Shawnee State University

This Preliminary Official Statement and information contained herein are subject to change, completion or amendment without notice. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. policy tobeissuedconcurrentlywiththedeliveryofBondsbyBuildAmericaMutualAssuranceCompany. $5,000. Bonds areissuableasfullyregisteredbondswithoutcoupons. commencing June1,2017atthedesignatedofficeofU.S.BankNationalAssociation(the“RegistrarandPayingAgent”).The Series 2016 * Preliminary; subjecttochange. Series 2016Bondsindefinitive form willbeavailablefordeliveryinNewYork,through DTConNovember___,2016. Dinsmore &ShohlLLP,Cincinnati, Ohio.TheUniversity’smunicipaladvisorisBlueRoseCapital Advisors,LLC.Itisexpectedthatthe legality byBricker & EcklerLLP,Columbus,Ohio,BondCounsel.Certain legalmatterswillbepasseduponfortheUnderwriter by federal securitieslaws,buttheUnderwriterdoesnotguarantee the accuracyorcompletenessofsuchinformation. THE MAKINGOFANINFORMEDINVESTMENTDECISION. THIS ISSUE.INVESTORSMUSTREADTHEENTIREOFFICIAL STATEMENTTOOBTAININFORMATIONESSENTIAL premium. to haveexcisesortaxesleviedbytheGeneralAssembly oftheStateOhioforpaymentprincipal,interestorany State appropriations,areexcludedfromGeneralReceipts. TheholdersandownersoftheSeries2016Bondshavenoright The Series2016BondsarepayablefromtheGeneralReceipts oftheUniversity.CertainreceiptsUniversity,including and notgeneralobligationsoftheUniversityfaith andcreditoftheUniversityisnotpledgedtopaymentthereof. herein. or itsnominee.TherewillbenodistributionofSeries2016Bondstotheultimatepurchasers.SeeAPPENDIX D -“BOOK-ENTRYSYSTEM” together withtheOriginalTrustAgreement,“TrustAgreement”),byandbetweenUniversityTrustee. (the “Trustee”),assupplementedbyaFirstSupplementalTrustAgreementdatedofNovember1,2016“FirstSupplement” and Agreement”), byandbetweenShawneeStateUniversity(the“University”)U.S.BankNationalAssociation,Columbus,Ohio, Trustee General ReceiptsObligationsissuedpursuanttoanAmendedandRestatedTrustAgreementdatedasofJune1,2007(the“Original Trust University, andupontherefundingofcertainbondsUniversityasdescribedherein,Series2016Bondswillbeonlyoutstanding which willbesuppliedwiththefinalOfficialStatement. Commission Rule 15c2-12(b)(1), except for certain information which has been omitted in accordance with such Rule and MATTERS” herein. taxes imposedonlyoncertaincorporations,includingthecorporatealternativeminimumtaxaportionofthatinterest.See“TAX institutions, andthenetworthbaseofcorporatefranchisetax.InterestonSeries2016Bondsmaybesubjecttocertainfederal the domesticinsurancecompanytax,dealersinintangiblestaxleviedonbasisoftotalequitycapitalfinancial income therefrom,includinganyprofitmadeonthesalethereof,arefreefromtaxationwithinStateofOhio,exceptestatetax, and corporations under the Internal Revenue Code of 1986, as amended, and (ii) the Series 2016 Bonds, the transfer thereof, and the income taxpurposesandisnotanitemofpreferenceforthefederalalternativeminimumimposedonindividuals covenants andtheaccuracyofcertainrepresentations,interestonSeries2016Bondsisexcludedfromgrossincomeforfederal Dated: DateofIssuance NEW ISSUE “BOOK-ENTRY ONLY” Principal ispayableeachJune1asshownontheinsidecoverpagehereof.Semi-annualinterestandDecember The scheduledpaymentofprincipalandinterestontheBondswhenduewillbeguaranteedunderamunicipalbondinsurance The Series2016Bondsareissuableasregisteredbondswithoutcouponsinthedenominationof$5,000andintegralmultiples of The Series2016Bondsaresubjecttooptionalandmandatorysinkingfundredemptionasdescribedherein. The Series2016Bondsareofferedwhen,asandifissued received bytheUnderwriter,subjecttounqualifiedapprovalof The UnderwriterhasreviewedtheinformationinthisOfficialStatement pursuanttoitsresponsibilitiesinvestorsunderapplicable THIS COVERPAGECONTAINSCERTAININFORMATION FORQUICKREFERENCEONLY.ITISNOTASUMMARYOF The UniversityisastateuniversityoftheStateOhio. Series2016BondsarenotobligationsoftheStateOhio, The Series 2016 Bondswillbeissuableunderabook-entrysystem,registeredinthenameofTheDepository TrustCompany(“DTC”) The Series2016Bonds are tobesecuredbyalienonandpayablefromtheGeneral Receipts (asdefinedonpage6 herein)ofthe The UniversityhasdeemedthisPreliminaryOfficialStatementtobefinalforthepurposesofSecuritiesandExchange In the opinion of Bricker&EcklerLLP,BondCounsel,underexistinglaw(i)assumingcontinuingcompliancewith certain

PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 21, 2016

SHAWNEE STATE UNIVERSITY This OfficialStatement datedNovember___,2016 General ReceiptsBonds, $20,080,000* Series 2016 (See “RATINGS”and“BONDINSURANCE”herein.) Underlying Rating:Moody’s:“Baa1” (Build AmericaMutualAssuranceCompanyInsured) Rating: S&P:“AA” Due: June1,asshownoninsidecover

Build America Mutual Assurance Company (“BAM”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM 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 BAM, supplied by BAM and presented under the heading “BOND INSURANCE” and APPENDIX F – “SPECIMEN MUNICIPAL BOND INSURANCE POLICY”.

PRINCIPAL MATURITY SCHEDULE $20,080,000* GENERAL RECEIPTS BONDS, SERIES 2016

Year Principal (June 1) Amount Rate Yield Price CUSIP** 2018 $570,000 2019 585,000 2020 595,000 2021 835,000 2022 865,000 2023 900,000 2024 925,000 2025 960,000 2026 1,005,000 2027 1,040,000 2028 1,090,000 2029 1,150,000 2030 1,210,000 2031 1,265,000 2032 1,330,000 2033 1,365,000 2034 1,415,000 2035 385,000 2036 400,000 2037 410,000 2038 425,000 2039 440,000 2040 450,000 2041 465,000

$______- ____% Term Bonds, Due June 1, 20__, Yield: ____%, Price: ____%, CUSIP**: ______$______- ____% Term Bonds, Due June 1, 20__, Yield: ____%, Price: ____%, CUSIP**: ______

* Preliminary; subject to change. ** CUSIP data herein are provided by Standard & Poor’s. CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP numbers have been assigned by an independent company not affiliated with the University and are included solely for the convenience of the holders of the Series 2016 Bonds. The University is not responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Series 2016 Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2016 Bonds as a result of various subsequent actions.

TABLE OF CONTENTS Page

INTRODUCTION ...... 1 The Issuer ...... 1 Sources of Payment for the Series 2016 Bonds ...... 1 Purpose of the Series 2016 Bonds ...... 1 Description of the Series 2016 Bonds ...... 1 Tax Matters ...... 2 Bond Insurance Policy ...... 2 Parties to the Issuance of the Series 2016 Bonds ...... 2 Authority for Issuance ...... 2 Disclosure Information ...... 3 Additional Information ...... 3 REGARDING THIS OFFICIAL STATEMENT ...... 3 AUTHORITY ...... 4 THE UNIVERSITY ...... 5 SECURITY ...... 6 Rate Covenant ...... 6 REDEMPTION ...... 7 Mandatory Sinking Fund Redemption ...... 7 Optional Redemption ...... 7 PURPOSE OF SERIES 2016 BONDS ...... 8 SOURCES AND USES OF SERIES 2016 BONDS ...... 8 THE PROJECT ...... 8 THE REFUNDING PROGRAM ...... 9 ANNUAL DEBT SERVICE REQUIREMENTS ...... 10 FINANCIAL INFORMATION ...... 10 THE TRUST AGREEMENT ...... 10 BOND INSURANCE ...... 11 Bond Insurance Policy ...... 11 Build America Mutual Assurance Company ...... 11 Capitalization of BAM ...... 11 Additional Information Available from BAM ...... 12 CONTINUING DISCLOSURE ...... 13 Continuing Disclosure Compliance ...... 15 RATINGS ...... 16 UNDERWRITING ...... 16 MUNICIPAL ADVISOR ...... 16 APPROVAL OF LEGAL PROCEEDINGS ...... 17 LEGAL INVESTMENT ...... 17 LITIGATION ...... 17 TAX MATTERS ...... 17 General ...... 17 Original Issue Discount and Original Issue Premium ...... 19 CONCLUDING STATEMENT ...... 21

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APPENDICES:

APPENDIX A - SHAWNEE STATE UNIVERSITY ...... A-1 APPENDIX B - JUNE 30, 2016 AUDITED FINANCIAL STATEMENTS ...... B-1 APPENDIX C - SUMMARY OF TRUST AGREEMENT ...... C-1 APPENDIX D - BOOK-ENTRY SYSTEM ...... D-1 APPENDIX E - FORM OF BOND COUNSEL OPINION ...... E-1 APPENDIX F - SPECIMEN MUNICIPAL BOND INSURANCE POLICY ...... F-1

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INTRODUCTION

The purpose of this Official Statement, which includes the cover page and appendices hereto, is to provide certain information with respect to the issuance of $20,080,000* General Receipts Bonds, Series 2016 (the “Series 2016 Bonds”) of Shawnee State University (the “University”), Portsmouth, Ohio.

The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information.

This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of Series 2016 Bonds to potential investors is made only by means of the entire Official Statement.

The Issuer

The Series 2016 Bonds are being issued by the University, a state university of the State of Ohio.

Sources of Payment for the Series 2016 Bonds

The Series 2016 Bonds are payable from and secured by a lien on the General Receipts of the University. The Series 2016 Bonds are not obligations of the State of Ohio and the faith and credit of the State are not pledged to the payment thereof, and the holders and the owners of the Series 2016 Bonds have no right to have excises or taxes levied by the General Assembly of the State of Ohio for the payment of principal, interest or any premium. The Series 2016 Bonds are not obligations of the State of Ohio, and not general obligations of the University and the faith and credit of the University are not pledged to the payment thereof. Certain receipts of the University, including State appropriations, are excluded from General Receipts. (See “SECURITY” herein.)

Purpose of the Series 2016 Bonds

The net proceeds of the Series 2016 Bonds will be used to (i) pay for the costs of various improvements to the University’s campus, including (1) the renovation and rehabilitation of existing facilities for athletics and student recreation, health and fitness, (2) student housing renovations, and (3) other campus improvements (collectively, the “Project”); (ii) advance refund all of the University’s outstanding General Receipts Bonds, Series 2007, dated June 5, 2007 (the “Series 2007 Bonds”); and (iii) pay costs of issuance of the Series 2016 Bonds.

Description of the Series 2016 Bonds

The Series 2016 Bonds are subject to mandatory sinking fund redemption and optional redemption, respectively, as herein described (see “SECURITY - Mandatory Sinking Fund Redemption” and “- Optional Redemption” herein).

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2016 Bonds. The Series 2016 Bonds will be issued as fully-registered securities registered

* Preliminary; subject to change.

in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Series 2016 Bond certificate will be issued for the entire amount and will be deposited with DTC.

The Series 2016 Bonds will be issuable under a book entry system, registered in the name of DTC or its nominee. There will be no distribution of Series 2016 Bonds to the ultimate purchasers (see “BOOK-ENTRY SYSTEM” in APPENDIX D hereto).

Tax Matters

In the opinion of Bond Counsel, under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Series 2016 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations under the Internal Revenue Code of 1986, as amended, and (ii) the Series 2016 Bonds, the transfer thereof, and the income therefrom, including any profit made on the sale thereof, are free from taxation within the State of Ohio, except the estate tax, the domestic insurance company tax, the dealers in intangibles tax, the tax levied on the basis of the total equity capital of financial institutions, and the net worth base of the corporate franchise tax. Interest on the Series 2016 Bonds may be subject to certain federal taxes imposed only on certain corporations, including the corporate alternative minimum tax on a portion of that interest.

See “APPENDIX E – FORM OF BOND COUNSEL OPINION” attached hereto for the form of the opinion Bond Counsel proposes to deliver in connection with the Series 2016 Bonds.

Bond Insurance Policy

Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company (“BAM”) 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 appendix to this Official Statement.

THE POLICY IS NOT COVERED BY ANY INSURANCE SECURITY OR GUARANTY FUND ESTABLISHED UNDER NEW YORK, CALIFORNIA, CONNECTICUT OR FLORIDA INSURANCE LAW.

Parties to the Issuance of the Series 2016 Bonds

The University is the issuer of the Series 2016 Bonds. The Trustee and the Registrar and Paying Agent for the Series 2016 Bonds is U.S. Bank National Association. Legal matters incident to the issuance of the Series 2016 Bonds and with regard to the status of the interest thereon are subject to the approving legal opinion of Bricker & Eckler LLP, Bond Counsel. The Underwriter for the Series 2016 Bonds is Ross, Sinclaire & Associates, LLC (the “Underwriter”). Certain legal matters will be passed upon for the Underwriter by Dinsmore & Shohl LLP, Cincinnati, Ohio. Blue Rose Capital Advisors, LLC, is serving as municipal advisor to the University with respect to the issuance of the Series 2016 Bonds.

Authority for Issuance

Issuance of the Series 2016 Bonds is authorized pursuant to general laws of the State of Ohio, particularly Chapter 3345 of the Ohio Revised Code (the “Act”). The pledge of fees to secure the Series 2016 Bonds was approved by the Ohio Department of Higher Education on October 17, 2016. The Series

2016 Bonds are being issued pursuant to the Act and the resolution of the University’s Board of Trustees (the “Board”), adopted August 19, 2016 (the “Bond Resolution”). See “AUTHORITY” herein. The Series 2016 Bonds are offered when, as and if issued by the University. The Series 2016 Bonds will be delivered on November ___, 2016.

Disclosure Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change. This Official Statement and continuing disclosure documents of the University are intended to be made available through one or more repositories. Copies of the basic documentation relating to the Series 2016 Bonds, including the authorizing resolution and the note forms, are available from the Trustee.

The University has deemed this Preliminary Official Statement to be final for the purposes of Securities and Exchange Commission Rule 15c2-12(b)(1), except for certain information which has been omitted in accordance with such Rule and which will be supplied with the final Official Statement.

Additional Information

Additional information concerning this Official Statement, as well as copies of the basic documentation relating to the Series 2016 Bonds, is available from Blue Rose Capital Advisors, LLC, 6400 Flying Cloud Drive, Suite 212, Minneapolis, Minnesota 55344, through the offering period for the Series 2016 Bonds.

REGARDING THIS OFFICIAL STATEMENT

This Official Statement does not constitute an offering of any security other than the original offering of the Series 2016 Bonds of the University. No dealer, broker, salesman or other person has been authorized by the University to give any information or to make any representation, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the University. 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 Series 2016 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

The information and expressions of opinion herein are subject to change without notice. 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 the affairs of the University since the date hereof.

Upon issuance, the Series 2016 Bonds will not be registered by the University under any federal or state securities law, and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity or agency (except the University) will have, at the request of the University, passed upon the accuracy or adequacy of this Official Statement or approved the Series 2016 Bonds for sale.

All financial and other information presented in this Official Statement has been provided by the University from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from tuition, fees and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the University. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue or be repeated in the future.

Insofar as the statements contained in this Official Statement involve matters of opinion or estimates, even if not expressly stated as such, such statements are made as such and not as representations of fact or certainty. No representation is made that any of such statements have been or will be realized, and such statements should be regarded as suggesting independent investigation or consultation of other sources prior to the making of investment decisions. Certain information may not be current; however, attempts were made to date and document sources of information.

References herein to provisions of Ohio law, whether codified in the Ohio Revised Code or uncodified, or to the provisions of the Ohio Constitution or the University’s resolutions, are references to such provisions as they presently exist. Any of these provisions may from time to time be amended, repealed or supplemented.

As used in this Official Statement, “debt service” means principal of, interest and any premium on, the obligations referred to, and “State” or “Ohio” means the State of Ohio and “Fiscal Year” or “FY” means the University’s Fiscal Year, currently the 12-month period from July 1 to June 30, and references to a particular Fiscal Year means the Fiscal Year ending on June 30 in the indicated year.

The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of, and as that term is defined in, Securities and Exchange Commission Rule 15c2-12.

AUTHORITY

The issuance of the Series 2016 Bonds is authorized pursuant to general laws of the State of Ohio, particularly Section 3345.12 of the Ohio Revised Code. The Series 2016 Bonds are being issued pursuant to the Act and the Amended and Restated Trust Agreement, dated as of June 1, 2007 (the “Original Trust Agreement”), by and between the University and U.S. Bank National Association (the “Trustee”), as supplemented by the First Supplemental Trust Agreement, dated as of November 1, 2016 (the “First Supplement” and, together with the Original Trust Agreement, the “Trust Agreement”), by and between the University and the Trustee. See “APPENDIX C - SUMMARY OF THE TRUST AGREEMENT” attached hereto.

Under the Act, the University is authorized to construct auxiliary facilities and educational facilities, such as the Project, both defined under the Act (herein the “University Facilities”), borrow money to pay for such construction, refund obligations previously issued to pay costs of such facilities and repay or restore moneys advanced for that purpose from other funds of the University. It is empowered to issue, on behalf of the University, bonds and notes in anticipation of the issuance of bonds, said notes and bonds to be secured by a pledge of and lien on the General Receipts, as hereafter defined, of the University, provided said notes and bonds are not general obligations of the State. The Series 2016 Bonds are issued under the foregoing authority and are special obligations of the University, acting by and through the Board.

The University is a state university, which is a body politic and corporate and an instrumentality of the State of Ohio. The Series 2016 Bonds are not obligations of the State and are not general obligations of the University and the faith and credit of neither the University nor the State is pledged to the payment thereof, and the holders and owners of the Series 2016 Bonds have no right to have excises or taxes levied by the General Assembly for the payment of principal, interest or any premium. Certain receipts of the University, including State appropriations, are excluded from General Receipts. The Series 2016 Bonds are payable from the General Receipts of the University.

THE UNIVERSITY

The University dates back to 1945, when Ohio University established an academic center at Portsmouth High School in Portsmouth, Ohio (“Ohio University-Portsmouth”). In 1975, after years of development, the Ohio Board of Regents voted to charter the Shawnee State General and Technical College from the merger of Ohio University-Portsmouth and Scioto Technical College, which was located eight miles north of Portsmouth, Ohio, in Scioto County. The University changed its name to Shawnee State Community College via an Ohio Senate bill in 1977, and in 1978, began operations at a newly expanded campus. State legislation created Shawnee State University in 1986, and nearly 2,800 students enrolled for its first year of operation.

The University is the newest of Ohio’s fourteen state universities. Located on the banks of the Ohio River, the University is the regional state university serving south central Ohio. The University offers 68 bachelor’s and associate degree programs, and Master’s degrees in Mathematical Sciences, Occupational Therapy, and Teacher Education. Shawnee State is well known in the region and state for programs in Biomedical Science, Plastics Engineering Technology, and its two- and four-year programs in Health Professions. The University employs approximately 300 total faculty members, of which 156 are full-time. A low faculty-to-student ratio of 1:18 attracts students to the University, as well as ranking as the second most affordable four-year Ohio public institution. For the 2016-17 academic year, the University charged total, in-state tuition and fees (for new, full-time equivalent undergraduate students) of $7,365 per year.

The University occupies a 62-acre campus that consists of approximately 720,000 square feet of buildings and features a modern University Center, which includes the Sodexo Ballroom, Jazzman’s Café, and a Barnes & Noble bookstore. Other notable facilities include the Clark Planetarium, a 66-seat room that sits under a 10 meter domed projection screen and featuring the state of the art Konica Minolta Mediaglobe I/II digital projection system, and the Vern Riffe Center for the Arts, a 102,000 square foot facility with performance and gallery spaces and named for the longest serving speaker of the Ohio House of Representatives. The University also has a dedicated motion capture studio that provides advanced digital capabilities that support SSU’s nationally ranked game development programs.

The University offers open admission to all high school graduates or GED recipients with either an ACT or SAT score. There are more than 50 student clubs and organizations available to the University’s nearly 3,800 students based on majors, interests, diversity, religious beliefs, and political affiliations, including Greek clubs, the Student Government Association and Student Programming Board. The University provides on-campus housing for nearly 1,000 students that consists of apartment- style housing with full kitchens, large living rooms, dining areas, and complete furnishings. The University requires all first-year undergraduate students whose permanent residences are outside of a 50- mile radius to live on campus.

For additional information regarding the University, particularly with respect to certain financial and operating data, see “APPENDIX A - SHAWNEE STATE UNIVERSITY” attached hereto.

SECURITY

Payment of the principal and interest on the Series 2016 Bonds is secured by a pledge of the General Receipts of the University (as defined below), which amounted in Fiscal Year 2016 to $25,019,117. The pledge of the General Receipts secures all outstanding obligations issued under the Trust Agreement (the “General Receipts Obligations”) of the University issued under the Trust Agreement on a parity basis; however, upon the issuance of the Series 2016 Bonds, the Series 2016 Bonds will be the only Outstanding Obligations under the Trust Agreement. Additional General Receipts Obligations may be issued by the University under the Trust Agreement, and such additional General Receipts Obligations will be secured by a pledge of the General Receipts on a parity with the pledge securing the then outstanding General Receipts Obligations; provided, among other things, that the General Receipts for the most recently completed Fiscal Year are at least two times the maximum aggregate amount required for the payment of Debt Service Charges to be paid in any subsequent Fiscal Year with respect to all Obligations to be Outstanding after the delivery of additional General Receipts Obligations.

The General Receipts of the University are defined as all moneys received by the University, except: (i) moneys raised by state appropriations and taxation, (ii) any grants, gifts, donations and pledges and receipts therefrom which under restrictions imposed in the grant or promise thereof or as a condition of the receipt thereof are not available for payment of Debt Service Charges, (iii) moneys received under grant agreements with the United States or it agencies, unless received for the purpose of paying Debt Service Charges, (iv) any moneys received or held for the purpose of making rebate payments to the United States and (v) any special fee and receipts therefrom charged pursuant to Section 154.21(D) of the Ohio Revised Code.

The General Receipts of the University for Fiscal Years 2012 through 2016 are shown below:

General Receipts and Bond Debt Service Fiscal Year Ended June 30th

2012 2013 2014 2015 2016 Student Tuition, Fees & Other Charges $24,714,784 $24,513,333 $24,209,355 $23,320,139 $22,579,836 Grants & Contracts 173,550 210,516 210,122 339,524 252,866 Sales & Services 1,910,816 1,810,841 1,742,795 1,846,922 1,815,460 Investment Income 102,056 1,316,141 2,128,762 342,725 68,098 Other 475,849 357,897 504,187 381,092 302,857 TOTALS $27,377,055 $28,208,728 $28,795,221 $26,230,369 $25,019,117

Debt Service Requirements $1,318,200 $1,321,800 $1,314,400 $1,186,400 $1,187,600

Rate Covenant

The University has covenanted in the Trust Agreement that in each Fiscal Year it will make, fix, adjust, collect and apply such charges, rates, fees, rentals and other items included in General Receipts, to the extent permitted by law, so that Available Receipts will be sufficient to pay the operation and maintenance expenses of the University and to pay principal, interest and any premium requirements on the General Receipts Obligations, any reserve requirements for the General Receipts Obligations and any other requirements provided for in the Trust Agreement and related financing documents. As used in this paragraph, the term “Available Receipts” means, for a particular Fiscal Year, the General Receipts received in that Fiscal Year plus all other money legally available to the University for those purposes in that Fiscal Year.

The University further covenants to include in its budget for each Fiscal Year the amounts from the several sources of General Receipts to be applied to make the payments to the Debt Service Fund established under the Trust Agreement, so that amounts from those sources, in the aggregate, will at all times be sufficient in amount and time of collection to meet those payments.

REDEMPTION*

Mandatory Sinking Fund Redemption

The Series 2016 Bonds stated to mature on June 1, 20__, are subject to mandatory sinking fund redemption prior to maturity by lot by the Registrar and Paying Agent without action by the University at par plus accrued interest to the date of redemption in the following principal amounts and in each of the following years:

Due June 1 Amount

* Final Maturity.

Due June 1 Amount

* Final Maturity.

Optional Redemption

The Series 2016 Bonds stated to mature on or after June 1, 20__, are subject to redemption at the option of the University in whole or in part on any date on or after ______1, 20__, on thirty (30) days’ notice, at the price of the principal amount redeemed plus accrued interest to the redemption date. The University has the right to choose specific maturities of Series 2016 Bonds for optional redemption and if less than all of a maturity of the same interest rate is to be called for redemption, the Trustee will select which Series 2016 Bonds in that maturity are to be redeemed by lot in such manner as determined by the Trustee.

* The information under the heading “REDEMPTION” is preliminary and subject to change.

PURPOSE OF SERIES 2016 BONDS

The net proceeds of the Series 2016 Bonds, in addition to an equity contribution from the University, will be used to (i) pay the costs of the Project; (ii) advance refund $13,375,000 of the Series 2007 Bonds stated to mature June 1, 2017, through June 1, 2034 (the “Refunded Bonds”); and (iii) pay costs of issuance of the Series 2016 Bonds.

SOURCES AND USES OF SERIES 2016 BONDS

Sources: Par...... $ Net Premium ...... University Equity Contribution1 ...... Total Sources $

Uses: Project Fund for the Series 2016 Bonds ...... $ Escrow Fund for the Defeasance of Refunded Bonds ...... Costs of Issuance, including Bond Insurance and Underwriter’s Discount ...... Total Uses $

THE PROJECT

Renovation and Rehabilitation of Facilities for Athletics and Student Recreation, Health and Fitness. This project renovates and rehabilitates portions of an existing complex that includes the James A. Rhodes Athletic Center, a physical education connector and the Warsaw Natatorium. The facilities that make up this complex range from over 20 years to nearly 40 years in age. The University has funded improvements to the approximate 74,000 sq. ft. complex; however, during this period of time, the campus has transitioned from a commuter campus to approximately one fourth of the student body living in University-owned or University-managed housing. This shift in demographics and the changing expectations of current and prospective students require substantial improvements to the current facilities. The planned improvements will provide an environment that supports the strategic expansion of varsity athletic programs, presents a variety of club sports to encourage greater numbers of student participation, and provides modernized campus recreational and fitness facilities.

The planned facility improvements include, but are not limited to: upgrading of the building’s life safety systems, ADA access, and facility infrastructure, replacement of the original (circa 1983) pool filtration and pump systems; separating the athletic programs’ cardiovascular area to permit additional space and modernization of a general student fitness area; upgrading of deteriorated exterior areas, including poor drainage and pathways that are not conducive to optimal circulation and foot traffic; and enhancing building security measures.

Other campus recreational capital improvements will be designed to increase opportunities for club sports and enhance wellness and fitness activities. Examples of possible new projects or improvements of existing campus areas include: new lighting for the multi-use athletic field to expand utilization of the field to evening hours for both athletic teams and club sports, playing field restroom facilities, athletic equipment storage facilities, a disc golf course, and additional student bike racks.

1 The University will contribute $520,000 to the Escrow Deposit Trustee, which amount is sufficient to defease the $500,000 June 1, 2017 maturity of the Refunded bonds and two interest payments of $10,000 due December 1, 2016 and June 1, 2017 related thereto.

Completion of Renovations to University-Owned Residential Housing. The University has funded from University sources major upgrades to two of four University-owned residential housing buildings, Townhouse Apartments #1 & #2. The new, bond-funded project will enable the completion of the remaining two residential buildings, Townhouse Apartments #3 & #4. The renovation will replace all doors and frames, hardware, floor finishes, and electrical systems; installation of new high impact drywall which will minimize repairs and allow apartments to be detailed and placed back online more quickly. The renovated apartments will also be used for summer athletic and academic camps and will support the availability of housing options for students attending during the summer term. This project will also upgrade sidewalks and exterior finishes. The buildings are nearly 40 years old and are in dire need of this rehabilitation.

THE REFUNDING PROGRAM

The University has determined that it is in its best interest to provide moneys to advance refund the Refunded Bonds in order to achieve lower debt service and to lower the effective interest costs of the amounts financed. The moneys required to advance refund the Refunded Bonds will be obtained from (i) the proceeds of a portion of the sale of the Series 2016 Bonds and (ii) University cash. Moneys to advance refund the Refunded Bonds will be paid over and simultaneously therewith irrevocably deposited with the Trustee, as the Escrow Agent for the Refunded Bonds (the “Escrow Deposit Trustee”), pursuant to the provisions of the Escrow Deposit Agreement entered into by the University and the Escrow Deposit Trustee. Such moneys will be applied by the Escrow Deposit Trustee to the redemption of the Refunded Bonds on June 1, 2017, the earliest possible date for redemption. Upon the establishment and funding of the irrevocable Escrow Deposit Agreement, the Refunded Bonds will no longer be deemed to be outstanding under the Restated Trust Agreement and payments by the University of the principal of and the interest on such Refunded Bonds will cease.

In the Escrow Deposit Agreement, the Escrow Deposit Trustee has acknowledged that the University has deposited with it funds which are sufficient, together with interest and earnings thereon to: (i) pay all principal and interest requirements when due on the Refunded Bonds through their redemption dates, (ii) pay the redemption price of such Refunded Bonds upon redemption, and (ii) pay, when required, costs and expenses related to the foregoing, including certain fees and expenses of the Escrow Deposit Trustee.

As a condition to the delivery of the Series 2016 Bonds, Robert Thomas CPA, LLC (the “Verification Agent”), will deliver to the Escrow Deposit Trustee a written verification report to the effect that (a) the proceeds of the securities and/or cash amounts deposited with the Escrow Deposit Trustee pursuant to the Escrow Deposit Agreement will be sufficient without further investment or reinvestment to pay the principal of, premium, if any, and interest on the Refunded Bonds as the same become due and payable, and (b) the computations of yield used by Bond Counsel to support its opinion that the Refunded Bonds are not arbitrage bonds within the meaning of Section 148 of the Code are correct.

The report of the Verification Agent will include the statement that the scope of its engagement was limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it and that it had no obligation to update its reports because of events occurring or data or information coming to its attention subsequent to the date of such report.

ANNUAL DEBT SERVICE REQUIREMENTS*

The following table lists the debt service requirements for the Series 2016 Bonds:

Fiscal Year Ending Total June 30th Principal Interest Debt Service

2018 $570,000 2019 585,000 2020 595,000 2021 835,000 2022 865,000 2023 900,000 2024 925,000 2025 960,000 2026 1,005,000 2027 1,040,000 2028 1,090,000 2029 1,150,000 2030 1,210,000 2031 1,265,000 2032 1,330,000 2033 1,365,000 2034 1,415,000 2035 385,000 2036 400,000 2037 410,000 2038 425,000 2039 440,000 2040 450,000 2041 465,000

TOTALS $20,080,000

FINANCIAL INFORMATION

The financial statements of the University as of and for the year ended June 30, 2016, included in this Official Statement in APPENDIX B attached hereto, have been prepared by the University and audited by Plante & Moran, PLLC (the “University Auditor”), independent auditors, as stated in their report appearing herein. The University did not request the University Auditor to perform any updating procedures subsequent to the date of its audit report on the financial statements included in APPENDIX B attached hereto.

Prior audited financial statements for the University are available by contacting the Office of the Controller, Shawnee State University, 940 Second Street, Portsmouth, Ohio 45662, and are also available on the Auditor of State’s website at http://www.ohioauditor.gov.

THE TRUST AGREEMENT

The terms and provisions of the Trust Agreement control both outstanding Bonds and all obligations of the University issued pursuant to the Trust Agreement. Please see “APPENDIX C – SUMMARY OF TRUST AGREEMENT” attached hereto.

* The information under the heading “ANNUAL DEBT SERVICE REQUIREMENTS” is preliminary and subject to change.

BOND INSURANCE

Bond Insurance Policy

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

Build America Mutual Assurance Company

BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM.

The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: 212-235-2500, and its website is located at: www.buildamerica.com.

BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law.

BAM’s financial strength is rated “AA/Stable” by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC (“S&P”). An explanation of the significance of the rating and current reports may be obtained from S&P at www.standardandpoors.com. The rating of BAM should be evaluated independently. The rating reflects the S&P’s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance.

The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds.

BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds 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 Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn.

Capitalization of BAM

BAM's total admitted assets, total liabilities, and total capital and surplus, as of June 30, 2016 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $485.9 million, $53.4 million and $432.5 million, respectively.

BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions.

BAM’s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM’s website at www.buildamerica.com, is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published.

BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM 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 BAM, supplied by BAM and presented under the heading “BOND INSURANCE”.

Additional Information Available from BAM

Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM’s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.)

Credit Profiles. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre-sale Credit Profile for those bonds. These pre-sale Credit Profiles provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre-sale Credit Profile will be updated and superseded by a final Credit Profile to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre-sale and final Credit Profiles are easily accessible on BAM's website at buildamerica.com/obligor/. BAM will produce a Credit Profile for all bonds insured by BAM, whether or not a pre-sale Credit Profile has been prepared for such bonds. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.)

Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Credit Profiles and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content.

BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise.

CONTINUING DISCLOSURE

In accordance with Rule 15c2-12 of the U.S. Securities and Exchange Commission (the “Rule”, promulgated at 17 CFR 240.15c2-12) and so long as the Series 2016 Bonds are outstanding, the University has agreed pursuant to the First Supplement, to be delivered on the date of delivery of the Series 2016 Bonds, to provide certain information pursuant thereto.

Pursuant to the Rule and its undertaking contained in the First Supplement, the University will agree to provide or cause to be provided to the Municipal Securities Rulemaking Board (the “MSRB”), through its Electronic Municipal Market Access (“EMMA”) system, or to such other entity and through such other system as may be required by the Rule, in an electronic format and containing such identifying information as may be necessary to ensure a proper filing:

A. Certain annual information (the “Annual Information”) of the type included in this Official Statement under the heading entitled “SECURITY – General Receipts and Bond Debt Service,” and in APPENDIX A to this Official Statement under the headings entitled “ACADEMIC PROGRAMS – Degrees Conferred,” “ENROLLMENT AND ADMISSIONS – Fall Enrollment – Total Headcount,” “ENROLLMENT AND ADMISSIONS – Student Financial Aid,” “FACULTY AND EMPLOYEES,” “FEES AND CHARGES – Ohio Resident Tuition & Fees,” “FEES AND CHARGES – Non- Ohio Resident Tuition & Fees,” “GENERAL RECEIPTS – General Receipts Fiscal Year Ended June 30,” “GRANTS AND CONTRACTS – Total Annual Grant and Other Amounts Received,” “STATE APPROPRIATIONS – Operating Appropriations”, “STATE APPROPRIATIONS – Capital Appropriations”, the table under the heading “SUMMARY OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION,” “UNIVERSITY CASH & INVESTMENTS AND NET POSITION – Cash & Investment Balances Fiscal Year Ended June 30,” “UNIVERSITY CASH & INVESTMENTS AND NET POSITION – Unrestricted Net Position Fiscal Year Ended June 30,” “Facilities,” “CAPITAL INVESTMENT AND PLANNING – Total Capital Expenditures Fiscal Years Ended June 30,” “RISK MANAGEMENT AND SELF-INSURANCE,” for each Fiscal Year (beginning with the Fiscal Year ending June 30, 2017), not later than the 210th day following the end of that Fiscal Year (or, if that day is not a Business Day, the next Business Day) (the “Filing Date”); and B. If not submitted with the Annual Information, when and if available, audited general purpose financial statements of the University for each such Fiscal Year, prepared in accordance with the Accounting Principles, as defined in the First Supplement. The University expects that Annual Information will be provided directly by it and in part by cross-reference to other documents, such as the University’s Annual Financial Reports and subsequent final official statements relating to Obligations, as that term is defined in the First Supplement, that any such financial statements will be available separately from the Annual Information, and that it will prepare those financial statements in accordance with the Accounting Principles.

In addition, the University has agreed to provide to each nationally recognized municipal securities information repository or to the MSRB in a timely manner, not in excess of ten (10) business days after the occurrence of the event, notice of the occurrence of the following events with respect to the Series 2016 Bonds:

(i) to the MSRB, notice of the occurrence of the following events with respect to the Series 2016 Bonds:

(a) Principal and interest payment delinquencies; (b) Non-payment related defaults, if material; (c) Unscheduled draws on debt service reserves reflecting financial difficulties; (d) Unscheduled draws on credit enhancements reflecting financial difficulties; (e) Substitution of credit or liquidity providers, or their failure to perform; (f) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax-exempt status of the security; (g) Modifications to rights of security holders, if material; (h) Bond calls, if material, and tender offers (except for mandatory scheduled redemptions not otherwise contingent upon the occurrence of an event); (i) Defeasances; (j) Tender offers; (k) Release, substitution or sale of property securing repayment of the securities, if material; (l) Rating changes; (m) Bankruptcy, insolvency, receivership or similar event of the obligated person (Note: for the purposes of this event, the event is considered to occur when any of the following occur: The appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person); (n) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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 (o) Appointment of a successor or additional trustee or the change of name of a trustee, if material; and (p) Notice of failure to provide annual financial information on or before the date specified in the agreement; and

(ii) to the MSRB, notice of a failure by the University to provide the required annual financial information or operating data on or before the date specified in the Continuing Disclosure Agreement.

The SEC requires the listing of events (a) through (p) although some of such events may not be applicable to the Series 2016 Bonds.

As required by the Rule, the Continuing Disclosure Agreement provides that the information to be filed with the MSRB described in the preceding paragraph is to be filed in an electronic format as

prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB. An MSRB rule change approved by the Securities and Exchange Commission established the MSRB’s Electronic Municipal Market Access system (“EMMA”) for the receipt of, and for making available to the public, continuing disclosure documents and related information to be submitted pursuant to continuing disclosure undertakings (such as the Continuing Disclosure Agreement) consistent with the Rule. After July 1, 2009, all such continuing disclosure documents and related information are to be submitted to the MSRB’s continuing disclosure service through an Internet-based electronic submitter interface (EMMA Dataport) or electronic computer-to-computer data connection, accompanied by certain identification information, in portable document format (PDF) files configured to permit document to be saved, viewed, printed and retransmitted by electronic means and must be word-searchable.

The Continuing Disclosure Agreement provides holders of the Series 2016 Bonds with certain enforcement rights in the event of a failure by the University to comply with the terms thereof; however, a default under the Continuing Disclosure Agreement does not constitute a default under the Authorizing Legislation. The Continuing Disclosure Agreement may be amended or terminated under certain circumstances in accordance with the Rule as more fully described therein. Holders of the Series 2016 Bonds are advised that the Continuing Disclosure Agreement, copies of which are available at the office of the University, should be read in its entirety for more complete information regarding its contents.

For purposes of this transaction with respect to events as set forth in the Rule:

(a) there are no debt service reserve funds applicable to the Series 2016 Bonds; (b) there are no tender offers applicable to the Series 2016 Bonds; and (c) there is no property securing the repayment of the Series 2016 Bonds.

Continuing Disclosure Compliance

In connection with the issuance of the Series 2007 Bonds, the University entered into a Continuing Disclosure Agreement with respect to its obligation to provide certain annual financial information pursuant to the Rule (the “Series 2007 CDA”). The Series 2007 CDA stipulated, among other things, that the University would provide or cause to be provided (i), “Annual Information for each Fiscal Year (beginning with Fiscal Year 2007) not later than the 270th day following the end of the Fiscal Year (or, if that is not a business day, the next business day), consisting of annual financial information and operating data of the type included in Appendix A to the Series 2007 Official Statement under the captions Enrollment, Admissions, Test Scores, Financial Aid, General Receipts, Tuition and Fees, State Appropriations, and Grants.”, (ii) when and if available, audited general purpose financial statements of the University for each Fiscal Year, and (iii) notices of certain material events.

Because the University’s Fiscal Year ends on June 30, in most years the Series 2007 CDA requires the University’s annual financial information and operating data to be filed on or before March 26 with respect to the Fiscal Year ending on the preceding June 30.

The University’s annual financial statements and operating data for the Fiscal Year ended June 30, 2015, were posted to EMMA on March 25, 2016. The University’s audited financial statements for each of the Fiscal Years ending June 30, 2007 through and including 2014 were posted to EMMA on March 25, 2016. Operating data as required by the Series 2007 Bonds for the same period of time was likewise posted on March 25, 2016. A notice of failure to file with respect to the same was posted to EMMA on September 22, 2016.

The Series 2007 Bonds were insured by MBIA Insurance Corporation (“MBIA”). The rating agencies which rated the Series 2007 Bonds downgraded MBIA’s ratings multiple times and one agency withdrew its rating. In 2009, MBIA was restructured into National Public Finance Guaranty Corp. and one or more of the rating agencies subsequently downgraded and upgraded the rating of the Series 2007 Bonds. A notice of failure to file with respect to the same was posted to EMMA on September 22, 2016. The University makes no representation as to the potential materiality of the failure to report.

The Board of the University approved and adopted, on October 14, 2016, certain policies designed to ensure compliance with its outstanding continuing disclosure obligations in connection with the issuance of securities subject to the Rule, including the Series 2016 Bonds.

RATINGS

As noted on the cover page of this Official Statement, S&P Global Ratings, a division of S&P Global Inc. (“S&P”), has assigned the Series 2016 Bonds a rating of “AA” with the understanding that, upon delivery of the Series 2016 Bonds, BAM will deliver its municipal bond insurance policy insuring the timely payment of the principal and interest components of the Series 2016 Bonds. In addition, Moody’s Investors Service, Inc. (“Moody’s”), has assigned the Series 2016 Bonds an underlying rating of “Baa1”.

Any explanation of the significance of such ratings may be obtained by the rating agency furnishing the same. The address of Moody’s is 99 Church Street, New York, New York 10007, and the address of S&P is 25 Broadway, New York, New York 10004. There is no assurance that such ratings will be maintained for any given period of time or that they may not be raised, lowered or withdrawn entirely by either of the rating agencies, if, in its judgment, circumstances so warrant. Any downward change in or withdrawal of such ratings may have an adverse effect on the price at which the Series 2016 Bonds may be resold.

UNDERWRITING

The Series 2016 Bonds are being purchased for reoffering by the Underwriter, at an aggregate purchase price of $______, pursuant to the Bond Purchase Agreement, being the par amount thereof plus a net original issue premium of $______, and less an underwriting discount of $______. The Bond Purchase Agreement provides that the Underwriter, subject to certain conditions, will purchase all of the Series 2016 Bonds if any are purchased.

The Underwriter may offer and sell the Series 2016 Bonds to certain dealers (including dealers depositing the Series 2016 Bonds) and others at prices lower than the public offering prices stated on the cover page hereof. The initial public offering prices may be changed from time to time by the Underwriters.

MUNICIPAL ADVISOR

Blue Rose Capital Advisors, LLC, Minneapolis, Minnesota, is serving as the municipal advisor (the “Municipal Advisor”) to the University in connection with the issuance and sale of the Series 2016 Bonds. The Municipal Advisor has been retained by the University to provide certain financial advisory services in connection with the issuance of the Series 2016 Bonds. The Municipal Advisor has not been

engaged, nor has it undertaken, to independently verify the accuracy of the information set forth in this Official Statement. The Municipal Advisor is not a public accounting firm and has not been engaged by the University to compile, review, examine or audit any information in this Official Statement in accordance with accounting standards. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities and therefore will not participate in the underwriting of the Series 2016 Bonds.

The Municipal Advisor is under common ownership with HedgeStar, LLC (“HedgeStar”) and MuniPriceTracker, LLC (“MPT”). HedgeStar provides hedge accounting, fair value accounting, and valuation services for financial instruments including, but not limited to, fixed-income securities and derivatives, which services may have been used in the preparation of the University’s financial statements. MPT provides secondary market bond trading reporting services, which may be relied upon for tax compliance and trading performance evaluation by the University, or by other parties involved in the issuance, in connection with the Series 2016 Bonds. HedgeStar and MPT currently do not, and in connection with the Series 2016 Bonds are not expected to, provide services to the University.

APPROVAL OF LEGAL PROCEEDINGS

All legal matters in connection with the authorization and issuance of the Series 2016 Bonds are and have been subject to the approval of Bricker & Eckler LLP, attorneys of Columbus, Ohio, Bond Counsel, whose approving opinions with respect to the Series 2016 Bonds will be delivered therewith.

Certain legal matters will be passed upon for the Underwriter by Dinsmore & Shohl LLP.

LEGAL INVESTMENT

In the opinion of Bricker & Eckler LLP, Bond Counsel, under the authority of Sections 3345.11 and 3345.12 of the Ohio Revised Code, the Series 2016 Bonds are lawful investments for banks, societies for savings, building and loan and savings and loan associations, deposit guarantee associations, trust companies, trustees, fiduciaries, insurance companies, including domestic for life and domestic not for life, trustees or other officers having charge of sinking and bond retirement or other special funds of political subdivisions and taxing districts of this state, the commissioners of the sinking fund of the state, the industrial commission, the state teachers retirement system, the public employees retirement system, the public school employees retirement system, and the police and firemen’s disability and pension fund, notwithstanding any other provisions of the Ohio Revised Code with respect to investments by them, and are also acceptable as security for the deposit of public moneys.

LITIGATION

The University is a defendant, from time to time, in various legal actions incident to its operations, but all such actions are unrelated to the Series 2016 Bonds. The University believes that its aggregate liability, if any, in any pending actions, taking insurance coverage into account, will not be material.

TAX MATTERS

General

In the opinion of Bricker & Eckler LLP, Bond Counsel, under existing law: (i) interest on the Series 2016 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code, as amended (the “Code”) and is not an item of tax preference for purposes of

the federal alternative minimum tax imposed on individuals and corporations; and (ii) the Series 2016 Bonds, the transfer thereof, and the income therefrom, including any profit made on the sale thereof, are free from taxation within the State of Ohio, except the estate tax, the domestic insurance company tax, the dealers in intangibles tax, the tax levied on the basis of the total equity capital of financial institutions, and the net worth base of the corporate franchise tax. Interest on the Series 2016 Bonds may be subject to certain federal taxes imposed only on certain corporations, and certain taxpayers may have other federal tax consequences as a result of owning the Series 2016 Bonds. Bond Counsel expresses no opinion as to any other tax consequences regarding the Series 2016 Bonds.

The opinion on tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants, of the State contained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Series 2016 Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of the certifications and representations, or the continuing compliance with covenants, of the State.

The opinion of Bond Counsel is based on current legal authority and covers certain matters not directly addressed by such authority. It represents Bond Counsel’s legal judgment as to exclusion of interest on the Series 2016 Bonds from gross income for federal income tax purposes but is not a guaranty of that conclusion. The opinion is not binding on the Internal Revenue Service (“IRS”) or any court. Bond Counsel expresses no opinion about (i) the effect of future changes in the Code and the applicable regulations under the Code or (ii) the interpretation and the enforcement of the Code or those regulations by the IRS.

The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and to remain excluded from gross income for federal income tax purposes, some of which require future or continued compliance after issuance of the obligations. Noncompliance with these requirements by the State may cause loss of such status and result in the interest on the Series 2016 Bonds being included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2016 Bonds. The State has covenanted to take the actions required of it for the interest on the Series 2016 Bonds to be and to remain excluded from gross income for federal income tax purposes and not to take any actions that would adversely affect that exclusion. After the date of issuance of the Series 2016 Bonds, Bond Counsel will not undertake to determine (or to so inform any person) whether any actions taken or not taken, or any events occurring or not occurring, or any other matters coming to Bond Counsel’s attention, may adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2016 Bonds or the market value of the Series 2016 Bonds.

A portion of the interest on the Series 2016 Bonds earned by certain corporations may be subject to a federal corporate alternative minimum tax. In addition, interest on the Series 2016 Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax- exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Series 2016 Bonds. Bond Counsel will express no opinion regarding those consequences.

Payments of interest on tax-exempt obligations, including the Series 2016 Bonds, are generally subject to IRS Form 1099-INT information reporting requirements. If a Series 2016 Bond owner is subject to backup withholding under those requirements, then payments of interest will also be subject to backup withholding. Those requirements do not affect the exclusion of such interest from gross income for federal income tax purposes.

Prospective purchasers of the Series 2016 Bonds should consult their own tax advisers regarding pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of the Series 2016 Bonds at other than their original issuance at the prices indicated on the Cover of this Official Statement should also consult their own tax advisers regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion.

Bond Counsel’s engagement with respect to the Series 2016 Bonds ends with the issuance of the Series 2016 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the University or the owners or Beneficial Owners of the Series 2016 Bonds regarding the tax status of interest on the Series 2016 Bonds in the event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Series 2016 Bonds, under current IRS procedures, the IRS will treat the University as the taxpayer and the owners and Beneficial Owners of the Series 2016 Bonds will have only limited rights, if any, to obtain and participate in judicial review of such audit. Any action of the IRS, including but not limited to selection of the Series 2016 Bonds for audit, or the course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the market values of the Series 2016 Bonds.

Original Issue Discount and Original Issue Premium

Certain of the Series 2016 Bonds (“Discount Bonds”) as shown on the Cover may be offered and sold to the public at an original issue discount (“OID”). OID is the excess of the stated redemption price at maturity (the principal amount) over the “issue price” of a Discount Bond. The issue price of a Discount Bond is the initial offering price to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of the same maturity is sold pursuant to that offering. For federal income tax purposes, OID accrues to the owner of a Discount Bond over the period to maturity based on the constant yield method, compounded semiannually (or over a shorter permitted compounding interval selected by the owner). The portion of OID that accrues during the period of ownership of a Discount Bond (i) is interest excluded from the owner’s gross income for federal income tax purposes to the same extent, and subject to the same considerations discussed above, as other interest on the Series 2016 Bonds, and (ii) is added to the owner’s tax basis for purposes of determining gain or loss on the maturity, redemption, prior sale or other disposition of that Discount Bond. A purchaser of a Discount Bond in the initial public offering at the price for that Discount Bond stated on the Cover of this Official Statement who holds that Discount Bond to maturity will realize no gain or loss upon the retirement of that Discount Bond.

Certain of the Series 2016 Bonds (“Premium Bonds”) as shown on the Cover may be offered and sold to the public at a price in excess of their stated redemption price (the principal amount) at maturity. That excess constitutes bond premium. For federal income tax purposes, bond premium is amortized over the period to maturity of a Premium Bond, based on the yield to maturity of that Premium Bond (or, in the case of a Premium Bond callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on that Premium Bond), compounded semiannually. No portion of that bond premium is deductible by the owner of a Premium Bond. For purposes of determining the owner’s gain or loss on the sale, redemption (including redemption at maturity) or other disposition of Premium Bond, the owner’s tax basis in the

Premium Bond is reduced by the amount of bond premium that is amortized during the period of ownership. As a result, an owner may realize taxable gain for federal income tax purposes from the sale or other disposition of a Premium Bond for an amount equal to or less than the amount paid by the owner for that Premium Bond. A purchaser of a Premium Bond in the initial public offering at the price for that Premium Bond stated on the Cover of this Official Statement who holds that Premium Bond to maturity (or, in the case of a callable Premium Bond, to its earlier call date that results in the lowest yield on that Premium Bond) will realize no gain or loss upon the retirement of that Premium Bond.

Owners of Discount and Premium Bonds should consult their own tax advisers as to the determination for federal income tax purposes of the amount of OID or bond premium properly accruable or amortizable in any period with respect to the Discount or Premium Bonds and as to other federal tax consequences and the treatment of OID and bond premium for purposes of state and local taxes on, or based on, income.

CONCLUDING STATEMENT

The delivery of this Official Statement has been duly authorized, prepared by, and executed on behalf of the Board of Trustees of the University by its Vice President for Finance and Administration.

BOARD OF TRUSTEES OF SHAWNEE STATE UNIVERSITY

By: /s/ Elinda C. Boyles, Vice President for Finance and Administration

Dated: November ___, 2016

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APPENDIX A

SHAWNEE STATE UNIVERSITY

APPENDIX A

Table of Contents

GENERAL ...... A-1

GOVERNANCE AND ADMINISTRATION ...... A-2

STRATEGIC PLANNING ...... A-4

UNIVERSITY POLICIES AND PROCESSES ...... A-5

ACADEMIC PROGRAMS ...... A-6

ENROLLMENT AND ADMISSIONS ...... A - 7

FACULTY AND EMPLOYEES ...... A-9

LABOR RELATIONS ...... A-10

RETIREMENT BENEFITS ...... A-10

FEES AND CHARGES ...... A-10

HOUSING & RESIDENCE LIFE ...... A-12

GENERAL RECEIPTS ...... A-14

GRANTS AND CONTRACTS ...... A-15

STATE APPROPRIATIONS ...... A-16

SUMMARY OF REVENUE, EXPENSES AND CHANGE IN NET POSITION ...... A-18

INVESTMENT POLICY ...... A-19

UNIVERSITY CASH & INVESTMENTS AND NET POSITION ...... A-19

SHAWNEE STATE UNIVERSITY DEVELOPMENT FOUNDATION ...... A-20

FACILITIES ...... A-21

CAPITAL INVESTMENT AND PLANNING ...... A-21

RISK MANAGEMENT AND SELF-INSURANCE...... A-22

SHAWNEE STATE UNIVERSITY

GENERAL Shawnee State University (the “University”) was created in 1986 by the Ohio legislature. Located on the banks of the Ohio River, the University is the regional state university serving south central Ohio. Fall headcount enrollment for the 2016-17 Academic Year is 3,772, including 169 graduate students. Students are attracted to the University because of the low student-to-teacher ratio, attractive classroom environment, student housing options, and the availability of more than $3.5 million in University sponsored scholarship aid. The University is successful in placing students in employment opportunities through its student career development services. The University offers 68 bachelor’s and associate degree programs in arts and humanities, mathematical sciences, natural sciences, social sciences, teacher education, business administration, industrial and engineering technologies, and health sciences. Also offered are Master’s degrees in Mathematical Sciences, Occupational Therapy, and Teacher Education. The University has the second lowest undergraduate tuition rate among Ohio public universities and the in-state tuition rate applies to eligible students in nearby counties of Kentucky. The University is well known in the region and state for programs in Biomedical Science, Plastics Engineering Technology, Digital Simulation and Game Design, and its two- and four-year programs in Health Professions. The University’s 62-acre landscaped campus includes the Advanced Technology Center that features one of the few Konica-Minolta Mediaglobe 3D planetariums in the world; a three- story library, the 102,000 square foot Vern Riffe Center for the Arts featuring a 1,139 seat Main Theater; the James A. Rhodes Athletic Center with a junior Olympic-size swimming pool; the Children’s Learning Center, a facility that serves as a clinical site for the Early Childhood Development Program and a learning center for children of students/faculty/staff/ at the University and the community; and the Morris University Center that houses campus dining services, a recreation center, a bookstore, the Student Business Center, the Office of Admission, the Offices of Student Affairs and Student Life as well as a ball room and conference facilities. To support its nationally ranked game development program, the campus has a dedicated motion capture studio with advanced digital capabilities. The University is a member of the National Association of Intercollegiate Athletics (“NAIA”) with a rich tradition of success in athletics. Teams have participated in 60 national championships in eight of 15 sponsored sports, with individual competitors in both men’s and women’s track and field. The women’s basketball team won the NAIA Division II National Championship in 1999 and has appeared in four NAIA Fab Fours in Division I and II. The men’s cross country team has placed in the top 10 at the National Championship Meet for the past four years. Prior to joining the Mid-South Conference in 2010, the University was a member of the American Mideast Conference (formerly the Mid-Ohio Conference). University teams have won 38 regular season conference championships and 19 conference tournament championships since athletics began in the 1988-89 season. University athletes are active in the NAIA Champions of Character initiative found at: http://www.championsofcharacter.org/ The Center for International Programs and Activities (“CIPA”) was established by the University to seek and attract a growing number of international students and to increase global awareness among its domestic students through strategically established study abroad programs. The CIPA has sister-institution affiliations with universities in Germany, China, Spain, Vietnam, and Morocco, and offers on a regular basis many study/travel abroad courses to an ever increasing choice of destinations through the University’s Kentucky Institute for International Studies consortium membership at Western Kentucky University. Some faculty-led CIPA

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courses are funded by the Hodgden Travel Fund and many others are funded, in part, by the University.

Historical Development The University dates back to 1945, when Ohio University established an academic center at Portsmouth High School in Portsmouth, Ohio (“Ohio University Portsmouth”). In 1975, after years of development, the Ohio Board of Regents voted to charter the Shawnee State General and Technical College from the merger of Ohio University Portsmouth and Scioto Technical College, located eight miles north of Portsmouth, Ohio, in Scioto County. An Ohio Senate bill in 1977 changed the institution’s name to Shawnee State Community College. In 1978, Shawnee State Community College began operations at a newly expanded campus at its current location. State legislation established Shawnee State University in 1986, and nearly 2,800 students enrolled for its first year of operation.

GOVERNANCE AND ADMINISTRATION

The Board of Trustees The Board of Trustees of the University (the “Board”) and the University are declared by statute to be a public body, both politic and corporate, performing essential governmental functions and serving public purposes, and an instrumentality of the State. The University’s powers are vested in and are exercised by its Board, consisting of nine voting members and two non-voting student members appointed by the Governor of the State of Ohio for overlapping terms of nine years and two years respectively.

Members of the Board of Trustees

Term Name Expires Committee/Position Occupation Robert Howarth 6/30/2020 - Board Chairperson Attorney & Partner Chairperson - Executive Committee Shoemaker & Howarth, - Liaison to SSU Development LLP Foundation Scott Williams 6/30/2021 - Board Vice Chairperson Director of Governmental Vice Chairperson - Finance & Administration Affairs Ohio Association of Committee – Chairperson Realtors - Executive Committee Scott Evans 6/30/2024 - Academic & Student Affairs Attorney Allen Law Office Committee – Vice Chairperson David Furbee 6/30/2018 - Finance & Administration Financial Advisor Committee Edward Jones - Investment Committee Liaison Francesca Hartop 6/30/2022 - Finance & Administration CEO of Gracie Plum Committee Investments - Liaison to SSU Development Foundation

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Term Name Expires Committee/Position Occupation Sondra Hash 6/30/2019 - Academic & Student Affairs Vice President of Operations Committee Compass Community Health Melissa Higgs- 6/30/2017 - Academic & Student Affairs E-Learning Specialist Horwell Committee – Chairperson InfoOhio - Executive Committee Joseph Watson 6/30/2023 - Finance & Administration President & CEO Committee – Vice Petland, Inc. Chairperson - Executive Committee George White 6/30/2025 - Newly appointed Retired Physician

Mykalley Detty 6/30/2018 - Academic & Student Affairs SSU Student Student Member Committee

Brian Stiers 6/30/2017 - Finance & Administration SSU Student Student Member Committee Rick Kurtz - - Ex-officio, non-voting Shawnee State University University President member President

University Officers Executive officers of the University include:

Rick Kurtz, Ph.D. President Jeffrey A. Bauer, Ph.D. Provost and Vice President for Academic Affairs Elinda C. Boyles, Ph.D. Vice President for Finance and Administration Anne Marie Gillespie, Ph.D. Vice President for Enrollment Management and Student Affairs Eric Braun Vice President for Advancement and External Affairs Cheryl Hacker General Counsel

Biographical information for each executive officer of the University is set forth below. Rick Kurtz, Ph.D. became the sixth President of the University on July 1, 2015, after recently serving as the Dean of the College of Arts and Sciences at Ferris State University in Big Rapids, Michigan, and Associate Dean in the College of Humanities and Social and Behavioral Sciences at Central Michigan University in Mt. Pleasant, Michigan. Dr. Kurtz earned a Ph.D. in Political Science at Colorado State University, Fort Collins, Colorado; a Master of Arts in Public Administration at the University of Virginia, Charlottesville, Virginia; and a Bachelor of Arts in Political Science at the University of Alaska, Anchorage, Alaska. Prior to his career in higher education, he served various roles in federal government services providing expertise in policy analysis, program budgeting and implementation, community outreach, and interagency cooperative planning and partnerships for organizations including the USDA Agriculture Research Service, National Park Service in Anchorage, Alaska, and the U.S. Navy-Navy Reserve.

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Jeffrey A. Bauer, Ph.D. was appointed as Provost and Vice President of Academic Affairs in June 2016. Dr. Bauer has recently played a critical role in the University’s strategic planning efforts and has assisted in advancing several initiatives under the University’s Academic Affairs division, including accreditation, retention, advising, and academic program review efforts. Dr. Bauer became the University’s first full-time faculty member in 1987, and over his 29-year career at the University, he has held numerous leadership positions, including Dean of the College of Arts and Sciences, Interim Dean for Research and Community Development, Interim Associate Provost, and Chair of the Department of Natural Sciences. He earned a bachelor’s degree in Geology and Business Administration from Bowling Green State University and a Master’s degree in Geology and a Ph.D. in Geology from The Ohio State University. Elinda C. Boyles, Ph.D. was employed in 1987 as the first Director of Human Resources for the newly established University. In addition to launching and organizing the department, Dr. Boyles successfully negotiated the initial collectively bargained agreement with the Communication’s Workers of America (AFL-CIO) that represented the University’s hourly staff. Dr. Boyles was appointed in 2008 to the position of vice president for finance and administration. In this capacity, she is responsible for the oversight of a wide array of business, finance and administrative functions. Dr. Boyles serves as the University spokesperson for the negotiation of labor agreements with the Shawnee Education Association that represents all full- time faculty. Dr. Boyles possesses a bachelor’s of science in business management from Eastern Kentucky University, M.Ed. from the University of Nevada, Las Vegas, and Ph.D. in higher education administration from Ohio University. Anne Marie Gillespie, Ph.D. came to the University in January 2016 from Ferris State University where she served as the Director of Student Academic Affairs for the College of Arts and Sciences, serving as the chief retention officer. As Vice President for Enrollment Services and Student Services at SSU, she leads the Offices of Admission, Dean of Students, Housing and Residence Life, Counseling and Health Services, Multicultural Student Affairs, Student Activities, and Financial Aid. Eric Braun was appointed the Vice President for Advancement and External Affairs in July 2016. Prior to this role, Mr. Braun served as Interim Special Assistant to the President for External Affairs and Executive Director of Development. The offices of Communications and Government Relations and Economic and Workforce Development report to him, and he facilitates both the President's work with the Board of Trustees and serves as secretary to the Board of Trustees. Mr. Braun continues to oversee the Office of Development in his current role. Cheryl Hacker is the General Counsel for the University. She oversees the legal affairs of the University and serves as the legal advisor for the President, Board of Trustees and other senior administrators. Prior to joining the University in July 2010, Ms. Hacker served as a Principal Assistant Attorney General in the Ohio Attorney General's Education Section where she advised and represented several state colleges and universities. She also served as an Assistant Attorney General in the Charitable Foundations Section. Prior to the Attorney General’s Office, Ms. Hacker served as the legal counsel to the Ohio General Assembly's Joint Committee on Agency Rule Review. Ms. Hacker received her B.A. in History from Bluffton College (now Bluffton University) and her J.D. from Capital Law School.

STRATEGIC PLANNING As the University marks its thirtieth anniversary in 2016, it is in the midst of implementing a strategic plan entitled Planning for the Next Generation (the “Strategic Plan”). The Strategic Plan was approved by the Board on August 19, 2016. It sets forth the mission, vision and values of the University as developed through a 12-month strategic planning process.

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During the strategic planning process, the University administration worked with faculty, staff, students, alumni, parents, business leaders, donors and community members to take an in-depth look at the culture of the University and what sets it apart as an institution. The strategic planning process resulted in a comprehensive update of the institution’s mission, vision and goals as follows:

Mission, Vision and Enduring Values The University’s guiding principles, as shown in the table below, reflect the culture at the University:

Our Mission We prepare today’s students to succeed in tomorrow’s world.

Our Vision We will be a best-value university offering a wide range of high-quality signature programs.

Our Enduring Values . Student-Focused Service . Community Engagement . Authentic Dialogue . Thoughtful Risk-Taking . Culture of Continuous Improvement

The University has set forth the following strategic goals as part of the Strategic Plan:

1) Our academic programs give Shawnee State and our graduates a competitive advantage. 2) Our admission practices help prospective students identify the best pathway to their academic and career goals. 3) Our services enhance the quality of life for students and community. 4) Our business operations and processes are customer-focused and outcome- driven.

The next steps in implementing the Strategic Plan include the development of division- wide strategic plans that align with the institution’s including identifying measurable goals for departments and individuals within those units and measuring the success of the implementation and refining strategies. More information on the Strategic Plan, as well as updates regarding its implementation, can be found at http://www.shawnee.edu/strategic-planning/

UNIVERSITY POLICIES AND PROCESSES The University has been engaged in a systematic review and upgrade of existing institutional policies. As part of the University’s strategic planning process, new policies and processes are being designed and implemented to improve efficiency and reduce expenditures. Further, the implementation of a new Enterprise Resource Platform (“ERP”) has invigorated the assessment of major internal business processes resulting in substantial change management initiatives on campus. These process changes are focused upon improved delivery of services to students and greater internal efficiencies. This effort, scheduled for completion in June 2017, combined with the ongoing review and development of new policies, review of academic

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programs, collegiate restructuring, and administrative streamlining, are the actions enabling the University to respond and overcome economic challenges with substantial strength.

ACADEMIC PROGRAMS

Accreditation The University is a member of the Higher Learning Commission (“HLC”), one of six regional institutional accreditors of degree-granting, post-secondary educational institutions in the United States. The University maintains its accreditation through participation in the HLC’s Academic Quality Improvement Program (“AQIP”). The AQIP process is ongoing, with a focus on continual improvement. Structured around quality improvement principles, AQIP involves a set of networking, goal-setting and accountability activities. Through the program, the University’s accreditation status is reviewed in an eight-year cycle of activities culminating in a Comprehensive Quality Review (“CQR”). The University’s next CQR will occur in the 2018-19 Academic Year. More information on AQIP can be found on the Higher Learning Commission’s website at http://www.hlcommission.org/Pathways/aqip-overview.html In addition, many of the University’s academic programs receive professional accreditation from specialized accreditation bodies. The University maintains professional accreditation in many fields, including Athletic Training, Dental Hygiene, Nursing, Occupational Therapy, Physical Therapy, Radiologic Technology, Respiratory Therapy and Teacher Education. Academic Programs & Rankings The University offers associate degrees in 23 major fields, baccalaureate degrees in 45 major fields, licensure in teacher education, and three Master’s degree programs. In the fall of the 2015-16 Academic Year, a total of 3,881 undergraduate and graduate students attended the University, of which 82.6% attended full-time, and of which 54.9% were women. The University’s mission statement is: We prepare today’s students to succeed in tomorrow’s world. Degree programs offered by the University are designed to fulfill this mission by challenging students to explore new worlds, ideas and ways of thinking. The University provides an intellectually stimulating community that gives students the opportunity to learn more about their careers, their futures and themselves. The University consists of three colleges: the College of Arts and Sciences, the College of Professional Studies and the University College (general education and support services for students who are in general studies or have not selected a major), including the following 11 departments: • Department of Mathematical Sciences • Department of Social Sciences • Department of English & Humanities • Department of Fine, Digital & Performing Arts • Department of Natural Sciences • Department of Health Sciences • Department of Nursing • Department of Business Administration • Department of Rehabilitation and Sport Professions • Department of Engineering Technologies • Department of Teacher Education

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Degree Programs The University offers the following degrees by type:

Associate Degree Programs Accounting Emergency Medical Legal Assisting Physical Therapy Assistant Art Technology Mathematical Sciences Plastics Engineering Business Management Engineering Preparatory Medical Laboratory Radiologic Technology Technology Studies Technology Respiratory Therapy Computer Aided Drafting & English/Humanities Natural Science Social Science Design General Studies Nursing Technical Study Dental Hygiene Information Technology Occupational Therapy Electromechanical Management Assistant Engineering

Bachelor Degree Programs Accounting Education (Middle Childhood) Language Arts Teacher Political Science Athletic Training Education (Visual Arts, Education Psychology Biology Pre-K-12) Legal Assisting Social Science Ceramics English/Humanities Generalist Management Sociology Chemistry Environmental Engineering Marketing Sport Management Communications Exercise Science Mathematical Sciences Studio Arts Computer Engineering Game & Simulation Arts Musical Theater Visualist Design & Interactive Culture and Media Studies Geology Nursing Media Digital Simulation & Gaming Health Care Administration Occupational Therapy (3+2) Drawing Health Science Painting Education (Adolescent to History Philosophy and Religion Young Adult) Information Systems Photography Education (Early Childhood) Management Physics Education (Intervention International Relations Plastics Engineering Specialist)

Master Degrees Education Occupational Therapy Mathematics

Degrees Conferred The University has awarded the following degrees in the preceding five Academic Years:

2011-12 2012-13 2013-14 2014-15 2015-16 Associate Degrees 250 281 292 265 231 Bachelor’s Degrees 350 426 435 448 415 Masters Degrees 31 28 27 38 57 Certificates 2 1 3 6 2

Total Degrees Conferred 633 736 757 757 705

ENROLLMENT AND ADMISSIONS The University has seen a decline in enrollment over the previous five years, but is not unique in this aspect. The University continues to experience the same challenges realized in comparable institutions of higher education in the state and across the nation. These challenges include low numbers of high-school graduates within the service areas, actions required to improve retention and graduation rates, continued avoidance of debt by students and their families, sensitivity to the cost of higher education, to name a few. To begin the 2016-17

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Academic Year, the University welcomed a total enrollment of 3,772 students including 3,603 undergraduate and 169 graduate students. Non-Ohio residents represent 11.3% of undergraduates with 0.9% international students representing 18 different nations. The University recognizes that student demographic trends are a challenge, but firmly believes that with previous and ongoing strategic planning that includes expanded advising, unique student success programs, targeted recruitment for signature academic programs, and increased emphasis on student life and fitness, it is in a position to maintain or strengthen current enrollment levels. Improvements made to academic and research buildings as well as housing, dining, and recreation center facilities have added to the quality of the student experience.

Detailed enrollment statistics by Academic Year is set forth in the tables below.

Fall Enrollment - Total Headcount 2012-13 2013-14 2014-15 2015-16 2016-17 Undergraduate 4,532 4,231 4,097 3,729 3,603 Graduate 98 86 133 152 169 Total 4,630 4,317 4,230 3,881 3,772

Fall Enrollment - Full-Time Equivalents (FTE) 2012-13 2013-14 2014-15 2015-16 2016-17 Undergraduate 4,037 3,803 3,537 3,266 3,237 Graduate 68 68 93 110 112 Total 4,105 3,871 3,630 3,376 3,349 The University seeks to maintain its accessibility to all students, but is primarily focused on serving prospective students within its regional service area. The 2015 national average for all students on the ACT Composite was 21.0; over the past five Academic Years, the average national University freshman ACT composite score for those students was 20.5. The University’s freshmen ACT and SAT scores continue to show improvement indicating better preparedness of students to achieve successful degree completions. The University has also seen improvement in its first-year student retention rate moving from 51.7% for the 2012-13 Academic Year to nearly 61% for the 2015-16 Academic Year.

Student Admissions Undergraduate, First-Year Freshmen

Percent of First Accepted Year Academic Applications Applications Percent Applicants Applicants ACT SAT Retention Year Received Accepted Accepted Enrolled Enrolled Scores* Scores* Rates 2012-13 5,412 4,233 78.2% 1,467 34.7% 20.1 991 51.7% 2013-14 5,380 4,260 79.2% 1,400 32.9% 20.5 974 53.8% 2014-15 4,841 3,505 72.4% 1,421 40.5% 20.9 1041 54.4% 2015-16 4,864 3,539 72.8% 1,293 36.5% 20.9 980 60.9% 2016-17 4,792 3,505 73.1% 1,185 33.8% 20.3 1046 N/A

* Applies only to Freshman undergraduate degree seeking students. SAT scores exclude the writing component score.

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Student Financial Aid The following table summarizes the financial aid awards provided to University students for the five most recent Academic Years:

Student Financial Aid Awarded By Academic Year

2011-12 2012-13 2013-14 2014-15 2015-16 Pell Grants $11,652,523 $10,806,682 $10,098,115 $ 8,913,645 $ 8,090,603 Other Federal Grants/Scholarships 838,919 922,910 826,759 708,548 618,183 Direct & PLUS Loans 29,529,331 27,516,584 26,016,243 23,889,124 21,149,464 University Scholarships 3,625,011 3,843,447 3,829,275 4,014,501 4,353,363 Fee Waivers 525,338 548,098 433,322 392,208 363,688 State Scholarships/Grants 2,303,371 2,363,166 2,463,403 2,677,708 2,255,112 Local & Private Scholarships 1,852,587 1,830,871 2,003,674 2,156,873 2,671,932 Student Employment College Work Study Only 144,514 134,147 126,528 132,887 130,879

Total Aid $50,471,594 $47,965,905 $45,797,319 $42,885,494 $39,633,224

FACULTY AND EMPLOYEES The University has approximately 151 full-time faculty members, and its total active faculty numbered 298, as of August 31, 2016. Excluding undergraduate student workers, the University employs approximately 594 people in total, making it one of the largest employers in Scioto County. Below is a summary of the full-time and part-time faculty statistics for the fall semester of the 2016-17 Academic Year.

Number Tenured Professors 37 Associate Professors 44 Assistant Professors 0 Instructors 0 Other 0 Subtotal 81 Tenure Eligible Professors 0 Associate Professors 0 Assistant Professors 43 Instructors 0 Other 0 Subtotal 43 Non-Tenure Professors 0 Associate Professors 0 Assistant Professors 11 Instructors 16 Other 147 Subtotal 174 Total 298

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LABOR RELATIONS The University currently has two employee groups that are unionized. Communications Workers of America (“CWA”) represents all full-time and regular, part-time, hourly employees (includes clerical, utility workers, representatives, custodial, maintenance workers, etc.). The expiration date of this collectively bargained agreement is November 7, 2016. Negotiations for a successor agreement began in October 2016. Wages are a subject of bargaining and the outcome is unknown at this time. The Shawnee Education Association (“SEA”) represents all full-time faculty members. There are 156 covered/represented full-time faculty members. The expiration date of the SEA’s collectively bargained agreement will be in August 2018. The exact date will be determined once the 2018-19 Academic-Year Calendar is adopted, the contractual salary adjustment pool for faculty for the 2017-18 Academic Year is estimated to include a 2.45% increase from the 2016-17 Academic Year’s salary base.

RETIREMENT BENEFITS The University participates in the State Teachers Retirement System (“STRS”) and the Ohio Public Employees Retirement System (“OPERS”), which are both statewide, cost-sharing, multiple-employer defined benefit public pension systems governed by the Ohio Revised Code. These plans cover substantially all employees of the University, including law enforcement officers of the University. Each system offers three different plan options available to its members (defined benefit, defined contribution, and combined), and each provides retirement, survivor, and disability benefits to plan members and their beneficiaries. Each system also provides post-employment health care benefits (including Medicare B premiums) to retirees and beneficiaries who elect to receive those benefits. For information on employee and employer contributions, benefits, and pension liability schedules, see Notes 13 and 14 in “APPENDIX B - JUNE 30, 2016 AUDITED FINANCIAL STATEMENTS” to the Official Statement. Both STRS and OPERS issue publicly available financial reports that include financial statements and required supplemental information for the pension and post-employment health care plans. For information on obtaining such reports, see Note 13 in “APPENDIX B - JUNE 30, 2016 AUDITED FINANCIAL STATEMENTS” to the Official Statement.

In June 2015, the Internal Revenue Service (IRS) notified Shawnee State University of its examination of the University's 403(b) and 457(b) supplemental retirement plans. The years under review span from 2009 through 2015 and the review focused on the University’s supplemental deferred compensation benefit plans administered by the Department of Human Resources. The issues under review involved whether the University followed the language of both Plan documents including the process used to notify eligible employees. Over the past year, the IRS made intermittent contacts with the University collecting related materials. We have been informed that the closing agreement coordinator is reviewing the matter.

FEES AND CHARGES

Tuition and Fees On March 11, 2016, the Board of Trustees approved the tuition and fees for the 2016-17 Academic Year, which reflect no increase for in-state undergraduate rates and a 5% increase for out-of-state undergraduate rates and in-state and out-of-state graduate rates over the 2015-16 Academic Year. Tuition and fees for the 2016-17 Academic Year ranges from $3,682 to $4,732 for residents of Ohio, and from $6,515 to $11,094 for out-of-state residents. Section 3333-1-10

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of the Ohio Administrative Code, which applies to the University, defines an Ohio resident for tuition purposes as any person who maintains a 12-month residence in the state, is qualified as a resident to vote in the state, and who may be subject to state income taxes. All full-time undergraduate students pay a general fee and a technology fee each semester of $344 and $62, respectively. Graduate students pay a $131 general fee and $45 technology fee. Both undergraduate and graduate students pay a university center bond fee in the amount of $150 for fall and spring semesters for purposes of providing funds to repay a portion of the debt service on the Series 2007 Bonds. The University plans to continue assessing the $150 semester fee until June 2034 – the original maturity date of the Series 2007 Bonds, which shall be refunded in full by the Series 2016 Bonds – as originally approved by the various approving bodies. The bond fee will continue through 2034 to support a portion of the debt service on the Series 2016 Bonds. Pursuant to Section 3333.17 of the Ohio Revised Code, the University has entered into a reciprocal agreement with certain educational institutions from Kentucky that permit students from either state to attend a participating institution in the other state at in-state tuition rates. Residents of the Counties of Boyd, Carter, Elliot, Fleming, Greenup, Lawrence, Lewis, Mason or Rowan in Kentucky are permitted under this agreement to attend the University at in-state tuition rates. The following table summarizes tuition (including mandatory fees) for the four most recent Academic Years, and the current Academic Year:

Ohio Resident Tuition & Fees

2012-13 2013-14 2014-15 2015-16 2016-17 Undergraduate $3,494 $3,588 $3,682 $3,682 $3,682 Graduate $4,398 $4,398 $4,398 $4,514 $4,732

Non-Ohio Resident Tuition & Fees

2012-13 2013-14 2014-15 2015-16 2016-17 Undergraduate $5,981 $6,145 $6,309 $6,381 $6,515 Graduate $10,296 $10,296 $10,297 $10,573 $11,094

Source: Controllers Office.

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Comparative Costs For the 2015-16 Academic Year, the instructional and general fees per semester for a full-time, in-state undergraduate student ranged from $3,123 to $7,007 at Ohio 4-year public universities as reflected below:

Academic Year 2015-16 Undergraduate Instructional and General Fees Miami University $7,007 University of Cincinnati $5,500 The University of Akron $5,135 Ohio University $5,268 The Ohio State University $5,018 Cleveland State University $4,848 Kent State University $5,006 University of Toledo $4,621 Bowling Green State University $5,295 Youngstown State University $4,044 Wright State University $4,365 Shawnee State University $3,682 Central State University $3,123

HOUSING & RESIDENCE LIFE The University’s Office of Housing & Residence Life is committed to creating an on- campus living experience that supports the holistic development of residents to become outstanding students, offering many opportunities for students to grow through educational and social programming, living-learning communities, and a wide-range of leadership roles and student activities both in the residence halls and campus-wide.

Housing Facilities University Townhouse Apartments (Series 2016 Bond funds to be allocated for renovation). Units are configured with four double occupancy bedrooms, two full bathrooms and feature a living room, kitchen, dining area and laundry room. The townhouse-style units consist of a ground, lower and upper level layout. All units are air conditioned and cable is provided. There is ample parking adjacent to the townhouses. University Townhouse Apartments is a University-owned property. Cedar House Apartments. Units are configured with two double occupancy bedrooms, a full bathroom and feature a living room, kitchen and dining room. The apartments consist of a first and second floor layout. All units are air conditioned and cable is provided. There is limited parking near Cedar, but other options are available near the University. Cedar House Apartments is a University-owned property.

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Carriage House Apartments. Units are configured with one double occupancy bedroom, a full bathroom and feature a living room, kitchen and dining area. All units are air conditioned and cable is provided. There is ample parking adjacent to the Carriage House Apartments. Carriage House Apartments is a University-owned property. Bridge View Court Apartments. Units are configured with one and two double occupancy bedrooms, a full bathroom a feature a living room, kitchen and dining area. Each apartment includes central air conditioning, cable and VCT flooring. ADA facilities are available. Ample parking is available. Bridge View Court Apartments is privately owned by Glover Street Apartments, LLC. Campus View Apartments. Units are configured with one, two and three, double occupancy bedrooms, a full bathroom and feature a living room, kitchen and dining area. Each apartment includes central air conditioning, cable and VCT flooring. ADA facilities are available. Ample parking is available. This is privately owned by Campus View Associates, LLC. Tanner Place Apartments. Units are configured with one double occupancy bedroom, a full bathroom and feature a living room and kitchen. All units are air conditioned and cable is provided. Ample parking is available. Tanner Place Apartments is privately owned by Tanner Place, LLC.

Housing Occupancy

Campus View; University Tanner Place; Residents Percentage Owned Bridgeview On Of Men Living Women Living Fall Capacity Court Capacity Campus Occupancy On Campus On Campus 2011 178 723 962 106.8% 456 506 2012 179 785 998 103.5% 483 515 2013 176 785 970 100.9% 477 493 2014 180 785 922 95.5% 478 444 2015 170 777 884 93.3% 476 408 2016 174 760 893 95.6% 498 395

Notes: Number of students/capacity in SSU-owned properties 164/174 Occupancy percentage for SSU-owned properties 94.3%

Number of students/capacity in privately-owned properties 728/760 Occupancy percentage for privately-owned properties 95.8%

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On March 11, 2016, the Board of Trustees approved the housing and meal plan rates for the 2016-17 Academic Year. The following table summarizes the most affordable housing and meal plan rates for the current and four most recent academic years.

Annual Board Charge Residence (unlimited Total Beds Rate of Residence Academic Year Hall Fee meal plan) Available Hall Occupancy 2012-13 $4,520 $3,330 964 94.5% 2013-14 $4,678 $3,458 961 94.0% 2014-15 $4,772 $3,528 965 91.5% 2015-16 $4,892 $3,598 951 86.5% 2016-17 $4,990 $3,634 957 95.0%

Notes: 1. Board plan quoted is 19 meals per week – required for all freshmen. 2. Total Beds Available – changes due to the housing of professional staff; visiting scholars; etc. 3. 2016-17 amounts are for fall semester – all others are for the academic year.

GENERAL RECEIPTS The General Receipts of the University for Fiscal Years 2012 through 2016 are shown below.

General Receipts Fiscal Year Ended June 30

2012 2013 2014 2015 2016 Student Tuition, Fees & Other Charges $24,714,784 $24,513,333 $24,209,355 $23,320,139 $22,579,836 Grants & Contracts 173,550 210,516 210,122 339,524 252,866 Sales & Services 1,910,816 1,810,841 1,742,795 1,846,922 1,815,460 Investment Income 102,056 1,316,141 2,128,762 342,692 68,098 Other 475,849 357,897 504,187 381,092 302,857 Total $27,377,055 $28,208,728 $28,795,221 $26,230,369 $25,019,117

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Budgeted General Receipts The following table sets forth the budgeted General Receipts for Fiscal Year 2017. As in prior years, the University’s current expenditures, which are financed in part by State appropriations and other funds excluded from the General Receipts, are projected to be greater than the General Receipts.

Budgeted General Receipts Fiscal Year Ending June 30, 2017

Student Tuition, Fees & Other Charges $ 30,319,355 Grants & Contracts 0 Sales & Services 329,454 Investment Income 0 Other 503,454 Total $ 31,152,263

Note: Budgeted amounts for Fiscal Year 2017 do not take into consideration GASB 34/35 adjustments such as fee waivers and scholarships which occur at year end.

GRANTS AND CONTRACTS

Grants, Contracts and Awards Although the University is not a research institution, almost $3 million in grants and contracts (excluding financial aid) is awarded to the University annually. The largest portion of awards are federal program awards or federal pass-through grants from the State. The University is the recipient of several Federal Department of Education funded TRIO programs, including Upward Bound, Upward Bound Math Science, and Educational Opportunity Center. In Fiscal Year 2017, the University received a new Title III grant titled Strengthening Advising. This is a five-year award totaling $1,977,701. Current grants including federal pass-through dollars include the 21st Century Community Learning Centers and the Ohio Deans Compact program. The University also receives grant funding from state and private sources including the Ohio Department of Education (“ODHE”) and Battelle Institute. The University continues to be active in partnerships and collaborations. Current and past grant partnerships have included The Ohio State University, University of Cincinnati, Ohio University, University of Dayton, Southern State Community College and University of Rio Grande. Operating grants and other amounts awarded to the University from federal, state and private sponsors in the last five Fiscal Years are shown in the table below. These amounts don’t include financial aid awards. Total Annual Grant and Other Amounts Received Fiscal Year Amount 2012 $2,595,659 2013 2,969,017 2014 2,862,671 2015 2,709,161 2016 2,785,611

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STATE APPROPRIATIONS All State universities in Ohio receive State financial assistance for operations and capital improvements through appropriations by the General Assembly. State appropriations contribute substantially to the maintenance and operation of the University. The General Assembly currently determines such appropriations biennially. In addition, appropriations made by the General Assembly for higher education and other purposes are subject to decreases by the Governor pursuant to Section 126.08 of the Ohio Revised Code. State appropriations are not included in General Receipts of the University and, therefore, are not pledged as security for the Series 2016 Bonds.

Operating Appropriations Prior to Fiscal Year 2010, state financial support was allocated in accordance with a formula that was driven largely by student enrollment. In Fiscal Year 2010, the State began to implement an allocation formula, whereby each institution’s State Share of Instruction (“SSI”) shifted to reflect student success outcomes (course and degree completions). The allocation formula also provided weighting factors for at-risk students and Science, Technology, Engineering and Math (“STEM”) programs. New components to the SSI allocation formula have been phased into the funding model every year since 2010. In Fiscal Year 2017, the formula shifted to allocating 50% of the SSI funds on degrees awarded, 30% on course completions, and 20% expressly earmarked for doctoral and medical components (the University does not receive funding from these earmarks). On June 30, 2015, Governor Kasich signed into law the Fiscal 2016-17 State Executive Budget. This budget includes an increase to the total SSI appropriation pool of 2% over Fiscal Year 2015, plus an additional appropriation intended to somewhat offset the effects upon the legislated freeze placed on in-state undergraduate tuition. State operating appropriations are classified as non-operating revenue on the University’s financial reports. In Fiscal Year 2016, the State operating appropriation represented 28.1% of the University’s total revenue. The following table shows State operating appropriations to the University for Fiscal Years 2012- 2016, as well as estimates for Fiscal Year 2017: Annual State Appropriations

Fiscal Year State Operating Ended June 30 Appropriations 2012 $16,120,703 2013 15,966,614 2014 15,916,302 2015 16,257,877 2016 16,303,575 2017* 15,712,660

* Estimated. The University’s actual allocation is subject to a mid-year adjustment based on updated course and degree completion numbers submitted by all Ohio public universities. The SSI formula is recalculated by the ODHE to reflect the updated numbers. For the past two mid-year adjustments, the University has received an increased funding amount.

Capital Appropriations In addition to operating appropriations, the University receives State capital appropriations. Prior to Fiscal Year 2012, capital appropriations for higher education in Ohio

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were distributed through an allocation formula that provided a guaranteed funding amount for each institution, but did not strategically allocate these resources. The capital appropriation process was changed in Fiscal Year 2012 to enable capital allocations to more closely meet institutional needs. The State did not appropriate any capital funds for the 2011-2012 biennium to higher education. In an effort to be consistent with the Governor’s commitment to restrain government spending, the 2013-14 capital bill was restrained in size, focusing on the preservation and improvement of existing infrastructure as a tool for economic growth. The state increased capital appropriations for the 2015-16 and 2017-18 biennia. The following table depicts State capital appropriation to the University for each biennium from 2009-10 through 2017-18: Biennial Capital Appropriations

Fiscal Year State Capital Biennium Appropriations 2009-2010 $2,680,715 2011-2012 No allocation 2013-2014 $3,145,000 2015-2016 $4,000,000 2017-2018 $4,800,000

Available State capital appropriations for the 2015-2016 and 2017-2018 biennia will be used to (i) renovate Health Sciences/STEMM facilities, (ii) improve the Advanced Technology Center/Tech and Industry Building improvements, (iii) Clark Memorial Library rehabilitation and repurposing, and (iv) basic facilities renovations including Kricker Hall. There can be no assurances that future State appropriations for operating or capital improvement purposes will be made available in the amounts requested, required or budgeted by the University.

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SUMMARY OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

Set forth below is a summary of the University’s revenues, expenses and changes in net position for the five most recent Fiscal Years. These summaries are derived from the audited financial statements of the University for each of the Fiscal Years shown:

Fiscal Year Ended June 30 2012 2013 2014 2015 2016 Operating Revenue Student tuition & fees (net)1 $24,714,784 $24,513,333 $24,209,355 $23,320,139 $22,579,836 Federal grants & contracts 2,225,814 2,373,300 2,417,573 2,387,444 2,247,491 State grants & contracts 332,774 370,823 448,515 286,323 249,101 Local grants & contracts 287,523 262,926 331,676 335,739 374,240 Private gifts, grants & contracts 511,144 950,592 430,543 576,601 404,821 Sales and services 1,910,816 1,810,841 1,742,795 1,846,922 1,815,460 Miscellaneous 475,849 357,897 504,187 381,092 302,857

Total operating revenue $30,458,704 $30,639,712 $30,084,644 $29,134,260 $27,973,806

Operating Expenses Education and general: Instruction & departmental research 21,129,397 21,750,948 20,100,199 19,794,586 19,551,682 Public service 2,154,204 2,321,027 2,398,875 2,244,944 2,289,885 Academic support 2,820,322 2,833,861 3,016,301 3,210,578 3,271,911 Student services 4,105,408 4,245,464 3,727,822 3,833,267 3,751,461 Institutional support 10,395,977 11,451,277 10,212,939 10,147,354 10,372,024 Operation & maintenance of plant 5,177,885 5,285,870 5,272,526 5,581,883 5,488,162 Scholarships & fellowships 7,870,245 7,038,480 6,834,336 6,426,737 6,775,895 Depreciation expense 3,561,196 3,617,381 3,576,210 3,510,953 3,527,238 Auxiliary enterprises 6,329,988 6,479,758 6,427,094 6,109,114 6,426,472

Total operating expenses 63,544,622 65,024,066 61,566,302 60,859,416 61,454,730

Operating Loss (33,085,918) (34,384,354) (31,481,658) (31,725,156) (33,480,924)

Nonoperating Revenue (Expenses) State appropriations 16,120,703 15,966,614 15,916,302 16,257,877 16,303,575 Federal, state and local grants & contracts 15,410,720 14,692,279 13,898,359 13,066,875 12,144,024 Private grants & contracts 813,459 800,397 959,636 952,935 1,099,577 Investment income 102,056 1,316,206 2,128,812 342,725 68,162 Interest on capital asset-related debt (765,334) (770,656) (753,039) (757,869) (695,915) Loss on disposal of capital assets (75,888) (8,501) (1,891) (6,668) (4,722) Amortization of debt issuance cost (11,748) ------

Net nonoperating revenues 31,593,968 31,996,339 32,148,179 29,855,875 28,914,701

Change in Net Position Before Capital Approp. (1,491,950) (2,388,015) 666,521 (1,869,281) (4,566,223)

Other Revenue – Capital appropriations 595,946 1,277,613 2,039,185 213,636 421,302

Increase (Decrease) in Net Position (896,004) (1,110,402) 2,705,706 (1,655,645) (4,144,921)

Net Position – Beginning of year 91,600,359 90,704,355 85,098,722 87,804,428 45,548,445

Adjustment for Change in Accounting Principles -- (4,495,231) -- (40,600,338) --

Net Position – Beginning of year, as restated 91,600,359 86,209,124 85,098,722 47,204,090 45,548,445

Net Position – End of year $90,704,355 $85,098,722 $87,804,428 $45,548,445 $41,403,524

1 Net of scholarship allowances of $12,251,656 in 2012, $12,480,451 in 2013, $12,128,351 in 2014, $11,902,240 in 2015 and $11,115,109 in 2016.

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INVESTMENT POLICY Investment Policy of the University Certain investment policies of the Board govern the University’s investment practices and sets forth two primary objectives: safety and return on investment. University investments are categorized as part of an established liquid investment pool or diversified investment pool. Investments in the liquid investment pool may only consist of certain highly liquid classes of investments, such as government securities or various certificates of deposit. The diversified investment pool consists of certain equities and fixed-income securities, including international securities approved by the Board’s Investment Committee. No more than 5% of the diversified investment pool may be invested in any single issue except for U.S. government securities. Assets are to be invested in publicly traded securities, as permitted by state statute, with a target allocation of 54% in equity securities, 45% in fixed income securities, 1% in cash and 0% in alternative assets. Ranges are established for each allocation classification. The University has recently transitioned its investment management from three separate managers to a single investment manager, TIAA. As part of this transition, the Investment Committee and the University’s Finance Office worked with TIAA to complete a due diligence review of the current investment policy. The proposed updated policy was approved by the Board of Trustees at its October 14, 2016 meeting.

Spending Policy The University may transfer up to 2.5% of the diversified investment pool’s previous 12-quarter moving market value average to the liquid investment pool for purposes of meeting cash needs of the University.

UNIVERSITY CASH & INVESTMENTS AND NET POSITION

Cash & Investments Summary A summary of the cash and investment balances of the University for Fiscal Years 2012 through 2016 is shown below. Cash & Investment Balances Fiscal Year Ended June 30 (excludes Development Foundation Assets)

2012 2013 2014 2015 2016 Operating Cash $2,789,973 $1,457,708 $1,570,805 $894,069 $1,081,866 Short-term Investments $247,538 $779,539 $537,294 $122,719 $14 Long-term Investments $17,271,323 $18,668,228 $19,712,229 $20,252,421 $18,263,093 Total $20,308,834 $20,905,475 $21,820,328 $21,269,209 $19,344,973

The accumulated fund balance is reflected on the University’s Statement of Net Position within the unrestricted net position. The University’s unrestricted net position decreased in Fiscal Year 2015 due to the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions and an amendment of this statement, GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date (see the University’s Fiscal Year 2015 Audited Financial Statements for a detailed explanation). A summary of the unrestricted net position of the University for Fiscal Years 2012 through 2016 is set forth below.

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Unrestricted Net Position Fiscal Year Ended June 30

2012 2013 2014 2015 2016 Unrestricted Net Position $17,672,760 $16,728,232 $18,928,809 $18,147,740 $16,007,800 Impact of Implementation of Pension Standards N/A N/A N/A ($40,106,037) ($40,201,216) Total Unrestricted Net Position $17,672,760 $16,728,232 $18,928,809 ($21,958,297) ($24,193,416)

SHAWNEE STATE UNIVERSITY DEVELOPMENT FOUNDATION The Shawnee State University Development Foundation (the “Foundation”) is the primary fundraising and gift receiving organization for the University. Formed as an Ohio non- profit organization in 1987, the Foundation is a 501(c)(3) charitable organization which relies on donor contributions as its primary source of revenues. The Foundation is a legally separate entity from the University and maintains a self-appointing voluntary board of trustees. The Series 2016 Bonds are not secured by any pledge of Foundation funds. The Foundation is responsible for overseeing the management of the funds that have been entrusted to it. It is governed by policies that are designed to meet the needs of both donors and the University. Net assets of the Foundation are over $30M, with over $10M in true endowment. The Foundation raises money and maintains funds for unrestricted annual fund that can be used to help meet institutional priorities, capital projects such as real estate acquisition and improving labs and classrooms, funding academic initiatives, enhancing campus life, and supporting core University projects.

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FACILITIES The University’s physical plant facilities include the following buildings:

Building Gross Sq. Age of Facility/Most Recent Renovation Ft. 310 Chillicothe Street 20,500 Circa 1900 Masonry/Infrastructure 2013 Administration Building 42,947 1976/Partial Interior 2005-2016 Administration Annex 4,279 1985/HVAC 2006 Advanced Technology Center 76,408 1992/Class/lab upgrades 2016-2017 Carriage House Apartments 5,040 Unk/Structural/DDC 2004-2011 Cedar House Apartments 16,200 Unk/Security/structural 2004-2011 Townhouse Apartments 28,316 1985/Exterior/Interior 2004-2016 Vern Riffe Center for the Arts 108,541 1995/Roof/Lighting/chiller 2007-2015 Toombs Children’s Learning Center 7,300 1999/Exterior/Interior/security 2004-2012 Health Sciences Building 38,136 1976/Classrooms/labs 2016-2017 Jacobs Center for International Programs 3,400 1974/Interior 2007 Kricker Hall 25,682 1976/Classrooms/labs 2016-2017 Clark Memorial Library 77,843 1991/Energy upgrades-roof 2003-2012 Massie Hall 96,504 1966/HVAC – part interior-roof 2005-2016 Rhodes Athletic Center/Natatorium 73,896 1976/1983 renovations; Repairs-pool 2012 Receiving Building 1,000 1925/New roof 2006 Smokestack Building 4,000 1903/Renovation 2011 Morris University Center 84,881 1992/2008 Major rehabilitation 2010 Maintenance Shop 3,552 1976/Interior 2006

CAPITAL INVESTMENT AND PLANNING The University receives capital appropriations from the State for various capital improvements, as discussed in the section entitled, “STATE APPROPRIATIONS”. In addition to State capital appropriations, the University self-funds certain capital investment projects. The table set forth below displays state, University, and total capital expenditures for the University for Fiscal Years 2012-2016.

Total Capital Expenditures Fiscal Years Ended June 30

2012 2013 2014 2015 2016 State Capital Expenditures $606,535 $1,277,613 $2,039,185 $194,300 $262,705 % of Total 25.5% 30.7% 61.1% 12.2% 38.6% University Capital Expenditures $1,775,455 $2,887,725 $1,298,431 $1,395,487 $417,129 % of Total 74.5% 69.3% 38.9% 87.8% 61.4% Total $2,381,990 $4,165,338 $3,337,617 $1,589,787 $679,834

The University’s current capital facilities plan, “Master Plan 2008 Forward”, was completed in September 2007 and revised in January 2011 prior to the University establishing the current Strategic Plan. To better align the facilities master plan and the recently adopted

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Strategic Plan, the University will undertake to revise the Master Plan 2008 Forward. To date, the University has appointed its facilities master plan team and, with third-party consultants, will work over the next several months towards the adoption of a new facilities master plan (scheduled for October 2017). For reference, a copy of the Master Plan 2008 Forward can be found on the University’s website at http://www.shawnee.edu/offices/facilities-planning- construction/media/Master-Plan-2008-Forward.pdf Given current capital planning initiatives and availability of State capital funding, the University does not anticipate issuing additional General Receipts Bonds within the next two years.

RISK MANAGEMENT AND SELF-INSURANCE The University is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. To address these exposures and reduce premiums, the University is a member of the Inter-University Council of Ohio Insurance Consortium (IUC-IC), a purchasing partnership with 12 other Ohio four-year public universities. Additionally, the University enjoys limited governmental immunity under Chapter 2744 of the Ohio Revised Code for certain actions brought against it. The University has a self-insured healthcare plan. The University also has an international travel comprehensive services assistance plan. The plan covers medical, security, and traveler assistance. Workers’ compensation benefits are provided through the Ohio Bureau of Workers’ Compensation. Under Ohio’s laws, there are no policy limits or cap on these benefits so long as treatment and compensation arise from the allowed conditions in a claim. There has been no significant change in coverage from last year. For information on obtaining additional information about risk management coverage and self-insurance totals, see Note 15 in “APPENDIX B -” to the Official Statement. JUNE 30, 2016 AUDITED FINANCIAL STATEMENTS.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE UNIVERSITY FOR THE FISCAL PERIODS ENDED JUNE 30, 2016 AND 2015 AND INDEPENDENT AUDITORS REPORT

[THIS PAGE INTENTIONALLY LEFT BLANK] Shawnee State University (a component unit of the State of Ohio)

Financial Report with Supplementary Information June 30, 2016

Board of Trustees Shawnee State University 940 Second Street Portsmouth, Ohio 45662

We have reviewed the Independent Auditor’s Report of the Shawnee State University, Scioto County, prepared by Plante & Moran, PLLC, for the audit period July 1, 2015 through June 30, 2016. Based upon this review, we have accepted these reports in lieu of the audit required by Section 117.11, Revised Code. The Auditor of State did not audit the accompanying financial statements and, accordingly, we are unable to express, and do not express an opinion on them.

Our review was made in reference to the applicable sections of legislative criteria, as reflected by the Ohio Constitution, and the Revised Code, policies, procedures and guidelines of the Auditor of State, regulations and grant requirements. The Shawnee State University is responsible for compliance with these laws and regulations.

Dave Yost Auditor of State

September 20, 2016

88 East Broad Street, Fifth Floor, Columbus, Ohio 43215‐3506 Phone: 614‐466‐4514 or 800‐282‐0370 Fax: 614‐466‐4490 www.ohioauditor.gov

This page intentionally left blank. Shawnee State University Contents

Report Letter 1-3

Management’s Discussion and Analysis 4-15

Basic Financial Statements

Statement of Net Position - University 16-17

Statement of Net Assets - Foundation 18

Statement of Revenue, Expenses, and Changes in Net Position - University 19

Statement of Activities - Foundation 20-21

Statement of Cash Flows - University 22-23

Notes to Financial Statements 24-58

Required Supplementary Information 59

Schedule of the University’s Proportionate Share of the Net Pension Liability and Schedule of University Contributions 60

Note to Required Supplementary Information 61

Supplementary Information 62

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 63-64

Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance 65-66

Schedule of Expenditures of Federal Awards 67

Notes to Schedule of Expenditures of Federal Awards 68

Schedule of Findings and Questioned Costs 69-70

Independent Auditor's Report

To the Board of Directors Shawnee State University

Report on the Financial Statements We have audited the accompanying basic financial statements of Shawnee State University (the "University") and its discretely presented component unit as of and for the years ended June 30, 2016 and 2015 and the related notes to the financial statements, which collectively comprise the University's financial statements as listed in the table of contents. These financial statements are reported as a component unit of the State of Ohio. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or 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 opinion.

1 To the Board of Directors Shawnee State University

Opinion In our opinion, the basic financial statements referred to above present fairly, in all material respects, the net position of Shawnee State University and its discretely presented component unit as of June 30, 2016 and 2015 and the changes in its net position and, where applicable, its cash flows thereof, for the years then ended, in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 2 to the financial statements, during the year ended June 30, 2016, the University adopted the provisions of Governmental Accounting Standards Board Statement No. 72, Fair Value Measurement and Application. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the schedule of the University's proportionate share of the net pension liability, and the schedule of university contributions, as indicated in the table of contents, 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, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Shawnee State University's basic financial statements. The schedule of expenditures of federal awards is presented for the purpose of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the "Uniform Guidance"), and is not a required part of the basic financial statements.

2 To the Board of Directors Shawnee State University

The schedule of expenditures of federal awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such 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 basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards 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 September 12, 2016 on our consideration of Shawnee State University's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Shawnee State University's internal control over financial reporting and compliance.

September 12, 2016

3 Shawnee State University Management’s Discussion and Analysis (Unaudited)

This unaudited section of Shawnee State University’s annual financial report presents a discussion and analysis of the financial performance of the University during the fiscal year ended June 30, 2016. This discussion, prepared by University management, provides an overview of the University’s financial activities and should be evaluated in conjunction with the accompanying financial statements and footnotes.

This annual report consists of the statements of net position, revenue, expenses, and changes in net position, and cash flows. These statements have been prepared in accordance with the Governmental Accounting Standards Board’s (GASB) Statements No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments, and No. 35, Basic Financial Statements and Management’s Discussion and Analysis - for Public Colleges and Universities, as amended.

In addition, in accordance with GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units, and GASB Statement No. 61, The Financial Reporting Entity - Omnibus, the Shawnee State University Development Foundation’s (the “Foundation”) financial statements have been included in this annual report. This information has been provided on separate financial statements and in a note to the financial statements. Shawnee State University’s management’s discussion and analysis reflects only information related to the University.

During fiscal year 2016, the University implemented GASB Statement No. 72, Fair Value Measurement and Application. Please see adoption of new accounting pronouncements in Note 2 to the financial statements for further details.

Financial Highlights

Key financial highlights for 2016 are as follows:

 Total net position decreased $4,144,921. The decrease was the result of a $922,851 reduction in nonoperating grant funding, a $740,303 decline in student tuition and fee revenue, and an increase of $595,314 in operating expenditures.

 Total assets decreased $5,903,044. Current assets decreased $1,151,807 and noncurrent assets (excluding capital assets) decreased $1,989,328 as the result of the reduction in investments held by the University.

 The $5,273,275 increase in total liabilities was primarily due to the $6,949,434 adjustment to the net pension liability related to GASB Statement No. 68.

4 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

 Total revenue decreased $1,957,862 from 2015 to 2016 compared with a decrease of $5,058,630 from 2014 to 2015.

 Total expenses increased $531,414 as compared with a decrease of $697,279 from 2014 to 2015.

 Operating expenses increased $595,314 primarily as a result of increased scholarship, auxiliary enterprise, and institutional expenses.

 Operating revenue decreased by $1,160,454 due to reduced student tuition and fees revenue.

 Nonoperating revenue decreased $1,005,074 mainly as a result of a $776,209 decrease in nonoperating grant revenue and $274,563 in decreased investment income. Nonoperating expenses increased $63,900 as a result of an increase in interest expense on capital asset related debt and losses on the disposal of capital assets in 2016.

Using this Financial Report

This annual report consists of two parts: (1) management’s discussion and analysis and the basic financial statements for Shawnee State University, and (2) the basic financial statements for the Shawnee State University Development Foundation. The basic financial statements for Shawnee State University include the statements of net position, revenue, expenses, and changes in net position, and cash flows. The basic financial statements for the Shawnee State University Development Foundation include the statement of net assets and the statement of activities.

Statement of Net Position and Statement of Revenue, Expenses, and Changes in Net Position

The statement of net position and statement of revenue, expenses, and changes in net position present information about the University and its activities in a way that helps answer the question, “How did Shawnee State University do financially during 2016?” The statement of net position includes all short-term and long-term assets and liabilities, both financial and capital and deferred outflows or inflows of resources. The accrual basis of accounting is used for the recording of revenue and expenses. This basis of accounting records revenue when earned and expenses when incurred, regardless of when the cash is actually received or paid. Over time, increases or decreases in net position are one indicator of the improvement or deterioration of the University’s financial health. Non-financial factors such as student retention rate, enrollment growth, and condition of facilities must also be considered.

5 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Statement of Net Position

The statement of net position, which reports all assets and liabilities of the University, reflects the financial position of the University at the end of the fiscal year. Total assets and deferred outflows minus total liabilities and deferred inflows equal net position. The University’s assets, deferred outflows, liabilities, deferred inflows, and net position as of June 30, 2016, 2015, and 2014 are presented below:

2016 2015 2014 Assets Current assets$ 7,252,468 $ 8,404,275 $ 9,391,226 Capital assets - Net 79,857,130 82,619,039 84,460,480 Other noncurrent assets 18,263,093 20,252,421 19,712,229 Total assets 105,372,691 111,275,735 113,563,935

Deferred Outflows of Resources 8,104,734 3,188,029 -

Liabilities Current liabilities 7,074,526 7,426,422 6,962,696 Non-current liabilities 61,278,613 55,653,442 18,082,525 Total liabilities 68,353,139 63,079,864 25,045,221

Deferred Inflows of Resources 3,720,762 5,835,455 714,286

Net Position Net investment in capital assets 65,400,451 67,314,273 68,650,729 Restricted, expendable 196,489 192,469 224,890 Unrestricted (24,193,416) (21,958,297) 18,928,809 Total net position $ 41,403,524 $ 45,548,445 $ 87,804,428

6 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Total assets of the University decreased $5,903,044 in 2016 and $2,288,200 in 2015. Current assets decreased $1,151,807 in 2016 and $986,951 in 2015. The decrease in current assets in 2016 and 2015 is predominantly attributable to a decrease in cash and short-term investments due to reduced government funding and tuition received during the year. Noncurrent assets (excluding capital assets) decreased $1,989,328 in 2016 as compared to an increase of $540,192 in 2015 due to the decreased market value of University investments and the liquidation of investment holdings to supplement the University’s cash needs during the fiscal year.

Net capital assets decreased $2,761,909 in 2016 and $1,841,441 in 2015 due to depreciation expense and the loss on disposals of capital assets exceeding the cost of construction projects completed during the respective years.

The $5,273,275 increase in total liabilities ($5,625,171 increase in noncurrent liabilities partially offset by a $351,896 decrease in current liabilities) is primarily due to an increase of $6,949,434 to recognize the University’s proportionate share of the net pension liability as determined by the two pension plans associated with the University, the State Teachers Retirement System, and Ohio Public Employees Retirement System, as required by GASB Statement No. 68. See Note 2 and Note 13 to the financial statements for further details.

7 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Statement of Revenue, Expenses, and Changes in Net Position

The statement of revenue, expenses, and changes in net position presents the results of operations for the University. The change in net position during the fiscal year is a measurement of the change in the overall financial condition of the University. The University’s revenue, expenses, and changes in net position for the fiscal years ended June 30, 2016, 2015, and 2014 are as follows:

2016 2015 2014 Operating revenue: Tuition, fees, and other student charges $ 22,579,836 $ 23,320,139 $ 24,209,355 Grants and contracts 3,275,653 3,586,107 3,628,307 Sales and services 1,815,460 1,846,922 1,742,795 Miscellaneous income 302,857 381,092 504,187 Nonoperating revenue: Investment income 68,162 342,725 2,128,812 State appropriations 16,303,575 16,257,877 15,916,302 Other grants 13,243,601 14,019,810 14,857,995 Capital appropriations 421,302 213,636 2,039,185

Total revenue 58,010,446 59,968,308 65,026,938

Operating expenses: Instruction and research 19,551,682 19,794,586 20,100,199 Public service 2,289,885 2,244,944 2,398,875 Academic support 3,271,911 3,210,578 3,016,301 Student services 3,751,461 3,833,267 3,727,822 Institutional support 10,372,024 10,147,354 10,212,939 Operation and maintenance of plant 5,488,162 5,581,883 5,272,526 Scholarships and fellowships 6,775,895 6,426,737 6,834,336 Depreciation 3,527,238 3,510,953 3,576,210 Auxiliary enterprises 6,426,472 6,109,114 6,427,094 Nonoperating expense: Interest on capital debt 695,915 757,869 753,039 Loss on disposal of capital assets 4,722 6,668 1,891 Total expenses 62,155,367 61,623,953 62,321,232

(Decrease) increase in net position $ (4,144,921) $ (1,655,645) $ 2,705,706

8 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Shawnee State University is dedicated to its mission of providing higher education that fosters competence in oral and written communication, scientific and quantitative reason, and critical analysis/logical thinking. To enrich the lives of the community, the University provides opportunities for continuing personal and professional development, intellectual discovery, and appreciation for the creative and performing arts. The University charges students tuition and fees in accordance with approved University policy, as constrained by state laws. Based on state regulations, there was no change in rates charged for undergraduate in-state tuition and fees during 2016. Rates charged for undergraduate out-of-state students and all graduate students increased 2.73 percent effective in the fall 2015 semester.

The University’s 2016 revenue from student tuition and fees has decreased to $22,579,836 from $23,320,139 in 2015 and $24,209,355 in 2014 due to decreases in enrollment over these years. Tuition and fees represent 38.9 percent of the University’s total revenue in 2016 as well as 2015, and 37.2 percent in 2014. The 9.5 percent decrease in operating grants and contracts revenue from $3,586,107 in 2015 to $3,275,653 in 2016 is attributable to the reduced funding the University received from scholarship grants as a result of lower enrollment levels in 2016.

The combination of institution-wide spending-constraint strategies implemented in prior years while still providing funding for projects related to the University’s strategic plan initiatives resulted in a small 1 percent increase in total operating expenses in 2016 when compared to 2015 spending levels. The 1 percent increase in total operating expenses is mainly a result of a $317,358 increase in auxiliary enterprises expenses and a $224,670 increase in institutional support expenses in 2016. In both instances, the increase in expenses is a result of new strategic plan initiatives such as enrollment management programs or new software applications implemented to increase operational efficiency. Scholarships and fellowships expenses increased from $6,426,737 in 2015 to $6,775,895 in 2016 primarily due to a change in the state College Credit Plus scholarship program that resulted in the program expenses being recorded in the current year instead of being recorded on a one-year lag under the prior Postsecondary Education Opportunity scholarship program. This change resulted in a combined expense being recorded in 2016. Operation and maintenance of plant experienced a decrease of 1.7 percent from $5,581,883 to $5,488,162 due to less University-funded building projects in 2016 than in 2015.

State appropriations represent 28.1 percent of the University’s total revenue in 2016, 27.1 percent in 2015, and 24.5 percent in 2014. These percentages illustrate that tuition and fee revenue alone is not sufficient to cover relevant operational expenses. The University is dependent upon a predictable and relatively stable level of state appropriation funding.

During 2016, investment income amounted to $68,162 as compared to $342,725 during 2015 and $2,128,812 during 2014. The level of decrease in investment markets in general is mirrored in the University’s decrease in investment income. During the last quarter of fiscal year 2016, the University had initiated a review for a new investment consultant as well as new investment managers to improve the University’s long-term investment performance.

9 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Pell Grants and certain other grants are considered non-exchange transactions and therefore are reflected as nonoperating revenue. The federal grants portion of nonoperating other grants revenue experienced a 5.9 percent decrease. The decrease in 2016 follows a similar decrease in 2014 of 5.9 percent in the federal grant portion of nonoperating other grants revenue. Income from federal aid programs such as Pell, SEOG, and Veteran’s Benefits amounted to $8.7 million in 2016 as compared with $9.6 million in 2015 and $10.9 million in 2014. Nonoperating grants revenue represents 22.8 percent of the University’s total revenue in 2016, 23.4 percent in 2015, and 22.8 percent in 2014.

Capital appropriations increased to $421,302 in 2016 from $213,636 in 2015 and decreased from $2,039,185 in 2014. The increases in 2016 and 2014 reflect the increased state capital funding received to support the startup costs of various capital projects during those years. These projects included the upgrade to the Fine Arts building and the STEMM building project. The decrease in 2015 reflects the reduced state capital funding received as projects that were started in previous years neared their completion and required less state funding and no new major state-funded capital projects were initiated in 2015.

The following graphs summarize Shawnee State University’s revenue and expense activity for the fiscal year ended June 30, 2016.

Revenue Activity

Other Non‐operating Income 23.56%

Tuition, Fees, & Other Student Charges 38.92%

Investment Income 0.12%

State Appropriations Grants and Contracts 28.10% 5.65%

Sales and Services Other Income 0.52% 3.13%

10 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Expense Activity Interest on Capital Nonoperating Auxiliary Enterprises Debt Expenses 10.34% 1.12% 0.01%

Depreciation Instruction & Research 5.67% 31.46%

Scholarships 10.90%

Plant Operation & Maintenance Public Service 8.83% 3.68%

Academic Support 5.26% Institutional Support Student Services 16.69% 6.04%

11 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Statement of Cash Flows

The statement of cash flows provides information about the University’s financial condition by reporting the cash sources (receipts) and the cash uses (payments) during the fiscal year ended June 30, 2016. A comparison of cash sources and uses during fiscal years 2016, 2015, and 2014 is presented below:

2016 2015 2014 Cash (used in) provided by: Operating activities $ (30,518,913) $ (27,792,718) $ (28,245,760) Noncapital financing activities 30,461,795 29,624,892 30,699,284 Capital and related financing activities (1,935,434) (2,727,227) (3,628,995) Investment activities 2,180,349 218,317 1,288,568

Net increase (decrease) in cash and cash equivalents 187,797 (676,736) 113,097

Cash and cash equivalents - Beginning of year 894,069 1,570,805 1,457,708

End of year $ 1,081,866 $ 894,069 $ 1,570,805

Cash and cash equivalents increased by $187,797 from 2015 to 2016, compared to a decrease of $676,736 from 2014 to 2015 mainly due to the liquidation of investments during 2016 by the University.

Capital Assets and Debt Administration

At the end of fiscal year 2016, the University had $79,857,130 in net capital assets. This reflects an overall decrease of $2,761,909 in net capital assets from 2015. The reduction was a result of the 2016 depreciation expense being larger than the cost of new capital assets acquired in 2016.

Capital assets - Net of depreciation at June 30: 2016 2015 2014

Land $ 8,003,370 $ 8,003,370 $ 8,003,370 Land improvements 6,928,632 6,928,632 6,928,632 Buildings and improvements 62,451,322 58,907,751 61,429,944 Equipment 1,763,004 2,177,996 2,653,813 Library books 309,007 320,416 308,218 Construction in progress 401,795 6,280,874 5,136,503 Totals $ 79,857,130 $ 82,619,039 $ 84,460,480

12 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Debt Administration

At June 30, 2016, the University had outstanding general revenue bonds payable totaling $13,875,000, $500,000 of which is due within one year. This reflects an overall decrease of $490,000 in the general revenue bonds payable liability from 2015. The Series 2007 Bonds were issued for the purpose of paying the cost to renovate and construct a new addition to the University Center and for the refunding of the outstanding Series A and Series B Bonds.

In fiscal year 2013, the University executed a new capital lease with Key Government Finance, Inc. The original lease proceeds of $2,820,339 are funding a portion of the University’s IT infrastructure upgrade project. In 2015, the University received an additional $227,407 in funding and revised the original lease’s payment schedule to reduce annual payment amounts by extending the lease through October 1, 2018. As of June 30, 2016, the remaining balance of the capital lease was $935,234, $301,976 of which is due within one year.

Outstanding debt at year end: 2016 2015 2014

Capital lease payable - 3.16% $ 935,234 $ 1,237,553 $ 1,285,070 General revenue bonds payable - 4.0% to 5.0% - Series 2007 13,875,000 14,365,000 14,835,000

Total debt $ 14,810,234 $ 15,602,553 $ 16,120,070

Current Financial Issues and Concerns

As detailed in the previous sections of the management’s discussion and analysis (MD&A), the University’s fiscal year 2016 net position experienced a substantial loss. The primary challenge was the academic year 2015/2016 enrollment decline compounded by such factors as the timing of a multi-year College Credit Plus scholarship expense adjustment, the planned renovation of one of four student residential buildings, and the fiscal year 2016 pension liability adjustment required by GASB Statement No. 68. While the tuition revenue loss was somewhat offset by reductions in instructional expense since fewer course sections were required, fewer costs associated with student services, and a slight increase in state revenue, these offsets are not sufficient to negate the tuition revenue impact.

Not adequately captured solely by this year’s financial performance are the concrete actions and strategic initiatives undertaken during fiscal year 2016 that are positioning Shawnee State for a real and positive transformation. With the board of trustees’ completion of a national search and employment, beginning July 1, 2015, of Shawnee’s sixth president, the influence of this new leader upon the institution cannot be overstated.

13 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

First, during fiscal year 2016, a major undertaking was the employment of three of the four division vice president positions that were vacated due to retirements or acceptance of promotional opportunities out of the state. These included the provost and vice president for academic affairs, the vice president for advancement and external affairs (a newly configured division), and the vice president for enrollment management and student affairs. This current leadership team formed a partnership with the president that is driving cultural and operational changes required for growth.

Second, in response to the desires of the board of trustees, the president rapidly deployed a comprehensive organizational assessment and strategic planning that occurred throughout fiscal year 2016. The impact of the strategic planning effort upon the community has been dynamic and positive. The participation of over 300 community and campus leaders produced four major forward-thinking themes upon which the campus will focus (i.e., competitive advantage of academic programs, strengthening of admission practices, enhancing life quality for students and community, and customer-focused and outcome-driven business process). Among the many positive outcomes, this effort produced a clear mission statement and, importantly, the articulation of a viable and achievable vision. The value in coalescing these multiple stakeholders is being realized in concrete ways - all leading to a reinvigorated community. The University’s strategic plan was approved by the board of trustees at its August 2016 meeting. The resulting divisional and unit planning processes currently underway are dedicated to achieving organizational and operational changes deep within the institution.

Third, while the University has been engaged in austerity measures for the past four years, we have been unable to keep pace with the degree and sustained nature of the revenue loss. The president is tackling this condition with a twofold approach: 1) heightening the austerity measures to include, beginning with the fiscal year 2017 budget, a three-year path to reducing recurring General Fund expenditures to achieve a balanced general operating budget; and, 2) with the active engagement of targeted action teams, the identification of key investment areas critical for operational efficiencies, improved services, and financial return. The first year of the three-year budgetary goal was achieved with:

 Extensive departmental-level examination and right-sizing of non-compensation spending  Deeper reductions of administrative positions  Organizational realignments that cover broader functionalities with fewer staff  Increased emphasis upon academic program reviews  Replacement of the institution’s outdated legacy software systems  Investment in change management techniques to gain efficiencies in business processes as well as reduced energy consumption that will produce measurable outcomes  Explicit expectations for marked improvement in the delivery of direct services to our students

14 Shawnee State University Management’s Discussion and Analysis (Unaudited) (Continued)

Embedded in his financial strategy is carefully planned use of debt. To that end, we have engaged professional financial advisors to assist with the refunding of 2007 general receipts bonds and anticipate utilizing the projected savings to acquire an additional $7 million of debt. This new funding enables the University to make sorely needed upgrades to health and recreation facilities and to redirect General Fund dollars to operating needs instead of the source for University- owned housing renovations. Further, the improvements to these auxiliary buildings support and enhance the University’s newly framed recruitment strategies.

Fourth, the above initiatives are conjoined with the implementation of a turn-around plan for improved student enrollment and retention. Even before this plan is fully implemented, we are realizing positive indicators with evidence of improved retention beginning academic year 2016/2017. These preliminary efforts have been supported by the Shawnee State University Development Foundation (SSUDF) and the Ohio Department of Higher Education (ODHE) through the awarding of grants to defray start-up costs. The turn-around plan incorporates an integrated marketing and communications strategy, updates an outdated admission process, and installs a multi-phase approach to maximize student advising opportunities and career planning support.

Lastly, while the University’s community has been reinvigorated and is demonstrating the collective desire to engage in the new strategies, the president and his leadership team know that true change will come incrementally and only with sustained energy, thoughtful planning, and creative approaches to solve problems by all sectors within the institution. What Shawnee State University has experienced with its lagging enrollment the past few years is not uncommon to many higher education institutions throughout the nation. What is different is the renewed dedication and sincere commitment by the leaders, key stakeholders, and the broader community to make the difficult changes required for continued success. To that end, the next steps include continuation of a robust strategic planning process that produces measurable outcomes deep within the organization, achieving a balanced general operating budget that enables strategic investments essential for growth, realizing sustained, multi-year improvements in enrollment and retention, and rebuilding a strong alumni and donor network that includes a robust relationship with external stakeholders.

15 Shawnee State University Statement of Net Position University

June 30 2016 2015 Assets and Deferred Outflows of Resources Current Assets Cash and cash equivalents $ 1,081,866 $ 894,069 Short-term investments 14 122,719

Total cash and short-term investments 1,081,880 1,016,788 Receivables: Accounts (net of allowance for doubtful accounts of $2,942,397 in 2016 and $2,880,748 in 2015) 5,635,905 7,002,973 Notes 83,672 85,547 Amounts due from primary government 93,207 26,140 Interest receivable 37,103 37,257 Inventory 40,424 42,388 Prepaid items 280,277 193,182

Total current assets 7,252,468 8,404,275 Noncurrent Assets Investments 18,263,093 20,252,421 Capital assets - Net 79,857,130 82,619,039

Total noncurrent assets 98,120,223 102,871,460

Total assets 105,372,691 111,275,735

Deferred Outflows of Resources Pension costs 8,104,734 3,188,029

Total Assets and Deferred Outflows of Resources $ 113,477,425 $ 114,463,764

See Notes to Financial Statements. 16 Shawnee State University Statement of Net Position (Continued) University

June 30 2016 2015

Liabilities, Deferred Inflows of Resources, and Net Position

Current Liabilities Accounts payable$ 992,148 $ 845,542 Accrued wages and benefits 3,633,939 4,008,929 Compensated absences payable 192,456 243,984 Capital lease payable 301,976 302,319 Bonds payable 500,000 490,000 Accrued interest payable 78,952 80,328 Unearned revenue 1,241,843 1,372,092 Deposits held by and due to others 133,212 83,228

Total current liabilities 7,074,526 7,426,422

Noncurrent Liabilities Compensated absences payable 1,732,106 2,195,853 Unearned revenue 593,061 651,601 Net pension liability 44,945,188 37,995,754 Capital lease payable 633,258 935,234 Bonds payable 13,375,000 13,875,000 Total noncurrent liabilities 61,278,613 55,653,442 Total liabilities 68,353,139 63,079,864

Deferred Inflows of Resources Service concession agreements 360,000 537,143 Pension costs 3,360,762 5,298,312

Total deferred inflows of resources 3,720,762 5,835,455

Net Position Net investment in capital assets 65,400,451 67,314,273 Restricted: Expendable Loans 112,896 112,891 Other 83,593 79,578 Unrestricted (24,193,416) (21,958,297)

Total net position 41,403,524 45,548,445

Total Liabilities, Deferred Inflows of Resources, and Net Position $ 113,477,425 $ 114,463,764

See Notes to Financial Statements. 17 Shawnee State University Statement of Net Assets Development Foundation

June 30 2016 2015 Assets Cash and cash equivalents $ 421,867 $ 236,209 Investments 17,602,784 18,256,891 Contributions receivable - Net 268,123 715,495 Lease receivable from related party 28,514 43,463 Beneficial interest in trusts held by others 952,875 1,016,169 Cash surrender value of life insurance 227,667 229,522 Other assets 85,700 95,560 Net property and equipment 11,206,083 11,250,522 Total assets $ 30,793,613 $ 31,843,831

Liabilities and Net Assets

Liabilities Accounts payable$ 27,354 $ 16,677 Accrued real estate tax 71,875 67,974 Deferred revenue 11,521 11,552 Deposits held and due to others 160,321 69,233 Annuity payment liability 245,529 251,176 Note payable 4,175,573 4,319,250

Total liabilities 4,692,173 4,735,862 Net Assets Unrestricted 8,118,867 8,437,951 Temporarily restricted 7,783,030 8,515,140 Permanently restricted 10,199,543 10,154,878

Total net assets 26,101,440 27,107,969 Total liabilities and net assets $ 30,793,613 $ 31,843,831

See Notes to Financial Statements. 18 Shawnee State University Statement of Revenue, Expenses, and Changes in Net Position University

Year Ended June 30 2016 2015 Operating Revenue Student tuition and fees (net of scholarship allowances of $11,115,109 in 2016 and $11,902,240 in 2015) $ 22,579,836 $ 23,320,139 Federal grants and contracts 2,247,491 2,387,444 State grants and contracts 249,101 286,323 Local grants and contracts 374,240 335,739 Private gifts, grants, and contracts 404,821 576,601 Sales and services 1,815,460 1,846,922 Miscellaneous 302,857 381,092 Total operating revenue 27,973,806 29,134,260 Operating Expenses Education and general: Instruction and departmental research 19,551,682 19,794,586 Public service 2,289,885 2,244,944 Academic support 3,271,911 3,210,578 Student services 3,751,461 3,833,267 Institutional support 10,372,024 10,147,354 Operation and maintenance of plant 5,488,162 5,581,883 Scholarships and fellowships 6,775,895 6,426,737 Depreciation expense 3,527,238 3,510,953 Auxiliary enterprises 6,426,472 6,109,114 Total operating expenses 61,454,730 60,859,416

Operating Loss (33,480,924) (31,725,156) Nonoperating Revenue (Expenses) State appropriations 16,303,575 16,257,877 Federal, state, and local grants and contracts 12,144,024 13,066,875 Private grants and contracts 1,099,577 952,935 Investment income 68,162 342,725 Interest on capital asset-related debt ( 695,915) ( 757,869) Loss on disposal of capital assets (4,722) (6,668)

Net nonoperating revenue 28,914,701 29,855,875

Change in Net Position Before Capital Appropriations (4,566,223) (1,869,281)

Other Revenue - Capital appropriations 421,302 213,636 Decrease in Net Position (4,144,921) (1,655,645)

Net Position - Beginning of year 45,548,445 87,804,428 Adjustment for Change in Accounting Principle (Note 2) - (40,600,338) Net Position - Beginning of year, as restated 45,548,445 47,204,090

Net Position - End of year $ 41,403,524 $ 45,548,445

See Notes to Financial Statements. 19 Shawnee State University Statement of Activities Development Foundation Year Ended June 30, 2016 (with comparative totals for 2015)

Temporarily Permanently Total Total Unrestricted Restricted Restricted 2016 2015

Revenue and Other Support Contributions $ 93,047 $ 625,839 $ 44,479 $ 763,365 $ 2,742,358 Investment income - Net (77,894) (13,820) - (91,714) 348,031 Change in value of split-interest agreements (105,526) (75,358) 186 (180,698) 536,498 Losses for uncollectible contributions (8,603) (6,992) - (15,595) (110,871) Loss on sale of assets (5,317) - - (5,317) ( 28,779) Other income 3,500 - - 3,500 3,500 Rental income 407,412 - - 407,412 412,205 Net assets released from restrictions 1,261,779 (1,261,779) - - - Total revenue and other support 1,568,398 (732,110) 44,665 880,953 3,902,942 Expenses and Losses Scholarships and other student aid 434,363 - - 434,363 351,161 Institutional support 459,979 - - 459,979 874,884 Guest speakers and lecturers 18,381 - - 18,381 11,924 Management and general expenses 350,164 - - 350,164 463,400 Rental expenses 624,595 - - 624,595 622,776

Total expenses and losses 1,887,482 - - 1,887,482 2,324,145

Change in Net Assets (319,084) (732,110) 44,665 (1,006,529) 1,578,797 Net Assets - Beginning of year 8,437,951 8,515,140 10,154,878 27,107,969 25,529,172

Net Assets - End of year $ 8,118,867 $ 7,783,030 $ 10,199,543 $ 26,101,440 $ 27,107,969

See Notes to Financial Statements. 20 Shawnee State University Statement of Activities (Continued) Development Foundation Year Ended June 30, 2015

Temporarily Permanently Unrestricted Restricted Restricted Total

Revenue and Other Support Contributions $ 1,987,127 $ 444,037 $ 311,194 $ 2,742,358 Investment income - Net (30,720) 378,751 - 348,031 Change in value of split-interest agreements (18,671) 475,872 79,297 536,498 Losses for uncollectible contributions (15,626) (95,245) - (110,871) Loss on sale of assets (28,779) - - (28,779) Other income 3,500 - - 3,500 Rental income 412,205 - - 412,205 Net assets released from restrictions 2,157,130 (2,157,130) - -

Total revenue and other support 4,466,166 (953,715) 390,491 3,902,942

Expenses and Losses Scholarships and other student aid 351,161 - - 351,161 Institutional support 874,884 - - 874,884 Guest speakers and lecturers 11,924 - - 11,924 Management and general expenses 463,400 - - 463,400 Rental expenses 622,776 - - 622,776

Total expenses and losses 2,324,145 - - 2,324,145

Change in Net Assets 2,142,021 (953,715) 390,491 1,578,797

Net Assets - Beginning of year 6,295,930 9,468,855 9,764,387 25,529,172

Net Assets - End of year $ 8,437,951 $ 8,515,140 $ 10,154,878 $ 27,107,969

See Notes to Financial Statements. 21 Shawnee State University Statement of Cash Flows University

Year Ended June 30 2016 2015 Cash Flows from Operating Activities Cash received from tuition, fees, and other student charges $ 23,094,667 $ 23,753,410 Cash received from gifts, grants, and contracts 2,964,762 3,497,328 Cash received from sales and services 1,779,944 1,902,832 Cash received from miscellaneous services 302,857 381,092 Cash payments to suppliers for goods and services (14,321,290) (13,696,716) Cash payments to employees for services (27,278,081) (26,205,781) Cash payments for employee benefits (10,285,877) (10,998,146) Cash payments for scholarships and fellowships (6,775,895) (6,426,737)

Net cash used in operating activities (30,518,913) (27,792,718)

Cash Flows from Noncapital Financing Activities State appropriations 16,303,575 16,257,877 Nonexchange gifts, grants, and contracts 13,677,793 13,595,563 Federal direct student loan program receipts 21,579,490 23,722,171 Federal direct student loan program disbursements (21,149,464) (23,889,124) Net cash from agency transactions 50,401 (61,595)

Net cash provided by noncapital financing activities 30,461,795 29,624,892

Cash Flows from Capital and Related Financing Activities Capital appropriations 354,235 187,496 Proceeds from capital debt - 242,046 Payments for capital acquisitions (801,435) (1,609,303) Principal payments (792,319) (789,597) Interest payments (695,915) (757,869)

Net cash used in capital and related financing activities (1,935,434) (2,727,227)

Cash Flows from Investing Activities Interest on investments 747,953 671,329 Proceeds for sales and maturities of investments 2,380,344 478,978 Purchases of securities (947,948) (931,990)

Net cash provided by investing activities 2,180,349 218,317

Net Change in Cash and Cash Equivalents 187,797 (676,736)

Cash and Cash Equivalents - Beginning of year 894,069 1,570,805

Cash and Cash Equivalents - End of year $ 1,081,866 $ 894,069

See Notes to Financial Statements. 22 Shawnee State University Statement of Cash Flows (Continued) University

Year Ended June 30 2016 2015

Reconciliation of operating loss to net cash from operating activities: Operating loss$ (33,480,924) $ (31,725,156) Adjustments to reconcile operating loss to net cash from operating activities: Depreciation expense 3,527,238 3,510,953 Changes in operating assets and liabilities and deferred inflows of resources and deferred outflows of resources which provided (used) cash: Accounts receivable 534,602 439,577 Notes receivable 1,875 5,618 Prepaid items (87,095) (3,064) Inventory 1,964 3,336 Accounts payable 146,606 (42,814) Accrued wages and benefits (375,031) 499,978 Compensated absences payable (515,275) 57,948 Unearned revenue (368,052) (44,793) Net pension liability 6,949,434 (2,604,584) Deferred outflows of resources - Net pension expense (6,988,535) (1,116,199) Deferred inflows of resources - Net pension expense 134,280 3,226,482

Net cash used in operating activities $ (30,518,913) $ (27,792,718)

See Notes to Financial Statements. 23 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 1 - Reporting Entity Shawnee State University (the “University”) is a state institution of higher education created in 1986 by the Ohio General Assembly under House Bill 739. The University is one of several state-supported universities in the state of Ohio (the “State”). The University is a component unit of the State and is included as a discretely presented entity in the State’s Comprehensive Annual Financial Report. It is declared by statute to be a body politic and corporate and an instrumentality of the State. The University is governed by a nine-member board of trustees, which is granted authority under Ohio law to do all things necessary for the proper maintenance and continual successful operation of the University. The trustees are appointed for staggered nine-year terms by the governor with the advice and consent of the State Senate. In addition, two non- voting student members are appointed to the board of trustees for staggered two-year terms. GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units, and GASB Statement No. 61, The Financial Reporting Entity - Omnibus, provide guidance to determine whether certain organizations for which the primary government is not financially accountable should be reported as component units based on the nature and significance of their relationship with the primary government. Generally, it requires reporting as a component unit an organization that raises and holds significant economic resources for the direct benefit of a government unit. The Shawnee State University Development Foundation (the “Foundation”) is a legally separate, tax-exempt organization supporting the University. The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the University in support of its programs. The Foundation’s board of trustees is self- perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of the resources the Foundation holds and invests are restricted by the donors to the activities of the University. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University’s financial statements. The Foundation’s financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles as prescribed by the Financial Accounting Standards Board. A separate financial report for the Foundation is available by contacting The Shawnee State University Development Foundation, 940 Second Street, Portsmouth, Ohio, 45662 or by calling 740-351-3284.

24 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 1 - Reporting Entity (Continued) The financial statements of the University have been prepared on the accrual basis and are in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB). The GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The significant Shawnee State University accounting policies are described below.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation - In accordance with GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments and GASB Statement No. 35, Basic Financial Statements - and Management’s Discussion and Analysis - for Public Colleges and Universities, and subsequent standards issued by GASB, the University has elected to report as an entity engaged in business-type activities.

When an expenditure is incurred for purposes for which both restricted and unrestricted funds are available, it is the University’s policy to apply restricted resources first, then unrestricted resources as needed.

The financial statements presentation is intended to provide a comprehensive, entity- wide perspective of the University’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position, revenue, expenses, changes in net position, and cash flows.

Basis of Accounting - The basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Shawnee State University’s financial statements are prepared using the accrual basis of accounting.

Revenue is recorded on the accrual basis when the exchange takes place. Expenses are recognized at the time they are incurred.

Cash and Cash Equivalents - Cash consists primarily of petty cash, cash in banks, and money market accounts. Cash equivalents are short-term highly liquid investments readily convertible to cash with original maturities of three months or less.

Accounts Receivable - Accounts receivable consist of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty, and staff, the majority of each residing in the state of Ohio. Accounts receivable also include amounts due from the federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University’s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.

25 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 2 - Summary of Significant Accounting Policies (Continued)

Prepaid Items - Payments made to vendors for services that will benefit periods beyond the year end are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of purchase and an expense is reported in the year in which the services are consumed.

Investments - Investments, which include investment contracts and money market investments that have a remaining maturity of one year or less at the time of purchase, are reported at fair value. The University has investment management agreements with Agincourt Capital Management, Manning & Napier Advisors, and Vaughn Nelson Investment Management, as permitted by state statute. The agreements allow (within statute limits) investment in both debt and equity instruments.

The University has invested funds in the State Treasury Asset Reserve of Ohio (STAR Ohio). STAR Ohio is an investment pool managed by the State Treasurer’s Office which allows governments within the State to pool their funds for investment purposes. STAR Ohio is not registered with the SEC as an investment company, but has adopted Governmental Accounting Standards Board (GASB) Statement No. 79, Accounting and Financial Reporting for Certain External Investment Pools and Pool Participants, which establishes accounting and financial reporting standards for qualifying external investment pools that elect to measure for financial reporting purposes all of their investments at amortized cost. Investments in STAR Ohio are valued at STAR Ohio’s share price, which is the price at which the investment could be sold on June 30, 2016.

Short-term investments represent investments with maturities of between 90 days and one year.

Fair Value Measurements - As of June 30, 2016, the University retrospectively applied Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. GASB Statement No. 72 provides guidance for determining a fair value measurement for reporting purposes and applying fair value to certain investments and disclosures related to all fair value measurements. See Note 4 for additional information.

Capital Assets - Capital assets utilized by Shawnee State University are reported on the statement of net position. All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated capital assets are recorded at their fair market values as of the date received. Shawnee State University maintains a capitalization threshold of $5,000 for movable equipment and $100,000 for buildings. Building improvement projects over $100,000 are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or significantly extend an asset’s life are not.

26 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 2 - Summary of Significant Accounting Policies (Continued) All reported capital assets except for land, land improvements, and construction in progress are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives: Buildings and improvements 25-50 years Machinery and equipment 5-20 years Licensed vehicles 5-10 years Library books 10 years Shawnee State University’s policy is to capitalize net interest on construction projects until completion of the project. The amount of the capitalized interest is the difference between the interest cost associated with the tax-exempt borrowing used to finance the project and the interest earned from temporary investments of the debt proceeds over the same period. Capitalized interest is amortized on a straight-line basis over the estimated useful life of the asset. No capitalized interest was recorded for fiscal years 2016 and 2015. Deferred Outflows of Resources - In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The University’s deferred outflows of resources is related to the net pension liability. See Note 13 for more information. Compensated Absences - Vacation benefits are accrued as a liability as the benefits are earned if the employee’s right to receive compensation is attributable to service already rendered and it is probable that the employer will compensate the employee for the benefits through paid time off or some other means. Sick leave benefits are accrued as a liability using the vesting method. The liability will include employees currently eligible to receive termination benefits and those Shawnee State University had identified as probable of receiving payment in the future. The amount is based on accumulated sick leave and the employee’s wage rate at year end, taking into consideration any limits specified in Shawnee State University’s termination policy. Unearned Revenue - Unearned revenue is predominantly made up of two categories of income. The first consists of receipts relating to tuition and student fees in advance of the services to be provided. The University will recognize revenue to the extent these services are provided over the coming fiscal year. The second is revenue received from the University bookstore vendor. These funds are designated for improvements to the bookstore as part of the University Center renovation project. The funding is dependent on retaining the contract with this vendor. The straight-line method will be used to amortize the revenue over the remaining life of the contract.

27 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 2 - Summary of Significant Accounting Policies (Continued) Pension - For the purpose of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Ohio Public Employees Retirement System (OPERS) and State Teachers Retirement System of Ohio (STRS), and additions to/deductions from OPERS’ and STRS’ fiduciary net position have been determined on the same basis as they are reported by OPERS and STRS. OPERS and STRS use the economic resources measurement focus and the full accrual basis of accounting. Contribution revenue is recorded as contributions are due, pursuant to legal requirements. Benefit payments (including refunds of employee contributions) are recognized as expense when due and payable in accordance with the benefit terms. Investments are reported at fair value. Deferred Inflows of Resources - In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The University deferred inflows of resources related to the net pension liability and service concession agreements. See Note 13 for more on the net pension liability. Net Position - GASB Statement No. 35 establishes standards for external financial reporting for public colleges and universities and requires that resources be classified for accounting and reporting purposes into the following net position categories:  Net Investment in Capital Assets - Capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt and deferred inflows of resources related to the acquisition, construction, or improvement of those assets.  Restricted - Owned by the University, but the use or purpose of the funds is restricted by an external source or entity. The restricted net position category is subdivided further into expendable and nonexpendable.

o Restricted Expendable - May be spent by the institution, but only for the purpose specified by the donor, or other external entity. This category includes the unspent balance in loan funds, debt service funds, and bond-funded capital projects.

o Restricted Nonexpendable - Endowment funds whose principal may be invested; however, only interest, dividends, and capital gains may be spent.

 Unrestricted - Resources whose use by the University is not subject to externally imposed stipulations. Unrestricted net position may be designated for specific purposes by action of management or the board of trustees or may otherwise be limited by contractual agreements with outside parties.

28 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 2 - Summary of Significant Accounting Policies (Continued)

Income Taxes - The University is an organization described in Section 115 of the Internal Revenue Code (the “Code”) and has further been classified as an organization that is not a private foundation in accordance with Sections 509(a)(1) and 170(b)(1)(A)(ii) of the Code. However, certain revenue is considered unrelated business income and may be taxable under Code Sections 511 through 513.

Self Insurance - The University is self-insured for certain employee health benefit programs. Funding for these programs is based on actuarial projections provided by the plan administrators. Aggregate stop loss insurance is maintained for benefit payments that exceed the maximum limits outlined in the policy. A liability for unpaid claim costs, including estimates of costs relating to incurred but not reported claims, is recorded.

Classification of Revenue - Revenue is classified as either operating or nonoperating.

 Operating revenue includes revenue from activities that have characteristics similar to exchange transactions. These include student tuition and fees (net of scholarship discounts and allowances), sales and services of auxiliary enterprises (net of scholarship discounts and allowances), and certain federal, state, local and private grants, and contracts. The presumption is that there is a fair exchange of value between all parties to the transaction.

 Nonoperating revenue includes revenue from activities that have the characteristics of non-exchange transactions, such as state appropriations, and certain federal, state, local and private gifts, and grants. The implication is that such revenue is derived from more passive efforts related to the acquisition of the revenue, rather than the earning of it.

Scholarship Discounts and Allowances - Student tuition and fee revenue, and certain other revenue from students, are reported net of scholarship discounts and allowances in the statement of revenue, expenses, and changes in net position. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain federal, state, local, and nongovernmental grants are recorded as either operating or nonoperating revenue in the University’s financial statements based on whether or not they are considered exchange transactions. To the extent that revenue from such programs is used to satisfy tuition and fees and other student charges, the University has recorded a scholarship discount and allowance.

29 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 2 - Summary of Significant Accounting Policies (Continued)

Service Concession Arrangements - The University has an agreement with a food service provider, which is a service concession arrangement. The University received funds toward dining hall renovations that are contingent upon the University utilizing the services of the food service provider over a 10-year period. The amounts received are being amortized over the life of the contract arrangement. The unamortized amounts previously were reflected as unearned revenue. Under GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, service concession arrangements are to be reported as deferred inflows/outflows of resources. The University recorded deferred inflows of resources of $360,000 and $537,143 at June 30, 2016 and 2015, respectively.

Budgetary Process - Although not required under the Ohio Revised Code, estimated budgets are adopted by the University board of trustees in the current fiscal year for the following fiscal year. As part of budgetary control, purchase orders, contracts, and other commitments are recorded as the equivalent of an expense on the budgetary basis in order to reserve that portion of the applicable encumbrance.

Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue during the reporting period. Actual results could differ from those estimates.

Reclassification - In the 2015 financial statements, $3,188,029 has been reclassified from deferred inflows of resources to deferred outflows of resources to conform to the 2016 presentation. The reclassification increased deferred outflows of resources by $3,188,029 and decreased deferred inflows of resources for pension costs by $3,188,029.

Adoption of a New Accounting Pronouncement - As of June 30, 2016, the University retrospectively applied Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. GASB Statement No. 72 provides guidance for determining a fair value measurement for reporting purposes and applying fair value to certain investments and disclosures related to all fair value measurements.

30 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 2 - Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements - As of June 30, 2015, the GASB has issued the following statements that were implemented by the University.

 Accounting for Pensions - The GASB issued GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Statement No. 68 requires governments providing defined benefit pensions to recognize their unfunded pension benefit obligation as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. Statement No. 71 is a clarification to GASB Statement No. 68, requiring a government to recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. The statements also enhance accountability and transparency through revised note disclosures and required supplemental information (RSI). In accordance with the statement, the University has reported a net pension liability of approximately $43 million and a deferred outflow of resources of approximately $2 million as a change in accounting principle adjustment to unrestricted net position as of July 1, 2014. June 30, 2014 amounts have not been restated to reflect the impact of GASB Statement No. 68 because the information is not available to calculate the impact on pension expense for the fiscal year ended June 30, 2014.

As of June 30, 2016, the GASB has issued the following statement not yet implemented by the University.

 Accounting for Postemployment Benefits Other Than Pensions - In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which addresses reporting by governments that provide postemployment benefits other than pensions (OPEB) to their employees and for governments that finance OPEB for employees of other governments. This OPEB standard will require the University to recognize on the face of the financial statements its proportionate share of the net OPEB liability related to its participation in the Ohio Public Employees Retirement System (OPERS) or State Teachers Retirement System (STRS). The statement also enhances accountability and transparency through revised note disclosures and required supplementary information (RSI). The University is currently evaluating the impact this standard will have on the financial statements when adopted. The provisions of this statement are effective for the University’s financial statements for the year ending June 30, 2018.

31 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 3 - Deposits and Investments Deposits - Custodial credit risk: At June 30, 2016, the carrying amount of the University’s deposits (which consist of cash, excluding cash on hand of $3,715, deposits held by trustee, and investments) was $1,078,151 and the bank balance was $1,193,345. The difference in the carrying amount and bank balance primarily results from outstanding checks. Of the bank balance, $250,000 is covered by the Federal Deposit Insurance Corporation. At June 30, 2015, the carrying amount of the University’s deposits, (which consist of cash, excluding cash on hand of $3,442, deposits held by trustee, and investments) was $890,627 and the bank balance was $1,161,575.

Investments - All investments are stated at fair value. Investments received by gift are stated at fair value at the date of gift if a fair value is available, and otherwise at an appraised or nominal value.

As of June 30, 2016, the University had the following investments and maturities using the segmented time distribution method:

Investment Maturities (in years) Investment Type Fair Value <1 1-5 6-10

U.S. Govt. and agency bonds $ 963,325 $ - $ 641,837 $ 321,488 Corporate bonds and notes 1,794,187 82,541 914,047 797,599 Foreign government bonds 61,007 - 27,836 33,171 Foreign corporate bonds 243,266 35,992 49,588 157,686 Fixed-income mutual funds 3,420,049 - 86,849 3,333,200 Money market funds 186,835 39,793 147,042 - STAR Ohio funds 2,423,889 2,423,889 - -

9,092,558 $ 2,582,215 $ 1,867,199 $ 4,643,144

Equities and equity funds 9,170,549

$ 18,263,107

32 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 3 - Deposits and Investments (Continued) As of June 30, 2015, the University had the following investments and maturities using the segmented time distribution method:

Investment Maturities (in years) Investment Type Fair Value <1 1-5 6-10

U.S. Govt. and agency bonds$ 1,058,621 $ 165,092 $ 626,539 $ 266,990 Corporate bonds and notes 1,819,656 20,744 957,169 841,743 Foreign corporate bonds 313,385 - 126,752 186,633 Fixed-income mutual funds 3,416,274 - 44,195 3,372,079 Money market funds 285,634 162,915 122,719 - STAR Ohio funds 3,416,622 3,416,622 - - 10,310,192 $ 3,765,373 $ 1,877,374 $ 4,667,445

Equities and equity funds 10,064,948

$ 20,375,140

Investments at June 30, 2016 and 2015 are shown in the statement of net position as current in the amount of $14 and $122,719, respectively, and as noncurrent in the amount of $18,263,093 and $20,252,421, respectively.

Interest Rate Risk - Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The University’s investment policy does not specifically limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Credit Risk - Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University’s investment policy limits investments in fixed-income securities to government and agency issues and corporate issues in the top four quality rating of recognized credit services. Other than for alternative investments, investments below investment grade and derivatives are specifically prohibited.

33 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 3 - Deposits and Investments (Continued)

As of June 30, 2016 and 2015, the University had the following investments and quality ratings: 2016 2015 Investment Type Rating Fair Value Fair Value

U.S. Govt. and agency bonds AAA $ - $ 777,768 AA+ 963,325 280,853

Corporate bonds and notes AAA 11,687 6,208 AA 136,936 150,695 A 719,920 744,735 BBB 925,644 918,018

Foreign government bonds A 61,007 -

Foreign corporate bonds AA 11,038 48,515 A 61,687 108,935 BBB 170,541 155,935

Fixed-income mutual funds AAA 1,514,570 1,512,396 BBB 1,303,204 1,903,878 BB 602,275 -

Money market funds AAA 186,835 285,634

STAR Ohio funds AAA 2,423,889 3,416,622

$ 9,092,558 $ 10,310,192

Concentration of Credit Risk - Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The University’s investment policy limits investment in any single issue other than U.S. government securities to 5.0 percent of the total investment portfolio.

34 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 4 - Fair Value Measurements

The University categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy below. In instances whereby inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The University’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. The University has the following recurring fair value measurements as of June 30, 2016 and 2015:

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Fair Value Measurements Using

Quoted Prices in Active Markets Significant Other for Identical Observable Significant Balance at Assets Inputs Unobservable June 30, 2016 (Level 1) (Level 2) Inputs (Level 3) Investments by fair value level: Debt securities: U.S. Treasury securities $ 963,325 $ 852,702 $ 110,623 $ - Foreign government bonds 61,007 - 61,007 - Domestic corporate bonds 1,794,187 - 1,794,187 - Foreign corporate bonds 243,266 - 243,266 - Total debt securities 3,061,785 852,702 2,209,083 - Equity securities: Domestic equity securities 1,536,427 1,536,427 - - International equity securities 209,764 209,764 - - Total equity securities 1,746,191 1,746,191 - - Mutual funds: Fixed-income mutual funds 3,420,048 3,420,048 - - Domestic equity mutual funds 5,871,858 5,871,858 - - Domestic tactical balanced mutual funds 1,552,500 1,552,500 - - Money market mutual funds 186,836 186,836 - - Total mutual funds 11,031,242 11,031,242 - - Total investments by fair value level $ 15,839,218 $ 13,630,135 $ 2,209,083 $ -

35 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 4 - Fair Value Measurements (Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Fair Value Measurements Using

Quoted Prices in Significant Other Significant Active Markets Observable Unobservable Balance at for Identical Inputs Inputs June 30, 2015 Assets (Level 1) (Level 2) (Level 3) Investments by fair value level: Debt securities: U.S. Treasury securities $ 1,058,621 $ 777,768 $ 280,853 $ - Domestic corporate bonds 1,819,656 - 1,819,656 - Foreign corporate bonds 313,385 - 313,385 - Total debt securities 3,191,662 777,768 2,413,894 - Equity securities: Domestic equity securities 1,663,587 1,663,587 - - International equity securities 100,309 100,309 - - Total equity securities 1,763,896 1,763,896 - - Mutual funds: Fixed-income mutual funds 3,416,274 3,416,274 - - Domestic equity mutual funds 6,658,214 6,658,214 - - Domestic tactical balanced mutual funds 1,642,838 1,642,838 - - Money market mutual funds 285,634 285,634 - - Total mutual funds 12,002,960 12,002,960 - - Total investments by fair value level $ 16,958,518 $ 14,544,624 $ 2,413,894 $ -

Short-term investment and investments on the statement of net position at June 30, 2016 and 2015 include investments in STAR Ohio of $2,423,889 and $3,416,622, respectively. The investments in STAR Ohio are measured at amortized cost; therefore, they are not included in the tables above. There are no limitations or restrictions on any STAR Ohio participant withdrawals due to redemption notice periods, liquidity fees, or redemption gates. However, notice must be given to STAR Ohio 24 hours in advance of all deposits and withdrawals exceeding $25 million. STAR Ohio reserves the right to limit the transaction to $50 million, requiring the excess amount to be transacted the following business day(s), but only to the $50 million limit. All accounts of the STAR Ohio investors will be combined for these purposes.

36 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 5 - Accounts Receivable

The composition of accounts receivable at June 30, 2016 and 2015 is summarized as follows:

2016 2015

Student tuition and fees $ 7,039,905 $ 8,078,576 Grants and contracts 1,475,564 1,769,453 Other 62,833 35,692

Total accounts receivable 8,578,302 9,883,721

Less allowance for doubtful accounts (2,942,397) (2,880,748)

Accounts receivable - Net $ 5,635,905 $ 7,002,973

Note 6 - Capital Assets

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

Balance Reclass and Balance July 1, 2015 Additions Reductions June 30, 2016

Capital assets, not being depreciated: Land $ 8,003,370 $ - $ - $ 8,003,370 Land improvements 6,928,632 - - 6,928,632 Construction in progress 6,280,874 355,912 (6,234,991) 401,795

Total capital assets not being depreciated 21,212,876 355,912 (6,234,991) 15,333,797

Capital assets being depreciated: Buildings and improvements 99,439,807 6,384,280 - 105,824,087 Equipment 13,901,061 205,912 (171,537) 13,935,436 Library books 4,425,294 58,938 (291,876) 4,192,356

Total capital assets being depreciated 117,766,162 6,649,130 (463,413) 123,951,879

Less accumulated depreciation: Buildings and improvements (40,532,056) (2,840,709) - (43,372,765) Equipment (11,723,065) (616,182) 166,815 (12,172,432) Library books (4,104,878) (70,347) 291,876 (3,883,349)

Total accumulated depreciation (56,359,999) (3,527,238) 458,691 (59,428,546)

Total capital assets being depreciated - Net 61,406,163 3,121,892 (4,722) 64,523,333

Capital assets - Net $ 82,619,039 $ 3,477,804 $ (6,239,713) $ 79,857,130

37 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 6 - Capital Assets (Continued)

Capital assets activity for the fiscal year ended June 30, 2015 was as follows:

Balance Reclass and Balance July 1, 2014 Additions Reductions June 30, 2015

Capital assets, not being depreciated: Land $ 8,003,370 $ - $ - $ 8,003,370 Land improvements 6,928,632 - - 6,928,632 Construction in progress 5,136,503 1,299,642 (155,271) 6,280,874 Total capital assets not being depreciated 20,068,505 1,299,642 (155,271) 21,212,876

Capital assets being depreciated: Buildings and improvements 99,252,718 187,089 - 99,439,807 Equipment 13,804,460 258,327 (161,726) 13,901,061 Library books 4,550,788 86,393 (211,887) 4,425,294 Total capital assets being depreciated 117,607,966 531,809 (373,613) 117,766,162

Less accumulated depreciation: Buildings and improvements (37,822,774) (2,709,282) - (40,532,056) Equipment (11,150,647) (727,476) 155,058 (11,723,065) Library books (4,242,570) (74,195) 211,887 (4,104,878)

Total accumulated depreciation (53,215,991) (3,510,953) 366,945 (56,359,999)

Total capital assets being depreciated - Net 64,391,975 (2,979,144) (6,668) 61,406,163 Capital assets - Net $ 84,460,480 $ (1,679,502) $ (161,939) $ 82,619,039

Note 7 - Compensated Absences

The criteria for determining vacation and sick leave components are derived from negotiated agreements and state laws. Classified employees and administrators earn 10- 25 days of vacation per fiscal year, depending upon length of service. Accumulated, unused vacation time is paid to classified employees and administrators upon termination of employment. Vacation time may be accumulated up to a maximum of twice the employee’s current accrual rate. Faculty does not earn vacation time.

Faculty, administrators, and classified employees earn sick leave at the rate of one and one-fourth days per month. Sick leave may be accumulated with no maximum by all personnel. Upon retirement, payment is made for one-fourth of accrued but unused sick leave credit to a maximum of 40 days for qualifying employees.

38 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 8 - Long-term Obligations

The changes in the University’s long-term obligations during fiscal year 2016 were as follows:

Principal Principal Outstanding Outstanding July 1, 2015 Additions Deductions June 30, 2016 Current Portion 2007 General Receipts Bonds, Series 2007 $ 14,365,000 $ - $ 490,000 $ 13,875,000 $ 500,000 Unamortized bond premium 606,502 - 29,901 576,601 - Capital lease 1,237,553 - 302,319 935,234 301,976 Compensated absences 2,439,837 270,486 785,761 1,924,562 192,456

Total long-term liabilities $ 18,648,892 $ 270,486 $ 1,607,981 $ 17,311,397 $ 994,432 The changes in the University’s long-term obligations during fiscal year 2015 were as follows:

Principal Principal Outstanding Outstanding July 1, 2014 Additions Deductions June 30, 2015 Current Portion 2007 General Receipts Bonds, Series 2007 $ 14,835,000 -$ $ 470,000 $ 14,365,000 $ 490,000 Unamortized bond premium 633,012 - 26,510 606,502 - Capital lease 1,285,070 286,720 334,237 1,237,553 302,319 Compensated absences 2,381,889 329,580 271,632 2,439,837 243,984

Total long-term liabilities $ 19,134,971 $ 616,300 $ 1,102,379 $ 18,648,892 $ 1,036,303

In fiscal year 2007, the University issued $18,000,000 of General Receipts Bonds, Series 2007, dated June 5, 2007, maturing at various dates, through June 1, 2034 at coupon rates ranging from 4.0 percent to 5.0 percent. The Series 2007 Bonds were issued for the purpose of paying the costs to renovate and construct a new addition to its University Center and for refunding the outstanding Series A and Series B Bonds.

In fiscal year 2013, the University entered into a capital lease agreement to fund an IT infrastructure upgrade project. The agreement totaled $2,820,339 with various payment dates through October 1, 2016. In fiscal year 2015, the University added $227,407 in net additional capital lease funding and revised the payment schedule to reduce annual payment amounts by extending payment dates through October 1, 2018. As of June 30, 2016, assets totaling $3,047,632 were purchased utilizing these funds. The assets purchased are included within buildings at June 30, 2016.

39 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 8 - Long-term Obligations (Continued)

The interest expense for fiscal years 2016 and 2015 was $695,915 and $757,869, respectively.

Principal and interest amounts due within each of the next five years and thereafter on the Series 2007 bond obligations outstanding at June 30, 2016 are as follows:

Years Ending June 30 Principal Interest Total 2017 $ 500,000 $ 678,000 $ 1,178,000 2018 525,000 658,000 1,183,000 2019 550,000 637,000 1,187,000 2020 570,000 615,000 1,185,000 2021 600,000 586,500 1,186,500 2022-2026 3,470,000 2,452,250 5,922,250 2027-2031 4,430,000 1,494,000 5,924,000 2032-2034 3,230,000 328,250 3,558,250

Total$ 13,875,000 $ 7,449,000 $ 21,324,000 Principal and interest amounts due within each of the next three years on the capital lease obligations outstanding at June 30, 2016 are as follows:

Years Ending June 30 Principal Interes t Total

2017 $ 301,976 $ 29,935 $ 331,911 2018 311,641 20,270 331,911 2019 321,617 10,294 331,911

Total $ 935,234 $ 60,499 $ 995,733 Note 9 - Leases

The University’s operating leases consist of real property and movable equipment that expires in fiscal year 2029. Total expenditures during 2016 and 2015 under operating leases amounted to approximately $91,000 and $100,000, respectively.

40 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 10 - Contingencies

The University receives financial assistance from federal and state agencies in the form of grants. The expenditure of funds received under these programs generally requires compliance with terms and conditions specified in the grant and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the unrestricted or restricted educational and general funds or other applicable funds. However, in the opinion of management, any such disallowed claims would not have a significant adverse effect on the overall financial statements of the University at June 30, 2016.

During the normal course of operations, the University has become a defendant in various legal and administrative actions. Liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. However, in the opinion of in-house legal counsel and University management, the disposition of all pending litigations would not have a significant adverse effect on the University’s financial position.

Note 11 - State Support

The University is a state-assisted institution of higher education which receives a student performance-based subsidy from the State of Ohio. This subsidy is determined annually based upon a formula managed by the Ohio Department of Higher Education, adjusted to State resources available. The University also receives a supplemental appropriation to support the goals of improving course completion, increasing the number of degrees conferred, and furthering the University’s mission of service to the Appalachian region.

In addition to the performance-based subsidy and supplement, the State of Ohio provides funding for the construction of major plant facilities on the University’s campus. State funding for the construction of University facilities is obtained from the issuance of revenue bonds by the Ohio Public Facilities Commission, which in turn initiates the construction and subsequent lease of the facility by the Ohio Department of Higher Education. Upon completion of a facility, the Ohio Department of Higher Education turns over control to the University. The University capitalizes the costs of these facilities as construction is completed and payment is received from the Ohio Public Facilities Commission.

Neither the obligation for the revenue bonds issued by the Ohio Public Facilities Commission nor the annual debt service charges for principal and interest on the bonds are reflected in the University’s financial statements. These are funded through appropriations to the Ohio Department of Higher Education by the Ohio General Assembly.

41 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 11 - State Support (Continued)

The University facilities are not pledged as collateral for the revenue bonds. Instead, the bonds are supported by a pledge of monies in the Higher Education Capital Facilities Bond Service Fund, and future payments to be received by such fund, which is established in the custody of the Treasurer of State.

As a result of the above-described financial assistance provided by the State of Ohio to the University, outstanding debt issued by the Ohio Public Facilities Commission is not included on the University’s statement of net position. In addition, appropriations by the General Assembly to the Ohio Department of Higher Education for payment of debt service charges are not reflected as appropriation revenue received by the University, and the related debt service payments are not recorded in the University’s accounts.

The University also receives appropriations from the State to fund capital improvements. The costs, both direct and indirect, are subject to examination and advance approval by the State of Ohio.

Note 12 - Grants and Contracts

Revenue from grants and contracts 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 University must provide local resources to be used for a specified purpose, and expense requirements, in which the resources are provided to the University on a reimbursement basis.

Note 13 - Retirement Plans

Plan Description - The University participates in the State Teachers Retirement System (STRS), and the Ohio Public Employees Retirement System (OPERS), statewide, cost- sharing, multiple-employer defined benefit public employee retirement systems governed by the Ohio Revised Code (ORC) that cover substantially all employees of the University, including law enforcement officers of the University. Each system has multiple retirement plan options available to its members, ranging from three in STRS and three in OPERS. Each system provides retirement, survivor, and disability benefits to plan members and their beneficiaries. Each system also provides postemployment healthcare benefits (including Medicare B premiums) to retirees and beneficiaries who elect to receive those benefits.

42 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

Each retirement system issues a publicly available financial report that includes financial statements and required supplemental information for the pension and postemployment healthcare plans. The reports may be obtained by contacting:

State Teachers Retirement System of Ohio Ohio Public Employees Retirement System 275 E. Broad Street 277 East Town Street Columbus, Ohio 43215 Columbus, Ohio 43215 (888) 227-7877 (800) 222-7377 www.strsoh.org www.opers.org

Contributions - State retirement law requires contributions by covered employees and their employers, and Chapter 3307 of the ORC limits the maximum rate of contributions. The retirement boards of the systems individually set contributions rates within the allowable limits. The adequacy of employer contribution rates is determined annually by actuarial valuation using the entry age normal cost method. Under these provisions, each University contribution is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance a portion of the unfunded accrued liability.

Member contributions are 10 percent of gross wages for all plans, set at the maximum authorized by the ORC. The plans’ 2016 and 2015 contribution rates on covered payroll to each system are: Employer Contribution Rate Post- Pension retirement Total STRS 14.00% 0.00% 14.00% OPERS 12.00% 2.00% 14.00% OPERS - Law enforcement 16.10% 2.00% 18.10%

43 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

The University’s required and actual contributions to the plans are as follows:

2016 2015 TRS $ 1,655,224 $ 1,614,083 PERS 1,495,704 1,525,951 Total $ 3,150,928 $ 3,140,034

Benefits Provided

STRS - Plan benefits are established under Chapter 3307 of the Ohio Revised Code, as amended by Substitute Senate Bill 342 in 2012, which gives the Retirement Board the authority to make future adjustments to the member contribution rate, retirement age and service requirements, and the cost-of-living adjustment as the need or opportunity arises, depending on the retirement system’s funding progress.

Any member may retire who has (1) five years of service credit and attained age 60; (2) 25 years of service credit and attained age 55; or (3) 30 years of service credit regardless of age. Beginning August 1, 2015, eligibility requirements for an unreduced benefit have changed. The maximum annual retirement allowance, payable for life, considers years of credited service, final average salary (3-5 years) and multiplying by a factor ranging from 2.2 percent to 2.6 percent with 0.1 percent incremental increases for years greater than 30-31, depending on retirement age.

A defined benefit plan or combined plan member with five or more years of credited service who is determined to be disabled (illness or injury preventing the individual’s ability to perform regular job duties for at least 12 months) may receive a disability benefit. Additionally, eligible survivors of members who die before service retirement may qualify for monthly benefits. New members on or after July 1, 2013 must have at least 10 years of qualifying service credit to apply for disability benefits.

A death benefit of $1,000 is payable to the beneficiary of each deceased retired member who participated in the plan. Death benefit coverage up to $2,000 can be purchased by participants in all three of the plans. Various other benefits are available to members’ beneficiaries.

44 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

OPERS - Plan benefits are established under Chapter 145 of the Ohio Revised Code, as amended by Substitute Senate Bill 343 in 2012. The requirements to retire depend on years of service (15 to 30 years) and attaining the age of 48 to 62, depending on when the employee became a member. Members retiring before age 65 with less than 30 years of service credit receive a percentage reduction in benefit. Member retirement benefits are calculated on a formula that considers years of service (15-30 years), age (48-62 years), and final average salary, using a factor ranging from 1.0 percent to 2.5 percent.

A plan member who becomes disabled before age 60 or at any age, depending on when the member entered the plan, and has completed 60 contributing months is eligible for a disability benefit.

A death benefit of $500 - $2,500 is determined by the number of years of service credit of the retiree. Benefits may transfer to a beneficiary upon death with 1.5 years of service credits with the plan obtained within the last 2.5 years, except for law enforcement and public safety personnel, who are eligible immediately upon employment.

Benefit terms provide for annual cost-of-living adjustments to each employee’s retirement allowance subsequent to the employee’s retirement date. The annual adjustment, if applicable, is 3.0 percent.

Net Pension Liability, Deferrals, and Pension Expense - At June 30, 2016, the University reported a liability for its proportionate share of the net pension liability of STRS and OPERS. The net pension liability was measured as of July 1, 2015 for the STRS plan and December 31, 2015 for the OPERS plan. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of those dates. The University’s proportion of the net pension liability was based on a projection of its long-term share of contributions to the pension plan relative to the projected contributions of all participating reporting units, actuarially determined.

Mea s urem ent Net P ens ion Liability Proportionate S hare Percent Plan Date 2016 2015 2016 2015 Change S TR S J uly 1 $ 30,295,455 $ 27,600,967 0.10962% 0.11347% -3.39% OPER S December 31 14,649,733 10,394,787 0.08469% 0.08633% -1.90%

Total $ 44,945,188 $ 37,995,754

45 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

For the years ended June 30, 2016 and 2015, the University recognized pension expense of $3,539,600 and $2,987,565, respectively. At June 30, 2016, the University reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience $ 1,382,338 $ 295,025 Net difference between projected and actual earnings on pension plan investments 4,329,058 2,178,816 Changes in proportion and differences between University contributions and proportionate share of contributions 1,664 886,921 University contributions subequent to the measurement date 2,391,674 -

Total $ 8,104,734 $ 3,360,762

At June 30, 2015, the University reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience $ 265,719 $ 188,366 Net difference between projected and actual earnings on pension plan investments 556,673 5,106,284

Changes in proportion and differences between University contributions and proportionate share of contributions - 3,662 University contributions subequent to the measurement date 2,365,637 -

Total $ 3,188,029 $ 5,298,312

46 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30 Amount

2017 $ 370,972 2018 441,255 2019 579,086 2020 965,696 2021 (882) Thereafter (3,829) In addition, the contributions subsequent to the measurement date will be included as a reduction of the net pension liability in 2017.

Actuarial Assumptions - The total pension liability is based on the results of an actuarial valuation and was determined using the following actuarial assumptions, applied to all periods included in the measurement for the period ended June 30, 2016, as follows: STRS - as of 7/1/15 OPERS - as of 12/31/15

Valuation date July 1, 2015 December 31, 2015 Actuarial cost method Entry age normal Individual entry age Cost of living 2.0 percent 3.0 percent Salary increases, including inflation 2.75 percent - 12.25 4.25 percent - 10.05 percent percent Inflation 2.75 percent 3.75 percent Investment rate of return 7.75 percent - Net of 8.00 percent - Net of pension plan investment pension plan investment expense expense Experience study date Period of 5 years ended July Period of 5 years ended 1, 2012 December 31, 2010 Mortality basis RP-2000 Combined RP-2000 Mortality Table Mortality Table (Projection (Projected 20 years using 2022-Scale AA) Projection Scale AA)

47 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

The following actuarial assumptions, applied to all periods included in the measurement for the period ended June 30, 2015, were as follows:

STRS - as of 7/1/14 OPERS - as of 12/31/14

Valuation date July 1, 2014 December 31, 2014 Actuarial cost method Entry age normal Individual entry age Cost of living 2.0 percent 3.0 percent Salary increases, including inflation 2.75 percent - 12.25 4.25 percent - 10.05 percent percent Inflation 2.75 percent 3.75 percent Investment rate of return 7.75 percent - Net of 8.00 percent - Net of pension plan investment pension plan investment expense expense Experience study date Period of 5 years ended July Period of 5 years ended 1, 2012 December 31, 2010 Mortality basis RP-2000 Combined RP-2000 Mortality Table Mortality Table (Projection (Projected 20 years using 2022-Scale AA) Projection Scale AA)

Discount Rate - The discount rates used to measure the total pension liability were 7.75 percent and 8.0 percent for STRS and OPERS, respectively. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that employer contributions will be made at contractually required rates for all plans. Based on those assumptions, each pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments for current active and inactive employees. 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.

48 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

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. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following tables:

STRS - as of 7/1/15 OPERS - as of 12/31/15 Long-term Long-term Expected Expected Target Real Rate of Target Real Rate of Investment Category Allocation Return Investment Category Allocation Return

Domestic equity 31.00% 8.00% Fixed income 23.00% 2.31% International equity 26.00% 7.85% Domestic equities 20.70% 5.84% Alternatives 14.00% 8.00% Real estate 10.00% 4.25% Fixed income 18.00% 3.75% Private equity 10.00% 9.25% Real estate 10.00% 6.75% International equity 18.30% 7.40% Liquidity reserves 1.00% 3.00% Other investments 18.00% 4.59%

Total 100.00% Total 100.00%

STRS - as of 7/1/14 OPERS - as of 12/31/14 Long-term Long-term Expected Expected Target Real Rate of Target Real Rate of Investment Category Allocation Return Investment Category Allocation Return Domestic equity 31.00% 5.50% Fixed income 23.00% 2.31% International equity 26.00% 5.35% Domestic equities 19.90% 5.84% Alternatives 14.00% 5.50% Real estate 10.00% 4.25% Fixed income 18.00% 1.25% Private equity 10.00% 9.25% Real estate 10.00% 4.25% International equity 19.10% 7.40% Liquidity reserves 1.00% 0.50% Other investments 18.00% 4.59%

Total 100.00% Total 100.00%

49 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

Sensitivity of the Net Pension Liability to Changes in the Discount Rate - The following presents the net pension liability of the University, calculated using the discount rate listed below, as well as what the University’s net pension liability would be if it were calculated using a discount rate that is 1.00 percentage point lower or 1.00 percentage point higher than the current rate for the period ended June 30, 2016:

Plan 1.00 Percent Decrease Current Discount Rate 1.00 Percent Increase

STRS 6.75%$ 42,082,672 7.75%$ 30,295,455 8.75%$ 20,327,605 OPERS 7.00% 23,373,034 8.00% 14,649,733 9.00% 7,292,921 $ 65,455,706 $ 44,945,188 $ 27,620,526

The following presents the net pension liability of the University, calculated using the discount rate listed below, as well as what the University’s net pension liability would be if it were calculated using a discount rate that is 1.00 percentage point lower or 1.00 percentage point higher than the current rate for the period ended June 30, 2015:

Plan 1.00 Percent Decrease Current Discount Rate 1.00 Percent Increase STRS 6.75%$ 39,512,167 7.75%$ 27,600,967 8.75%$ 17,526,003 OPERS 7.00% 19,160,524 8.00% 10,394,787 9.00% 2,985,361 $ 58,672,691 $ 37,995,754 $ 20,511,364

Pension Plan Fiduciary Net Position - Detailed information about the pension plan’s fiduciary net position is available in the separately issued STRS/OPERS financial report.

50 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 13 - Retirement Plans (Continued)

Defined Contribution Plans - All newly hired full-time administrative employees, classified support staff, and faculty are eligible to choose an Alternative Retirement Plan (ARP) rather than the STRS Ohio or OPERS. Once an employee decides to enroll in an ARP or the state retirement plan, the decision is irrevocable during his/her employment with the University.

An employee in an OPERS eligible position contributes 10 percent of his/her earned income to their ARP account. Legislation mandates the employer must contribute an amount to the state retirement system to which the employee would otherwise have belonged. For the years ended June 30, 2016 and 2015, 13.23 percent was paid into the member’s ARP account and the remaining 0.77 percent was paid to OPERS, as required by state legislation, to cover unfunded liabilities.

An employee in a STRS Ohio eligible position contributes 13 percent of their earned income to their ARP account. Legislation mandates the employer must contribute an amount to the state retirement system to which the employee would otherwise have belonged. For the year ended June 30, 2016, 9.5 percent was paid into the member’s ARP account and the remaining 4.5 percent was paid to STRS Ohio. For the year ended June 30, 2015, 9.5 percent was paid into the member’s ARP account and the remaining 4.5 percent was paid to STRS Ohio, as required by state legislation, to cover unfunded liabilities.

As of June 30, 2016 and 2015, there are approximately 71 and 51 active participants, respectively, participating in an ARP. The University’s contribution for employees enrolled in ARP accounts for fiscal years 2016, 2015, and 2014 was $490,810, $462,550, and $470,142, respectively.

Combined Plans - OPERS and STRS Ohio also offer combined plans with features of both a defined benefit plan and a defined contribution plan. In the combined plans, employee contributions are invested in self-directed investments, and the employer contribution is used to fund a reduced defined benefit.

51 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 14 - Postemployment Benefits

Ohio Public Employees Retirement System (OPERS) - OPERS provides access to postretirement healthcare coverage to age and service retirees with 10 or more years of qualifying Ohio service credit. OPERS’ eligibility requirements for postemployment healthcare coverage are changed for those retiring on and after January 1, 2015. Please see the plan statement in the OPERS 2015 CAFR for details. Access to healthcare coverage for disability recipients and primary survivor recipients is available. The Ohio Revised Code permits, but does not mandate, OPERS to provide OPEB to its eligible members and beneficiaries. Authority to establish and amend benefits is provided per the Ohio Revised Code.

OPERS’ Postemployment Health Care Plan was established under, and is administered in accordance with, Internal Revenue Code Section 401(h). Each year, the OPERS board of trustees determines the portion of the employer contribution rate that will be set aside for funding of postemployment health care. The portion of employer contributions allocated to health care for members in the Traditional Pension Plan and Combined Plan, as recommended by OPERS’ actuary, was 2.0 percent during calendar years 2016 and 2015. The OPERS board of trustees is also authorized to establish rules for the retiree or their surviving beneficiaries to pay a portion of the health care provided. Payment amounts vary depending on the number of covered dependents and the coverage selected. The portion of the University’s 2016, 2015, and 2014 contributions to OPERS used to fund postemployment benefits was $213,589, $218,291, and $162,739, respectively.

State Teachers Retirement System (STRS Ohio) - STRS Ohio provides access to healthcare coverage to eligible retirees who participated in the defined benefit or combined plans. Coverage under the current program includes hospitalization, physicians’ fees, prescription drugs, and reimbursement of monthly Medicare Part B premiums. Pursuant to the Ohio Revised Code, the retirement board has discretionary authority over how much, if any, of the associated healthcare costs will be absorbed by STRS Ohio. All benefit recipients, for the most recent year, pay a portion of the healthcare costs in the form of a monthly premium.

Previously, under Ohio law, funding for postemployment health care could be deducted from employer contributions. Effective July 1, 2014, no employer contributions for STRS are being allocated to postemployment health care.

52 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 15 - Risk Management

The University is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. To address these exposures and reduce premiums, the University is a member of the Inter-University Council of Ohio Insurance Consortium (IUC-IC), a purchasing partnership with 12 other Ohio four-year public universities.

During fiscal year 2016, the University maintained the lines of coverage below. All limits are dedicated to the University, unless explicitly noted as shared with other IUC-IC members. Real property and contents are 100 percent insured.

Lines of Coverage Limit of Liability Deductible $250,000 (Pool) $100,000 "All Risk" Property Coverage Including $100,000,000 $350,000 (Pool) Boiler & Machinery $900,000,000 excess N/A $100,000,000(1) Automobile Physical Damage Actual Cash Value $1,000 IUC-IC Casualty Pool $900,000 $100,000 General Liability $10,000,000 (2) N/A Automobile Liability $10,000,000(2) N/A Educators Legal Liability $10,000,000(2) N/A $15,000,000 excess N/A 1st Excess Liability $10,000,000(1) $15,000,000 excess N/A 1st Excess Educators Legal Liability $10,000,000(1) $25,000,000 excess N/A 2nd Excess Liability $25,000,000(1) Crime $5,000,000 $100,000 $1,000,000 occ./ $3,000,000 $25,000 Medical Malpractice agg. Foreign $1,000,000 - Special Accident $20,000,000 - Pollution $5,000,000(1) $25,000 Cyber Risk/Breach Response $1,000,000 $25,000 Notes: (1) Shared limits with other IUC-IC members (2) Reinsurance provided by private carrier for $9,000,000 excess of $1,000,000 The University has an international travel comprehensive services assistance plan. The plan covers medical, security, and traveler assistance.

The University has a self-insured healthcare plan.

53 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 15 - Risk Management (Continued)

Changes in the self-insurance claims liability for the years ended June 30, 2016, 2015, and 2014 are summarized as follows: 2016 2015 2014

Accrued claims liability - Beginning of year $ 614,345 $ 514,099 $ 558,893 Current year claims 4,127,013 4,895,035 4,609,104 Claims payments (4,246,595) (4,794,789) (4,653,898)

Accrued claims liability - End of year $ 494,763 $ 614,345 $ 514,099

The liability amounts above are recorded in accrued wages and benefits on the statement of net position.

Workers’ compensation benefits are provided through the Ohio Bureau of Workers’ Compensation. Under Ohio’s laws, there are no policy limits or cap on these benefits so long as treatment and compensation arise from the allowed conditions in a claim. There has been no significant change in coverage from last year.

Note 16 - Component Unit Disclosure

Basis of Presentation The accompanying financial statements of the Foundation have been prepared in accordance with accounting principles generally accepted in the United States of America. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation’s financial information in the University’s financial reporting entity for these differences. Net Assets Temporarily restricted net assets represent funds which are restricted for a specific purpose determined by the donor. Permanently restricted net assets represent contributions in which the donor has stipulated, as a condition of the gift, the principal be maintained intact and only the earnings of the fund be expended as the donor has specified. Temporarily and permanently restricted net assets at June 30, 2016 and 2015 are restricted primarily for scholarships, University programs, and capital improvements.

54 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 16 - Component Unit Disclosure (Continued)

Contribution Revenue Contributions, including unconditional promises to give, are recognized as revenue in the period the related commitments are received. Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value. Contributions to be received beyond the fiscal year are discounted at an appropriate discount rate. Investments Foundation investments are stated at fair value, with changes in fair value being recognized as gains and losses during the period in which they occur. The fair value of investments at June 30, 2016 and 2015, by classification is as follows:

2016 2015

U.S. government securities $ 1,096,177 $ 852,857 Foreign bond issues 222,907 174,514 Mutual funds: Equity 7,230,836 7,938,681 Fixed income 2,645,293 3,205,885 Balanced 2,188,424 2,374,615 Common stock 2,697,923 2,554,215 Corporate bond issues 1,521,224 1,156,124 $ 17,602,784 $ 18,256,891 Total

55 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 16 - Component Unit Disclosure (Continued)

Assets Measured at Fair Value on a Recurring Basis at June 30, 2016

Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Balance at Assets (Level 1) (Level 2) (Level 3) June 30, 2016

U.S. government securities $ 1,096,177 $ - $ - $ 1,096,177 Mutual funds: Equity 7,230,836 - - 7,230,836 Fixed income 2,645,293 - - 2,645,293 Balanced 2,188,424 - - 2,188,424 Common stock: Industrials 193,687 - - 193,687 Healthcare 349,801 - - 349,801 Information technology 632,469 - - 632,469 Telecomm 12,325 - - 12,325 Energy 36,044 - - 36,044 Materials 209,688 - - 209,688 Foreign 353,613 - - 353,613 Financials 365,516 - - 365,516 Consumer goods 468,898 - - 468,898 Real estate 75,882 - - 75,882 Foreign bond issues - 222,907 - 222,907 Corporate bond issues - 1,521,224 - 1,521,224 Beneficial interest in trusts - - 952,875 952,875

Total assets $ 15,858,653 $ 1,744,131 $ 952,875 $ 18,555,659

56 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 16 - Component Unit Disclosure (Continued)

Assets Measured at Fair Value on a Recurring Basis at June 30, 2015

Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Balance at Assets (Level 1) (Level 2) (Level 3) June 30, 2015

U.S. government securities $ 852,857 $ - $ - $ 852,857 Mutual funds: Equity 7,938,681 - - 7,938,681 Fixed income 3,205,885 - - 3,205,885 Balanced 2,374,615 - - 2,374,615 Common stock: Industrials 309,526 - - 309,526 Healthcare 401,594 - - 401,594 Information technology 528,835 - - 528,835 Energy 86,307 - - 86,307 Materials 125,971 - - 125,971 Foreign 167,959 - - 167,959 Financials 175,045 - - 175,045 Consumer goods 690,267 - - 690,267 Real estate 68,711 - - 68,711 Foreign bond issues - 174,514 - 174,514 Corporate bond issues - 1,156,124 - 1,156,124 Beneficial interest in trusts - - 1,016,169 1,016,169

Total assets $ 16,926,253 $ 1,330,638 $ 1,016,169 $ 19,273,060

Fixed Assets During fiscal year 2016, the Foundation acquired one new property. The transaction occurred on November 23, 2015 at the purchase price of $150,000. During the year ended June 30, 2015, the Foundation was the recipient of real property known as the Tauren property. The Tauren property was donated on September 12, 2014 with a fair value of $1,915,000 and was recorded as a gift-in-kind contribution.

57 Shawnee State University Notes to Financial Statements June 30, 2016 and 2015

Note 16 - Component Unit Disclosure (Continued)

Property and equipment consist of the following:

2016 2015

Land $ 2,168,264 $ 2,000,770 Equipment and furniture 5,747 5,747 Buildings 9,551,652 9,544,230 Construction in progress 15,699 -

Total property and equipment 11,741,362 11,550,747 Accumulated depreciation 535,279 300,225

Net property and equipment $ 11,206,083 $ 11,250,522

Debt The Foundation entered into a $4,500,000 note with an interest rate of 5.0 percent payable to Hatcher Real Estate, LLC for the purchase of the Fourth Street Properties. The note is secured by the land and buildings. This note is payable in monthly installments of $29,698. The payments are based on a 20-year amortization schedule and include a balloon payment due at maturity on February 25, 2019 for the remaining balance. The Foundation will have an option to extend the maturity date for a two-year period; however, payments will continue during that time. At June 30, 2016 and 2015, the outstanding principal balance of the note was $4,175,573 and $4,319,250, respectively. Related Party Transactions During the years ended June 30, 2016 and 2015, the Foundation made distributions of $994,464 and $1,329,223, respectively, to or on behalf of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Shawnee State University Development Foundation, Inc. at 940 Second Street, Portsmouth, Ohio 45662.

Required Supplementary Information

59 Shawnee State University

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

OPERS STRS 2016 2016

University’s proportion of the collective net pension liability: As a percentage 0.08469% 0.10962% Amount $ 14,649,733 $ 30,295,455 University’s covered-employee payroll $ 10,894,207 $ 11,436,893 University’s proportionate share of the collective pension liability (amount), as a percentage of the University’s covered-employee 134.47% 264.89% payroll Plan fiduciary net position as a percentage of the total pension 81.19% 72.10% liability

Schedule of University Contributions OPERS STRS 2016 2016

Statutorily required contribution $ 1,495,704 $ 1,655,224 Contributions in relation to the actuarially determined contractually $ 1,495,704 $ 1,655,224 required contribution Contribution deficiency (excess) $ - $ - Covered employee payroll $ 10,683,600 $ 11,823,029 Contributions as a percentage of covered-employee payroll 14.00% 14.00%

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

OPERS STRS 2015 2015

University’s proportion of the collective net pension liability: As a percentage 0.08633% 0.11347% Amount $ 10,394,787 $ 27,600,967 University’s covered-employee payroll $ 10,899,653 $ 10,440,100 University’s proportionate share of the collective pension liability (amount), as a percentage of the University’s covered-employee 95.37% 264.37% payroll Plan fiduciary net position as a percentage of the total pension 86.53% 74.71% liability

Schedule of University Contributions OPERS STRS 2015 2015

Statutorily required contribution $ 1,534,786 $ 1,623,157 Contributions in relation to the actuarially determined contractually $ 1,534,786 $ 1,623,157 required contribution Contribution deficiency (excess) $ - $ - Covered employee payroll $ 10,962,757 $ 11,593,979 Contributions as a percentage of covered-employee payroll 14.00% 14.00%

60 Shawnee State University Notes to Required Supplementary Information Year Ended June 30, 2016

Changes of benefit term - Amounts reported in 2016 for OPERS and STRS reflect no change in benefits.

Changes of assumptions - Amounts reported in 2016 reflect no adjustments based on changes of assumptions such as life expectancies, retired life mortality, or retirement age.

Supplementary Information

62 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 Auditor's Report

To Management and the Board of Trustees Shawnee State University

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 Shawnee State University (the "University"), a component unit of the State of Ohio, and its discretely presented component unit, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the University's financial statements, and have issued our report thereon dated September 12, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Shawnee State University'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 opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University's internal control. Accordingly, we do not express an opinion on the effectiveness of the University's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the University's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

63 To Management and the Board of Trustees Shawnee State University

Compliance and Other Matters As part of obtaining reasonable assurance about whether Shawnee State University'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. 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 University'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 University's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

September 12, 2016

64 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance Independent Auditor's Report

To the Board of Trustees Shawnee State University

Report on Compliance for Each Major Federal Program We have audited Shawnee State University's (the "University") compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. Shawnee State University's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of Shawnee State University'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 Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the "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 Shawnee State University'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 Shawnee State University's compliance.

65 To the Board of Trustees Shawnee State University

Opinion on Each Major Federal Program In our opinion, Shawnee State University complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. Report on Internal Control Over Compliance Management of Shawnee State University 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 Shawnee State University'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 the University'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 a 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.

September 12, 2016

66 Shawnee State University Schedule of Expenditures of Federal Awards Year Ended June 30, 2016

Total Amount Federal/Pass-through Provided to Federal Grantor/Pass-through Grantor/Program Title CFDA No. Grant Number Subrecipients Expenditures

U. S. Department of Education: Direct from Federal Agency - Student Financial Assistance Cluster: Federal Supplemental Educational Opportunity Grants (SEOG) 84.007 N/A $ - $ 127,418 Federal College Work Study 84.033 N/A - 137,422 Federal Pell Grant Program 84.063 N/A - 8,090,603 Federal Direct Loan Program 84.268 N/A - 21,149,464 Teacher Education Assistance for College & Higher Education (TEACH) 84.379 N/A - 86,048 Total Student Financial Aid Cluster 29,590,955

TRIO Cluster: Student Support Services 84.042A N/A - 85,628 Upward Bound 84.047A N/A - 278,001 Upward Bound Math Science 84.047M N/A - 218,685 Educational Opportunity Centers 84.066A N/A - 400,645 Total TRIO Cluster 982,959

U. S. Department of Education: Pass through the University of Dayton Special Education Cluster (IDEA): Broadening Horizons 84.027 RSC15079 - 130,874 Simultaneous Renewal 84.027 RSC16039 - 29,111 Teachers for All Students 84.027 RSC15085 - 105,232 Total Special Education Cluster (IDEA) 265,217

U.S. Department of Justice/Bureau of Justice Assistance Edward Byrne Memorial Justice Grant 16.738 N/A - 3,265

U. S. Department of Education: Pass through the Ohio Department of Education: Twenty-First Century Community Learning Centers 84.287 063321-T1S1 - 774,662 All Together 84.323A N/A - 8,361 Science By Inquiry 84.367 N/A - 54,384 Subtotal Pass-through Programs 837,407

U. S. Department of Agriculture Pass through Ohio Department of Education - Child and Adult Care Food Program 10.558 16-CU, 21-CU, 21-FU - 9,392

National Aeronautics and Space Administration Pass through Space Telescope Science Institute - Space Telescope Project 43.012 N/A - 1,746

Total Federal Expenditures $ 31,690,941

See Notes to Schedule of Expenditures of Federal Awards. 67 Shawnee State University Notes to Schedule of Expenditures of Federal Awards Year Ended June 30, 2016

Note 1 - Basis of Presentation The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal grant activity of Shawnee State University under programs of the federal government for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the “Uniform Guidance”). Because the Schedule presents only a selected portion of the operations of Shawnee State University, it is not intended to and does not present the financial position, changes in net position, or cash flows of Shawnee State University. Note 2 - Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the same basis of accounting as the basic financial statements. Such expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-21, Cost Principles for Educational Institutions, or the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available. The University has not elected to use the 10 percent de minimus indirect cost rate to recover indirect costs as allowed under the Uniform Guidance. Note 3 - Federal Work-study and Federal SEOG Waiver For the year ended June 30, 2016, the University received a waiver from the Department of Education for the Institutional Share Requirement under the Federal Work-study and Federal Supplemental Educational Opportunity Grant programs. Note 4 - Federal Direct Loan Program The University participates in the William D. Ford Direct Loan Program. The University originates the loans, which are then funded through the U.S. Department of Education.

68 Shawnee State University Schedule of Findings and Questioned Costs Year Ended June 30, 2016

Section I - Summary of Auditor's Results Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting:  Material weakness(es) identified? Yes X No  Significant deficiency(ies) identified that are 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(ies) identified that are not considered to be material weaknesses? Yes X None reported Type of auditor's report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 2 CFR 200.516 (a)? Yes X No Identification of major programs:

CFDA Numbers Name of Federal Program or Cluster 84.007, 84.033, 84.063, 84.268, 84.379 Student Financial Assistance Cluster 84.287 Twenty-First Century Community Learning Centers Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? X Yes No

69 Shawnee State University Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2016

Section II - Financial Statement Audit Findings None

Section III - Federal Program Audit Findings None

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SHAWNEE STATE UNIVERSITY

SCIOTO COUNTY

CLERK’S CERTIFICATION This is a true and correct copy of the report which is required to be filed in the Office of the Auditor of State pursuant to Section 117.26, Revised Code, and which is filed in Columbus, Ohio.

CLERK OF THE BUREAU

CERTIFIED OCTOBER 4, 2016

88 East Broad Street, Fourth Floor, Columbus, Ohio 43215-3506 Phone: 614-466-4514 or 800-282-0370 Fax: 614-466-4490

www.ohioauditor.gov

APPENDIX C

SUMMARY OF TRUST AGREEMENT

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APPENDIX C

SUMMARY OF THE TRUST AGREEMENT

The following is a summary of certain provisions of the Original Trust Agreement as supplemented by the First Supplement, and does not purport to be complete.

The Original Trust Agreement contains provisions as to (i) special funds; (ii) authentication, registration, transfer, exchange and replacement and redemption of General Receipts Obligations; (iii) events of default and remedies; (iv) duties of the Trustee (and any successor); (v) supplemental trust agreements; and (vi) defeasance of the lien of the Trust Agreement, among others. The First Supplement contains the specific terms of the Series 2016 Bonds and modifies the conditions for the incurrence of Parity Obligations; see “Parity Obligations,” below. Certain provisions of the Trust Agreement as to University budgeting requirements, special funds, University covenants, events of default and remedies, enforcement by mandamus, defeasance, nonpresentment of General Receipts Obligations, supplemental trust agreements, Parity Obligations, annual reports and records, and the Trustee, are summarized below.

As long as the Series 2016 Bonds are immobilized in a book entry system with a securities depository, that depository or its nominee for all purposes of the Trust Agreement will be considered by the University and the Trustee to be the owner or holder of the Series 2016 Bonds, and (except as regards continuing disclosure pursuant to the Rule) the owners of book entry interests will not be considered owners or holders and have limited rights as holders or owners under the Trust Agreement.

University Budgeting Requirements

In the Trust Agreement, the University has covenanted to include in its budget for each Fiscal Year the amounts from the several sources of General Receipts to be applied to make the payments to the Debt Service Fund, so that the amounts from those sources, in the aggregate, will at all times be sufficient in amount and time of collection to meet those payments. Budgets can and must be revised from time to time during a Fiscal Year to reflect any changes necessary to meet those requirements.

Funds and Accounts

Debt Service Fund. The Debt Service Fund is held by the Trustee and the moneys and investments in it are pledged to and are to be applied exclusively to the payment of Debt Service Charges on General Receipts Obligations. The Trust Agreement directs the Trustee to establish separate accounts within the Debt Service Fund for each separate series of General Receipts Obligations so that the Trustee may at all times establish the date of deposit, the amounts and the source of funds in each account.

Project Fund. The Trust Agreement directs the University to establish Project Funds to receive proceeds of General Receipts Obligations intended for the payment of costs of Facilities. Separate accounts and subaccounts may be established within the Project Fund as the University may determine. Project Funds may be invested in Eligible Investments, as defined in the Trust Agreement.

Rebate Fund. The Rebate Fund is established by the Trust Agreement and held by the Trustee to receive any amount calculated to be due and remitted to the United States Government as arbitrage rebate under Section 148(f) of the Code. If the amount on deposit in the Rebate Fund is less than the amount due as rebate, the University will pay a sufficient amount to the Trustee to be deposited in the Rebate Fund for such purpose.

General Receipts Fund. The General Receipts Fund is established by the Trust Agreement and held by the Trustee. During the continuance of any Event of Default, if the Trustee is taking any action to enforce any right, remedy or power granted to it under the Trust Agreement, all General Receipts and any other money received by the Trustee under any right given or action taken will be deposited in the General Receipts Fund and applied as provided in the Trust Agreement.

Eligible Investments

Under the Trust Agreement, amounts in the Debt Service Account and in a Project Fund may be invested, to the extent lawful, in Eligible Investments. “Eligible Investments” means, with respect to the Series 2016 Bonds,

(i) Government Obligations, as defined in the Trust Agreement;

(ii) obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including: Export-Import Bank, Farm Credit System Financial Assistance Corporation, Rural Economic Community Development Administration (formerly Farmers Home Administration), General Services Administration, U.S.Maritime Administration, Small Business Administration, Government National Mortgage Association (GNMA), U.S. Department of Housing & Urban Development (PHA’s), Federal Housing Administration, and Federal Financing Bank;

(iii) direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: senior debt obligations rated “AAA” by Standard & Poor’s Corporation (“S&P”) and “Aaa” by Moody’s Investors Service, Inc. (“Moody’s”) issued by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHMLC); obligations of the Resolution Funding Corporation (REFCORP); and senior debt obligations of the Federal Home Loan Bank System;

(iv) U.S. dollar denominated deposit accounts, federal funds and banker’s acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of “A-I” or “A-1+” by S&P and “P-1” by Moody’s and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank);

(v) commercial paper which is rated at the time of purchase in the single highest classification, “A-1+” by S&P and “P-1” by Moody’s and which matures not more than 270 days after the date of purchase;

(vi) investments in a money market fund rated “AAAm” or “AAAm-G” or better by S&P, including those for which the Trustee or an affiliate performs services for a fee, whether as a custodian, transfer agent, investment advisor or otherwise;

(vii) pre-refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (1) which are rated at the time of purchase, based on an irrevocable escrow account or fund (the “escrow”), in the highest rating category of S&P and Moody’s or any successors thereto; or (2) (A) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of Government Obligations, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other

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obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; and

(viii) general obligations of states with a rating of at least “A2/A” or higher by both Moody’s and S&P at the time of purchase; (ix) any repurchase agreement: (1) with any bank, including the Trustee and its affiliates, or any broker dealer with retail customers that falls under the protection of the Securities Investors Protection Corporation; (2) which is secured by collateral of the type specified in (a) and (b) above which collateral is (A) is in the possession of the Trustee or a third-party acting solely as agent for the Trustee, (B) is not subject to any third-party claims, and (C) has a market value (determined at least once every 14 days) at least equal to the 102% of the amount invested in the repurchase agreement; (3) which permits the Trustee to liquidate the collateral immediately upon failure to maintain the collateral at the required level.

University Covenants

In the Trust Agreement, the University covenants, among other things:

• To pay, or cause to be paid, the Debt Service Charges on each and all General Receipts Obligations on the dates, at the places and in the manner provided in the Trust Agreement.

• That it will not fail to perform and observe all agreements, covenants and obligations contained in the Trust Agreement for any cause, including without limitation, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Facilities or other properties owned or operated by the University, commercial frustration of purpose, or any change in the tax or other laws or administrative rulings of or administrative actions by or under authority of the United States of America or the State.

See also the discussion under “SECURITY – Rate Covenant.”

Events of Default and Remedies

As long as the Series 2016 Bonds are held under a book entry system with DTC (or any successor securities depository), that depository or its nominee is for all purposes of the Trust Agreement considered the owner or holder of the Series 2016 Bonds, and the owners of book entry interests will not be considered owners or holders and have no rights as holders or owners under the Trust Agreement to receive notices relating to Events of Default, to enforce remedies or to take other steps to protect or enforce the rights of Bondholders.

Under the Trust Agreement, each of the following is an “Event of Default”:

(a) Failure in the payment of any interest on any General Receipts Obligation when due and payable.

(b) Failure in the payment of the principal of or any premium on any General Receipts Obligation when due and payable, whether at stated maturity or by acceleration or redemption.

(c) Failure by the University to perform or observe any other covenant, agreement or condition in the Trust Agreement or in the General Receipts Obligation, which failure has continued for a period of 30 days after written notice to the University specifying the failure and requiring the same to be remedied, which notice may be given by the Trustee in its discretion and

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which notice will be given by the Trustee at the written request of the Holders of not less than 25% in aggregate principal amount of General Receipts Obligation then outstanding.

(d) The occurrence of a Bankruptcy Event, as defined in the Trust Agreement, with respect to the University.

The term “default” under the Trust Agreement means default by the University in the performance or observance of any of the covenants, agreements or conditions in the Trust Agreement or in the General Receipts Obligation, exclusive of any period of grace or notice required to constitute an Event of Default.

The Trust Agreement does not require the furnishing of periodic evidence to the Trustee as to the absence of defaults or Events of Default under, or compliance with, the terms of the Trust Agreement. Waivers are authorized in connection with Events of Default.

During the continuance of any Event of Default, if the Trustee seeks to enforce or exercise any right, remedy or power available to it on behalf of the Holders, the Trustee will deposit any General Receipts received by it, and any other moneys received by it under any right given or action taken, into the General Receipts Fund. Following such transfer, the Trustee will pay Debt Service Charges on the outstanding General Receipts Obligations from the General Receipts Fund in the order and as provided in the Trust Agreement. If all Events of Default have been cured or have been waived as provided in the Trust Agreement, the Trustee will transfer promptly all moneys in, including without limitation all investments credited to, the General Receipts Fund back to the appropriate Special Fund.

Upon the occurrence of an Event of Default, the Trustee will in the case of a payment default, and in the case of any other Event of Default may, or will if requested in writing by the Holders of not less than 25% of the aggregate principal amount of outstanding General Receipts Obligations, declare the principal of all outstanding General Receipts Obligations (if not then due and payable) together with interest accrued thereon, to be due and payable immediately. Any declaration of acceleration will be by notice in writing to the University and the original purchaser of each series of General Receipts Obligations. With or without such acceleration, upon the occurrence and continuance of an Event of Default, the Trustee may, or will if requested in writing by the Holders of not less than 25% of the aggregate principal amount of outstanding General Receipts Obligations, pursue any other available remedy to enforce the payment of Debt Service Charges or the observance and performance of any other covenant, agreement or obligation under the Trust Agreement, or related instruments providing security, directly or indirectly, for the General Receipts Obligations.

If, at any time after a declaration of acceleration of the General Receipts Obligations: (i) payment has been duly made, or provision for payment has been duly made, by deposit with the Trustee of all sums payable under the Trust Agreement (other than principal of and interest on General Receipts Obligations which have not reached their stated maturity dates, but which are due and payable solely by reason of the declaration of acceleration); and (ii) all existing Events of Default under the Trust Agreement have been cured; then the Trustee will waive such Event of Default and its consequences and will rescind and annul the declaration of acceleration. No waiver or rescission and annulment will extend to any subsequent or other Event of Default or impair any right consequent thereon.

Except as otherwise provided in the Trust Agreement, the registered owners of the General Receipts Obligations are not entitled to enforce the provisions of the Trust Agreement or to institute, appear in or defend any suit, action or proceeding to enforce any rights, remedies or covenants granted or contained in the Trust Agreement, or to take any action with respect to any Event of Default.

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Enforcement by Mandamus

Pursuant to the Act and the Trust Agreement, the duties under the bond proceedings of the University and the Board and their members, officers and employees, are enforceable by mandamus.

Defeasance

If all Debt Service Charges due or to become due on the outstanding General Receipts Obligations are paid or caused to be paid and provision is made for paying all other sums payable under the Trust Agreement by the University, then the Trust Agreement (with certain exceptions) will cease, determine and become null and void, and the College’s covenants, agreements and other obligations under it will be discharged and satisfied. Thereupon the Trustee is to assign and deliver to the University any funds at the time subject to the lien of the Trust Agreement which may then be in its possession except for funds for the payment of Debt Service Charges (subject to the provisions for unclaimed moneys described below under “Nonpresentment”).

All or any part of the General Receipts Obligations will be deemed to have been paid and discharged within the meaning of the Trust Agreement if the Trustee has received, in trust for and irrevocably committed thereto:

(a) sufficient money; or

(b) Government Obligations, which are certified by an independent public accounting firm of national reputation to be of such maturities or redemption dates and interest payment dates, and to bear such interest, as will be sufficient together with any money so received, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom (which earnings are to be held likewise in trust and so committed, except as provided herein), for the payment of all Debt Service Charges on those General Receipts Obligations, at their maturity or redemption date, as the case may be, or if a default in payment has occurred on any maturity or redemption date, then for the payment of all Debt Service Charges thereon to the date of the tender of payment.

If any General Receipts Obligations are deemed paid and discharged pursuant to this provision of the Trust Agreement, then within 15 days after such General Receipts Obligations are so deemed paid and discharged, the Trustee will cause a written notice to be given to each Holder of such General Receipts Obligations as shown on the Register on the date on which such General Receipts Obligations are deemed paid and discharged. Such notice will state the numbers of the General Receipts Obligations deemed paid and discharged or state that all General Receipts Obligations of a particular series are deemed paid and discharged, set forth a description of any Government Obligations held for such purpose and specify dates on which any of the specified General Receipts Obligations are to be called for redemption.

Parity Obligations

Parity Obligations, as they may from time to time be authorized by resolutions of the University, are issuable on a parity with then outstanding General Receipts Obligations, without limitation as to amount except as provided in the Trust Agreement or as may subsequently be provided by law. The University may provide for bond insurance or other credit support instrument, or a reserve fund or account, with respect to any one or more General Receipts Obligations or series of General Receipts Obligations and not with respect to any other General Receipts Obligations or series of General Receipts Obligations.

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Among other conditions for the issuance of Parity Obligations, the Original Trust Agreement as supplemented by the First Supplement requires at the time of incurrence of the proposed Parity Obligations and after giving effect to the issuance of the proposed Parity Obligations, no Event of Default or event which with notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing, and the authorized representative of the University must certify to the Trustee that the General Receipts for the Fiscal Year immediately preceding the issuance of the proposed Parity Obligations was at least twice the maximum aggregate amount required for the payment of Debt Service Charges to be paid in any subsequent Fiscal Year with respect to all General Receipts Obligations, as defined in the Trust Agreement, to be outstanding after the delivery of the proposed Parity Obligations. For purposes of this computation, historic General Receipts and future debt service requirements are subject to certain adjustments set forth in the Trust Agreement.

Nonpresentment If an Obligation is not presented for payment when due or an interest payment check is uncashed, and if moneys for the purpose of paying and sufficient to pay that amount have been made available to the Trustee for the benefit of the Holder, all liability of the University to the Holder for such payment will cease and be discharged completely. The Trustee is to hold that money in trust, without liability for interest on it, for the exclusive benefit of the Holder, who will be restricted exclusively to that money for any claim of whatever nature under the Trust Agreement or on or with respect to that Obligation. Moneys so held by the Trustee and remaining unclaimed for four years after the due date will be paid to the University free of any trust or lien. Thereafter the Holder may look only to the University for payment and then only to the amounts so received by the University (without interest).

Supplemental Trust Agreements

Supplemental Trust Agreements not Requiring Consent of Holders. The University and the Trustee may, without the consent of, or notice to, any of the Holders, enter into Supplemental Trust Agreements as will not, in the opinion of the Trustee, be inconsistent with the terms and provisions of the Trust Agreement for any one or more of the following purposes:

(a) to cure any ambiguity, inconsistency or formal defect or omission in the Trust Agreement;

(b) to grant to or confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers, or authority that may lawfully be granted to or conferred upon the Holders or the Trustee;

(d) to accept additional security and instruments of further assurance;

(e) to add to the covenants and agreements of the University contained in the Trust Agreement other covenant and agreements thereafter to be observed for the protection of the Holders, or to surrender or limit any right, power or authority reserved to or conferred upon the University in the Trust Agreement, including the limitation of rights of redemption so that in certain instances Obligations of different series will be redeemed in some prescribed relationship to one another;

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(f) to evidence any succession to the University and the assumption by such successor of the covenants and agreements of the University contained in the financing documents and the General Receipts Obligations;

(g) in connection with the issuance of Parity Obligations in accordance with the Trust Agreement;

(h) to provide for the issuance or exchange of General Receipts Obligations in coupon or book entry form, if the Trustee receives an Opinion of Bond Counsel that such issuance or exchange will not adversely affect the federal tax status of the interest on the General Receipts Obligations;

(i) to permit the Trustee to comply with any obligations imposed upon it by law;

(j) to specify further the duties and responsibilities of, and to define further the relationship among, the Trustee, the registrar, and any authenticating agent or paying agent;

(k) to achieve compliance of the Trust Agreement with any applicable federal or state securities or tax law;

(l) to permit any other amendment which, in the judgment of the Trustee, is not to the material prejudice of the Trustee or the Holders, including, but not limited to, changes required in order to obtain or maintain a rating on any series of General Receipts Obligations from a rating agency; and

(m) to accept a Credit Facility, as defined in the Trust Agreement.

Supplemental Trust Agreements Requiring Consent of Holders. Exclusive of Supplemental Trust Agreements described above which do not require the consent of Holders, the University and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of then outstanding General Receipts Obligations, may execute Supplemental Trust Agreements adding any provisions to or changing in any manner or eliminating any of the provisions of the Trust Agreement or restricting in any manner the rights of the Holders; provided however, that nothing permits or will be construed as permitting, except as otherwise provided in the Trust Agreement,

(a) without the consent of the Holder of each General Receipts Obligation so affected: (i) an extension of the maturity of the principal of or the interest on any General Receipts Obligation; (ii) a reduction in the principal amount of any General Receipts Obligation or the rate of interest or redemption premium thereon; (iii) a reduction in the amount or extension of the time of payment of any mandatory sinking fund requirements; and (iv) any modification of any mandatory redemption provision affecting the General Receipts Obligations; or

(b) without the consent of the Holders of all outstanding General Receipts Obligations: (i) the creation of a privilege or priority of any General Receipts Obligations over any other General Receipts Obligations; or (ii) a reduction in the aggregate principal amount of the General Receipts Obligations required for consent to such Supplemental Trust Agreement.

If at any time the University requests the Trustee to enter into a Supplemental Trust Agreement, the Trustee will, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such Supplemental Trust Agreement to be mailed by certified mail, postage

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prepaid, to all Holders of outstanding General Receipts Obligations at their addresses as they appear on the Register.

If the Holders of the required percentage in aggregate principal amount of the General Receipts Obligations have consented to and approved the execution of the Supplemental Trust Agreement as provided in the Trust Agreement, no Holder will have any right to object to the execution of such Supplemental Trust Agreement or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the University from executing the same or from taking any action under the provisions thereof.

Reports and Records Upon Event of Default

The Trust Agreement requires that if an Event of Default has occurred and is continuing, the authorized representative of the University will (i) file with the Trustee such financial statements and information concerning the operations and financial affairs of the University as the Trustee may from time to time reasonably request, excluding specifically donor records, personnel records, and any other records the confidentiality of which may be protected by law, and (ii) provide access to the facilities of the University for the purpose of inspection by the Trustee during regular business hours or at such other times as the Trustee may reasonably request.

Trustee

The Trustee, initially U.S. Bank National Association, with its designated corporate trust office located in Cincinnati, Ohio, is a national banking association organized and existing under the laws of the United States, and is authorized to exercise corporate trust powers in Ohio.

The Trust Agreement contains provisions for the Trustee’s removal by the Holders of not less than a majority in aggregate principal amount of General Receipts Obligations then outstanding and which removal will take effect upon the appointment by the University and acceptance by a qualified successor trustee. No resignation or removal of the Trustee will be effective until a successor has been appointed and has accepted the duties of trustee.

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APPENDIX D

BOOK-ENTRY SYSTEM

The information in this section concerning The Depository Trust Company (“DTC”) and DTC’s book-entry only system has been obtained from DTC and the University takes no responsibility for the completeness or accuracy thereof. The University cannot and does not give any assurances that DTC, Direct Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal, or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its partnership nominee, as the registered owner of the Bonds, or that they will so do on a timely basis or that DTC, Direct Participants or Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

Owners of book-entry interests in the Bonds will neither receive nor have the right to receive physical delivery of the Bonds and will not be or be considered to be, and will not have any rights as, registered owners (“Holders”) of Bonds under the Trust Agreement.

The following information on the Book-entry Only System applicable to the Bonds has been supplied by The Depository Trust Company, New York, New York, and none of the University, the Underwriter or Bond Counsel, make any representations, warranties or guarantees with respect to its accuracy or completeness.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as securities registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Bond certificate for each maturity will be issued in the aggregate principal amount of the Bond and will be deposited with DTC.

DTC, the world’s largest depository, is a limited-purpose trust company organized under 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 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. (This internet site is included for reference only and the information on that internet site is not incorporated by reference in this Official Statement.)

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Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each of the Bonds (the “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 transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

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

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

Redemption notices will be sent to DTC. If less than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of interest of each Direct Participant to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the University 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the University or the Bond Registrar, 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 or the Bond Registrar, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the University, disbursement of such payments

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to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as Securities Depository with respect to the Bonds, at any time by giving reasonable notice to the University or the Bond Registrar. Also, the University may determine that continuation of a securities depository/book-entry relationship is not in the best interests of the Holders of the Bonds. Under such circumstances, in the event that a successor Securities Depository is not obtained, Bond certificates are required to be and will be printed and delivered.

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APPENDIX E

FORM OF BOND COUNSEL OPINION

The form of the legal approving opinion of Bricker & Eckler LLP, bond counsel, is set forth below. The actual opinion will be delivered on the date of delivery of the bonds referred to therein and may vary from the form set forth to reflect circumstances both factual and legal at the time of such delivery. Recirculation of the final Official Statement creates implication that Bricker & Eckler LLP has reviewed any of the matters set forth in such opinion subsequent to the date of such opinion.

Ross, Sinclaire & Associates, LLC Cincinnati, Ohio

We have examined the transcript of proceedings (the “Transcript”) relating to the issuance by Shawnee State University (the “University”), a university of the State of Ohio and a body corporate and politic, of its $20,080,000 General Receipts Bonds, Series 2016, dated this date (the “Series 2016 Bonds”) that are being issued for the purpose of (i) paying all or a portion of the costs the acquisition, construction and installation of facilities; (ii) refunding certain bonds; and (iii) paying all or a portion of the costs in connection with the issuance of the Series 2016 Bonds. The Transcript includes (i) a resolution adopted by the Board of Trustees of the University (the “Board”) on February 9, 2007, (ii) a conformed copy of the Amended and Restated Trust Agreement dated as of June 1, 2007 (the “Original Trust Agreement”) by and between the University and The Bank of New York Trust Company, N.A., as trustee, (iii) a resolution adopted by the Board on August 19, 2016, and (iv) an executed counterpart of the First Supplemental Trust Agreement dated as of November 1, 2016 (the “First Supplemental Trust Agreement” and, together with the Original Trust Agreement, the “Trust Agreement”) by and between the University and U.S. Bank National Association, as trustee. We have also examined a copy of the signed and authenticated Series 2016 Bond of the first maturity. We have also examined Section 2i of Article VIII of the Ohio Constitution, Sections 3345.11 and 3345.12 of the Revised Code (the “Act”) and such other law, as we deemed relevant and necessary to render this opinion.

Based on this examination we are of the opinion that, under existing law:

1. The Series 2016 Bonds are valid and legally binding special obligations of the University in accordance with their terms. The principal of and interest on the Series 2016 Bonds and General Receipts Obligations of the University heretofore or hereafter issued pursuant to the Trust Agreement (collectively with the Series 2016 Bonds, the “Bonds”), are payable equally and ratably from and secured by a first pledge of and lien on the Debt Service Fund and the General Receipts Fund, both established by and as provided in the Trust Agreement, and the gross amount of “General Receipts” of the University as defined in and subject to the provisions of the Trust Agreement. The owners of the Bonds are given no right to have any excises or taxes levied by the Ohio General Assembly for the payment of principal of or interest on the Bonds.

2. Interest on the Series 2016 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and is not an item of tax preference under Section 57 of the Code for purposes of the alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. The interest on the Series 2016 Bonds, and any profit made on their sale, exchange or other disposition, are exempt from all Ohio state and local taxation, except the estate tax, the domestic insurance company tax, the dealers in intangibles

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tax, the tax levied on the basis of the total equity capital of financial institutions, and the net worth base of the corporate franchise tax. We express no opinion as to any other tax consequences regarding the Series 2016 Bonds.

In giving the foregoing opinion with respect to the treatment of interest on the Series 2016 Bonds and the status of the Series 2016 Bonds under the federal tax laws, we have assumed and relied upon compliance with the University’s covenants and the accuracy, which we have not independently verified, of the University’s representations and certifications, all as contained in the Transcript. The accuracy of those representations and certifications, and compliance with those covenants, may be necessary for the interest to be and to remain excluded from gross income for federal income tax purposes and for other federal tax effects stated above. Failure to comply with certain of those covenants subsequent to issuance could cause the interest on the Series 2016 Bonds to be included in gross income for federal income tax purposes retroactively to their date of issuance.

This opinion is given 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 come to our attention, or any changes in law that may hereafter occur. We bring to your attention the fact that our legal opinions are an expression of our professional judgment and are not a guarantee of a result.

Respectfully submitted,

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APPENDIX F

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

MUNICIPAL BOND BAM INSURANCE POLICY

ISSUER: [NAME OF ISSUER] Policy No: _

MEMBER: [NAME OF MEMBER]

BONDS: $ in aggregate principal Effective Date: ___--"--- _ amount of [NAME OF TRANSACTION] [and maturing on]

Risk Premium: $_-----: ___ Member Surplus Contribution: $ ~ ___ Total Insurance Payment: $ ____

BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM-'), for consideration received, hereby UNCONDITIONAllY AND IRREVOCABLY agree!> to pay to the trustee (the "Trustee") or paying agent (the "Paying Agl!nl") for the Bonds named above (as set torth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Polic), (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 first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but wilhout duplication in the case of duplicate claims for the SaInt! Nonpayment) to or for the benefit of each Owner oC the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but ifl then unpaid by rcasolt of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactoty to it, of (a) evidence of the Owner's right to receive payment of such principal or interest tben Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights wi th respect to payment of such principal or interest that is Due for Payment shall tht:reupon vest in BAM. A Notice of Nonpaymcnt wi ll be deemed received on a given Business Day iCit is received prior to LOa 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 BAM is incomplete, it shaH b e deemed not to have been rf:(."'t'ived by BAM for purposes of the preceding sentence. and BAM shall promptly so advise the Tnlstee, Paying Agent or Owner, as appropriate. any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such B ond, any appurtenant coupon (Q such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under such Bond. Payment by BAM eilher to tbe Trustee or Paying Agent for the benefit of the Owners, or directly to tbe Owners, on account of any Nonpayment shall di scharge the obligation of BAM under this Policy with respect to said Nonpayment.

Except to the extent expressly modified by an endorsement hereto, the following tenns shall have the meanings specified for al\ purposes of this Poli<..,,),. "Business D

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BAM may appoint a fi scal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer 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, the Paying Agent, the Member or the Issuer (0.) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to BAM and shall not be deemed received until received by both lind (b) all payments reguired to be made by HAM under this Policy may be mude directly by BAM or by the Insurer's Fiscal Agent on behalf of BAM. The Insurer's Fiscal Agent is the agent of BAM only, and the Insurer's Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer'~ Fiscal Agent or any failure of BAM to depOsit or cause to be deposited sufficient funds to make payments due undcr this Policy.

To the fullest extent permittcd by applicable law, BAM agrees not to assen, and hereby waives, only for the benefit of eac h Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limiuHion, the defense of fraud), -whether acquired by subroglliion. assignment or otherwise, 10 the extent that such rights lind defenses may be available to BAM to avoid payment-of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked.

This Policy sets forth in full the undertaking of BAM and shall not be modified. altered or affected by any other agreement or (U,.strument. including any modification or umendment thereto. Except to the extent expressly modified by an endorsement hereto. _any premium paid ~ltspect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for puyment, aT. the. Bonds prior to maturity. THIS POLlCY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW, THIS POLlCY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT.

In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY hAS caU,sed this Polity to be.executM on its behalf by its Authorized Officer.

BUILD AMERICA MUTUAL ASSURANCE COMPANY

By: Authorized Officer

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Notices (Unless Otherwise Specified by BA_\l)

Email: [email protected] Address: 1 World financial Center, 27th floor 200 Liberty Street New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims)

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SHAWNEE STATE UNIVERSITY • General Receipts Bonds, Series 2016