Pottstown OS

NEW ISSUE—BOOK-ENTRY ONLY RATING: S&P: “AA” (Stable Outlook) (Insured) “AA-” (Stable Outlook) (Underlying) (See “RATINGS” herein) In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds (including, in the case of Bonds sold at an original issue discount, the difference between the initial offering price and par) is excluded from gross income for Federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under §57 of the Internal Revenue Code of 1986, as amended (the “Code”) for purposes of Federal individual or corporate alternative minimum taxes. The Bonds, and the interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania. (See “TAX MATTERS” herein.)

The School District has designated the Bonds as “Qualified Tax-Exempt Obligations” pursuant to §265(b)(3) of the Code (relating to the deductibility of interest expense by certain financial institutions).

$2,500,000 Westmont Hilltop School District Cambria County, Pennsylvania General Obligation Bonds, Series of 2018

Dated: May 24, 2018 Principal Due: October 1, as shown on inside cover Interest Due: April 1 and October 1 First Interest Payment: October 1, 2018 The General Obligation Bonds, Series of 2018 (the “Bonds”) in the aggregate principal amount of $2,500,000 will be issued in registered form, without coupons, in denominations of $5,000 or any integral multiple thereof. The Bonds will be registered in the name of Cede & Co., as the registered owner and nominee of The Depository Trust Company (“DTC”), New York, New York. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or any integral multiple thereof only under the book-entry only system maintained by DTC through its brokers and dealers who are, or act through, DTC Participants. The purchasers of the Bonds will not receive physical delivery of the Bonds. For so long as any purchaser is the beneficial owner of a Bond, that purchaser must maintain an account with a broker or a dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on the Bonds. See “BOOK-ENTRY ONLY SYSTEM” herein. If, under the circumstances described herein, Bonds are ever issued in certificated form, the Bonds will be subject to registration of transfer, exchange and payment as described herein. The principal of the Bonds will be paid to the registered owners or assigns, when due, upon presentation and surrender of the Bonds to Manufacturers and Traders Trust Company (“Paying Agent”), acting as paying agent and sinking fund depository, at its principal corporate trust office in Harrisburg, Pennsylvania. Interest on the Bonds is payable initially on October 1, 2018, and thereafter, semiannually on April 1 and October 1 of each year, until the principal sum thereof is paid. Payment of interest on the Bonds will be made by check drawn on the Paying Agent mailed to the registered owners of the Bonds as of the Record Date (see “THE BONDS” infra). The Bonds are subject to redemption prior to maturity.

The Bonds are general obligations of the Westmont Hilltop School District, Cambria County, Pennsylvania (the “School District”), payable from its tax and other general revenues. The School District has covenanted that it will provide in its budget in each year, and will appropriate from its general revenues in each such year, the amount of the debt service on the Bonds for such year and will duly and punctually pay or cause to be paid from the sinking fund established under the Resolution or any other of its revenues or funds the principal of every Bonds and the interest thereon on the dates, at the place and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the School District irrevocably has pledged its full faith, credit and available taxing power, which taxing power includes the power to levy ad valorem taxes on all taxable real property within the School District (See “SECURITY FOR THE BONDS” and “TAXING POWERS OF THE SCHOOL DISTRICT” herein).

Proceeds of the Bonds will be used towards: (1) capital projects including, but not limited to, the acquisition and construction of renovations and improvements to both the elementary and high school buildings in connection with the reduction of the number of education facilities being used by the School District; and (2) the payment of all costs and expenses incurred by the School District in connection with the issuance and sale of the Bonds.

The Bonds are an authorized investment for fiduciaries in the Commonwealth of Pennsylvania pursuant to the Pennsylvania Probate, Estate and Fiduciaries Code, Act of June 30, 1972, No. 164, P.L. 508, as amended and supplemented.

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

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

The Bonds are offered when, as and if issued, subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of Dinsmore & Shohl LLP, of Pittsburgh, Pennsylvania, Bond Counsel, to be furnished upon delivery of the Bonds. Certain other legal matters will be passed upon for the School District by Beard Legal Group, P.C., of Altoona, Pennsylvania, School District Solicitor. PFM Financial Advisors LLC, of Harrisburg, Pennsylvania, serves as the Financial Advisor to the School District in connection with the Bonds. It is expected that the Bonds will be available for delivery in New York, New York, on or about May 24, 2018. Baird

Official Statement Dated: April 19, 2018.

$2,500,000 Westmont Hilltop School District Cambria County, Pennsylvania General Obligation Bonds, Series of 2018

Dated: May 24, 2018 Principal Due: October 1, as shown below Interest Due: April 1 and October 1 First Interest Payment: October 1, 2018

MATURITIES, AMOUNTS, RATES AND PRICES/YIELDS

Maturity Date Principal Maturity Interest Initial Offering Initial Offering (Oct. 1) Amounts Rates Yields Prices 2019 $50,000 5.000% 1.950% 104.050% 2020 55,000 5.000 2.000 106.858 2021 60,000 5.000 2.150 109.168 2022 60,000 5.000 2.300 111.119 2023 65,000 5.000 2.400 112.984 2024 65,000 3.000 2.500* 102.488* 2025 65,000 3.000 2.600* 101.984* 2026 70,000 3.000 2.700* 101.483* 2027 70,000 3.000 2.800* 100.985* 2028 75,000 3.000 2.900* 100.490* 2029 75,000 3.000 3.000 100.000 2030 80,000 3.100 3.100 100.000 2031 80,000 3.200 3.200 100.000 2032 85,000 3.250 3.250 100.000 2033 85,000 3.250 3.300 99.398 2034 90,000 3.300 3.350 99.371 2035 90,000 3.375 3.400 99.671 2036 95,000 3.400 3.450 99.321 2037 100,000 3.500 3.500 100.000 2038 105,000 3.500 3.550 99.276 2039 105,000 3.550 3.600 99.256 2040 110,000 3.625 3.625 100.000 2041 115,000 3.625 3.630 99.918 2042 120,000 3.625 3.640 99.755 2043 125,000 3.625 3.650 99.585 2044 130,000 3.625 3.660 99.408 2045 135,000 3.625 3.670 99.223 2046 140,000 3.625 3.680 99.033

*Yield/Priced to Optional Redemption Date of October 1, 2023.

Westmont Hilltop School District Cambria County, Pennsylvania

BOARD OF SCHOOL DIRECTORS

Daniel D. Hill ...... President Dr. Kamal V. Gella ...... Vice President Joseph J. Kesslak ...... Secretary Jeffrey P. Masterson ...... Treasurer David J. Angeletti ...... Member Lisa M. Drennen ...... Member Malika S. Karunaratne ...... Member John D. Messina...... Member Rebecca L. Webb ...... Member

SUPERINTENDENT DR. TIMOTHY P. WILLIAMS

BUSINESS MANAGER MR. DONALD B. IRWIN JR.

SCHOOL DISTRICT SOLICITOR BEARD LEGAL GROUP, P.C. Altoona, Pennsylvania

BOND COUNSEL DINSMORE & SHOHL LLP Pittsburgh, Pennsylvania

FINANCIAL ADVISOR PFM FINANCIAL ADVISORS LLC Harrisburg, Pennsylvania

UNDERWRITER ROBERT W. BAIRD & CO. INCORPORATED Milwaukee, Wisconsin

PAYING AGENT MANUFACTURERS AND TRADERS TRUST COMPANY Harrisburg, Pennsylvania

SCHOOL DISTRICT ADDRESS 222 Fair Oaks Drive Johnstown, Pennsylvania 15905 No dealer, broker, salesman or other person has been authorized by the School District to give information or to make any representations, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from the School District and from other sources which are believed to be reliable but the School District does not guarantee the accuracy or completeness of information from sources other than the School District. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof. Municipal Assurance Corp. (“MAC”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, MAC has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding MAC supplied by MAC and presented under the heading “Bond Insurance” and “Appendix D - Specimen Municipal Bond Insurance Policy”.

TABLE OF CONTENTS Page Page

INTRODUCTION ...... 1 DEBT AND DEBT LIMITS ...... 22 Debt Statement ...... 22 PURPOSE OF THE ISSUE ...... 1 Debt Limit and Remaining Borrowing Capacity ...... 24 Sources and Uses of Bond Proceeds ...... 1 Debt Service Requirements ...... 25 THE BONDS...... 2 Future Financing ...... 26 Description ...... 2 LABOR RELATIONS ...... 26 Payment of Principal and Interest ...... 2 School District Employees ...... 26 Transfer, Exchange and Registration of Bonds ...... 2 Pension Program ...... 26 REDEMPTION OF BONDS ...... 3 Other Post-Employment Benefits ...... 27 Optional Redemption...... 3 LITIGATION ...... 27 Notice of Redemption ...... 3 Manner of Redemption ...... 3 DEFAULTS AND REMEDIES ...... 27

SECURITY FOR THE BONDS ...... 4 TAX MATTERS ...... 28 General Obligation Pledge ...... 4 Commonwealth Enforcement of Debt Service Payments ...... 4 CONTINUING DISCLOSURE UNDERTAKING ...... 30 Pennsylvania Budget Adoption ...... 4 Existing Continuing Disclosure Filing History ...... 31 Act 85 of 2016 ...... 5 Failure to Provide Annual Financial Information ...... 32 Sinking Fund ...... 6 Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s ...... 32 BOND INSURANCE ...... 6 Future Continuing Disclosure Compliance ...... 32 Bond Insurance Policy ...... 6 Municipal Assurance Corp...... 6 RATINGS ...... 32 UNDERWRITING ...... 32 BOOK-ENTRY ONLY SYSTEM ...... 7 LEGAL OPINION ...... 33 THE SCHOOL DISTRICT ...... 9 Administration ...... 9 FINANCIAL ADVISOR ...... 33 School Facilities ...... 9 Enrollment Trends ...... 10 MISCELLANEOUS ...... 33

SCHOOL DISTRICT FINANCES ...... 10 APPENDIX A - DEMOGRAPHIC AND ECONOMIC INFORMATION Introduction ...... 10 RELATING TO THE WESTMONT HILLTOP SCHOOL DISTRICT Financial Reporting ...... 10 Population ...... A-1 Budgeting Process in School Districts under the 2006 Income ...... A-4 Taxpayer Relief Act ...... 10 Commercial Activity ...... A-4 Summary and Discussion of Financial Results ...... 12 Educational Institutions ...... A-4 Revenue ...... 14 Housing ...... A-4 Transportation ...... A-5 TAXING POWERS OF THE SCHOOL DISTRICT ...... 16 Public Utilities ...... A-5 Limitations on Local Taxes ...... 16 Communications ...... A-5 Status of the Bonds Under Act 1 ...... 17 Police and Fire Protection and Emergency Services ...... A-5 Act 130 of 2008 ...... 17 Recreational Facilities ...... A-5 Act 48 of 2003 ...... 18 Tax Levy Trends ...... 18 APPENDIX B - OPINION OF BOND COUNSEL Real Property Tax ...... 19 APPENDIX C - AUDITED FINANCIAL STATEMENTS Other Taxes ...... 20 APPENDIX D - SPECIMEN MUNICIPAL BOND INSURANCE COMMONWEALTH AID TO SCHOOL DISTRICTS ...... 21 POLICY General ...... 21

OFFICIAL STATEMENT

$2,500,000 Westmont Hilltop School District Cambria County, Pennsylvania General Obligation Bonds, Series of 2018

INTRODUCTION

This Official Statement, including the cover page and inside cover page hereof and Appendices hereto, is furnished by Westmont Hilltop School District, Cambria County, Pennsylvania (the “School District”) in connection with the offering of $2,500,000 aggregate principal amount of its General Obligation Bonds, Series of 2018 (the “Bonds”), dated as of May 24, 2018. The Bonds are being issued pursuant to a Resolution of the Board of School Directors of the School District adopted on April 19, 2018 (the “Resolution”), and pursuant to the Local Government Unit Debt Act of the Commonwealth of Pennsylvania (the “Commonwealth”), 53 Pa.C.S.A. §8001 et seq., as amended (the “Act”).

PURPOSE OF THE ISSUE

Sources and Uses of Bond Proceeds

The following is a summary of the sources and uses of the proceeds from the issuance of the Bonds.

Source of Funds Bond Proceeds ...... $2,500,000.00 Net Original Issue Premium ...... 23,770.85 Total Source of Funds ...... $2,523,770.85

Use of Funds Deposit to Project Fund ...... $2,380,045.85 Costs of Issuance(1) ...... 143,725.00 Total Use of Funds ...... $2,523,770.85

(1)Includes legal, solicitor, financial advisor, printing, rating, bond discount, bond insurance premium, CUSIP, paying agent, and miscellaneous costs.

THE BONDS

Description

The Bonds will be issued only as fully registered bonds in the denominations of $5,000 and integral multiples thereof. The Bonds will be issued as one fully registered Bond for each maturity of the Bonds in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), as registered owner of all Bonds. See “BOOK-ENTRY ONLY SYSTEM” herein. The Bonds will be dated as of May 24, 2018, and will bear interest at the rates and mature in the amounts and on the dates set forth on the inside front cover of this Official Statement. Interest on the Bonds will be payable initially on October 1, 2018, and thereafter, semiannually on April 1 and October 1 until the principal sum thereof is paid.

Payment of Principal and Interest

Subject to the provisions described under “BOOK-ENTRY ONLY SYSTEM” below, principal of the Bonds will be paid to the registered owners thereof or assigns, when due, upon surrender of the Bonds at the designated trust office of Manufacturers and Traders Trust Company, the Paying Agent.

Interest is payable to the registered owner of a Bond from the interest payment date next preceding the date of registration and authentication of the Bond, unless: (a) such Bond is registered and authenticated as of an interest payment date, in which event such Bond shall bear interest from said interest payment date, or (b) such Bond is registered and authenticated after a Record Date (hereinafter defined) and before the next succeeding interest payment date, in which event such Bond shall bear interest from such interest payment date, or (c) such Bond is registered and authenticated on or prior to the Record Date preceding October 1, 2018, in which event such Bond shall bear interest from May 24, 2018, or (d) as shown by the records of the Paying Agent, interest on such Bond shall be in default, in which event such Bonds shall bear interest from the date to which interest was last paid on such Bond. Interest shall be paid initially on October 1, 2018, and thereafter, semiannually on April 1 and October 1 each year, until the principal sum is paid. Interest on each Bond is payable by check drawn on the Paying Agent, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the 15th day of the calendar month next preceding any interest payment date (whether or not a day on which the Paying Agent is open for business) (the "Record Date"), on the registration books maintained by the Paying Agent, irrespective of any transfer or exchange of the Bond subsequent to such Record Date and prior to such interest payment date, unless the School District shall be in default in payment of interest due on such interest payment date. In the event of any such default, such defaulted interest shall be payable to the person in whose name the Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Paying Agent to the registered owners of such Bonds not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the persons in whose names such Bonds are registered at the close of business on the fifth (5th) day preceding the date of mailing.

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

Transfer, Exchange and Registration of Bonds

Subject to the provisions described below under “BOOK-ENTRY ONLY SYSTEM”, Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Paying Agent, at its designated trust office, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Paying Agent, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Paying Agent shall enter any transfer of ownership of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered bond or bonds of authorized denominations of the same maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The School District and the Paying Agent may deem and treat the registered owner of any Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the School District and the Paying Agent shall not be affected by any notice to the contrary.

Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Paying Agent, at its designated corporate trust office, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Paying Agent, duly executed by the registered owner of such Bond or his attorney-in- fact or legal representative. The Paying Agent shall enter any transfer of ownership of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered bond or bonds of authorized denominations of the same series, maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The School District and the Paying Agent may deem and treat the registered owner of any Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the School District and the Paying Agent shall not be affected by any notice to the contrary.

REDEMPTION OF BONDS

Optional Redemption

The Bonds stated to mature on or after October 1, 2024, shall be subject to redemption prior to maturity, at the option of the School District, as a whole or in part, on October 1, 2023, or on any date thereafter, or from time to time, in part (and if in part, of any order of maturity as selected by the School District and within a maturity by lot), on October 1, 2023, or on any date thereafter, in either case upon payment of a redemption price of 100% of the principal amount of such Bonds, together with accrued interest to the redemption date.

Notice of Redemption

So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, however, the School District and the Paying Agent shall send redemption notices only to Cede & Co. See “BOOK-ENTRY ONLY SYSTEM” herein for further information regarding conveyance of notices to Beneficial Owners.

If at time of mailing of a notice of redemption the School District shall not have deposited with the Paying Agent (or, in the case of a refunding, with another bank or depository acting as refunding escrow agent) money sufficient to redeem all Bonds called for redemption, the notice of redemption may state that it is conditional, i.e., that it is subject to the deposit of sufficient redemption money with the Paying Agent not later than the opening of business on the redemption date, and such notice shall be of no effect unless such money is so deposited.

Notice of any redemption shall be given by depositing a copy of the redemption notice in first class mail not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for redemption addressed to each of the registered owners of Bonds to be redeemed, in whole or in part, at the addresses shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein or in the mailing thereof, shall not affect the validity of any proceeding for redemption of other Bonds so called for redemption as to which proper notice has been given.

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

Manner of Redemption

If a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed. For the purposes of redemption, a Bond shall be treated as representing the number of Bonds that is equal to the principal amount thereof divided by $5,000, each $5,000 portion of such Bond being subject to redemption. In the case of partial redemption of a Bond, payment of the redemption price shall be made only upon surrender of such Bond in exchange for Bonds of authorized denominations in an aggregate principal amount equal to the unredeemed portion of the principal amount thereof.

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

SECURITY FOR THE BONDS

General Obligation Pledge

The Bonds will be general obligations of the School District, payable from its tax and other general revenues. The School District has covenanted that it will provide in its budget for each year, and will appropriate from its general revenues in each such year, the amount of the debt service on the Bonds for such year, and will duly and punctually pay or cause to be paid from its Sinking Fund, as hereinafter defined, or any other of its revenues or funds, the principal of each of the Bonds and the interest thereon at the dates and place and in the manner stated on the Bonds, and for such budgeting, appropriation and payment the School District irrevocably has pledged its full faith, credit and available taxing power, which taxing power includes the power to levy ad valorem taxes on all taxable property within the School District within the limits provided by law (See “TAXING POWERS OF THE SCHOOL DISTRICT” herein). The Act presently provides for enforcement of debt service payments as hereinafter described (see “DEFAULTS AND REMEDIES” herein), and the Public School Code presently provides for the withholding and application of subsidies in the event of failure to pay debt service (see “Commonwealth Enforcement of Debt Service Payments” herein).

Commonwealth Enforcement of Debt Service Payments

Section 633 of the Pennsylvania Public School Code of 1949, as amended by Act 154 of 1998 (the “Public School Code”), presently provides that in all cases where the board of school directors of any school district fails to pay or to provide for the payment of any indebtedness at date of maturity or date of mandatory redemption or on any sinking fund deposit date, or any interest due on such indebtedness on any interest payment date or on any sinking fund deposit date, in accordance with the schedule under which the bonds were issued, the Secretary of Education shall notify such board of school directors of its obligation and shall withhold out of any Commonwealth appropriation due such school district an amount equal to the sum of the principal amount maturing or subject to mandatory redemption and interest owing by such school district, or sinking fund deposit due by such school district, and shall pay over the amount so withheld to the bank or other person acting as sinking fund depository for such bond issue. These withholding provisions are not part of any contract with the holders of the Bonds, and may be amended or repealed by future legislation.

The effectiveness of Section 633 of the Public School Code may be limited by the application of other withholding provisions contained in the Public School Code, such as provisions for withholding and paying over of appropriations for payment of unpaid teachers’ salaries. Enforcement may also be limited by bankruptcy, insolvency, or other laws or equitable principles affecting the enforcement of creditors’ rights generally. See “Pennsylvania Budget Adoption” hereinafter.

Pennsylvania Budget Adoption

Over the past several years the Commonwealth of Pennsylvania has, from time to time, started its fiscal year without a fully adopted state budget. In the state’s 2015-16 fiscal year, a final budget was not enacted until 270 days following the beginning of the fiscal year on March 27, 2016 when the Governor failed to sign or veto the state budget that was adopted by the General Assembly on March 17, 2016.

For the 2016-17 fiscal year, the state budget became law, known as Act 16A of 2016, on July 12, 2016 when the Governor failed to sign or veto the state budget that was adopted by the General Assembly on July 1, 2016. On July 13, 2016, the General Assembly adopted and Governor signed into law additional tax and revenue package, known as Act 85 of 2016, which was needed to balance the 2016-17 state budget.

For the current 2017-18 fiscal year, the state budget became law, known as Act 1A of 2017, on July 11, 2017 when the Governor failed to sign or veto the state budget that was adopted by the General Assembly on June 30, 2017. Act 1A of 2017 did not have any accompanying legislation regarding the potential revenue that would be needed to fund the balance of the 2017-18 Budget at the time of its enactment. On October 25, 2017, the General Assembly adopted House Bill 542 which contained the necessary revenue to fund the balance of the previously adopted Act 1A of 2017. On October 30, 2017 the Governor approved and signed House Bill 542 and it became known as Act 43 of 2017.

During a state budget impasse, school districts in Pennsylvania cannot be certain that state subsidies and revenues owed them from the Commonwealth will become available. This includes many of the major state subsidies, and overall revenues, that a Pennsylvania school district receives including basic education funding, special education funding, PlanCon reimbursements, and certain block grants, among many others. Future budget impasses may affect the timeliness or amount of payments by the Commonwealth under the withholding provisions of Section 633 of the Public School Code, however recent legislation included in Act 85 of 2016 has attempted to address the timeliness of the withholding provisions of Section 633 of the Public School Code during any future budget impasses. See “Act 85 of 2016” hereinafter.

Act 85 of 2016

On July 13, 2016, the Governor of the Commonwealth signed into law Act No. 85 of 2016, (P.L. 664, No. 85) (“Act 85 of 2016”), an amendment to the Act of April 9, 1929 (P.L. 343, No. 176), known as the Fiscal Code (“Fiscal Code”). Act 85 of 2016 adds to the Fiscal Code Article XVII-E.4, entitled “School District Intercepts for the Payment of Debt Service During Budget Impasse”, which provides for intercept of subsidy payments by the Pennsylvania Department of Education (“PDE”) to a school district subject to an intercept statute or an intercept agreement in the event of a Commonwealth budget impasse in any fiscal year.

Act 85 of 2016 includes in the definition of “intercept statutes” Section 633 of the Public School Code. The School District's general obligation bonds, including the Bonds, are subject to Section 633 of the Public School Code.

Act 85 of 2016 provides that the amounts that may be necessary for PDE to comply with the provisions of the applicable intercept statute or intercept agreement “shall be appropriated” to PDE from the General Fund of the Commonwealth after PDE submits justification to the majority and minority chairs of the appropriations committees of the Pennsylvania Senate and House of Representatives allowing ten (10) calendar days for their review and comment, if, in any fiscal year:

(1) annual appropriations for payment of Commonwealth money to school districts have not been enacted by July 1 and continue not to be enacted when a payment is due;

(2) the conditions under which PDE is required to comply with an intercept statute or intercept agreement have occurred, thereby requiring PDE to withhold payments which would otherwise be due to school districts; and

(3) the Secretary of PDE, in consultation with the Secretary of the Budget, determines that there are no payments or allocations due to be paid to the applicable school districts from which PDE may withhold money as required by the applicable intercept statute or intercept agreement.

The necessary amounts shall be appropriated and paid to the paying agent on the day the scheduled payment for principal and interest is due on the expiration of the tenth (10th) day following submission of the justification described above to the majority and minority chairs of the appropriations committees, who may comment on the justification but cannot prevent the effectiveness of the appropriation.

The total of all intercept payments under Article XVII-E.4 for a school district may not exceed 50% of the total nonfederal general fund subsidy payments made to that school district in the prior fiscal year.

Act 85 of 2016 requires that each school district with bonds or notes subject to an intercept statute or intercept agreement must deliver to PDE, in such format as PDE may direct, a copy of the final Official Statement for the relevant bonds or notes or the loan documents relating to the obligations, within thirty (30) days of receipt of the proceeds of the obligations. The School District intends on submitting this information with respect to the Bonds to PDE within the prescribed timeframe following the issuance of the Bonds. Act 85 of 2016 provides that any obligation for which PDE does not receive the required documents shall not be subject to the applicable intercept statute or intercept agreement.

The provisions of Act 85 of 2016 are not part of any contract with the holders of the Bonds and may be amended or repealed by future legislation.

Sinking Fund

A sinking fund for the payment of debt service on the Bonds, designated “Sinking Fund, General Obligation Bonds, Series of 2018” (the “Sinking Fund”), has been created under the Resolution and is maintained by the Paying Agent, as sinking fund depositary. The School District shall deposit in the Sinking Fund a sufficient sum not later than the date when interest and/or principal is to become due on the Bonds so that on each payment date the Sinking Fund will contain an amount which, together with any other funds available therein, is sufficient to pay, in full, interest and/or principal then due on the Bonds.

The Sinking Fund shall be held by the Paying Agent, as sinking fund depository, and invested by the Paying Agent in such securities or shall be deposited in such funds or accounts as are authorized by the Act, upon direction of the School District. Such deposits and securities shall be in the name of the School District, but subject to withdrawal or collection only by the Paying Agent, as sinking fund depository, and such deposits and securities, together with the interest thereon, shall be a part of the Sinking Fund.

The Paying Agent, as sinking fund depository, is authorized without further order from the School District to pay from the Sinking Fund the principal of and interest on the Bonds, as and when due and payable.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the Bonds, Municipal Assurance Corp. ("MAC") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York or Connecticut insurance law.

Municipal Assurance Corp.

MAC is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of the shareholders or affiliates of AGL, other than MAC, is obligated to pay any debts of MAC or any claims under any insurance policy issued by MAC.

MAC is wholly owned by Municipal Assurance Holdings Inc., which, in turn, is owned 61% by Assured Guaranty Municipal Corp. and 39% by Assured Guaranty Corp.

MAC’s financial strength is rated "AA" (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”) and "AA+" (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”). Each rating of MAC should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of MAC in its sole discretion. In addition, the rating agencies may at any time change MAC’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by MAC. MAC only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by MAC on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

Current Financial Strength Ratings

On July 14, 2017, KBRA issued a financial guaranty surveillance report in which it affirmed the insurance financial strength rating of “AA+”, with a Stable Outlook, of MAC. MAC can give no assurance as to any further ratings action that KBRA may take.

On June 26, 2017, S&P issued a research update report in which it affirmed MAC’s financial strength rating of “AA” (stable outlook). MAC can give no assurance as to any further ratings action that S&P may take.

For more information regarding MAC’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Capitalization of MAC

As of December 31, 2017, MAC’s policyholders’ surplus and contingency reserve were approximately $494 million and its unearned premium reserve was approximately $248 million, in each case, determined in accordance with statutory accounting principles.

Incorporation of Certain Documents by Reference

Portions of the following document filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to MAC are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (filed by AGL with the SEC on February 23, 2018).

All financial statements of MAC and all other information relating to MAC included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Municipal Assurance Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding MAC included herein under the caption “BOND INSURANCE – Municipal Assurance Corp.” or included in a document incorporated by reference herein (collectively, the “MAC Information”) shall be modified or superseded to the extent that any subsequently included MAC Information (either directly or through incorporation by reference) modifies or supersedes such previously included MAC Information. Any MAC Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

Miscellaneous Matters

MAC makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, MAC has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding MAC supplied by MAC and presented under the heading “BOND INSURANCE”.

BOOK-ENTRY ONLY SYSTEM

The information in this section has been obtained from materials provided by DTC for such purpose. The School District (herein referred to as the “Issuer”) and the Underwriter do not guaranty the accuracy or completeness of such information, and such information is not to be construed as a representation of the School District or the Underwriter.

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC.

DTC the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a

“clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency'” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants (“Direct Participants'”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities: DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit bas agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

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

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

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

A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to Tender Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the

Securities, on DTC's records, to Tender Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to Tender Agent's DTC account.

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

Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

NEITHER THE ISSUER NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY TO ANY BENEFICIAL OWNER BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER.

The Issuer and the Paying Agent cannot give any assurances that DTC or the Participants will distribute payments of the principal or redemption price of and interest on the Bonds paid to DTC or its nominee, as the registered owner of the Bonds, or any redemption or other notices, to the Beneficial Owners or that they will do so on a timely basis, or that DTC will serve and act in the manner described in this Official Statement.

THE SCHOOL DISTRICT

Administration

The Superintendent is the chief administrative officer of the School District with overall responsibility for all aspects of operations, including education and finance. The Business Manager is responsible for budget and financial operations. The School Board appoints both of these officials.

School Facilities

The School District presently operates one elementary school and a high school, all as described in the following table.

TABLE 1

WESTMONT HILLTOP SCHOOL DISTRICT FACILITIES

Original Addition/ Rated Construction Renovation Pupil 2017 -18 Building Date Date(s) Grades Capacity Enrollment Elementary: 1957, 80, 94, 726 Westmont Hilltop Elementary School 1953 2017 K-6 825

Secondary: Westmont Hilltop High School 1960 1996, 2017 7-12 823 702 Source: School District officials.

Enrollment Trends

The following table presents recent trends in school enrollment and a projection of enrollments.

TABLE 2

WESTMONT HILLTOP SCHOOL DISTRICT ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments School School Year Elementary Secondary Total Year Elementary Secondary Total 2013-14 799 760 1,559 2018-19 726 708 1,570 2014-15 780 735 1,515 2019-20 713 708 1,421 2015-16 830 800 1,630 2020-21 709 690 1,399 2016-17 731 736 1,467 2021-22 703 673 1,376 2017-18 726 702 1,428 2022-23 711 639 1,350 Source: School District officials.

SCHOOL DISTRICT FINANCES

Introduction

The School District budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by the Superintendent and Business Manager and submitted to the School Board for approval prior to the beginning of each fiscal year on July 1.

Financial Reporting

The School District keeps its books and prepares its financial reports according to a modified accrual basis of accounting. Major accrual items are payroll taxes and pension fund contributions payable, loans receivable from other funds, and revenues receivable from other governmental units. The School District’s financial statements are audited annually by an independent certified public accountant, as required by State law. The firm Kotzan CPA & Associates, P.C., Johnstown, Pennsylvania, serves as auditor for the School District.

The School District auditor has not been engaged to perform and has not performed since the date of its report, any procedures on the financial statements addressed in that report. Such auditor also has not performed any procedures relating to this Official Statement.

Budgeting Process in School Districts under the 2006 Taxpayer Relief Act

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

Procedures for Adoption of the Annual Budget. Under the Pennsylvania Act No. 1 of the Special Session of 2006, as amended by Act 25 of 2011 (“Act 1” or the “Taxpayer Relief Act”), all school districts of the first class A, second class, third class and fourth class (except as described below) must adopt a preliminary budget proposal (which must include estimated revenues and expenditures and proposed tax rates) no later than 90 days prior to the date of the election immediately preceding the fiscal year. The preliminary budget proposal must be printed and made available for public inspection at least 20 days prior to its adoption; the board of school directors may hold a public hearing on the budget; and the board must give at least 10 days’ public notice of its intent to adopt the final budget.

If the adopted preliminary budget includes an increase in the rate of any tax levy, the preliminary budget must be submitted to the Pennsylvania Department of Education (PDE) no later than 85 days prior to the date of the election immediately preceding the fiscal year. PDE is to compare the proposed percentage increase in the rate of any tax with the school district’s Index (see “Limitations on Local Taxes” herein) and within 10 days, but not later than 75 days prior to the upcoming election, inform the school district whether the proposed percentage increase is less than or equal to the Index. If PDE determines that a proposed tax increase will exceed the Index, the school district must reduce the proposed tax increase, seek voter approval for the tax increase at the upcoming election, or seek approval to utilize one of the referendum exceptions authorized under the Taxpayer Relief Act.

With respect to the utilization of any of Taxpayer Relief Act referendum exceptions for which PDE approval is required (see “Limitations on Local Taxes” herein), the school district must publish notice of its intent to seek PDE approval not less than one week before submitting its request for approval to PDE and, if PDE determines to schedule a public hearing on the request, a notice of the date, time and place of such hearing. PDE is required by the Taxpayer Relief Act to rule on the school district’s request and inform the school district of its decision no later than 55 days prior to the upcoming election so that, if PDE denies the school district’s request, the school district may submit a referendum question to the local election officials at least 50 days before the upcoming election, if it so chooses.

If a school district seeks voter approval to increase taxes at a rate higher than the applicable Index, whether or not it first seeks approval to utilize one of the referendum exceptions available under the Taxpayer Relief Act, and the referendum question is not approved by a majority of the voters voting on the question, the board of school directors may not approve an increase in the tax rate greater than the applicable Index.

Simplified Procedures in Certain Cases. The above budgetary procedures will not apply to a school district if the board of school directors adopts a resolution no later than 110 days prior to the election immediately preceding the upcoming fiscal year declaring that it will not increase any tax at a rate that exceeds the Index and that a tax increase at or below the rate of the Index will be sufficient to balance its budget. In that case, the Taxpayer Relief Act requires only that the proposed annual budget be prepared at least 30 days, and made available for public inspection at least 20 days, prior to its adoption, and that at least ten (10) days’ public notice be given of the board’s intent to adopt the annual budget. No referendum exceptions are available to a school district adopting such a resolution.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

Summary and Discussion of Financial Results

A summary of comparative General Fund balance sheet and changes in fund balances is presented in Tables 3 and 4. Table 5 shows Revenues and Expenditures for past five years and the 2017-18 Budget. The Budget for 2017-18 as adopted June 26, 2017, budgeted revenues and expenditures of $21,195,967.

TABLE 3

WESTMONT HILLTOP SCHOOL DISTRICT SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Years ending June 30)

ASSETS 2013 2014 2015 2016 2017 Cash and Cash Equivalents ...... $2,867,264 $7,572,360 $9,959,803 $11,300,871 $8,985,213 Investments ...... 4,645,290 2,136,000 1,141,000 728,000 481,000 Taxes Receivable ...... 1,206,469 1,157,495 1,217,174 1,243,695 1,222,538 Interfund Receivable ...... 0 0 47,562 Intergovernmental Receivable ...... 287,305 571,632 821,023 984,835 849,959 Other Receivables ...... 400,824 23,435 23,229 100,531 117,669 Inventories ...... 26,479 10,000 10,000 10,000 10,000 Prepaid expenses/expenditures ...... 178,809 142,740 136,811 222,440 0 TOTAL ASSETS ...... $9,612,440 $11,613,662 $13,356,602 $14,590,372 $11,666,379

LIABILI TIES Interfund Payables ...... $0 $35,763 $15,282 $259,029 Accounts Payable ...... 125,243 544,798 795,291 1,201,256 837,501 Accrued Salaries and Benefits ...... 1,699,479 1,505,161 1,545,443 1,402,754 1,555,721 Payroll Deductions and Withholdings .... 0 29,159 28,672 186,272 77,663 Deferred Revenues ...... 940,826 0 0 0 186,057 TOTAL LIABILITIES ...... $2,765,548 $2,114,881 $2,369,406 $2,805,564 $2,915,971

Deferred Inflows of Resources ...... $0 $756,299 $715,402 $768,139 $740,597

FUND EQUITIES Nonspendable Fund Balance ...... $26,479 $152,740 $146,811 $232,440 $10,000 Restricted Fund Balance ...... 0 0 $100,000 $200,000 200,000 Committed Fund Balance ...... 3,361,329 0 0 0 0 Unassigned Fund Balance ...... 3,459,084 8,589,742 10,024,983 10,584,229 7,799,811 TOTAL FUND EQUITIES ...... $6,846,892 $8,742,482 $10,271,794 $11,016,669 $8,009,811

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND EQUITIES ...... $9,612,440 $11,613,662 $13,356,602 $14,590,372 $11,666,379

Source: School District Annual Financial Reports.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

TABLE 4 WESTMONT HILLTOP SCHOOL DISTRICT GENERAL FUND SUMMARY OF CHANGES IN FUND BALANCE* (Years Ending June 30)

Actual Budget

2013 2014 2015 2016 2017 2018(1) Beginning Fund Balance ...... $5,715,026 $6,843,109 $8,628,179 $10,271,794 $11,016,669 $8,009,810 Revenues over (under) Expenditure ...... 1,129,338 1,781,287 1,529,312 794,769 (3,006,859) 105,797 Other ...... (1,255) 3,783 114,303 (49,894) 0 0 Ending Fund Balance ...... $6,843,109 $8,628,179 $10,271,794 $11,016,669 $8,009,810 $8,115,607

*Totals may not add due to rounding. (1)Budget, as adopted June 26, 2017. Source: School District Annual Financial Reports and Budget.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

Revenue

The School District received $21,822,674 in revenue in 2016-17 and has budgeted revenue of $21,195,967 in 2017-18. Revenue from local sources has decreased as a share of total revenue in the past five years, 66.7 percent in 2012-13 to 62.4 percent in 2016-17. Revenue from State sources increased as a share of the total revenue from 31.7 percent to 35.0 percent over this period. Revenue from Federal and other sources increased as a share of the total revenue from 1.5 percent to 2.6 percent over this period.

TABLE 5 WESTMONT HILLTOP SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES* (For years ending June 30)

REVENUES: Actual Budget Local Sources: 2013 2014 2015 2016 2017 2018(1) Real Estate Taxes ...... $10,933,945 $10,929,160 $10,945,134 $10,816,911 $10,888,448 $10,937,159 Interim Real Estate Taxes ...... 3,246 8,878 3,783 0 Total Act 511 Taxes ...... 1,814,401 1,881,296 1,773,418 1,824,191 1,789,478 1,781,000 Per Capita (Sec. 679) Taxes ...... 31,485 32,036 31,492 25,457 0 26,000 Public Utility Realty Tax ...... 17,752 0 16,863 15,586 14,926 15,587 Delinquency on Taxes Levied ...... 536,711 524,800 535,574 471,676 407,433 452,000 Earnings from Investments...... 6,449 81,185 129,299 132,723 150,569 92,500 Revenue from Student Activities ...... 22,092 25,454 19,296 25,063 19,289 25,063 Federal Revenue Rec.'d from Other Interim. Sources ...... 190,778 230,958 155,758 150,692 205,509 172,463 Rentals ...... 5,518 7,418 6,588 5,943 7,740 5,945 Contributions and Donations from Private sources 6,100 42,229 64,216 50,084 17,850 50,084 Tuition from Patrons ...... 5,675 22,812 9,250 10,887 0 25,886 State Rev. - Intermediary Sources ...... 0 0 0 0 0 0 Receipts from Other LEAS in PA – Education ..... 19,056 0 0 38,140 79,651 0 Refunds of Prior Years' Expenditures ...... 0 0 0 0 31,950 0 Other Sources ...... 18,980 27,241 10,486 19,751 3,532 35,000 Total Local Sources ...... $13,612,185 $13,813,466 $13,701,156 $13,587,104 $13,616,373 $13,618,687 State Sources: Basic Instructional Subsidy ...... $3,743,804 $3,832,863 $3,833,534 $3,898,915 $3,984,432 $3,833,813 Rentals and Sinking Fund Payments ...... 169,665 167,418 91,551 0 181,400 0 Transportation ...... 444,887 469,321 351,002 413,278 364,597 365,000 Special Education for School Aged Children ...... 779,960 779,960 789,895 805,798 814,954 811,841 Driver Education ...... 2,345 0 0 0 0 0 Revenue for Retirement ...... 581,331 769,937 940,861 1,131,354 1,355,817 1,393,590 Revenue for Social Security ...... 349,941 342,000 323,179 292,856 389,567 316,899 Health Services ...... 40,682 39,272 37,891 36,134 31,404 36,000 State Property Tax Reduction Allocation ...... 308,521 308,571 308,572 309,945 308,572 309,290 PA Accountability Grant ...... 48,681 48,681 132,136 177,493 177,493 170,000 Other Sources ...... 0 0 0 0 27,376 0 Total State Sources ...... $6,469,817 $6,758,023 $6,808,620 $7,065,772 $7,635,610 $7,236,433 Federal Sources: Total Federal Sources ...... $311,149 $395,505 $386,301 $829,177 $554,671 $340,847 Other Sources: Total Other Sources ...... $0 $0 $346,335 $14,878 $16,020 $0 TOTAL REVENUES ...... $20,393,151 $20,966,994 $21,242,413 $21,496,930 $21,822,674 $21,195,967

(1)Budget, as adopted June 26, 2017. Source: School District Annual Financial Reports and Budget.

TABLE 5 WESTMONT HILLTOP SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES* (Continued) (For years ending June 30)

Actual Budget 2013 2014 2015 2016 2017 2018(1) EXPENDITURES: Instruction ...... $11,707,176 $11,224,881 $11,579,772 $12,898,397 $12,002,070 $12,382,400 Pupil Personnel ...... 519,050 627,588 1,044,342 1,148,834 1,139,517 986,995 Instructional Staff ...... 847,223 460,981 170,471 231,382 316,016 242,134 Administration ...... 868,805 967,679 1,124,378 1,009,410 943,655 1,401,195 Pupil Health ...... 264,481 336,557 319,249 286,754 392,195 428,680 Business ...... 247,905 250,797 160,142 105,537 317,648 323,034 Operation and Maintenance ...... 1,794,688 1,927,894 1,561,954 1,541,755 1,454,241 1,581,334 Student Transportation...... 749,189 768,534 834,696 850,317 867,013 875,000 Central ...... 217,171 611,179 830,966 678,371 535,017 492,002 Other Support Services ...... 5,993 5,865 7,653 8,032 6,458 Operation of Noninstructional Services 592,579 547,001 494,736 681,927 580,372 664,896 Facilities, Acquisition, Constr. & Improv...... 471,534 477,034 667,647 858,227 3,908,258 15,000 Debt Service...... 0 978,522 917,096 403,219 778,862 1,697,500 Fund Transfers ...... 978,019 0 0 0 1,588,211 0 Refund of Prior Year Receipts ...... 0 1,195 0 0 0 0 Budgetary Reserve ...... 0 0 0 0 0 50,000 TOTAL EXPENDITURES ...... $19,263,813 $19,185,707 $19,713,101 $20,702,162 $24,829,533 $21,090,170

SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES $1,129,338 $1,781,287 $1,529,312 $794,769 ($3,006,859) $105,797

*Totals may not add due to rounding. (1)Budget, as adopted June 26, 2017. Source: School District Annual Financial Reports and Budget.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

TAXING POWERS OF THE SCHOOL DISTRICT

Subject to certain limitations imposed by the Taxpayer Relief Act (described below), the School District is empowered by the School Code and other statutes to levy the following taxes:

1. A basic annual tax on all real property taxable for school purposes, not to exceed 25 mills on each dollar of assessed valuation, to be used for general school purposes.

2. An unlimited ad valorem tax on the property taxable for school purposes to provide funds:

a. for minimum salaries and increments of the teaching and supervisory staff;

b. to pay rentals due any municipality authority or non-profit corporation or due the State Public School Building Authority;

c. to pay interest and principal on any indebtedness incurred pursuant to the Local Government Unit Debt Act, or any prior or subsequent act governing the incurrence of indebtedness of the school district; and

d. to pay for the amortization of a bond or note issue which provided a school building prior to the first Monday of July, 1959.

3. An annual per capita tax on each resident or inhabitant over 18 years of age of not less than $1.00 and not more than $10.00.

4. Additional taxes subject to division with other political subdivisions authorized to levy similar taxes on the same person, subject, business, transaction or privilege, under Act No. 511, enacted December 31, 1965, as amended (“The Local Tax Enabling Act”). These taxes, which may include, among others, an additional per capita tax, a wage and other earned income tax, a real estate transfer tax, a gross receipts tax, a local services tax and an occupation tax, shall not exceed, in the aggregate, an amount equal to the product of the market valuation of real estate in the School District (as certified by the State Tax Equalization Board of the Commonwealth – “STEB”) multiplied by twelve mills. All local taxing authorities are required by the Local Tax Enabling Act to exempt disabled veterans and members of the armed forces reserve who are called to active duty at any time during the tax year from any local services tax and to exempt from any local services tax levied at a rate in excess of $10 those persons whose total income and net profits from all sources within the political subdivision is less than $12,000 for the tax year. The Local Tax Enabling Act also authorizes, but does not require, taxing authorities to exempt from per capita, occupation, and earned income taxes and any local services tax levied at a rate of $10 or less per year, any person whose total income from all sources is less than $12,000 per year.

Limitations on Local Taxes

Under the Taxpayer Tax Relief Act a school district may not levy any new tax for the support of the public schools or increase the rate of any tax for school purposes by more than the Index (defined below), unless in each case either (a) such increase is approved by the voters in the school district at a public referendum or (b) one of the exceptions summarized below is applicable and the use of such exception is approved by the Pennsylvania Department of Education (PDE):

1. to pay interest and principal on indebtedness originally incurred (i) prior to September 4, 2004, in the case of a school district which had elected to become subject to the provisions of the prior Homeowner Tax Relief Act, Act 72 of 2004, or (ii) prior to June 27, 2006, in the case of a school district which had not elected to become subject to Act 72 of 2004; to pay interest and principal on any indebtedness approved by the voters at referendum (electoral debt); and to pay interest and principal on debt refunding or refinancing debt for which one of the above exceptions is permitted, as long as the refunding or refinancing incurs no additional debt other than for costs and expenses related to the refunding or refinancing and the funding of appropriate debt service reserves; 2. to pay costs incurred in providing special education programs and services to students with disabilities, under specified circumstances; and 3. to make payments into the State Public School Employees’ Retirement System when the increase in the estimated payments between the current year and the upcoming year is greater than the Index, as determined by PDE in accordance with the provisions of Act 1.

Any revenue derived from an increase in the rate of any tax allowed under the exception numbered 1 above may not exceed the anticipated dollar amount of the expenditure, and any revenue derived from an increase in the rate of any tax allowed pursuant to any other exception enumerated above may not exceed the rate increase required, as determined by PDE. If a school district’s petition or request to increase taxes by more than the Index pursuant to one or more of the allowable exceptions is not approved, the school district may submit the proposed tax increase to a referendum.

The Index (to be determined and reported by PDE by September of each year for application to the following fiscal year) is the average of the percentage increase in the statewide average weekly wage, as determined by the State Department of Labor and Industry for the preceding calendar year, and the employment cost index for elementary and secondary schools, as reported by the federal Bureau of Labor Statistics for the preceding 12-month period beginning July 1 and ending June 30. If and when a school district has a Market Value/Income Aid Ratio greater than 0.40 for the prior school year, however, the Index is adjusted upward by multiplying the unadjusted Index by the sum of 0.75 and such Aid Ratio.

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

Fiscal Year Index 2014-15 2.6% 2015-16 2.4% 2016-17 3.0% 2017-18 3.2% 2018-19 3.1%

In accordance with Act 1, the School District placed a referendum question on the May, 15, 2007, primary election ballot seeking voter approval to levy (or increase the rate of) the earned income and net profits tax (“EIT”) or a new personal income tax (“PIT”) and use the proceeds to reduce local real estate taxes by a homestead and farmstead exclusion. The referendum was NOT approved by the voters.

A board of school directors may submit, but is not required to submit, a referendum question to the voters at the municipal election seeking approval to levy or increase the rate of an EIT or impose PIT for the purpose of funding homestead and farmstead exclusions, but the proposed rate of the EIT or PIT shall not exceed the rate that is required to provide the maximum homestead and farmstead exclusions allowable under law.

The information set forth above is a summary of the Taxpayer Relief Act. This summary is not intended to be an exhaustive discussion of the provisions of the Taxpayer Relief Act nor a legal interpretation of any provision of the Taxpayer Relief Act and a prospective purchaser of the Bonds should review the full text of the Taxpayer Relief Act as a part of any decision to purchase the Bonds.

Status of the Bonds Under Act 1

No exceptions to the Act 1 taxing limits are expected to apply to the Bonds. The School District, however, has included sufficient new millage in its current year budget to cover the full amount of the debt service on the Bonds without exceeding the Act 1 Index (although the actual tax increase may have exceeded the Index as a result of the application of other approved (non- debt related) exceptions to the Index).

Act 130 of 2008

Act 130 of 2008 of the Commonwealth amended the Local Tax Enabling Act so as to authorize school districts levying an occupation tax to replace that occupation tax with an increased earned income tax or, if the school district has implemented a personal income tax in accordance with the Taxpayer Relief Act, an increased personal income tax, in a revenue neutral manner. To so replace an occupation tax, the board of school directors must first hold at least one public hearing on the matter and then place a binding referendum question on the ballot at a general or municipal election for approval by the voters.

The School District has not scheduled a public hearing or taken other action to conduct a referendum under the Local Tax Enabling Act, as amended by Act 130 of 2008.

Act 48 of 2003

Pennsylvania Act No. 2003-48 (enacted December 23, 2003) prohibits a school district from increasing real property taxes for the school year 2005-2006 or any subsequent school year, unless the school district has adopted a budget for such school year that includes an estimated ending unassigned fund balance which is not more than a specified percentage of the total budgeted expenditures, as set forth below:

Estimated Ending Unassigned Fund Balance Total Budgeted Expenditures* as a Percentage of Total Budgeted Expenditures Less than or equal to $11,999,999 12.0% Between $12,000,000 and $12,999,999 11.5% Between $13,000,000 and $13,999,999 11.0% Between $14,000,000 and $14,999,999 10.5% Between $15,000,000 and $15,999,999 10.0% Between $16,000,000 and $16,999,999 9.5% Between $17,000,000 and $17,999,999 9.0% Between $18,000,000 and $18,999,999 8.5% Greater than or equal to $19,000,000 8.0%

“Estimated ending unreserved fund balance” is defined in Act 2003-48 as that portion of the fund balance which is appropriable for expenditure or not legally or otherwise segregated for a specific or tentative future use, projected for the close of the school year for which a school district’s budget was adopted and held in the general fund accounts of the school district.

Tax Levy Trends

Table 6 shows the recent trend of tax rates levied by the School District. Table 7 shows the comparative trend of real property tax rates for the School District, the boroughs and the township that comprise the School District and Cambria County.

TABLE 6 WESTMONT HILLTOP SCHOOL DISTRICT TAX RATES

Real Estate Wage and Real Estate Per Capita (1) Transfer Income (mills) ($) (%) (%) 2013 -14 ...... 86.20 10.00 0.50 0.50 2014-15 ...... 86.20 10.00 0.50 0.50 2015-16 ...... 85.20 10.00 0.50 0.50 2016-17 ...... 85.20 10.00 0.50 0.50 2017-18 ...... 86.20 10.00 0.50 0.50 (1) Includes School Code and Act 511 taxes. Source: School District officials.

TABLE 7 WESTMONT HILLTOP SCHOOL DISTRICT COMPARATIVE REAL PROPERTY TAX RATES (Mills on Assessed Value)

2013-14 2014-15 2015-16 2016-17 2017-18 School District...... 86.20 86.20 85.20 85.20 86.20

2014 2015 2016 2017 2018 Southmont Borough...... 13.00 13.00 13.00 13.00 13.00 Upper Yoder Township ...... 12.63 12.63 12.63 12.63 12.63 Westmont Borough ...... 21.00 21.00 21.00 21.00 21.00 Cambria County ...... 29.50 29.50 34.50 34.00 34.00 Source: Department of Community and Economic Development- Municipal Statistics.

Real Property Tax

The real property tax (excluding delinquent collections) produced $10,888,448, approximately 49.9 percent of total revenue. The tax is levied on July 1 of each year. The tax bills are dated July 15 and taxpayers who remit within 60 days receive a 2 percent discount, and those who remit subsequent to 120 days after October 1 are assessed a 10 percent penalty.

The following tables summarize recent trends of assessed and market valuations of real property and real property tax collection data. The last countywide assessment in Cambria County was in 1972.

TABLE 8 WESTMONT HILLTOP SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA

Market Assessed Year Value Value Ratio

2012 -13 ...... $570,539,387 $137,735,990 24.14% 2013-14 ...... 569,925,781 137,529,750 24.13% 2014-15 ...... 570,631,245 137,667,770 24.13% 2015-16 ...... 570,640,141 137,663,370 24.12% 2016-17 ...... 570,810,961 138,567,030 24.28% Compound Average Annual Percentage Change 0.01% 0.12%

Source: Pennsylvania State Tax Equalization Board.

TABLE 9 WESTMONT HILLTOP SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2015 2015 2016 2016 Market Assessed Market Assessed Value Value Value Value School District $570,640,141 $137,663,370 $570,810,961 $138,567,030 Southmont Borough 91,848,531 22,199,010 89,871,022 22,296,240 Upper Yoder Township 223,025,100 54,126,700 228,274,473 54,887,880 Westmont Borough 255,766,510 61,337,660 252,665,466 61,382,910 Cambria County 5,077,240,321 1,276,906,450 5,228,834,475 1,260,830,880 Source: Pennsylvania State Tax Equalization Board.

TABLE 10 WESTMONT HILLTOP SCHOOL DISTRICT ASSESSMENT BY LAND USE

2012 2013 2014 2015 2016 Residential $121,465,010 $121,431,800 $121,614,650 $121,656,580 $121,583,890 Trailers $316,280 $313,860 $309,060 $299,360 $294,230 Lots 235,090 229,350 233,790 222,970 257,080 Commercial 12,072,730 11,905,480 11,859,060 11,837,210 12,716,920 Agriculture 3,515,070 3,513,250 3,515,200 3,511,240 3,582,620 Land 7,150 11,350 11,350 11,350 7,630 Mineral 124,660 124,660 124,660 124,660 124,660 Total $137,735,990 $137,529,750 $137,667,770 $137,663,370 $138,567,030

Source: Pennsylvania State Tax Equalization Board.

TABLE 11 WESTMONT HILLTOP SCHOOL DISTRICT REAL PROPERTY TAX COLLECTION DATA

Current Year Total Collections Collections Current as Percent Total as Percent Total Year of Total Current of Total Adjusted Collections Adjusted Plus Adjusted Year Flat Billing(1) Millage July-June Flat Billing Delinquent Flat Billing 2012-13 $11,872,842 86.2 $10,933,944 92.09% $11,473,656 96.64% 2013-14 11,855,064 86.2 10,938,040 92.26% 11,458,535 96.66% 2014-15 11,867,824 86.2 10,945,133 92.23% 11,366,133 95.77% 2015-16 11,729,003 85.2 10,816,911 92.22% 11,237,911 95.81% 2016-17 11,850,404 86.2 10,888,448 91.88% 11,314,544 95.48% (1)Plus penalties, less discounts and exonerations. Source: School District Financial Reports.

The ten largest real property taxpayers, together with 2017-18 assessed values, are shown in Table 12. The aggregate assessed value of these ten taxpayers totals approximately 5.5 percent of total assessed value.

TABLE 12 WESTMONT HILLTOP SCHOOL DISTRICT TEN LARGEST REAL PROPERTY TAXPAYERS, 2017-18

2017-18 Assessed Owner Property Value Laurelwood Associates Convalescent Home $1,481,481 Kastelic, Richard & Suzanne Medical Offices 1,195,670 Sunnehanna Country Club Country Club 933,220 Westmont Woods Convalescent Home 841,550 Carriage Hills Company Apartment Complex 801,290 Gillen Family Trust Super Market 739,520 WJAC, Inc. Television Station 488,700 A L C Convalescent Home 453,530 Conemaugh Housing Convalescent Home 394,380 Hawkeye Associates Medical Offices 345,040 Total $7,674,381

Source: School District officials.

Other Taxes

Under Act 511, the School District produced $1,789,478 in other taxes for 2016-17. Among the taxes authorized by Act 511, the Real Estate Transfer Tax, Wage and Other Earned Income Tax (including net profits) and Per Capita Tax are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property, was $7,420,542.

Real Estate Transfer. The School District collects a tax of 0.5 percent of the value of real estate transfers. In 2016-17 the School District’s portion of this tax yielded $98,587, or less than one percent of total revenue.

Wage and Other Earned Income Tax (including net profits). The School District levies a tax of 0.5 percent of the earned income and net profits of residents. In 2016-17 the School District’s portion of this tax yielded $1,619,384, or 7.4 percent of total revenue.

Per Capita Taxes. A tax of $10.00 ($5.00 under Act 511 and $5.00 under the Public School Code) is levied on each resident over 18 years old. In 2017-18 the School District’s portion of this tax should yield approximately $60,320, or less than one percent of total revenue.

COMMONWEALTH AID TO SCHOOL DISTRICTS

General

Pennsylvania school districts receive financial assistance from the Commonwealth in a number of forms, all subject to statutory provisions and annual appropriation by the Pennsylvania General Assembly.

The largest subsidy, the basic instructional subsidy, is allocated to all school districts based on (1) the per pupil market value of assessable real property in the school district; (2) the per pupil earned income in the school district; and (3) the school district's tax effort, as compared with the tax effort of other school districts in the Commonwealth. School districts also receive subsidies for special education, pupil transportation; vocational education, health service and debt service are also received by the school district.

Current Lack of State Appropriations for Debt Service Subsidies

Commonwealth law presently provides that the School District will receive, subject to state legislative appropriation, reimbursement from the Commonwealth for a portion of debt service paid on certain approved indebtedness following final approval by PDE. Commonwealth reimbursement is calculated based on the “Reimbursable Percentage” assigned to the approved indebtedness by the PDE and the School District's permanent Capital Account Reimbursement Fraction (“CARF”) (24.98%) or the wealth based Market Value Aid Ratio (“MVAR”) currently (60.98%), whichever is higher. The Reimbursable Percentage is determined through a process known as the “Planning and Construction Workbook” or “PlanCon”.

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

In May of 2016, the Commonwealth enacted appropriation legislation known as Act 25 (“Act 25”), which contains authorization for the Commonwealth Finance Authority (“CFA”) to issue up to $2.5 billion of debt to fund PlanCon reimbursements to school districts. Act 25 also instituted a moratorium on new projects entering the PlanCon process while an advisory committee established under Act 25 considers amendments to the PlanCon reimbursement program. This new moratorium went into effect on May 15, 2016 and expired on June 30, 2017. On November 6, 2017, House Bill 178 became law without the signature of the Governor and became known as Act 55 of 2017. Contained in Act 55 of 2017 was an extension of the PlanCon moratorium through the end of the 2017-18 fiscal year.

To date, the CFA has issued $1,170,705,000, to provide for PlanCon reimbursements owed to school districts, including the issuance of its Revenue Bonds, Series A of 2016 (Federally Taxable) in the principal amount of $758,185,000 issued on October 31, 2016, as well as its Revenue Bonds, Series A of 2018 (Federally Taxable) in the total amount of $412,520,000 issued on January 18, 2018. It is expected that proceeds of these issues have been and will continue to be used to provide PlanCon reimbursement that is owed to the School District for past and current fiscal years. However, the School District cannot be certain that any future PlanCon reimbursement will be received by PDE as the ability for CFA to issue additional bonds in the future to fund future PlanCon reimbursements owed to school districts may impact the availability of PlanCon reimbursements payable to the School District. Any failure by the Commonwealth to adopt a timely budget and enact necessary spending authorizations could have a material adverse effect upon the School District’s anticipated receipt of PlanCon reimbursements.

There can be no assurances that the School District will be able to successfully apply for, be awarded, and receive sufficient PlanCon reimbursement for the costs of any current or future projects of the School District. A failure by the School District to receive such reimbursement could force the School District to apply other available funds, if any, toward the completion costs of the Project and may have a material adverse effect on the financial resources of the School District to fund other obligations, including payment of debt service on the Bonds.

Legislation has been introduced from time to time in the Pennsylvania legislature containing language that would revise or even abolish the debt service reimbursement program for Pennsylvania school districts. As of the date hereof, and except as described above, none of these proposals have been signed into law. To the extent that any future legislation contains material changes to the PlanCon program as it is structured currently, the amount of PlanCon reimbursement to the School District may be positively or negatively affected, which could materially impact the amount of local funds needed to be raised by the School District to pay debt service on its debt obligations.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

DEBT AND DEBT LIMITS

Debt Statement

Table 13 which follows shows the debt of the Westmont Hilltop School District as of April 19, 2018, including the issuance of the Bonds.

TABLE 13 WESTMONT HILLTOP SCHOOL DISTRICT DEBT STATEMENT (As of April 19, 2018)*

Gross Outstanding NONELECTORAL DEBT General Obligation Bonds, Series of 2018 (last maturity 2046) ...... $2,500,000 General Obligation Bonds, Series of 2017 (last maturity 2046) ...... 9,970,000 General Obligation Bonds, Series of 2016 (last maturity 2044) ...... 9,475,000 General Obligation Bonds, Series of 2014 (last maturity 2033) ...... 8,495,000 TOTAL NONELECTORAL DEBT ...... $30,440,000

LEASE RENTAL TOTAL LEASE RENTAL ...... 0

TOTAL PRINCIPAL OF DIRECT DEBT ...... $30,440,000

*Includes the Bonds offered through this Official Statement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

Table 14 presents the overlapping indebtedness and debt ratios of the School District. After issuance of the Bonds, the principal of direct debt of the School District will total $30,440,000. After adjustment for available funds and estimated State aid, the local effort of direct debt will total $30,440,000.

TABLE 14

WESTMONT HILLTOP SCHOOL DISTRICT BONDED INDEBTEDNESS AND DEBT RATIOS (As of April 19, 2018)*

Local Effort or Net of Available Funds Gross and Estimated Outstanding State Aid(1) DIRECT DEBT Nonelectoral Debt ...... $30,440,000 $30,440,000 Lease Rental Debt ...... 0 0 TOTAL DIRECT DEBT ...... $30,440,000 $30,440,000

OVERLAPPING DEBT Cambria County, General Obligation(2) ...... $5,907,146 $5,907,146 Municipal Debt ...... 31,187,029 31,187,029 TOTAL OVERLAPPING DEBT ...... $37,094,175 $37,094,175

TOTAL DIRECT AND OVERLAPPING DEBT ...... $67,534,175 $67,534,175

DEBT RATIOS Per Capita ...... $5,229.53 $5,229.53 2016-17 Percent Assessed Value ...... 48.74% 48.74% 2016-17 Percent Market Value ...... 11.83% 11.83%

*Includes the Bonds offered through this Official Statement. (1)Gives effect to current appropriations for payment of debt service and expected future State Reimbursement of School District sinking fund payments based on current CARF. See “COMMONWEALTH AID TO SCHOOL DISTRICTS”. The School District may, at any time, claim a credit against the gross principal of debt outstanding equal to the amount. (2)Pro rata 10.92 percent share of $54,111,594 of principal outstanding.

Debt Limit and Remaining Borrowing Capacity

The statutory borrowing limit of the School District under the Act is computed as a percentage of the School District's “Borrowing Base”. The “Borrowing Base” is defined as the annual arithmetic average of “Total Revenues” (as defined by the Act), for the three full fiscal years ended next preceding the date of incurring debt. The School District calculates its present borrowing base and borrowing capacity as follows:

Total Revenues for 2014-15 $ 20,804,527 Total Revenues for 2015-16 21,482,052 Total Revenues for 2016-17 21,625,255

Total Revenues, Past Three Years $ 63,911,834

Annual Arithmetic Average (Borrowing Base) $ 21,303,945

Under the Act as presently in effect, no school district shall incur any nonelectoral debt or lease rental debt, if the aggregate net principal amount of such new debt together with any other net nonelectoral debt and lease rental debt then outstanding, would cause the net nonelectoral debt plus net lease rental debt to exceed 225% of the Borrowing Base. The application of the aforesaid percentage to the School District's Borrowing Base produces the following product:

Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $47,933,875 $30,440,000 $17,493,875

*Includes the Bonds offered through this Official Statement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

Debt Service Requirements

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

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

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

TABLE 15 WESTMONT HILLTOP SCHOOL DISTRICT DEBT SERVICE REQUIREMENTS*

Other Outstanding General Obligation Series of Debt 2018 Total Year Principal Interest Subtotal Requirements 2017-18 $1,220,240 $0 $0 $0 $1,220,240 2018-19 1,456,456 0 76,344 76,344 1,532,800 2019-20 1,457,706 50,000 88,274 138,274 1,595,980 2020-21 1,455,931 55,000 85,649 140,649 1,596,580 2021-22 1,458,656 60,000 82,774 142,774 1,601,430 2022-23 1,455,819 60,000 79,774 139,774 1,595,592 2023-24 1,458,601 65,000 76,649 141,649 1,600,249 2024-25 1,457,094 65,000 74,049 139,049 1,596,142 2025-26 1,454,787 65,000 72,099 137,099 1,591,886 2026-27 1,456,098 70,000 70,074 140,074 1,596,172 2027-28 1,459,438 70,000 67,974 137,974 1,597,412 2028-29 1,455,258 75,000 65,799 140,799 1,596,057 2029-30 1,455,403 75,000 63,549 138,549 1,593,952 2030-31 1,454,798 80,000 61,184 141,184 1,595,982 2031-32 1,457,615 80,000 58,664 138,664 1,596,279 2032-33 1,458,755 85,000 56,003 141,003 1,599,758 2033-34 1,458,929 85,000 53,240 138,240 1,597,169 2034-35 1,455,060 90,000 50,374 140,374 1,595,434 2035-36 1,457,213 90,000 47,370 137,370 1,594,583 2036-37 1,458,518 95,000 44,236 139,236 1,597,754 2037-38 1,457,835 100,000 40,871 140,871 1,598,706 2038-39 1,454,663 105,000 37,284 142,284 1,596,946 2039-40 1,459,863 105,000 33,583 138,583 1,598,445 2040-41 1,458,730 110,000 29,725 139,725 1,598,455 2041-42 1,456,250 115,000 25,647 140,647 1,596,897 2042-43 1,457,413 120,000 21,388 141,388 1,598,800 2043-44 1,457,313 125,000 16,947 141,947 1,599,259 2044-45 1,455,853 130,000 12,325 142,325 1,598,178 2045-46 1,455,260 135,000 7,522 142,522 1,597,782 2046-47 1,455,383 140,000 2,538 142,538 1,597,920 Total $43,470,933 $2,500,000 $1,501,903 $4,001,903 $47,472,836

*Totals may not add due to rounding.

TABLE 16 WESTMONT HILLTOP SCHOOL DISTRICT COVERAGE OF DEBT SERVICE AND LEASE RENTAL REQUIREMENTS BY STATE AID*

2016-17 State Aid Received ...... $7,635,610 2016-17 Debt Service Requirements ...... $778,862 Maximum Future Debt Service Requirements after Issuance of Bonds ...... $1,601,430 Coverage of 2016-17 Debt Service Requirements ...... 9.80 times Coverage of Maximum Future Debt Service Requirements after Issuance of Bonds .. 4.77 times *Assumes current State Aid Ratio. See “COMMONWEALTH AID TO SCHOOL DISTRICTS.”

Future Financing

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

LABOR RELATIONS

School District Employees

There are presently 153 permanent employees of the School District, including 105 teachers, 10 administrators, and 38 support personnel, including secretaries, maintenance staff, and teacher aides.

The School District's teachers are represented by the Westmont Hilltop Education Association an affiliate of the Pennsylvania State Education Association (PSEA), under a contract with the School District, which expires on June 30, 2022.

Pension Program

School Districts in Pennsylvania are required to participate in a statewide pension program administered by the Public School Employees Retirement System (PSERS). All of the School District's full-time employees, part-time employees who work more than 80 days in a school year, and hourly employees who work over 500 hours a year participate in the program. However, please note a Pennsylvania Supreme Court decision(1) has removed the hourly de minimis requirement for current members of PSERS regarding the purchase of credit for their part-time school service rendered prior to their being members of PSERS, for purposes of increasing their pension benefits.

Beginning July 1, 1976, certain revisions were made in the pension program. The Retirement Board, previously under the Department of Education of the Commonwealth, became an independent agency. However, the program is still guaranteed by the Commonwealth. Currently, each party to the program contributes a fixed percentage of the employee's salary. Employees belonging to the Public School Employees Retirement System (“PSERS”) prior to July 22, 1983 contribute 5.25% of their salary, and employees who joined the PSERS on or after July 22, 1983 contribute 6.25% of their salary. On February 17, 2002, Governor Ridge signed Act 9 which created a new membership class that sets the employee contribution rate at 7.50% of the employee’s salary for those employees hired on or after July 1, 2001. Act 9 also provides an option for those employees hired prior to July 1, 2001 to elect a contribution rate of 6.50%, if they were hired before July 22, 1983, or 7.50% if they were hired on or after July 22, 1983. Act 120 of 2010 (“Act 120”) was passed by the General Assembly on September 1 and signed by Governor Rendell on November 23, 2010. The benefit reductions contained in this legislation, only impacts individuals who become new members of PSERS on or after July 1, 2011. New members have the option of selecting one of 2 new classes. The members selecting class T-E contribute a base rate of 7.5% with “shared risk” contribution levels between 7.5% and 9.5% and a pension multiplier of 2.0%. Members selecting class T-F contribute a base rate of 10.3% with shared risk contribution levels between 10.3% and 12.3% and a pension multiplier of 2.5%.

The PSERS Board of Trustees certified an annual employer contribution rate of 30.03% for fiscal year 2016-17, which commenced on July 1, 2016. The 30.03% employer contribution rate was composed of 0.83% for health insurance premium assistance and a pension rate of 29.20%. On December 7, 2016 the Board of Trustees certified an annual employer contribution rate of 32.57% for fiscal year 2017-18, which begins July 1, 2017.

The School District and the Commonwealth are responsible for paying a portion of the employer’s share. School entities are initially responsible for paying 100% of the employer share of contributions to PSERS. The Commonwealth reimburses the employer for a minimum of one-half of the payment made on behalf of employees. The School District contributions are made on a quarterly basis and employee contributions are deducted from each eligible employee paycheck and remitted quarterly. Annual School District contributions have been as follows:

2012-13 $994,156 2013-14 $1,517,614 2014-15 $2,131,544 2015-16 $2,457,761 2016-17 $2,613,930 2017-18 (budgeted) $2,927,158

PSERS is also funded through investment earnings and mandatory member contributions. PSERS members contribute from 5.25% to 10.30% of pay depending on their membership class and when they joined PSERS. Members will contribute an average of 7.54% of their salary to fund their retirement benefit in fiscal year 2017-18. Member contributions of approximately $1 billion are expected in fiscal year 2017-18.

In June 2012, the Government Accounting Standards Board (“GASB”) issued “Statement No. 68 Accounting and Financial Reporting for Pensions – An Amendment of GASB Statement No 27.” The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. The accounting standard requires the School District to report in its government-wide financial statements its proportionate share of the new pension liability of the pension systems to which it contributes. GASB 68 is effective for fiscal years beginning after June 15, 2014, which, in the case of the School District began with fiscal year ending June 30, 2015. Please see the School District’s Audited Financial Statements for fiscal year ending June 30, 2017 in Appendix D for the net effects of the implementation of GASB 68.

(1)Pennsylvania Sch. Boards Ass'n, Inc. v. Com., Pub. Sch. Employees' Ret. Bd., 580 Pa. 610, 612, 863 A.2d 432, 434 (2004). Source: Pennsylvania School Board Association at www.PSBA.org and PSERS at www.PSERS.state.pa.us

Other Post-Employment Benefits

The School District is obligated under collective bargaining agreements to provide in the future health insurance coverage for current and future retired employees, and to provide retirement severance pay for existing employees. The School District has become subject to the requirements of GASB Statements No. 43 and 45 commencing with the School District’s annual financial statements for the fiscal year ending June 30, 2010. For a full description of the School District’s other post-employment benefits, please refer to Appendix C – Audited Financial Statements – Note 11 herein.

LITIGATION

At the time of settlement, the School Board and the Solicitor will deliver a certificate stating that there is no litigation pending with respect to the Bonds, the Resolution or the right of the School District to issue the Bonds.

DEFAULTS AND REMEDIES

In the event of failure of the School District to pay or cause to be paid the interest on or principal of the Bonds, as the same becomes due and payable, the holders of the Bonds shall be entitled to certain remedies provided by the Act. Among the remedies, if the failure to pay shall continue for 30 days, holders of the Bonds shall have the right to recover the amount due by bringing an action in assumpsit in the Court of Common Pleas of the county in which the School District is located. The Act provides any judgment shall have an appropriate priority upon the funds next coming into the treasury of the School District. The Act also provides that upon a default of at least 30 days, holders of at least 25 percent of the Bonds may appoint a trustee to represent them. The Act provides certain other remedies in the event of default, and further qualifies the remedies hereinbefore described.

TAX MATTERS

State Tax Matters

In the opinion of Bond Counsel, the Bonds, and the interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania.

The residence of a holder of a Bond in a state other than Pennsylvania, or being subject to tax in a state other than Pennsylvania, may result in income or other tax liabilities being imposed by such other state or its political subdivisions based on the interest or other income from the Bonds.

Federal Income Tax Matters

In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds (including, in the case of Bonds sold at an original issue discount, the difference between the initial offering price and par) is excluded from gross income for Federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under Section 57 of the Internal Revenue Code of 1986, as amended (the “Code”) for purposes of Federal individual or corporate alternative minimum taxes.

Original Issue Discount

The Bonds that mature on October 1, 2033 through and including October 1, 2036, October 1, 2038, October 1, 2039 and October 1, 2041 through and including October 1, 2046 (collectively, the "Tax-Exempt Discount Bonds") are being offered and sold to the public at an original issue discount ("OID") from the amounts payable at their maturity. OID is the excess of the stated redemption price of a bond at maturity (par) over the price to the public at which a substantial amount of bonds of the same maturity are sold pursuant to the initial offering. Under the Code, OID on each Tax-Exempt Discount Bond will accrue over its term and the amount of accretion will be based on the yield to maturity, compounded semi-annually. The amount of OID that accrues during each semi-annual period will do so ratably within that period on a daily basis. With respect to an initial purchaser of a Tax-Exempt Discount Bond at its initial offering price, the portion of OID that accrues during the period that such purchaser owns such Bond is added to the purchaser's tax basis for purposes of determining gain or loss at the maturity, redemption, sale, or other disposition of that Tax-Exempt Discount Bond and thus, in practical effect, is treated as interest, which is excludable from gross income for federal income tax purposes.

Holders of Tax-Exempt Discount Bonds should consult their own tax advisors as to the effect of OID with respect to their federal tax liability.

Original Issue Premium

The Bonds that mature on October 1, 2019 through and including October 1, 2028 (collectively, the “Tax-Exempt Premium Bonds”) are being sold at an original issue premium (“OIP”). An amount equal to the excess of the issue price of a Tax-Exempt Premium Bond over its stated redemption price at maturity constitutes OIP on such Tax-Exempt Premium Bond. An initial purchaser of a Tax-Exempt Premium Bond must amortize any OIP over such Tax-Exempt Premium Bond’s term using constant yield principles, based on the purchaser’s yield to maturity (or, in the case of Tax-Exempt Premium Bonds callable prior to their maturity, by amortizing the OIP to the call date, based on the purchaser’s yield to the call date and giving effect to any call premium). As OIP is amortized, the amount of the amortization offsets a corresponding amount of interest for the period and the purchaser’s basis in such Tax-Exempt Premium Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Tax-Exempt Premium Bond prior to its maturity. Even though the purchaser’s basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Tax-Exempt Premium Bonds should consult with their tax advisors with respect to the determination and treatment of OIP for federal income tax purposes and with respect to the state and local tax consequences of owning a Tax- Exempt Premium Bond.

Interest Expense Deductions for Financial Institutions

Under Section 265 of the Code, financial institutions are denied any deduction for interest expenses that are allocable, by a formula, to tax-exempt obligations acquired after August 7, 1986. An exception, which permits a deduction for 80% of such interest expenses, is provided in respect of certain tax-exempt obligations issued by a qualified issuer that specifically designates such obligations as “qualified tax-exempt obligations” under Section 265 of the Code.

The School District is a qualified issuer and the School District has designated the Bonds as “qualified tax-exempt obligations” for the purposes and effect contemplated by Section 265 of the Code.

Financial institutions intending to purchase Bonds should consult their own tax advisors to determine the effect of the interest expense deduction on their federal tax liability.

Continuing Compliance

The Code imposes various terms, restrictions, conditions and requirements relating to the exclusion from gross income for Federal income tax purposes of interest on obligations such as the Bonds. The School District has covenanted to comply with all such requirements, including non-arbitrage requirements under Section 148 of the Code, that are necessary to ensure that interest on the Bonds will not be includable in gross income for Federal income tax purposes. Failure to comply with these covenants could result in interest on the Bonds being includable in gross income for Federal income tax purposes and such inclusion could be required retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with the aforesaid covenants. Moreover, Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the tax-exempt status of the interest on the Bonds.

Certain requirements and procedures contained or referred to in the Resolution and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Such changes or actions could constitute an exchange or other tax event with respect to the Bonds, which could result in gain or loss to the holder of a Bond, and a consequent tax liability.

Pursuant to its continuing disclosure obligations made pursuant to SEC Rule 15c2-12 (see “Continuing Disclosure Undertaking” herein), the School District may be required to provide notice of such changes or actions, as Material Events under said Rule. However, holders of the Bonds should consult their own tax advisors as to the effect of such changes or actions with respect to their federal tax liability.

Collateral Tax Liabilities

Although Bond Counsel has rendered an opinion that interest on the Bonds is excludable from gross income for Federal and Pennsylvania income tax purposes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may result in other collateral effects on a Bondholder’s Federal, state or local tax liabilities. The nature and extent of these other tax consequences may depend upon the particular tax status of the Bondholder or the Bondholder’s other items of income or deduction. Bond Counsel expresses no opinions regarding any tax consequences other than what is set forth in its opinion; each Bondholder or potential Bondholder is urged to consult with its own tax advisors with respect to the effects of purchasing, holding or disposing of the Bonds on its tax liabilities.

For example, corporations are required to include interest on the Bonds in determining “adjusted current earnings” under Section 56(c) of the Code, which may increase the amount of any alternative minimum tax owed (with respect to taxable years beginning before January 1, 2018; the corporate alternative minimum tax has been repealed effective for taxable years beginning after December 31, 2017). Other tax consequences for certain taxpayers include, without limitation, increasing the federal tax liability of certain foreign corporations subject to the branch profits tax imposed by Section 884 of the Code, increasing the federal tax liability of certain insurance companies under Section 832 of the Code, increasing the federal tax liability of certain S corporations subject to Sections 1362 and 1375 of the Code, increasing the federal tax liability of certain individual recipients of social security or railroad retirement benefits under Section 86 of the Code, limiting the use of the Earned Income Credit under Section 32 of the Code, limiting the use of the refundable credit for coverage under a qualified health plan under Section 36B of the Code, and denying an interest expense deduction to certain financial institutions under Section 265 of the Code (unless, and in the circumstance when, the Bonds have been designated by the issuer as “qualified tax-exempt obligations”).

Change in Law; Adverse Determinations

From time to time, certain legislative proposals may be introduced, or are pending, in the Congress of the United States or the various state legislatures, including some that carry retroactive effective dates, that, if, enacted, could alter or amend the federal and state tax matters described above or affect the market value of the Bonds. No prediction can be made whether or in what form any such proposal or proposals might be enacted into law or whether, if enacted, the same would apply to bonds issued prior to enactment. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation.

The Internal Revenue Service (the “Service”) regularly audits tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includible in the gross income of the owners thereof for federal income tax purposes. No prediction can be made whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures, the Service may treat the School District as a taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until such time as the audit is concluded, regardless of the ultimate outcome.

Payments of interest on, and proceeds of the sale, redemption or maturity of, tax-exempt obligations, such as the Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Bondholder who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and

Certification, or to any Bondholder who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns.

THE FOREGOING IS NOT INTENDED AS AN EXHAUSTIVE LIST OF THE PROVISIONS OF FEDERAL, STATE AND LOCAL TAX LAWS WHICH MAY HAVE AN EFFECT ON INDIVIDUALS AND CORPORATIONS HOLDING THE BONDS OR RECEIVING INTEREST THEREON. PROSPECTIVE PURCHASERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE EFFECT ON THEIR FEDERAL, STATE OR LOCAL TAX LIABILITY AND GENERAL FINANCIAL AFFAIRS OF HOLDING THE BONDS OR RECEIVING INTEREST THEREON.

CONTINUING DISCLOSURE UNDERTAKING

In accordance with the requirements of the Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission (the “SEC”), the School District (being an “obligated person” with respect to the Bonds, within the meaning of the Rule), will agree to provide the following to the Municipal Securities Rulemaking Board (the “MSRB”) in an electronic format as prescribed by the MSRB, either directly or indirectly through a designated agent:

(A) Annually, not later than 270 days following the end of each fiscal year, beginning with the fiscal year ending June 30, 2018, the following financial information and operating information for the School District:

(1) financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for local government units

(2) a summary of the budget for the current fiscal year (i.e. the fiscal year following the fiscal year of the financial statements being provided)

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

(C) In a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds:

(1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the Bonds, or other material events affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the School District; (13) the consummation of a merger, consolidation, or acquisition involving the School District or the sale of all or substantially all of the assets of the School District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; and

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

With respect to the filing of annual financial and operating information, the School District reserves the right to modify from time to time the specific types of information provided or the format of the presentation of such information to the extent necessary or appropriate as a result of a change in legal requirements or a change in the nature of the School District or its operations or financial reporting, but the School District will agree that any such modification will be done in a manner consistent with the Rule.

The events listed in (C) above are those specified in the Rule, not all of which may be relevant to the Bonds. The School District may from time to time choose to file notice of the occurrence of other events, in addition to the events listed in (C) above, but the School District does not commit to provide notice of the occurrence of any events except those specifically listed in (C) above.

The School District acknowledges that its undertaking pursuant to the Rule described herein is intended to be for the benefit of the holders and beneficial owners of the Bonds and shall be enforceable by the holders and beneficial owners of the Bonds, but the right of the holders and beneficial owners of the Bonds to enforce the provisions of the School District’s continuing disclosure undertaking shall be limited to a right to obtain specific enforcement, and any failure by the School District to comply with the provisions of the undertaking shall not be an event of default with respect to the Bonds.

The School District’s obligations with respect to continuing disclosure described herein shall terminate upon the prior redemption or payment in full of all of the Bonds or if and when the School District is no longer an “obligated person” with respect to the Bonds, within the meaning of the Rule.

The MSRB has been designated by the SEC to be the central and sole repository for continuing disclosure information filed by issuers of municipal securities since July 1, 2009. Information and notices filed by municipal issuers (and other “obligated persons” with respect to municipal securities issues) are made available through the MSRB’s Electronic Municipal Market Access (“EMMA”) System, which may be accessed on the internet at http://www.emma.msrb.org.

Certain operating data of the School District may be inherently included in the annual filings of financial statements, the summary of the budget, contents in Official Statements of future bond issues as well as publicly available information.

Existing Continuing Disclosure Filing History

The School District has previously entered into Continuing Disclosure Agreements with respect to each one of its previously issued bond issues that are currently outstanding. The School District’s filing history of its annual financial and operating information during the past five (5) years is outlined in the table below.

Fiscal Year Filing Financial Statements Budget Operating Data Ending Deadline [1] Filing Date EMMA ID [2] Filing Date EMMA ID [2] Filing Date EMMA ID [2] 6/30/2013 1/26/2014 12/10/2013 ER590253 12/10/2013 ER590253 Various[3] Various[3]

6/30/2014 1/26/2015 1/26/2015 EA568193 1/26/2015 EA568198 1/26/2015 EA568200

6/30/2015 1/26/2016 1/26/2016 EP716996 1/26/2016 EP716996 N/A [4]

6/30/2016 1/26/2017 1/26/2017 ER802943 1/26/2017 ER802953 N/A [4]

6/30/2017 1/26/2018 1/25/2018 ER871098 1/25/2018 ER871118 N/A [4]

Notes

[1] For these purposes, assumes the shortest filing deadline of the School District’s previous Continuing Disclosure Agreements

[2] Submission ID is the EMMA Submission ID for each filing. To access a filing, insert the Submission ID to the end of the web address below: http://emma.msrb.org/ContinuingDisclosureView/ContinuingDisclosureDetails.aspx?submissionId=

[3] Included in various EMMA filings. The School District filed the market value and assessed values and the tax and millage rates on 12/10/2013 under EMMA ID ER590253. The pupil enrollment, tax collection data and top ten taxpayers were filed on 8/4/2014 under EMMA ID EA525158.

[4] Operating data was contained within the Budget filing requirement.

Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can be summarized as follows:

For fiscal year ending June 30, 2013, the School District filed the audited financial statements and budget timely, a portion of the operating data was filed on December 10, 2013 and the remaining portion was filed late on August 4, 2014.

For fiscal year ending June 30, 2014, the School District filed the audited financial statements, budget report and operating data timely.

For fiscal year ending June 30, 2015, the School District filed the audited financial statements, budget report and operating data timely.

For fiscal year ending June 30, 2016, the School District filed the audited financial statements, budget report and operating data timely.

For fiscal year ending June 30, 2017, the School District filed the audited financial statements, budget report and operating data timely.

Failure to Provide Annual Financial Information

As outlined in the table above, the School District failed to provide certain annual financial information in a timely manner during the past (5) five years. The School District filed a “Failure to Provide Annual Financial Information” notice to EMMA on September 19, 2016.

Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s

Some of the School District’s bond issues that have been outstanding during the past five (5) years have been insured by various bond insurance companies that have received rating downgrades and upgrades by both S&P and Moody’s. This information was publicly available from widely accepted information sources at the time of their respective downgrades or upgrades. For informational purposes, the School District has recently filed a summary of rating upgrades and downgrades relating to certain bond insurance companies.

Future Continuing Disclosure Compliance

The School District has conducted a thorough review of its continuing disclosure obligations and submissions. Upon discovering any inadvertent omissions with respect to these filings, the School District, to the best of its knowledge, has attempted to bring its continuing disclosure filings up to date.

In an effort to augment the School District’s procedures and policies to maintain future compliance, the School District has taken additional steps intended to assure future compliance with its Continuing Disclosure Agreements. These steps include implementing the MSRB’s EMMA’s internal notification system whereby the School District will receive timely email reminders a month in advance for all of the School District’s annual disclosure filings and coordinating with the School District’s financial advisor to ensure all disclosure obligations have been made on a timely basis and in all material respects.

A member of the School District’s business office will be responsible for ensuring ongoing continuing disclosure compliance. Members of the School District’s business office will make an effort to participate in any ongoing continuing education regarding continuing disclosure undertaking if offered by local groups or affiliated organizations such as MSRB, PASBO or GFOA. The School District may communicate with its financial advisor, underwriter(s), bond counsel, or solicitor regarding any questions or concerns regarding ongoing continuing disclosure compliance. The School District may also communicate with its local auditor and advise of the School District’s need for financial statements in a timely manner. In the event audited financial statements are not available by the filing deadline, the School District will file to EMMA, if available, its State Form PDE-2057 Annual Financial Report as an interim filing until such audited financial statements are available. Some of the operating data requirements may be found contained within the School District’s financial statements or budget filing and may not be filed explicitly by themselves.

RATINGS

S&P Global Ratings has assigned the School District an underlying rating of “AA-” (Stable Outlook) to the Bonds. S&P Global Ratings is expected to assign its municipal Bond rating of “AA” (Stable Outlook) to this issue of Bonds with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of principal of and interest on the Bonds will be issued by MAC. Such rating reflects only the view of such organization and any desired explanation of the significance of such rating should be obtained from the rating agency furnishing the same, at the following address: 55 Water Street, 38th Floor, New York, New York 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that any such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.

UNDERWRITING

The Underwriter has agreed to purchase the Bonds from the School District, subject to certain conditions precedent, and will purchase all of the Bonds if any of such Bonds are purchased. The Bonds will be purchased for a purchase price of $2,481,220.85, equal to the par value of the Bonds less an underwriters’ discount of $42,550.00 and plus an original issue premium of $23,770.85.

LEGAL OPINION

FINANCIAL ADVISOR

The School District has retained PFM Financial Advisors LLC, Harrisburg, Pennsylvania, as financial advisor (the “Financial Advisor”) in connection with the preparation, authorization and issuance of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement. PFM Financial Advisors LLC is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

MISCELLANEOUS

This Official Statement has been prepared under the direction of the School District by PFM Financial Advisors LLC, Harrisburg, Pennsylvania, in its capacity as Financial Advisor to the School District. The information set forth in this Official Statement has been obtained from the School District and from other sources believed to be reliable. Insofar as any statement herein includes matters of opinion or estimates about future conditions, it is not intended as representation of fact, and there is no guarantee that it is, or will be, realized. Summaries or descriptions of provisions of the Bonds, the Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof. Reference is hereby made to the complete documents, copies of which will be furnished by the School District or the Financial Advisor upon request. The information assembled in this Official Statement is not to be construed as a contract with holders of the Bonds.

The School District has authorized the distribution of this Official Statement.

WESTMONT HILLTOP SCHOOL DISTRICT Cambria County, Pennsylvania

By: /s/ Daniel D. Hill President, Board of School Directors

33 [ THIS PAGE INTENTIONALLY LEFT BLANK ]

APPENDIX A Demographic and Economic Information Relating to the Westmont Hilltop School District

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

Population

Table A-1 shows recent population trends for the School District, Cambria County, and the Commonwealth of Pennsylvania (the “State”). Table A-2 shows 2000 age composition and the average number of persons per household in Cambria County and for the State. Average household size was smaller in the County than the statewide average.

TABLE A-1

RECENT POPULATION TRENDS

Compound Average Annual Percentage Change Area 2010 2015 2010-2015 School District ...... 12,914 12,571 -0.54% Cambria County ...... 143,679 139,381 -0.30% Pennsylvania ...... 12,702,379 12,779,559 0.06% Source: U.S. Bureau of the Census, Decennial Census and Pennsylvania State Data Center, 2010 General Population and Housing Characteristics: Pennsylvania and the American Community Survey 2011-2015 5 year estimates.

TABLE A-2

AGE COMPOSITION

0-17 18-64 65+ Years Years Years Cambria County ...... 19.7% 61.5% 18.8% Pennsylvania ...... 24.1 62.9 13.0 Source: Pennsylvania State Data Center, 2010 General Population and Housing Characteristics: Pennsylvania.

A-1

Employment

Overall NonFarm data are not compiled for the School District or municipalities within it, but such data is compiled for the Johnstown Metropolitan Statistical Area for January 2018.

TABLE A-3 NONFARM JOBS (Johnstown Metropolitan Statistical Area)

Industry Employment Net Change From: ESTABLISHMENT DATA Jan 2018 Dec 2017 Nov 2017 Jan 2017 Dec 2017 Jan 2017

TOTAL NONFARM 54,200 55,600 56,100 54,000 -1,400 200 TOTAL PRIVATE 46,600 47,900 48,400 46,400 -1,300 200 GOODS-PRODUCING 5,600 5,900 6,100 5,400 -300 200 Mining, Logging, and Construction 1,700 1,900 2,100 1,500 -200 200 Manufacturing 3,900 4,000 4,000 3,900 -100 0 SERVICE-PROVIDING 48,600 49,700 50,000 48,600 -1,100 0 PRIVATE SERVICE-PROVIDING 41,000 42,000 42,300 41,000 -1,000 0 Trade, Transportation, and Utilities 10,700 10,900 10,900 10,700 -200 0 Retail trade 6,400 6,600 6,700 6,600 -200 -200 Information 800 800 800 800 0 0 Financial Activities 2,500 2,600 2,600 2,600 -100 -100 Professional and Business Services 4,700 4,800 4,900 5,000 -100 -300 Educational and Health Services 15,200 15,700 15,900 15,000 -500 200 Leisure and Hospitality 4,400 4,500 4,500 4,200 -100 200 Other Services 2,700 2,700 2,700 2,700 0 0 Government 7,700 7,700 7,700 7,600 0 100 Federal Government 1,000 1,000 1,000 1,000 0 0 State Government 1,700 1,700 1,700 1,800 0 -100 Local Government 5,000 5,000 5,000 4,800 0 200

Data benchmarked to March 2017 ***Data changes of 100 may be due to rounding*** Source: Pennsylvania Department of Labor & Industry, Workforce Information News Release

A-2

Table A-4 shows recent trends in employment and unemployment for the County and the Commonwealth. The unemployment rate for the County has been higher than that for the Commonwealth during the period shown.

TABLE A-4

RECENT TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT

Compound Average Annual % 2012 2013 2014 2015 2016 2017(1) Rate

Cambria County Civilian Labor Force (000) ...... 66.0 64.6 63.0 62.4 61.6 59.5 -2.05% Employment (000) ...... 60.2 59.0 58.6 58.4 57.4 56.3 -1.33% Unemployment (000) ...... 5.8 5.6 4.4 4.0 4.2 3.1 -11.78% Unemployment Rate ...... 8.8 8.7 7.0 6.4 6.9 5.3

Pennsylvania Civilian Labor Force (000) ...... 6464.0 6440.0 6391.0 6424.0 6453.0 6358.0 -0.33% Employment (000) ...... 5957.0 5965.0 6016.0 6094.0 6105.0 6080.0 0.41% Unemployment (000) ...... 507.0 476.0 376.0 330.0 348.0 278.0 -11.32% Unemployment Rate ...... 7.8 7.4 5.9 5.1 5.4 4.4

(1) As of December 2017. Source: Pennsylvania Department of Labor & Industry

Major employers in the County include:

DLP Partner Conemaugh LLC State Government Federal Government Wal-Mart Associates Inc Cambria County Saint Francis University University of Pittsburgh DLP Conemaugh Physician Practices Laurel Technologies Sheetz Inc Source: Quarterly Census of Employment and Wages – Quarter 3 of 2017.

A-3

Income

The data on Table A-5 shows recent trends in per capita income for the School District, Cambria County and the State over the 2000-2009 period. Per capita income in the School District is higher than average per capita income in the State and the County.

TABLE A-5

RECENT TRENDS IN PER CAPITA INCOME*

Compound Average Annual Percentage Change 2000 2009 2000-2009 School District ...... $25,652 $29,492 1.40% Cambria County ...... 16,058 20,782 2.61% Pennsylvania ...... 20,880 26,678 2.48%

*Income is defined by the Bureau of the Census as the sum of wage and salary income, non-farm self-employment income, net self-employment income, Social Security and Railroad retirement income, public assistance income, interest, dividends, pensions, etc. before deductions for personal income taxes, Social Security, etc. School District income is the population- weighted average for political subdivisions. Source: 2000: U.S. Census Bureau, Summary File 1 (SF 1) and Summary File 3 (SF 3) & 2009: U.S. Census Bureau, 2005- 2009 American Community Survey.

Commercial Activity

Table A-6 shows trends for retail sales in the MSA and the Commonwealth.

TABLE A-6 TOTAL RETAIL SALES (000)

2011 2012 2013 2014 2015 MSA ...... $2,003,966 $2,003,423 $1,995,668 $3,872,518 $1,722,652 Pennsylvania ...... 188,193,104 188,149,728 187,412,600 199,975,258 198,215,135

Source: Sales and Marketing Management Magazine

Educational Institutions

The University of Pittsburgh Johnstown Campus Centre located in Johnstown, St. Francis University in Loretto, Mt. Aloysius Junior College in Cresson, Penn State University in State College, Penn State University Altoona Campus in Altoona and Indiana University in Indiana, Pennsylvania are all located near the School District.

Housing

According to the 2010 census figures there were 65,650 housing units in Cambria County versus 65,796 units in 2000. This represents a decrease of 146 units within a decade.

A-4

Transportation

State Routes 56 and 403, which run in an east-west direction, and State Route 271, which runs in a north-south direction, pass through Cambria County (the “County”). U.S. Route 219, a limited access highway running in a north-south direction, also passes through the County and provides a vital link to major east-west and north-south arteries. U.S. Route 219 is flanked by Interstate Route 80 to the north and Interstate Route 76 (the Pennsylvania Turnpike) to the south. U.S. Route 22 (the William Penn Highway) and Route 30, both major east-west highways, are also located in the County. The County is also served by U.S. Route 422, which runs east-west through the County, and State Route 53, which runs north-south. Johnstown-Cambria County Municipal Airport, approximately five miles east of the City of Johnstown, has daily commuter flight service connecting to all major cities through the Greater Pittsburgh International Airport. Bus service in the County is supplied by the Cambria County Transit Authority, Blue & White Bus Lines, Greyhound Bus Line, Somerset Bus Company, DeBolt and Lone Star. ConRail, the Conemaugh & Blacklick Railroad, and the Johnstown & Stonycreek Railroad serve the freight transportation needs of the County and connect with major marketing areas of the country; Amtrak supplies intercity rail passenger service to the County.

Public Utilities

Residents and businesses in the Greater Johnstown Area are served by the following utilities:

Electricity is provided by the Pennsylvania Electric Company (Penelec). Peoples Natural Gas Company supplies gas service, while the General Telephone Company of Pennsylvania and Verizon, Cellular One, and Independent Cellular Network provide telephone service. Water is supplied by the Greater Johnstown Water Authority, which recently purchased the Quemahoming Dam (13.5 billion gallons) to add to the Greater Johnstown Area water supply. The Bureau of Sewage of the City of Johnstown provides sewage treatment services for the Greater Johnstown Area.

Communications

Two newspapers are published in and serve the area. The Tribune-Democrat is published daily, including Sunday, and the Shopper is published weekly. Two other weekly publications include Traders Guide and Penny Saver. Eight local radio stations broadcast in the Greater Johnstown Area; four are on AM frequencies and four operate on FM frequencies. NBC and CBS broadcast on television locally on WJAC-TV and WTAJ-TV, respectively, along with WWCP-Channel 8 and WATM-Channel 23. WPTJ-TV is Johnstown’s independent television network, and Cablevision of Johnstown and Eastern Telecom Corporation provide cable television services.

Police and Fire Protection and Emergency Services

Police protection is provided to the Greater Johnstown Area by some 62 full-time and 80 part-time police officers from the City’s Police Department, which also includes nine full-time and ten part-time dispatchers and four civilian employees; smaller police departments of the Component Municipalities also provide protection to area residents. Fire protection is provided by some 44 full-time fire fighters in the City, along with twenty-four volunteer fire companies which serve both the City proper and the Greater Johnstown Area Ambulance and EMT services are also provided on a twenty-four hour basis by both the City and the remaining component Municipalities of the School District.

Recreational Facilities

In addition to many parks, mini-parks and playgrounds, Roxbury Park is located within the borders of the City. Other parks which are located in the area include Duman Lake Park, Kooser State Park, Laurel Hill State Park, Prince Gallatzin State Park, and Laurel Highlands Trail. This park is a 28 acre site which includes a band pavilion and facilities for baseball, softball, basketball and tennis; a 92 acre 9-hole public golf course; Point Stadium, which seats 11,000 for football, baseball and other outdoor activities; and the 5,500 seat Johnstown War Memorial, which provides facilities for basketball, the Johnstown Chiefs hockey team, which is a member of the Eastern Hockey League and a farm team for the Detroit Redwings, and for various exhibitions and concerts. Major sports events which are held in the City include the AAABA Baseball Tournament, the Johnstown Marathon, the War Memorial Invitation Basketball Tournament, the Sunnehanna Amateur Golf Tournament, and the Ken Lantzy All Star Football Classic. The Johnstown Flood Museum is also located in the City. The “Johnstown Steal” a Single A professional Baseball team, a member of the Frontier League, began play in 1995.

A-5

A major tourist attraction is the Inclined Plane Railway, which connects the adjacent Borough of Westmont with the City and is purported to be the world’s steepest vehicular inclined plane. Area residents also have access to five private and thirteen public golf courses, and several ski slopes and other recreational facilities located in the area. Prince Gallitzin State Park, the largest state park in the Commonwealth, is located 40 miles north of the city. It features a 1,640 acre mountain lake surrounded by 25 miles of forested shoreline and beaches. The City is the center of cultural activities, supporting a symphony orchestra and other cultural events for residents of the City and the surrounding areas. Seven Springs Mountain Resort and Hidden Valley, which both provide facilities for conventions, skiing, golf, year-round swimming and various recreational activities, are located less than one-half hour from the City in adjacent Somerset County.

A-6

APPENDIX B Opinion of Bond Counsel

[ THIS PAGE INTENTIONALLY LEFT BLANK ] FORM OF OPINION OF BOND COUNSEL

The form of the approving legal opinion of Dinsmore & Shohl LLP, Bond Counsel, is set forth below. The actual opinion will be delivered on the date of delivery of the Bonds and may vary from the form set forth to reflect circumstances both factual and legal at the time of such delivery. Bond Counsel has no duty, and has assumed no obligation, to revise, update or supplement its opinion to address or reflect a change or changes in such circumstances subsequent to the date of delivery of the Bonds, whether or not it has notice or obtains knowledge of the same, and whether or not this Official Statement shall be recirculated. The approving legal opinion of Bond Counsel represents its considered professional judgment, following a comparison of relevant factual certifications to applicable law. Such opinion is not a guarantee of a particular result, nor is such opinion binding on any administrative or judicial tribunal.

We have served as Bond Counsel to Westmont Hilltop School District (Cambria County, Pennsylvania) (the "Local Government Unit") and do hereby undertake to advise you in connection with the issuance, sale and delivery of its $2,500,000.00, aggregate principal amount, General Obligation Bonds, Series of 2018 (the "Bonds"), issued in fully registered form, dated and bearing interest from May 24, 2018, maturing on various annual dates ending October 1, 2046 and subject to redemption prior to maturity at the option of the Local Government Unit beginning October 1, 2023.

In that capacity, we have examined the Constitution of the Commonwealth of Pennsylvania; the Public School Code of 1949, Act of March 10, 1949, P.L. 30, No. 14, as amended (the "School Code"); the Local Government Unit Debt Act, 53 Pa.C.S.A. §8001 et seq., as amended (the "Debt Act"); the formal action of the Governing Body of the Local Government Unit authorizing the incurrence of nonelectoral debt evidenced by the Bonds (the "Debt Ordinance"); the corresponding Certificate of Approval of the Department of Community and Economic Development; the opinion of Beard Legal Group, P.C., solicitor for the Local Government Unit (upon which we have relied); the Internal Revenue Code of 1986, as amended (the "Tax Code"); and such other proceedings and law as we deemed necessary in order to render this opinion. We have reviewed the Federal Income Tax Certificate of an authorized officer of the Local Government Unit, along with other closing certificates of the Local Government Unit and other parties to the issuance and sale of the Bonds. Unless separately noted, we have relied upon, but have not independently verified, factual certifications made to us by the Local Government Unit, its officers and agents, and by said other parties, both in such certificates and otherwise during the course of our engagement.

Both principal of and interest on the Bonds are payable at the designated corporate trust office of Manufacturers and Traders Trust Company, Harrisburg, Pennsylvania, as Paying Agent for the Local Government Unit; the bank has additionally been appointed Registrar and Sinking Fund Depository for the Bonds.

These proceedings demonstrate that, in the absence of any meritoriously-based action in a governmental or judicial forum affecting the validity of the Bonds, the same have been delivered upon full payment.

We have not been engaged nor undertaken to review the adequacy of disclosure in the Official Statement nor in any other securities offering material produced in respect of the Bonds and, except as to matters set forth in this opinion and described as such in said Official Statement, we express no opinion or belief with respect thereto.

Based on the foregoing, we are of the opinion on this date as follows:

1. The Bonds are valid and binding general obligations of the Local Government Unit.

(a) The Bonds are issued for a valid purpose under the School Code.

(b) The Bonds, and all other outstanding debt of the Local Government Unit, are within constitutional and statutory limitations.

(d) The Bonds conform, in all substantial respects, to the form provided in the Debt Ordinance.

2. The Bonds are secured by a pledge of the full faith, credit and taxing power of the Local Government Unit. The Local Government Unit has effectively covenanted in the Debt Ordinance to include the amount of debt service on this issue, in each fiscal year for which such sums are due, in its budget for that year; to appropriate such amounts to the payment of such debt service; and to pay or cause to be paid, from time to time as and when due, the principal of the Bonds and the interest thereon on the dates, at the place and in the manner stated in the Bonds.

3. Presently included among the general revenues of the Local Government Unit available for the payment of the Bonds are ad valorem real estate taxes, whose levy upon all taxable real property situate within the corporate limits of the Local Government Unit is subject to the limitations of Pennsylvania Act No. 1 of Special Session 2006 ("Act 1"), which became effective June 27, 2006.

4. The Bonds are payable and enforceable according to their own terms, those of the Debt Ordinance and all provisions of the Debt Act; however, any such payment and enforcement could be restrained by a court of proper jurisdiction operating under the authority of bankruptcy, receivership and other similar laws of accommodation and adjustment of creditors' rights, as then applicable.

5. The Bonds, having all the qualities and incidents of securities under Article 8 of the Uniform Commercial Code, are negotiable instruments.

6. The Bonds are an authorized investment, under the Probate, Estates and Fiduciaries Code, as amended, for fiduciaries and personal representatives (as such terms are therein defined) within the Commonwealth of Pennsylvania.

7. Under the laws, regulations, rulings and judicial decisions in effect as of the date hereof, interest on the Bonds is excludable from gross income for Federal income tax purposes, pursuant to the Tax Code. Furthermore, interest on the Bonds will not be treated as a specific item of tax preference, under Section 57(a)(5) of the Tax Code, in computing the alternative minimum tax for individuals and corporations. Due to the designation of the Bonds as "qualified tax-exempt obligations" pursuant to Section 265(b)(3) of the Tax Code, certain financial institutions may be able to deduct 80% of the interest expense incurred in purchasing or carrying the Bonds. In rendering the opinions in this paragraph, we have assumed continuing compliance with certain covenants designed to meet the requirements of Section 103 of the Tax Code. We express no opinion as to any other Federal income tax consequence arising from ownership of the Bonds.

8. The Bonds, and interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania.

This opinion is rendered as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter be brought to our attention, or any changes in law that may hereafter arise.

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

APPENDIX C Audited Financial Statements

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

Westmont Hilltop School District 112 Lindberg Avenue Johnstown, Pennsylvania 15905

Single Audit Report

For the Year Ended June 30, 2017

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

Table of Contents

List of Report Distributions ...... 2

Independent Auditors’ Report ...... 3

Management’s Discussion and Analysis ...... 5

Basic Financial Statements Statement of Net Position ...... 14 Statement of Activities ...... 16 Balance Sheet – Governmental Funds ...... 17 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ...... 18 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ...... 19 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities ...... 20 Statement of Net Position – Proprietary Fund ...... 22 Statement of Revenue, Expenses and Changes in Fund Net Position – Proprietary Fund ...... 23 Statement of Cash Flows – Proprietary Fund ...... 24 Statement of Fiduciary Net Position – Fiduciary Funds ...... 25 Statement of Changes in Fiduciary Net Position – Fiduciary Funds ...... 26

Notes to Financial Statements ...... 27

Supplemental Information: Pension Schedules ...... 56 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund ...... 57

Schedule of Expenditures of Federal Awards and Certain State Grants ...... 58

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 ...... 62

Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by The Uniform Guidance ...... 64

Schedule of Findings and Questioned Costs ...... 66

Schedule of Prior Audit Findings ...... 68

List of Report Distribution

November 27, 2017

To the Members of the Board Westmont Hilltop School District 112 Lindberg Avenue Johnstown, PA 15905

Board Members:

Not later than 30 days after receipt of the audit report, Westmont Hilltop School District must distribute the audit report as follows:

One (1) copy to: Commonwealth of Pennsylvania Bureau of Audits (submitted electronically)

One (1) copy to: Single Audit Clearinghouse (submitted electronically)

Sincerely,

Kotzan CPA & Associates, P.C.

Independent Auditors’ Report

To the Members of the Board Westmont Hilltop School District 112 Lindberg Avenue Johnstown, PA 15905

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Westmont Hilltop School District as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

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

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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit includes 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, business-type activities, each major fund, and the aggregate remaining fund information of the Westmont Hilltop School District as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America. 3

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, historical pension information, and budgetary comparison information on pages 5 through 12, page 56 and page 57, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The accompanying schedule of expenditures of federal awards and certain state grants is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and is not a required part of the basic financial statements. The schedule of expenditures of federal awards and certain state grants 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. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 expenditures of federal awards and certain state grants is 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 November 27, 2017 on our consideration of Westmont Hilltop School District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. 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 Westmont Hilltop School District’s internal control over financial reporting and compliance.

Kotzan CPA & Associates, P.C. Johnstown, Pennsylvania November 27, 2017

Management’s Discussion and Analysis Westmont Hilltop School District 2016-2017

This Management’s Discussion and Analysis (MD&A) offers an overview of the Westmont Hilltop School District‘s (WHSD) financial performance during the fiscal year ended June 30, 2017. It should be read in conjunction with the financial statements and notes to the financial statements to enhance the understanding of the District’s financial performance.

Background

The Management’s Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments issued June 1999. Certain comparative information between the current year and the prior year is required to be presented.

Previous standards (pre GASB 34) required modified accrual (no accruals beyond 60 days), no capital assets depreciation and no reports of combined net position. GASB 34 requires full accrual accounting including fixed asset accounting, proper combination of multiple funds, and the realization of depreciation expense as part of the Statement of Net Position and Statement of Activities.

Various statements required under GASB 34 are:

 Statement of Net Position

 Statement of Activities

 Balance Sheet of Governmental Funds

 Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position

 Statement of Revenues, Expenditures, and Changes in Fund Balances

 Reconciliation of Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities

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

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

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

The Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position reconciles the fund balance per the fund financial statements to the net position per the government-wide financial statements by outlining the accounting changes necessary to convert from modified accrual to the full accrual to the full accrual method of accounting.

5 Westmont Hilltop School District Management’s Discussion & Analysis (MD&A)

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

Funds analyzed in this audit include:

 Major governmental activities including: General Fund and Capital Projects Fund

 Major business-type activities: Food Service Fund

 Fiduciary funds: Agency Fund- Student activity accounts and Private Purpose Trust Fund – Scholarship account

FUND FINANCIAL STATEMENTS

The District’s fund financial statements provide detailed information about the most significant funds, not the District as a whole.

Governmental funds – The majority of the District’s activities are reported in governmental funds, which focus on determining the financial position and the net change in financial position, not on income determination. They 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 District’s operations and the services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the District’s programs. The relationship between governmental activities and governmental funds is reconciled in the financial statements.

Proprietary funds – These funds are used to account for the District activities that are similar to business operations in the private sector; or where the reporting is on determining net income, financial position, changes in financial position, and a significant portion of funding through user charges. When the District charges customers for services it provides – whether to outside customers or to other units in the District – these services are generally reported in proprietary funds. The Food Service Fund is the District’s proprietary fund and is the same as the business-type activities we report in the government-wide statements, but provide more detail, including cash flows.

Fiduciary funds – The District is the trustee, or fiduciary, for some scholarship funds. All of the District’s fiduciary activities are reported in separate Statements of Fiduciary Net Position. We exclude these activities from the District’s other financial statement because the District cannot use these assets to finance its operations.

Financial Highlights

The Westmont Hilltop School District general fund had revenues of $21,822,675 and expenditures of $24,829,533 for the year ended June 30, 2017. The overall financial status of the District’s general fund has had a decrease with a fund balance of $8,009,811 at June 30, 2017.

The District’s general fund balance decreased by $3,006,858 in 2016-17. Overall expenditures increased $4,084,480 primarily as a result of a transfer to capital projects of $1,588,211 and capital outlay by the General Fund of $3,908,258 for the current construction projects. Additionally, the District had an increase in the retirement rate. General Fund revenues increased $325,744 over prior year primarily due to the receipt of PlanCon state subsidies and retirement state subsidies.

The Business-type Activities, which is essentially the Cafeteria Fund (Food Service Fund), experienced an increase in revenue of $202,400 and an increase in expenses of $15,686, leading to a profit of $159,155 in 2016-17.

6 Westmont Hilltop School District Management’s Discussion & Analysis (MD&A)

Table 1 summarizes the assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position of the District at June 30, 2017, as compared to June 30, 2016. The District’s total net position was $(8,979,765) at June 30, 2017.

Table 1 Condensed Schedule of Net Position June 30, 2017

Governmental Activities Business-type Activities Total School District Change 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 Current and other assets $ 19,888,549 $ 20,902,448 $ 26,968 $ 114,099 $ 19,915,517 $ 21,016,547 $ (1,101,030) Non-current assets 36,984,783 14,236,122 45,740 57,089 37,030,523 14,293,211 22,737,312 Total assets $ 56,873,332 $ 35,138,570 $ 72,708 $ 171,188 $ 56,946,040 $ 35,309,758 $ 21,636,282

Deferred outflows of resources $ 5,852,432 $ 2,161,933 $ 0 $ 0 $ 5,852,432 $ 2,161,933 $ 3,690,499 Current and other liabilities $ 7,203,964 $ 5,938,662 $ (170,863) $ 86,772 $ 7,033,101 $ 6,025,434 $ 1,007,667 Long-term liabilities 63,664,136 39,542,108 0 0 63,664,136 39,542,108 24,122,028 Total liabilities $ 70,868,100 $ 45,480,770 $ (170,863) $ 86,772 $ 70,697,237 $ 45,567,542 $ 25,129,695 Deferred inflows of resources $ 1,081,000 $ 1,298,000 $ 0 $ 0 $ 1,081,000 $ 1,298,000 $ (217,000) Net Position Invested in capital assets, net of related debt $ 13,174,584 $ 8,536,377 $ 45,740 $ 57,089 $ 13,220,324 $ 8,593,466 $ 4,626,858 Restricted 213,345 239,296 0 0 213,345 239,296 (25,951) Unrestricted (22,611,265) (18,253,940) 197,831 27,327 (22,413,434) (18,226,613) (4,186,821) Total net position $ (9,223,336) $ (9,478,267) $ 243,571 $ 84,416 $ (8,979,765) $ (9,393,851) $ 414,086

Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position

Current assets represented 34.97% of the total assets and are comprised primarily of cash and cash equivalents of $9,489,478 and investments of $8,198,905. Capital assets including land, site and building improvements, furniture and equipment represent 65.03% of total assets at $37,030,523.

The total liability amount of $70,697,237 consists primarily of net pension liability of $33,748,000 (47.74%), bonds payable of $28,461,254 (40.26%), and accrued salaries and benefits of $1,555,721 (2.20%).

The resulting $(8,979,765) in net position includes $13,220,324 invested in capital assets, $13,345 restricted for capital projects, $200,000 restricted for contribution for improvements, and $(22,413,434) in unrestricted net position.

The government-wide financial statements also reflect deferred inflows and outflows of resources relating to the pension plan.

7 Westmont Hilltop School District Management’s Discussion & Analysis (MD&A)

Table 2 summarizes the revenues, expenses, and changes in net position of the District for the year ended June 30, 2017 compared to the year ended June 30, 2016.

Table 2 Changes in Net Position Year Ended June 30, 2017 Governmental Activities Business-type Activities Total School District Favorable 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 (Unfavorable) Program Revenues: Charges for services $ 106,679 $ 80,033 $ 361,647 $ 357,311 $ 468,326 $ 437,344 $ 30,982 Operating grants and contributions 3,939,238 3,886,866 350,902 322,403 4,290,140 4,209,269 80,871 Capital grants and contributions 181,400 0 0 0 181,400 0 181,400 General Revenues: Taxes levied 13,073,014 13,206,830 0 0 13,073,014 13,206,830 (133,816) Grants and entitlements 4,293,003 4,208,859 0 0 4,293,003 4,208,859 84,144 Investment earnings 163,914 172,019 1,841 1,409 165,755 173,428 (7,673) Miscellaneous 35,210 19,479 0 0 35,210 19,479 15,731 Special Items: Sale of fixed assets 16,020 (117,357) 0 0 16,020 (117,357) 133,377 Total revenues 21,808,478 21,456,729 714,390 681,123 22,522,868 - 22,137,852 385,016 - Program Expenses: Instruction 13,247,531 13,016,735 0 0 13,247,531 13,016,735 (230,796) Instructional support 2,111,519 2,134,148 0 0 2,111,519 2,134,148 22,629 Administrative and financial support 2,334,312 1,465,405 0 0 2,334,312 1,465,405 (868,907) Operation and maintenance 1,663,598 1,587,784 0 0 1,663,598 1,587,784 (75,814) Pupil transportation 867,013 850,316 0 0 867,013 850,316 (16,697) Student activities 596,007 599,207 0 0 596,007 599,207 3,200 Community 1,113 101,812 0 0 1,113 101,812 100,699 Interest on long-term debt 563,321 243,176 0 0 563,321 243,176 (320,145) Food service 0 0 724,368 708,682 724,368 708,682 (15,686) Total expenses 21,384,414 19,998,583 724,368 708,682 22,108,782 20,707,265 (1,401,517)

Changes in net position before transfers 424,064 1,458,146 (9,978) (27,559) 414,086 1,430,587 (1,016,501) Interfund transfers (169,133) 0 169,133 0 0 0 0

Increase (decrease) in net position $ 254,931 $ 1,458,146 $ 159,155 $ (27,559) $ 414,086 $ 1,430,587 $ (1,016,501)

8 Westmont Hilltop School District Management’s Discussion & Analysis (MD&A)

Table 3 analyzes the budget to actual variances for the 2016-17 school year and the 2016-17 actual to 2015-16 actual.

Actual Actual Favorable/ 2016-17 2015-16 Over/(Under) 2016-17 (Unfavorable) Description Expenses Expenses From P/Y Budget Budget

1100 Regular Programs $ 9,798,420 $ 10,579,732 $ (781,312) $ 9,953,165 $ 154,745 1200 Special Programs 1,765,845 2,042,295 (276,450) 1,793,070 27,225 1300 Vocational Programs 381,280 171,911 209,369 473,720 92,440 1400 Other Instructional Programs 35,160 61,567 (26,407) 52,990 17,830 1500 Nonpublic School Programs 1,845 42,892 (41,047) 0 (1,845) 1800 Pre-Kindergarten Programs 19,520 42,892 (23,372) 0 (19,520) 2100 Pupil Personnel Services 1,139,517 1,148,834 (9,317) 957,223 (182,294) 2200 Instructional Staff Services 316,016 231,382 84,634 161,503 (154,513) 2300 Administrative Services 943,655 1,009,410 (65,755) 1,329,871 386,216 2400 Pupil Health 392,195 286,754 105,441 409,022 16,827 2500 Business Services 317,648 105,537 212,111 312,229 (5,419) 2600 Operation and Maintenance 0 of Plant Services 1,454,241 1,541,755 (87,514) 1,575,294 121,053 2700 Student Transportation Services 867,013 850,317 16,696 855,000 (12,013) 2800 Central and Other Support Services 535,017 678,371 (143,354) 642,650 107,633 2900 Other Support Services 6,458 8,032 (1,574) 0 (6,458) 3200 Student Activities 579,259 580,115 (856) 665,744 86,485 3300 Community Services 1,113 101,812 (100,699) 0 (1,113) 4000 Fac Acq., Constr., and Imp. 3,908,258 858,227 3,050,031 155,000 (3,753,258) 5110 Debt Services (principal and interest) 778,862 403,216 375,646 1,542,076 763,214 5130 Refund of Prior Year Receipts 0 2 (2) 0 0 5200 Interfund Transfers 1,588,211 0 1,588,211 0 (1,588,211)

Total Expenditures 24,829,533 20,745,053 4,084,480 20,878,557 (3,950,976)

Revenues/Other financing sources (uses) 21,822,675 21,496,931 325,744 20,878,557 944,118 Net Change $ (3,006,858) $ 751,878 $ (3,758,736) $ 0 $ (3,006,858)

9 Westmont Hilltop School District Management’s Discussion and Analysis (MD&A)

FUND FINANCIAL STATEMENT ANALYSIS

Revenues

The revenue for the school district comes from local, state, federal and other sources. During the 2016-17 fiscal year, $13,616,374 of local funds (62.40%), $7,635,610 of state funds (34.99%), $554,671 of federal funds (2.54%), and $16,020 of other financing sources (0.07%) were recognized by the general fund.

Local funding is primarily comprised of real estate taxes ($10,903,645) and earned income taxes ($1,619,384). Delinquent taxes in the amount of $418,618 were collected during the fiscal year.

Basic Education Subsidy of $3,984,432 makes up 52.18% of the total state subsidies received. Other significant receipts from the state include special education subsidy $814,954 (10.67%), transportation subsidy $364,597 (4.77%), and revenue for the state’s share of social security and retirement payments $1,745,384 (22.86%).

No Child Left Behind, Title I – Improving the Academic Achievement of the Disadvantaged ($222,580) and Striving Readers Comprehensive Literacy Grant Program (KTO) ($242,920) revenue made up a majority of federal funds received.

In the 2016-17 fiscal year, the District received proceeds of $16,020 for the sale of assets through the sale of items via an auction at the Middle School.

Expenditures

A review of the fund financial statements shows that expenditures increased $4,084,480 from 2015-16 to 2016-17. Overall, expenditures were under budget by $3,950,976.

Regular Programs (1100) decreased significantly by $781,312 due to the retirement of 13 teachers at the end of 2015-16. As a result, the District had a decrease in salary and benefits expenses. Additionally, there was a decrease in supplies purchased through the KTO grant consistent with the decrease in grant award for 2016-17. The District also purchased new text books in 2015-16 with no need to purchase again in 2016-17.

Special Programs (1200) decreased significantly by $276,450 due to cost savings associated with reducing services provided by outside agencies with new District staff.

Vocational Programs (1300) increased significantly by $209,369 due to implementation of new industrial arts and business education classes.

Pupil Health (2400) increased by $105,441 due to the increase in health services provided by outside agencies.

Business Services (2500) increased significantly by $212,111 mostly due to the business manager also serving as superintendent in 2015-16 to serving only as business manager in 2016-17. No salaries or benefits for the business manager position were reported in 2015-16. Additionally, the District filled the open accounts payable and payroll technician positions in April 2016 that had been vacant since November 2015.

Central and Other Support Services (2800) decreased by $143,354 as the District purchased new computers in 2015- 16 with no need to purchase as many in 2016-17.

Facility Acquisition, Construction and Improvement (4000) increased significantly by $3,050,031 as construction continued on to move the District from a three building configuration to a two building configuration.

Interfund Transfers (5200) consisted primarily of a transfer from General Fund to the Capital Projects Fund to assist with covering construction expenses.

10 Westmont Hilltop School District Management’s Discussion and Analysis (MD&A)

DEBT SERVICE

As of July 1, 2016, the District had total outstanding principal of $9,355,000. The District issued Series of 2016 in October 2016 totaling $9,500,000 and issued Series of 2017 in June 2017 totaling $9,970,000. Additionally, the District made payments against the debt principal of $425,000 in fiscal 2017 resulting in an ending principal balance as of June 30, 2017 of $28,400,000.

Table 4 Outstanding Debt

2015-16 2016-17 General Obligation Bonds: Series of 2014 $ 9,355,000 $ 8,930,000 Series of 2016 0 9,500,000 Series of 2017 0 9,970,000

$ 9,355,000 $ 28,400,000

CAPITAL ASSETS

Table 5 illustrates changes in capital assets, net of depreciation, by asset type.

Table 5 Capital Assets, Net of Depreciation

Governmental Activities Business-type Activities Total Percentage 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 Change Land $ 24,493 $ 24,493 $ 0 $ 0 $ 24,493 $ 24,493 0.00% Construction in Progress 30,774,778 7,376,843 0 0 30,774,778 7,376,843 317.18% Buildings and Improvements 5,938,640 6,339,835 0 0 5,938,640 6,339,835 -6.33% Furniture and Equipment 409,075 494,951 45,740 57,089 454,815 552,040 -17.61% $ 37,146,986 $ 14,236,122 $ 45,740 $ 57,089 $ 37,192,726 $ 14,293,211 160.21%

The construction in progress includes the construction of the new elementary school and renovations to the high school allowing the District to consolidate three buildings into two by eliminating the middle school building. Construction is expected to be completed with the completion of the administration offices in the high school building in January 2018.

PERSONNEL

The Teacher contract expired on June 30, 2017. A new agreement has been approved which will expire on June 30, 2022.

The Support Staff contract expired on June 30, 2017. A new agreement with the teamsters for the maintenance staff has been approved which will expire on June 30, 2021. A new agreement with the support staff, represented by PSEA, has been approved which will expire on June 30, 2020.

11 Westmont Hilltop School District Management’s Discussion and Analysis (MD&A)

CURRENTLY KNOWN FACTS, DECISIONS OR CONDITIONS

Enrollment has recently been on the decline at a significant rate for the last 5 years. This decrease is expected to continue for the next several years.

The 2016-17 school year was the last one with a three building configuration. Classes in the new elementary school commenced with the start of the 2017-18 school year. This will provide opportunities to generate savings through efficiencies.

CONTACTING THE DISTRICT REGARDING FINANCIAL MANAGEMENT

Our financial report is designed to provide our citizens, taxpayers, parents, students, investors and creditors with a general overview of the District’s finances and to show the Board’s accountability for the money it receives during the fiscal year. If you have questions about this report or wish to request additional financial information, please contact the Superintendent at Westmont Hilltop School District, 112 Lindberg Avenue, Johnstown, Pennsylvania 15905.

BASIC FINANCIAL STATEMENTS

Westmont Hilltop School District Statement of Net Position June 30, 2017

Governmental Business-Type Activities Activities Total Assets Current assets: Cash and equivalents $ 9,489,478 $ 0 $ 9,489,478 Investments 8,198,905 0 8,198,905 Taxes receivable 1,222,538 0 1,222,538 Intergovernmental receivables 849,959 8,973 858,932 Inventories 10,000 17,995 27,995 117,669 0 117,669 Other receivables Total current assets 19,888,549 26,968 19,915,517 Noncurrent assets: Land 24,493 0 24,493 Construction in progress 30,612,575 0 30,612,575 Depreciable capital assets, net 6,347,715 45,740 6,393,455 Total noncurrent assets 36,984,783 45,740 37,030,523 Total assets 56,873,332 72,708 56,946,040 Deferred Outflows of Resources Defined benefit pension plan: Change in proportionate share 279,000 0 279,000 Changes of assumptions 1,218,000 0 1,218,000 Difference between projected and actual investment earnings 1,881,000 0 1,881,000 Contributions subsequent to measurement date 2,474,432 0 2,474,432 Total deferred outflows of resources 5,852,432 0 5,852,432 Total assets and deferred outflows of resources $ 62,725,764 $ 72,708 $ 62,798,472

See accompanying notes to the basic financial statements.

Westmont Hilltop School District Statement of Net Position June 30, 2017

Governmental Business-Type Activities Activities Total Liabilities Current liabilities: Internal balances $ 259,029 $ (259,029) $ 0 Accounts payable 4,395,271 61,387 4,456,658 Accrued salaries and benefits 1,555,721 0 1,555,721 Accrued interest payable 270,223 0 270,223 Payroll deductions and withholdings 77,663 0 77,663 Unearned revenues 0 26,779 26,779 Health reimbursement accounts 186,057 0 186,057 Current portion of long-term liabilities 551,000 0 551,000 Total current liabilities 7,294,964 (170,863) 7,124,101 Noncurrent liabilities: Bonds payable, net 28,001,254 0 28,001,254 Long-term portion of compensated absences 728,984 0 728,984 Long-term portion of retirement incentives 462,000 0 462,000 Other post-employment benefits (OPEB) 632,898 0 632,898 Net pension liability 33,748,000 0 33,748,000 Total noncurrent liabilities 63,573,136 0 63,573,136 Total liabilities 70,868,100 (170,863) 70,697,237 Deferred Inflows of Resources Defined benefit pension plan: Change in proportionate share 800,000 0 800,000 Difference between expected and actual experience 281,000 0 281,000 Total deferred inflows of resources 1,081,000 0 1,081,000 Net Position Invested in capital assets, net of debt 13,174,584 45,740 13,220,324 Restricted for capital projects 13,345 0 13,345 Restricted for capital contribution 200,000 0 200,000 Unrestricted (22,611,265) 197,831 (22,413,434) Total net position (9,223,336) 243,571 (8,979,765) Total liabilities, deferred inflows of resources, and net position $ 62,725,764 $ 72,708 $ 62,798,472

See accompanying notes to the basic financial statements. 15

Westmont Hilltop School District Statement of Activities For the Year Ended June 30, 2017

Net (Expenses) Revenues and Program Revenues Changes in Net Position Charges for Operating Grants Capital Grants Governmental Business-Type Expenses Services and Contributions and Contributions Activities Activities Total Governmental Activities: Instruction $ 13,247,531 $ 79,650 $ 3,453,465 $ 0 $ (9,714,416) $ 0 $ (9,714,416) Instructional student support 2,111,519 0 89,772 0 (2,021,747) 0 (2,021,747) Administration and financial support 2,334,312 0 31,404 0 (2,302,908) 0 (2,302,908) Operations and maintenance of plant 1,663,598 0 0 181,400 (1,482,198) 0 (1,482,198) Pupil transportation 867,013 0 364,597 0 (502,416) 0 (502,416) Student activities 596,007 19,289 0 0 (576,718) 0 (576,718) Community 1,113 7,740 0 0 6,627 0 6,627 Interest on long-term debt 563,321 0 0 0 (563,321) 0 (563,321) Total governmental activities 21,384,414 106,679 3,939,238 181,400 (17,157,097) 0 (17,157,097) Business-Type Activities: Food service 724,368 361,647 350,902 0 0 (11,819) (11,819) Total primary government $ 22,108,782 $ 468,326 $ 4,290,140 $ 181,400 (17,157,097) (11,819) (17,168,916) General Revenues: Taxes levied 13,073,014 0 13,073,014 Grants, subsidies and contributions, not restricted 4,293,003 0 4,293,003 Investment earnings 163,914 1,841 165,755 Transfers between governmental, business-type activiities (169,133) 169,133 0 Miscellaneous 35,210 0 35,210 Total general revenues 17,396,008 170,974 17,566,982 Special Items: Gain on disposal of fixed assets 16,020 0 16,020 Total special items 16,020 0 16,020 Change in net position 254,931 159,155 414,086 Net position, beginning of year (9,478,267) 84,416 (9,393,851) Net position, end of year $ (9,223,336) $ 243,571 $ (8,979,765)

See accompanying notes to the basic financial statements. 16

Westmont Hilltop School District Balance Sheet Governmental Funds June 30, 2017

Major Fund Total General Capital Projects Governmental Fund Fund Funds Assets Cash and cash equivalents $ 8,985,213 $ 504,265 $ 9,489,478 Investments 481,000 7,717,905 8,198,905 Taxes receivable 1,222,538 0 1,222,538 Due from other governments 849,959 0 849,959 Other receivables 117,669 0 117,669 Inventories 10,000 0 10,000

Total assets 11,666,379 8,222,170 19,888,549

Deferred Outflows of Resources 0 0 0

Total assets and deferred outflows of resources $ 11,666,379 $ 8,222,170 $ 19,888,549

Liabilities Due to other funds $ 259,029 $ 0 $ 259,029 Accounts payable 837,501 3,557,770 4,395,271 Accrued salaries and benefits 1,555,721 0 1,555,721 Payroll deductions and withholding 77,663 0 77,663 Retirement incentives 186,057 0 186,057

Total liabilities 2,915,971 3,557,770 6,473,741

Deferred Inflows of Resources Delinquent taxes receivable 740,597 0 740,597

Total deferred inflows of resources 740,597 0 740,597

Fund Balance Nonspendable 10,000 0 10,000 Restricted 200,000 4,664,400 4,864,400 Unassigned 7,799,811 0 7,799,811

Total fund balance 8,009,811 4,664,400 12,674,211

Total liabilities, deferred inflows of resources, and fund balance $ 11,666,379 $ 8,222,170 $ 19,888,549

See accompanying notes to the basic financial statements. 17

Westmont Hilltop School District Reconciliation of the Governmental Funds Balance Sheet To the Statement of Net Position June 30, 2017

Total fund balance – governmental funds $ 12,674,211

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

Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. The cost of the assets is $51,836,748 and the accumulated depreciation is $14,851,965. 36,984,783

Property taxes receivable will be collected in the future, but are not available soon enough to pay for the current period’s expenditures and therefore, are recorded as deferred inflows of resources in the funds. 740,597

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

Bonds payable $(28,400,000) Unamortized bond premiums (61,254) Accrued interest payable (270,223) Retirement incentives (553,000) Compensated absences (728,984) OPEB obligation (632,898) Net pension liability (33,748,000) (64,394,359)

Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the funds.

Deferred outflows related to pensions $ 5,852,432 Deferred inflows related to pensions (1,081,000) 4,771,432

Net position of governmental activities $ (9,223,336)

See accompanying notes to the basic financial statements. 18

Westmont Hilltop School District Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2017

Major Fund Total General Capital Projects Governmental Fund Fund Funds Revenues Local sources $ 13,616,374 $ 13,345 $ 13,629,719 State sources 7,635,610 0 7,635,610 Federal sources 554,671 0 554,671

Total revenues 21,806,655 13,345 21,820,000

Expenditures Instruction 12,002,070 0 12,002,070 Support services 5,971,760 506,355 6,478,115 Non-instructional services 580,372 0 580,372 Capital outlays 3,908,258 19,489,677 23,397,935 Debt service (principal and interest) 778,862 0 778,862

Total expenditures 23,241,322 19,996,032 43,237,354

Excess of revenues over (under) expenditures (1,434,667) (19,982,687) (21,417,354)

Other Financing Sources Sale of fixed assets 16,020 0 16,020 Proceeds from bond issuance 0 19,470,000 19,470,000 Bond premium 0 26,774 26,774 Interfund transfers (1,588,211) 1,419,078 (169,133)

Total other financing sources (1,572,191) 20,915,852 19,343,661

Net change in fund balance (3,006,858) 933,165 (2,073,693)

Fund balance, beginning of year 11,016,669 3,731,235 14,747,904

$ 8,009,811 $ 4,664,400 $ 12,674,211 Fund balance, end of year

See accompanying notes to the basic financial statements. 19

Westmont Hilltop School District Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended June 30, 2017

Total net change in fund balance – governmental funds $ (2,073,693)

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

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period.

Capital outlays $23,274,663 Depreciation expense (526,002) 22,748,661

Because some property taxes will not be collected for several months after the District’s year end, they are not considered as “available” revenues in the governmental funds. Deferred inflows of resources from tax revenues decreased by this amount this year. (27,542)

Interest on long-term debt is recognized in the governmental funds when it is due. In the statement of activities, expense is recognized as interest accrues. Accrued interest expense increased by this amount this year. (209,459)

In the governmental funds, compensated absences are measured by the amounts used. The statement of activities measures by the amount earned. The liability for compensated absences increased by this amount this year. (27,359)

Other post-employment benefits (OPEB) are recognized as expenditures in the governmental funds when they are paid. In the statement of activities, other post-employment benefits are recognized as expenses when incurred. The liability for other post-employment benefits decreased by this amount this year. 89,901

The proceeds and principal payments on long-term debt provide and consume current financial resources of governmental funds, respectively. However, they increase and reduce long-term liabilities on the statement of net position. Further, the effect of bond premiums are reported in the funds in the year of issue but are deferred and amortized in the statement of activities. The effect is shown below:

Proceeds from 2016 bond issue $(9,500,000) Proceeds from 2017 bond issue (9,970,000) Premium on 2017 bond issue (26,774) Bond principal payments 425,000 Accretion of bond premiums 2,204 (19,069,570) 20

Westmont Hilltop School District Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended June 30, 2017

Repayment of other long-term financing is an expenditure in the governmental funds, but reduces long-term liabilities in the statement of net position. This amount represents the current year payments of the other long-term financing. $ 66,493

During fiscal year 2017, the District offered a retirement incentive package to employees. In the governmental funds, the retirement incentives are recognized as expenditures when they are paid. In the statement of activities, the retirement incentives are recognized as expense when incurred. Unpaid retirement incentives totaled this amount for the year. (553,000)

Governmental funds report district pension contributions as expenditures in the year required to be made. However, pension expense, which is the change in net pension liability, adjusted for changes in deferred outflows and inflows of resources related to pensions, is reported in the statement of activities.

District pension contributions $ 2,474,432 Pension expense (3,163,933) (689,501)

Change in net position of governmental activities $ 254,931

See accompanying notes to the basic financial statements. 21

Westmont Hilltop School District Statement of Net Position Proprietary Fund June 30, 2017

Food Service Assets Current assets: Due from other funds $ 259,029 Due from other governments 8,973 Inventory 17,995

Total current assets 285,997

Noncurrent assets: Machinery and equipment, net 45,740

Total noncurrent assets 45,740

Total assets 331,737

Deferred Outflows of Resources 0

Total assets and deferred outflows of resources $ 331,737

Liabilities Current liabilities: Accounts payable 61,387 Unearned revenues 26,779

Total current liabilities 88,166

Total liabilities 88,166

Deferred Inflows of Resources 0 Net Position Invested in capital assets 45,740 Unrestricted 197,831

Total net position 243,571

Total liabilities, deferred inflows of resources, and net position $ 331,737

See accompanying notes to the basic financial statements.

Westmont Hilltop School District Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Fund For the Year Ended June 30, 2017

Food Service Operating revenues Food service revenue $ 361,647

Total operating revenues 361,647

Operating expenses Purchased professional and technical services 1,153 Other purchased service 649,002 Supplies 62,864 Depreciation 11,349

Total operating expenses 724,368

Operating income (loss) (362,721)

Nonoperating revenues (expenses) Earnings on investments 1,841 State sources 21,845 Federal sources 329,057

Total nonoperating revenues (expenses) 352,743

Change in net position (9,978)

Contributions and transfers Transfers from other funds 169,133

Change in net position 159,155

Total net position, beginning of year 84,416

Total net position, end of year $ 243,571

See accompanying notes to the basic financial statements. 23

Westmont Hilltop School District Statement of Cash Flows Proprietary Fund For the Year Ended June 30, 2017

Food Service Cash flows from operating activities Cash received from users $ 360,801 Cash payments to suppliers for goods and services (716,722)

Net cash provided by (used for) operating activities (355,921)

Cash flows from non-capital financing activities State sources 28,328 Federal sources 156,619 Operating transfers in (out) 169,133

Net cash provided by (used for) non-capital financing activities 354,080

Cash flows from investing activities Earnings on investments 1,841

Net cash provided by (used for) investing activities 1,841

Net increase (decrease) in cash and cash equivalents 0

Cash and cash equivalents, beginning of year 0

Cash and cash equivalents, end of year $ 0

Reconciliation of operating income (loss) to net cash provided by (used for) operating activities:

Operating income (loss) $ (362,721)

Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation 11,349 (Increase) decrease in accounts receivable 1,880 (Increase) decrease in inventories 4,306 Increase (decrease) in accounts payable (8,009) Increase (decrease) in unearned revenue (2,726)

Total adjustments 6,800

Net cash provided by (used for) operating activities $ (355,921)

See accompanying notes to the basic financial statements. 24

Westmont Hilltop School District Statement of Fiduciary Net Position Fiduciary Funds June 30, 2017

Private Total Agency Purpose Trust Fiduciary Fund Fund Funds Assets Cash and cash equivalents $ 35,981 $ 10,129 $ 46,110 Investments 0 9,307 9,307

Total assets 35,981 19,436 55,417

Deferred Outflows of Resources 0 0 0

Total assets and deferred outflows of resources $ 35,981 $ 19,436 $ 55,417

Liabilities Due to students $ 35,981 $ 0 $ 35,981

Total liabilities 35,981 0 35,981

Deferred Inflows of Resources 0 0 0

Net Position Held in trust for scholarships 0 19,436 19,436

Total liabilities, deferred inflows of resources, and net position $ 35,981 $ 19,436 $ 55,417

See accompanying notes to the basic financial statements.

Westmont Hilltop School District Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended June 30, 2017

Private Purpose Trust Fund Additions: Earnings on investments $ 1,344

Total additions 1,344

Deductions: Scholarships awarded 2,000

Total deductions 2,000

Change in net position (656)

Net position, beginning of year 20,092

Net position, end of year $ 19,436

See accompanying notes to the basic financial statements.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

1. Description of School District and Reporting Entity

The Westmont Hilltop School District is a Local Education Agency of the third class, governed by a nine- member publicly elected board, located in Cambria County, Pennsylvania. The District provides educational services to approximately 1,313 students from Westmont Borough, Southmont Borough and Upper Yoder Township. In 2016-17, the District operated one elementary school, one middle school and one high school. However, commencing with the 2017-18 school year, the District is operating one elementary school and one high school. The District also participates in a local area vocational/technical school with various other districts.

A reporting entity is comprised of the primary government, component units and other organizations that are included to ensure that the basic financial statements of the School District are not misleading. The primary government consists of all funds, departments, boards and agencies that are not legally separate from the School District. For Westmont Hilltop School District, this includes general operations, food service, and student related activities of the School District.

Component units are legally separate organizations for which the School District is financially accountable or other organizations whose nature and significant relationship with the School District are such that exclusion would cause the School District’s financial statements to be misleading. Financial accountability is defined as the appointment of a voting majority of the component unit’s board, and (1) either the School District’s ability to impose its will on the organization or (2) there is potential for the organization to provide a financial benefit to or impose a financial burden on the School District. The School District has no component units.

2. Summary of Significant Accounting Policies

The financial statements of the School District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to local governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial principles. The more significant of these accounting policies are described below.

A. Basis of Presentation

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

Government-wide Financial Statements

The statement of net position and the statement of activities display information about the School District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

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

Fund Financial Statements

Fund financial statements are also provided in the report for all governmental funds, proprietary funds, and the fiduciary funds of the School District. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund statements. Non-major funds are aggregated and presented in a single column. Fiduciary funds are reported by fund type.

B. Fund Accounting

The School District uses funds to maintain its financial record during the year. A fund is defined as a fiscal and accounting entity with a self balancing set of accounts. There are three categories of funds: governmental, proprietary and fiduciary.

Governmental Funds

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

General Fund – The general fund is the operating fund of the School District and is used to account for all financial resources except those required to be accounted for in another fund.

Capital Projects Fund – The capital projects fund accounts for financial resources that are restricted for the acquisition, construction, renovation, and deferred maintenance of major capital facilities or equipment, and for debt service.

Proprietary Funds

Proprietary funds focus on the determination of net position, changes in net position and cash flows and are classified as either internal service or enterprise funds. Internal service funds account for the financing of services provided by one department or agency to other departments or agencies of the School District. There are no internal service funds. Enterprise funds may be used to account for any activity for which a fee is charged to external users for goods and services. The following is the School District’s major enterprise fund:

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Food Service Fund – This fund accounts for the financial transactions related to the food service operation of the School District.

Fiduciary Fund

Fiduciary fund reporting focuses on net position and changes in net position. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds and agency funds. Trust funds are used to account for assets held by the School District under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the School District’s own programs. The School District’s only trust fund is a private purpose trust which accounts for a scholarship program for students. The agency fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. The School District’s agency fund accounts for those student activity programs which have student participation in the activity and have students involved in the management of the program.

C. Measurement Focus

Government-wide Financial Statements

Government-wide financial statements are prepared using the economic resources measurement focus. All assets, deferred outflows of resources, liabilities and deferred inflows of resources associated with the operation of the School District are included on the statement of net position.

Fund Financial Statements

Fund financial statements are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances reports on the sources (i.e. revenues and other financing sources) and uses (i.e. expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government- wide statements and the statements for governmental funds.

Like the government-wide statements, the proprietary fund is accounted for on a flow of economic resources measurement focus. All assets, deferred outflows of resources, liabilities and deferred inflows of resources associated with the operation of these funds are included on the statement of net position. The statement of changes in fund net position presents increases (i.e. revenues) and decreases (i.e. expenses) in total net position. The statement of cash flows provides information about how the School District finances and meets the cash flow needs of its proprietary activities.

Proprietary fund types distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operation. The principal operating revenues of the Food Service fund are charges for sales and services. Operating expenses for proprietary funds include the cost of sales and services and administrative expenses. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Fiduciary funds are reported using the economic resources measurement focus.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

D. Basis of Accounting

Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Proprietary and fiduciary funds also use the accrual basis of accounting. Differences in the accrual and the modified accrual basis of accounting arise in the recognition of revenue, the recording of unearned revenue, deferred inflows and outflows of resources, and in the presentation of expenses versus expenditures. Unearned revenues are addressed in Note 2M, and deferred inflows/outflows of resources in Note 2N.

Revenues - Exchange and Non-Exchange Transactions

Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the School District, available means expected to be received within sixty days of fiscal year-end.

Non-exchange transactions, in which the School District receives value without directly giving equal value in return, include income taxes, property taxes, grants, entitlements and donations. Revenue from property taxes is recognized in the fiscal year for which the taxes are levied (see Note 5). Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted; matching requirements, in which the School District must provide local resources to be used for a specified purpose; and expenditure requirements, in which the resources are provided to the School District on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.

Under the modified accrual basis, the following revenue sources are considered to be both measurable and available at year end: property taxes available as an advance, interest, tuition, grants, fees and rentals.

Expenses/Expenditures

On the accrual basis of accounting, expenses are recognized at the time they are incurred.

The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and amortization, are not recognized in governmental funds.

E. Budgetary Data

An operating budget is adopted each year for the General Fund on a modified accrual basis of accounting.

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

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

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

The School District is required to adopt a proposed budget at least thirty (30) days prior to adoption of the annual budget. The proposed budget shall be printed or otherwise made available for public inspection to all persons and shall be made available for duplication to any person, on request, at least twenty (20) days prior to the date set for the adoption of the budget. Final action shall not be taken on the proposed budget until after ten (10) days of public notice.

The Board of Directors may make transfers of funds appropriated to any particular item of expenditure by legislative action. An affirmative vote of two-thirds of all members of the board is required. The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts in the certificate when the original appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetary statements reflect the amounts in the final amended certificate issued during fiscal year 2017.

Fund balances in budgetary funds may be appropriated based on resolutions passed by the Board of Education, which authorized the School District to make expenditures. Appropriations lapse at the end of the fiscal period. In order to preserve a portion of an appropriation for which an expenditure has been committed by a purchase order contract or other form of commitment, an encumbrance is recorded.

Included in the General Fund budget are program budgets as prescribed by the State and Federal agencies funding the program. These budgets are approved on a program by program basis by the State or Federal funding agency.

An Enterprise fund budget is not adopted; however, a formal budget is prepared and approved by management and expenditures are controlled on the basis of this budget.

F. Investment Valuation

The District categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.

The District’s investments include long-term, non-negotiable certificates of deposit with local financial institutions. Similar to checking and savings accounts, non-negotiable certificates of deposit are not subject to fair value or the aforementioned fair value level disclosures.

The District’s investments also include mutual funds, which are reported at fair value (Level 1), and Federal Home Loan Mortgage Corporation (FHLMC) securities which are valued utilizing a yield-based matrix system to arrive at an estimated market value (Level 2).

Although included in cash and cash equivalents on the District’s financial statements, the District also invests in pooled funds with the Pennsylvania School District Liquid Asset Fund (PSDLAF), Pennsylvania Local Government Investment Trust (PLGIT), and Federated Government Obligations Funds. The Federated Government Obligations Funds follow Rule 2a7, and PSDLAF and PLGIT investments are held in 2a7-like pools. Portfolio securities are valued at amortized cost, which approximates market value. The Federated Government Obligations Funds maintain a stable net asset value of $1.00 per share. PSDLAF and PLGIT act like money market mutual funds, in that, their objective is to maintain a stable net asset value of $1.00 per share. The District reports these funds at the pool’s share price. These funds are further discussed in Note 3.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

G. Prepaid Items

Payments made to vendors for services that will benefit periods beyond June 30, 2017, 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.

H. Inventory

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

Inventories in governmental funds are stated at cost by the first-in, first-out method and consist of supplies held for consumption. The purchase method is used to account for inventories. Under the purchase method, inventories are recorded as an expenditure when purchased; however, an estimated value of inventories ($10,000) is reported as an asset in the General Fund. The inventories in the General Fund are equally offset by nonspendable fund balance which indicates they do not constitute “available spending resources” even though they are a component of net current assets.

A physical inventory of the Food Service Fund food and supplies was taken as of June 30, 2017. The inventory consisted of government donated commodities which are valued at estimated fair market value, and purchased commodities and supplies, both valued at cost using first-in, first-out (FIFO) method. Any unused commodities donated by the federal government at June 30, 2017 are reported as unearned revenue.

I. Capital Assets

General capital assets result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the government-wide statement of net position but are not reported in the fund financial statements. Capital assets used by the proprietary fund are reported in both the business-type activities column on the government-wide statement of net position and in the fund financial statements.

All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their fair market values as of the date received. The School District maintains a capitalization threshold of fifteen hundred ($1,500) dollars. The School District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life are not capitalized.

All reported capital assets, except for land and construction in progress, are depreciated. 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:

Description Estimated Lives

Site Improvements 15 - 20 years Buildings and Improvements 20 - 50 years Furniture and Equipment 3 - 20 years

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

J. Original Issue Discounts and Premiums

Bond premiums and discounts are reported as direct adjustments to the face amount of the bond and are deferred and amortized over the life of the bond using the straight-line method of amortization.

K. Receivables and Payables

Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e. the current portion of interfund loans) or “advances to/from other funds” (i.e. the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” In governmental fund financial statements, advances between funds are offset by an amount reported as nonspendable fund balance to indicate that they are not available for appropriation and are not expendable available financial resources.

All receivables are determined to be collectible, and no allowance has been established.

Receivables from and payables to external parties are reported separately and are not offset in the proprietary fund financial statements and business-type activities of the government-wide financial statements, unless a right of offset exists.

L. Accrued Liabilities and Long-term Obligations

All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements, and all payables, accrued liabilities and long-term obligations payable from proprietary funds are reported on the proprietary fund financial statements.

In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources, are reported as obligations of the funds. However, claims and judgments, compensated absences, special termination benefits and contractually required pension contributions that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they are due for payment during the current year. Bonds and notes are recognized as a liability on the fund financial statements when due.

M. Unearned Revenues

The District reports unearned revenue on its government-wide and fund financial statements. Unearned revenues arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period (fund financial statements). Unearned revenues also arise when resources are received by the District before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures (fund financial statements and government-wide financial statements). In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for unearned revenue is removed from the applicable financial statement and revenue is recognized.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

N. Deferred Outflows/Inflows of Resources

Deferred Outflows of Resources

The District reports decreases in net assets that relate to future periods as deferred outflows of resources in a separate section of its government-wide statement of net position. The deferred outflows of resources reported in this year’s financial statements include a deferred outflow of resources for contributions made to the District’s cost-sharing multi-employer defined benefit pension plan between the measurement date of the net pension liability from the plan and the end of the District’s fiscal year. They further include deferred amounts arising from changes in the District’s proportionate share of the net pension liability; changes in assumptions; and the difference between projected and actual investment earnings, which are amortized to pension expense over a total of five years, including the current year. No deferred outflows of resources affect the fund financial statements in the current year. See further detail on deferred outflows of resources related to the pension plan at Note 10.

Deferred Inflows of Resources

The District’s statement of net position and its governmental fund balance sheet report a separate section for deferred inflows of resources. This separate financial statement element reflects an increase in net assets that applies to a future period(s). Deferred inflows of resources are reported on the District’s statement of net position for actual pension plan experience in excess of the expected amounts included in determining pension expense. They further include a deferred amount arising from the change in the District’s proportionate share of the net pension liability. These deferred inflows of resources are amortized to pension expense over a total of five years, including the current year. See further detail on deferred inflows of resources related to the pension plan at Note 10.

In the District’s governmental funds, the only deferred inflow of resources is for revenues that are not considered available. The District will not recognize the related revenues until they are available (collected not later than 60 days after the end of the District’s fiscal year) under the modified accrual basis of accounting. Accordingly, unavailable revenues from property taxes are reported in the governmental funds balance sheet as a deferred inflow of resources ($740,597).

O. Fund Balance Classification

GASB Statement No. 54, “Fund Balance Reporting and Governmental Fund Type Definitions,” provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government’s fund balances more transparent. The following classifications describe the relative strength of the spending constraints:

. Nonspendable Fund Balance – amounts that are not in spendable form (such as inventory or prepaid items) or are required to be maintained intact.

. Restricted Fund Balance – amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation.

. Committed Fund Balance – amounts constrained to specific purposes by the District itself, using its highest level of decision-making authority (i.e., School Board). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

. Assigned Fund Balance – amounts the District intends to use for a specific purpose. Intent can be expressed by the School board or by an official or body to which the School Board delegates the authority.

. Unassigned Fund Balance – amounts that are available for any purpose. Positive amounts are reported only in the general fund.

As of June 30, 2017, fund balance components consist of the following:

General Capital Projects Fund Fund Nonspendable: Inventory $ 10,000 $ 0 Restricted: Capital contribution to Upper Yoder Township 200,000 0 Capital projects 0 4,664,400 Unassigned 7,799,811 0 $ 8,009,811 $ 4,664,400 Total Fund Balance

The School Board establishes (and modifies or rescinds) fund balance commitments by resolution of the board. A fund balance commitment is further indicated in the budget document as a commitment of the fund. Assigned fund balance is established by the Business Manager and/or Superintendent as delegated by the School Board.

The District would typically use Restricted fund balances first, followed by Committed resources, and then Assigned resources, as appropriate opportunities arise, but reserves the right to selectively spend Unassigned resources first to defer the use of these other classified funds.

P. Net Position

Net position represents the assets and deferred outflows of resources, net of liabilities and deferred inflows of resources. 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 its use either through the enabling legislation adopted by the School District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments.

When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed.

The government-wide statement of net position reports $213,345 of restricted net position, which is restricted by enabling legislation for Capital Projects ($13,345) and for a capital contribution to Upper Yoder Township ($200,000).

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Q. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

R. Pension Plan

Substantially all full-time and part-time employees of the District participate in a cost-sharing multi- employer defined benefit pension plan. GASB Statement No. 68, Accounting and Financial Reporting for Pensions, requires cost-sharing employers such as the District to recognize a liability for their proportionate share of the collective net pension liability. The standard further requires the District to recognize pension expense and report deferred outflows of resources and deferred inflows of resources related to pensions for its proportionate shares of collective pension expense and collective deferred outflows and inflows of resources related to pensions.

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pension expense, information about the fiduciary net position of the Public School Employees’ Retirement System (PSERS), and additions to/deductions from PSERS’s fiduciary net position have been determined on the same basis as they are reported by PSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms, and investments are reported at fair value.

3. Cash and Cash Equivalents and Investments

Under Section 440.1 of the Public School Code of 1949, as amended, the District is permitted to invest its monies as follows:

Obligations of (a) the United States of America or any of its agencies or instrumentalities backed by the full faith and credit of the United States of America, (b) the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the Commonwealth, or (c) any political subdivision of the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the political subdivision.

Deposits in savings or time deposits or share accounts of institutions insured by the Federal Deposit Insurance Corporation to the extent that such accounts are so insured and, for any amounts above the insured maximum, provided that approved collateral as provided by law is pledged by the depository.

Shares of an investment company registered under the Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, provided certain requirements are met.

Repurchase agreements with respect to U. S. Treasury bills or obligations.

Local Government Investment Pools (LGIPs) which include, but are not limited to, the Pennsylvania School District Liquid Asset Fund (PSDLAF) and the Pennsylvania Local Government Investment Trust (PLGIT).

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Under Pennsylvania Act 10 of 2016, effective May 24, 2016, all Pennsylvania local governments, including school districts, have additional investment options including commercial paper, bankers’ acceptances, and negotiable certificates of deposit. These additional investments are subject to maturity terms and credit rating requirements, as defined in the Act. However, due to the collateralization requirements of the Code and because negotiable certificates of deposit do not exist in the current investment market in a collateralized form to satisfy the requirements, they are not an investment lawfully available to school districts at this time.

The deposit and investment policy of the school district adheres to state statutes and prudent business practice. Cash equivalents are defined as short-term, highly liquid investments that are readily convertible to known amounts of cash and include investments with original maturities of three months or less. Cash and cash equivalents include demand deposits at various financial institutions. The market values of deposits are equal to the cost of the deposits. Cash and cash equivalents further include pooled investments with the Pennsylvania Local Government Investment Trust (PLGIT), and the Pennsylvania School District Liquid Asset Fund (PSDLAF) further discussed below.

PSDLAF was established to enable school districts to pool funds for investment in instruments authorized by Section 440.1 of the Pennsylvania School Code of 1949, as amended. PLGIT insures that it will not place deposits with any single issuing institution if the largest participant’s pro rata share of such deposits exceeds the insurance limits unless such deposits are collateralized as prescribed by Act 72 of the Commonwealth of Pennsylvania. These funds have the characteristics of open-end mutual funds and are not subject to credit risk classification.

In accordance with GASB Statement No. 79, Certain External Investment Pools and Pool Participants, PSDLAF funds meet the requirements of investments held in 2a7-like pools, and accordingly, portfolio securities are valued at amortized cost, which approximates market value. Although not registered with the Securities and Exchange Commission and not subject to regulatory oversight, PSDLAF acts like money market mutual funds, in that, their objective is to maintain a stable net asset value of $1.00 per share, are rated by a nationally recognized statistical rating organization, and are subject to an independent annual audit. Investments in PSDLAF are highly liquid, as deposits can be converted to cash within twenty-four hours without loss of principal or interest.

Also in accordance with GASB Statement No. 79, PLGIT “liquid portfolios” meet the requirements of investments held in 2a7-like pools, and accordingly, portfolio securities are valued at amortized cost, which approximates market value. Although not registered with the Securities and Exchange Commission and not subject to regulatory oversight, PLGIT portfolios act like money market mutual funds, in that, their objective is to maintain a stable net asset value of $1.00 per share, are rated by a nationally recognized statistical rating organization, and are subject to an independent annual audit. Investments in certain PLGIT portfolios are highly liquid, as deposits can be converted to cash within twenty-four hours without loss of principal or interest. However, other portfolios, although liquid, impose penalties for withdrawals prior to initial holding periods of 30 days or for exceeding limits on the number of withdrawals per month. Another has 7-day wait time, in the case of premature redemptions, in addition to a premature redemption penalty.

The District’s investments, as reported on the financial statements, include multiple long-term, non-negotiable certificates of deposit with local financial institutions. These investments are stated at cost, including accrued interest. The District’s investments also include Federated Government Obligation Funds and Wells Fargo Mutual Funds, which are reported at fair value (Level 1), and FHLMC securities, which are valued utilizing a yield-based matrix system to arrive at an estimated market value (Level 2).

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Cash

Custodial Credit Risk – Deposits

Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be returned to it. The District does not have a policy for custodial credit risk, however, the District’s deposits in excess of the FDIC limit are collateralized in accordance with the Pennsylvania Security for Public Deposit Act. As of June 30, 2017, $8,884,099 of the District’s bank balance of $9,625,228 was exposed to custodial risk as:

Uninsured and uncollateralized $ 0 Collateralized with securities held by the pledging financial institution 0 Uninsured and collateral held by the pledging bank’s trust department not in the District’s name 8,884,099 Total $8,884,099

Reconciliation to Financial Statements

Uninsured amount above $8,884,099 Plus: Insured amount 741,129 Less: Outstanding checks (669,584) Carrying amount – bank balances 8,955,644 Plus: Petty cash 130 Pooled investments considered to be cash equivalents 1,021,894 Overdrawn cash included in accounts payable 38,920 Less: Certificates of deposit considered investments (481,000) Total cash per financial statements $9,535,588

Investments

As of June 30, 2017, the District had the following investments and maturities:

Investment Maturity Value

Certificates of Deposit 24-36 months $ 481,000 PA School District Liquid Asset Fund <1 year 26,743 PA Local Government Investment Trust <1 year 995,151 Federal Home Loan Mortgage Corporation 30 years 2,065 Wells Fargo Mutual Funds <1 year 7,242 Federated Government Obligation Funds <1 year 7,717,905

Total $9,230,106

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

As of June 30, 2017, the District’s investments had the following maturities:

Investment Maturities (in Years) Fair Less Value than 1 1-5 6-10 Thereafter Certificates of Deposit $ 481,000 $ 0 $ 481,000 $ 0 $ 0 PA School District Liquid Asset Fund 26,743 26,743 0 0 0 PA Local Government Investment Trust 995,151 995,151 0 0 0 Federal Home Loan Mortgage Corporation 2,065 0 0 0 2,065 Wells Fargo Mutual Funds 7,242 7,242 0 0 0 Federated Government Obligation Funds 7,717,905 7,717,905 0 0 0 $ 9,230,106 $ 8,747,041 $ 481,000 $ 0 $ 2,065

Interest Rate Risk

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

Credit Risk

State law limits investments to those authorized by State statutes. However, the District has no investment policy that would limit its investment choices to certain credit ratings. As of June 30, 2017, the District’s investments were rated as:

Investment Standard & Poor’s PA Local Government Trust AAAm PA School District Liquid Asset Fund AAAm Federated Government Obligation Funds AAAm Federal Home Loan Mortgage Corporation AA+ Wells Fargo Mutual Funds N/A

Concentration of Credit Risk

The District places no limit on the amount the District may invest in any one issuer.

Custodial Credit Risk

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

Reconciliation to Financial Statements

Total investments above $ 9,230,106 Less: Deposits in investment pool considered cash equivalents (1,021,894) Total investments per financial statements $ 8,208,212

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

4. Real Estate Taxes

Real estate taxes for the School District are collected from the Boroughs of Westmont and Southmont and the Township of Upper Yoder. The tax on real estate for public school purposes for fiscal 2017 was 85.20 mills ($85.20 per $1,000 of assessed valuation) as levied by the Board. Assessed valuations ($137,967,030) of property are determined by Cambria County, and the elected tax collectors are responsible for collection. The schedule for real estate taxes levied for each fiscal year is as follows:

July 1 - Levy Date July 1 - August 31 - 2% Discount Period September 1 - October 31 - Face Payment Period November 1 - December 31 - 5% Penalty Period January 15 - Lien Date

5. Taxes Receivable

The elected tax collectors are required to return any uncollected real estate taxes to the county’s tax claim bureau by January 15. It has been determined the amount of outstanding taxes as of June 30, 2017 is $1,222,538. The School District, in accordance with accounting principles generally accepted in the United States of America, recognized the delinquent and unpaid taxes receivable. An allowance for uncollectible taxes was not established by the administration. A portion of the amount estimated to be collectible which was measurable and available within 60 days was recognized as revenue and the balance recorded as a deferred inflow of resources in the fund financial statements.

Uncollected taxes for the year ended June 30, 2017:

Delinquent Real Estate $ 141,185 Realty Transfer Tax 12,153 Earned Income Taxes 328,603

Uncollected Taxes Recognized as Revenue (received within 60 days) 481,941

Real Estate Tax-Deferred Inflow of Resources 740,597

Total Taxes Receivable $1,222,538

6. Unearned Revenues

Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Unearned revenues in the food service fund ($26,779) represent credits on student cafeteria accounts ($12,407) and donated commodities inventory on hand ($14,372) at June 30, 2017.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

7. Due From Other Governments

Amounts due from other governments represent receivables for revenues earned by the School District or collections made by another governmental unit on behalf of the School District. At June 30, 2017, the following amounts are due from other governmental units:

Due From General Fund Proprietary Fund

Federal $229,469 $8,351 State 620,490 622 $849,959 $8,973

8. Capital Assets

Capital asset activity for the fiscal year ended June 30, 2017, was as follows:

Beginning Ending Balance Additions Deductions Balance Governmental Activities Capital assets, not being depreciated: Land $ 24,493 $ 0 $ 0 $ 24,493 Construction in progress 7,376,843 23,235,732 0 30,612,575 Total capital assets, not being depreciated 7,401,336 23,235,732 0 30,637,068 Capital assets, being depreciated: Site improvements 822,922 0 0 822,922 Buildings and improvements 16,679,727 0 0 16,679,727 Furniture and equipment 3,658,100 38,931 0 3,697,031 Total capital assets, being depreciated 21,160,749 38,931 0 21,199,680 Less accumulated depreciation: Site improvements 675,457 20,104 0 695,561 Buildings and improvements 10,487,357 381,091 0 10,868,448 Furniture and equipment 3,163,149 124,807 0 3,287,956 Total accumulated depreciation 14,325,963 526,002 0 14,851,965 Total capital assets, being depreciated, net 6,834,786 (487,071) 0 6,347,715 Governmental activities capital $ 14,236,122 $ 22,748,661 $ 0 $ 36,984,783 assets, net

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Beginning Ending Balance Additions Deductions Balance Business-Type Activities Capital assets, being depreciated: Equipment $ 157,886 $ 0 $ 0 $ 157,886 Total capital assets, being depreciated 157,886 0 0 157,886 Less accumulated depreciation: Equipment 100,797 11,349 0 112,146 Total accumulated depreciation 100,797 11,349 0 112,146 Business-type activities $ 57,089 $ (11,349) $ 0 $ 45,740 capital assets, net

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

Governmental Activities: Instruction $347,019 Instruction support 57,740 Administration and finance 62,448 Operation and maintenance of plant 42,047 Student activities 16,748 Total depreciation expense - governmental activities $526,002

9. Defined Benefit Pension Plan

Plan Description

The District contributes to a governmental cost-sharing multiple-employer defined benefit pension plan administered by Pennsylvania Public School Employee’s Retirement System (PSERS). Benefit provisions of the plan are established under the provisions of the Pennsylvania Public School Employees’ Retirement Code (the Code) and may be amended by an act of the Pennsylvania State Legislature. The plan provides retirement and disability, legislatively mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying plan members and beneficiaries. It also provides for refunds of a member’s accumulated contribution upon termination of a member’s employment in the public school sector. The members eligible to participate in the plan include all full-time employees, part-time hourly employees who render at least 500 hours of service in the school year, and part-time per diem employees who render at least 80 days of service in the school year. PSERS issues a publicly available financial report that includes financial statements and required supplementary information for the plan. That report may be obtained at www.psers.state.pa.us.

Funding Policy

The contribution policy is set by the Code and requires contributions by active members, employers, and the Commonwealth.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Benefits provided

PSERS provides retirement, disability, and death benefits. Members are eligible for monthly retirement benefits upon reaching (a) age 62 with at least one year of credited service; (b) age 60 with 30 or more years of credited service; or (c) 35 or more years of service regardless of age. Act 120 of 2010 (Act 120) preserves the benefits of existing members and introduced benefit reductions for individuals who became new members on or after July 1, 2011. Act 120 created two new membership classes, Membership Class T-E (Class T-E) and Membership Class T-F (Class T-F). To qualify for normal retirement, Class T-E and Class T-F members must work until age 65 with a minimum of three years of service or attain a total combination of age and service that is equal to or greater than 92 with a minimum of 35 years of service. Benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service. For members whose membership started prior to July 1, 2011, after completion of five years of service, a member’s right to the defined benefits is vested and early retirement benefits may be elected. For Class T-E and Class T-F members, the right to benefits is vested after ten years of service.

Participants are eligible for disability retirement benefits after completion of five years of credited service. Such benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service, but not less than one-third of such salary nor greater than the benefit the member would have had at normal retirement age. Members over normal retirement age may apply for disability benefits.

Death benefits are payable upon the death of an active member who has reached age 62 with at least one year of credited service (age 65 with at least three years of credited service for Class T-E and Class T-F members) or who has at least five years of credited service (ten years for Class T-E and Class T-F members). Such benefits are actuarially equivalent to the benefit that would have been effective if the member had retired on the day before death.

Contributions

Member Contributions:

Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class T-C) or at 6.50% (Membership Class T-D) of the member’s qualifying compensation.

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

Members who joined the System after June 30, 2001 and before July 1, 2011, contribute at 7.5% (automatic Membership Class T-D). For all new hires and for new members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January 1, 2002.

Members who joined the System after June 30, 2011, automatically contribute at the Membership Class T-E rate of 7.5% (base rate) of the member’s qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at 10.3% (base rate) of the member’s qualifying compensation. Membership Class T-E and Class T-F are affected by a “shared risk” provision in Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate to fluctuate between 7.5% and 9.5% and Membership Class T-F contribution rate to fluctuate between 10.3% and 12.3%.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Employer Contributions:

The contribution required of participating employers is based on an actuarial valuation and is expressed as a percentage of annual covered payroll during the period for which the amount is determined. Before July 1, 1995, the school district and the Commonwealth shared the employer contribution rate equally. Since July 1, 1995, the school districts are required to pay the entire employer contribution rate and are reimbursed by the Commonwealth in an amount equal to the Commonwealth’s share as determined by the market value/personal income aid ratio (as defined in Act 29 of 1994), which is at least one-half of the total employer rate.

The District’s contractually required contribution rate, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year with an additional amount to finance any unfunded accrued liability. For the fiscal year ended June 30, 2017, the rate of the employer’s contribution was 30.03 percent of covered payroll. The 30.03 percent rate is composed of a pension contribution rate of 29.20 percent for pension benefits and 0.83 percent for healthcare insurance premium assistance. Westmont Hilltop School District’s contributions to PSERS for the year ending June 30, 2017 were $2,544,767.

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

At June 30, 2017, the District reported a liability of $33,748,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by rolling forward the system’s total pension liability as of June 30, 2015 to June 30, 2016. The District’s proportion of the net pension liability was calculated utilizing the employer’s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2016, the District’s proportion was 0.06813%, which was an increase of 0.0008% from its proportion measured as of June 30, 2015.

For the year ended June 30, 2017, the District recognized pension expense of $3,163,933. At June 30, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual experience $ 0 $ 281,000 Changes in assumptions 1,218,000 0 Net difference between projected and actual investment earnings 1,881,000 0 Changes in proportions 279,000 800,000 Difference between employer contributions and proportionate share of total contributions 0 0 Contributions subsequent to the measurement date 2,474,432 0 $ 5,852,432 $ 1,081,000

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

$2,474,432, reported as deferred outflows of resources 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, 2018. Other amounts, reported as deferred outflows of resources and deferred inflows of resources related to pensions, will be recognized in the pension expense as follows:

Year Ended June 30: 2018 $ 294,000 2019 294,000 2020 931,000 2021 778,000 2022 0 2023 0 Thereafter 0 $ 2,297,000

Actuarial assumptions

The total pension liability as of June 30, 2016 was determined by rolling forward the System’s total pension liability as of June 30, 2015 to June 30, 2016 using the following actuarial assumptions, applied to all periods included in the measurement.

Changes in assumptions used in measurement of the Total Pension Liability beginning June 30, 2016:

 The investment rate of return was adjusted from 7.50% to 7.25%.  The inflation assumption was decreased from 3.0% to 2.75%.  Salary growth changed from an effective average of 5.50%, which was comprised of inflation of 3.00%, real wage growth and merit or seniority increases of 2.50%, to an effective average of 5.00%, comprised of inflation of 2.75% and 2.25% for real wage growth and for merit or seniority increases.  Mortality rates were modified from the RP-2000 Combined Healthy Annuitant Tables (male and female) with age set back 3 years for both males and females to the RP-2014 Mortality Tables for Males and Females, adjusted to reflect PSERS’ experience and projected using a modified version of MP-2015 Mortality Improvement Scale. For disabled annuitants, the RP-2000 Combined Disabled Tables (male and female) with age set back 7 years for males and 3 years for females, to the RP-2014 Mortality Tables for Males and Females, adjusted to reflect PSERS’ experience and projected using a modified version of the MP-2015 Mortality Improvement Scale.

The actuarial assumptions used in the June 30, 2016 valuation were based on the experience study that was performed for the five-year period ending June 30, 2015. The recommended assumption changes based on this experience study were adopted by the Board at its June 10, 2016 board meeting, and were effective beginning with the June 30, 2016 actuarial valuation.

The long-term expected rate of return on pension plan investments was determined using a building-block method 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 by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

The pension plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the Board. Plan assets are managed with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension.

Long-Term Target Expected Real Asset Class Allocation Rate of Return

Global public equity 22.5% 5.3% Fixed income 28.5% 2.1% Commodities 8.0% 2.5% Absolute return 10.0% 3.3% Risk parity 10.0% 3.9% Infrastructure/MLPs 5.0% 4.8% Real estate 12.0% 4.0% Alternative investments 15.0% 6.6% Cash 3.0% 0.2% Financing (LIBOR) -14.0% 0.5% 100.0%

The above was the Board’s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, 2016.

Discount rate

The discount rate used to measure the total pension liability was 7.25%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the District’s proportionate share of the net pension liability to changes in the discount rate

The following presents the net pension liability , calculated using the discount rate of 7.25%, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.25%) or one percentage point higher (8.25%) than the current rate:

Current Discount 1% Decrease Rate 1% Increase 6.25% 7.25% 8.25%

District's proportionate share of the net pension liability $ 41,283,000 $ 33,748,000 $ 27,417,000

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Pension plan fiduciary net position

Detailed information about PSERS’ fiduciary net position is available in PSERS Comprehensive Annual Financial Report which can be found on the System’s website at www.psers.state.pa.us.

11. Post-employment Healthcare Benefits

The Public School Employees’ Retirement System (PSERS) provides a health insurance premium assistance program (premium assistance), a post-employment healthcare plan as defined in the Public School Employees’ Retirement Code and amended by Act 29. The program is available to all eligible annuitants who elect to participate. Under this program, an employer contribution rate for premium assistance was established to provide reserves in the Health Insurance Account that are sufficient for the payment of premium assistance benefits.

Participating eligible annuitants are entitled to receive premium assistance payments equal to the lesser of $100 per month or their monthly insurance premium. In order to receive premium assistance, eligible annuitants must obtain their health insurance through their employer or the System’s Health Options Program (HOP), in which the system acts as a conduit between the insurance companies and the eligible annuitant.

12. Postemployment Benefits

From an accrual accounting perspective, the cost of postemployment healthcare benefits, like the cost of pension benefits, should be associated with the periods in which the cost occurs, rather than in the future year when it will be paid. Under GASB Statement No. 45, the District recognizes the cost of postemployment healthcare in the year when employee services are received, reports the accumulated liability from prior years, and provides information useful in assessing potential demands on the District’s future cash flows. Because the District adopted the requirements of GASB Statement No. 45 prospectively, recognition of the liability accumulated from prior years will be phased in over 30 years, commencing with the 2009 liability.

Plan Description

The District provides continuation of medical and pharmacy benefits to employees who retire from the District.

Eligibility

Age and service requirements for retirement vary by group as shown below. No benefits are provided upon termination of employment if retirement conditions are not met at termination. No benefits are provided to surviving dependents upon death if employee has not retired.

Professional Staff: Eligibility for PSERS retirement (superannuation or early retirement provisions), including at least 15 years with the Westmont Hilltop School District. Otherwise, healthcare coverage can be purchased in retirement at age 45 or upon completion of 20 years of service with the District.

Support Staff: Eligible to purchase coverage upon meeting the requirements of Act 110/43.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Duration of Healthcare Benefits

Professional Staff: Retirees may purchase coverage until age 65, or death, or qualification for Medicare if earlier. Spouses and surviving spouses may purchase coverage until age 65, or death, or qualification for Medicare if earlier.

Support Staff: Retirees may purchase coverage until age 65, or death, or qualification for Medicare, if earlier. Spouses and surviving spouses may purchase coverage until age 65, or death, or qualification for Medicare, if earlier.

Cash Payments

Professional Staff: Retirement Bonus: $15,000 lump sum upon retirement after meeting PSERS superannuation or early retirement eligibility and completing 15 years of service with the District.

Act 93 Severance Payment: Upon retirement under PSERS with less than 15 years of service, retirees will receive a cash payment as follows:

Years of Service Payment 5 $1,100 10 1,250 11 1,400 12 1,600 13 1,800 14 or more 2,100

Support Staff: Retirees (excluding maintenance) will receive a cash payment as follows upon retirement after meeting PSERS superannuation or early retirement eligibility:

Years of Service Payment 5 $1,100 10 1,250 11 1,400 12 1,600 13 1,800 14 or more 2,100

Participant Contributions

Professional Staff: Retiree and/or spouse pay the full premium amount.

Support Staff: Retiree and/or spouse pay the full premium amount.

All contracts with the District’s union employees will be renegotiated at various times in the future and, thus, costs and benefits are subject to change.

OPEB benefits are administered by District personnel. No separate financial statements are issued.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

The number of participants as of July 1, 2014, the effective date of the triennial OPEB valuation, follows. There have been no significant changes in the number covered or the type of coverage since that date.

District Active employees 134 Retired employees 30

Total 164

Funding Policy

The District currently pays for postemployment health care benefits on a pay-as-you-go basis, and these financial statements assume that pay-as-you-go funding will continue.

Annual Other Postemployment Benefit Cost

For the fiscal year ended June 30, 2017, the District’s annual OPEB cost (i.e., expense) of $193,899 is equal to the adjusted Annual Required Contribution. Considering the District’s annual OPEB cost as well as the payment of current health insurance premiums, which totaled $283,800, the result was a decrease in the District’s Net OPEB Obligation of $89,901 for the year ended June 30, 2017.

District Actuarial Accrued Liability (AAL) Retired employees $ 1,299,100 Active employees 1,221,800 Unfunded actuarial accrued liability (UAAL) $ 2,520,900 Normal cost at beginning of year $ 85,200 Amortization factor based on 30 years 22.3494 Annual covered payroll To be determined UAAL as % of covered payroll To be determined

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

District ARC Normal Cost $ 94,541 Amortization of UAAL 111,546 Annual required contribution (ARC) 206,087 Interest on Net OPEB Obligation 0 Adjustment to ARC (12,188) Annual OPEB cost (expense) 193,899 Contribution for the fiscal year (283,800) Decrease in Net OPEB Obligation (89,901) Net OPEB Obligation June 30, 2016 722,799 Net OPEB Obligation June 30, 2017 $ 632,898

Percent of annual OPEB cost contributed 146.4%

The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation of the fiscal years ending June 30, 2017, 2016 and 2015 for the benefits were as follows:

Percentage of Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed Obligation 6/30/2017 $ 193,899 146.4% $ 632,898 6/30/2016 $ 190,947 150.8% $ 722,799 6/30/2015 $ 187,695 142.9% $ 819,752

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and plan members to that point. Most included coverages are “community-rated” and annual premiums for community-rated coverages were used as a proxy for claims costs without age adjustment. The unfunded actuarial accrued liability is being amortized over 30 years on a closed level dollar basis.

The projection of future benefits for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of future events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

In the July 1, 2014 actuarial valuation, the liabilities were computed using the projected unit credit method and closed level dollar amortization. The actuarial assumptions utilized a 4.00% discount rate. Because the plan is unfunded, reference to the general assets, which are short-term in nature (such as money market funds), was considered in the selection of the 4.00% rate. The valuation assumes a 7.70% healthcare cost trend increase for fiscal year 2017-18, reduced by decrements to a rate of 5.40% by 2020.

13. Long-Term Obligations

During the fiscal year ended June 30, 2017, general long-term obligations changed as follows:

Other Total General Bonds Long-Term Compensated Retirement Long-term Payable Financing Absences Incentives Debt Beginning of year $ 9,355,000 $ 66,493 $ 701,625 $ 0 $ 10,123,118 Bond proceeds 19,470,000 0 0 0 19,470,000 Principal retirement (425,000) (66,493) 0 0 (491,493) Changes in compensated absences 0 0 27,359 0 27,359 Retirement incentives earned 0 0 0 739,057 739,057 Paid into health reimbursement accounts 0 0 0 (186,057) (186,057) End of year 28,400,000 0 728,984 553,000 29,681,984 Add: Original issue premium, net 61,254 0 0 0 61,254 Less: current portion (460,000) 0 0 (91,000) (551,000) Long-term liabilities $ 28,001,254 $ 0 $ 728,984 $ 462,000 $ 29,192,238

The future annual payments required to amortize all outstanding debt and obligations, except for the compensated absences and retirement incentives as of June 30, 2017, including total interest payments are as follows:

Year Ended General Obligation Bonds June 30, Interest Principal Total 2018 $ 760,240 $ 460,000 $ 1,220,240 2019 816,456 640,000 1,456,456 2020 802,706 655,000 1,457,706 2021 785,931 670,000 1,455,931 2022 768,656 690,000 1,458,656 2023-2027 3,582,398 3,700,000 7,282,398 2028-2032 3,047,510 4,235,000 7,282,510 2033-2037 2,353,474 4,935,000 7,288,474 2038-2042 1,567,340 5,720,000 7,287,340 2043-2047 586,220 6,695,000 7,281,220 $ 15,070,931 $ 28,400,000 $ 43,470,931

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

General Obligation Bonds, Series of 2014

In September 2014, the District issued $9,755,000 of General Obligation Bonds, Series of 2014. The purpose of this bond is to provide funds for the acquisition and construction of renovations and improvements to both the elementary and high school buildings in connection with the reduction in the number of education facilities being used by the School District and payment of all costs and expenses incurred by the School District in connection with the issuance and sale of the bonds. These bonds bear interest rates ranging from 0.15% to 3.25% with annual principal maturities from April 1, 2016 to October 1, 2033. The outstanding balance at June 30, 2017 is $8,930,000.

General Obligation Bonds, Series of 2016

In October 2016, the District issued $9,500,000 of General Obligation Bonds, Series of 2016. The purpose of this bond is to provide funds for the acquisition and construction of renovations and improvements to both the elementary and high school buildings in connection with the reduction in the number of facilities being used by the School District and payment of all costs and expenses incurred by the School District in connection with the issuance and sale of the bonds. These bonds bear interest rates ranging from 1.50% to 3.00% with annual principal maturities from October 1, 2017 to October 1, 2044. The outstanding balance at June 30, 2017 is $9,500,000.

General Obligation Bonds, Series of 2017

In June 2017, the District issued $9,970,000 of General Obligation Bonds, Series of 2017. The purpose of this bond is to provide funds for the acquisition and construction of renovations and improvements to both the elementary and high school buildings in connection with the reduction in the number of facilities being used by the School District and payment of all costs and expenses incurred by the School District in connection with the issuance and sale of the bonds. These bonds bear interest rates ranging from 1.00% to 4.00% with annual principal maturities from October 1, 2018 to October 1, 2046. The outstanding balance at June 30, 2017 is $9,970,000.

Other Long-Term Debt: Retirement Incentives

In January 2016, the District offered a retirement incentive for those employees retiring from December 1, 2015 through February 29, 2016. The retirement incentive included a District contribution of $7,000 per year for seven consecutive years into the employee’s limited purpose health reimbursement account (HRA) or into the employee’s 403(b) account. The District’s balance due to retiree accounts for incentives at June 30, 2017 is $553,000 as reflected in the government-wide financial statements. Further, the District is holding HRA funds on behalf of retirees in the amount of $186,057 at June 30, 2017 which is reflected as a liability on both the fund and government-wide financial statements.

Other Long-Term Financing: iPads Purchase Agreement

In July 2014 the District entered into an agreement with Apple Financial Services in the amount of $199,500 to provide financing for the purchase of 500 iPads. The purchase was financed with an interest rate of 1.9% with annual payments of $67,755 commencing July 25, 2014 through July 25, 2016. The balance outstanding at June 30, 2017 was $0.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Accumulated Compensated Absences

In accordance with accounting principles generally accepted in the United States of America, the District accrues liabilities for compensated absences. Compensated absences reflect the potential cost of vacation and sick leave earned by employees as of June 30, 2017. The School District compensates employees at retirement for unused sick days in the following manner. Contractual provisions with teachers and administrators require payment at a rate of $100 per day not to exceed $20,000. Contractual provisions with secretaries and aides require payment at a rate of $30 per day not to exceed 50 days. The School District has computed a liability of $728,984 at June 30, 2017. Due to the complexity of the calculation, no current portion was determined. The entire liability is reflected as a long-term obligation on the statement of net position. In addition, due to the nature of the obligation, annual requirements to amortize such obligations are not determinable and have not been presented.

General obligation bonds and other long-term obligations issued for governmental activity purposes are liquidated by the general fund. Compensated absences liabilities for governmental activities also will be paid by the general fund.

14. Operating Leases

The School District entered into noncancellable operating leases for copiers, computers and facility use. Rental expenditures under all operating lease agreements were $176,381. Future minimum rental payments required under operating leases that have remaining lease terms as of June 30 are as follows:

Year Ended June 30, Payment 2018 $14,178 2019 14,178 2020 14,178 2021 14,178 2022 1,181 Total minimum payments required $57,893

15. Interfund Transactions

The following is a summary of interfund receivables and payables at June 30, 2017:

Receivables Payables General Fund (Major Fund) $ 0 $259,029 Enterprise Fund – Food Service (Major Fund) 259,029 0 $259,029 $259,029

The interfund balances above represent 1) $245,627 due to Food Service Fund for federal and state subsidies; and 2) $13,402 due from students for meal purchases to be remitted to the Food Service fund upon collection by the General Fund.

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Interfund transfers during the year ended June 30, 2017 consisted of the following:

Transfers In Transfers Out Enterprise Fund – Food Service (Major Fund) $ 169,133 $ 0 Capital Projects Fund (Major Fund) 1,419,078 0 General Fund (Major Fund) 0 1,588,211 $1,588,211 $1,588,211

The interfund transfer into the food service fund represents prior year amounts due to the general fund that were forgiven in fiscal year 2017. Additionally, the District transferred funds to the capital projects fund to assist with the cost of the current construction project.

16. Contingent Liabilities

Grant Programs

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

17. Self-Insurance - Medical Insurance

The School District is participating in the insurance consortium with the Greater Johnstown Area Consortium to provide for the medical care for eligible employees and their dependents. The consortium, which administers the plan, monitors the School’s deposit into the school district trust account to be held for the benefits described above and Highmark Services, the plan administrator, processes and pays the claims. The consortium limits its liability by stop-loss insurance coverage. Westmont Hilltop School District’s liability at June 30, 2017, for unpaid claims incurred prior to fiscal year end is not readily determinable. No liability has been recorded for these claims at June 30, 2017, as the District recognizes medical claim expenses as claims are paid.

18. Risk Management

The District is exposed to various risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The District has purchased various insurance policies to safeguard its assets from risk of loss. Insurance coverage appears to be consistent with previous years. During the year ended June 30, 2017 and the two previous fiscal years, no settlements exceeded insurance coverage.

19. Related Party Transactions

Intermediate Unit Participation The District is a member of Appalachia Intermediate Unit 8. The District avails itself of various services provided by this membership including special education, curriculum development, and certain internal service functions. The total of services provided to Westmont Hilltop School District for the year ended June 30, 2017 for Appalachia Intermediate Unit 8 programs amounted to $350,152. At June 30, 2017, the District had a balance due to Appalachia IU8 of $63,514. 54

Westmont Hilltop School District Notes to Financial Statements June 30, 2017

Technology Center School Participation The School District governs, with six other school districts, the Greater Johnstown Career and Technology Center. Each district is represented on the Technology Center’s school board. Students of the Westmont Hilltop School District have available at the Technology Center courses and curriculums related to the technical training fields. The District’s portion of tuition payments for its students attending the Technology Center for fiscal year 2017 amounted to $132,428.

20. Economic Dependency

Westmont Hilltop School District receives approximately 33.98% of its revenue from the State of Pennsylvania in the form of state subsidies. Changes in funding levels by the State could have a material effect on future operations of the District.

21. Nonmonetary Transactions

The District receives one of its federal program subsidies by means of noncash transfer. The U.S. Department of Agriculture, through the Pennsylvania Department of Agriculture, provides food commodities under the National School Lunch Program. These nonmonetary commodity items are valued at market values and recorded as revenue as utilized. The total food commodities donated by the federal government for the fiscal year 2017 totaled $56,582.

Westmont Hilltop School District Required Supplementary Information – Pension Schedules June 30, 2017

Schedule of Proportionate Share of the Net Pension Liability 2017 2016 2015 2014

District's proportion of net pension liability 0.0681% 0.0673% 0.0689% 0.0712%

District's proportionate share of net pension liability $ 33,748,000 $ 29,151,000 $ 27,271,000 $ 29,147,000

District's covered-employee payroll * $ 8,816,769 $ 8,654,591 $ 8,797,707 $ 9,141,784

District's proportionate share of net pension liability as percentage of its covered-employee payroll 382.77% 336.83% 309.98% 318.83%

Plan fiduciary net position as a percentage of the total pension liability 50.14% 54.36% 57.24% 54.49%

*The District's covered employee payroll noted above is as of the measurement date of the net pension liability (June 30, 2016, 2015, 2014, and 2013).

Schedule of District Contributions 2017 2016 2015 2014

Contractually required contributions $ 2,474,432 $ 2,161,933 $ 1,724,016 $ 1,367,940

Contributions in relation to the contractually required contributions (2,474,432) (2,161,933) (1,724,016) (1,367,940)

Contribution deficiency (excess) $ 0 $ 0 $ 0 $ 0

Covered-employee payroll $ 8,750,112 $ 8,816,769 $ 8,654,591 $ 8,797,707

Contributions as a percentage of covered-employee payroll 28.28% 24.52% 19.92% 15.55%

Note: These schedules are intended to present information for ten years. Additional years will be displayed prospectively as information becomes available.

See accompanying notes to basic financial statements.

Westmont Hilltop School District Schedule of Revenues, Expenditures and Changes In Fund Balance – Budget and Actual General Fund For the Year Ended June 30, 2017

Actual Variance with Final Budgeted Amounts (Budgetary Budget Favorable Original Final Basis) (Unfavorable) Revenues Local sources $ 13,384,107 $ 13,384,107 $ 13,616,374 $ 232,267 State sources 6,972,217 6,972,217 7,635,610 663,393 Federal sources 522,233 522,233 554,671 32,438 Total revenues 20,878,557 20,878,557 21,806,655 928,098 Expenditures Instruction: Regular programs 9,953,165 9,953,165 9,798,420 154,745 Special programs 1,793,070 1,793,070 1,765,845 27,225 Vocational education programs 473,720 473,720 381,280 92,440 Other instructional programs 52,990 52,990 35,160 17,830 Nonpublic schools programs 0 0 1,845 (1,845) Pre-kindergarten 0 0 19,520 (19,520) Support services: Pupil personnel 957,223 957,223 1,139,517 (182,294) Instructional staff 161,503 161,503 316,016 (154,513) Administration 1,329,871 1,329,871 943,655 386,216 Pupil health 409,022 409,022 392,195 16,827 Business 312,229 312,229 317,648 (5,419) Operation and maintenance of plant 1,575,294 1,575,294 1,454,241 121,053 Student transportation 855,000 855,000 867,013 (12,013) Central 642,650 642,650 535,017 107,633 Other support services 0 0 6,458 (6,458) Operation of noninstructional services: Student activities 665,744 665,744 579,259 86,485 Community services 0 0 1,113 (1,113) Capital outlay 155,000 155,000 3,908,258 (3,753,258) Debt service: Principal and interest 1,542,076 1,542,076 778,862 763,214

Total expenditures 20,878,557 20,878,557 23,241,322 (2,362,765)

Excess (deficiency) of revenues over expenditures 0 0 (1,434,667) (1,434,667)

Other financing sources (uses) Sale of fixed assets 0 0 16,020 16,020 Interfund transfers 0 0 (1,588,211) (1,588,211) Total other financing sources (uses) 0 0 (1,572,191) (1,572,191) Net change in fund balance 0 0 (3,006,858) (3,006,858) Fund balance, beginning of year 10,271,794 10,271,794 11,016,669 744,875 Fund balance, end of year $ 10,271,794 $ 10,271,794 $ 8,009,811 $ (2,261,983)

See accompanying notes to basic financial statements.

Westmont Hilltop School District Schedule of Expenditures of Federal Awards and Certain State Grants For the Year Ended June 30, 2017

Pass Program Total Accrued Accrued Federal Through Or Received (Unearned) Passed (Unearned) Federal/Grant Source C.F.D.A. Grantors Grant Period Award For the Revenue at Revenue Through to Revenue Project Title Code Number Number Beginning/End Date Amount Year July 1, 2016 Recognized Expenditures Subrecipients June 30, 2017

U.S. DEPARTMENT OF EDUCATION

Passed through the Pennsylvania Department of Education:

ECIA Title I - Low Income I 84.010 013-170480 07/01/16-09/30/17 $ 228,402 $ 213,135 $ 0 $ 222,580 $ 222,580 $ 0 $ 9,445 ECIA Title I - Low Income I 84.010 013-160480 07/01/15-09/30/16 231,502 76,425 76,425 0 0 0 0

ECIA Title II Improving Teacher Quality I 84.367 020-170480 07/01/16-09/30/17 32,445 32,445 0 32,445 32,445 0 0 ECIA Title II Improving Teacher Quality I 84.367 020-160480 07/01/15-09/30/15 33,485 11,084 11,084 0 0 0 0

Striving Readers Comprehensive Literacy I 84.371 143-160480 10/01/16-09/30/17 291,535 194,357 0 241,917 241,917 0 47,560 Striving Readers Comprehensive Literacy I 84.371 143-150480 10/01/15-09/30/16 482,855 193,597 192,594 1,003 1,003 0 0

Total passed through Pennsylvania Department of Education 1,300,224 721,043 280,103 497,945 497,945 0 57,005

Passed through Appalachia Intermediate Unit #8:

IDEA Part B - Section 611 I 84.027 062-170008 07/01/16-09/30/17 172,464 0 0 172,464 172,464 0 172,464 IDEA Part B - Section 611 I 84.027 062-160008 07/01/15-09/30/16 149,791 149,791 149,791 0 0 0 0

Total passed through Appalachia Intermediate Unit #8 322,255 149,791 149,791 172,464 172,464 0 172,464

Total U.S. Department of Education 1,622,479 870,834 429,894 670,409 670,409 0 229,469

*Prior year adjustment

See accompanying notes.

Westmont Hilltop School District Schedule of Expenditures of Federal Awards and Certain State Grants For the Year Ended June 30, 2017

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Passed through the Pennsylvania Department of Public Welfare:

Medical Assistance Program - Reimbursement SBAP Administration Reimbursement I 93.778 N/A 07/01/16-06/30/17 N/A 1,887 0 1,887 1,887 0 0

Total U. S. Department of Health and Human Services 1,887 0 1,887 1,887 0 0

U.S. DEPARTMENT OF AGRICULTURE

Passed through the Pennsylvania Department of Agriculture:

National School Lunch - (a) (b) (c) (d) (USDA Donated Commodities) I 10.555 N/A 07/01/16-06/30/17 N/A 56,582 (17,524) 59,734 59,734 0 (14,372)

Passed through the Pennsylvania Department of Education:

National School Lunch Federal I 10.555 N/A 07/01/16-06/30/17 N/A 283,370 69,444 220,486 220,486 0 6,560

School Breakfast Program I 10.553 N/A 07/01/16-06/30/17 N/A 62,296 15,250 48,837 48,837 0 1,791

Subtotal Child Nutrition Cluster 402,248 67,170 329,057 329,057 0 (6,021)

State Matching Funds S N/A N/A 07/01/16-06/30/17 N/A 28,328 7,105 21,845 21,845 0 622

Total U.S. Department of Agriculture 430,576 74,275 350,902 350,902 0 (5,399)

TOTAL FINANCIAL ASSISTANCE $ 1,622,479 $ 1,303,297 $ 504,169 $ 1,023,198 $ 1,023,198 $ 0 $ 224,070

See accompanying notes.

Westmont Hilltop School District Schedule of Expenditures of Federal Awards and Certain State Grants For the Year Ended June 30, 2017

Notes to Schedule of Expenditures of Federal Awards and Certain State Grants

Note A – Basis of Presentation

The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of Westmont Hilltop School District under programs of the federal government for the year ended June 30, 2017. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Westmont Hilltop School District, it is not intended to and does not present the financial position, changes in financial position, or cash flows of Westmont Hilltop School District.

Note B – Summary of Significant Accounting Policies

(1) Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement.

(2) Westmont Hilltop School District has elected not to use the 10 percent de minimis indirect cost rate, as allowed under the Uniform Guidance.

Note C – Donated Commodities

Nonmonetary assistance is reported in the schedule at fair market value of the commodities received and disbursed. At June 30, 2017, the District had food commodities totaling $14,372 in inventory.

(a) Total amount of commodities received from the Department of Agriculture. (b) Beginning inventory at July 1, 2016. (c) Total amount of commodities used. (d) Ending inventory at June 30, 2017.

Note D – Direct/Indirect Funding

The following source codes reflect program funding:

D = Direct Funding I = Indirect Funding F = Federal Share S = State Share

Westmont Hilltop School District Schedule of Expenditures of Federal Awards and Certain State Grants For the Year Ended June 30, 2017

Notes to Schedule of Expenditures of Federal Awards and Certain State Grants

Note E – Reconciliation to Financial Statements

Total Federal Sources reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds $ 554,671

Less: School Based Access Medicaid Reimbursement Program (54,839) Add: IDEA-B Section 611 passed through, recorded as Local Sources 172,464

Total Federal Expenditures – Governmental Funds 672,296

Total Federal Sources reported on Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Fund 329,057

Total Federal Expenditures - Proprietary Fund 329,057

Total Federal Expenditures $1,001,353

Note F – Test of 40% Rule

Total Expenditures $1,023,198

Less: State’s share of National School Lunch And Severe Need Breakfast Programs (21,845)

Total Federal Expenditures $1,001,353

Child Nutrition Cluster $ 329,057 IDEA Part B – Section 611 172,464

Tested $ 501,521 = 50.1% Total Federal Expenditures $1,001,353

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

Independent Auditors’ Report

To the Members of the Board Westmont Hilltop School District 112 Lindberg Avenue Johnstown, Pennsylvania 15905

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Westmont Hilltop School District as of and for the year ended June 30, 2017 and the related notes to the financial statements, which collectively comprise Westmont Hilltop School District’s basic financial statements, and have issued our report thereon dated November 27, 2017.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Westmont Hilltop 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 the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of Westmont Hilltop School District’s internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified a deficiency in internal control that we consider to be a material weakness.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or 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. We consider the deficiency described in the accompanying schedule of findings and questioned costs to be a material weakness (#2017-001).

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Westmont Hilltop School District’s financial statements are free from 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.

Westmont Hilltop School District’s Response to Findings

Westmont Hilltop School District’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Westmont Hilltop School District’s response was not subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we express no opinion on it.

Purpose of this Report

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

Kotzan CPA & Associates, P.C. Johnstown, Pennsylvania November 27, 2017

Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by The Uniform Guidance

Independent Auditors’ Report

To the Members of the Board Westmont Hilltop School District 112 Lindberg Avenue Johnstown, Pennsylvania 15905

Report on Compliance for Each Major Federal Program We have audited Westmont Hilltop 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 Westmont Hilltop School District’s major federal programs for the year ended June 30, 2017. Westmont Hilltop School District’s major federal programs are identified in the summary of 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 Westmont Hilltop School District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those 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 Westmont Hilltop School District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Westmont Hilltop School District’s compliance.

Opinion on Each Major Federal Program

In our opinion, Westmont Hilltop 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, 2017.

Report on Internal Control Over Compliance

Management of Westmont Hilltop School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Westmont Hilltop 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 Westmont Hilltop 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 a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

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

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

Kotzan CPA & Associates, P.C. Johnstown, Pennsylvania November 27, 2017

Westmont Hilltop School District Schedule of Findings and Questioned Costs Year Ended June 30, 2017

Section I - Summary of Auditors' Results

Financial Statements

Type of auditors' report issued: unmodified

Internal control over financial reporting: Material weakness(es) identified? X Yes No Significant deficiency identified not considered to be material weaknesses? Yes X None reported

Noncompliance material to financial statements noted? Yes X No

Federal Awards

Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency identified not considered to be material weakness(es)? Yes X None reported

Type of auditors' report issued on compliance for major programs: unmodified

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes X No

Identification of major programs:

CFDA Number(s) Name of Federal Program or Cluster

10.555/10.553 Child Nutrition Cluster 84.027 IDEA Part B - Section 611

Dollar threshold used to distinguish between Type A and Type B programs: $750,000

Auditee qualified as low-risk auditee? Yes X No

Section II – Financial Statement Findings

INTERNAL CONTROL OVER FINANCIAL REPORTING

Finding #2017-001

CONDITION:

Material audit adjustments were required in order for the financial statements to be fairly presented in accordance with U.S. generally accepted accounting principles at June 30, 2017. 66

Westmont Hilltop School District Schedule of Findings and Questioned Costs Year Ended June 30, 2017

CRITERIA:

An indicator of a material weakness is when the auditor identifies a material misstatement in the financial statements that was not detected by the entity’s internal control.

CAUSE:

Management failed to ensure year-end close procedures were performed subsequent to the prior year audit which led to errors in reported current year revenues and expenditures. Further, management’s review of the financial statements did not detect material misstatements.

EFFECT:

The deficiency resulted in materially misstated cash, interfund balances, receivables, payables, prepaid expenses, accrued employee benefits, payroll liabilities and corresponding revenues and expenditures in the General, Food Service, Capital Projects, and Scholarship Funds at June 30, 2017.

RECOMMENDATION:

1. Management should update the general ledger for the proposed audit adjustments effective June 30, 2017 then close the 2016-17 year in the accounting software system. 2. When recording invoices, accounting staff should be careful to properly differentiate between general fund and construction fund invoices and record the payables, expenditures and subsequent payments to the proper fund. 3. Payroll accruals and accounts payable should be recorded by accounting staff at year end, along with reversals of prior year amounts. These journal entries should be recorded by staff and reviewed by the Business Manager for accuracy prior to commencement of audit fieldwork. 4. We recommend changing the contact person on the Wells Fargo Scholarship account to the Business Manager to ensure that all bank statements are received in the Business Office on a timely basis and the activity is tracked by accounting staff in a separate Scholarship Fund. 5. We recommend that certain accounting duties including journal entries to record accruals and payables be delegated to accounting staff, allowing the Business Manager to perform frequent and careful reviews of financial statements, ensuring that misstatements are identified and corrected in a timely manner.

MANAGEMENT RESPONSE

Management agrees with the recommendations. The Business Manager will ensure audit adjustments are recorded in the District’s general ledger and that year-end close procedures are subsequently performed for the 2016-17 year in the accounting system. The Business Manager will review construction invoices going forward to ensure that payables and expenditures are recorded in the correct fund. The Business Manager will ensure that Wells Fargo Scholarship account monthly bank statements are consistently received by the Business Office going forward. Finally, management will investigate opportunities for a more effective segregation of duties in the accounting function to help ensure completeness and accuracy in reporting prior to audit time, with management reviews of financial statements in place.

Section III – Federal Award Findings and Questioned Costs No Findings or Questioned Costs

Westmont Hilltop School District Schedule of Prior Audit Findings Year Ended June 30, 2017

Financial Statement Findings

INTERNAL CONTROLS OVER FINANCIAL REPORTING

Finding #2016-001 – Material Weakness, June 30, 2016

CONDITION:

Audit adjustments that were material to the financial statements were required in order for the financial statements to be fairly presented in accordance with accounting principles generally accepted in the United States of America.

RECOMMENDATION:

It was recommended that management update the general ledger for the purposed audit adjustments effective June 30, 2016. It was also recommended that new accounting staff receive proper software training. It was further recommended that the Business Manager maintain adequate support for year-end balances, including a detailed list of invoices comprising accounts payable in each fund. It was recommended that payables and expenditures for the construction project be paid from the fund in which invoices were recorded. It was further recommended that bank statements for the Wells Fargo Scholarship account be directed to, reviewed and maintained by the Business Manager. Finally, it was recommended that the Business Manager perform a careful review of General Fund, Food Service Fund and Capital Project (Construction) Fund financial statements on a regular basis to ensure that misstatements are identified and corrected in a timely manner.

CURRENT STATUS:

Management agreed with the recommendations. Management updated the ledger for proposed audit adjustments subsequent to issuance of the audit report in January 2017. The vacancies in the payroll and accounts payable positions were filled in the spring of 2016, and the new staff received necessary training on the accounting software. A new Superintendent was hired in the fall of 2016 which allowed the Business Manager to resume duties solely related to business administration. While improvements were noted in record-keeping and the maintenance of support for year-end balances, the issues with proper recording of construction invoices, maintenance of Scholarship account activity, and management review of financial statements persisted in the current year. Accordingly, the finding for material audit adjustments remained at June 30, 2017.

COMPLIANCE AND OTHER MATTERS

Finding #2016-002 – Material Weakness, June 30, 2016

CONDITION:

Management failed to submit the quarterly reports (“Reconciliation of Cash on Hand”) for Title I, Title II-A and Keystone to Opportunity funding to PDE in a timely manner during the 2015-16 school year. Further, errors in the submission of the September 2015 meal claims led to delayed child nutrition finding.

Westmont Hilltop School District Schedule of Prior Audit Findings Year Ended June 30, 2017

RECOMMENDATION:

It was recommended that management assign reporting duties, as well as maintenance of records, to a Federal Program Coordinator. In so doing, the Business Manager would then be responsible for oversight of the position, including reviewing and monitoring the required reports. Maintenance of records should include an organized filing system of awards by year comprised of contracts, amendments, award letters and copies of submitted reports with support attached. Most importantly, a proper accounting of each award should be maintained. For example, a spreadsheet reflecting the amount of the award, the tracking of the expenditures, and the running balance will help ensure timely and allowable expenditure of each grant.

CURRENT STATUS:

The vacancies in key positions in the accounting function were filled in 2016. Further, with the hiring of a Superintendent in the fall of 2016, the Business Manager was able to resume duties solely related to business administration. Accordingly, the Business Manager worked with the Education Coordinator to ensure improved maintenance of federal program records in the current year. Further, improvements were noted in the timeliness of filing federal program quarterly reports to PDE during the 2016-17 year. In addition, child nutrition funding was current during 2016-17 and submission of meal claims appeared accurate and timely during the current year.

Federal Award Findings

INTERNAL CONTROL OVER COMPLIANCE

U.S. DEPARTMENT OF EDUCATION

Passed through the Pennsylvania Department of Education:

Finding #2016-003, Striving Readers Comprehensive Literacy – CFDA Nos. 84.371; Year Ended June 30, 2016

CONDITION:

The District’s internal control over compliance failed to prevent the late submission of quarterly reports (“Reconciliation of Cash on Hand”) to PDE during the 2015-16 school year. The March and June 2016 quarterly reports were submitted approximately 1 month after the respective submission deadline.

RECOMMENDATION:

It was recommended that management assign reporting duties, as well as maintenance of records, to a Federal Programs Coordinator. In doing so, the Business Manager would then be responsible for oversight of the position, including reviewing and monitoring the required reports. Maintenance of records should include an organized filing system of awards by year comprised of contracts, amendments, award letters and copies of submitted reports with support attached. Most importantly, a proper accounting of each award should be maintained. For example, a spreadsheet reflecting the amount of the award, the tracking of the expenditures, and the running balance will help ensure timely and allowable expenditure of each grant.

Westmont Hilltop School District Schedule of Prior Audit Findings Year Ended June 30, 2017

CURRENT STATUS:

The vacancies in key positions in the accounting function were filled in 2016. Further, with the hiring of a Superintendent in the fall of 2016, the Business Manager was able to resume duties solely related to business administration. Accordingly, the Business Manager worked with the Education Coordinator to ensure improved maintenance of federal program records in the current year. Quarterly and final reports for the Striving Readers Comprehensive Literacy program appear to have been submitted in a timely manner during the 2016-17 year.

APPENDIX D Specimen Municipal Bond Insurance Policy

[ THIS PAGE INTENTIONALLY LEFT BLANK ] MUNICIPAL BOND INSURANCE POLICY

ISSUER: Policy No: -N

BONDS: $ in aggregate principal amount of Effective Date: Premium: $

MUNICIPAL ASSURANCE CORP. ("MAC"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of MAC, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which MAC shall have received Notice of Nonpayment, MAC will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by MAC, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in MAC. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by MAC is incomplete, it shall be deemed not to have been received by MAC for purposes of the preceding sentence and MAC shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, MAC shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by MAC hereunder. Payment by MAC to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of MAC under this Policy.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless MAC shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the Page 2 of 2 Policy No. -N

United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to MAC which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

MAC may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to MAC pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to MAC and shall not be deemed received until received by both and (b) all payments required to be made by MAC under this Policy may be made directly by MAC or by the Insurer's Fiscal Agent on behalf of MAC. The Insurer's Fiscal Agent is the agent of MAC only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of MAC to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, MAC agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to MAC to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy.

This Policy sets forth in full the undertaking of MAC, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

In witness whereof, MUNICIPAL ASSURANCE CORP. has caused this Policy to be executed on its behalf by its Authorized Officer.

MUNICIPAL ASSURANCE CORP.

By Authorized Officer

A subsidiary of Assured Guaranty Ltd. 1633 Broadway, New York, N.Y. 10019 (212) 974-0100

Form 500NY (5/13) (MAC)