Finance Officer to institute an internal tickler system as a reminder of the obligations set forthherein. By December 1 of each fiscal year and each 30 days thereafter the Finance Officer will contact the auditorfor the Board to determine when the audited financial statements will be finalized. The Finance Officer willimpress upon the auditor the necessity of having such audited financial report on or before March 15. Within 5days of receipt of such audited financial report the finance officer will cause the annual financial information to

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be filed as required by this Agreement.

3. SPECIAL REQUESTS FOR INFORMATION

Upon the request of any Registered or Beneficial Owner of the Bonds or the original purchaser of theBonds or any subsequent broker-dealer buying or selling said Bonds on the secondary market ("Underwriters"),the Board shall cause financial information or operating data regarding the conduct of the affairs of the Board tobe made available on a timely basis following such request.

4. DISCLAIMER OF LIABILITY

The Board and the Corporation hereby disclaim any liability for monetary damages for any breach of thecommitments set forth in this Agreement and remedies for any breach of the Board's continuing disclosureundertaking shall be limited to an action for specific performance or mandamus in a court of competent jurisdictionin Kentucky following notice and an opportunity to cure such a breach.

5. FINAL OFFICIAL STATEMENT

That the Final Official Statement prepared by the Financial Advisor and approved by the authorizedrepresentatives of the Board and the Corporation is hereby incorporated in this Agreement as fully as if copiedherein and the "annual financial information" required under Section 1 hereof shall in summary form update thespecific information set forth in said FOS.

6. DURATION OF THE AGREEMENT

This Agreement shall be in effect so long as any of the Bonds remain outstanding and unpaid; provided,however, that the right is reserved in the Board to delegate its responsibilities under the Agreement to a competentagent or trustee, or to adjust the format of the presentation of annual financial information so long as the intentand purpose of the Rule to present adequate and accurate financial information regarding the Board is served.

7. AMENDMENT; WAIVER

Notwithstanding any other provision of this Agreement, the Board may amend this Agreement, and anyprovision of this Agreement may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Section 1, it may only be made in connectionwith a change in circumstances that arises from a change in legal requirements, change in law, or change in theidentity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationallyrecognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance ofthe Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change incircumstances; and

(c) The amendment or waiver either (i) is approved by the holders of the Bonds in the same manner asprovided in the Bond Resolution for amendments to the Bond Resolution with the consent of holders, or (ii) doesnot, in the opinion of nationally recognized bond counsel, materially impair the interests of the Registered Ownersor Beneficial Owners of the Bonds.

(C-3)

In the event of any amendment or waiver of a provision of this Agreement, the Board shall describe suchamendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of thereason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles,on the presentation) of financial information or operating data being presented by the Board. In addition, if theamendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of suchchange shall be given in the same manner as for a material event under Section 15c2-12(b)(5)(i)(C) of the Rule,and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative formand also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the newaccounting principles and those prepared on the basis of the former accounting principles.

8. DEFAULT

In the event of a failure of the Board to comply with any provision of this Agreement, the Corporationmay and, at the request of any Underwriter or any Registered Owner or Beneficial Owner of Bonds, shall take suchactions as may be necessary and appropriate, including seeking mandamus or specific performance by court order,to cause the Board to comply with its obligations under this Agreement. A default under this Agreement shall notbe deemed an event of default under the Bond Resolution, and the sole remedy under this Agreement in the eventof any failure of the Board to comply with this Agreement shall be an action to compel performance.

In witness whereof the parties hereto have executed this Agreement as of the date first above written.

BOARD OF EDUCATION OF OWENSBOROINDEPENDENT SCHOOL DISTRICT

Chairperson

Attest:

Secretary

OWENSBORO INDEPENDENT SCHOOL DISTRICT FINANCE CORPORATION

President

Attest:

Secretary

(C-4)

APPENDIX D


Series of 2017

Official Terms and Conditions of Bond Sale

OFFICIALTERMS AND CONDITIONS OF BOND SALE

$7,530,000*

Owensboro Independent School District Finance Corporation School Building Revenue Bonds, Series of 2017

Dated August 1, 2017

SALE: July 20, 2017 AT 11:00 A.M., E.D.S.T.

As advertised in The Courier Journal, published in Louisville, Kentucky, the Owensboro IndependentSchool District Finance Corporation ("Corporation") will until July 20, 2017, at the hour of 11:00 A.M., E.D.S.T.,in the office of the Executive Director of the Kentucky School Facilities Construction Commission, 229 WestMain Street, Suite 102, Frankfort, Kentucky 40601-1879, receive competitive bids for the revenue bonds hereindescribed. To be considered, bids must be submitted on an Official Bid Form and must be delivered to theCorporation at the address indicated on the date of sale no later than the hour indicated. Bids may be submittedmanually or by facsimile or electronically via PARITY. Bids will be considered by the Corporation and may beaccepted without further action by the Corporation's Board of Directors.

Subject to a Permitted Adjustment* increasing or decreasing the issue by up to $1,505,000.


The Corporation has been formed in accordance with the provisions of Sections 162.120 through 162.290and Section 162.385 of the Kentucky Revised Statutes ("KRS"), and KRS Chapter 273 and KRS 58.180, as a nonprofit, non stock corporation for the purpose of financing necessary school building facilities for and on behalfof the Board of Education of the Owensboro Independent School District (the "Board"). Under the provisions ofexisting Kentucky law, the Corporation is permitted to act as an agency and instrumentality of the Board forfinancing purposes and the legality of the financing plan to be implemented by the Bonds herein referred to hasbeen upheld by the Kentucky Court of Appeals (Supreme Court) in the case of White v. City of Middlesboro, Ky.414 S.W.2d 569.

STATUTORY AUTHORITY, PURPOSE OF ISSUE AND SECURITY

These Bonds are authorized pursuant to KRS 162.120 through 162.290, 162.385, and KRS 58.180 andare issued in accordance with a Resolution of the Corporation's Board of Directors. Said Bonds are revenue bondsand constitute a limited indebtedness of the Corporation payable from rental revenues derived by the Corporationfrom the Board under the Lease identified below. Said Bonds are being issued to finance improvements at NewtonParrish Elementary School (the "Project") and are secured by a lien upon and a pledge of the revenues from therental of the school building to the Board under the Lease on a year to year basis; the first rental period endingJune 30, 2018; provided, however, said lien and pledge are on parity with a similar lien and pledge securing theCorporation's School Building Revenue Bonds previously issued to refinance the building(s) in which the Projectis located (the "Parity Bonds").

Should the Board default in its obligations under the Lease or fail to renew the Lease, the RegisteredOwners of Bonds have the right to have a receiver appointed to administer the Project but foreclosure and sale arenot available as remedies.

The rental of the Project from the Corporation to the Board is to be effected under a certain LeaseAgreement by and between the Corporation and the Board (the "Lease"), whereunder the Project is leased to theBoard for the initial period ending June 30, 2018, with an option in the Board to renew the Lease each year atrentals sufficient to provide for the principal and interest requirements on the Bonds as they become due, plus thecosts of insurance, maintenance, depreciation, and bond issuance and administration expenses; the Board beinglegally obligated only for the initial rental period and for one year at a time thereafter each time the Lease isrenewed.

Under the terms of the Lease and any renewal thereof, so long as the Bonds remain outstanding and inconformance with the intent and purpose of KRS 157.627(5) and KRS 160.160(5), in the event of a failure by the

(D-1)

Board to pay the rentals due under the Lease, and unless sufficient funds have been transmitted to the PayingAgent, or will be so transmitted, for paying said rentals when due, the Board has granted under the terms of theLease and Participation Agreement to the Corporation and the Commission the right to notify and request theKentucky Department of Education to withhold from the Board a sufficient portion of any undisbursed funds thenheld, set aside, or allocated to the Board and to request said Department or Commissioner of Education to transferthe required amount thereof to the Paying Agent for the payment of such rentals.

Although the Board is obligated to pay the Corporation annual rentals in the full amount of the principaland interest requirements for the Bonds for each year in which the Lease is renewed, the Board has entered intothe Lease in reliance upon a certain Participation Agreement by and between the Board and the Kentucky SchoolFacilities Construction Commission (the "Commission"). Under the terms of the Participation Agreement, theCommission has agreed to pay annually directly to the Paying Agent for the Bonds a stated Agreed Participationequal to approximately $90,333 to be applied to the annual debt service requirements for the Bonds hereinidentified until their retirement, subject to the constitutional restrictions limiting the commitment to the biennium;said annual amount is to be applied only to the principal and interest requirements of the Bonds so long as theBoard renews the Lease. Under the Lease, the Board has pledged and assigned all of its rights under theParticipation Agreement in and to the Agreed Participation to the Corporation in order to secure the Bonds andhas agreed to pay that portion of the rentals in excess of said Agreed Participation for each year in which the Leaseis renewed.

KENTUCKY SCHOOL FACILITIES CONSTRUCTION COMMISSION

The Commission is an independent corporate agency and instrumentality of the Commonwealth ofKentucky established pursuant to the provisions of Sections 157.611 through 157.640 of the Kentucky RevisedStatutes, as repealed, amended, and reenacted (the "Act") for the purpose of assisting local school districts inmeeting the school construction needs of the Commonwealth in a manner which will ensure an equitabledistribution of funds based upon unmet need.

Pursuant to the provisions of the Act, the Regulations of the Kentucky Board of Education and theCommission, the Commission has determined that the Board is eligible for participation from the Commission inmeeting the costs of construction of the Projects and has entered into a Participation Agreement with the Boardwhereunder the Commission agrees to pay an annual Agreed Participation equal to approximately $90,333 to beapplied to the annual debt service requirements for the Bonds herein identified each year until their retirement;provided, however, that the contractual commitment of the Commission to pay the annual Agreed Participationis limited to the biennial budget period of the Commonwealth, with the first such biennial period terminating onJune 30, 2018; the right is reserved in the Commission to terminate its commitment to pay the Agreed Participationafter the initial biennial period and every two years thereafter. The obligation of the Commission to makepayments of the Agreed Participation shall be automatically renewed each two years for a period of two yearsunless the Commission shall give notice of its intention not to participate not less than sixty days prior to the endof the biennium; however, by the execution of the Participation Agreement, the Commission has expressed itspresent intention to continue to pay the Agreed Participation in each successive biennial budget period until theretirement of all of the Bonds, but such execution does not obligate the Commission to do so.

The General Assembly of the Commonwealth adopted the State's Budget for the biennium ending June30, 2018. Inter alia, the Budget provides $121,610,900 in FY 2016-17 and $134,544,300 in FY 2017-18 to paydebt service on existing and future bond issues; $100,000,000 of the Commission's previous Offers of Assistancemade during the last biennium; and authorizes $91,000,000 in additional Offers of Assistance for the currentbiennium to be funded in the Budget for the biennium ending June 30, 2020.

ADDITIONAL PARITY BONDS

The Corporation has reserved the right and privilege of issuing additional bonds from time to time payablefrom the income and revenues of said lands and school building Project and secured by a statutory mortgage lienand pledge of revenues, but only if and to the extent the issuance of such additional parity bonds are in accordancewith the plans and specifications which have been approved by the Board, Commissioner of Education, and filedin the office of the Secretary of the Corporation and a Lease shall be entered into whereunder the annual rentalpayments during the life of such additional bonds shall be increased by the amount of the annual principal andinterest requirements of such additional bonds.

BOND MATURITIES, PRIOR REDEMPTION PROVISIONS AND PAYING AGENT

(D-2)

All such Bonds shall be in denominations in multiples of $5,000 within the same maturity, bear interestfrom August 1, 2017, payable on February 1, 2018, and semi annually thereafter and shall mature as to principalon August 1 in each of the years as follows:

Year Amount Year Amount

2018 $115,000 2028 $150,0002019 105,000 2029 580,0002020 105,000 2030 590,0002021 115,000 2031 620,0002022 125,000 2032 650,0002023 130,000 2033 665,0002024 125,000 2034 655,0002025 135,000 2035 680,0002026 140,000 2036 840,0002027 145,000 2037 860,000

*Subject to a Permitted Adjustment of the amount of Bonds awarded of up to $1,505,000 which may beapplied in any or all maturities.

The Bonds maturing on or after August 1, 2028 are subject to redemption at the option of the Corporationprior to their stated maturities on any date falling on or after August 1, 2027, in any order of maturities (less thanall of a single maturity to be selected by lot), in whole or in part, upon notice of such prior redemption being givenby the Paying Agent in accordance with DTC requirements not less than thirty (30) days prior to the date ofredemption, upon terms of the face amount, plus accrued interest, but without redemption premium.

Notwithstanding the foregoing, the Corporation reserves the right, upon thirty (30) days notice, to callthe Bonds in whole or in part on any date at par for redemption upon the total destruction by fire, lightning,windstorm or other hazard of any building constituting the Project and apply casualty insurance proceeds to suchpurpose.

The Bonds are to be issued in fully registered form (both principal and interest). The Huntington NationalBank, Cincinnati, Ohio, has been designated as the Bond Registrar and Paying Agent, shall remit interest on eachsemiannual due date to Cede & Co. Principal and interest will be payable through the Book-Entry-Only-Systemadministered by The Depository Trust Company: Please see "BOOK-ENTRY-ONLY-SYSTEM" below. Intereston the Bonds will be paid at rates to be established upon the basis of competitive bidding as hereinafter set forth,such interest to be payable on February 1 and November 1 of each year, beginning February 1, 2018 (Record Dateis the 15th day of month preceding interest due date).

BIDDING CONDITIONS AND RESTRICTIONS

(A) Bids must be made on Official Bid Form, contained in Information for Bidders available from theundersigned or Ross, Sinclaire & Associates, LLC, Lexington, Kentucky, by visiting www.rsamuni.com submittedmanually, by facsimile or electronically via PARITY®.

(B) Electronic bids for the Bonds must be submitted through PARITY® and no other provider ofelectronic bidding services will be accepted. Subscription to the PARITY® Competitive Bidding System isrequired in order to submit an electronic bid. The Corporation will neither confirm any subscription nor beresponsible for the failure of any prospective bidders to subscribe. For the purposes of the bidding process, thetime as maintained by PARITY® shall constitute the official time with respect to all bids whether in electronicor written form. To the extent any instructions or directions set forth in PARITY® conflict with the terms of theOfficial Terms and Conditions of Bond Sale, this Official Terms and Conditions of Sale of Bonds shall prevail. Electronic bids made through the facilities of PARITY® shall be deemed an offer to purchase in response to theNotice of Bond Sale and shall be binding upon the bidders as if made by signed, sealed written bids delivered tothe Corporation. The Corporation shall not be responsible for any malfunction or mistake made by or as a resultof the use of the electronic bidding facilities provided and maintained by PARITY®. The use of PARITY®facilities are at the sole risk of the prospective bidders. For further information regarding PARITY®, potentialbidders may contact PARITY®, telephone (212) 404-8102. Notwithstanding the foregoing, non-electronic bidsmay be submitted via facsimile or by hand delivery utilizing the Official Bid Form.

(D-3)

(C) The minimum bid shall be not less than $7,379,400 (98% of par) plus accrued interest. Interest ratesshall be in multiples of 1/8 or 1/20 of 1% or both. Only one interest rate shall be permitted per Bond, and all Bondsof the same maturity shall bear the same rate. Interest rates must be on an ascending scale, in that the interest ratestipulated in any year may not be less than that stipulated for any preceding maturity. There is no limit on thenumber of different interest rates.

(D) The maximum permissible net interest cost for the Bonds shall not exceed "The Bond Buyer's" Indexof 20 Municipal Bonds as established on the Thursday immediately preceding the sale of said Bonds plus 1.50%.

(E) The determination of the best purchase bid for said Bonds shall be made on the basis of all bidssubmitted for exactly $7,530,000 principal amount of Bonds offered for sale hereunder, but the Corporation mayadjust the principal amount of Bonds upward or downward by $1,505,000 (the "Permitted Adjustment") whichmay be awarded to such best bidder may be a minimum of $6,025,000 or a maximum of $9,035,000. In the eventof such Permitted Adjustment, no rebidding or recalculation of a submitted bid will be required or permitted. Theprice of which such adjusted principal amount of Bonds will be sold will be the same price per $5,000 of Bondsas the price per $5,000 for the $7,530,000 of Bonds bid.

(F) If three (3) or more bids for the Bonds are received as a result of this competitive sale, the successfulpurchaser will be required to certify on or before the issue date the reasonably expected initial offering price tothe public as of the Sale Date for each Maturity of the Bonds which prices are the prices for each Maturity of theBonds used by the successful purchaser in formulating its bid to purchase the Bonds.

If less than three (3) bids for the Bonds are received as a result of this competitive sale, the successfulpurchaser, by submitting a bid pursuant to a published Notice of Sale, has agreed in writing that they will certifyon or before the issue date (and provide reasonable supporting documentation for such Certification, such as acopy of the Pricing wire or equivalent communication) for each Maturity of the Bonds (i) the first price at whichat least 10% of each Maturity of the Bonds was sold to the Public, or (ii) that they will neither offer nor sell anyof the Bonds of each Maturity to any person at a price that is higher than the Initial Offering Price for suchmaturity during the Holding Period for such Maturity.

Bids will not be subject to cancellation or withdrawal by the bidder in the event that three bids are notreceived and the Issuer determines to apply the hold-the-offering-price rule.

For purposes of the above the following terms are defined as follows:

(a)Holding Period means, with respect to a Maturity, the period starting on the Sale Date andending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the dateon which the successful purchaser has sold at least 10% of such Maturity to the Public at pricesthat are no higher than the Initial Offering Price for such Maturity.

(b)Maturity means Bonds with the same credit and payment terms. Bonds with differentmaturity dates, or Bonds with the same maturity date but different stated interest rates, are treatedas separate maturities.

(c)Public means any person (including an individual, trust, estate, partnership, association,company, or corporation) other than an Underwriter or a related party to an Underwriter. Theterm "related party" for purposes of this certificate generally means any two or more persons whohave greater than 50% common ownership, directly or indirectly.

(D-4)

(d)Sale Date means the first day on which there is a binding contract in writing for the sale ofa Maturity of the Bonds. The Sale Date of the Bonds is July 20, 2017.

(e)Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer(or with the lead underwriter to form an underwriting syndicate) to participate in the initial saleof the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directlyor indirectly with a person described in clause (i) of this paragraph to participate in the initial saleof the Bonds to the Public (including a member of a selling group or a party to a retaildistribution agreement participating in the initial sale of the Bonds to the Public).

(G) The successful bidder may elect to notify the Financial Advisor within twenty-four (24) hours of theaward of the Bonds that certain serial maturities as awarded may be combined with immediately succeeding serialmaturities as one or more Term Bonds; provided, however, (a) bids must be submitted to permit only a singleinterest rate for each term bond specified, and (b) Term Bonds will be subject to mandatory redemption by lot onAugust 1 in accordance with the maturity schedule setting the actual size of the issue.

(H) CUSIP identification numbers will be printed on the Bonds at the expense of the Corporation. Thepurchaser shall pay the CUSIP Service Bureau Charge. Improper imprintation or the failure to imprint CUSIPnumbers shall not constitute cause for a failure or refusal by the purchaser to accept delivery of and pay for saidBonds in accordance with the terms of any accepted proposal for the purchase of said Bonds.

(I) The Corporation will provide to the successful purchaser a Final Official Statement in accordance withSEC Rule 15c2-12. A Final Official Statement will be provided in Electronic Form to the successful bidder, insufficient time to meet the delivery requirements of the successful bidder under SEC and Municipal SecuritiesRulemaking Board Delivery Requirements. The successful bidder will be required to pay for the printing of FinalOfficial Statements.

(J) Bids need not be accompanied by a certified or bank cashier's good faith check, BUT the successfulbidder will be required to wire transfer an amount equal to 2% of the amount of the principal amount of Bondsawarded to the order of the Corporation by the close of business on the day following the award. Said good faithamount which will be forfeited as liquidated damages in the event of a failure of the successful bidder to takedelivery of such Bonds when ready. The good faith amount (without interest) will be applied to the purchase priceupon delivery of the Bonds. The successful bidder shall not be required to take up and pay for said Bonds unlessdelivery is made within 45 days from the date the bid is accepted.

(K) Delivery will be made utilizing the DTC Book-Entry-Only-System.

(L) The Corporation reserves the right to reject any and all bids or to waive any informality in any bid. The Bonds are offered for sale subject to the principal and interest not being subject to Federal or Kentuckyincome taxation or Kentucky ad valorem taxation on the date of their delivery to the successful bidder, inaccordance with the Final Approving Legal Opinion of Steptoe & Johnson PLLC, Bond Counsel, Louisville,Kentucky, which Opinion will be qualified in accordance with the section hereof on TAX EXEMPTION.

(M) The Corporation and the Board agree to cooperate with the successful bidder in the event saidpurchaser desires to purchase municipal bond insurance regarding the Bonds; provided, however, that any and allexpenses incurred in obtaining said insurance shall be solely the obligation of the successful bidder should thesuccessful bidder so elect to purchase such insurance.

STATE SUPPORT OF EDUCATION

The 1990 Regular Session of the General Assembly of the Commonwealth enacted a comprehensive legislative package known as the Kentucky Education Reform Act ("KERA") designed to comply with themandate of the Kentucky Supreme Court that the General Assembly provide for as efficient and equitable systemof schools throughout the State.

KERA became fully effective on July 13, 1990. Elementary and Secondary Education in theCommonwealth is supervised by the Commissioner of Education as the Chief Executive Officer of the StateDepartment of Education ("DOE"), an appointee of the reconstituted State Board for Elementary and SecondaryEducation (the "State Board"). Some salient features of KERA are as follows:

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KRS 157.330 establishes the fund to Support Education Excellence in Kentucky ("SEEK") funded frombiennial appropriations from the General Assembly for distribution to school districts. The base fundingguaranteed to each school district by SEEK for operating and capital expenditures is determined in each fiscal yearby dividing the total annual SEEK appropriation by the state-wide total of pupils in average daily attendance("ADA") in the preceding fiscal year; the ADA for each district is subject to adjustment to reflect the number ofat risk students (approved for free lunch programs under state and federal guidelines), number and types ofexceptional children, and transportation costs.

KRS 157.420 establishes a formula which results in the allocation of funds for capital expenditures inschool districts at $100 per ADA pupil which is included in the SEEK allotment ($3,981) for the current bienniumwhich is required to be segregated into a Capital Outlay Allotment Fund which may be used only for (1) directpayment of construction costs; (2) debt service on voted and funding bonds; (3) lease rental payments in supportof bond issues; (4) reduction of deficits resulting from over expenditures for emergency capital construction; and(5) a reserve for each of the categories enumerated in 1 through 4 above.

KRS 160.470(12)(a) requires that effective for fiscal years beginning July 1, 1990 each school districtshall levy a minimum equivalent tax rate of $.30 for general school purposes. The equivalent tax rate is definedas the rate which results when the income collected during the prior year from all taxes levied by the district(including utilities gross receipts license and special voted) for school purposes is divided by the total assessedvalue of property, plus the assessment for motor vehicles certified by the Revenue Cabinet of the Commonwealth. Any school district board of education which fails to comply with the minimum equivalent tax rate levy shall besubject to removal from office.

KRS 160.470(12)(2) provides that for fiscal years beginning July 1, 1990 each school district may levyan equivalent tax rate which will produce up to 15% of those revenues guaranteed by the SEEK program. Anyincrease beyond the 4% annual limitation imposed by KRS 132.017 is not subject to the recall provisions of thatSection. Revenue generated by the 15% levy is to be equalized at 150% of the state-wide average per pupilequalized assessment.

KRS 157.440(2) permits school districts to levy up to 30% of the revenue guaranteed by the SEEKprogram, plus the revenue produced by the 15% levy, but said additional tax will not be equalized with state fundsand will be subject to recall by a simple majority of those voting on the question.

KRS 157.620(1) also provides that in order to be eligible for participation from the Kentucky SchoolFacilities Construction Commission for debt service on bond issues the district must levy a tax which will producerevenues equivalent to $.05 per $100 of the total assessed value of all property in the district (including tangibleand intangible property and motor vehicles) in addition to the minimum $.30 levy required by KRS 160.470(12). A district having a special voted tax which is equal to or higher than the required $.05 tax, must commit andsegregate for capital purposes at least an amount equal to the required $.05 tax. Those districts which levy theadditional $.05 tax are also eligible for participation in the Kentucky Facilities Support ("KFS") program for whichfunds are appropriated separately from SEEK funds and are distributed to districts in accordance with a formulataking into account outstanding debt and funds available for payment from both local and state sources under KRS157.440(1)(b).

KRS 160.460 provides that as of July 1, 1994 all real property located in the Commonwealth subject tolocal taxation shall be assessed at 100% of fair cash value.

BIENNIAL BUDGET FOR PERIOD ENDING JUNE 30, 2018

The Kentucky General Assembly, during its Regular Session, adopted a budget for the biennium endingJune 30, 2018 which was approved and signed by the Governor. Such budget was effective beginning July 1, 2016.

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POTENTIAL LEGISLATION

No assurance can be given that any future legislation, including amendments to the Code, if enacted intolaw, or changes in interpretation of the Code, will not cause interest on the Bonds to be subject, directly orindirectly, to federal income taxation, or otherwise prevent owners of the Bonds from realizing the full currentbenefit of the tax exemption of such interest. In addition, current and future legislative proposals, if enacted intolaw, may cause interest on state or local government bonds (whether issued before, on the date of, or afterenactment of such legislation) to be subject, directly or indirectly, to federal income taxation by, for example,changing the current exclusion or deduction rules to limit the amount of interest on such bonds that may currentlybe treated as tax exempt by certain individuals. Prospective purchasers of the Bonds should consult their owntax advisers regarding any pending or proposed federal tax legislation.

Further, no assurance can be given that the introduction or enactment of any such future legislation, orany action of the IRS, including but not limited to regulation, ruling, or selection of the Bonds for auditexamination, or the course or result of any IRS examination of the Bonds or obligations which present similar taxissues, will not affect the market price for the Bonds.

CONTINUING DISCLOSURE

As a result of the Board and issuing agencies acting on behalf of the Board offering for public salemunicipal securities in excess of $1,000,000, the Corporation and the Board will enter into a written agreementfor the benefit of all parties who may become Registered or Beneficial Owners of the Bonds whereunder saidCorporation and Board will agree to comply with the provisions of the Municipal Securities Disclosure Rules setforth in Securities and Exchange Commission Rule 15c2-12 by filing annual financial statements and materialevents notices with the Electronic Municipal Market Access (EMMA) System maintained by the MunicipalSecurities Rule Making Board.

Financial information regarding the Board may be obtained from Superintendent, Owensboro IndependentSchool District Board of Education, 450 Griffith Avenue, Owensboro, Kentucky 42301, Telephone 270-686-1000.

TAX EXEMPTION; BANK QUALIFIED

Bond Counsel is of the opinion that the Bonds are "qualified tax-exempt obligations" within the meaningof the Internal Revenue Code of 1986, as amended, and therefore advises as follows:

(A) The Bonds and the interest thereon are exempt from income and ad valorem taxation by theCommonwealth of Kentucky and all of its political subdivisions.

(B) The interest income from the Bonds is excludable from the gross income of the recipient thereof forFederal income tax purposes under existing law; provided, that the corporate entities noted below are advised ofcertain tax consequences as follows:

(1) In the computation of the corporate minimum tax, earnings and profits may include otherwisetax-exempt interest on the Bonds; this provision applies to corporations only.

(2) Property and casualty insurance companies may be denied certain loss reserve deductionsto the extent of otherwise tax-exempt interest on the Bonds.

(C) As a result of certifications by the Board and the Corporation, indicating the issuance of less than$10,000,000 of tax-exempt obligations during the calendar year ending December 31, 2017, the Bonds may betreated by financial institutions as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code.

(D) The interest income from the Bonds is excludable from the gross income of the recipient thereof forFederal income tax purposes under existing law for individuals; however, said income must be included in thecalculation of "modified adjusted gross income" in the determination of whether and to what extent Social Securitybenefits are subject to Federal income taxation.

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The Bonds shall utilize the Book-Entry-Only-System administered by The Depository Trust Company("DTC").

DTC will act as securities depository for the Bonds. The Bonds initially will be issued as fully-registeredsecurities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered BondCertificate will be issued, in the aggregate principal amount of the Bonds, and will be deposited with DTC.

DTC is a limited-purpose trust company organized under the New York Banking Law, a "bankingorganization" 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 securitiesthat its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants ofsecurities transactions, such as transfers and pledges, in deposited securities through electronic computerizedbook-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securitiescertificates. "Direct Participants" include securities brokers and dealers, banks, trust companies, clearingcorporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by theNew York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of SecuritiesDealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks,and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directlyor indirectly ("Indirect Participants"). The Rules applicable to DTC and its participants are on file with theSecurities and Exchange Commission.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which willreceive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participant's records. Beneficial Ownerswill not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receivewritten confirmations providing details of the transaction, as well as periodic statements of their holdings, fromthe Direct or Indirect Participant through which the beneficial Owner entered into the transaction. Transfers ofownership interests in the Bonds ("Beneficial Ownership Interest") are to be accomplished by entries made on thebooks of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificatesrepresenting their Beneficial Ownership interests in Bonds, except in the event that use of the book-entry systemfor the Securities is discontinued. Transfers of ownership interest in the Securities are to be accomplished byentries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will notreceive certificates representing their ownership interests in Securities, except in the event that use of thebook-entry system for the Securities is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the nameof DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the nameof Cede & Co., effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Ownersof the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds arecredited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keepingaccount of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participantsto Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners, will be governedby arrangements among them, subject to any statutory or regulatory requirements as may be in effect from timeto time.

Redemption notices shall be sent to Cede & Co. If less than all of the Bonds are being redeemed, DTC'spractice is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed.

Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures,DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assignsCede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are creditedon the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments of the Bonds will be made to DTC. DTC's practice is to credit DirectParticipants' account on payable date in accordance with their respective holdings shown on DTC's records unless

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DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to BeneficialOwners will be governed by standing instructions and customary practices, as is the case with securities held forthe accounts of customers in bearer form or registered in "street name", and will be the responsibility of suchParticipant and not of DTC, the Issuer, or the Trustee, subject to any statutory or regulatory requirements as maybe in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Issuer or theTrustee, disbursements of such payments to Direct Participants shall be the responsibility of DTC, anddisbursements of such payment to the Beneficial Owners shall be the responsibility of Direct and IndirectParticipants.

A Beneficial Owner shall give notice to elect to have its Beneficial Ownership Interests purchased ortendered, through its Participant, to the Trustee, and shall effect delivery of such Beneficial Ownership Interestsby causing the Direct Participant to transfer the Participant's interest in the Beneficial Ownership Interests, onDTC's records, to the purchaser or the Trustee, as appropriate. The requirements for physical delivery of Bondsin connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownershiprights in the Bonds are transferred by Direct Participants on DTC's records.

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

NEITHER THE ISSUER, THE BOARD NOR THE BOND REGISTRAR/PAYING AGENT WILLHAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT, INDIRECTPARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THEREGISTRATION BOOKS OF THE BOND REGISTRAR/PAYING AGENT AS BEING AN OWNER WITHRESPECT TO: (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC ORANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANYDIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIALOWNER IN RESPECT OF THE PURCHASE PRICE OF TENDERED BONDS OR THE PRINCIPAL ORREDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY BY ANY DIRECTPARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICHIS REQUIRED OR PERMITTED UNDER THE TERMS OF THE BOND RESOLUTION TO BE GIVEN TOHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THEEVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY CONSENT GIVEN OR OTHERACTION TAKEN BY DTC AS HOLDER.


by /s/ Nick Brake Secretary

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APPENDIX E

Owensboro IndependentSchool District Finance Corporation School Building Revenue Bonds

Series of 2017

Official Bid Form

OFFICIAL BID FORM(Bond Purchase Agreement)

The Owensboro Independent School District Finance Corporation ("Corporation" or "Issuer"), will until 11:00 A.M.,E.D.S.T., on July 20, 2017, receive in the office of the Executive Director of the Kentucky School Facilities Construction Commission,Suite 102, 229 W. Main Street, Frankfort, Kentucky 40601, (telephone 502-564-5582; fax 888-979-6152) competitive bids for its$7,530,000 School Building Revenue Bonds, Series of 2017, dated August 1, 2017; maturing August 1, 2018 through 2037 ("Bonds").

We hereby bid for said $7,530,000* principal amount of Bonds, the total sum of $_______________ (not less than$7,379,400) plus accrued interest from August 1, 2017 payable February 1, 2018 and semiannually thereafter at the following annualrates, (rates on ascending scale in multiples of 1/8 or 1/20 of 1%; number of interest rates unlimited) and maturing as to principal onAugust 1 in the years as follows:

Year Amount* Rate Year Amount* Rate

2018 $115,000 _________% 2028 $150,000 _________%2019 105,000 _________% 2029 580,000 _________%2020 105,000 _________% 2030 590,000 _________%2021 115,000 _________% 2031 620,000 _________%2022 125,000 _________% 2032 650,000 _________%2023 130,000 _________% 2033 665,000 _________%2024 125,000 _________% 2034 655,000 _________%2025 135,000 _________% 2035 680,000 _________%2026 140,000 _________% 2036 840,000 _________%2027 145,000 _________% 2037 860,000 _________%

* Subject to Permitted Adjustment

We understand this bid may be accepted for as much as $9,035,000 of Bonds or as little as $6,025,000 of Bonds, at the sameprice per $5,000 Bond, with the variation in such amount occurring in any maturity or all maturities, which will be determined at thetime of acceptance of the best bid.

We further understand that by submitting a bid we agree as follows:

If three (3) or more bids for the Bonds are received as a result of this competitive sale, the successful purchaser will berequired to certify on or before the issue date the reasonably expected initial offering price to the public as of the Sale Date for eachMaturity of the Bonds which prices are the prices for each Maturity of the Bonds used by the successful purchaser in formulating itsbid to purchase the Bonds.

If less than three (3) bids for the Bonds are received as a result of this competitive sale, the successful purchaser, bysubmitting a bid pursuant to a published Notice of Sale, has agreed in writing that they will certify on or before the issue date (andprovide reasonable supporting documentation for such Certification, such as a copy of the Pricing wire or equivalent communication)for each Maturity of the Bonds (i) the first price at which at least 10% of each Maturity of the Bonds was sold to the Public, or (ii) thatthey will neither offer nor sell any of the Bonds of each Maturity to any person at a price that is higher than the Initial Offering Pricefor such maturity during the Holding Period for such Maturity.

Bids will not be subject to cancellation or withdrawal by the bidder in the event that three bids are not received and the Issuerdetermines to apply the hold-the-offering-price rule.

For purposes of the above the following terms are defined as follows:

(a)Holding Period means, with respect to a Maturity, the period starting on the Sale Date and ending on the earlier of (i) theclose of the fifth business day after the Sale Date, or (ii) the date on which the successful purchaser has sold at least 10%of such Maturity to the Public at prices that are no higher than the Initial Offering Price for such Maturity.

(b)Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with thesame maturity date but different stated interest rates, are treated as separate maturities.

(c)Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) otherthan an Underwriter or a related party to an Underwriter. The term "related party" for purposes of this certificate generallymeans any two or more persons who have greater than 50% common ownership, directly or indirectly.

(d)Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. TheSale Date of the Bonds is July 20, 2017.

(e)Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriterto form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agreespursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate inthe initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreementparticipating in the initial sale of the Bonds to the Public).

Electronic bids for the Bonds must be submitted through PARITY® and no other provider of electronic bidding services willbe accepted. Subscription to the PARITY® Competitive Bidding System is required in order to submit an electronic bid. TheCorporation will neither confirm any subscription nor be responsible for the failure of any prospective bidders to subscribe. For thepurposes of the bidding process, the time as maintained by PARITY® shall constitute the official time with respect to all bids whetherin electronic or written form. To the extent any instructions or directions set forth in PARITY® conflict with the terms of the OfficialTerms and Conditions of Sale of Bonds, this Official Terms and Conditions of Sale of Bonds shall prevail. Electronic bids made

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through the facilities of PARITY® shall be deemed an offer to purchase in response to the Notice of Bond Sale and shall be bindingupon the bidders as if made by signed, sealed written bids delivered to the Corporation. The Corporation shall not be responsible forany malfunction or mistake made by or as a result of the use of the electronic bidding facilities provided and maintained by PARITY®. The use of PARITY® facilities are at the sole risk of the prospective bidders. For further information regarding PARITY®, potentialbidders may contact PARITY®, telephone (212) 404-8102. Notwithstanding the foregoing, non-electronic bids may be submitted viafacsimile or by hand delivery utilizing the Official Bid Form.

The successful bidder may elect to notify the Financial Advisor within twenty-four (24) hours of the award of the Bonds thatcertain serial maturities as awarded may be combined with immediately succeeding serial maturities as one or more Term Bonds;provided, however, (a) bids must be submitted to permit only a single interest rate for each Term Bond specified, and (b) Term Bondswill be subject to mandatory redemption on August 1 in accordance with the maturity schedule setting the actual size of the issue.

The DTC Book-Entry-Only-System will be utilized on delivery of this issue.

It is understood that the Corporation will furnish the final approving Legal Opinion of Steptoe & Johnson PLLC BondCounsel, Louisville, Kentucky.

No certified or bank cashier's check will be required to accompany a bid, but the successful bidder shall be required to wiretransfer an amount equal to 2% of the principal amount of Bonds awarded by the close of business on the date following the award. Said good faith amount will be applied (without interest) to the purchase price on delivery. Wire transfer procedures should be arrangedthrough The Huntington National Bank, Cincinnati, Ohio, Attn: Ms. Amy Thompson (513-762-5182).

Bids must be submitted only on this form and must be fully executed.

If we are the successful bidder, we agree to accept and make payment for the Bonds in Federal Funds within forty-five (45)days of the award and upon acceptance by the Issuer's Financial Advisor this Official Bid Form shall become the Bond PurchaseAgreement.

Respectfully submitted,

__________________________________Bidder

By ________________________________Authorized Officer

___________________________________Address

Total interest cost from August 1, 2017 to final maturity $______________

Plus discount or less any premium $______________

Net interest cost (Total interest cost plus discount) $______________

Average interest rate or cost _______________%

The above computation of net interest cost and of average interest rate or cost is submitted for information only and is nota part of this Bid.

Accepted by Ross, Sinclaire & Associates, LLC, as Financial Advisor and Agent for the Owensboro Independent SchoolDistrict Finance Corporation for $_________________ amount of Bonds at a price of $______________ as follows:

Year Amount Rate Year Amount Rate

2018 _______,000 ________% 2028 _______,000 ________%2019 _______,000 ________% 2029 _______,000 ________%2020 _______,000 ________% 2030 _______,000 ________%2021 _______,000 ________% 2031 _______,000 ________%2022 _______,000 ________% 2032 _______,000 ________%

2023 ______,000 _______% 2033 ______,000 _______%2024 ______,000 _______% 2034 ______,000 _______%2025 ______,000 _______% 2035 ______,000 _______%2026 ______,000 _______% 2036 ______,000 _______%2027 ______,000 _______% 2037 ______,000 _______%

Dated: July 20, 2017 ________________________________Ross, Sinclaire & Associates, LLC,As Agent for Owensboro IndependentSchool District Finance Corporation

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DATED JULY 13, 2017 NEW ISSUE RATING Electronic Bidding ... · 7/7/2018 · The Owensboro...

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