BOARD OF EDUCATION OF THE GRAHAM LOCAL SCHOOL … · 2012-10-22 · graham local school district counties of champaign and shelby, ohio $7,990,000 school improvement unlimited tax

OFFICIAL STATEMENT DATED OCTOBER 17, 2012

New Issue Ratings: Moody's Investors ServiceBook Entry Only “Aa2” (State of Ohio Credit Enhancement)

“A1” (Underlying)(See “Ratings” and “Ohio School District Credit Enhancement Program” herein)

In the opinion of Bond Counsel, under existing law (i) interest on the Bonds will be excludable from grossincome of the holders thereof for purposes of federal income taxation, (ii) interest on the Bonds will not be a specificitem of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations and(iii) interest on and any profit made on the sale, exchange, or other disposition of, the Bonds, are exempt from the Ohiopersonal income tax, the net income base of the Ohio corporate franchise tax, the Ohio commercial activity tax, andmunicipal, school district, and joint economic development district income taxes in Ohio, all subject to the qualificationsdescribed herein under the heading “TAX EXEMPTION.”

BOARD OF EDUCATION OF THEGRAHAM LOCAL SCHOOL DISTRICT

COUNTIES OF CHAMPAIGN AND SHELBY, OHIO

$7,990,000SCHOOL IMPROVEMENT

UNLIMITED TAXGENERAL OBLIGATION

REFUNDING BONDSSERIES 2012

(BANK QUALIFIED)

$590,000ENERGY CONSERVATION

LIMITED TAXGENERAL OBLIGATION BONDS

SERIES 2012(BANK QUALIFIED)

Dated: Date of Issuance Due: December 1, as shown on inside cover.

The two series of bonds captioned above: (a) the $7,990,000 School Improvement General ObligationRefunding Bonds, Series 2012 (the “Refunding Bonds”) and (b) the $590,000 Energy Conservation General ObligationBonds, Series 2012 (the “Energy Conservation Bonds” and together with the Refunding Bonds, the “Bonds”), areissuable as serial bonds [and as term bonds] (the “Current Interest Bonds”) and a portion of the Refunding Bonds shallbe issued as capital appreciation bonds (the “Capital Appreciation Bonds”). Interest on the Current Interest Bonds willbe payable, from the date of issuance, on June 1 and December 1, commencing December 1, 2012. The CapitalAppreciation Bonds will not pay current interest but will accrete in value in lieu thereof. The Bonds mature onDecember 1, as shown on inside cover.

The Refunding Bonds and Energy Conservation Bonds that are Current Interest Bonds are subject toredemption prior to maturity as set forth herein. The Capital Appreciation Bonds are not subject to redemption prior tostated maturity.

The Bonds will be prepared as fully registered Bonds and when delivered all Bonds will be registered in thename of CEDE & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”). Principal on theBonds will be payable to the record owner thereof (DTC or its nominee) at the designated office of The Bank of NewYork Mellon Trust Company, N.A., Cincinnati, Ohio, as paying agent and registrar (the “Paying Agent and Registrar”).Interest on the Bonds will be paid by check, draft or wire sent by the Paying Agent and Registrar. It is expected thatdelivery of the Bonds will be made in New York, New York (or in the case of a “fast” closing, delivery of the Bondsmay be made locally to the Paying Agent and Registrar) through DTC on or about October 24, 2012.

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT ISNOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TOOBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.

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MATURITY SCHEDULE

REFUNDING BONDS

$7,420,000 Current Interest Bonds (Serial Bonds)

Year(Dec. 1)

PrincipalAmount

InterestRate Price CUSIP†

Year(Dec. 1)

PrincipalAmount


2012 $195,000 1.000% 100.066 384694 CD5 2019 $545,000 2.000 104.387 384694 CL72013 195,000 1.000 100.549 384694 CE3 2023* 805,000 2.250 101.999 384694 CM52014 85,000 1.000 100.624 384694 CF0 2024* 825,000 2.250 101.266 384694 CN32015 65,000 1.000 100.611 384694 CG8 2025 845,000 2.125 99.375 384694 CP82016 395,000 1.500 102.411 384694 CH6 2026 865,000 2.125 98.495 384694 CQ62017 430,000 2.000 104.707 384694 CJ2 2027 885,000 2.250 98.733 384694 CR42018 460,000 1.500 101.759 384694 CK9 2028 905,000 2.350 98.674 384694 CS2

_______*Priced to the December 1, 2022 call date.

$490,000 Capital Appreciation Bonds

Year(Dec. 1)

OriginalPrincipalAmount

MaturityAmount

EquivalentInterest Rate

Original PrincipalPer $5,000

Maturity Amount

Original OfferingPrice to Public

Per $5,000Maturity Amount

Approx.Yield to

Maturity CUSIP†

2020 $120,000 $625,000 21.439% $ 960.00 $4,197.75 2.170% 384694 CT02021 195,000 805,000 16.198 1,211.18 4,042.10 2.350 384694 CU72022 175,000 810,000 15.756 1,080.25 3,890.05 2.500 384694 CV5

****************************************************

† Copyright 2012, CUSIP Global Services. CUSIP is a registered trademark of the American Bankers Association.CUSIP Global Services is managed on behalf of the American Bankers Association by Standard & Poor’s. CUSIPdata herein are provided by Standard & Poor’s, CUSIP Service Bureau, a Division of The McGraw-Hill Companies,Inc. The CUSIP numbers listed are being provided solely for the convenience of the holders only at the time ofissuance of the Bonds, and the District does not make any representations with respect to such numbers or undertakeany responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity issubject to being changed after the issuance of the Bonds as a result of various subsequent actions, including, but notlimited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary marketportfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certainmaturities of the Bonds.

MATURITY SCHEDULE

ENERGY CONSERVATION BONDS

$365,000 Current Interest Bonds (Serial Bonds)

Year(Dec. 1)

PrincipalAmount


Year(Dec. 1)

PrincipalAmount


2013 $40,000 1.000% 100.493 384694 CW3 2018 $40,000 1.500 101.169 384694 DB82014 40,000 1.000 100.520 384694 CX1 2019 40,000 1.375 98.826 384694 DC62015 40,000 1.000 100.458 384694 CY9 2020 40,000 2.000 101.500 384694 DD42016 40,000 1.000 100.000 384694 CZ6 2021 45,000 2.000 99.585 384694 DE22017 40,000 1.250 100.642 384694 DA0

$225,000 Current Interest Bonds (Term Bonds)

$225,000 – 2.250% Term Bonds Due December 1, 2026, Price: 98.804, CUSIP: 384694 DF9

† Copyright 2012, CUSIP Global Services. CUSIP is a registered trademark of the American Bankers Association.CUSIP Global Services is managed on behalf of the American Bankers Association by Standard & Poor’s. CUSIPdata herein are provided by Standard & Poor’s, CUSIP Service Bureau, a Division of The McGraw-Hill Companies,Inc. The CUSIP numbers listed are being provided solely for the convenience of the holders only at the time ofissuance of the Bonds, and the District does not make any representations with respect to such numbers or undertakeany responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity issubject to being changed after the issuance of the Bonds as a result of various subsequent actions, including, but notlimited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary marketportfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certainmaturities of the Bonds.

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REGARDING THIS OFFICIAL STATEMENT

This Official Statement does not constitute an offering of any security other than theoriginal offering of the Bonds of the Board of Education of the District. No dealer, broker,salesman or other person has been authorized by the Board of Education to give any informationor to make any representation, other than those contained in this Official Statement, and, if givenor made, such other information or representations must not be relied upon as having beenauthorized by the Board of Education. This Official Statement does not constitute an offer to sellor the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person inany 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 anycircumstances, create any implication that there has been no change in the affairs of the Board ofEducation or the District since the date hereof.

Upon issuance, the Bonds will not be registered by the Board of Education under anyfederal 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 othergovernmental entity or agency (other than the Board of Education) will have, at the request ofthe Board of Education, passed upon the accuracy or adequacy of this Official Statement orapproved the Bonds for sale.

All financial and other information presented in this Official Statement has been providedby the Board of Education from its records, except for information expressly attributed to othersources. The presentation of information, including tables of receipts from taxes and othersources, is intended to show recent historic information, and is not intended to indicate future orcontinuing trends in the financial position or other affairs of the Board of Education. Norepresentation is made that past experience, as is shown by that financial and other information,will be necessarily continued or be repeated in the future.

Insofar as the statements contained in this Official Statement involve matters of opinionor estimates, even if not expressly stated as such, such statements are made as such and not asrepresentations of fact or certainty. No representation is made that any of such statements havebeen or will be realized, and such statements should be regarded as suggesting independentinvestigation 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 documentsources of information. Neither this Official Statement nor any oral or written representations byor on behalf of the Board of Education preliminary to sale of the Bonds should be regarded a partof the Board of Education's contract with the underwriter or the holders from time to time of theBonds.

The underwriter has reviewed the information in this official statement pursuant to itsresponsibilities to investors under the federal securities laws, but the underwriter does notguarantee the accuracy or completeness of such information.

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References herein to provisions of Ohio law, whether codified in the Ohio Revised Code(the “Revised Code”) or uncodified, or to provisions of the Ohio Constitution or the Board ofEducation's resolutions, are references to such provisions as they presently exist. Any of theseprovisions may from time to time be amended, repealed or supplemented.

As used in this Official Statement, “debt service” means principal of, and interest on, theobligations referred to; “Counties” means the Counties of Champaign and Shelby; and “State” or“Ohio” means the State of Ohio.

[Remainder of page intentionally left blank]

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TABLE OF CONTENTS

Page

REGARDING THIS OFFICIAL STATEMENT ............................................................................ i

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

The Issuer.................................................................................................................................... 1Source of Payment of the Bonds................................................................................................. 1Book Entry.................................................................................................................................. 2Ohio School District Credit Enhancement Program................................................................... 2Purpose of the Bonds .................................................................................................................. 2Description of the Bonds ............................................................................................................ 3Investment Considerations.......................................................................................................... 4Tax Status ................................................................................................................................... 4Parties to the Issuance of the Bonds ........................................................................................... 4Authority for Issuance ................................................................................................................ 5Offering and Delivery of the Bonds ........................................................................................... 5Disclosure Information ............................................................................................................... 5Additional Information ............................................................................................................... 6

SELECTED INFORMATION........................................................................................................ 6

Security and Source of Payment for Bonds ................................................................................ 6Risk Consideration...................................................................................................................... 7Bankruptcy Considerations......................................................................................................... 7Fiscal Emergency Legislation..................................................................................................... 8Expedited Local Partnership Program ........................................................................................ 9Classroom Facilities Act ........................................................................................................... 10Accrued Interest and Premium ................................................................................................. 11

SOURCES AND USES OF FUNDS............................................................................................ 12

DESCRIPTION OF THE BONDS ............................................................................................... 13

Current Interest Bonds .............................................................................................................. 13Capital Appreciation Bonds...................................................................................................... 15Debt Service Schedules ............................................................................................................ 18

PURPOSE OF THE BONDS AND PLAN OF REFUNDING .................................................... 20

Refunding Bonds ...................................................................................................................... 20Energy Conservation Bonds ..................................................................................................... 20General...................................................................................................................................... 20

VERIFICATION AGENT............................................................................................................ 21

OHIO SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM..................................... 21

BOOK-ENTRY SYSTEM............................................................................................................ 23

GENERAL INFORMATION CONCERNINGTHE BOARD OF EDUCATION AND THE DISTRICT............................................................ 25

Introduction............................................................................................................................... 25

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Organization of the District ...................................................................................................... 26Information Regarding the Counties......................................................................................... 27Overlapping Governmental Entities ......................................................................................... 27Population ................................................................................................................................. 28Employment.............................................................................................................................. 29Income and Housing Data......................................................................................................... 31Building Permits ....................................................................................................................... 31Organization and Officials of the Board of Education ............................................................. 31Enrollment ................................................................................................................................ 33School District Facilities........................................................................................................... 34Employees................................................................................................................................. 34State Performance Standards .................................................................................................... 35

FINANCIAL MATTERS ............................................................................................................. 40

Introduction............................................................................................................................... 40Budgeting, Tax Levy and Appropriations Procedures.............................................................. 41Financial Reports and Examinations of Accounts .................................................................... 42Financial Condition of the District ........................................................................................... 43Current Financial Condition of the District .............................................................................. 43Five-Year Projection................................................................................................................. 43Insurance................................................................................................................................... 44Investment Policies of Champaign and Shelby Counties ......................................................... 47

AD VALOREM TAX REVENUES............................................................................................. 48

Ad Valorem Tax Base............................................................................................................... 48Assessed Valuation of the District............................................................................................ 52Largest Taxpayers..................................................................................................................... 53Collections and Delinquencies of Ad Valorem Taxes.............................................................. 54Unvoted and Voted Taxes for Local Purposes ......................................................................... 54Sources of Income .................................................................................................................... 56Voting Records ......................................................................................................................... 56State Funding for Public Schools.............................................................................................. 57

BOARD OF EDUCATION DEBTAND OTHER LONG-TERM OBLIGATIONS ........................................................................... 58

Principal Amounts of Outstanding Debt................................................................................... 61Indirect Debt Limitation ........................................................................................................... 61Outstanding General Obligation Debt ...................................................................................... 63Outstanding Lease Obligations Subject to Annual Appropriation ........................................... 63Future Financings ..................................................................................................................... 63Pension Obligations .................................................................................................................. 64Accrued Fringe Benefits ........................................................................................................... 66

LITIGATION................................................................................................................................ 67

LEGAL MATTERS...................................................................................................................... 68

TRANSCRIPT AND CLOSING DOCUMENTS ........................................................................ 68

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TAX EXEMPTION ...................................................................................................................... 68

ORIGINAL ISSUE DISCOUNT AND PREMIUM BONDS...................................................... 70

Discount .................................................................................................................................... 70Premium.................................................................................................................................... 71Capital Appreciation Bonds...................................................................................................... 71

RATINGS ..................................................................................................................................... 72

UNDERWRITING ....................................................................................................................... 72

Refunding Bonds ...................................................................................................................... 72Energy Conservation Bonds ..................................................................................................... 72General...................................................................................................................................... 73

CONTINUING DISCLOSURE.................................................................................................... 73

APPENDICES

APPENDIX A-1 Audited Financial Reports for the period July 1, 2010 - June 30, 2011APPENDIX A-2 Audited Financial Reports for the period July 1, 2009 - June 30, 2010APPENDIX B District's Five Year ForecastAPPENDIX C-1 Champaign County Tax RatesAPPENDIX C-2 Shelby County Tax RatesAPPENDIX D-1 Champaign County Ten-Mill Certificate (Energy Conservation Bonds

Only)*APPENDIX D-2 Shelby County Ten-Mill Certificate (Energy Conservation Bonds Only)*APPENDIX E Financial StatementAPPENDIX F-1 Specimen Opinion of Bond Counsel (Refunding Bonds)APPENDIX F-2 Specimen Opinion of Bond Counsel (Energy Conservation Bonds)APPENDIX G Summary of Annual Appropriation ResolutionAPPENDIX H Investment Policy of the District

______*Subject to final approval.


INTRODUCTION

The purpose of this Official Statement, which includes the cover page and appendiceshereto, is to provide certain information with respect to the issuance of (a) $7,990,000 aggregateprincipal amount of School Improvement General Obligation Refunding Bonds, Series 2012 (the“Refunding Bonds”) of the Board of Education (the “Board of Education”) of the Graham LocalSchool District (the “District”), Counties of Champaign and Shelby, Ohio, comprised of CurrentInterest Bonds and Capital Appreciation Bonds and (b) $590,000 Energy Conservation GeneralObligation Bonds, Series 2012 (the “Energy Conservation Bonds” and collectively with theRefunding Bonds, the “Bonds”) of the Board of Education of the District, Counties ofChampaign and Shelby, Ohio, comprised of Current Interest Bonds.

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

The Issuer

The Bonds are being issued by the Board of Education of the Graham Local SchoolDistrict, a political subdivision of the State of Ohio. The District, which is approximately 189square miles, is located in the Counties of Champaign and Shelby in west-central Ohio.

Source of Payment of the Bonds

The Refunding Bonds are voted unlimited tax general obligation debt of the Board ofEducation. Principal of and interest on the Bonds, unless paid from other sources, are payablefrom an ad valorem tax on all the taxable property in the District without limitation as to rate andamount (See “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS – RefundingBonds,” herein).

The Energy Conservation Bonds are limited tax general obligation debt of the Board ofEducation. Principal of and interest on the Bonds, unless paid from other sources, are payablefrom an ad valorem tax on all the taxable property in the District within the ten-mill limitationimposed by the Ohio Constitution and laws, for the District and overlapping politicalsubdivisions (See “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS – EnergyConservation,” herein).

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Book Entry

The Bonds will be prepared as fully registered Bonds and when delivered all Bonds willbe registered in the name of CEDE & Co., as nominee of the Depository Trust Company, NewYork, New York (“DTC”) (or in the case of a “fast” closing, delivery of the Bonds may be madelocally to the Paying Agent and Registrar).

Ohio School District Credit Enhancement Program

The Refunding Bonds are payable from unlimited property taxes in the amount necessaryto pay annual debt service in the event that debt service of the Refunding Bonds could not bepaid. As additional security for the Refunding Bonds, such bonds will be qualified as part of theState of Ohio Credit Enhancement Program, which directs the State Department of Education topay the Paying Agent and Registrar certain state education aid payments otherwise payable to theBoard of Education in the event the District cannot meet its debt service payments on theRefunding Bonds. (See “OHIO SCHOOL DISTRICT CREDIT ENHANCEMENTPROGRAM”).

Purpose of the Bonds

The Refunding Bonds are being issued for the purpose of advance refunding a portion ofthe new money portion of the Board’s School Improvement Bonds, Series 2005, dated August15, 2005 (the “Prior Bonds”), which Prior Bonds were originally issued in the aggregateprincipal amount of $17,235,000, and which bonds are now outstanding in the aggregateprincipal amount of $16,775,000. The new money portion of the Prior Bonds originallyconsisted of principal in the amount of $13,575,000, and which new money portion of the PriorBonds is now outstanding in the principal amount of $13,265,000. The new money portion ofthe Prior Bonds provided proceeds for the purpose of constructing a new elementary school andproviding equipment, furnishings and site improvements therefor. Authority for the issuance ofthe Prior Bonds was provided by Chapter 133 of the Ohio Revised Code, the requisite majorityvote of the electors of the District at an election held May 3, 2005 and a resolution passed by theBoard of Education on July 21, 2005. (See “PURPOSE OF THE BONDS AND PLAN OFREFUNDING – Refunding Bonds”)

The Energy Conservation Bonds are being issued for the purpose of acquiring,constructing and installing energy conservation measures, including costs described in Section133.15(B) of the Ohio Revised Code. Authority for the issuance of the Energy ConservationBonds is provided by Chapters 133 and 3313 of the Ohio Revised Code, a resolution passed bythe Ohio School Facilities Commission on June 28, 2012, and resolutions passed by the Board ofEducation on July 30, 2012. (See “PURPOSE OF THE BONDS AND PLAN OF REFUNDING– Energy Conservation Bonds”)

The Bonds are also being issued to pay certain costs under Chapter 133 of the OhioRevised Code including, without limitation, the cost of printing the Bonds, expense in deliveryof the Bonds, service charges of the Paying Agent and Registrar, legal services and obtaining anapproving legal opinion and all necessary costs in connection therewith.

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Description of the Bonds

General. The Bonds are dated, mature and bear interest as set forth on the inside coverpage hereof.

Mandatory Redemption. The Energy Conservation Bonds maturing on December 1,2026 are subject to mandatory redemption prior to maturity commencing on December 1, 2022.(See “DESCRIPTION OF THE BONDS—Mandatory Redemption” herein).

The Capital Appreciation Bonds are not subject to mandatory redemption prior tomaturity.

Optional Redemption. The Refunding Bonds that are Current Interest Bonds maturingon and after December 1, 2023 are subject to optional redemption, in whole or in part (in theamount of $5,000 or any integral multiple thereof), on any date, on or after December 1, 2022 ata price of par, which is 100% of the face value of the Current Interest Bonds. (See“DESCRIPTION OF THE BONDS – Optional Redemption” herein).

The Energy Conservation Bonds maturing on and after December 1, 2023 are subject tooptional redemption, in whole or in part (in the amount of $5,000 or any integral multiplethereof), on any date, on or after December 1, 2022 at a price of par, which is 100% of the facevalue of the Current Interest Bonds. (See “DESCRIPTION OF THE BONDS – OptionalRedemption” herein).

The Capital Appreciation Bonds are not subject to optional redemption prior to maturity.

Denominations. The Current Interest Bonds will be issued in the denominations of$5,000 or any integral multiple thereof. The Capital Appreciation Bonds may be issued in anydenomination provided that the principal amount of any such Capital Appreciation Bond shall be$5,000 upon maturity or in integral multiples thereof.

Registration, Transfers and Exchanges. The Bonds will be fully registered and may betransferred at the designated corporate trust office of the Paying Agent and Registrar, withoutcost except for any taxes or other governmental charges.

Payments. Principal and any redemption premium (with respect to the Current InterestBonds) are payable to the registered owner upon presentation and surrender at the designatedcorporate trust office of the Paying Agent and Registrar. Interest on the Bonds will be payableby check, draft or wire sent by the Paying Agent and Registrar to the person who is the registeredowner as of the 15th day of the calendar month preceding the applicable interest payment date.

Registrar. Interest on the Bonds will be payable by check or draft mailed by the PayingAgent and Registrar to the person who is the registered owner as of the 15th day of the calendarmonth preceding the applicable interest payment date.

Notices. In the event any Current Interest Bonds are called for redemption, notice shallbe given by mailing a copy of the redemption notice by first class mail, postage prepaid, not less

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than thirty (30) days prior to the date fixed for redemption to the registered owner of eachCurrent Interest Bond to be redeemed.

Investment Considerations

The Bonds, like all obligations of state and local government, are subject to changes invalue due to changes in the condition of the tax-exempt bond market and/or changes in thefinancial position of the District.

Prospective purchasers of the Bonds may need to consult their own tax advisors prior toany purchase of the Bonds as to the impact of the Internal Revenue Code of 1986, as amended,upon their acquisition, holding or disposition of the Bonds.

It is possible under certain market conditions, or if the financial condition of the Districtshould change, that the market price of the Bonds could be adversely affected.

Tax Status

Under the laws, regulations, rulings and judicial decisions in effect as of the date hereof,interest on the Bonds is excludible from gross income for Federal income tax purposes, pursuantto the Internal Revenue Code of 1986, as amended (the “Code”). Furthermore, interest on theBonds will not be treated as an item of tax preference, under Section 57(a)(5) of the Code, incomputing the alternative minimum tax for individuals and corporations. In rendering theopinions in this paragraph, we have assumed continuing compliance with certain covenantsdesigned to meet the requirements of Section 103 of the Code. We express no other opinion asto the federal tax consequences of purchasing, holding or disposing of the Bonds.

The Board of Education has designated the Bonds as “qualified tax-exempt obligations”under Section 265(b) of the Internal Revenue Code of 1986, as amended.

See Appendices F-1 and F-2 for the forms of the opinions that Bond Counsel proposes todeliver in connection with the Refunding Bonds and the Energy Conservation Bonds,respectively.

Parties to the Issuance of the Bonds

The Paying Agent and Registrar for the Bonds is The Bank of New York Mellon TrustCompany, N.A., Cincinnati, Ohio. Legal matters incident to the issuance of the Bonds and withregard to the tax-exempt status of the interest thereon are subject to the approving legal opinionof Peck, Shaffer & Williams LLP, Cincinnati, Ohio, Bond Counsel. The Underwriter for theBonds is RBC Capital Markets, LLC, Cincinnati, Ohio.

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Authority for Issuance

Authority for the issuance of the Refunding Bonds is provided by Chapter 133 of theOhio Revised Code, the requisite majority vote of the electors of the District at an election heldon May 3, 2005 and a resolution passed by the Board of Education on July 30, 2012.

Authority for the issuance of the Energy Conservation Bonds is provided by Chapters133 and 3313 of the Ohio Revised Code, in particular Sections 133.06(G) and 3313.372. Section133.06(G) permits a school district to issue bonds for the purpose of acquiring, constructing andinstalling energy conservation measures that result in energy cost savings over a period of fifteenyears, which cost savings are expected to be greater than the costs of acquiring, constructing, andinstalling such energy conservation measures after a determination by the Board of Education ofthe District that such savings are likely to occur, provided that the school district cannot issuebonds unless the Ohio School Facilities Commission determines that the Board of Education’sdetermination is reasonable. The Board of Education determined that the cost of acquiring,constructing, and installing the proposed energy conservation measures would likely not exceedthe energy savings over the next fifteen years in a resolution adopted January 31, 2012. TheOhio School Facilities Commission determined that the Board of Education’s determination wasreasonable in a resolution adopted on June 28, 2012. The Board of Education authorized theissuance of the Energy Conservation Bonds in a resolution adopted on July 30, 2012.

Offering and Delivery of the Bonds

The Bonds are offered when, as and if issued and received by RBC Capital Markets,LLC, Cincinnati, Ohio, the Underwriter, subject to prior sale, to withdrawal or modification ofthe offer without notice. The Bonds will be delivered on or about October 24, 2012, in NewYork, New York, (or in the case of a “fast” closing, delivery of the Bonds may be made locallyto the Paying Agent and Registrar) through the Depository Trust Company (“DTC”).

Disclosure Information

This Official Statement speaks only as of its date, and the information contained herein issubject to change. This Official Statement and continuing disclosure documents of the Board ofEducation are intended to be made available through one or more repositories. Copies of thebasic documentation relating to the Bonds, including the respective authorizing resolutions andthe respective bond forms are available from the Board of Education.

Certain information contained in this Official Statement is attributed to the OhioMunicipal Advisory Council (“OMAC”). OMAC compiles information from official and othersources. OMAC believes the information it compiles is accurate and reliable, but OMAC doesnot independently confirm or verify the information and does not guaranty its accuracy. OMAChas not reviewed this Official Statement to confirm that the information attributed to it isinformation provided by OMAC or for any other purpose.

The District has deemed this Official Statement to be “final” for the purposes ofSecurities and Exchange Commission Rule 15c2-12(b)(3).

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Additional Information

Additional information concerning this Official Statement, as well as copies of the basicdocumentation relating to the Bonds, is available from Mr. Bob Hoover, Treasurer, Board ofEducation Graham Local School District, 370 E. Main Street, Saint Paris, Ohio 43072, phone:(937) 663-4123.

SELECTED INFORMATION

Security and Source of Payment for Bonds

Refunding Bonds. At an election held on May 3, 2005, pursuant to the provisions ofChapter 133 of the Ohio Revised Code, the electors of the District approved the issuance ofbonds in the principal amount of $13,575,000 and the levy of taxes to pay the principal thereofand interest thereon. The Prior Bonds were issued as of August 15, 2005, and the new moneyportion of the Prior Bonds was issued in the original principal amount of $13,575,000. On July30, 2012, the Board of Education adopted a resolution authorizing the issuance of the RefundingBonds in order to advance refund a portion of the new money component of the Prior Bonds.(See “INTRODUCTION – Purpose of the Bonds”). The Board of Education will pledge the fullfaith, credit and revenue of the Board of Education thereto, and levy on all the taxable propertyin the District, in addition to all other taxes, an annual tax sufficient in amount to provide forpayment of the principal of and interest on the Refunding Bonds. The Refunding Bonds arevoted unlimited tax general obligations of the Board of Education. The authorizing legislationalso covenants with respect to restricting the use of the proceeds of the Refunding Bonds asnecessary to prevent them from constituting “arbitrage bonds” under Sections 103(b)(2) and 148of the Internal Revenue Code of 1986, as amended, and regulations prescribed thereunder.

The ad valorem tax supporting the Prior Bonds (as well as the Refunding Bonds) wasfirst collected in 2005. Such taxes can be expended only for the purpose of paying the principalof and interest on the Refunding Bonds (together with costs of issuing the Refunding Bonds) andnotes issued in anticipation thereof, and are unlimited as to rate or amount; therefore, the rate ofmillage actually levied in each year while the Refunding Bonds are outstanding will be such as isdetermined to be necessary by the County Auditor to produce the amount necessary to payprincipal and interest due in that year, giving due consideration to the District's assessedvaluation and previous tax collection experience.

Energy Conservation Bonds. On July 30, 2012, the Board of Education adopted aresolution authorizing the issuance of the Energy Conservation Bonds. (See “INTRODUCTION– Purpose of the Bonds”). The Board of Education will pledge the full faith, credit, and revenueof the Board of Education thereto. The basic security for unvoted general obligation debt of theBoard of Education is the Board's ability to levy, and its levy, pursuant to constitutional andstatutory requirements, of ad valorem taxes on all real and tangible personal property subject toad valorem taxation by the Board of education, within the ten-mill limitation imposed by Ohiolaw. This tax must be in sufficient amount to pay (to the extent not paid from other sources) as itbecomes due the debt service on unvoted general obligation bonds of the Board of Education,both outstanding and in anticipation of which notes are outstanding. The law provides that thelevy necessary for debt service has priority over any levy for current expenses within the ten-mill

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limitation; however, that priority may be subject to the provisions of federal bankruptcy law andother laws affecting creditors' rights. The Board of Education expects to pay the principal of andinterest on the Energy Conservation Bonds from cash flow generated by the energy savingsattributable to the energy conservation measures to be acquired and installed, or from its generalrevenues. The authorizing legislation also covenants with respect to restricting the use of theproceeds of the Energy Conservation Bonds as necessary to prevent them from constituting“arbitrage bonds” under Sections 103(b)(2) and 148 of the Internal Revenue Code of 1986, asamended, and regulations prescribed thereunder.

Risk Consideration

The Board of Education uses a financial statement presentation methodology known as“regulatory cash basis.” This form of financial statement reporting is not in accordance withGenerally Accepted Accounting Principles (“GAAP”) as required for Ohio school districtspursuant to Section 117-2-03(B) of the Ohio Administrative Code. The IndependentAccountants’ Report dated February 9, 2012 states, in part, that:

[t]he accompanying financial statements and notes omit entitywide statements, and assets, liabilities, fund equities, anddisclosures that while material, we cannot determine at this time.In our opinion, because of the departure from generally acceptedaccounting principles described in the preceding paragraph, theaccompanying statements do not present fairly the financialposition and results of operations of the Graham Local SchoolDistrict as of and for the year ended June 30, 2011 in accordancewith accounting principles generally accepted by the United Stateof America. (See Appendix A, page 1)

As a result of the aforesaid practices, the District’s audited financial statements are notcompliant with GAAP or GASB 34. District personnel considered the cost-benefit of reportingin accordance with GAAP versus reporting on a cash basis methodology, and determined thatreporting on a cash basis of accounting was the more fiscally responsible format at this time.(For additional information, see “FINANCIAL MATTERS – Financial Reports and Examinationof Accounts” herein.)

Bankruptcy Considerations

Chapter 9 of the Federal Bankruptcy Code contains provisions relating to the adjustmentof debts of a State's political subdivisions, public agencies and instrumentalities (“eligibleentity”), such as the District. Under the Bankruptcy Code, an eligible entity may be authorized toinitiate a Chapter 9 case without prior notice to or consent of its creditors, which case may resultin material and adverse modification or alteration of the rights of its secured and unsecuredcreditors, including holders of its bonds and notes.

Chapter 9 of the Bankruptcy Code protects holders of certain municipal revenue andspecial obligation bonds by providing that “special revenues” acquired by the eligible entity after

8

the commencement of the bankruptcy case remain subject to any lien resulting from any securityagreement entered into by the eligible entity before commencement of the case.

Section 133.36 of the Ohio Revised Code permits a political subdivision, such as theDistrict, for the purpose of enabling such subdivision to take advantage of the provisions of theBankruptcy Code, and upon approval of the State Tax Commissioner, to file a petition statingthat the subdivision is insolvent or unable to meet its debts as they mature, and that it desires toeffect a plan for the composition or readjustment of its debts, and to take such furtherproceedings as are set forth in the Bankruptcy Code as they relate to such subdivision. UnderSection 133.36, the taxing authority of such subdivision may, upon like approval of the State TaxCommissioner, refund its outstanding securities, whether matured or unmatured, and exchangerefunding bonds for the securities being refunded. In its order approving such refunding, theState Tax Commissioner shall fix the maturities of the applicable securities to be issued, whichshall not exceed thirty years. Section 133.36 also provides that no taxing subdivision ispermitted, in availing itself of the provisions of the Bankruptcy Code, to scale down, cut down orreduce the principal sum of its securities, except that interest thereon may be reduced in whole orin part. See “SELECTED INFORMATION - Fiscal Emergency Legislation.”

Fiscal Emergency Legislation

Chapter 3316 of the Revised Code of Ohio (hereinafter in this section of this OfficialStatement the “Act”) provides methods for dealing with fiscal emergencies of school districts inOhio. The Act applies only to those school districts which are determined to have circumstancesthat constitute the existence of a fiscal watch or a fiscal emergency condition and therefore afiscal watch or a fiscal emergency pursuant to Sections 3316.01, 3316.02 and 3316.03 of theRevised Code, as set forth in the Act.

Section 3316.03 of the Ohio Revised Code sets forth a series of conditions that constitutegrounds for a fiscal watch. If a fiscal watch is determined to exist, the school district mustprepare and submit to the superintendent of public instruction a financial plan delineating thesteps the board of education will take to eliminate the school district's current operating deficitand avoid future operating deficits. The school district is also provided technical and supportservices by the State Auditor's Office to restore financial stability. If the fiscal watch conditionsare not remedied the school district will remain under fiscal watch or be reclassified to a fiscalemergency.

Section 3316.03 of the Ohio Revised Code also sets forth a series of circumstances thatare defined “fiscal emergency conditions.” If a fiscal emergency condition is determined toexist, the school district is subjected to state oversight through a five-member Financial Planningand Supervision Commission (hereinafter in this section of this Official Statement the“Supervision Commission”). The Auditor of State may be required to assist the SupervisionCommission.

A school district subject to the Act because of the existence of a fiscal emergency mustdevelop and submit a detailed financial plan for the approval or rejection of the SupervisionCommission. Among other matters, the financial plan must show the actions to be taken by sucha school district to eliminate existing fiscal emergency conditions, avoid future fiscal emergency

9

conditions, and to restore such a school district's ability to market long-term debt obligationsunder state law generally applicable to Ohio political subdivisions.

The Supervision Commission must approve the amount and purpose of any issue of debtobligations. The Supervision Commission, among other powers, shall require the school districtto establish monthly levels of expenditures and encumbrances consistent with the financial planand shall monitor such monthly levels and require justification to substantiate any departure froman approved level. The Supervision Commission must disapprove the issuance of debtobligations if the issuance would impede the purposes of the financial plan or be inconsistentwith the financial plan or the Act; debt limits would be exceeded; the ability of overlappingsubdivisions to issue unvoted faith and credit debt obligations would be impaired; and theirissuance would be likely to lead to the reallocation of minimum levies of other politicalsubdivisions. Expenditures may not be made contrary to an approved financial plan.Expenditures may not be made contrary to a proposed financial plan after it is submitted to theSupervision Commission and before it is approved or disapproved; and if it is disapproved, noexpenditures may be made which are inconsistent with the reasons given for disapproval.

The Act provides, among other requirements and provisions, that a school district subjectto such Act must develop an effective financial accounting and reporting system; budgets,appropriations and expenditures are to be consistent with the purposes of the financial plan; sucha school district may include certain covenants in its debt obligations, including a state pledgenot to repeal such Act; and permits the school district to issue current revenue notes andadvanced tax payment notes pursuant to the authorization and subject to the restrictions of suchAct. During any fiscal emergency period that a school district will incur an operating deficit,such school district must work with the county auditor and the tax commissioner (as definedbelow) to estimate the amount and rate of a tax levy that is needed to generate a positive fiscalyear end cash balance by the fifth year of the school district's five-year forecast and recommendto the Supervision Commission whether it supports or opposes proposing the levy of a tax underSections 5705.194 or 5705.21 or Chapter 5748 of the Ohio Revised Code. The SupervisionCommission must then adopt a resolution to either submit a ballot question proposing a tax levyor not to submit such a question.

The Treasurer of the District has reviewed applicable portions of the Act and hasreviewed records pertaining to the District's circumstances with respect to the Act. Based uponthe Treasurer's understanding of the Act, the Treasurer is of the opinion that, with respect to theDistrict, no circumstances or conditions exist that will cause a fiscal caution, watch or emergencycondition to be determined to exist under the Act.

Expedited Local Partnership Program

The Ohio School Facilities Commission (the “Commission”) offers two programs, theExpedited Local Partnership Program (“ELPP”) and the Classroom Facilities AssistanceProgram, to assist Ohio school districts in the financing of construction and renovation of localschool district facilities. In order to qualify for State assistance under the programs, a schooldistrict must meet certain criteria. Annually, the Department of Education calculates theadjusted valuation per pupil of each district and the three-year average adjusted valuation perpupil in the state and ranks the districts in order from lowest to highest. Those percentile

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rankings are forwarded to the Commission and the Commission uses those rankings to determinedistrict eligibility for assistance. While some districts with the highest eligibility rankingsqualify for immediate State assistance, other districts with middle or low eligibility rankingsmust wait for State assistance until the highest ranked school districts' needs are met. Thedistricts which do not qualify for immediate State assistance may enter into the ELPP whilewaiting to qualify for the Classroom Facilities Program.

ELPP is designed to give districts not yet participating in the Classroom FacilitiesAssistance Program the opportunity to move ahead with portions of their project. ELPP allowsschool districts to pass a resolution requesting to enter the program. The Commission thenperforms an assessment of the district's facilities and enters into an agreement with the district ona Facility Master Plan that covers the entire needs of the district. The district then chooses a“distinct portion” of their master Plan to fund through local efforts. When the district's turn laterarises in the Classroom Facilities Assistance Program, the money spent by the district on thedistinct portion is credited against the local share of the entire Master Plan projects.

A school district's portion of the basic project cost shall be the greater of: (a) the requiredpercentage of the basic project costs, determined based on the school district's percentile ranking;or (b) an amount necessary to raise the school district's net bonded indebtedness, as of the fiscalyear the Commission and the school district enter into the Facility Master Plan agreement, towithin five thousand dollars of the required level of indebtedness. A school district may allocateany available school district moneys to pay the distinct portion, including the proceeds of anissuance of bonds if approved by the electors of the school district.

The District participated in ELPP and had substantial portions of its 1998 Bonds and its2005 Bonds (new money portion) included as part of the District’s local share portion (see“BOARD OF EDUCATION DEBT AND OTHER LONG-TERM OBLIGATIONS –Outstanding General Obligation Debt”). The District entered into a Project Agreement with theOhio School Facilities Commission in 2008 to receive the State of Ohio’s share of the classroomfacilities project financing, which state share was used for significant improvements to theDistrict’s high school.

Classroom Facilities Act

The Commission administers a program known generally as the Classroom FacilitiesAssistance Program which provides for essentially non-recourse loans to be made by the State ofOhio, said loan money to be applied directly to the cost of construction or renovation of local schooldistrict facilities. To qualify for State assistance under this program certain criteria must be met.Under the Classroom Facilities Assistance Program, the state pays part of the costs of constructingclassroom facilities for school districts. The program is a graduated cost-sharing program where theState and the school district shares are based on the relative wealth of the district. Under thisprogram, the poorest districts are served first and receive a greater amount of state assistance thanthe wealthier districts will receive.

Once a district qualifies to participate in the Ohio School Facilities Program, theCommission will examine any classroom facilities needs assessment that has been conducted by thedistrict. The Commission will then conduct an on site evaluation to determine the need of

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additional classroom facilities, the number of classroom facilities to be included in a project, theamount the district can supply from funds, and the amount the state will supply from availablefunds. The district and the Commission will work together to create a master plan.

The project cost portion for a district will be the greater of (a) the required percentage or (b)an amount necessary to raise the district's net bonded indebtedness within $5,000 of the requiredlevel of indebtedness, but in no event will the district's share be more than 95%. A district isresponsible for paying its portion of the project usually through the issuance of bonds. In addition, adistrict must levy a 0.5 mill or more property tax for maintenance of the facility constructed, or havein place a continuing levy for on-going permanent improvements, where the proceeds may be usedfor maintenance, to earmark from the proceeds of that on-going levy an amount equivalent of the0.5 mill additional levy. Once the Commission conditionally approves a district's project, electorsmust vote favorably on a bond issue and/or a maintenance tax levy within one year.

At the end of the 23-year period the State will cease to require the District to use the 0.5 millmaintenance levy to pay the cost of the purchase of the school facilities from the State. During thisprocess the school district is not restricted, inhibited, or impaired from incurring additional debt inconventional capital markets for any needed capital improvement projects (subject to its maximumdebt limitations) but does need State consent to issue such debt.

The State of Ohio contracted with the District to provide the above described State-subsidized financing for constructing new school improvements and facilities. A portion of theproceeds of the Prior Bonds was used to finance a portion of the District’s local share. Thebalance of the cost of constructing new school improvements and facilities was provided by theState of Ohio (see “GENERAL INFORMATION CONCERNING THE BOARD OFEDUCATION AND THE DISTRICT – School District Facilities”).

Accrued Interest and Premium

Premium on the Bonds, if any, shall be deposited into the District’s bond retirement fundand/or used to pay the appropriate costs of issuance, while accrued interest, if any, shall bedeposited in the Bond Retirement Fund of the District for the purposes of debt retirement of theBonds.


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SOURCES AND USES OF FUNDS

Refunding Bonds

SourcesPar Amount of Refunding Bonds $7,990,000.00Net Original Issue Premium 1,364,599.55Total Sources $9,354,599.55

UsesCash Contribution to Escrow Account $ 0.67Deposit to Escrow Account (Escrow Obligations) 9,205,709.00Costs of Issuance† 144,519.39Deposit to the District's Bond Retirement Fund 4,370.49Total Uses $9,354,599.55

______†Includes Bond Counsel Fees, Rating Agency Fees, Underwriter’s Discount, Paying Agent andRegistrar Fees and Miscellaneous Costs of Issuance.

Energy Conservation Bonds

SourcesPar Amount of Energy Conservation Bonds $590,000.00Net Original Issue Discount (1,434.55)Total Sources $588,565.45

UsesDeposit to Project Fund $575,000.00Costs of Issuance† 13,415.01Deposit to the District's Bond Retirement Fund 150.44Total Uses $588,565.45

______†Includes Bond Counsel Fees, Rating Agency Fees, Underwriter’s Discount, Paying Agentand Registrar Fees and Miscellaneous Costs of Issuance.

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DESCRIPTION OF THE BONDS

The Bonds are issuable as bonds which pay interest semiannually (the “Current InterestBonds”), and as bonds which do not pay interest currently but accrete in value in lieu thereofuntil their maturity date (the “Capital Appreciation Bonds”). The Bonds will be dated, mature,and bear interest or, in the case of the Capital Appreciation Bonds, accrete in value, all as moreparticularly described herein.

Current Interest Bonds

General. The Current Interest Bonds shall be dated October 24, 2012, shall bearsemiannual interest, payable each June 1 and December 1, commencing December 1, 2012,computed on the basis of a 360-day year consisting of twelve 30-day months, from such date atthe rates set forth on the cover page hereof, and the Current Interest Bonds shall mature onDecember 1, of the years set forth on the cover page hereof. The Current Interest Bonds arebeing issued as fully registered bonds, without coupons, in the principal amounts of $5,000 andany integral multiple thereof. Annual principal, and any premium, on all Current Interest Bondsare payable upon presentation and surrender by the registered owner thereof at the designatedoffice of the Paying Agent and Registrar. Interest on the Current Interest Bonds shall be paid bycheck, draft, or wire sent by the Paying Agent and Registrar to the registered owner as shown inthe registration records maintained by the Paying Agent and Registrar as bond registrar on the15th day preceding such interest payment date.

The Current Interest Bonds are dated their date of delivery if authenticated prior to thefirst interest payment date of the Current Interest Bonds and otherwise will be dated as of theinterest payment date next preceding the date the Current Interest Bonds are authenticated exceptthat if the Current Interest Bonds are authenticated on an interest payment date they will be datedas of such date of authentication; provided that if at the time of authentication, interest thereon isin default, they will be dated as of the date to which interest has been paid. The Current InterestBonds mature as indicated on the cover of this Official Statement.

Mandatory Redemption. The Energy Conservation Bonds maturing on December 1,2026 are subject to mandatory redemption prior to maturity from funds in the District’s bondretirement fund by lot by the Paying Agent without action by the District at par plus accruedinterest to the date of redemption in the following principal amounts and in each of the followingyears:

YearPrincipal Amountto be Redeemed

12/1/2022 $45,00012/1/2023 45,00012/1/2024 45,00012/1/2025 45,00012/1/2026† 45,000

______†Maturity

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Optional Redemption. The Refunding Bonds that are Current Interest Bonds maturingon and after December 1, 2023 are subject to optional redemption, in whole or in part (in theamount of $5,000 or any integral multiple thereof) on any date at the option of the District on orafter December 1, 2022 at a price of par, which is 100% of the face value of such CurrentInterest Bonds.

The Energy Conservation Bonds maturing on and after December 1, 2023 are subject tooptional redemption, in whole or in part (in the amount of $5,000 or any integral multiplethereof) on any date at the option of the District on or after December 1, 2022 at a price of par,which is 100% of the face value of such Energy Conservation Bonds.

Notice of Redemption. If fewer than all of the outstanding Refunding Bonds that areCurrent Interest Bonds, or Energy Conservation Bonds of a single maturity are called forredemption, the selection of the Refunding Bonds that are Current Interest Bonds, or EnergyConservation Bonds to be redeemed, or portions thereof in amounts of $5,000 or any integralmultiple thereof, shall be made by lot by the Paying Agent and Registrar in any manner whichthe Paying Agent and Registrar may determine. In the case of a partial redemption of theRefunding Bonds that are Current Interest Bonds, or Energy Conservation Bonds when suchbonds are of denominations greater than $5,000 are then outstanding, each $5,000 unit of facevalue of principal thereof shall be treated as though it were a separate Refunding Bond or EnergyConservation Bond of the denomination of $5,000. If one or more, but not all, of such $5,000units of face value represented by a Refunding Bond that is a Current Interest Bond, or EnergyConservation Bond are to be called for redemption, then upon notice of redemption of a $5,000unit or units, the registered holder of such bond shall surrender the Refunding Bond that is aCurrent Interest Bond, or Energy Conservation Bond to the Paying Agent and Registrar (a) forpayment of the redemption price for the $5,000 unit or units of face value called for redemption(including without limitation, the interest accrued to the date fixed for redemption and anypremium), and (b) for issuance, without charge to the registered holder thereof, of a newRefunding Bond or an Energy Conservation Bond or bonds of the same series, of any authorizeddenomination or denominations in an aggregate principal amount equal to the unmatured andunredeemed portion of, and bearing interest at the same rate and maturing on the same date as,such bond surrendered.

The notice of the call for redemption of the Refunding Bonds that are Current InterestBonds, or Energy Conservation Bonds shall identify (a) by designation, letters, numbers or otherdistinguishing marks, the bonds or portions thereof to be redeemed, (b) the redemption price tobe paid, (c) the date fixed for redemption, and (d) the place or places where the amounts dueupon redemption are payable. The notice shall be given by the Paying Agent and Registrar bymail, postage prepaid, at least thirty (30) days prior to the date fixed for redemption, to theregistered holder's address shown on the bond registration records on the fifteenth (15th) day ofthe calendar month preceding that mailing. Failure to receive notice by mailing or any defect inthe proceedings regarding any bond, however, shall not affect the validity of the proceedings forthe redemption of any such bond. Notice having been mailed in the manner provided above,Refunding Bonds that are Current Interest Bonds, or Energy Conservation Bonds and the portiontherefor called for redemption shall become due and payable on the redemption date and on suchredemption date, interest on such bonds or portions thereof so called shall cease to accrue; andupon presentation and surrender of such bonds or portions thereof at the place or places specified

15

in that notice, such bonds or portions thereof shall be paid at the redemption price, includinginterest accrued to the redemption date.

Capital Appreciation Bonds

The Capital Appreciation Bonds shall be dated the date of their initial issuance. TheCapital Appreciation Bonds shall not pay current interest, but will accrete in value from theirdate at the Yield to Maturity set forth on the inside cover hereof on the basis of a 360-day year,consisting of twelve 30-day months. The accreted value will compound initially on the dateddate of the Capital Appreciation Bonds, then on December 1, 2012 and semiannually thereafteron each June 1 and December 1 (each a “Compound Date”) and the accreted value so accruedand computed as of any date of determination shall be the “Compound Accreted Amount” and asof the maturity date shall be the “Maturity Amount.”

The Compound Accreted Amount of the Capital Appreciation Bonds as of eachCompound Date is set forth in the following Accretion Tables. The Compound AccretedAmount of the Capital Appreciation Bonds as of any date other than a Compound Date shall bethe amount set forth in the following Accretion Tables with respect to the last precedingCompound Date plus a portion of the difference between such amount and the amount set forthin the Accretion Tables with respect to the next succeeding Compound Date calculated on theassumption that the Compound Accreted Amount increases in equal daily amounts (based on a360-day year consisting of twelve 30-day months) from such preceding Compound Date to thenext succeeding Compound Date.

The following Accretion Table A sets forth Compound Accreted Amounts resulting fromapplying the Yield to Maturity to the Original Principal Amount per $5,000 at maturity. Thefollowing Accretion Table B sets forth Compound Accreted Amounts resulting from applyingthe Initial Offering Yield to the Initial Price to the public per $5,000 at maturity. The AccretionTables are not to be construed as a representation as to the market value of the CapitalAppreciation Bonds at any time in the future.


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Accretion Table A

Compound Accreted Amount Per $5,000 Maturity Amountof Capital Appreciation Bonds

Based on Par AmountDue as Set Forth Below

Date

CapitalAppreciation

Bonds MaturingDecember 1, 20201

CapitalAppreciation


CapitalAppreciation


10/24/2012 $ 960.00 $1,211.18 $1,080.2512/01/2012 980.35 1,230.70 1,097.2006/01/2013 1,085.40 1,330.40 1,183.6512/01/2013 1,201.80 1,438.15 1,276.9006/01/2014 1,330.60 1,554.65 1,377.5012/01/2014 1,473.25 1,680.55 1,486.0006/01/2015 1,631.15 1,816.65 1,603.1012/01/2015 1,806.00 1,963.80 1,729.4006/01/2016 1,999.60 2,122.85 1,865.6512/01/2016 2,213.95 2,294.80 2,012.6006/01/2017 2,451.30 2,480.65 2,171.1512/01/2017 2,714.05 2,681.55 2,342.2006/01/2018 3,005.00 2,898.75 2,526.7512/01/2018 3,327.15 3,133.50 2,725.8006/01/2019 3,683.80 3,387.30 2,940.5512/01/2019 4,078.70 3,661.65 3,172.2006/01/2020 4,515.90 3,958.20 3,422.1512/01/2020 5,000.00 4,278.80 3,691.7506/01/2021 0.00 4,625.35 3,982.6012/01/2021 0.00 5,000.00 4,296.3506/01/2022 0.00 0.00 4,634.8512/01/2022 0.00 0.00 5,000.00


1 Equivalent interest rate: 21.439%2 Equivalent interest rate: 16.198%3 Equivalent interest rate: 15.756%

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Accretion Table B

Compound Accreted Amount Per $5,000 Maturity Amountof Capital Appreciation Bonds

Based on Issue PriceDue as Set Forth Below

Date

CapitalAppreciation


CapitalAppreciation


CapitalAppreciation


10/24/2012 $4,197.75 $4,042.10 $3,890.0512/01/2012 4,207.05 4,051.80 3,900.0006/01/2013 4,252.70 4,099.40 3,948.7512/01/2013 4,298.85 4,147.60 3,998.1506/01/2014 4,345.50 4,196.35 4,048.1012/01/2014 4,392.65 4,245.65 4,098.7006/01/2015 4,440.30 4,295.50 4,149.9512/01/2015 4,488.50 4,346.00 4,201.8006/01/2016 4,537.20 4,397.05 4,254.3512/01/2016 4,586.40 4,448.70 4,307.5006/01/2017 4,636.20 4,501.00 4,361.3512/01/2017 4,686.50 4,553.90 4,415.9006/01/2018 4,737.35 4,607.40 4,471.1012/01/2018 4,788.75 4,661.55 4,526.9506/01/2019 4,840.70 4,716.30 4,583.5512/01/2019 4,893.20 4,771.70 4,640.8506/01/2020 4,946.30 4,827.80 4,698.8512/01/2020 5,000.00 4,884.50 4,757.6006/01/2021 0.00 4,941.90 4,817.0512/01/2021 0.00 5,000.00 4,877.3006/01/2022 0.00 0.00 4,938.2512/01/2022 0.00 0.00 5,000.00

Redemption. The Capital Appreciation Bonds are not subject to redemption prior to theirmaturities.

4 Yield: 2.170%5 Yield: 2.350%6 Yield: 2.500%

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Debt Service Schedules

The following table lists the debt service for the Refunding Bonds:

PeriodEnding Principal Interest

CompoundedInterest

PeriodDebt Service

AnnualDebt Service

12/01/2012 $195,000.00 $15,613.75 $210,613.75 $210,613.75

06/01/2013 74,983.76 74,983.76

12/01/2013 195,000.00 74,983.76 269,983.76 344,967.52

06/01/2014 74,008.76 74,008.76

12/01/2014 85,000.00 74,008.76 159,008.76 233,017.52

06/01/2015 73,583.76 73,583.76

12/01/2015 65,000.00 73,583.76 138,583.76 212,167.52

06/01/2016 73,258.76 73,258.76

12/01/2016 395,000.00 73,258.76 468,258.76 541,517.52

06/01/2017 70,296.26 70,296.26

12/01/2017 430,000.00 70,296.26 500,296.26 570,592.52

06/01/2018 65,996.26 65,996.26

12/01/2018 460,000.00 65,996.26 525,996.26 591,992.52

06/01/2019 62,546.26 62,546.26

12/01/2019 545,000.00 62,546.26 607,546.26 670,092.52

06/01/2020 57,096.26 57,096.26

12/01/2020 120,000.00 57,096.26 $505,000.00 682,096.26 739,192.52

06/01/2021 57,096.26 57,096.26

12/01/2021 195,000.00 57,096.26 610,000.00 862,096.26 919,192.52

06/01/2022 57,096.26 57,096.26

12/01/2022 175,000.00 57,096.26 635,000.00 867,096.26 924,192.52

06/01/2023 57,096.26 57,096.26

12/01/2023 805,000.00 57,096.26 862,096.26 919,192.52

06/01/2024 48,040.01 48,040.01

12/01/2024 825,000.00 48,040.01 873,040.01 921,080.02

06/01/2025 38,758.76 38,758.76

12/01/2025 845,000.00 38,758.76 883,758.76 922,517.52

06/01/2026 29,780.63 29,780.63

12/01/2026 865,000.00 29,780.63 894,780.63 924,561.26

06/01/2027 20,590.00 20,590.00

12/01/2027 885,000.00 20,590.00 905,590.00 926,180.00

06/01/2028 10,633.75 10,633.75

12/01/2028 905,000.00 10,633.75 915,633.75 926,267.50

TOTALS $7,990,000.00 $1,757,337.77 $1,750,000.00 $11,497,337.77 $11,497,337.77

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The following table lists the debt service for the Energy Conservation Bonds:

PeriodEnding Principal Interest

Period DebtService

Annual DebtService

12/01/2012 $1,029.05 $1,029.05 $1,029.05

06/01/2013 5,006.25 5,006.25

12/01/2013 $40,000 5,006.25 45,006.25 50,012.50

06/01/2014 4,806.25 4,806.25

12/01/2014 40,000 4,806.25 44,806.25 49,612.50

06/01/2015 4,606.25 4,606.25

12/01/2015 40,000 4,606.25 44,606.25 49,212.50

06/01/2016 4,406.25 4,406.25

12/01/2016 40,000 4,406.25 44,406.25 48,812.50

06/01/2017 4,206.25 4,206.25

12/01/2017 40,000 4,206.25 44,206.25 48,412.50

06/01/2018 3,956.25 3,956.25

12/01/2018 40,000 3,956.25 43,956.25 47,912.50

06/01/2019 3,656.25 3,656.25

12/01/2019 40,000 3,656.25 43,656.25 47,312.50

06/01/2020 3,381.25 3,381.25

12/01/2020 40,000 3,381.25 43,381.25 46,762.50

06/01/2021 2,981.25 2,981.25

12/01/2021 45,000 2,981.25 47,981.25 50,962.50

06/01/2022 2,531.25 2,531.25

12/01/2022 45,000 2,531.25 47,531.25 50,062.50

06/01/2023 2,025.00 2,025.00

12/01/2023 45,000 2,025.00 47,025.00 49,050.00

06/01/2024 1,518.75 1,518.75

12/01/2024 45,000 1,518.75 46,518.75 48,037.50

06/01/2025 1,012.50 1,012.50

12/01/2025 45,000 1,012.50 46,012.50 47,025.00

06/01/2026 506.25 506.25

12/01/2026 45,000 506.25 45,506.25 46,012.50

TOTALS $590,000 $90,229.05 $680,229.05 $680,229.05

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PURPOSE OF THE BONDS AND PLAN OF REFUNDING

Refunding Bonds

The Refunding Bonds are being issued for the purpose of refunding a portion of the newmoney component of the Prior Bonds. The proceeds of the new money portion of the PriorBonds were used to acquire and construct a new elementary school and to provide equipment,furnishings and site improvements therefor. For a description of the Prior Bonds, see“INTRODUCTION – PURPOSE OF THE BONDS.”

The District has determined that it is in its best interest to provide moneys to advancerefund a portion of the new money portion of the Prior Bonds in order to achieve lower debtservice and to lower the effective interest costs of the amounts financed.

The moneys required to refund a portion of the new money component of the Prior Bondswill be obtained from the proceeds of the sale of the Refunding Bonds. Moneys necessary torefund all or a portion of the new money portion of the Prior Bonds will be paid over andsimultaneously therewith irrevocably deposited with The Bank of New York Mellon TrustCompany, N.A., as escrow trustee (the “Escrow Trustee”) into an escrow account pursuant to theprovisions of an Escrow Deposit Agreement entered into by and between the District and theEscrow Trustee. Such moneys will be applied by the Escrow Trustee for the redemption of thenew money portion of the Prior Bonds maturing on or after December 1, 2016, which maturitiesof the Prior Bonds will be subject to optional redemption on December 1, 2015 at a redemptionprice of 100% of the principal amount thereof.

Upon the establishment and funding of the irrevocable Escrow Deposit Agreement, theportion of the new money portion of the Prior Bonds that are refunded will no longer be deemedto be outstanding and payments by the District of the principal of and the interest on the refundedportion of the Prior Bonds will cease. In the Escrow Deposit Agreement, the Escrow Trusteewill acknowledge that the District has deposited with it funds which are sufficient, together withinterest and earnings thereon, to: (a) pay all principal and interest requirements when due on theportion of the new money portion of the Prior Bonds being refunded, through their respectiveredemption dates, (b) pay the redemption prices of new money portion of the Prior Bonds beingrefunded, upon redemption; and (c) pay, when required, costs and expenses related to theforegoing, including certain fees and expenses of the Escrow Trustee.


The Energy Conservation Bonds are being issued for the purpose of acquiring,constructing and installing energy conservation measures at: (a) Graham Elementary School,located at 9464 W. US Hwy 36, Saint Paris, Ohio 43072, (b) Graham Middle School, located at9644 W. US Hwy 36, Saint Paris, Ohio 43072, and (c) Graham High School, located at 7800 W.US Hwy 36, Saint Paris, Ohio 43072.

General

The Bonds are also being issued for the purpose of paying certain costs under Chapter133 of the Ohio Revised Code including, without limitation, the cost of printing the bonds,

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expense in delivery of the bonds, service charges of the paying agent and registrar, legal services,costs associated with the verification agent, and obtaining an approving legal opinion and allnecessary costs in connection therewith.

VERIFICATION AGENT

Upon delivery of the Refunding Bonds, Grant Thornton LLP (the “Verification Agent”)will deliver its verification report indicating that it has verified, in accordance with attestationstandards established by the American Institute of Certified Public Accountants, themathematical accuracy of (a) the mathematical computations of the adequacy of the cash and thematuring principal of and interest on state and local government obligations (and/or open marketsecurities) held in escrow for the portion of the Prior Bonds being refunded to pay, when due, thematuring principal of, interest on and related call premium requirements of the portion of thePrior Bonds being refunded, and (b) the mathematical computations of yield used by BondCounsel to support its opinion that interest on the Refunding Bonds will be excluded from grossincome for federal income tax purposes.

The examination performed by the Verification Agent will be solely based upon data,information and documents provided to the Verification Agent by the District. The VerificationAgent has restricted its procedures to recalculating the computations provided by the District andhas not evaluated or examined the assumptions or information used in the computations.

OHIO SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM

Certain school districts, including the District, that meet State-established criteria mayparticipate in the Ohio School District Credit Enhancement Program established under Section3317.18 of the Ohio Revised Code (the “Credit Enhancement Program”). District obligations areeligible for the Credit Enhancement Program only if (a) the projected amount to be distributed tothe District from state education aid for the current fiscal year exceeds the maximum annual debtcharges due in the current or any future fiscal year by a ratio of 2.5 to one; and (b) at any timeduring the current or any fiscal year, the projected amount of state education aid remaining to bedistributed in the fiscal year exceed the debt charges remaining to be paid in that fiscal year by aratio of 1.25 to one. Under the Credit Enhancement Program, and to provide further security forthe Refunding Bonds, the Board of Education, the State Department of Education, (the“Department”) and the Paying Agent and Registrar will enter into an agreement (the“Agreement”) concurrently with the issuance of the Refunding Bonds establishing a mechanismby which certain state education aid payments to the Board of Education can be transferreddirectly to the Paying Agent and Registrar for the payment of debt service on the RefundingBonds if a shortfall occurs in the Board of Education's funding of debt service.

Under the Agreement, the Paying Agent and Registrar and the Board of Education are toimmediately notify the Department if, on the fifteenth business day prior to a debt servicepayment date, the amount on deposit with the Paying Agent and Registrar for the payment ofdebt service on the Refunding Bonds is less than the amount of the debt service due on thatpayment date. In this event, the Department must pay to the Paying Agent and Registrar certainstate education aid payments otherwise payable to the Board of Education. Those payments areto be made no later than one day prior to a debt service payment date and are to be in an amount

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equal to the lesser of (a) the amount by which funds on deposit with the Paying Agent andRegistrar on that date are less than the required debt service payment on the immediatelysucceeding debt service payment date, or (b) the state education aid amount due the Board ofEducation for the remainder of the then current fiscal year. The Agreement is irrevocable aslong as any of the enhanced Refunding Bonds are outstanding. If state education aid paymentsare paid to the Paying Agent and Registrar pursuant to the Agreement, the Department isrequired to evaluate the Board of Education's inability to meet the debt service payments and torecommend corrective actions to be implemented by the Board of Education.

In accordance with the Credit Enhancement Program, the Board of Education hascovenanted that it will not pledge state education aid payments (“Foundation ProgramPayments”) as primary security for any debt having a claim on the state education aid paymentsunless the projected state education aid to be distributed to the District in the current fiscal yearexceeds the maximum annual debt charges due in the current or any future year on alloutstanding or proposed obligations to which state aid is pledged as the primary security by aratio of 2.5 to one. The aforesaid maximum annual debt charges due shall be referred to as“Credit Enhanced Maximum Annual Debt Service” or “CEMADS.”

The following table presents the amount of state education aid payments distributed tothe Board of Education during the fiscal years indicated and the ratio of that amount to the Boardof Education's Credit Enhanced Maximum Annual Debt Service (“CEMADS”).

Fiscal YearEnding June 30

FoundationProgramPayments CEMADS

Ratio ofFoundation

Program Paymentsto CEMADS

2008 $9,076,687 $1,221,778 7.432009 8,580,759 1,221,778 7.022010 8,678,481 1,221,778 7.102011 8,289,808 1,221,778 6.792012 8,094,567 1,221,778 6.63

There can be no assurance as to the future levels of State funding of the FoundationProgram.

The Department's responsibilities under the Agreement are a mechanism for deliveringmoney to the Paying Agent and Registrar which would otherwise go to the Board of Education,and are an obligation of the Department only to the extent that money is appropriated by theGeneral Assembly of the State for Chapter 3317 of the Revised Code or for the purposes of theCredit Enhancement Program. They do not constitute obligations or debts or pledges of thefaith, credit or taxing power of the State of Ohio, and the holders or owners of the enhancedRefunding Bonds have no right to have taxes levied or appropriations made by the GeneralAssembly for the payment of debt service on such Refunding Bonds. A statement to that effectwill be contained in the enhanced Refunding Bonds. The Agreement and any payments by theState thereunder do not constitute the assumption by the State of any debt of the Board ofEducation.

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The Department's participation in the Credit Enhancement Program is solely for thepurpose of enhancing the rating on and marketability of the Refunding Bonds, and should notindicate any projected possibility of the Credit Enhancement Program being called upon toperform. As described above, the Refunding Bonds are payable from unlimited property taxes inthe amount necessary to pay annual debt service.

BOOK-ENTRY SYSTEM

The following information on the Book Entry System applicable to all Bonds has beensupplied by DTC and neither the District, the Underwriter nor Bond Counsel (each as defined)make any representation, warranties or guarantees with respect to its accuracy or completeness.

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

DTC, the world's largest securities depository, is a limited-purpose trust companyorganized under the New York Banking Law, a “banking organization” within the meaning ofthe 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. equityissues, corporate and municipal debt issues, and money market instruments (from over 100countries) that DTC's participants (“Direct Participants”) deposit with DTC. DTC also facilitatesthe post-trade settlement among Direct Participants of sales and other securities transactions indeposited securities, through electronic computerized book-entry transfers and pledges betweenDirect Participants' accounts. This eliminates the need for physical movement of securitiescertificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers,banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is theholding company for DTC, National Securities Clearing Corporation and Fixed Income ClearingCorporation, all of which are registered clearing agencies. DTCC is owned by the users of itsregulated 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 corporationsthat clear through or maintain a custodial relationship with a Direct Participant, either directly orindirectly (“Indirect Participants”). DTC has a Standard & Poor's rating of AA+. The DTCRules applicable to its Participants are on file with the Securities and Exchange Commission.More information about DTC can be found at www.dtcc.com.

Purchases of Securities under the DTC system must be made by or through DirectParticipants, which will receive a credit for the Securities on DTC's records. The ownershipinterest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recordedon the Direct and Indirect Participants' records. Beneficial Owners will not receive writtenconfirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive

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written confirmations providing details of the transaction, as well as periodic statements of theirholdings, from the Direct or Indirect Participant through which the Beneficial Owner entered intothe transaction. Transfers of ownership interests in the Securities are to be accomplished byentries made on the books of Direct and Indirect Participants acting on behalf of BeneficialOwners. Beneficial Owners will not receive certificates representing their ownership interests inSecurities, except in the event that use of the book-entry system for the Securities isdiscontinued.

To facilitate subsequent transfers, all Securities deposited by Direct Participants withDTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other nameas may be requested by an authorized representative of DTC. The deposit of Securities with DTCand their registration in the name of Cede & Co. or such other DTC nominee do not effect anychange in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of theSecurities; DTC's records reflect only the identity of the Direct Participants to whose accountssuch Securities are credited, which may or may not be the Beneficial Owners. The Direct andIndirect Participants will remain responsible for keeping account of their holdings on behalf oftheir customers.

Conveyance of notices and other communications by DTC to Direct Participants, byDirect Participants to Indirect Participants, and by Direct Participants and Indirect Participants toBeneficial Owners will be governed by arrangements among them, subject to any statutory orregulatory requirements as may be in effect from time to time. Beneficial Owners of Securitiesmay wish to take certain steps to augment the transmission to them of notices of significantevents with respect to the Securities, such as redemptions, tenders, defaults, and proposedamendments to the Security documents. For example, Beneficial Owners of Securities may wishto ascertain that the nominee holding the Securities for their benefit has agreed to obtain andtransmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to providetheir names and addresses to the registrar and request that copies of notices be provided directlyto them.

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

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

Redemption proceeds, distributions, and dividend payments on the Securities will bemade to Cede &. Co., or such other nominee as may be requested by an authorized representativeof DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of fundsand corresponding detail information from District or Agent, on payable date in accordance withtheir respective holdings shown on DTC's records. Payments by Participants to BeneficialOwners will be governed by standing instructions and customary practices, as is the case with

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securities held for the accounts of customers in bearer form or registered in “street name,” andwill be the responsibility of such Participant and not of DTC, Agent, or District, subject to anystatutory or regulatory requirements as may be in effect from time to time. Payment ofredemption proceeds, distributions, and dividend payments to Cede & Co. (or such othernominee as may be requested by an authorized representative of DTC) is the responsibility ofDistrict or Agent, disbursement of such payments to Direct Participants will be the responsibilityof DTC, and disbursement of such payments to the Beneficial Owners will be the responsibilityof Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Securities atany time by giving reasonable notice to District or Agent. Under such circumstances, in the eventthat a successor depository is not obtained, Security certificates are required to be printed anddelivered.

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

The information in this section concerning DTC and DTC's book-entry system has beenobtained from sources that District believes to be reliable, but District takes no responsibility forthe accuracy thereof.

GENERAL INFORMATION CONCERNINGTHE BOARD OF EDUCATION AND THE DISTRICT

Introduction

About the Community. Graham Local School District (the “District”) is situated in SaintParis, Ohio, approximately a one-hour drive from both downtown Columbus, Ohio, and Dayton,Ohio. U.S. Highway 36 connects the District to Interstate 75. The Graham Local School Districtcommunity includes ten distinct political subdivisions. There is a strong sense of pride and atradition of commitment that have provided very stable, well-run schools and communities. Themanagerial expertise of so many residents contributes to high expectations and recognition thatresources must be committed to meet those expectations. The residents of the District areinformed of the events of the District through the District’s website.

About the District. The District was created in 1955 by combining six smaller schooldistricts. The District's approximately 189 square mile area is primarily located in the westernportion of Champaign County, Ohio, with a small portion of the District located in the south-eastern portion of Shelby County, Ohio.

The District offers comprehensive academic curriculum through the following programs:college preparatory classes, advanced placement courses, gifted education, vocational programsand a full range of services in special education. The District provides tutorial help, resourcerooms, speech/language therapy, psychological services and counseling. The District offers aninnovative digital academy for students who are interested.

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The District consists of one elementary school (grades Pre-K-5), one middle school(grades 6-8) and one high school (grades 9-12).

In addition to academic and related services, students have the opportunity to participatein a wide range of extracurricular activities to extend their learning and increase enjoyment ofschool. Students may choose from baseball, basketball, bowling, cheerleading, cross-country,football, golf, soccer, softball, tennis, track, volleyball and wrestling for extracurricular activities.The wrestling team won state championships in 2000-2001, 2001-2002, 2002-2003, 2004-2005,2005-2006, 2007-2008, 2008-2009, 2009-2010, 2010-2011 and 2011-2012.

Students may also participate in activities such as band, chorus, district musical, drama,yearbook, newspaper, foreign language clubs, school-sponsored service organizations, studentgovernment, and academic honor societies and competitive academic teams.

Organization of the District

Effective with the 2012-13 school year the District organization is as follows:

Grades Enrollment Capacity

1 Elementary SchoolGraham Elementary School Pre-K-5 1,043 1,039

1 Middle SchoolGraham Middle School 6-8 476 735

1 High SchoolGraham High School 9-12 616 1,331

1 Virtual SchoolGraham Digital Academy K-12 35 50

1 “Brick & Mortar”Community SchoolA.B. Graham Academy K-12 110 200

TOTAL 2,280 3,355_______Source: Records of the Treasurer of the District

The District's administrative staff consists of the following: Superintendent (1), Principals(3), Assistant Principals (2), Treasurer (1), Administrative Assistant (3), Payroll Administrator(1) Director of Special Education (1), District Operator and Services Supervisor (1),Transportation Secretary (1) and Director of Curriculum (1).

The District currently employs 124 certificated personnel and 98 classified support staffincluding food service, secretarial, transportation, custodial, maintenance and educational aides.

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The District is providing transportation for more than 1,521 public school students andprivate school students.

Information Regarding the Counties

With respect to the total assessed valuation of the District for 2011-2012, the percentagesattributable to each County were as follows: Champaign County – 99.94% and Shelby County –0.06%. Since over 99% of the total assessed valuation of the District is attributable toChampaign County, such County serves as the primary point of reference for County-related datain this Offering Circular, except as otherwise provided.

Overlapping Governmental Entities

The major political subdivisions overlapping all or a portion of the territory of theDistrict, the approximate percentages of the assessed valuation of such subdivisions locatedwithin the District and the net overlapping debt (excluding special assessment and self-supporting debt) attributable to the District from such subdivisions are as follows:

Subdivision

% of AssessedValuation

Within School District Net DebtGraham Local School District 100.00% $16,889,188Champaign County 32.34 535,227Shelby County 0.01 0Christiansburg Village 100.00 0St. Paris Village 100.00 126,295Adams Township 100.00 0Concord Township 98.71 0Green Township 0.64 0Harrison Township 57.99 0Jackson Township 99.18 0Johnson Township 100.00 0Mad River Township 98.55 0Salem Township 0.13 0Ohio Hi-Point Career Center Jt. Voc. School District 8.12 0Champaign Library District 23.05 0JSP Fire District 100.00 0Logan-Champaign Mental Health District 13.06 0St. Paris Library 100.00 0Tri County Mental Health District 0.00 0

_______Source: Ohio Municipal Advisory Council, as of August 24, 2012

OMAC dates are approximately three weeks ahead of actual date

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NET DEBT

Total Per Capita % of A/V

$16,889,188 $1,412 7.15%

NET OVERALL DEBT

Total Per Capita % of A/V$17,550,710 $1,467 7.43%

_______Source: Ohio Municipal Advisory Council, as of August 24, 2012

OMAC dates are approximately three weeks ahead of actual date

Each of these entities operates independently under and is governed by Ohio law with itsown budget, tax rate and sources of revenue. All such entities may levy unvoted ad valoremproperty taxes within the “ten-mill limitation” discussed herein at “BOARD OF EDUCATIONDEBT AND OTHER LONG-TERM OBLIGATIONS - Indirect Debt Limitation.”

Population

Population statistics for the District, the Village of St. Paris and Champaign County areas follows:

SCHOOL DISTRICT VILLAGE OF ST. PARIS COUNTYYear Population % Change Population % Change Population % Change

1970 8,380 -- 1,646 -- 30,491 --1980 9,790 16.83% 1,742 5.83% 33,649 10.36%1990 9,160 (6.44) 1,842 5.74 36,019 7.042000 11,473 25.25 1,998 8.47 38,890 7.972010 11,965 4.29 2,089 4.55 40,097 3.10

_______________Source: U. S. Department of Commerce, Bureau of Census

Ohio Municipal Advisory Council


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Employment

Unemployment Statistics. The following table lists the average annual unemploymentrates for the United States, the State of Ohio and Champaign County for the five most recentyears and the unemployment rates for the most recent month for which such data is available.The figures are expressed in percentages and represent the ratio of the total unemployed to thetotal labor force. The monthly data is not seasonally adjusted.

Year United States State of Ohio Champaign Co.2007 4.6% 5.6% 5.9%2008 5.8 6.6 6.92009 9.3 10.2 11.62010 9.6 10.1 11.22011 8.9 8.6 9.2

June, 2012 8.4 7.4 7.5_____Source: Ohio Bureau of Employment Services

Labor Force Statistics - Champaign County

YearTotal Labor

Force Employment UnemploymentPercent

Unemployed2007 20,800 19,600 1,200 5.92008 20,300 18,900 1,400 6.92009 20,300 17,900 2,400 11.62010 19,900 17,700 2,200 11.22011 19,400 17,700 1,800 9.2

June, 2012 19,400 17,900 1,400 7.5_______*Not seasonally adjustedSource: Ohio Bureau of Employment Services, Ohio Labor Market Information: Labor Force Estimates.


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Champaign CountyEstablishments, Employment And Wages By Sector: 2010

Industrial SectorAverage

Employment Total Wages

AverageWeeklyWage

Private Sector* 7,288 $247,409,855 $653Goods-Producing 2,717 131,208,613 929

Natural Resources and Mining 135 4,604,106 654Construction 209 7,156,396 658Manufacturing 2,373 119,448,111 968

Service-Providing 4,571 116,201,242 489Trade, Transportation and Utilities 1,538 39,229,522 490

Information 101 3,778,215 721Financial Services 300 9,233,627 593Professional and Business Services 345 15,732,043 878Education and Health Services 1,141 32,874,635 554Leisure and Hospitality 834 11,261,286 260Other Services 307 4,024,964 252

Federal Government 87 3,443,663 766State Government 58 2,753,921 920Local Government 1,861 67,150,546 694

______*Private Sector includes Unclassified establishments not shownSource: Office of Policy, Research and Strategic Planning

Champaign County Largest Employers

Name of EmployerNature of Activity

or Business

Approx.Number

of Employees1. Honeywell Inc. Manufacturing 8002. KTH Parts Industries, Inc. Manufacturing 7703. Rittal Corporation Manufacturing 6354. Mercy Memorial Hospital Healthcare 5405. Wal-Mart Stores, Inc. Retail 3726. Orbis Corporation Manufacturing 2807. Johnson Welded Products, Inc. Manufacturing 2108. Lawnview Industries, Inc. Manufacturing 1759. Grimes Aerospace Company Manufacturing 15010. Mercy McAuley Center Healthcare 125

__________________Source: Hoover’s Inc.

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Income and Housing Data

The following shows the Median Household, Per Capita Income, Median Home Value ofOwner-Occupied Housing Units and Median Family Income for 2010 for the District and theVillage of St. Paris in comparison to Champaign County, the State of Ohio and the United States:

Village ofSt. Paris

ChampaignCounty State of Ohio

UnitedStates

Median Household Income $42,165 $49,246 $47,358 $51,914Per Capita Income 18,229 23,438 25,113 27,334Median Value of Owner Occupied Units 91,900 124,900 136,400 188,400Median Family Income 53,700 58,433 59,680 62,982

_______Source: U.S. Census Bureau, 2010 American Community Survey 5-year estimate

Building Permits

The chart below indicates the number of permits and the estimated value of the projectsconstructed pursuant to such permits for the County.

Year Number Estimated Value2007 366 $22,153,3092008 343 19,659,9152009 288 27,203,3292010 421 15,519,2002011 387 12,220,547

______Source: County of Champaign

Organization and Officials of the Board of Education

The Board of Education is a body politic and corporate and, as such, can be sued and cansue, can enter into contracts and can be contracted with, can acquire, hold, possess and dispose ofreal and personal property, and take and hold in trust for the use and benefit of the District, anygrant or devise of land, and any donation or bequest of money or other personal property.

The Board of Education is comprised of five members who are elected for overlappingfour-year terms. The Board of Education is charged with the duties and responsibilities ofmanaging the affairs of the District pursuant to the laws governing public education in Ohio.The Board of Education directly employs the Superintendent and Treasurer. The Board ofEducation serves as the legislative body of the District.

The Treasurer is appointed by the Board of Education for a term not longer than fiveyears and serves as the fiscal officer of the Board Education and, with the president of the Boardof Education, executes all conveyances made by the Board.

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The Superintendent is appointed by the Board of Education for a term not longer thanfive years and is the executive officer of the Board of Education. The Superintendent isresponsible for administering Board of Education-adopted policies, is expected to provideleadership in all phases of policy formulation and is the chief advisor to the Board of Educationon all aspects of the educational program and total operation of the schools governed by theBoard of Education.

The Board of Education employs all certificated and classified employees only upon therecommendation of the Superintendent.

The current members of the Board of Education, and the Superintendent and Treasurer ofthe District are as follows:

Board of Education

Name Term ExpiresYears asMember Occupation

Duane Miller, President 12/2015 5 Local BusinessmanAlan Mitchell, Vice President 12/2015 5 RetiredBrett Evilsizor 12/2013 13 EMS/FirefighterMichelle Whitley Turner 12/2013 7 University ProfessorPat Wagner 12/2015 13 Retired

Superintendent. The Superintendent is the chief executive officer of the District,responsible directly to the Board of Education for all educational and support operations. Mr.Norm Glismann has been superintendent of the District since 2009. He previously served assuperintendent of the Yellow Springs Exempted Village School District. He received hisBachelor’s Degree from the University of Nebraska in 1976 and his Master’s Degree from theUniversity of Nebraska in 1981.

Treasurer. The Treasurer is the chief financial officer of the District, responsible directlyto the Board of Education for maintaining all financial records, issuing all payments, maintainingcustody of all District funds and assets and investing idle funds as specified by Ohio Law. Mr.Robert Hoover is the treasurer and business manager for the District. He has served in thatcapacity since 1998. Mr. Hoover received his Bachelor’s Degree from Miami University. From1995–1998, Mr. Hoover was the Superintendent for Northwestern Local Schools. Before that hewas an assistant superintendent of Business Operations for Urbana City Schools. He has alsobeen a teacher, assistant principal, supervisor and a principal.


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Enrollment

Enrollment in the District for the school years 2006-2007 through 2011-2012 is shown inthe table below:

School Year K-5 6-8 9-12Community

Schools Total Enrollment

2006-2007 941 578 681 88 2,2882007-2008 966 521 669 105 2,2612008-2009 1,005 497 699 126 2,3272009-2010 982 497 711 154 2,3442010-2011 961 495 681 139 2,2762011-2012 951 486 631 144 2,212

_______Source: Data for 2006-2007 through 2011-2012 from the Ohio Department of Education, based on a headcount ofstudents in attendance during the first full week of classes in October or another full week of school (pursuant to awaiver).

Certain additional statistical information concerning enrollment in the District follows:

Per PupilExpenditure

Per PupilAssessed

Valuation K-12

Fiscal YearK-12

EnrollmentDistrictAverage

StateAverage

DistrictAverage

StateAverage

Pupil/TeacherRatio

2006-2007 2,295 $7,185 $9,623 $ 94,761 $138,391 20.88

2007-2008 2,265 7,448 9,991 93,457 143,429 19.41

2008-2009 2,307 8,672 10,254 103,720 143,543 N/A

2009-2010 2,314 8,297 10,565 99,485 144,109 N/A

2010-2011 2,256 7,947 10,697 98,333 139,375 N/A

_________Note: The K-12 Enrollment figures in this table are based on average daily membership (as defined by the Ohio Department ofEducation) and do not exactly match the figures provided by the District, listed above, which are based on a headcount (asdescribed above). The methodologies differ due to adjustments for funding purposes per funding regulations.Source: Ohio Department of Education


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School District Facilities

The District operates three school buildings: one elementary school, one middle schooland one high school. Through the use of a five-year building grounds and maintenance plan, allfacilities are kept in the best operating and physical condition possible. The District has beensensitive to an energy conservation program. The facilities of the District are described asfollows:

BuildingGradesHoused

Date ofOriginal

ConstructionDates of

Improvement Description of ImprovementGraham Elementary School Pre-K-5 2005 N/A NewGraham Middle School 6-8 2000 N/A NewGraham High School 9-12 1956 1962, 2000,

2009Classroom additions,

gymnasium, expanded cafeteriaand parking, air conditioning

Employees

The Board of Education currently employs 222 employees (including non-teachingpersonnel). In fiscal year 2010-2011, the Board of Education paid $9,562,250 in salaries andwages to these employees (including substitutes and supplementals) and $3,649,308 for fringebenefits which include state employer retirement contributions, school employer retirementcontributions, workers' compensation insurance coverage, unemployment compensation,severance payments and board insurance premiums. Of the Board of Education's currentemployees, 140 are certified by the Ohio Department of Education serving as classroomteachers, paraprofessional aides, education specialists and administrators. The starting salary fora teacher with a bachelor's degree for the period beginning August 1, 2011 was $32,079. Themaximum teacher salary in 2011 for a Master's Degree, plus 15 hours, was $68,650 with 30+years’ experience.

The Board of Education's certificated teachers and educational specialists are representedby the Graham Education Association (“GEA”), a labor organization affiliated with OEA/NEA.The present contract between the Board of Education and the GEA is July 1, 2010 to June 30,2013.

The Board of Education’s non-certificated employees are represented by the OhioAssociation of Public School Employees (“OAPSE”), a labor organization. The present contractbetween the Board of Education and OAPSE is from July 1, 2010 to June 30, 2013.

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State Performance Standards

The Ohio Department of Education released preliminary data on September 26, 2012,subject to revision, for the 2011-2012 School Year Report Cards for Ohio schools7. TheDepartment has stated that additional data for the 2011-2012 School Year Report Cards for Ohioschools will be released pending the progress of an investigation by State Auditor David Yostinto alleged irregularities in the reporting of student attendance by certain districts throughout theState.

The District received an “Effective” rating on its 2010-2011 School Year Report Card(2010-2011 Fiscal Year) from the Ohio Department of Education. This rating reflects the factthat the District met 23 of the 26 standards, had a Performance Index Score of 98.1 out of 120,had an Adequate Yearly Progress indicator of Not Met and had a Value-Added Measureindicator of Met. For a more complete breakdown of the District's rating, both present andhistorical, please refer to the website of the Ohio Department of Education(www.ode.state.oh.us).8

The four measures summarized below are the basis for assigning the above-mentionedState designations.

1. Number of State Indicators Met: Two of the 26 State Indicators identifyminimum graduation and attendance rates. The remaining 24 State Indicators are basedon achievement tests and identify a minimum percentage of students that should be at orabove the proficient level on third-, fourth-, fifth-, sixth-, seventh- and eighth-grade testsand the Ohio Graduation Test. The following table shows the District's performanceindicators. Any results at and above the State standard are shown in bold.


7The preliminary data for the 2011-2012 School Year Report Card may be accessed at:http://education.ohio.gov/GD/Templates/Pages/ODE/ODEDetail.aspx?page=3&TopicRelationID=1&ContentID=131230.8 This discussion of state performance standards is provided for the convenience of the reader and only summarizesthe process by which the Department reaches its designation for school districts. For more information about stateperformance standards, including more detail about the District's performance, please see the Department's websiterelating to state and local report care reporting at:http://www.ode.state.oh.us/GD/Templates/Pages/ODE/ODEDetail.aspx?page=279

http://www.ode.state.oh.us/

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2010-2011 State Performance IndicatorsGraham Local School District

Performance IndicatorStateStd.

StateAvg.

SchoolDistrict Performance Indicator

StateStd.

StateAvg.

SchoolDistrict

3rd Grade Achievement 8th Grade Achievement1. Reading 75% 79.9% 80.1% 12. Reading 75% 85.1% 91.4%2. Mathematics 75 82.0 88.3 13. Mathematics 75 74.3 82.1

14. Science 75 67.4 75.94th Grade Achievement

3. Reading 75% 83.8% 82.5%4. Mathematics 75 78.1 75.3 Ohio Graduation Test (10th Grade)

15. Reading 75% 87.2% 91.6%16. Mathematics 75 82.6 91.0

5th Grade Achievement 17. Writing 75 89.5 91.05. Reading 75% 74.1% 72.8% 18. Science 75 74.7 82.66. Mathematics 75 66.1 66.9 19. Social Studies 75 80.1 84.87. Science 75 71.1 74.0

Ohio Graduation Test (11th Grade)+

20. Reading 85% 92.4% 95.7%6th Grade Achievement 21. Mathematics 85 89.1 91.3

8. Reading 75% 85.6% 87.0% 22. Writing 85 93.4 95.79. Mathematics 75 77.5 83.6 23. Science 85 84.2 90.2

24. Social Studies 85 88.0 91.37th Grade Achievement

10. Reading 75% 77.3% 78.4% 25. Student Attendance Rate (all grades) 93% 94.5% 95.3%11. Mathematics 75 74.8 80.7

26. Graduation Rate++ 90% 84.3% 96.7%

______+Cumulative Results for students who took the test as 10th or 11th graders.++2009-2010 Graduation Rate


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2. Performance Index (“PI”): This measure records the achievement of everytested student, not just those who score proficient or higher. School districts earn pointsbased on how well each student does on all tested subjects in grades 3-8 and the 10thGrade Ohio Graduation Test. Each achievement test has five performance levels:advanced, accelerated, proficient, basic, and limited. The school district's PI is aweighted score from 0 to 120 based on the number of students falling into eachperformance level. Students who are not tested earn zero points.

3. Adequate Yearly Progress (“AYP”): AYP is a federally required measure.Every school and district must meet AYP goals that are set for Reading and MathematicsProficiency and Participation, Attendance Rate and Graduation Rate. The Reading andMathematics goals are applied to 10 student groups: All Students, EconomicallyDisadvantaged Students, Asian/Pacific Islander Students, Black, non-Hispanic Students,American Indian/Alaska Native Students, Hispanic Students, Multi-Racial Students,White, non-Hispanic Students, Students with Disabilities (IEP) and Students withLimited English Proficiency (LEP). The Attendance Rate and Graduation Rate goals areapplied only to the All Students group. For the school district to meet AYP, goals foreach student group must be met in each category. If any goal is missed, the schooldistrict does not meet AYP for the year, unless one of the following conditions are met:(i) prior year results when combined with current year results produce a proficiency levelat or above the current year AYP; or (ii) certain requirements are met under safe harborprovisions or the growth model for projected improvements.

4. Value-Added Measure: This measure gauges the amount of academicimprovement in the performance of students even though the school district may not havemet the standard for student achievement. The Value-Added measure attempts to reflectstudent progress since the prior year, whereas the State Indicators reflect studentproficiency at a single point in time. The Value-Added measure is rated as follows:

+ (Above): school district has achieved more than one year of expectedgrowth for their students over the past year

√ (Met): school district has achieved one year of expected growth for their students over the past year

- (Below): school district has achieved less than one year of expectedgrowth for their students over the past year

Beginning with the 2010-2011 Report Cards, a school district that achieves oneyear above expected growth in student progress may increase its overall rating by onecategory. Previously, two years of above expected growth were required for an increasedrating. Concurrently however, the statistical process for calculating growth has becomemore rigorous, which will result in fewer school districts being placed in the “above” and“below” categories. Beginning with the 2011-2012 Report Cards, a school district thatshows below expected growth for two consecutive years (rather than the current threeyears) may have their designation reduced.

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Determining the State designation for a school district is a two-step process. First, thecombination of the percentage of State Indicators met, PI, and AYP for a school districtdetermine its preliminary designation as follows:

IndicatorsMet

Performance IndexScore

AYP Status Preliminary Designation

94%-100% or 100 to 120 and Met or Not Met = Excellent or Effective75%-93.9% or 90 to 99.9 and Met or Not Met = Effective or Continuous

Improvement0%-74.9% or 0 to 89.9 and Met = Continuous

50%-74.9% or 80 to 89.9 and Not Met = Improvement31%-49.9% or 70 to 79.9 and Not Met = Academic Watch0%-30.9% and 0 to 69.9 and Not Met = Academic Emergency

For the 2010-2011 school year, the District met 88% of the State Indicators, scored a PIof 98.1, and had an AYP designation of Not Met. The District's preliminary designation wasEffective.

If a school district's designation either increased or decreased due to AYP then the value-added measure has no impact upon the preliminary designation and that designation is the finaldesignation, otherwise the value-added measure determines the school district's final designationas follows:

Preliminary Designation Value-Added Measure*† Final Designation

Above expected growthor

Excellent with Distinction

Excellent andBelow expected growth for at least 3 consecutive yrs Effective

Above expected growthOr

ExcellentEffective and

Below expected growth for at least 3 consecutive yrs Continuous Improvement


EffectiveContinuous Improvement and

Below expected growth for at least 3 consecutive yrs Academic Watch


Continuous ImprovementAcademic Watch and

Below expected growth for at least 3 consecutive yrs Academic Emergency


Academic WatchAcademic Emergency and

Below expected growth for at least 3 consecutive yrs Academic Emergency______*In all other cases, Value-Added will have no impact on the designation and the preliminary designation will become the final designation.†Beginning with 2011-2012 Report Cards below expected growth for at least two consecutive years, rather than three, will negatively impact aschool district's final designation.

The District's value added measure was √ (Met) in 2010-2011. The District's finaldesignation for 2010-2011 was Effective.

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Comparative Position of the District. The following tables compare the District with itssimilar district cohorts (as defined by the Department) and the State average in the areas ofsources of revenue and expenditures by category.

Sources of Revenue, 2009-2010Graham Local School District

School District Similar Districts State of OhioLocal Funding 29.54% 34.50% 46.68%State Funding 62.09 57.16 43.50Federal Funding 8.37 8.34 9.82__________Source: Ohio Department of Education

Sources of Revenue, 2010-2011Graham Local School District

School District Similar Districts State of OhioLocal Funding 28.52% 35.55% 47.61%State Funding 63.26 56.27 42.49Federal Funding 8.22 8.18 9.90__________Source: Ohio Department of Education

Expenditures by Category, 2009-2010Graham Local School District

(Dollars per Pupil)

School District Similar Districts State of OhioInstruction $4,255 $4,683 $5,862Building Operations 1,680 1,764 2,034Administration 1,130 1,010 1,215Pupil Support 1,013 818 1,087Staff Support 219 246 366Total Spending Per Pupil $8,297 $8,521 $10,564__________Source: Ohio Department of Education


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Expenditures by Category, 2010-2011Graham Local School District

(Dollars per Pupil)

School District Similar Districts State of OhioInstruction $4,315 $4,703 $5,941Building Operations 1,698 1,823 2,037Administration 1,000 986 1,229Pupil Support 736 767 1,093Staff Support 198 210 396Total Spending Per Pupil $7,947 $8,489 $10,696__________Source: Ohio Department of Education

FINANCIAL MATTERS

Introduction

The Board of Education's fiscal year corresponds with the July 1 to June 30 school year.The collection of taxes is made on a calendar year basis.

The responsibilities for the major financial functions of the Board of Education aredivided between the Board of Education and the Treasurer. The Treasurer is the fiscal officer ofthe Board, its chief accounting officer, and serves the Board of Education as financial advisor.The Treasurer keeps the accounts of the Board of Education and is responsible for accuratestatements of all moneys received and expended and of all taxes. At the end of each fiscal year,the Treasurer must examine the accounts of all offices and departments of the Board ofEducation. The Treasurer is not to allow the amount set aside for any appropriation to beoverdrawn, or the amount appropriated for any one item of expense to be drawn upon for anyother purpose, or allow a voucher to be paid unless sufficient funds are in the treasury of theBoard of Education to the credit of the fund upon which such voucher is drawn.

Other important financial functions and the officials responsible for such functionsinclude:

(a) General financial recommendations and planning, and budget and annualappropriation preparation by the Treasurer and the Superintendent;

(b) Express approval of all budgeting and appropriations of moneys by theBoard of Education;

(c) Examinations of accounts by the Department of Audit in the office of theAuditor of the State, which by law is required to inspect and supervise the accounts andreports of the offices of each taxing district or public institution of the State, including theBoard of Education;

(d) Assessment of real property by the County Auditors of Champaign andShelby Counties, who are elected at large within both Counties, subject to supervision by

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the Ohio Tax Commissioner (the “Tax Commissioner”) who is appointed by theGovernor and confirmed by the Ohio General Assembly;

(e) Assessment of public utility property and tangible personal property by theTax Commissioner; and

(f) Billing and collection of property taxes and assessments by the CountyTreasurers of Champaign and Shelby Counties, who are elected at large within theCounty.

Budgeting, Tax Levy and Appropriations Procedures

Detailed provisions for budgeting by the Board of Education, tax levies andappropriations are made in the Revised Code.

In general, the budgetary process begins six months or more before the start of the fiscalyear for which the budget is to be adopted, and involves review by county officials at severalstages. The following discussion describes the process to be undertaken in Champaign andShelby Counties. Significant steps in the budgetary process are summarized as follows:

1. On or before January 15 of each year, the Board of Education andadministration prepares, and, after a public hearing, the Board of Education adopts, a taxbudget for the succeeding fiscal year. The tax budget must show estimated receipts andexpenditures and indicate the amount of ad valorem property taxes, both inside andoutside the ten-mill limitation, as hereinafter described, that must be levied in such fiscalyear.

2. The proposed tax budget is filed with the County Auditors on or beforeJanuary 20 of each year, who present it to each County Budget Commission, which iscomprised of the respective County Auditor, respective County Treasurer and respectiveCounty Prosecuting Attorney. On or before March 1 of each year, each County BudgetCommission reviews the tax budget, makes any necessary changes in the amount of advalorem property taxes to be levied, and in particular, ascertains that sufficient advalorem property taxes are to be levied, both inside and outside the ten-mill limitation, topay all debt charges.

3. Each County Budget Commission then certifies the results of its review tothe Board of Education. Before April 1 of each year, the Board of Education approvesthe tax levies as determined by each County Budget Commission and certifies them to theappropriate County officials, who bill and collect the ad valorem property taxes asapproved. Real property taxes are payable in two installments, the first usually inJanuary and the second in June.

4. Each year, the Board of Education adopts an annual appropriationresolution for the current fiscal year, which may not contain amounts in excess of thoseapproved by the County Budget Commission. The annual appropriation resolution iscertified to each County Auditor, who both must certify that the amounts appropriated do

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not exceed current estimated receipts. Temporary appropriation measures may beenacted pending adoption of the annual appropriation resolution.

In addition to the procedure discussed above, Ohio law provides for amendments to theamounts certified by the County Budget Commission, and for supplemental appropriationmeasures by the Board of Education to reflect changes in the amounts of estimated receipts andexpenditures of the Board of Education as the fiscal year progresses.

Financial Reports and Examinations of Accounts

The Ohio Department of Audit is charged by Ohio law with responsibility for inspectingand supervising the accounts and reports of all taxing districts and public institutions in the State,including the Board of Education. The most recent examination of the Board of Educationfinancial statements by Dave Yost, Ohio Auditor of State, was completed for fiscal year endingJune 30, 2011. Three material findings were made during the period audited with respect to thefinancial statements. The District addressed each material finding. (See Appendix A-1, pages30 through 32)

The Board of Education uses a financial statement presentation methodology known as“regulatory cash basis.” This form of financial statement reporting is not in accordance withGenerally Accepted Accounting Principles (“GAAP”) as required for Ohio school districtspursuant to Section 117-2-03(B) of the Ohio Administrative Code. As a result of thisnoncompliance, the District is levied an annual fine for each year it is noncompliant. TheIndependent Accountants’ Report dated February 9, 2012 states, in part, that:

[t]he accompanying financial statements and notes omit entitywide statements, and assets, liabilities, fund equities, anddisclosures that while material, we cannot determine at this time.In our opinion, because of the departure from generally acceptedaccounting principles described in the preceding paragraph, theaccompanying statements do not present fairly the financialposition and results of operations of the Graham Local SchoolDistrict as of and for the year ended June 30, 2011 in accordancewith accounting principles generally accepted by the United Statesof America. (See Appendix A, page 1)

As a result of the aforesaid practices, the District’s audited financial statements are notcompliant with GAAP or GASB 34. District personnel considered the cost-benefit of reportingin accordance with GAAP versus reporting on a cash basis methodology, and determined thatreporting on a cash basis of accounting was the more fiscally responsible format at this time.

Other than as directed by the Ohio Auditor of State, the Board of Education does notretain other independent public accountants to audit its financial records and reports, except withrespect to certain federal program requirements.

Appendix A-1 contains copies of the Audited Financial Report of the Board of Educationfor the fiscal year 2011. Appendix A-2 contains copies of the Audited Financial Report of theBoard of Education for the fiscal year 2010. Such annual reports are required to be filed with the

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Auditor of State's Office within 90 days after the close of each fiscal year; the Board ofEducation has filed such reports by the required time.

Appendix G contains a summary of the most recent Annual Appropriation Resolutionadopted by the Board of Education.

Financial Condition of the District

The Board of Education has been able to maintain unencumbered balances in the generaloperating fund in each of the last five years as shown:

FiscalYear

Ending

BeginningCash

Balance Receipts Expenditures

EndingCash

Balance

ReservedFor

Encumbrances Unencumbered6/30/2008 $1,707,453 $16,542,192 $16,589,354 $1,669,722 $320,260 $1,349,4626/30/2009 1,669,725 17,122,134 17,816,975 974,884 139,303 835,5816/30/2010 974,884 17,317,182 17,986,446 305,620 243,250 62,3706/30/2011 305,620 17,511,357 17,146,357 670,620 30,489 640,1316/30/2012* 670,620 16,482,843 16,013,135 1,140,328 75,580 1,064,748

______*UnauditedSource: Records of the Treasurer of the District

Current Financial Condition of the District

Recent changes in State tax law will have a minimal impact on the District's finances.Specifically, the reductions in personal tangible property represents only a small portion of theDistrict’s overall assessed valuation. Personal property as a component of assessed valuationwas essentially phased-out by fiscal year 2010. The decrease in assessed valuation will not be asignificant factor in reducing receipts. State of Ohio estimates of lost revenue have beenprovided to the District and for all operating levies the District will receive reimbursement fromthe state.

Five-Year Projection

School districts are required to prepare a five-year projection of revenues andexpenditures according to Department of Education (the “Department”) rules. Pursuant to suchrules, the Department reviews a school district's five-year projection to determine if the schooldistrict has projected a deficit during the first three years of the five-year projection period. Ifthe Department determines that further fiscal analysis is needed, the Department must forwardthe projection to the Auditor, who will determine if the school district must be formally notifiedof a pending projected deficit. The school district must then take steps to eliminate any deficit inthe current year and to plan to avoid projected deficits. The District's five-year projection isattached hereto as Appendix B.

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Insurance

The Board of Education maintains comprehensive insurance coverage with privatecarriers for real property, building contents, general liability and vehicles. Vehicle policiesinclude liability coverage for bodily injury and property damage. Real property and contents areinsured by blanket coverage in the amount of $350,000,000. General liability coverage providesfor $1,000,000 per occurrence, $3,000,000 aggregate, and excess liability of $5,000,000.

As a general rule, Ohio law provides that political subdivisions such as the Board have animmunity from liability in damages for injury, death, or loss to persons or property allegedlycaused by an act or omission of such political subdivisions or their employees in connection withgovernmental and proprietary functions, as defined in the Ohio statutes. This law has no effecton actions based on contract and any liability imposed by federal law or other federal cause ofaction. Pursuant to Ohio law, there are, however, five areas in which a political subdivision maybe held liable for such loss. These include the negligent operation of a motor vehicle on publicroads, highways or streets; negligent performance of proprietary functions; failure to keep publicroads, highways, streets, sidewalks, bridges or public grounds open, in repair, and free fromnuisance; negligence of employees within or upon the grounds of buildings, excluding jails,juvenile detention workhouses and other detention facilities; and liability specifically imposed bylaw. Ohio law imposes a two-year statute of limitations, prohibits the garnishment or judicialsale of assets and funds of political subdivisions, and puts limits on the damages which may berecovered from such political subdivisions. A political subdivision is also required to indemnifyand defend its officers and employees when an officer or employee is acting in good faith andwithin the scope of duty. No punitive or exemplary damages can be recovered, and anyinsurance benefits are deducted from any award against a political subdivision. Although thereis no limitation with respect to compensatory damages representing a person's economic loss,there is a $250,000 per person ceiling on the compensatory damage that represents a person'snon-economic loss in cases other than wrongful death, in which case there is no maximumlimitation.

Investment Policies of the District

Chapter 135 of the Ohio Revised Code sets forth the requirements and limitations forinvestments of the state's political subdivisions, including the District. Under Section 135.14 ofthe Ohio Revised Code, the District may invest its funds provided that such investments mustmature or be redeemable within five years from the date of purchase. The only classifications ofobligations which are eligible for such investment by the District are as follows:

(1) United States Treasury bills, notes, bonds, or any other obligation orsecurity issued by the United States Treasury or any other obligation guaranteed as toprincipal and interest by the United States;

(2) Bonds, notes, debentures, or any other obligations or securities issued byany federal government agency or instrumentality, including but not limited to, theFederal National Mortgage Association, Federal Home Loan Bank, Federal Farm CreditBank, Federal Home Loan Mortgage Corporation, Government National Mortgage

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Association, and Student Loan Marketing Association. All federal agency securities shallbe direct issuances of federal government agencies or instrumentalities;

(3) Interim deposits in the eligible institutions applying for interim moneys asprovided in Section 135.08 of the Revised Code. The award of interim deposits shall bemade in accordance with Section 135.09 of the Revised Code and the Treasurer or theBoard of Education shall determine the periods for which such interim deposits are to bemade and shall award such interim deposits for such periods, provided that any eligibleinstitution receiving an interim deposit award may, upon notification that the award hasbeen made, decline to accept the interim deposit in which event the award shall be madeas though such institution had not applied for such interim deposit;

(4) Bonds and other obligations of this state;

(5) No-load money market mutual funds consisting exclusively of obligationsdescribed in clauses (1) or (2) above and repurchase agreements secured by suchobligations, provided that investments in securities described in this clause are made onlythrough eligible institutions mentioned in Section 135.03 of the Revised Code;

(6) The Ohio Subdivision's Fund as provided in Section 135.45 of the RevisedCode; and

(7) Up to twenty-five percent of interim moneys available for investment ineither of the following:

(a) Commercial paper notes issues by an entity that is defined indivision (D) of section 1705.01 of the Revised Code and that has assets exceedingfive hundred million dollars, to which notes all of the following apply:

(b) The notes are rated at the time of purchase in the highestclassification established by at least two nationally recognized standard ratingservices.

(i) The aggregate value of the notes does not exceed ten percent of the aggregate value of the outstanding commercial paper of theissuing corporation.

(ii) The notes mature not later than one hundred eighty daysafter purchase.

(c) Bankers acceptances of banks that are insured by the federaldeposit insurance corporation and to which both of the following apply:

(i) The obligations are eligible for purchase by the federalreserve system.

(ii) The obligations mature not later than one hundred eightydays after purchase.

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No investment shall be made pursuant to clause (7) above unless the Treasurer or Boardof Education has completed additional training for marking the investments authorized byclause (7) above. The type and amount of additional training shall be approved by theAuditor of State and may be conducted or provided under the supervision of the auditorof state.

Nothing in the classification of eligible obligations set forth in clause (1) of this sectionor in the classifications of eligible obligations set forth in clauses (2) to (7) of this section shallbe construed to authorize any investment in stripped principal or interest obligations of sucheligible obligations.

Nothing in the classification of eligible obligations set forth in (1) above or in theclassifications of eligible obligations set forth in (2) to (7) above shall be construed to authorizeany investment in stripped principal or interest obligations of such eligible obligations or anyinvestment in a derivative. For purposes of this prohibition, a derivative means a financialinstrument or contract or obligation whose value or return is based upon or linked to anotherasset or index, or both, separate from the financial instrument, contract, or obligation itself. Anysecurity, obligation, trust account, or other instrument that is created from an issue of the UnitedStates treasury or is created from an obligation of a federal agency or instrumentality or iscreated from both is considered a derivative instrument. An eligible investment described in thisparagraph with a variable interest rate payment, based upon a single interest payment or singleindex comprised of other eligible investments provided for in clauses (1) or (2) above, is not aderivative, provided that such variable rate investment has a maximum maturity of two years.

The Treasurer or Board of Education may also enter into a written repurchase agreementwith any eligible institution mentioned in Section 135.03 of the Revised Code or any eligibledealer pursuant to Division (M) of Section 135.14 of the Ohio Revised Code, under the terms ofwhich agreement the treasurer or Board purchases, and such institution or dealer agreesunconditionally to repurchase any of the securities listed in clauses (1) or (2) above. Thisinvestment is not required to mature within five years from the date of settlement.

The District has invested in or is eligible, under the above-described legal limitations, toinvest in United States Treasuries and eligible guaranteed obligations of the United States, StateTreasurer's Asset Reserve (STAR Ohio), certificates of deposit, commercial paper, repurchaseagreements and eligible Treasury Obligation Funds. The District interprets the limits on Federalguaranteed investments, and all other legal investments very conservatively. The District hasnever owned any derivative type investments, interest only investments or reverse repurchaseagreements. All investments are transacted with reputable banks or other financial institutionsoperating in the State of Ohio that are well versed in the statutory restrictions Ohio politicalsubdivisions operate under and also have an understanding of the District's investmentrequirements.

The District values safety, liquidity and return, in that order. Interest earned by theDistrict for the fiscal year ending June 30, 2011, totaled $8,248 (general fund only).

The Investment Policy of the District, as adopted by the District's Treasurer's Office andfiled with the State Auditor's Office, is attached hereto as Appendix H.

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All brokers, dealers, and financial institutions, who give advice or make investmentrecommendations to the District shall sign the District's Investment Policy therebyacknowledging their agreement to abide by the Policy's contents; those who execute transactionsfor the District shall read and sign the Policy thereby acknowledging their comprehension andreceipt of the Policy.

_______Source: Treasurer of the Graham Local School District

Investment Policies of Champaign and Shelby Counties

Each County is limited by Ohio law, the Uniform Depository Act and Chapter 135 of theOhio Revised Code on its investments. Generally such investments must mature within ten yearsfrom the date of settlement unless certain conditions found in Section 135.35 are satisfied. EachCounty Treasurer, in accordance with the Ohio law, is permitted to invest or deposit in thefollowing classification of obligations:

(1) United States Treasury bills, notes, bonds or any other obligation orsecurity issued by the United States treasury, any other obligation guaranteed as toprincipal or interest by the United States, or any book entry, zero-coupon United Statestreasury security that is a direct obligation of the United States.

(2) Bonds, notes, debentures, or other obligations or securities issued by anyfederal government agency or instrumentality. All federal agency securities must bedirect issuances of federal government agencies or instrumentalities.

(3) Time certificates of deposit or savings or deposit accounts; including, butnot limited to, passbook accounts, in any eligible institution mentioned in Section 135.32of the Revised Code.

(4) Bonds and other obligations of the State or the political subdivisions of theState.

(5) No-load money market mutual funds consisting exclusively of obligationsdescribed in clause (1) or (2) above and repurchase agreements secured by suchobligations, provided that investments in securities described in this division are madeonly through eligible institutions mentioned in Section 135.32 of the Revised Code.

(6) The Ohio subdivision's fund as provided in Section 135.45 of the RevisedCode.

(7) Securities lending agreements with any eligible institution mentioned inSection 135.32 of the Revised Code that is a member of the federal reserve system orfederal home loan bank or with any recognized United States government securitiesdealer meeting the description in Section 135.35(J) of the Revised Code, under the termsof which the County lends securities and the eligible institution or the dealer agrees tosimultaneously exchange similar securities or cash, equal value for equal value.

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Counties are also permitted to invest in commercial paper notes, bankers acceptances,notes issued by corporations, no-load money market mutual funds and other securities subject tocertain restrictions found in Section 135.35 of the Revised Code.

Counties are not permitted to invest in stripped principal or interest obligations of any ofthe securities mentioned above, nor is the County permitted to invest in a derivative as defined inSection 135.35(B) of the Revised Code.

Champaign County and Shelby County invest in United States Treasury obligations andeligible guaranteed obligations of the United States. The County does not currently own anddoes not intend to own any derivative investments.

AD VALOREM TAX REVENUES

Ad Valorem Tax Base

The laws of the State of Ohio presently require that the County Auditor reassess realproperty at any time it is determined that the true or taxable value thereof has changed, and in thethird calendar year following the year in which a sexennial reappraisal (whereby the true value ofreal property is adjusted to reflect current market values as of January l of the respective years),is completed if ordered by the Tax Commissioner. The tables below sets forth the followinginformation for Champaign and Shelby Counties: (a) the tax year in which a sexennialreappraisal was most recently performed, (b) the tax year of the last/next triennial reappraisal and(c) the tax year of the next sexennial reappraisal. See “AD VALOREM TAX REVENUES –Assessed Valuation of the District.”

Champaign County

Tax Year of LastSexennial

Reappraisal

Tax Year of Last/NextTriennialAppraisal

Tax Year of NextSexennialAppraisal

2012-2013 2009-2010/2015-2016 2018-2019

Shelby County

Tax Year of LastSexennial

Reappraisal

Tax Year of Last/NextTriennialAppraisal

Tax Year of NextSexennialAppraisal

2008-2009 2011-2012/2017-2018 2014-2015

Existing law requires that taxable real property be assessed at not more than 35% of itstrue value except that taxable real property devoted exclusively to agricultural use is to beassessed at not more than 35% of its current agricultural use value as determined by the CountyAuditors in accordance with rules adopted by the Tax Commissioner for such purpose. Theassessment ratio has been fixed at 35% under existing rules of the Tax Commissioner. TheCounty Auditors are required to adjust (but without individual appraisal of properties except inthe sexennial reappraisal) taxable real property values triennially to reflect true values. Any

49

taxable real property which the owner thereof, under rules and regulations promulgated by theChief of the Ohio Division of Forestry, declares is devoted exclusively to forestry or timbergrowing is taxed at 50% of the local tax rate upon its true value.

Given the standard assessment base determined under the provisions noted above,legislation effective in 1976 and recent legislation enacted pursuant to a constitutionalamendment approved by the voters of Ohio in November, 1980, have provided for a two phasetax reduction of real property taxes, with respect to taxes other than taxes levied at a rate requiredto produce a specified amount of tax money (i.e. for payment of debt charges), taxes leviedinside the ten mill limitation, or taxes authorized by a municipal charter.

1. Each County Auditor must annually classify all real property into twoclasses: (a) residential/agricultural real property, and (b) nonresidential/agricultural realproperty. The Tax Commissioner then determines the amount of carryover property ineach such case for each taxing district, “carryover property” being defined as all realproperty on the current year's tax list except: (a) land and improvements that were nottaxed by the district in both the preceding year and the current year, and (b) land andimprovements that were not in the same class in both the preceding year and the currentyear. The Tax Commissioner must determine annually by what percent (the “TaxReduction Factor”), if any, the sums that would otherwise be levied by a tax against thecarryover property in each class would have to be reduced to equal the amount that wouldbe levied if the full rate thereof were imposed against the total taxable value of suchproperty in the preceding tax year. Thereafter, the County Auditors must reduce the sumto be levied by the tax against each parcel of real property in the district by the TaxReduction Factor certified by the Tax Commissioner for its class. However, if saidreduction for either class of property could cause the total taxes charged and payable forcurrent expenses of a school district, other than a joint vocational school district, prior tothe statutory ten percent reduction, discussed hereinafter, to be less than two percent ofthe taxable value of all real property in that class that is subject to taxation, the TaxCommissioner, upon notification thereof by the County Auditors, must adjust the TaxReduction Factor as required by law.

2. The County Auditors must reduce the sums remaining thereafter to belevied against parcels of real property by ten percent; such reduction is reimbursed by theState to the County for distribution to the affected subdivisions after deduction of astatutorily determined fee to be used by the Department of Taxation for administrativepurposes. The taxes remaining after such reduction constitute the real and public utilityproperty tax chargeable and payable on such property.

In addition, Ohio law provides real property tax reductions for certain owner-occupiedproperties and to certain elderly or disabled property owners. Any such reductions arereimbursed by the State to the District.

While the aforesaid tax reductions shall not affect the determination of the principalamount of notes that may be issued in anticipation of any tax levies or the amount of bonds ornotes for any planned improvements, should funds for payment of debt charges on bonds ornotes payable from taxes so reduced be insufficient for such purpose, the reduction of taxes shall

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be adjusted to the extent necessary to provide sufficient funds from real property taxes for thepayment of such debt charges.

Failure of either County Auditor to supply to the Tax Commissioner the informationrequired to determine the Tax Reduction Factor may result in substantial withholding of staterevenues to the local government until such time as such County Auditor supplies suchinformation.

A corporation with taxable property in more than one county must also make, directly tothe Tax Commissioner, a single combined return, listing all taxable property. Distribution of thefunds so generated is normally made by the Tax Commissioner to the respective county auditorsduring the last quarter of each calendar year.

Recent changes to the assessment of tangible personal property enacted by the OhioGeneral Assembly include:

(a) Beginning in 2006, taxation affecting three classes of tangible personalproperty used in business changed. Tangible personal property taxes on (i)manufacturing equipment, (ii) furniture and fixtures and (iii) inventory was phased-outover a four year period, ending in 2009. Tangible personal property taxes on a fourthclass, telephone, telegraph and interexchange communication companies, were phased-out from 2007-2011. A portion of the commercial activities tax (the “CAT tax”),implemented in 2005, replaced the tax on business tangible personal property. Prior tothe passage of Am. Sub. HB 153, effective June 30, 2011 (“HB 153”), as part of the CATtax, gross rents and royalties from tangible personal property, as well as gross receiptsfrom the sale of tangible personal property (among several other categories of receipts)were credited to the State’s general revenue fund and used to reimburse school districtsand other local taxing units for the phase-out of taxes on business tangible personalproperty. These payments are commonly referred to as “replacement payments.” Thedivision of CAT tax revenue among these sources was scheduled to be phased-out in2018, with the State’s general fund receiving 100% of the CAT tax revenues thereafter.HB 153 has generally accelerated the phase-out and reduces the reimbursementpayments, depending on the type of levy and the financial resources of each particularschool district or other taxing unit.

Generally, HB 153 accelerates the phase-down of the reimbursement amounts forfixed-rate levies by means of a formula based on a school district’s or taxing unit'sreliance on such reimbursements as a percentage of its total budget (or “total resources”),rather than by a fixed fractional reduction of reimbursement amounts through 2019, asprovided under prior law. For example, under this recently implemented formula forreimbursement, certain thresholds for fixed-rate levy loss reimbursement (which, in somecases, apply to current expense fixed-rate levies) have been established for schooldistricts (2% for fiscal year 2012 and 4% for fiscal year 2013 and thereafter) and for othertaxing units (4% for fiscal year 2012 and 6% for fiscal year 2013 and thereafter). If aschool district or other taxing unit does not receive reimbursement (also referred to as an“allocation”) for fixed-rate levy loss in an amount equal to these respective minimumthresholds, then the school district or other taxing unit receives no reimbursement. By

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the end of fiscal year 2013, fixed-rate levy loss reimbursements will be either reduced orterminated. Reimbursement for fixed-rate levies other than current expense levies will bereduced by 50% for school districts by 2013 and 75% for municipalities by 2013.Reimbursement will continue to be paid for fixed-sum and unvoted debt levy lossesalthough the phase-out period has generally been accelerated. Fixed-sum levy losses andlosses on unvoted debt levies will be calculated in a manner similar to the manner inwhich losses for fixed-rate levies are calculated.

For additional information regarding expected changes to reimbursementamounts, please reference the following website:

http://www.tax.ohio.gov/channels/government/phase_out.stm.

(b) Beginning with tax year 2006, the percentages used to determine theassessed value of electric company personal property used in the production of electricitywere reduced to 24% of true value; taxable transmission and distribution property areassessed at 85% of true value (50% of true value for rural electric companies). The Stateis to reimburse school districts and other local taxing districts for a portion of therevenues lost due to this reduction in tax valuation with proceeds of a kilowatt-hourexcise tax imposed on electricity consumers as well as natural gas distribution taxrevenue (the “Utility Taxes”). The reimbursement paid to school districts and othertaxing units as a result of the lower Utility Taxes are commonly referred to as“replacement payments.” Prior to the passage of HB 153, qualifying levyreimbursements to school districts were scheduled to be distributed, in full, through 2016(or, for fixed-rate levies, the reimbursement period could end prior to 2016 if increases ina school district’s state aid exceeded its fixed-rate reimbursement measured against 2002levels) with no further reimbursements thereafter for losses resulting from the reductionin tax valuation against utility property. Reimbursements for such losses to other taxingunits were scheduled to be made through 2017 on a declining basis after 2006. HB 153changes the manner in which replacement payments are made to school districts and localtaxing units

Generally, reimbursement for fixed-rate levy loss is calculated by determining thedifference between personal property taxes due using the higher assessed rates under apre-determined prior year (which prior year varies depending on whether the property iselectric or gas) and taxes due using lower rates under the new law. Similar todetermining reimbursement amounts for business tangible personal property losses, HB153 provides a methodology for determining reimbursement amounts for fixed-rate leviesby means of a formula based on a school district’s or taxing unit's reliance on suchreimbursements as a percentage of its total budget (or “total resources”). For example,under this recently implemented formula for reimbursement, certain thresholds for fixed-rate levy loss reimbursement (which, in some cases, apply to current expense fixed-ratelevies) have been established for school districts (2% for fiscal year 2012 and 4% forfiscal year 2013 and thereafter) and for other taxing units (4% for fiscal year 2012 and6% for fiscal year 2013 and thereafter). If a school district or other taxing unit does notreceive reimbursement (also referred to as an “allocation”) for fixed-rate levy loss in anamount equal to these respective minimum thresholds, then the school district or other

http://www.tax.ohio.gov/channels/government/phase_out.stm

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taxing unit receives no reimbursement. By the end of fiscal year 2013, fixed-rate levyloss reimbursements will be either reduced or terminated. Reimbursement for fixed-ratelevies other than current expense levies will be reduced by 50% for school districts by2013 and 75% for municipalities by 2013. Reimbursement will continue to be paid forfixed-sum and unvoted debt levy losses with reimbursement for all but ¼ of a mill perdollar. Fixed-sum levy losses and losses on unvoted debt levies will be calculated in amanner similar to the manner in which losses for fixed-rate levies are calculated.

For additional information regarding expected changes to reimbursementamounts, please reference the following website:

http://www.tax.ohio.gov/channels/government/phase_out.stm.

The Ohio General Assembly has exercised from time to time its power to revise the Ohiostatutes applicable to the determination of assessed valuation of property subject to ad valoremtaxation and the amount of tax proceeds produced by ad valorem taxation against such property.It is anticipated that the General Assembly will continue to make similar revisions.

Assessed Valuation of the District

The assessed valuation of property within the District subject to levy of ad valorem taxesover the last five years is indicated in the following table:

Assessed Valuation

TaxYear

CollectionYear Real (a)

TangiblePersonal(b)

PublicUtility

TotalA/V

% Increase/DecreaseOver Prev. Year

2007 2008 $216,040,250 $13,592,023 $7,254,540 $236,886,813 ---2008 2009 220,134,090 5,416,509 5,555,740 231,106,339 (2.44%)2009 2010 223,242,410 0 5,477,640 228,720,050 (1.03)2010 2011 230,612,780 0 5,620,540 236,233,320 3.282011 2012 231,068,210 0 5,773,720 236,841,930 0.26

_______(a) Including public utility, manufactured homes(b) Tangible personal onlySource: Champaign County Auditor


http://www.tax.ohio.gov/channels/government/phase_out.stm

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Largest Taxpayers

The largest taxpayers within the District based upon the assessed valuation of thetaxpayer’s real and personal property for tax collection year 2012 (tax year 2011) are shown inthe following table:

Taxpayer

TotalAssessed Valuation

Real, Personal Property

% of TotalAssessed

Valuation1. Graham Local Schools† $9,608,150 4.06%2. KTH Parts 9,129,040 3.853. Dayton Power & Light 3,210,010 1.364. Mark Runkle 2,136,540 0.905. Pioneer Electric Coop 2,050,570 0.876. Everingham Ltd 1,496,400 0.637. Olagean K. Faulkner 1,391,340 0.598. Timothy Howell 1,061,850 0.459. William Stadler 1,050,590 0.44

TOTAL $31,136,490 13.15%

_______† Chapter 5709 of the Revised Code provides that certain political subdivisions, school districts, may not have to pay ad valoremtaxes on some or all of their property.Source: Champaign and Shelby County Auditors.

The largest taxpayers within the District based upon the amount of current taxes leviedagainst such taxpayer for tax collection year 2012 (tax year 2011) are shown in the followingtable:

Taxpayer

TotalAssessed Valuation

Real, Personal Property1. KTH Parts $381,0272. Dayton Power & Light 184,6663. Pioneer Electric Coop 118,0544. Graham Local Schools 66,9155. Mark Runkle 36,9416. JSP Joint Fire District 27,5837. Ronald and Ana Burns 27,5158. Sonoco Products 23,4859. Everingham Ltd 22,51010. Dearth Resources 21,524

TOTAL $910,220

_______Source: Ohio Municipal Advisory Council

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Collections and Delinquencies of Ad Valorem Taxes

Real property taxes which remain unpaid for a period of one year after they are due arecertified delinquent. Foreclosure proceedings to enforce collection are required to be instituted ifdelinquent taxes have not been paid within the year following the certification of delinquenttaxes. In addition to foreclosure proceedings, delinquent real property taxes may be collected bythe appointment of a receiver or by forfeiture of the property. Another law provides for noticeby publication and mass foreclosure proceedings and sales after three years' delinquency andmay facilitate the County Auditors’ method of collecting delinquencies under the circumstancescovered by the law. Taxes other than those in real estate are, in general, certified delinquent ifthey remain unpaid for one year. In addition to the remedies of foreclosure, receivership andforfeiture, such delinquent taxes may be collected through civil action in the local courts. Thedelinquent taxes that are collected become part of the current collection and are distributed ascurrent collections to the respective subdivisions. Special assessments levied by the varioussubdivisions are collected with the real property taxes; upon collection, delinquent specialassessments are remitted to the levying subdivisions. The preceding is a general description ofsuch procedures, which may vary in practice among Ohio Counties.

The following table sets forth the amounts billed and collected for ad valorem real estateand public utility taxes and tangible personal property taxes for the District on the tax duplicatefor the last five years:

Real Estate, Public Utility and Tangible Personal Property Tax Collection Percentages

CollectionYear*

CurrentTaxesLevied

CurrentTaxes

CollectedPercentageCollected

DelinquentTaxesBilled

DelinquentTaxes

CollectedPercentageCollected

2006 $5,329,622 $5,542,251 103.99% N/A $216,916 N/A2007 5,707,725 5,504,551 96.44 N/A 197,421 N/A2008 6,250,837 5,871,901 93.94 N/A 243,142 N/A2009 6,146,397 5,736,509 93.33 N/A 232,122 N/A2010 6,091,167 5,790,590 95.07 N/A 214,196 N/A2011 6,209,004 5,986,151 96.41 $438,133 220,402 50.30%

_______Source: Champaign and Shelby County Auditors; Ohio Department of Taxation

Unvoted and Voted Taxes for Local Purposes

To meet current expenses of subdivisions, the laws of Ohio authorize two types of advalorem tax levies - unvoted and voted.

Unvoted ad valorem tax levies are permitted by the State Constitution and the RevisedCode so long as all such unvoted taxes do not exceed one per cent (ten mills) of any property'sassessed valuation. This limitation is known as the “ten-mill limitation” and such unvoted taxesare referred to as the “inside millage.” (See “BOARD OF EDUCATION DEBT AND OTHER

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LONG-TERM OBLIGATIONS - Indirect Debt Limitation” herein) for a discussion of the effectof the ten-mill limitation on borrowings by subdivisions.

Ohio law permits voted ad valorem tax levies outside the one-percent limitation whenapproved by a majority of the electors of a taxing district voting on the proposition. A voted taxlevy for a board of education is generally initiated by a resolution of the board of education toplace such a levy on the ballot at a general, primary or special election.

The following chart lists the rates of taxation for the General Fund, Bond RetirementFund and the Permanent Improvement Fund of the Board of Education for the last five years:

Rates of Taxation

FULLRESIDENTIAL/

AGRICULTURALCOMMERCIAL/

INDUSTRIAL.

Year Inside Outside Total Inside Outside Total Inside Outside Total

2007 Valuation2008 Collection

5.000 29.35 34.350 5.000 21.729506 26.729506 5.000 21.819453 26.819453


5.000 29.35 34.350 5.000 21.783217 26.783217 5.000 21.803430 26.803430


5.000 29.35 34.350 5.000 21.769589 26.769589 5.000 21.798618 26.798618


5.000 29.675 34.350 5.000 21.686989 26.686989 5.000 21.854300 26.854300


5.000 29.35 34.675 5.000 22.011554 27.011554 5.000 22.154114 27.154114

______Source: Champaign County Auditor


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Sources of Income

The following chart shows the sources of income for the General Fund of the Board ofEducation for the last five fiscal years:

2007 2008 2009 2010 2011

LOCALReal Estate $3,852,513 $3,976,542 $4,040,765 $4,145,636 $3,737,650Investment Earnings 234,264 183,329 63,048 13,527 8,248Other 799,099 1,007,866 926,299 1,172,478 1,229,913

STATEFoundation 10,373,428 10,630,394 11,068,753 10,355,276 10,106,639Rollback 673,706 718,367 832,868 881,385 921,318Other 49,792 25,694 64,126 11,067 50,021

FEDERALOther 0 0 0 701,486 1,421,202

TOTAL $15,982,802 $16,542,192 $16,995,859 $17,280,855 $17,474,991

______Source: Records of the Treasurer of the District

Voting Records

The following tables show the history of bond issue elections for the District for the past24 years, during which time the voters of the District have approved 33% of the proposed bondissues, 74% of the proposed levies and 0% of the proposed income tax levies.

History of Bond Issue Elections

_______*Issues passed by voters of the DistrictSource: Ohio Municipal Advisory Council


DateBond Issue

Amt. For Against % For Purpose05/03/2005* $13,575,000 1,811 1,630 52.63% Constructing new elementary school03/02/2004 13,375,000 1,689 1,736 49.31% Constructing new elementary school11/04/2003 13,375,000 1,623 2,111 43.47 Constructing School Facilities, Improving School Sites05/06/1997* 7,735,000 1,335 1,179 53.10 Improving School Sites11/05/1996 7,750,000 2,361 2,398 49.61 Improving School Sites05/02/1989 8,000,000 590 1,532 27.80 Building and Improvements

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History of Levies

Date Millage For Against % For Purpose Years05/03/2011 8.00 931 2,236 29.40% Emergency 505/04/2010* 1.00 1,289 1,008 56.12 Permanent Improvement 505/05/2009* 1.50 795 553 58.98 Permanent Improvement 511/04/2008* 0.50 3,149 2,730 53.56 Current Expense 511/04/2008 1.50 2,882 3,083 48.32 Permanent Improvement 503/04/2008 0.50 1,976 1,995 49.76 Current Expense 511/06/2007 0.50 1,207 1,358 47.06 Current Expense 511/08/2005* 1.00 1,808 1,616 52.80 Permanent Improvement 511/02/2004* 1.50 3,217 2,702 54.35 Permanent Improvement 505/08/2001* 3.10 885 791 52.80 Current Expense 311/07/2000* 1.00 2,662 2,407 52.52 Permanent Improvement 511/03/1998* 3.90 1,945 1,914 50.40 Current Expense 311/03/1998* 1.50 2,070 1,804 53.43 Permanent Improvement 505/05/1998 3.90 838 1,065 44.04 Current Expense 305/06/1997* 0.50 1,335 1,179 53.10 Current Expense 2305/02/1995* 4.80 901 644 58.32 Current Expense 305/02/1995* 1.00 784 771 50.42 Permanent Improvement 511/08/1994* 1.00 2,162 1,537 58.45 Permanent Improvement 511/02/1993* 1.50 1,758 1,281 57.85 Permanent Improvement 506/02/1992* 5.00 1,862 1,383 57.38 Current Expense 311/06/1990* 12.80 3,946 3,713 51.52 Current Expense Continuing11/07/1989* 1.00 1,511 837 64.35 Permanent Improvement 511/08/1988* 1.50 2,722 1,167 69.99 Permanent Improvement 5


History of School Income Tax Elections

Date Purpose For Against % For Years11/02/2010 Current Expense 1,469 3,316 30.70% Continuing11/05/1991 Current Expense 1,509 1,851 44.91 505/07/1991 Current Expense 1,170 1,384 45.81 511/06/1990 Current Expense 1,743 1,867 48.28 5


State Funding for Public Schools

Public schools in Ohio receive financial assistance from the State. There are certainrequirements for receipt of state funding; for example, the District must levy at least 20 mills foroperating purposes, certain reporting and accounting requirements must be met, schools in thedistrict must be open for a minimum number of days or hours for instructional purposes, andteachers’ salaries must meet certain criteria. Failure to comply with these requirements mayresult in the elimination or reduction of benefits received by a school district.

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The 2012-2013 State Budget eliminates the Evidence-Based Model as the program toprovide state funding to the school districts. A new funding mechanism has not yet beenformulated so for fiscal year 2011-2012 schools will be funded pursuant to a transitional formula(the “Bridge Formula”) until a new final formula is devised. The Bridge Formula providesfunding to districts based upon a fiscal year 2010-2011 amount per pupil basis. For fiscal year2011-2012 each school district is to receive no less state foundation aid as they received in fiscalyear 2010-2011 after subtracting the state fiscal stabilization funds from the funding total.

The Board of Education currently participates in the State Funding Program. As shownin the following table, in fiscal year 2012, the Board of Education relied on the State FundingProgram for approximately 64% of its operating revenues:

FiscalYear

General FundRevenues

Total Funds receivedfrom State

Funding Programs*

Percentage of GeneralFund Revenues

Attributable to Fundsfrom State Funding

Programs*2007-2008 $16,542,192 $10,656,088 64.42%2008-2009 16,995,860 11,132,879 65.50%2009-2010 17,280,856 11,067,829 64.05%2010-2011 17,474,992 11,577,862 66.25%2011-2012 16,482,843 10,599,850 64.31%

______*Prior to the 2010 fiscal year, the State Funding Program consisted of the State Foundation Program describedabove. Beginning with the 2010 fiscal year, the State Funding Program consists of the Evidence-Based Modeladopted in the 2010-2011 State budget.Source: Records of the Treasurer of the District

BOARD OF EDUCATION DEBTAND OTHER LONG-TERM OBLIGATIONS

The following describes the security for the Board's general obligation debt such as theBonds, applicable statutory and constitutional debt limitations, and outstanding and projectedbond and note indebtedness and certain other long-term financial obligations of the Board. Asfurther discussed and described below, the Bonds are voted general obligations of the Board andare subject to the direct debt limitations. The Board is not and has never been in default in thepayment of debt service on any of its general obligation bonds or notes.

Security for and Sources of Payment of General Obligation Debt

Unvoted Debt. The basic security for unvoted Board general obligation debt is theBoard's ability to levy, and its levy, pursuant to constitutional and statutory requirements, of advalorem taxes on all real and tangible personal property subject to ad valorem taxation by theBoard, within the ten-mill limitation imposed by Ohio law (See “Indirect Debt Limitation”within this section). This tax must be in sufficient amount to pay (to the extent not paid fromother sources) as it becomes due the debt service on unvoted Board general obligation bonds,both outstanding and in anticipation of which notes are outstanding. The law provides that the

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levy necessary for debt service has priority over any levy for current expenses within the ten-milllimitation; however, that priority may be subject to the provisions of federal bankruptcy law andother laws affecting creditors' rights. See the discussion in this Section, under “Indirect DebtLimitation,” of the ten-mill limitation, and the priority of claim thereon for debt service onunvoted general obligation debt of the Board and all overlapping taxing subdivisions. The Boardhas no unvoted general obligation debt outstanding.

Voted Debt. The basic security for voted Board general obligation debt is theauthorization by the electors for the District to levy ad valorem taxes without limitation as to rateor amount on all real and tangible personal property subject to ad valorem taxation by the Board.This tax is outside of the tax limitations referred to above under “Unvoted Debt,” and iscalculated to be in sufficient amount to pay (to the extent not paid from other sources) as itbecomes due the debt service on voted Board general obligation bonds, both outstanding and inanticipation of which notes are outstanding, subject to the provisions of federal bankruptcy lawand other laws affecting creditors' rights.

Notes in Anticipation of Bonds. While general obligation bond anticipation notes areoutstanding, Ohio law requires the Board to levy ad valorem property taxes in an amount not lessthan that which would have been levied if bonds had been issued without the prior issuance ofthe notes, provided that such levy need not actually be collected if payment of debt service onsuch notes is, in fact, to be provided from other sources, such as proceeds from the sale ofrenewal notes or bonds.

In general, such notes, including renewals of such notes, may be issued and outstandingfrom time to time up to a maximum period of twenty years from the date of issuance of theoriginal notes. Any period in excess of five years must be deducted from the permittedmaximum maturity of the bonds anticipated, and portions of the principal amount of notesoutstanding for more than five years must be retired in amounts at least equal to, and payable notlater than, those principal maturities that would have been required if the bonds had been issuedat the expiration of the initial five year period.

Bond anticipation notes may be retired at maturity from the proceeds of the sale ofrenewal notes or of the bonds anticipated by the notes. The ability of the Board to retire itsoutstanding bond anticipation notes, from the proceeds of the sale of either bonds or renewalnotes will be dependent upon the marketability of those obligations under market conditionsprevailing at the time of such sale.

Direct Debt Limitations

The Revised Code provides that the aggregate principal amount of voted and unvoted“net indebtedness” of a board of education may not exceed nine percent of the total value of allproperty in such board's school district as listed and assessed for taxation, and that the aggregateprincipal amount of unvoted “net indebtedness” of such board of education may not exceed one-tenth of one percent of such value.

Within the same nine percent limitation, a bond issue may not be submitted to a vote ofthe electorate in an amount which will make a board of education's “net indebtedness” (after

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issuance of the bonds) exceed four percent of its assessed valuation, unless the TaxCommissioner and the State Superintendent of Public Instruction, acting under policies adoptedby the State Board of Education, consent thereto. The Board received ballot consent to exceedthe four percent debt limitation, as well as special needs approval to exceed the nine percent debtlimitation, all prior to submitting the Bonds for approval by the electors.

In calculating “net indebtedness,” the Revised Code exempts self-supporting, revenueand special assessment obligations.

Other infrequently-issued types of obligations are also excluded from the calculation ofnet indebtedness. The Board has two outstanding leases which are subject to annualappropriation totaling $355,000 which are excluded from the calculation of net indebtedness(See “Outstanding Lease Obligations Subject to Annual Appropriation” within this section).Notes issued in anticipation of bonds excluded from the calculation of net indebtedness are alsoexcluded from such calculation. In calculating net indebtedness, amounts in a board ofeducation's bond retirement fund allocable to the principal amount of bonds otherwise includedin the amount of net indebtedness are deducted from the total net indebtedness of such board ofeducation.

Under Section 133.06(E) of the Revised Code, if a board of education determines that itsstudents are not being adequately serviced by existing facilities, and that sufficient funds toprovide such facilities cannot be obtained when needed by the issuance of bonds within the ninepercent limitation, may, upon certain showings as to projected growth in its assessed valuation,qualify as a “special needs district,” and thereby be permitted to incur net indebtedness,calculated as described above, in an amount that does not exceed an amount equal to the greaterof the following: (a) twelve percent of the sum of its assessed valuation plus an amount that isthe product of multiplying its assessed valuation by the percentage by which its assessedvaluation has increased over its assessed valuation on the first day of the sixtieth monthpreceding the month in which the board of education determines to submit to the electors thequestion of the issuance of the indebtedness proposed to be issued or (b) twelve percent of sumof its assessed valuation plus an amount that is the product of multiplying its assessed valuationby the percentage, determined by the superintendent of public instruction, by which its assessedvaluation is projected to increase during the next ten years. The Board has not relied on the useof Section 133.06(E) for issuance of any of its obligations.

Appendix E of this Official Statement is a Financial Statement for the Board, certified bythe Treasurer, indicating the amount of the outstanding obligations of the Board (including theBonds) and that portion which is subject to the nine percent and one-tenth of one percent limits,respectively, described above. The total principal amount of voted and unvoted generalobligation debt that could be issued by the Board, subject to the nine percent total direct debtlimitation is $21,315,773. The Board's net debt subject to such limitation presently outstanding(including the Bonds) as indicated by Appendix E is $17,544,188, leaving a balance ofapproximately $3,771,585 borrowing capacity issuable within the limitation (please note that theOhio Revised Code permits Ohio school districts to exceed the nine percent debt limitationprovided that certain measurements for future growth are satisfied).

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The total unvoted Board general obligation debt that could be issued subject to the one-tenth of one percent unvoted direct debt limitation is $236,841. The net Board debt subject tosuch one-tenth of one per cent limitation presently outstanding, as indicated by Appendix E is $-0- leaving a balance of approximately $236,841 of additional unvoted non-exempt debt thatcould be issued by the Board under such one-tenth of one percent limitation. However, asdescribed below, the Board's ability to incur unvoted debt in this amount is restricted by theindirect debt limitation. In the case of unvoted general obligation debt issued within the one-tenth of one percent limitation, both the direct and the indirect debt limitations must be met.

Pursuant to Section 133.06(G) of the Ohio Revised Code, a school district may issue upto nine-tenths of one percent of its tax valuation for purposes of acquiring and installing energyconservation measures. Nine-tenths of one percent of the District’s tax valuation is equal to$2,131,577. With the issuance of the Bonds, the District will have $590,000 in principaloutstanding per Section 133.06(G) of the Ohio Revised Code, leaving leeway of $1,541,577.

Principal Amounts of Outstanding Debt

Tax Valuation $236,841,930Total Debt including the Bonds $17,899,000Exempt Debt $355,000Total non-exempt debt $17,544,1881/10th of 1% of tax valuation (unvoted debt limitation) $236,841Total limited tax non-exempt bonds outstanding -0-Debt leeway within the 1/10th of 1% unvoted debt limitationbut subject to indirect debt limitation $236,841

9/10th of 1% of tax valuation (unvoted debt limitation) $2,131,577Total limited tax non-exempt bonds outstanding $590,000Debt leeway within the 9/10th of 1% unvoted debt limitationbut subject to indirect debt limitation $1,541,577

9% of tax valuation (voted and unvoted debt limitation) $21,315,773Total non-exempt bonds outstanding (including the Bonds)under debt limitation $17,544,188

Balance in Bond Retirement Fund 10/01/2012 -0-Net non-exempt debt $17,544,188Debt leeway within debt limitation $3,771,585

Indirect Debt Limitation

Ohio boards of education may issue voted general obligation debt within the direct debtlimitation described above. Ad valorem taxes, without limitation as to rate or amount, to paydebt service on such voted bonds, are authorized by the electors at the same time the bonds areauthorized. Certain other subdivisions may also issue voted debt.

The Ohio Constitution and the Revised Code, by limiting the amount of ad valorem taxeswhich may be levied without a vote to one percent (or ten mills) of the valuation of the propertyto be taxed, while requiring that an ad valorem tax sufficient to pay debt service be levied

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whenever general obligation indebtedness is incurred, operate to indirectly limit the amount ofunvoted bonds that may be issued. This indirect limitation on the amount of unvoted generalobligation indebtedness is commonly known as the “ten-mill limitation.”

Typically, the various taxing subdivisions levy the full ten mills of unvoted taxespermitted by Ohio law (which is sometimes referred to as the “inside millage”), regardless ofwhether such millage is needed for debt service, and this inside millage is allocated by eachCounty Budget Commission among the overlapping subdivisions pursuant to a formulacontained in the Revised Code. The current allocation of the inside millage is shown under “ADVALOREM TAX REVENUES – Unvoted and Voted Taxes for Local Purposes.”

The inside millage allocated to a taxing subdivision is required by Ohio law to be usedfirst for the payment of debt service on unvoted general obligation debt of the subdivision, unlessprovision has been made for its payment from other sources, and the balance may be used forgeneral fund purposes of the subdivision. To the extent that this inside millage is required fordebt service of a taxing subdivision (which may exceed the formula allocation for thatsubdivision), the amount that would otherwise be available to that subdivision for general fundpurposes is reduced. Since the inside millage that may actually be required to pay debt serviceon unvoted general obligation debt of a subdivision may exceed the formula allocation of insidemillage to such subdivision, such excess reduces the amount of inside millage available tooverlapping subdivisions.

In determining whether additional unvoted bonds may be issued within this indirect debtlimitation, the outstanding unvoted general obligation indebtedness of the issuing board ofeducation and all overlapping political subdivisions must be considered, including generalobligation indebtedness which is expected to be paid from sources other than ad valorem taxes.Since the indirect debt limit results from tax limitations and the requirement to levy taxes to paybonds, it has application only to bonds that are payable from taxes either initially or in the eventother non-tax revenues pledged to pay such bonds prove to be insufficient.

Unlike the direct debt limitations, the test for applying the indirect debt limitation maynot be expressed in terms of a percentage of tax valuation. The amount of bonds that may beissued under this indirect debt limitation is determined by whether the amount required for debtservice on the proposed bonds in a given year is greater than the number of dollars that will beproduced by a tax levy equal to the inside millage available. The inside millage available isdetermined by subtracting from ten mills the number of mills required for unvoted outstandinggeneral obligation bonds of the issuing board of education and all other political subdivisionsthat overlap such board of education. In arriving at the available inside millage, the insidemillage that is actually being used by the overlapping subdivision at the time to pay debt serviceon unvoted general obligation debt is not considered; instead, it is the inside millage that couldbe required to pay all such debt and the inside millage that could be required to retire theproposed issue, if no funds were available from other sources, that is considered.

A constitutional amendment designed to remove this indirect debt limitation was defeatedby the voters of Ohio at an election held on June 8, 1976

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Outstanding General Obligation Debt

The District currently has the following outstanding bonds, notes and other debtobligations:

General Obligation Bonds

Date ofOriginal

Issue PurposeInterest

Rate

OriginalAmountIssued

FinalMaturity

AmountOutstanding

08/15/2005School

Improvementand Refunding

3.750-10.986%*

$17,235,000 12/01/2033 $16,775,000**

05/01/1998School

Improvement8.830% 7,735,000 12/01/12 114,188

TOTAL $16,889,188_______*Includes effective interest rates in connection with capital appreciation bonds.**$7,990,000 to be Advance Refunded

Outstanding Lease Obligations Subject to Annual Appropriation

Lease Obligations

Date ofOriginal

Issue PurposeInterest

Rate

OriginalAmountIssued

FinalMaturity

AmountOutstanding

07/01/2005OASBO Energy

ConservationVariable $382,000 07/01/2020 $232,000

03/08/2007OASBOProgram

5.375% 650,000 12/01/2012 123,000

TOTAL $355,000

Future Financings

The District has no imminent plans for future financing.

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Pension Obligations

The tables below show the employee and employer contributions to the retirementprograms of certificated and classified employees of the District for the last five years:

Retirement Programs

State Teachers' Retirement - Certificated Employees

Member Contribution Employer ContributionYear Percent Amount Percent Amount

2006-2007 10.0% $755,499 14.0% $1,057,6982007-2008 10.0 758,141 14.0 1,061,3972008-2009 10.0 797,130 14.0 1,115,9822009-2010 10.0 833,960 14.0 1,167,5442010-2011 10.0 826,794 14.0 1,157,511

School Employee Retirement - Classified Employees

Member Contribution Employer ContributionYear Percent Amount Percent Amount

2006-2007 10.0% $212,605 14.0% $297,6472007-2008 10.0 227,235 14.0% 318,1302008-2009 10.0 232,113 14.0% 324,9582009-2010 10.0 240,632 14.0% 336,8842010-2011 10.0 228,748 14.0% 320,248

_______Source: Records of the Treasurer of the District and Records of State Teachers' Retirement System and School

Employee Retirement System


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The Board's annual contributions to STRS and SERS are treated as a current expense andare paid primarily from its General Fund. SERS and STRS payments are deducted by the Statefrom each monthly State Foundation payment. Current law establishes maximum contributionrates to STRS and SERS of 10.0% for the employees' portion and 14% for the employer'sportion.

STRS and SERS are not now subject to the funding and vesting requirements of thefederal Employee Retirement Income Security Act of 1974.

On September 12, 2012, the General Assembly passed SB 341 and SB 342 modifyingSERS and STRS respectively. The Governor signed both bills on September 26, 2012. Each billbecomes effective January 7, 2013.

SB 341 changes multiple aspects of SERS in ways expected to enhance its ability toamortize its unfunded actuarial accrued liabilities within thirty years. Some of the changes madeby SB 341 include: (1) an increase in minimum age and service requirements with respect tocertain employees and (2) a reduction in disability benefits with respect to certain employees.SB 341 permits the SERS Board to modify minimum age and service requirements as necessaryto amortize its unfunded actuarial accrued liabilities within thirty years.

SB 342 changes numerous aspects of STRS in ways expected to enhance its ability toamortize its unfunded actuarial accrued liabilities within thirty years. Some of the changes madeby SB 342 include: (1) an increase in the minimum age and service requirements with respect tocertain employees, (2) an increase in the STRS employee contribution rate from 10% to 14%, inannual increments of 1% a year, starting July 1, 2013, (3) a change in the method by whichbenefits for certain employees are calculated that is expected to result in a reduction of suchbenefits, (4) a reduction in the annual cost of living adjustment applied to benefits with atemporary freeze in cost of living adjustments and (5) a reduction in disability benefits to certainemployees. SB 342 permits the SERS Board to modify minimum age and service requirements,employee contributions and cost of living adjustments as necessary to amortize its unfundedactuarial accrued liabilities within thirty years.

Both STRS and SERS were created by and operate pursuant to Ohio law. The GeneralAssembly could determine to amend the format of either system and could revise rates ormethods of contribution to be made by the Board into the pension funds and revise benefits orbenefit levels.


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Accrued Fringe Benefits

All certificated and classified employees may enroll in the group medical, dental, vision,and life insurance programs.

Medical/Prescription Drug Insurance*

Superintendent and Administrators: 76% PPO1 Board paid for family or single.82% PPO2100% HSA

Treasurer/Chief Financial Officer: Contracted ServiceCertificated Employees(employed at least half-time):

76% PPO1 Board paid for family or single.82% PPO2100% HSA

Classified Employees(20 hours or more per week, working 9months per year):

76% PPO1 Board paid for family or single.82% PPO2100% HSA

Vision Insurance

Superintendent: 86% Board paid premiumTreasurer: 0% Board paid premiumAdministrators: 86% Board paid premiumCertificated Employees(employed at least half-time): 86% Board paid premiumClassified employees(20 hours or more per week, working 9months per year):

86% Board paid premium

Dental Insurance

Superintendent: 43% Board paid premiumTreasurer: 0% Board paid premiumAdministrators: 43% Board paid premiumCertificated Employees(employed at least half-time): 43% Board paid premiumClassified employees(20 hours or more per week, working 9months per year): 43% Board paid premium

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Life Insurance

Superintendent and Administrators: The Board pays 100% for a $100,000 LifeInsurance Policy.

Other Eligible Employees: The Board pays 100% for a $50,000 LifeInsurance Policy for all eligible employees.

LITIGATION

There is no proceeding or litigation of any kind now pending or, to the best of the Board'sknowledge, threatened, to restrain or enjoin the issuance, sale, execution or delivery of the Bondsor any way contesting or affecting the validity of the Bonds, the proceedings of the Board takenwith respect to the issuance and sale of the Bonds, the pledge or application of the moneys forsecurity provided for the payment of the Bonds, the existence or powers of the Board or theDistrict, or the title or capacity of any officers of the Board. The Board and the District, fromtime to time, are parties to various legal proceedings seeking damages for injunctive or otherrelief generally related to their respective operations but unrelated to the Bonds or the securityfor the Bonds. Though the ultimate disposition of any such proceedings is not presentlydeterminable, to the knowledge of the Board, no litigation or administrative action or proceedingis pending or threatened directly affecting the Bond issue, the security for the Bonds, or theimprovements being financed from the proceeds of the Bonds. A no-litigation certificate to sucheffect will be delivered to the purchaser at the time of the delivery of the Bonds to suchpurchaser.

School Funding

Between 1997 and 2003, the Ohio Supreme Court released several decisions in the caseDeRolph v. State of Ohio, in which the Plaintiffs challenged the constitutionality of the way theState funds public schools. The original decision from the Ohio Supreme Court on May 24,1997 held that the State's school funding system was unconstitutional and that property taxesmay not be the primary means for providing the finances for a thorough and efficient system ofschools. The decision was stayed for twelve months to give the State Legislature time to developa revised system. The Supreme Court remanded the case to the trial court to retain jurisdictionuntil legislation was passed that provided adequate school funding in conformity with the OhioConstitution and the decision of the Supreme Court.

In response to the case, the State Legislature enacted laws that changed the basic Statefunding of Ohio school districts and established an increased minimum base cost per pupil for anadequate education, with the funding to be provided from State and local sources. However, in adecision released in May of 2000, the Ohio Supreme Court held that the State's revised methodof funding public schools was still unconstitutional. Despite attempts to reach a settlement, thecase again reached the Ohio Supreme Court in 2001 and 2002. In its opinion released December11, 2002, the Ohio Supreme Court ruled that the State's current school funding system wasunconstitutional and directed the State to enact a school-funding scheme that was thorough andefficient. However, in 2003, the Ohio Supreme Court prohibited the lower court fromproceeding further in the case, effectively ending the litigation. Plaintiffs petitioned the United

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States Supreme Court for a Writ of Certiorari, but the Petition was denied, thereby ending theDeRolph case.

LEGAL MATTERS

Legal matters incident to the issuance of the Bonds and with regard to the tax statusthereof are subject to the approving legal opinion of Peck, Shaffer & Williams LLP, BondCounsel. Upon delivery of the Bonds to the purchaser thereof, each series of Bonds will beaccompanied by an approving opinion dated the date of such delivery, rendered by Peck, Shaffer& Williams LLP, as to the legality of the authorization of the respective Bonds. Such opinionwill state, in part, that, in the opinion of Peck, Shaffer & Williams LLP, interest on the Bonds isexcludable from gross income for federal income tax purposes upon the conditions and subject tothe limitations set forth herein under “TAX EXEMPTION.” Drafts of such legal opinions for theBonds are attached hereto as Appendix F-1 and Appendix F-2, respectively.

While Bond Counsel has participated in the preparation of portions of this OfficialStatement, it has not been engaged to confirm or verify, and expresses and will express noopinion as to, the accuracy, completeness or fairness of, any statements in this OfficialStatement, including the appendices, or in any other reports, financial information, offering ordisclosure documents or other information pertaining to the Board of Education or the Bonds thatmay be prepared or made available by the Board of Education or others to the purchasers orholders of the Bonds, or others.

In addition to rendering the approving legal opinion, Bond Counsel will assist in thepreparation of and advise the Board of Education concerning documents for the bond transcript.

Peck, Shaffer & Williams LLP, also serves and has served in a bond counsel capacity forone or more of the political subdivisions that territorially overlap the District.

TRANSCRIPT AND CLOSING DOCUMENTS

A complete transcript of proceedings, including a certificate relating to litigation(described above under “LITIGATION”) and other appropriate closing documents, will bedelivered by the Board when the Bonds are delivered to the underwriter for the Bonds. TheBoard at that time will also provide to the underwriter for the Bonds a certificate of the Boardaddressed to such underwriter relating to the accuracy and completeness of this OfficialStatement.

TAX EXEMPTION

In the opinion of Bond Counsel for the Bonds, based upon an analysis of existing laws,regulations, rulings and court decisions, interest on the Bonds is excludible from gross incomefor Federal income tax purposes. Bond Counsel for the Bonds is also of the opinion that intereston the Bonds is not a specific item of tax preference under Section 57 of the Internal RevenueCode of 1986 (the “Code”) for purposes of the Federal individual or corporate alternativeminimum taxes. Furthermore, Bond Counsel for the Bonds is of the opinion that interest on theBonds is exempt from taxation, including personal income taxation, by the State of Ohio and itspolitical subdivisions, and is excludible from the net income base used in calculating the Ohio

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corporate franchise tax, the Ohio commercial activity tax, and municipal, school district and jointeconomic development district income taxes in Ohio.

A complete copy of the opinion of Bond Counsel for each respective series of Bonds isset forth in Appendices F-1 and F-2, attached hereto.

The Code imposes various restrictions, conditions, and requirements relating to theexclusion from gross income for Federal income tax purposes of interest on obligations such asthe Bonds. The Board has covenanted to comply with certain restrictions designed to ensure thatinterest on the Bonds will not be includable in gross income for Federal income tax purposes.Failure to comply with these covenants could result in interest on the Bonds being includable inincome for Federal income tax purposes and such inclusion could be required retroactively to thedate of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with thesecovenants. Bond Counsel has not undertaken to determine (or to inform any person) whetherany actions taken (or not taken) or events occurring (or not occurring) after the date of issuanceof the Bonds may adversely affect the tax status of the interest on the Bonds.

Certain requirements and procedures contained or referred to in the Bond Legislation andother relevant documents may be changed and certain actions may be taken or omitted under thecircumstances and subject to the terms and conditions set forth in such documents. BondCounsel expresses no opinion as to any Bonds or the interest thereon if any such change occursor action is taken or omitted upon the advice or approval of bond counsel other than Peck,Shaffer & Williams LLP.

Although Bond Counsel has rendered an opinion that interest on the Bonds is excludiblefrom gross income for Federal income tax purposes and Ohio income tax purposes, theownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwiseaffect a Bondholder's Federal, state or local tax liabilities. The nature and extent of these othertax consequences may depend upon the particular tax status of the Bondholder or theBondholder's other items of income or deduction. Bond Counsel expresses no opinion regardingany tax consequences other than what is set forth in its opinion and each Bondholder or potentialBondholder is urged to consult with tax counsel with respect to the effects of purchasing, holdingor disposing of the Bonds on the tax liabilities of the individual or entity.

For example, corporations are required to include all tax-exempt interest in determining“adjusted current earnings” under Section 56(c) of the Code, which may increase the amount ofany alternative minimum tax owed. Receipt of tax-exempt interest, ownership or disposition ofthe Bond may result in other collateral federal, state or local tax consequence for certaintaxpayers. Such effects include, without limitation, increasing the federal tax liability of certainforeign corporations subject to the branch profits tax imposed by Section 884 of the Code,increasing the federal tax liability of certain insurance companies, under Section 832 of theCode, increasing the federal tax liability and affecting the status of certain S Corporations subjectto Sections 1362 and 1375 of the Code, increasing the federal tax liability of certain individualrecipients of Social Security or Railroad Retirement benefits, under Section 86 of the Code andlimiting the use of the Earned Income Credit under Section 32 of the Code that might otherwisebe available. Ownership of any Bond may also result in the limitation of interest and certainother deductions for financial institutions and certain other taxpayers, pursuant to Section 265 of

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the Code. Finally, residence of the holder of Bond in a state other than Ohio or being subject totax in a state other than Ohio, may result in income or other tax liabilities being imposed by suchstates or their political subdivisions based on the interest or other income from the Bond.

Legislation affecting tax-exempt obligations is regularly considered by the United StatesCongress and may also be considered by the State legislature. Court proceedings may also befiled the outcome of which could modify the tax treatment of obligations such as the Bonds.There can be no assurance that legislation enacted or proposed, or actions by a court, after thedate of issuance of the Bonds will not have an adverse effect on the tax status of interest or otherincome on the Bonds or the market value of the Bonds.

In addition, there are or may be pending in the U.S. Congress legislative proposals,including some that carry retroactive effective dates, that, if enacted, could alter or amend thefederal tax matters with respect to the Bonds or affect the market value of the Bonds. It cannotbe predicted whether or in what form any such proposal might be enacted or whether, if enacted,it would apply to bonds issued prior to enactment. Bond Counsel expresses no opinion regardingany pending or proposed federal tax legislation.

Prospective purchasers of the Bonds should consult their own tax advisors regardingpending or proposed federal and state tax legislation and court proceedings, and prospectivepurchasers of the Bonds at other than their original issuance at the respective prices indicated onthe inside cover page of this Official Statement should also consult their own tax advisorsregarding other tax considerations such as the consequences of market discount, as to all ofwhich Bond Counsel expresses no opinion.

ORIGINAL ISSUE DISCOUNT AND PREMIUM BONDS

Discount

The Bonds that mature December 1, 2025 through and including December 1, 2028 (the“Discount Bonds”) are being offered and sold to the public at an original issue discount (“OID”)from the amounts payable at maturity thereon. OID is the excess of the stated redemption priceof a bond at maturity (the face amount) over the “issue price” of such bond. The issue price isthe initial offering price to the public (other than to bond houses, brokers or similar personsacting in the capacity of underwriters or wholesalers) at which a substantial amount of bonds ofthe same maturity are sold pursuant to that initial offering. For federal income tax purposes, OIDon each bond will accrue over the term of the bond, and for the Discount Bonds, the amount ofaccretion will be based on a single rate of interest, compounded semiannually (the “yield tomaturity”). The amount of OID that accrues during each semi-annual period will do so ratablyover that period on a daily basis. With respect to an initial purchaser of a Discount Bond at itsissue price, the portion of OID that accrues during the period that such purchaser owns theDiscount Bond is added to such purchaser’s tax basis for purposes of determining gain or loss atthe maturity, redemption, sale or other disposition of that Discount Bond and thus, in practicaleffect, is treated as stated interest, which is excludable from gross income for federal income taxpurposes.

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Premium

“Acquisition Premium” is the excess of the cost of a bond over the stated redemptionprice of such bond at maturity or, for bonds that have one or more earlier call dates, the amountpayable at the next earliest call date. The Bonds that mature December 1, 2012 through andincluding December 1, 2019 and December 1, 2023 through and including December 1, 2024(the “Premium Bonds”) are being initially offered and sold to the public at an AcquisitionPremium. A portion of the Premium Bonds are callable prior to their maturity date. For federalincome tax purposes, the amount of Acquisition Premium on each bond the interest on which isexcludible from gross income for federal income tax purposes (“tax-exempt bonds”) must beamortized and will reduce the bondholder’s adjusted basis in that bond. However, no amount ofamortized Acquisition Premium on tax-exempt bonds may be deducted in determiningbondholder’s taxable income for federal income tax purposes. The amount of any AcquisitionPremium paid on the Premium Bonds, or on any of the Bonds, that must be amortized during anyperiod will be based on the “constant yield” method, using the original bondholder’s basis insuch bonds and compounding semiannually. This amount is amortized ratably over thatsemiannual period on a daily basis.

Please note that because the some of the Premium Bonds are callable with redemptionpremiums, both the amount of, and the amortization period for, the Acquisition Premium withdepend both upon when the Premium Bonds can be redeemed and if in fact they are redeemed.Holders of any Premium Bonds, both original purchasers and any subsequent purchasers, shouldconsult their own tax advisors as to the actual effect of such Acquisition Premium with respect totheir own tax situation and as to the treatment of the Acquisition Premium for state tax purposes.

Holders of the Bonds, both original purchasers and any subsequent purchasers, shouldconsult their own tax advisors as to the effect of such Acquisition Premium with respect to theirown tax situation and as to the treatment of the Acquisition Premium for state tax purposes.

Capital Appreciation Bonds

The Capital Appreciation Bonds maturing December 1, 2020, December 1, 2021 andDecember 1, 2022 (collectively, the “Capital Appreciation Bonds”) are being sold initially at apremium over their original principal amount, as set forth on the cover page hereof. However,the initial offering price of the Capital Appreciation Bonds to the public for federal income taxpurposes reflects the premium payable in addition to the original principal amount. The amountof the excess of the stated redemption price at maturity of the Capital Appreciation Bonds overthis initial offering price is treated as original issue discount or OID. See “Original IssueDiscount” below for a brief discussion of the treatment of OID for federal income tax purposes.

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RATINGS

The Bonds received a “Aa2” rating from Moody’s Investors Service (“Moody’s”) basedon the credit support provided by the Ohio School District Credit Enhancement Program. (See“OHIO SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM” herein.) The Districthas received an underlying rating of “A1” from Moody's. No application for a rating has beenmade to any other rating agency.

These ratings reflect only the view of said organization. Any explanation of thesignificance of such ratings may only be obtained from Moody's.

The District furnished to the rating agencies certain information and materials, some ofwhich may not have been included in this Official Statement, relating to the Bonds and theDistrict. Generally, rating agencies base their ratings on such information and materials andinvestigation, studies and assumptions of their own. There can be no assurance that a ratingwhen assigned will continue for any given period of time or that it will not be revised downwardor withdrawn entirely by the rating agencies if in their judgment circumstances so warrant. Anysuch downward change in or withdrawal of a rating may have an adverse effect on themarketability and/or market price of the Bonds.

The District expects to furnish the rating agency with information and material that itmay request. However, the District assumes no obligation to furnish requested information andmaterial, and may issue debt for which a rating is not requested. Failure to furnish requestedinformation and materials, or the issuance of debt for which a rating is not requested, may resultin the suspension or withdrawal of a rating on the Bonds.

UNDERWRITING

Refunding Bonds

RBC Capital Markets, LLC (the “Underwriter”) has agreed to purchase the RefundingBonds at a purchase price of $9,273,594.73 for the aggregate principal amount of the RefundingBonds, plus accrued interest, pursuant to a purchase contract between the District and theUnderwriter. The initial public offering price of the Refunding Bonds is $9,354,599.55, plusaccrued interest to the date of delivery, which includes the Underwriter’s spread in addition tocertain fees and expenses related to the issuance of the Bonds to be paid by the Underwriter. TheUnderwriter reserves the right to join with dealers and other underwriters in offering theRefunding Bonds. The Underwriter may offer and sell the Refunding Bonds to certain dealers(including dealer banks and dealers depositing the Refunding Bonds into investments trusts) andothers at prices lower than the respective public offering prices stated on the cover page. Thoseinitial public offering prices may be changed from time to time by the Underwriter.


The Underwriter has agreed to purchase the Energy Conservation Bonds at a purchaseprice of $582,583.87 for the aggregate principal amount of the Energy Conservation Bonds, plusaccrued interest, pursuant to a purchase contract between the District and the Underwriter. Theinitial public offering price of the Energy Conservation Bonds is $588,565.45, plus accrued

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interest to the date of delivery, which includes the Underwriter’s spread in addition to certainfees and expenses related to the issuance of the Bonds to be paid by the Underwriter. TheUnderwriter reserves the right to join with dealers and other underwriters in offering the EnergyConservation Bonds. The Underwriter may offer and sell the Energy Conservation Bonds tocertain dealers (including dealer banks and dealers depositing the Energy Conservation Bondsinto investments trusts) and others at prices lower than the respective public offering pricesstated on the cover page. Those initial public offering prices may be changed from time to timeby the Underwriter.

General

The obligation of the Underwriter to accept delivery of the Bonds is subject to variousconditions of the purchase contract. The Underwriter is obligated to purchase all of the Bonds ifany of the Bonds are purchased.

The Underwriter has reviewed the information in this Official Statement pursuant to itsresponsibilities to investors under the federal securities laws, but the Underwriter does notguarantee the accuracy or completeness of such information.

CONTINUING DISCLOSURE

In accordance with the Securities and Exchange Commission Rule 15c2-12 (the “Rule”)and so long as the Bonds are outstanding the District (the “Obligated Person”) will agreepursuant to a Continuing Disclosure Certificate to be dated on or about October 1, 2012, to bedelivered on the date of delivery of the Bonds, to cause the following information to be provided:

(a) to the MSRB certain annual financial information and operating data,including audited financial statements when available, generally consistent with theinformation contained under the heading(s) “FINANCIAL MATTERS—FinancialCondition of the District,” “AD VALOREM TAX REVENUES—Assessed Valuation ofthe District,” “—Largest Taxpayers,” “—Collections and Delinquencies of Ad ValoremTaxes,” “—Rates of Taxation,” “—Sources of Income,” “BOARD DEBT AND OTHERLONG-TERM OBLIGATIONS—Outstanding General Obligation Debt,” “—LeaseObligations,” “—Future Financings,” “—Pension Obligations” and Appendices A, B andD of this Official Statement (“annual financial information”); such information shall beprovided on or before April 15 following the end of each fiscal year ending on June 30,with the fiscal year ending June 30, 2013;

(b) to the MSRB, in a timely manner, not in excess of ten business days afterthe occurrence of the event, notice of the occurrence of the following events with respectto the Bonds:

(i) Principal and interest payment delinquencies;

(ii) Non-payment related defaults, if material;

(iii) Unscheduled draws on debt service reserves reflecting financialdifficulties;

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(iv) Unscheduled draws on credit enhancements reflecting financialdifficulties;

(v) Substitution of credit or liquidity providers, or their failure toperform;

(vi) Adverse tax opinions, the issuance by the Internal Revenue Serviceof proposed or final determinations of taxability, Notices of Proposed Issue (IRSForm 5701-TEB) or other material notices or determinations with respect to thetax status of the security, or other material events affecting the tax-exempt statusof the security;

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

(viii) Bond calls, if material, and tender offers (except for mandatoryscheduled redemptions not otherwise contingent upon the occurrence of an event);

(ix) Defeasances;

(x) Release, substitution or sale of property securing repayment of thesecurities, if material;

(xi) Rating changes;

(xii) Bankruptcy, insolvency, receivership or similar event of theObligated Person (Note: For the purposes of this event, the event is considered tooccur when any of the following occur: The appointment of a receiver, fiscalagent 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 acourt or governmental authority has assumed jurisdiction over substantially all ofthe assets or business of the Obligated Person, or if such jurisdiction has beenassumed by leaving the existing governing body and officials or officers inpossession but subject to the supervision and orders of a court or governmentalauthority, or the entry of an order confirming a plan of reorganization,arrangement or liquidation by a court or governmental authority havingsupervision or jurisdiction over substantially all of the assets or business of theObligated Person);

(xiii) The consummation of a merger, consolidation, or acquisitioninvolving an Obligated Person or the sale of all or substantially all of the assets ofthe Obligated Person, other than in the ordinary course of business, the entry intoa definitive agreement to undertake such an action or the termination of adefinitive agreement relating to any such actions, other than pursuant to its terms,if material; and

(xiv) Appointment of a successor or additional trustee or the change ofname of a trustee, if material; and

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The SEC requires the listing of events (i) through (xiv) although some of suchevents may not be applicable to the Bonds; and

(c) to the MSRB, notice of a failure (of which the Obligated Person hasknowledge) of an Obligated Person to provide the required annual financial informationon or before the date specified in its written continuing disclosure undertaking.

As required by the Rule, the Continuing Disclosure Certificate provides that theinformation to be filed with the MSRB described in the preceding paragraph is to be filed in anelectronic format as prescribed by the MSRB, accompanied by identifying information asprescribed by the MSRB. An MSRB rule change approved by the Securities and ExchangeCommission established a continuing disclosure service of the MSRB’s Electronic MunicipalMarket 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 continuingdisclosure undertakings (such as the Continuing Disclosure Certificate) entered into on or afterJuly 1, 2009, consistent with the Rule. In general, all continuing disclosure documents andrelated information are to be submitted to the MSRB’s continuing disclosure service through anInternet-based electronic submitter interface (EMMA Dataport) or electronic computer-to-computer data connection, accompanied by certain identification information, in portabledocument format (PDF) files configured to permit document to be saved, viewed, printed andretransmitted by electronic means and must be word-searchable.

The Continuing Disclosure Certificate provides bondholders with certain enforcementrights in the event of a failure by the Obligated Person to comply with the terms thereof;however, a default under the Continuing Disclosure Certificate does not constitute a defaultunder the Authorizing Legislation. The Continuing Disclosure Certificate may be amended orterminated under certain circumstances in accordance with the Rule as more fully describedtherein. Holders of the Bonds are advised that the Continuing Disclosure Certificate, copies ofwhich are available at the office of the District, should be read in its entirety for more completeinformation 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 Bonds;

(b) there are no credit enhancements applicable to the Energy ConservationBonds; however, the Refunding Bonds are enhanced pursuant to the Ohio School DistrictCredit Enhancement Program; see “OHIO SCHOOL DISTRICT CREDITENHANCEMENT PROGRAM”;

(c) there are no liquidity providers applicable to the Bonds; and

(d) there is no property securing the repayment of the Bonds.

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During the past five years, the District has filed its annual financial information in atimely manner in accordance with its existing continuing disclosure agreements in accordancewith Securities and Exchange Commission Rule 15c2-12 (the “Rule”). In addition, the Districthas filed a substantial portion of its operating data in a timely manner in accordance with itsexisting continuing disclosure requirements in accordance with the Rule; however, until October10, 2012 the District had not filed all of the requisite operating data in accordance with therequirements of its continuing disclosure agreements. As of the date of this Preliminary OfficialStatement, the District is current with the filing of all past delinquent operating data, and intendsto file all such operating data in the future with the assistance of the County Auditors ofChampaign and Shelby Counties.


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This Official Statement has been duly authorized and prepared by, and executed anddelivered for and on behalf of, the Board of Education by its President and Treasurer.

BOARD OF EDUCATIONGRAHAM LOCAL SCHOOL DISTRICT

By: /s/ Duane Miller, PresidentPresident

By: /s/ Robert HooverTreasurer

Dated: October 17, 2012


APPENDIX A-1AUDITED FINANCIAL REPORTS

FOR THE PERIOD JULY 1, 2010 - JUNE 30, 2011

[SEE ATTACHED]

A-1-1


GRAHAM LOCAL SCHOOL DISTRICT CHAMPAIGN COUNTY

TABLE OF CONTENTS

TITLE PAGE Independent Accountants’ Report ................................................................................................................. 1 Combined Statement of Cash Receipts, Cash Disbursements, and Changes in Fund Cash Balances – All Governmental Fund Types For the Fiscal Year Ended June 30, 2011 ................................................................................................. 3 Statement of Changes in Fiduciary Net Assets – Fiduciary Funds For the Fiscal Year Ended June 30, 2011 ............................................................................................... 4 Notes to the Basic Financial Statements ...................................................................................................... 5 Schedule of Federal Awards Receipts and Expenditures ........................................................................... 23 Notes to the Schedule of Federal Awards Receipts and Expenditures ...................................................... 24 Independent Accountants’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Required By Government Auditing Standards .......................................................................................... 25 Independent Accountants’ Report on Compliance with Requirements Applicable to Each Major Federal Program and on Internal Control Over Compliance Required by OMB Circular A-133 ......................................................................................... 27 Schedule of Findings and Questioned Costs .............................................................................................. 29 Corrective Action Plan ................................................................................................................................. 34 Independent Accountants’ Report on Applying Agreed-Upon Procedure .................................................. 35


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One First National Plaza, 130 W. Second St., Suite 2040, Dayton, Ohio 45402 Phone: 937‐285‐6677 or 800‐443‐9274 Fax: 937‐285‐6688

www.ohioauditor.gov

INDEPENDENT ACCOUNTANTS’ REPORT Graham Local School District Champaign County 370 E. Main Street St. Paris, Ohio 43072 To the Board of Education: We have audited the accompanying financial statements of Graham Local School District, Champaign County, (the District) as of and for the fiscal year ended June 30, 2011. These financial statements are the responsibility of the District’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in the Comptroller General of the United States’ Government Auditing Standards. Those standards require that we plan and perform the audit to reasonably assure whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion. Ohio Administrative Code Section 117-2-03 (B) requires the District to prepare its annual financial report in accordance with accounting principles generally accepted in the United States of America. However, as discussed in Note 2, the accompanying financial statements and notes have been prepared on an accounting basis not in accordance with these generally accepted accounting principles. The accompanying financial statements and notes omit entity wide statements, and assets, liabilities, fund equities, and disclosures that, while material, we cannot determine at this time. In our opinion, because of the departure from generally accepted accounting principles described in the preceding paragraph, the accompanying financial statements do not present fairly the financial position and results of operations of the Graham Local School District as of and for the year ended June 30, 2011 in accordance with accounting principles generally accepted in the United States of America. During 2011, the District changed its financial statement presentation method to a regulatory cash basis presentation. The District has not presented Management’s Discussion and Analysis, which accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not required to be part of, the financial statements.

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Graham Local School District Champaign County Independent Accountants’ Report Page 2 In accordance with Government Auditing Standards, we have also issued our report dated February 9, 2012, on our consideration of the District’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. While we did not opine on the internal control over financial reporting or on compliance, that report describes the scope of our testing of internal control over financial reporting and compliance, and the results of that testing. That report is an integral part of an audit performed in accordance with Government Auditing Standards. You should read it in conjunction with this report in assessing the results of our audit. We conducted our audit to opine on the District’s financial statements taken as a whole. The Schedule of Federal Awards Receipts and Expenditures provides additional information required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and is not a required part of the financial statements. The Schedule of Federal Awards Receipts and Expenditures is management’s responsibility, and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. This schedule was subject to the auditing procedures we applied to the basic financial statements. We also applied certain additional procedures, including comparing and reconciling this information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, in accordance with auditing standards generally accepted in the United States of America. For reasons stated in the third paragraph, the financial statements do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the District, as of June 30, 2011, or its changes in financial position for the year then ended. Therefore we are unable to express, and we do not express, an opinion on the Schedule of Federal Awards Receipts and Expenditures. Dave Yost Auditor of State February 9, 2012

Totals Special Debt Capital (Memorandum

General Revenue Service Projects Only)Cash Receipts: Property tax and other local taxes $3,737,650 $74,781 $970,837 $205,003 $4,988,271 Intergovernmental 11,104,490 2,826,707 245,073 288,337 14,464,607 Tuition 792,392 792,392 Earnings on investments 8,248 2,078 4,630 14,956 Extracurricular Activities 393,605 393,605 Classroom Materials and Fees 67,380 67,380 Charges for Services 436,026 436,026 Miscellaneous 219,152 8,877 14,847 242,876Total Cash Receipts 15,929,312 3,742,074 1,215,910 512,817 21,400,113

Cash Disbursements: Instruction: Regular 6,316,593 781,663 7,098,256 Special 1,625,118 486,674 2,111,792 Vocational Education 3,845 3,845 Other Instruction 1,594,389 92,963 1,687,352 Supporting Services: Pupils 554,934 508,758 1,063,692 Instructional Staff 794,007 147,100 941,107 Board of Education 37,629 37,629 Administration 1,106,677 295,604 1,402,281 Fiscal Services 342,690 2,446 31,663 6,850 383,649 Operation and Maintenance of Plant 1,504,567 84,865 4,541 1,593,973 Pupil Transportation 1,295,578 180,680 21,192 1,497,450 Central 206,883 5,000 211,883 Non-Instructional Services 793,065 793,065 Extracurricular Activities 296,895 216,937 513,832 Facilities Acquisition and Construction 4,482,625 4,482,625 Debt Service: Principal Retirement 23,000 470,000 113,000 606,000 Interest and Fiscal Charges 11,830 781,104 13,276 806,210Total Cash Disbursements 15,714,635 3,595,755 1,282,767 4,641,484 25,234,641

Total Cash Receipts Over/(Under) Cash Disbursements 214,677 146,319 (66,857) (4,128,667) (3,834,528)

Other Financing Receipts/Disbursements: Transfers-In 3,021 96,574 99,595 Transfers-Out (41,495) (55,000) (96,495)Total Other Financing Receipts/(Disbursements) 3,021 55,079 (55,000) 3,100

Excess of Cash Receipts and other Financing Receipts Over/ (Under) Cash Disbursements and Other Financing Disbursements 217,698 201,398 (66,857) (4,183,667) (3,831,428)

Restated Fund Cash Balances, July 1 347,670 1,050,367 1,070,772 6,517,951 8,986,760

Fund Cash Balances, June 30 $565,368 $1,251,765 $1,003,915 $2,334,284 $5,155,332

Reserves for Encumbrances, June 30 $30,489 $20,845 $0 $698,774 $750,108

GRAHAM LOCAL SCHOOL DISTRICTCHAMPAIGN COUNTY

The notes to the financial statements are an integral part of this statement

COMBINED STATEMENT OF CASH RECEIPTS, CASH DISBURSEMENTS, ANDCHANGES IN FUND CASH BALANCES - ALL GOVERNMENTAL FUND TYPES

FOR THE FISCAL YEAR ENDED JUNE 30, 2011

Governmental Fund Types

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Scholarship Totals

Private Purpose (MemorandumTrust Funds Agency Funds Only)

Operating Cash Receipts: Charges for Services $645,599 $645,599 Extracurricular Activities 36,326 36,326Total Operating Cash Receipts 681,925 681,925

Operating Cash Disbursements: Personal Services 479,670 479,670 Employees Retirement and Insurance 133,068 133,068 Purchased Services 70 70 Other Operating Expenses $2,000 42,487 44,487Total Operating Cash Disbursements 2,000 655,295 657,295

Operating Income/(Loss) (2,000) 26,630 24,630

Non-Operating Cash Receipts: Earnings on Investments 1,206 1,206Total Non-Operating Cash Receipts 1,206 1,206

Excess of Disbursements Over/(Under) Receipts Before Interfund Transfers (794) 26,630 25,836

Transfers-In 49 49 Transfers-Out (3,149) (3,149)Net Cash Disbursements Over/(Under) Cash Receipt (794) 23,530 22,736

Restated Fund Cash Balances, July 1 121,122 13,106 134,228

Fund Cash Balances, June 30 $120,328 $36,636 $156,964

Reserve for Encumbrances, June 30 $0 $4,926 $4,926

The notes to the financial statements are an integral part of this statement

CHAMPAIGN COUNTYGRAHAM LOCAL SCHOOL DISTRICT

FIDUCIARY FUNDSFOR THE FISCAL YEAR ENDED JUNE 30, 2011

STATEMENT OF CHANGESIN FIDUCIARY NET ASSETS

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NOTES TO THE FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED JUNE 30, 2011

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1. DESCRIPTION OF THE SCHOOL DISTRICT

Graham Local School District (the “School District”) is a body politic and corporate established for the purpose of exercising the rights and privileges conveyed to it by the constitution of the State of Ohio. The School District operates under a locally elected, five-member Board of Education (Board) to provide educational and other services as required and permitted by the laws and regulations of the State of Ohio and United States of America. The School District was established in 1955 through the consolidation of existing land areas and school districts. The School District serves an area of approximately 189 square miles. It is located in Champaign and Shelby Counties, and includes all of the Villages of Christiansburg, Rosewood, and St. Paris, and portions of Adams, Concord, Harrison, Jackson, Johnson, and Mad River Townships. The School District is staffed by 99 classified employees, 140 certified teaching personnel, and 13 administrative employees who provide services to 2,200 students and other community members. The School District currently operates 3 instructional buildings and an administration building.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Although required by Ohio Administrative Code § 117-2-03(B) to prepare its annual financial report in accordance with accounting principles generally accepted in the United States of America, the District chooses to prepare its financial statements and notes in accordance with standards established by the Auditor of State for governmental entities that are not required to prepare reports in accordance with generally accepted accounting principles. This basis of accounting is similar to the cash receipts and disbursements basis of accounting. Receipts are recognized when received in cash rather than when earned, and disbursements are recognized when paid rather than when a liability is incurred. Budgetary presentations report budgetary expenditures when a commitment is made (i.e. when an encumbrance is approved).

A. The Reporting Entity

Reporting Entity: A reporting entity is comprised of the primary government, component units and other organizations that are included to insure that the financial statements are not misleading. The primary government of the School District consists of all funds, departments, boards, and agencies that are not legally separate from the School District. For Graham Local School District, this includes general operations, food service, student guidance, extracurricular activities, educational media, care and upkeep of grounds and buildings, preschool and student related activities of the School District. Component units are legally separate organizations for which the School District is financially accountable. The School District is financially accountable for an organization if the School District appoints a voting majority of the organization’s governing board and (1) the School District is able to significantly influence the programs or services performed or provided by the organization; or (2) the School District is legally entitled to or can otherwise access the organization’s resources; the School District is legally obligated or has assumed responsibility to finance the deficits of, or provide financial support to the organization; or the School District is obligated for the debt of the organization. Component units may also include organizations that are fiscally dependent on the School District in that the School District approves the budget, the levying of taxes or the issuance of debt for the organization.

The component units, Graham Digital Academy and A.B. Graham Academy, are reported separately to emphasize that they are legally separate from the School District.



FOR THE FISCAL YEAR (Continued)

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Graham Digital Academy: Graham Digital Academy (Academy) is a legally separate not-for-profit organization served by an appointed seven-member Board of Directors (Board). The Academy was approved for operation under contract with the School District for a period of five years commencing July 1, 2007. The School District is responsible for evaluating the performance of the Academy and has the authority to deny renewal of the contract at its expiration or terminate the contract prior to its expiration. The Board consists of five voting members who are not employed by the School District and two nonvoting members who hold administrative positions with the School District. The Board is responsible for carrying out provisions of the contract, which include, but are not limited to, State-mandated provisions regarding student population, curriculum, academic goals, performance standards, admission standards and qualifications of teachers. A.B. Graham Academy: A.B. Graham Academy (Academy) is a legally separate not-for-profit organization served by an appointed seven-member Board of Directors (Board). The Academy was approved for operation under contract with the School District until superseded by a mutually agreed upon service agreement commencing October 26, 2009. The School District is responsible for evaluating the performance of the Academy and has the right to terminate this agreement with a 90-day notice to the Academy. The Board consists of five voting members who are not employed by the School District and two non-voting members who hold administrative positions with the School District. The Board is responsible for carrying out provisions of the contract, which include, but are not limited to, State-mandated provisions regarding student population, curriculum, academic goals, performance standards, admission standards and qualifications of teachers. The Academies each issue a publicly available, stand-alone financial report that includes financial statements and supplementary information. These reports may be obtained by writing to the Administrative Offices, 370 East Main Street, St. Paris, Ohio 43072 or by calling (937) 663-4123. The School District is associated with four jointly governed organizations, an insurance purchasing pool and a related organization. These organizations are presented in Notes 13, 14 and 15 to the basic financial statements. These organizations are:

Jointly Governed Organizations: Ohio Hi-Point Joint Vocational School Western Ohio Computer Organization Southwestern Ohio Education Purchasing Council Southwestern Ohio Instructional Technology Association Insurance Purchasing Pool: Ohio School Boards Association Workers’ Compensation Group Rating Plan Related Organization: St. Paris Public Library




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Fund Accounting

The District uses fund accounting to segregate cash and investments which are restricted to use. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain District functions or activities. For financial statement presentation purposes, the various funds of the District are grouped into the following generic fund types under the broad fund categories governmental, proprietary, and fiduciary.

1. Governmental Fund Types

Governmental funds are those through which most governmental functions of the District are financed. The following are the District’s governmental fund types: General Fund – The General Fund is the operating fund of the District and is used to account for all financial resources except those required to be accounted for in another fund. The General Fund balance is available to the District for any purpose provided it is expended or transferred according to the general laws of Ohio. Special Revenue Funds – Special revenue funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditure for specified purposes. Debt Service Fund – This fund is used for the accumulation of resources for, and the payment of, general obligation long-term debt principal and interest. Capital Projects Funds – The capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds).

2. Fiduciary Fund Types

Fiduciary funds are used to account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. The District’s fiduciary funds include agency and trust funds.

C. Basis of Accounting

The District’s financial statements are prepared using the cash basis of accounting. Receipts are recorded in the District’s financial records and reported in the financial statements when cash is received rather than when earned and disbursements are recorded when cash is paid rather than when a liability is incurred. As a result of the use of this cash basis of accounting, certain assets and their related revenues (such as accounts receivable and revenue for billed or provided services not yet collected) and certain liabilities and their related expenses (such as accounts payable and expenses for goods or services received but not yet paid, and accrued expenses and liabilities) are not recorded in these financial statements.




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Budgetary Process

All funds, except agency funds, are legally required to be budgeted and appropriated. The major documents prepared are the certificate of estimated resources and the appropriations resolution, both of which are prepared on the budgetary basis of accounting. The certificate of estimated resources establishes a limit on the amount the Board of Education may appropriate. The appropriations resolution is the Board’s authorization to spend resources and sets annual limits on cash disbursements plus encumbrances at the level of control selected by the Board. The legal level of control has been established by the Board at the fund level for all funds with the exception of the General Fund which is at the fund, object code. Budgetary allocations at the function and object level within all funds are made by the Treasurer. The certificate of estimated resources may be amended during the fiscal year if projected increases or decreases in receipts are identified by the Treasurer. The appropriation resolution is subject to amendment throughout the year with the restriction that appropriations cannot exceed estimated resources.

E. Cash and Investments

To improve cash management, cash received by the District is pooled and invested. Monies for all funds are maintained in this pool. Individual fund integrity is maintained through District records. Interest in the pool is included in the cash balances reported by fund type.

F. Capital Assets

Acquisitions of property, plant and equipment are recorded as disbursements when paid. These items are not reflected as assets.

G. Accumulated Leave

In certain circumstances, such as upon leaving employment or retirement, employees are entitled to cash payments for unused leave. Unpaid leave is not reflected as a liability under the District’s cash basis of accounting.

H. Employer Contributions to Cost-Sharing Pension Plans

The District recognizes the disbursement for employer contributions to cost-sharing pension plans when they are paid. As described in Notes 8 and 9, the employer contributions include portions for pension benefits and for postretirement health care benefits.

I. Long-Term Obligations

The District’s cash basis does not report liabilities for bonds and other long-term obligations. Proceeds of debt are reported when cash is received and principal and interest payments are reported when paid. Since recording a capital asset when entering into a capital lease is not the result of a cash transaction, neither another financing source nor capital outlay expenditure is reported at inception.




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Interfund Transactions

Exchange transactions between funds are reported as receipts in the seller funds and as disbursements in the purchaser funds. Subsidies from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after non-operating receipts/cash disbursements in fiduciary funds. Repayments from funds responsible for particular cash disbursements to the funds that initially paid for them are not presented in the financial statements.

K. Total Columns on Financial Statements

Total columns on the financial statements are captioned “Total- (Memorandum Only)” to indicate that they are presented only to facilitate financial analysis. This data is not comparable to a consolidation. Interfund –type eliminations have not been made in the aggregation of this data.

3. COMPLIANCE

Ohio Administrative Code, §117-2-03 (B), requires the District to prepare its annual financial report in accordance with generally accepted accounting principles. However, the District prepared its financial statements on a regulatory basis, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The accompanying financial statements omit assets, liabilities, net assets/fund balances, and disclosures that, while material, cannot be determined at this time. The District can be fined and various other administrative remedies may be taken against the District.

4. DEPOSITS AND INVESTMENTS

Monies held by the District are classified by State statute into three categories. Active monies are public monies determined to be necessary to meet current demands upon the District treasury. Active monies must be maintained either as cash in the District treasury, in commercial accounts payable or withdrawable on demand, including negotiable order of withdrawal (NOW) accounts, or in money market deposit accounts. Inactive deposits are public deposits that the Board has identified as not required for use within the current five year period of designation of depositories. Inactive deposits must either be evidenced by certificates of deposit maturing not later than the end of the current period of designation of depositories, or by savings or deposit accounts including, but not limited to, passbook accounts. Interim deposits are deposits of interim monies. Interim monies are those monies which are not needed for immediate use but which will be needed before the end of the current period of designation of depositories. Interim deposits must be evidenced by time certificates of deposit maturing not more than one year from the date of deposit or by savings or deposit accounts including passbook accounts.

Interim monies may be deposited or invested in the following securities:




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4. DEPOSITS AND INVESTMENTS (Continued)

1. United States Treasury bills, bonds, notes, or any other obligation or security issued by the United States Treasury, or any other obligation guaranteed as to principal and interest by the United States;

2. Bonds, notes, debentures, or any other obligation or security issued by any federal government

agency or instrumentality including, but not limited to, the Federal National Mortgage Association, Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, and Student Loan Marketing Association. All federal agency securities shall be direct issuances of federal government agencies or instrumentalities;

3. Written repurchase agreements in the securities listed above provided the market value of the

securities subject to the repurchase agreement must exceed the principal value of the agreement by at least 2 percent and be marked to market daily, and the term of the agreement must not exceed thirty days;

4. Bonds and other obligations of the State of Ohio or Ohio local governments; 5. Time certificates of deposit or savings or deposit accounts including, but not limited to,

passbook accounts; 6. No-load money market mutual funds consisting exclusively of obligations described in division

(1) or (2) and repurchase agreements secured by such obligations, provided that investments in securities described in this division are made only through eligible institutions;

7. The State Treasurer’s investment pool (STAR Ohio).

Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives are prohibited. The issuance of taxable notes for the purpose of arbitrage, the use of leverage and short selling are also prohibited. An investment must mature within five years from the date of purchase unless matched to a specific obligation or debt of the District, and must be purchased with the expectation that it will be held to maturity.

A. Deposits

Custodial credit risk is the risk that in the event of bank failure, the District will not be able to recover deposits or collateral securities that are in the possession of an outside party. At June 30, 2011, $4,768,683 of the District’s bank balance of $5,546,728 was exposed to custodial credit risk because those deposits were uninsured and collateralized with securities held by the pledging financial institution’s trust department or agent, but not in the District’s name. The District has no deposit policy for custodial risk beyond the requirements of State statute. Ohio law requires that deposits be either insured or be protected by eligible securities pledged to and deposited either with the District or a qualified trustee by the financial institution as security for repayment, or by a collateral pool of eligible securities deposited with a qualified trustee and pledged to secure the repayment of all public monies deposited in the financial institution whose market value at all times shall be at least one hundred five percent of the deposits being secured.

B. Investments

As of June 30, 2011, the district had no investments other than CD’s.




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5. BUDGETARY ACTIVITY Budgetary activity for the year ending June 30, 2011:

2011 Budgeted vs. Actual Receipts Budgeted Actual

Fund Type Receipts Receipts Variance General $16,549,583 $15,932,333 ($ 617,250) Special Revenue 3,851,102 3,838,648 (12,454) Debt Service 1,139,503 1,215,910 76,407 Capital Projects 1,255,800 512,817 (742,983) Private-Purpose Trust 3,800 1,206 (2,594)

Total $22,799,788 $21,500,914 ($1,298,874) 2011 Budgeted vs. Actual Budgetary Basis Expenditures

Appropriation Budgetary Fund Type Authority Expenditures Variance General $16,282,795 $15,745,124 $ 537,671 Special Revenue 4,172,855 3,658,095 514,760 Debt Service 2,210,000 1,282,767 927,233 Capital Projects 6,423,170 5,395,258 1,027,912 Private-Purpose Trust 8,000 2,000 6,000

Total $29,096,820 $26,083,244 $3,013,576

Contrary to Ohio law, appropriations exceeded actual resources for the IDEA Part B Fund by $101,754 and for the Title I Fund 572 by $39.

6. PROPERTY TAXES

Property taxes are levied and assessed on a calendar year basis, while the District’s fiscal year runs from July through June. First-half tax distributions are received by the District in the second half of the fiscal year. Second-half tax distributions are received in the first half of the following fiscal year. Property taxes include amounts levied against all real property, public utility property, and tangible personal (used in business) property located in the District. Real property tax receipts received in calendar years 2011 and 2010 represent the collection of calendar years 2010 and 2009 taxes. Real property taxes received in calendar years 2011 and 2010 were levied after April 1, 2010 and 2009, on the assessed values as of January 1, 2010 and 2009, respectively, the lien date. Assessed values for real property taxes are established by State statute at 35 percent of appraised market value. Real property taxes are payable annually or semiannually. If paid annually, payment is due December 31; if paid semiannually, the first payment is due December 31, with the remainder payable by June 20. Under certain circumstances, State statute permits alternate payment dates to be established. Public utility property tax receipts received in calendar years 2011 and 2010 represent the collection of calendar years 2010 and 2009 taxes, respectively. Public utility real and tangible personal property taxes received in calendar years 2011 and 2010 became a lien on December 31, 2009 and 2008, respectively, were levied after April 1, 2010 and 2009, and are collected with real property taxes. Public utility real property is assessed at 35 percent of true value; public utility tangible personal property is currently assessed at varying percentages of true value.




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6. PROPERTY TAXES (Continued)

Tangible personal property tax receipts received in calendar years 2011 and 2010 (other than public utility property) represent the collection of calendar years 2011 and 2010 taxes, respectively. Tangible personal property taxes received in calendar years 2011 and 2010 were levied after April 1, 2010 and 2009, respectively, on the value as of December 31, 2010 and 2009, respectively. Tangible personal property is currently assessed at 25 percent of true value for capital assets and 23 percent for inventory. Amounts paid by multi-county taxpayers are due September 20. Single county taxpayers may pay annually or semiannually. If paid annually, payment is due April 30; if paid semiannually, the first payment is due April 30, with the remainder payable by September 20. Tangible personal property taxes paid by April 30 are usually received by the District prior to June 30. The District receives property taxes from Champaign and Shelby Counties. The County Auditors periodically advances to the District its portion of the taxes collected. Second-half real property tax payments collected by the counties by June 30, 2011 and 2010 are available to finance fiscal years 2011 and 2010 operations, respectively. The amount available to be advanced can vary based on the date the tax bills are sent. The assessed values upon which fiscal year 2011 taxes were collected are:

2010 Second- 2011 First-

Half Collections Half Collections Amount Percent Amount Percent Real Property: Agricultural/Residential $203,119,870 88.65% $210,042,470 88.77% Industrial/Commercial 20,135,120 8.79% 20,583,450 8.70% Public Utility Real Land 82,350 0.04% 82,350 0.03% Public Utility Property 5,790,900 2.52% 5,907,400 2.50% Total Assessed Value $229,128,240 100.00% $236,615,670 100.00%Tax rate per $1,000 of assessed valuation $34.35 $34.35

7. RISK MANAGEMENT

A. Property and Liability

The School District 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. During fiscal year 2011, the School District contracted with the Southwestern Ohio Educational Purchasing Council for property and fleet insurance, liability insurance, crime, terrorism and automobile coverage.

Property, including building, contents, extra expense, business interruption, mobile equipment, valuable papers, fine art, accounts receivable, EDP, inland marine, and auto physical damage. $350,000,000Crime and employee dishonesty (each and every loss) 500,000




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7. RISK MANAGEMENT (Continued)

Liability: General and employee benefits liability: Per occurrence 1,000,000 Aggregate annual total 3,000,000 Automobile, school board legal and employer and sexual abuse/ molestation liability 1,000,000 Auto medical payments (per person) 5,000 Excess Liability (umbrella) (Per occurrence and aggregate limit) 5,000,000 Pollution Legal Liability (Per occurrence limit) 1,000,000

Settled claims have not exceeded this commercial coverage in any of the past five years, and there has been no significant reduction in coverage from the prior fiscal year.

B. Workers’ Compensation

For fiscal year 2011, the School District participated in the Ohio School Boards Association Workers’ Compensation Group Rating Plan (GRP), an insurance purchasing pool. The intent of the GRP is to achieve the benefit of a reduced premium for the School District by virtue of its grouping and representation with other participants in the GRP. The workers’ compensation experience of the participants is calculated as one experience and a common premium rate is applied to all participants in the GRP. Each participant pays its workers’ compensation premium to the State based on the rate for the GRP rather than its individual rate. Total savings are then calculated and each participant’s individual performance is compared to the overall savings percentage of the GRP. A participant will then either receive money from or be required to contribute to the “Equity Pooling Fund”. This “equity pooling” arrangement insures that each participant shares equally in the overall performance of the GRP. Participation in the GRP is limited to participants that can meet the GRP’s selection criteria. The firm of Comp Management, Inc. provides administrative, cost control, and actuarial services to the GRP.

8. DEFINED BENEFIT PENSION PLANS

A. School Employees Retirement System

The School contributes to the School Employees Retirement System of Ohio (SERS), a cost-sharing multiple-employer defined benefit pension plan. SERS provides retirement, disability, and survivor benefits; annual cost-of-living adjustments; and death benefits to plan members and beneficiaries. Authority to establish and amend benefits is provided by state statute per Chapter 3309 of the Ohio Revised Code. SERS issues a publicly available, stand-alone financial report that includes financial statements and required supplementary information. That report can be obtained by contacting SERS, 300 East Broad Street, Suite 100, Columbus, Ohio 43215-3746 or by calling toll free (800) 878-5853. It is also posted on SERS’ website at www.ohsers.org under Employer/Auditor Resources. Funding Policy – Plan members are required to contribute 10 percent of their annual covered salary and the School District is required to contribute at an actuarially determined rate. The current School District rate is 14 percent of annual covered payroll. The contribution requirements of plan members and employers are established and may be amended, up to a statutory maximum amount, by the SERS’ Retirement Board. The retirement board acting with advice of the actuary, allocates the employer contribution rate among four of the funds (Pension Trust, Death Benefit, Medicare B, and Health Care fund of the System). For fiscal year ending June 30, 2011, the allocation of pension and death benefits was 11.81 percent. The remaining 2.19 percent of the 14 percent employer contribution rate was allocated to the Health Care and Medicare B funds.




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8. DEFINED BENEFIT PENSION PLANS (Continued)

The School District’s required contributions for pension obligations to SERS for the fiscal years ended June 30, 2011, 2010, and 2009 were $271,061, $372,156, and $315,068, respectively; 79.19 percent has been contributed for fiscal year 2011 and 100 percent for 2010 and 2009.

B. State Teachers Retirement System of Ohio

Plan Description – The School District participates in the State Teachers Retirement System of Ohio (STRS Ohio), a cost-sharing, multiple-employer public employee retirement system. STRS Ohio provides retirement and disability benefits to members and death and survivor benefits to beneficiaries. STRS Ohio issues a stand-alone financial report that may be obtained by writing to STRS Ohio, 275 E. Broad St., Columbus, OH 43215-3371, by calling (888) 227-7877, or by visiting the STRS Ohio web site at www.strsoh.org. New members have a choice of three retirement plans, a Defined Benefit (DB) Plan, a Defined Contribution (DC) Plan and a Combined Plan. The DB plan offers an annual retirement allowance based on final average salary times a percentage that varies based on years of service, or an allowance based on member contributions and earned interest matched by STRS Ohio funds divided by an actuarially determined annuity factor. The DC Plan allows members to place all their member contributions and employer contributions equal to 10.5 percent of earned compensation into an investment account. Investment decisions are made by the member. A member is eligible to receive a retirement benefit at age 50 and termination of employment. The Combined Plan offers features of both the DC Plan and the DB Plan. In the Combined Plan, member contributions are invested by the member, and employer contributions are used to fund the defined benefit payment at a reduced level from the regular DB Plan. The DB portion of the Combined Plan payment is payable to a member on or after age 60; the DC portion of the account may be taken as a lump sum or converted to a lifetime monthly annuity at age 50. Benefits are established by Chapter 3307 of the Ohio Revised Code. A DB or Combined Plan member with five or more years of credited service who becomes disabled may qualify for a disability benefit. Eligible spouses and dependents of these active members who die before retirement may qualify for survivor benefits. Members in the DC Plan who become disabled are entitled only to their account balance. If a member dies before retirement benefits begin, the member’s designated beneficiary is entitled to receive the member’s account balance. Funding Policy – For the fiscal year ended June 30, 2010 (most current available), plan members were required to contribute 10 percent of their annual covered salaries. The School District was required to contribute 14 percent; 13 percent was the portion used to fund pension obligations. Contribution rates are established by the State Teachers Retirement Board, upon recommendations of its consulting actuary, not to exceed statutory maximum rates of 10 percent for members and 14 percent for employers. Chapter 3307 of the Ohio Revised Code provides statutory authority for member and employer contributions.

The School District’s required contributions for pension obligations to STRS Ohio for the fiscal years ended June 30, 2011, 2010, and 2009, were $1,161,390, $1,159,848, and $1,096,544; 83.27 percent has been contributed for fiscal year 2011 and 100 percent for 2010 and 2009. Contributions to the DCP and the CP plans for fiscal year 2011 were $18,731 made by the School District and $13,379 made by plan members.




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8. DEFINED BENEFIT PENSION PLANS (Continued) C. Social Security System

Effective July 1, 1991, all employees not otherwise covered by the School Employees Retirement System or the State Teachers Retirement System of Ohio have an option to choose Social Security or the School Employees Retirement System. As of June 30, 2011, four members of the Board of Education have elected Social Security. The Board’s liability is 6.2 percent of wages paid.

9. POSTEMPLOYMENT BENEFITS

The School District provides comprehensive health care benefits to retired teachers and their dependents through the State Teachers Retirement System (STRS) and to retired non-certified employees and their dependents through the School Employees Retirement System (SERS).

A. School Employees Retirement System

The School Employees Retirement System (SERS) administers two postemployment benefit plans, Medicare Part B and Health Care Plans. The SERS Retirement Board establishes the rules for the premiums paid by the retirees for health care coverage for themselves and their dependents or for their surviving beneficiaries. Premiums vary depending on the plan selected, qualified years of service, Medicare eligibility, and retirement status. The financial reports of SERS’ Health Care and Medicare B plans are included in its Comprehensive Annual Financial Report. The report can be obtained by contacting SERS, 300 East Broad Street, Suite 100, Columbus, Ohio 43215-3746 or by calling toll free (800) 878-5853. It is also posted on SERS’ website at www.ohsers.org under Employer/Auditor Resources. State statute permits SERS to fund the health care benefits through employer contributions. Each year, after the allocation for statutorily required benefits, the Retirement Board allocates the remainder of the employer contributions of 14 percent of covered payroll to the Health Care Fund. The Health Care Fund was established and is administered in accordance with Internal Revenue Code Section 105(e). For 2011, 1.43 percent of covered payroll was allocated to health care. In addition, employers pay a surcharge for employees earning less than an actuarially determined amount; for 2011, this amount was $36,339. Active employee members do not contribute to the Health Care Plan. Retirees and their beneficiaries are required to pay a health care premium that varies depending on the plan selected, the number of qualified years of service, Medicare eligibility, and retirement status. The amount of the School District’s contributions to SERS allocated to the Health Care Plan for the years ended June 30, 2011, 2010, and 2009 were $32,868, $12,228, and $128,643, respectively; 79.19 percent has been contributed for all years. The Retirement Board, acting with advice of the actuary, allocates a portion of the employer contribution to the Medicare B Fund. For 2011, this actuarially required allocation was 0.76 percent of covered payroll. The School District’s contributions for Medicare Part B for the fiscal years ended June 30, 2011, 2010, and 2009 were $17,468, $20,203, and $16,879, respectively; 79.19 percent has been contributed for all years.




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9. POSTEMPLOYMENT BENEFITS (Continued) B. State Teachers Retirement System

STRS Ohio administers a pension plan that is comprised of: a defined benefit plan; a self-directed defined contribution plan and a combined plan which is a hybrid of the defined benefit and defined contribution plan. Ohio law authorizes STRS Ohio to offer a cost-sharing, multiple-employer health care plan. STRS Ohio provides access to health care 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. STRS Ohio issues a stand-alone financial report. Interested parties can view the most recent Comprehensive Annual Financial Report by visiting www.strsoh.org or by requesting a copy by calling toll-free 1-888-227-7877. Ohio law authorizes STRS Ohio to offer the Plan and gives the Retirement Board authority over how much, if any, of the health care costs will be absorbed by STRS Ohio. Active employee members do not contribute to the Plan. All benefit recipients pay a monthly premium. Under Ohio law, funding for post-employment health care may be deducted from employer contributions. For 2011, STRS Ohio allocated employer contributions equal to 1 percent of covered payroll to the Health Care Stabilization Fund. The School District’s contributions for health care for the years ended June 30, 2011, 2010 and 2009 were $82,956, $82,847, and $78,325, respectively; 83.27 percent has been contributed for all years.

10. DEBT The changes in the District’s long-term obligations during fiscal year 2011 were as follows:

Amount Amount Amount Outstanding Outstanding Due Within

6/30/2010 Decrease 6/30/2011 One Year General Obligation Bonds Serial and Term Bonds – 1998 $ 380,000 $380,000 Capital Appreciation Bonds 235,000 $ 235,000 Serial and Term Bonds – 2005 16,720,000 90,000 16,630,000 $290,812 Capital Appreciation Bonds 315,000 315,000 Capital Lease Debt 632,000 136,000 496,000 141,000

Total $18,282,000 $606,000 $17,676,000 $431,812

On May 1, 1998, the School District issued $7,735,000 in voted general obligation bonds for construction, improvement, and renovation of school facilities. The bond issue included serial, term, and capital appreciation bonds in the amount of $3,840,000, $3,660,000, and $235,000, respectively. The bonds were issued for a twenty-three year period, with final maturity during fiscal year 2021. The bonds are being retired from the Bond Retirement debt service fund. The capital appreciation bonds will mature in fiscal years 2012 and 2013. The maturity amount of the capital appreciation bonds is $800,000.

During fiscal year 2006, the School District issued $17,235,000 of general obligation bonds to refinance $13,575,000 in bond anticipation notes and to advance refund $3,660,000 of the 1998 school facilities issue. These bonds include serial and term bonds and capital appreciation bonds. The capital appreciation bonds will mature in fiscal years 2014 and 2015. The maturity amount of the capital appreciation bonds is $775,000.




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10. DEBT (Continued) Debt Schedule for General Obligation Bond:

Fiscal Year Principal Interest Total 2012 $ 290,812 $ 1,049,573 $ 1,340,385 2013 314,188 1,049,415 1,363,603 2014 625,000 745,525 1,370,525 2015 565,000 919,806 1,484,806 2016 535,000 974,106 1,509,106

2017-2021 5,000,000 2,979,341 7,979,341 2022-2026 3,085,000 2,062,256 5,147,256 2027-2031 3,915,000 1,219,738 5,134,738 2032-2034 2,300,000 218,250 2,518,250

$16,630,000 $11,218,010 $27,848,010 Debt Schedule for Capital Appreciation Bonds:

Fiscal Year Principal 2012 $120,882 2013 114,118 2014 115,000 2015 200,000 Total $550,000

The Ohio Revised Code provides that voted net general obligation debt of the District shall never exceed 9% of the total assessed valuation of the District. The code further provides that unvoted indebtness shall not exceed 1/10 of 1% of the property valuation of the District. The total district assessed valuation of the FY11 fiscal year was $236,615,670 as shown at the end of Note 6. The voted debt margin was $4,612,401 and the un-voted debt margin was $230,983. Capital Lease Schedule:

Fiscal Year Principal

2012 $141,000 2013 148,000 2014 26,000 2015 27,000 2016 28,000

2017-2020 126,000 Total $496,000

11. SET ASIDE REQUIREMENTS

The District is required by State statute to annually set aside, in the General Fund, an amount based on a statutory formula for the purchase of textbooks and other instructional materials, and an equal amount for the acquisition and construction of capital improvements. Amounts not spent by the end of the fiscal year or offset by similarly restricted resources received during the fiscal year must be held in cash at fiscal year end. These amounts must be carried forward and used for the same purposes in future years. In prior years, the District was also required to set aside money for budget stabilization.




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11. SET ASIDE REQUIREMENTS (Continued)

The following cash basis information identifies the changes in the fund balance reserves for textbooks, and capital improvements during fiscal year 2011.

Capital

Textbooks Improvements Balance June 30, 2010 ($2,139,662) ($12,525,617) Current Year Set Aside Requirement 312,343 312,343 Current Year Offsets (205,003) Qualifying Cash Disbursements (224,528) Set Aside Reserve Balance June 30, 2011 ($2,051,847) ($12,418,277)

12. CONTINGENCIES

A. Grants

The District received 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 agreements and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, 2011.

B. Litigation There are currently no matters in litigation with the District as defendant. 13. JOINTLY GOVERNED ORGANIZATIONS

Ohio Hi-Point Joint Vocational School – The Ohio Hi-Point Joint Vocational School (JVS) is a distinct political subdivision of the State of Ohio which provides vocational education. The JVS operates under the direction of a Board consisting of one representative from each participating School Districts elected board. The Board possesses its own budgeting and taxing authority. The degree of control exercised by the School District is limited to its representation on the Board. Financial information can be obtained from Eric Adelsberger, who serves as Treasurer, 2280 State Route 540, Bellefontaine, Ohio 43311. Western Ohio Computer Organization – The District is a participant in the Western Ohio Computer Organization (WOCO). WOCO is an association of public Districts within the boundaries of Hardin, Auglaize, Shelby, Logan, and Champaign Counties. The organization was formed for the purpose of applying modern technology with the aid of computers and other electronic equipment to administrative and instructional functions among member Districts. This organization is governed by a board of directors consisting of 14 members: the superintendent of the fiscal agent Shelby County Educational Service Center, two superintendents from each county that is represented, one treasurer representative from the school districts, student services representative from the school districts, and a non-voting independent district representative. The degree of control exercised by any participating school district is limited to its representation on the board. Financial information can be obtained from Donn Walls, who serves as director, at 129 East Court Street, Sidney, Ohio 45365.




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13. JOINTLY GOVERNED ORGANIZATIONS (Continued)

Southwestern Ohio Educational Purchasing Council – The Southwestern Ohio Educational Purchasing Council (SOEPC) is a purchasing council made up of nearly 100 school districts in 12 counties. The purpose of the council is to obtain reduced prices for quality merchandise and services commonly used by schools. All member districts are obligated to pay all fees, charges, or other assessments as established by the SOEPC.

Each member district has one voting representative. Title to any and all equipment, furniture and supplies purchased by the SOEPC is held in trust for the member districts. Any district withdrawing from the SOEPC shall forfeit its claim to any and all SOEPC assets. One year prior notice is necessary for withdrawal from the group. During this time, the withdrawing member is liable for all member obligations. Payments to SOEPC are made from the general fund. To obtain financial information, write to the Southwestern Ohio Educational Purchasing Council, Ken Swink, who serves as Director, 303 Corporate Center Dr, Suite 208, Vandalia, Ohio 45377.

Southwestern Ohio Instructional Technology Association – The Southwestern Ohio Instructional Technology Association (SOITA) is a not-for-profit corporation. The purpose of the corporation is to serve the educational needs of the area through television programming for the advancement of educational programs. The Board of Trustees is comprised of twenty-one representatives of SOITA member schools or institutions. Nineteen representatives are elected from within the counties by the qualified members within the counties, i.e., Auglaize, Butler, Champaign, Clark, Clinton, Darke, Fayette, Greene, Hamilton, Logan, Mercer, Miami, Montgomery, Preble, Shelby, and Warren. Montgomery, Greene and Butler Counties elect two representatives per area. All others elect one representative per area. One at-large non-public representative is elected by the non-public school SOITA members from within the State assigned SOITA service area. One at-large higher education representative is elected by higher education SOITA members from within the State assigned SOITA service area. All member districts are obligated to pay all fees, charges, or other assessments as established by the SOITA. Upon dissolution, the net assets shall be distributed to the federal government, or to a state or local government, for a public purpose. Payments to SOITA are made from the general fund. To obtain financial information, write to the Southwestern Ohio Instructional Technology Association, Steve Straus, who serves as Director, at 150 East Sixth Street, Franklin, Ohio 45005.

14. INSURANCE POOL

Ohio School Boards Association Workers’ Compensation Group Rating Plan – The School District participates in the Ohio School Boards Association Workers’ Compensation Group Rating-Plan (GRP), an insurance purchasing pool. The GRP’s business and affairs are conducted by a three member Board of Directors consisting of the President, the President-Elect, and the Immediate Past President of the OSBA. The Executive Director of the OSBA, or his designee, serves as coordinator of the GRP. Each year, the participating school districts pay an enrollment fee to the GRP to cover the costs of administering the program. Financial information can be obtained from Van D. Keating, Deputy Director of Management Services, at 8050 North High Street, Columbus, Ohio 43235. The intent of the Program is to achieve the benefit of a reduced premium for the District by virtue of its grouping and representation with other participants in the Program. The workers compensation experience of the participating school districts is calculated as one experience and a common premium rate is applied to all school districts in the Program.




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14. INSURANCE POOL (Continued)

Each participant pays its workers’ compensation premium to the State based on the rate for the Program rather than its individual rate. Total savings are then calculated and each participant’s individual performance is compared to the overall savings percentage of the Program. A participant will then either receive money from or be required to contribute to the “Equity Pooling Fund”. This “equity pooling” arrangement insures that each participant shares equally in the overall performance of the program. Participation in the Program is limited to school districts that can meet the Program’s selection criteria. The firm of Comp Management, Inc. provides administrative, cost control and actuarial services to the Program.

15. RELATED ORGANIZATION

St. Paris Public Library – The St. Paris Public Library is a distinct political subdivision of the State of Ohio created under Chapter 3375 of the Ohio Revised Code. The Library is governed by a Board of Trustees appointed by the Graham Board of Education. The Board of Trustees possesses its own contracting and budgeting authority, hires and fires personnel, and does not depend on the School District for operational subsidies. Although the School District serves as the taxing authority and the School District issued tax related debt on behalf of the Library, its role is limited to a ministerial function. The determination to request approval of a tax, the rate, and the purpose are discretionary decisions made solely by the Board of Trustees. Financial information can be obtained from the St. Paris Public Library, Diane Kremer, Clerk/Treasurer, P.O. Box 740, St. Paris, Ohio 43072.

16. INTERFUND ASSETS/LIABILITIES AND TRANSFERS Interfund transactions at June 30, 2011, consisted of transfers in and transfers out:

Transfers Transfers In Out

Permanent Improvement Fund $55,000 OSFC Maintenance Fund $55,000 Principal’s Activity Fund 3,149 3,070 Student Activity Fund 49 3,149 General Fund 3,021 Federal Funds 38,425 38,425

$99,644 $99,644

During fiscal year 2011, the School District transferred $55,000 from the Permanent Improvement fund to the Classroom Facilities Maintenance Fund to meet the requirements of the Ohio School Facilities Commission (OSFC) for the 0.5 mill tax levy for facilities maintenance per Board Resolution 10-145. The OSFC and the Auditor of State approved an alternative funding arrangement for the potential “shortfall” when the current 0.5 mill tax levy expires in 2019 (last collected in FY2020). The School District must make annual deposits through 2020 in the event that the 0.5 tax levy for building maintenance is not renewed by voters in 2019 since the useful life of the new building extends through 2031, or 23 years from the project agreement date of 2008. Other transfers included transfers between the Principal’s Activity Fund and the Student Activity Fund to close student activity funds that were no longer active due to graduating classes and from a transfer from the Middle School Principal’s Fund to cover an expenditure that was inadvertently taken from the General Fund Fee Account. The federal funds Title I and VI-B transferred funds from one fiscal year to the next after the close of the previous year’s account with ODE.




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17. CHANGE IN BASIS OF ACCOUNTING AND RESTATEMENT OF FUND EQUITY

A. Change in Basis of Accounting

For fiscal year 2011, the School District ceased to report using generally accepted accounting principles and reported on the cash basis as described in Note 2C.

B. Restatement of Fund Equity

The implementation of this change had the following effects on fund equity of the major and non-major funds of the School District as they were previously reported. The effects on net assets of governmental activities are also presented.

Bond Capital Other Private General Retirement Improvement Governmental Purpose Trust Agency

Fund Balance 6-30-2010 ($ 45,052) $1,479,044 $5,590,468 $ 762,213 $176,410 Eliminate Asset Accruals (4,697,676) (1,206,294) (620,054) (100,916) (60,000) Eliminate Inventory (11,843) Eliminate Liability Accruals 5,059,909 798,022 1,547,537 401,324 2,000 $45,896Reclassification of funds 30,489 (411) 2,712 (32,790)Adjusted Fund Balance 7-1-2010 $ 347,670

$1,070,772

$6,517,951

$1,050,367

$121,122

$13,106


Federal Grantor/ FederalPass Through Grantor CFDA Non-Cash Non-CashProgram Title Number Receipts Receipts Expenditures Disbursements

U.S. DEPARTMENT OF AGRICULTURE(Passed through Ohio Department of Education)

Child Nutrition Cluster: School Breakfast Program 10.553 $65,327 $65,327 National School Lunch Program 10.555 337,361 $40,915 337,361 $34,574

Total Child Nutrition Cluster 402,688 40,915 402,688 34,574

Total U.S. Department of Agriculture 402,688 40,915 402,688 34,574

U.S. DEPARTMENT OF EDUCATION(Passed through Ohio Department of Education)

Title I, Grants to Local Educational Agencies 84.010 168,577 178,615 ARRA Title I, Grants to Local Educational Agencies - Recovery Act 84.389 32,944 24,905 Total Title I 201,521 203,520

Special Education Cluster: Special Education Grants to States 84.027 428,776 447,582 Special Education Preschool Grants 84.173 14,752 14,752 ARRA Special Education Grants to States - Recovery Act 84.391 246,005 226,866 ARRA Special Education Preschool Grants - Recovery Act 84.392 1,612 2,327 Total Special Education Cluster 691,145 691,527

Safe and Drug-Free Schools and Communities State Grants 84.186 3,309 3,846

Education Technology State Grants 84.318 2,704 2,926

Improving Teacher Quality State Grants 84.367 58,539 58,719

ARRA State Fiscal Stabilization Fund (SFSF) - Education State Grants 84.394 863,262 756,108

Education Jobs Fund 84.410 557,940 552,530

Total U.S. Department of Education 2,378,420 2,269,176

Total Federal Assistance $2,781,108 $40,915 $2,671,864 $34,574

See accompanying notes to the schedule of federal awards receipts and expenditures.

GRAHAM LOCAL SCHOOL DISTRICTCHAMPAIGN COUNTY

SCHEDULE OF FEDERAL AWARDS RECEIPTS AND EXPENDITURESFOR THE FISCAL YEAR ENDED JUNE 30, 2011

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NOTES TO THE SCHEDULE OF FEDERAL AWARDS RECEIPTS AND EXPENDITURES

FISCAL YEAR ENDED JUNE 30, 2011 NOTE A – SIGNIFICANT ACCOUNTING POLICIES The accompanying Schedule of Federal Awards Receipts and Expenditures (the Schedule) reports the Graham Local School District’s (the District’s) federal award programs’ receipts and disbursements. The Schedule has been prepared on the cash basis of accounting. NOTE B – CHILD NUTRITION CLUSTER The District commingles cash receipts from the U.S. Department of Agriculture with similar State grants. When reporting expenditures on this Schedule, the District assumes it expends federal monies first. NOTE C – FOOD DONATION PROGRAM The District reports commodities consumed on the Schedule at entitlement. The District allocated donated food commodities to the respective program that benefitted from the use of those donated food commodities. NOTE D – TRANSFERS BETWEEN PROGRAM YEARS Federal regulations require schools to obligate certain federal awards by June 30. However, with ODE’s consent, schools can transfer unobligated amounts to the subsequent fiscal year’s program. The District transferred the following amounts from 2010 to 2011 programs: Amount Transferred Program Title CFDA Number From 2010 to 2011 Title I Grants to Local Educational Agencies 84.010 $9,618 ARRA Title I Grants to Local Educational Agencies 84.389 3,001 ARRA Special Education – Grants to States 84.391 25,806

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www.ohioauditor.gov

INDEPENDENT ACCOUNTANTS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

REQUIRED BY GOVERNMENT AUDITING STANDARDS Graham Local School District Champaign County 370 E. Main Street St. Paris, Ohio 43072 To the Board of Education: We have audited the financial statements of the Graham Local School District (the School District) as of and for the year ended June 30, 2011, and have issued our report thereon dated February 9, 2012, wherein we issued an adverse opinion and noted the School District prepared its financial statements using accounting practices the Auditor of State prescribes or permits rather than accounting principles generally accepted in the United States of America. We also noted the School District changed its financial statement presentation method during 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in the Comptroller General of the United States’ Government Auditing Standards.

Internal Control Over Financial Reporting In planning and performing our audit, we considered the School District’s internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of opining on the effectiveness of the School District’s internal control over financial reporting. Accordingly, we have not opined on the effectiveness of the School District’s internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. Therefore, we cannot assure that we have identified all deficiencies, significant deficiencies or material weaknesses. However, as described in the accompanying schedule of findings we identified a certain deficiency in internal control over financial reporting, that we consider to be a material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, when performing their assigned functions, to prevent, or detect and timely correct misstatements. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and timely corrected. We consider finding 2011-02 described in the accompanying schedule of findings to be a material weakness.

Graham Local School District Independent Accountants’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Required by Government Auditing Standards Page 2

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Compliance and Other Matters As part of reasonably assuring whether the School District’s financial statements are free of material misstatement, we tested its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could directly and materially affect 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 an opinion. The results of our tests disclosed instances of noncompliance or other matters we must report under Government Auditing Standards which are described in the accompanying schedule of findings as items 2011-01 and 2011-03 We also noted certain matters not requiring inclusion in this report that we reported to the School District’s management in a separate letter dated February 9, 2012. The School District’s responses to the findings identified in our audit are described in the accompanying schedule of findings. We did not audit the School District’s responses and, accordingly, we express no opinion on them. We intend this report solely for the information and use of management, the finance committee, Board of Education, and federal awarding agencies and pass-through entities, and others within the School District. We intend it for no one other than these specified parties. Dave Yost Auditor of State February 9, 2012

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www.ohioauditor.gov

INDEPENDENT ACCOUNTANTS’ REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER

COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Graham Local School District Champaign County 370 E. Main Street St. Paris, Ohio 43072 To the Board of Education:

Compliance We have audited the compliance of Graham Local School District (the School District) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133, Compliance Supplement that could directly and materially affect each of Graham Local School District’s major federal programs for the year ended June 30, 2011. The summary of auditor’s results section of the accompanying schedule of findings identifies the School District’s major federal programs. The School District’s management is responsible for complying with the requirements of laws, regulations, contracts, and grants applicable to each major federal program. Our responsibility is to express an opinion on the School District’s compliance based on our audit. Our compliance audit followed auditing standards generally accepted in the United States of America; the standards applicable to financial audits included in the Comptroller General of the United States’ Government Auditing Standards; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. These standards and OMB Circular A-133 require that we plan and perform the audit to reasonably assure whether noncompliance occurred with the compliance requirements referred to above that could directly and materially affect a major federal program. An audit includes examining, on a test basis, evidence about the School District’s compliance with these requirements and performing other procedures we considered necessary in the circumstances. We believe our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the School District’s compliance with these requirements. As described in finding 2011-04 in the accompanying schedule of findings, the School District did not comply with requirements regarding cash management applicable to its (CFDA 84.394) ARRA State Fiscal Stabilization Fund (SFSF) and (CFDA 84.391) Special Education to State Grants, Recovery Act major federal programs. Compliance with this requirement is necessary, in our opinion, for the School District to comply with requirements applicable to these programs. In our opinion, except for the noncompliance described in the preceding paragraph, the Graham Local School District complied, in all material respects, with the requirements referred to above that could directly and materially affect each of its major federal programs for the year ended June 30, 2011.

Graham Local School District Champaign County Independent Accountants’ Report On Compliance With Requirements Applicable To Each Major Federal Program And On Internal Control Over Compliance Required By OMB Circular A-133 Page 2

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Internal Control Over Compliance

The School District’s management is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the School District’s internal control over compliance with the requirements that could directly and materially affect a major federal program, to determine our auditing procedures for the purpose of expressing our opinion on compliance, and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of opining on the effectiveness of internal control over compliance. Accordingly, we have not opined on the effectiveness of the School District’s internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, we cannot assure we have identified all deficiencies, significant deficiencies, or material weaknesses. However, as discussed below, we identified a certain deficiency in internal control over compliance that we consider to be a material weakness. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, when performing their assigned functions, to prevent, or to timely detect and correct, noncompliance with a federal program compliance requirement. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a federal program compliance requirement will not be prevented, or timely detected and corrected. We consider the deficiency in internal control over compliance described in the accompanying schedule of findings as item 2011-04 to be a material weakness. The School District’s response to the finding we identified is described in the accompanying schedule of findings. We did not audit the School District’s response and, accordingly, we express no opinion on it. We also noted matters involving federal compliance or internal control over federal compliance not requiring inclusion in this report, that we reported to the School District’s management in a separate letter dated February 9, 2012. We intend this report solely for the information and use of the finance committee, management, Board of Education, others within the entity, federal awarding agencies, and pass-through entities. It is not intended for anyone other than these specified parties. Dave Yost Auditor of State February 9, 2012

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SCHEDULE OF FINDINGS

OMB CIRCULAR A -133 § .505 JUNE 30, 2011

1. SUMMARY OF AUDITOR’S RESULTS

(d)(1)(i) Type of Financial Statement Opinion Adverse (d)(1)(ii) Were there any material control weaknesses

reported at the financial statement level (GAGAS)?

Yes

(d)(1)(ii) Were there any significant deficiencies in internal control reported at the financial statement level (GAGAS)?

No

(d)(1)(iii) Was there any reported material noncompliance at the financial statement level (GAGAS)?

Yes

(d)(1)(iv) Were there any material internal control weaknesses reported for major federal programs?

Yes

(d)(1)(iv) Were there any significant deficiencies in internal control reported for major federal programs?

No

(d)(1)(v) Type of Major Programs’ Compliance Opinion Qualified

(d)(1)(vi) Are there any reportable findings under § .510(a)?

Yes

(d)(1)(vii) Major Programs (list): Special Education Cluster Special Education Grants to States – CFDA 84.027 Special Education Preschool Grants – CFDA 84.173 ARRA Special Education Grants to States – Recovery Act – CFDA 84.391 ARRA Special Education Preschool Grants – Recovery Act – CFDA 84.392 ARRA State Fiscal Stabilization Fund (SFSF) Education State Grants – Recovery Act – CFDA 84.394 Title I Cluster Title I Grants to Local Educational Agencies – CFDA 84.010 ARRA Tile I Grants to Local Educational Agencies – Recovery Act – CFDA 84.389 Education Jobs Fund – CFDA 84.410

30

Graham Local School District Champaign County Schedule of Findings Page 2

1. SUMMARY OF AUDITOR’S RESULTS (Continued)

(d)(1)(viii) Dollar Threshold: Type A\B Programs Type A: > $ 300,000 Type B: all others

(d)(1)(ix) Low Risk Auditee? Yes

2. FINDINGS RELATED TO THE FINANCIAL STATEMENTS REQUIRED TO BE REPORTED IN ACCORDANCE WITH GAGAS

FINDING NUMBER 2011-01

GAAP Reporting MATERIAL NONCOMPLIANCE Ohio Rev. Code Section 117.38 provides that each public office shall file a financial report for each fiscal year. The Auditor of State may prescribe forms by rule or may issue guidelines, or both, for such reports. If the Auditor of State has not prescribed a rule regarding the form for the report, the public office shall submit its report on the form utilized by the public office. Ohio Administrative Code Section 117-2-03 further clarifies the requirements of Ohio Rev. Code Section 117.38. Ohio Adm. Code Section 117-2-03(B) requires the School District to file annual financial reports which are prepared using generally accepted accounting principles (GAAP). For fiscal year 2011, the School District prepared financial statements that report on the basis of cash receipts and cash disbursements, rather than GAAP. The accompanying financial statements and notes omit certain assets, liabilities, fund equities, and disclosures that, while material, cannot be determined at this time. Pursuant to Ohio Rev. Code Section 117.38, the School District may be fined and subject to various other administrative remedies for its failure to file the required financial report. To help provide the users with more meaningful financial statements, the School District should prepare their annual financial statements according to generally accepted accounting principles. Official’s Response: The Board of Education and management of the District are knowledgeable concerning the required reporting format (GASB 34 / Generally Accepted Accounting Principles) and the similarities and differences from the required reporting format and the method currently incorporated by the District (Cash Basis of Accounting). District personnel considered the cost-benefit of the two reporting formats and determined reporting on the Cash Basis of Accounting format to be the more fiscally responsible format at this time.

31


FINDING NUMBER 2011-02 Material Weakness – Report Presentation of Activity The District’s fiscal year 2011 cash basis financial report had the following numerous errors: • The Special Revenue Fund had the refund of prior year receipts overstated by $5,810 and

miscellaneous revenue was overstated by $441,842. This Fund did not present charges for service line item, which amounted to $447,652.

• The Private Purpose Trust Fund was incorrectly presented as Enterprise Fund on the financial statement. The beginning fund balance was incorrectly presented.

• The School District is currently involved in an Ohio School Facilities construction project that requires the establishment of escrow bank accounts. The June 30, 2011 book balance was understated $273,045, the amount of the escrow account balances at fiscal year end.

Errors in the financial statements and accounting records inhibit the ability of the Treasurer and the Board of Education to properly monitor financial activity and to make sound financial decisions regarding the operations of the District. Reliance on financial information that contains errors could result in noncompliance with level of effort/maintenance of effort applicable to the federal grant compliance requirements.

To help provide meaningful information to the users of the District’s financial statements and accounting records, controls and recording procedures should be in place to help prevent and detect errors. The Treasurer should review the Uniform School Accounting System User Manual, Auditor of State Bulletins, specific grant requirements, and other resources for guidance in correctly classifying receipts and expenditures.

The District should implement policies and procedures to review the draft financial report. Proper review of the draft financial report will help assure accurate reporting and presentation. The adjustments noted above were made in the financial statements.

Official’s Response: The errors of this finding are referring to the placement of revenue and expenditures into an area of the auditor’s preferred formatted table rather than into another section of the table. No revenue or expenditure in the District’s accounting procedures for day to day operations has been misrepresented or misapplied. This error refers to a reporting table for the financial statement only. The Board of Education and management of the District go over in detail reports of revenue, expenditures, appropriations and budget of the District every month. These errors in no way inhibit the District from making sure that all funds are accounted for and appropriately managed. The escrow accounts were accounted for in the same method that was used in two previous building projects and there was never any mention from the auditor’s office of a problem. Since we are all public employees, it would make more sense for the auditor’s office provide districts guidance in specific situations that are only faced by districts in very rare instances. Auditor of State’s Analysis: Bank accounts in the school district’s name and the corresponding balances were not reflected on the District’s financial statements. Placement (recording) of revenue and expenditures should be posted in accordance with USAS (Uniform System of Accounting for Schools) which is required by Ohio Administrative Code 117-06-01(B). The adjustments above were required to comply with USAS standards.

32


FINDING NUMBER 2011-03 Material Noncompliance Ohio Revised Code Section 5705.36(A)(4) requires that upon a determination by the fiscal officer of a subdivision that the revenue to be collected by the subdivision will be less than the amount included in an official certificate and that the amount of the deficiency will reduce available resources below the level of current appropriations, the fiscal officer shall certify the amount of the deficiency to the commission, and the commission shall certify an amended certificate reflecting the deficiency. The following District fund had actual receipts less than the amount anticipated and should have requested a reduced amended certificate:

7/1/10 Unencumbered

Balance

Actual

Revenue

Total Available

Resources

Appropriations

Variance Title I Fund 572 $2,994 $214,141 $217,135 $318,889 ($101,754)

To help prevent the potential for deficit spending, the Treasurer and Board of Education should periodically compare estimated resources to actual resources to help identify which funds may not achieve estimated resource levels. The current level of appropriation should then be compared to actual resources to determine if an amended certificate of estimated resources should be obtained along with reducing appropriations. Official’s Response: While the Certificate of Available Resources could have been reduced, there was never potential of deficit spending due to the fact that the district reports cash availability every month to the board and sends requests for cash advances to the state to meet those needs. If cash was not available from the grant when the monthly request was made, the expenditures would not have been made.

3. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS Material Noncompliance/Material Weakness – Cash Management Finding Number 2011-04 CFDA Title and Number ARRA State Fiscal Stabilization Fund (SFSF) Education State

Grants – Recovery Act – CFDA 84.394 Special Education Cluster ARRA Special Education Grants to States – Recovery Act – CFDA 84.391

Federal Award Number/Year 2010/2011 Federal Agency U.S. Department of Education Pass-Through Agency Ohio Department of Education

34 CFR 80.20 (b)(7) requires that when advances are made by letter-of-credit or electronic transfer of funds methods, the grantee must make draw downs as close as possible to the time of making disbursements.

33


FINDING NUMBER 2011-04 (Continued)

The District received advance payments of ARRA State Fiscal Stabilization Funds (SFSF) from the Ohio Department of Education (ODE) via the State Foundation Settlement Sheet. During the fiscal year, the District accumulated a positive cash balance in the SFSF Fund due to the District not spending the cash received in a timely manner as follows:

Date SFSF Balance 10/28/10 $20,946 11/16/10 33,870 2/28/11 19,720 3/24/11 25,600 4/22/11 30,173

The District requested drawdown payments of Title VI-B monies (Special Education Grants to States – Recovery Act) from the Ohio Department of Education (ODE) via electronic fund transfers. During the fiscal year, the District did not expend the Title VI-B monies within thirty days of drawdown. The positive Title VI-B balances were as follows:

Date Title VI Balance 1/31/11 $19,001 2/28/11 12,236 3/31/11 2,927

The failure to spend federal grants in a timely manner could result in the District being required to return funding to the grantor agency. The loss of federal grant money could negatively impact the operations of the District. The District should implement procedures to help assure that the balances of federal grant funds are spent in a timely manner. Official’s Response: In past years, the auditor’s office remarked if the grants cash balance was negative, now they are commenting if it is positive. When a request was made for the amount that should be kept in a fund, there was no dollar or percentage amount given. The past year was unusual with the ARRA funding. There were even disputes to the end of the year as to what were legitimate expenditures for the ARRA funds. The District does not try to “pad” their bank accounts so as to gain some advantage. These were estimates in a new program with new requirements. Auditor of State’s Analysis: 34 CFR 80.20 (b)(7) requires grant recipients to minimize cash held on hand by scheduling drawdown requests appropriately.

34


CORRECTIVE ACTION PLAN

OMB CIRCULAR A -133 § .315 © JUNE 30, 2011

Finding Number

Planned Corrective

Action Anticipated Completion

Date

Responsible

Contact Person

2011-04

See Official’s Response on page 33.

35


www.ohioauditor.gov

Independent Accountants’ Report on Applying Agreed-Upon Procedure Graham Local School District Champaign County 370 E. Main Street St. Paris, OH 43072 To the Board of Education: Ohio Rev. Code Section 117.53 states “the auditor of state shall identify whether the school district or community school has adopted an anti-harassment policy in accordance with Section 3313.666 of the Revised Code. This determination shall be recorded in the audit report. The auditor of state shall not prescribe the content or operation of any anti-harassment policy adopted by a school district or community school.” Accordingly, we have performed the procedure enumerated below, which was agreed to by the Board, solely to assist the Board in evaluating whether Graham Local School District (the District) has updated its anti-harassment policy in accordance with Ohio Rev. Code Section 3313.666. Management is responsible for complying with this requirement. This agreed-upon procedure engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of this procedure is solely the responsibility of the Board. Consequently; we make no representation regarding the sufficiency of the procedure described below either for the purpose for which this report has been requested or for any other purpose.

1. We noted the Board amended its anti-harassment policy at its meeting on 11/23/10 to include violence within a dating relationship within its definition of harassment, intimidation or bullying.

We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on compliance with the anti-harassment policy. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Board and is not intended to be and should not be used by anyone other than these specified parties. Dave Yost Auditor of State February 9, 2012


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

www.auditor.state.oh.us

GRAHAM LOCAL SCHOOL DISTRICT

CHAMPION 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 APRIL 10, 2012

APPENDIX A-2AUDITED FINANCIAL REPORTS

FOR THE PERIOD JULY 1, 2009 - JUNE 30, 2010

The audited financials for the year ended June 30, 2010 are available on the Ohio StateAuditor's web site at www.auditor.state.oh.us. The reference to this web site is for the purpose ofthe Graham Local School District audited financials only; neither the District nor theUnderwriter makes any representation as to the accuracy of the information appearing at suchweb site. Neither the District nor the Underwriter undertakes any obligation to maintain orupdate such web site or such information contained on such web site.

A-2-1

http://www.auditor.state.oh.us/


APPENDIX BDISTRICT'S FIVE YEAR FORECAST

B-1

GRAHAM LOCAL SCHOOL DISTRICT - - CHAMPAIGN COUNTYSchedule Of Revenue, Expenditures and Changes In Fund Balances

Actual and Forecasted Operating Fund

ACTUAL FORECASTEDFiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year

2010 2011 2012 2013 2014 2015 2016 2017Revenue:

1.010 - General Property Tax (Real Estate) 3,988,529 3,586,690 3,895,806 3,855,194 3,956,438 4,052,376 4,106,467 4,205,416 1.020 - Tangible Personal Property Tax 157,107 150,960 153,413 151,006 151,006 151,006 151,006 151,006 1.030 - Income Tax - - - - - - - - 1.035 - Unrestricted Grants-in-Aid 10,355,276 10,106,639 10,579,438 10,417,315 10,318,963 10,353,387 10,328,799 10,328,799 1.040 - Restricted Grants-in-Aid 712,554 1,471,223 20,412 7,246 7,246 7,246 7,246 7,246 1.045 - Restricted Federal Grants-in-Aid - SFSF - - - - - - - - 1.050 - Property Tax Allocation 881,385 921,318 631,132 637,042 646,053 656,744 663,311 676,611 1.060 - All Other Operating Revenues 1,186,005 1,238,161 1,108,813 1,152,976 1,152,976 1,152,976 1,152,976 1,152,976

1.070 - Total Revenue 17,280,856 17,474,991 16,389,014 16,220,778 16,232,683 16,373,735 16,409,804 16,522,052

Other Financing Sources:2.010 - Proceeds from Sale of Notes - - - - - - - - 2.020 - State Emergency Loans and Advancements - - - - - - - - 2.040 - Operating Transfers-In - 3,021 5,081 - - - - - 2.050 - Advances-In - - 84,000 84,000 84,000 84,000 84,000 84,000 2.060 - All Other Financing Sources 36,326 33,345 4,748 - - - - - 2.070 - Total Other Financing Sources 36,326 36,366 93,829 84,000 84,000 84,000 84,000 84,000

2.080 - Total Revenues and Other Financing Sources 17,317,182 17,511,357 16,482,843 16,304,778 16,316,683 16,457,735 16,493,804 16,606,052

Expenditures:3.010 - Personnel Services 9,576,081 9,562,250 8,687,863 8,470,192 8,602,932 8,731,975 8,862,955 8,995,899 3.020 - Employees' Retirement/Insurance Benefits 3,780,153 3,649,308 3,269,391 3,284,527 3,484,913 3,756,356 4,008,048 4,287,740 3.030 - Purchased Services 3,364,925 2,995,897 3,043,287 3,104,153 3,166,236 3,229,561 3,294,152 3,360,035 3.040 - Supplies and Materials 606,186 541,081 555,507 566,617 577,949 589,508 601,299 613,325 3.050 - Capital Outlay 140,237 44,384 22,552 23,003 23,463 23,932 24,411 24,899 3.060 - Intergovernmental - - - - - - - -

Debt Service:4.010 - Principal-All Years 22,000 23,000 24,000 - - - - - 4.020 - Principal - Notes - - - - - - - - 4.030 - Principal - State Loans - - - - - - - - 4.040 - Principal - State Advances - - - - - - - - 4.050 - Principal - HB264 Loan - - - - - - - - 4.055 - Principal - Other - - - 25,000 26,000 27,000 28,000 29,000 4.060 - Interest and Fiscal Charges 12,431 11,522 10,572 9,582 8,549 7,475 6,360 5,204 4.300 - Other Objects 360,559 318,911 315,962 315,962 322,281 328,727 335,301 342,007

4.500 - Total Expenditures 17,862,572 17,146,353 15,929,134 15,799,036 16,212,323 16,694,535 17,160,526 17,658,110

Other Financing Uses5.010 - Operating Transfers-Out 55,365 1 84,000 84,000 84,000 84,000 84,000 84,000 5.020 - Advances-Out - - - - - - - - 5.030 - All Other Financing Uses 68,509 - - - - - - - 5.040 - Total Other Financing Uses 123,874 1 84,000 84,000 84,000 84,000 84,000 84,000

5.050 - Total Expenditures and Other Financing Uses 17,986,446 17,146,354 16,013,134 15,883,036 16,296,323 16,778,535 17,244,526 17,742,110

Excess of Rev & Other Financing Uses Over (Under) 6.010 - Expenditures and Other Financing Uses (669,264) 365,004 469,709 421,742 20,359 (320,801) (750,722) (1,136,058)

Cash Balance July 1 - Excluding Proposed Renewal/7.010 - Replacement and New Levies 974,883 305,619 670,622 1,140,331 1,562,073 1,582,433 1,261,632 510,910

7.020 - Cash Balance June 30 305,619 670,622 1,140,331 1,562,073 1,582,433 1,261,632 510,910 (625,148)

8.010 - Estimated Encumbrances June 30 243,250 30,489 75,580 100,000 150,000 150,000 150,000 150,000

Reservations of Fund Balance:9.010 - Textbooks and Instructional Materials - - - - - - - - 9.020 - Capital Improvements - - - - - - - - 9.030 - Budget Reserve - - - - - - - - 9.040 - DPIA - - - - - - - - 9.050 - Debt Service - - - - - - - - 9.060 - Property Tax Advances - - - - - - - - 9.070 - Bus Purchases - - - - - - - - 9.080 - Subtotal - - - - - - - -

Fund Balance June 30 for Certification10.010 - of Appropriations 62,369 640,133 1,064,751 1,462,073 1,432,433 1,111,632 360,910 (775,148)

Rev from Replacement/Renewal Levies11.010 - Income Tax - Renewal - - - - - 11.020 - Property Tax - Renewal or Replacement - - - - - 11.030 - Cumulative Balance of Replacement/Renewal Levies - - - - - - - -

Fund Balance June 30 for Certification 12.010 - of Contracts, Salary and Other Obligations 62,369 640,133 1,064,751 1,462,073 1,432,433 1,111,632 360,910 (775,148)

Revenue from New Levies13.010 - Income Tax - New - - - - - 13.020 - Property Tax - New - - - - - 13.030 - Cumulative Balance of New Levies - - - - - - - -

14.010 - Revenue from Future State Advancements - - - - - - - -

15.010 - Unreserved Fund Balance June 30 62,369 640,133 1,064,751 1,462,073 1,432,433 1,111,632 360,910 (775,148)

ADM Forecasts20.010 - Kindergarten - October Count 133 145 132 122 130 20.015 - Grades 1-12 - October Count 1,868 1,833 1,849 1,849 1,839 20.020 - Kindergarten - February County - - - - - 20.025 - Grades 1-12 - February Count - - - - -

B-2

APPENDIX C-1CHAMPAIGN COUNTY TAX RATES

C-1-1

C-1-2

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2

28

. N. L

ewis

burg

Cor

p.-T

riad

L.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

.60

5.50

.50

1.20

28.6

02.

001.

2051

.00

0.18

1110

0.09

2527

41.7

6

46

.28

29. W

oods

tock

Cor

p.-T

riad

L.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

.60

5.50

.50

1.20

28.6

02.

001.

2051

.00

0.18

1110

0.09

2527

41.7

6

46

.28

SA

LEM

TO

WN

SHIP

30

. Con

gres

slan

ds-W

.L. S

alem

L.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

.80

1.80

1.80

.10

1.20

35.1

02.

0054

.20

0.31

3358

0.28

9701

37.2

2

38

.50

34. C

ongr

essl

ands

-Gra

ham

L.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

.80

1.80

1.80

.10

1.70

34.6

752.

0054

.275

0.19

9691

0.17

3123

43.4

4

44

.88

49. U

rban

a C

orp.

-Urb

ana

C.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

1.20

68.0

52.

003.

3085

.95

0.42

2827

0.26

4044

49.6

1

63

.26

50. U

rban

a C

orp.

-W.L

. Sal

em2.

60.2

01.

005.

501.

00.4

0.7

0.8

0.1

01.

2035

.10

2.00

2.40

53.0

00.

3118

48

0.

2848

90

36

.47

37.9

0

U

NIO

N T

OW

NSH

IP

35. U

n.-M

echa

nics

burg

-Mec

h. E

.V.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

1.30

2.00

2.50

1.00

40.0

52.

0060

.25

0.20

7345

0.14

6417

47.7

6

51

.43

36. U

n.-N

.E.-L

.S.D

. Cla

rk C

o.2.

60.2

01.

005.

501.

00.4

0.7

01.

302.

002.

501.

2046

.79

3.00

68.1

90.

3435

99

0.

2798

46

44

.76

49.1

1

37

. Un.

-Tria

d-L.

S.D

.2.

60.2

01.

005.

501.

00.4

0.7

01.

302.

002.

501.

2028

.60

2.00

49.0

00.

1870

73

0.

1099

19

39

.83

43.6

1

38

. Un.

-W.L

. Sal

em L

.S.D

.2.

60.2

01.

005.

501.

00.4

0.7

01.

302.

002.

501.

2035

.10

2.00

55.5

00.

3111

85

0.

2882

77

38

.23

39.5

0

39

. Un.

-Urb

ana

C.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

1.30

2.00

2.50

1.20

68.0

52.

0088

.45

0.41

9275

0.26

6758

51.3

7

64

.86

40. M

utua

l-Mec

h. E

.V.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

1.30

1.00

40.0

52.

002.

7558

.50

0.21

5505

0.14

0034

45.8

9

50

.31

UR

BAN

A TO

WN

SHIP

41

. Urb

ana-

Urb

ana

C.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

.10

4.10

1.40

1.20

68.0

52.

0088

.25

0.41

1813

0.25

7162

51.9

1

65

.56

42. U

rban

a-N

.W.-L

.S.D

.2.

60.2

01.

005.

501.

00.4

0.7

0.1

04.

101.

401.

2038

.52

3.00

59.7

20.

0984

22

0.

0647

21

53

.84

55.8

5

48

. Urb

ana

Cor

pora

tion-

Urb

ana

C.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

.10

1.20

68.0

52.

003.

3086

.05

0.42

2336

0.26

3737

49.7

1

63

.36

WAY

NE

TOW

NSH

IP

43. T

riad

L.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

1.00

5.50

6.70

.10

1.20

28.6

02.

0056

.50

0.19

7266

0.11

5605

45.3

5

49

.97

47. W

ayne

Sal

em-W

.L. S

alem

L.S

.D.

2.60

.20

1.00

5.50

1.00

.40

.70

1.00

5.50

6.70

.10

1.20

35.1

02.

0063

.00

0.30

5551

0.27

2143

43.7

5

45

.86

2011

Ker

mit

D. R

usse

ll, T

reas

urer

C

ham

paig

n C

ount

y, O

hio

2011

APPENDIX C-2SHELBY COUNTY TAX RATES

C-2-1

C-2-2

OLD

NE

WD

ISTR

ICT

MR

DD

TR

I-CO

CO

UN

TYS

CH

OO

LFI

RE

&20

11R

ES

& A

GR

RES

& A

GR

ALL

OTH

ER

ALL

OTH

ERD

ISTR

DIS

TRM

EN

TAL

INC

LUD

ES

INC

LUD

ES

AM

BU

LTO

TAL

RE

DU

CTI

ON

EFFE

CTI

VER

ED

UC

TIO

NEF

FEC

TIVE

NU

MN

UM

HE

ALT

HH

EA

LTH

JVS

TWP

DIS

TRIC

TC

OR

P.

RA

TEFA

CTO

RS

RA

TEFA

CTO

RS

RA

TE

CLI

NTO

N T

OW

NS

HIP

0010

02

Sid

ney

S.D

. 7.

002.

7053

.12

4.20

0.00

0.00

67.0

20.

2610

49.5

299

0.21

5652

.569

100

2001

S

idne

y C

orp.

S.S

.D.

7.00

2.70

53.1

20.

100.

003.

2066

.12

0.26

4548

.629

90.

2186

51.6

691

CY

NTH

IAN

TO

WN

SH

IP00

3003

Fo

rt Lo

ram

ie S

D,L

AD

,LFD

7.00

2.70

52.8

22.

003.

000.

0067

.52

0.32

6945

.445

20.

2253

52.3

047

0040

04

Har

din-

Hou

ston

SD

, LFD

, HA

D7.

002.

7040

.69

2.00

2.10

0.00

54.4

90.

2282

42.0

579

0.17

8344

.774

900

5005

R

ussi

a S

D, L

FD, H

AD

7.00

2.70

51.8

72.

002.

100.

0065

.67

0.24

9449

.291

90.

0909

59.6

996

0045

06

Har

din-

Hou

ston

SD

, LFD

, LA

D7.

002.

7040

.69

2.00

3.00

0.00

55.3

90.

2236

43.0

053

0.17

4445

.730

600

5507

R

ussi

a S

D, L

FD, L

AD

7.00

2.70

51.8

72.

003.

000.

0066

.57

0.24

5350

.239

30.

0889

60.6

552

DIN

SM

OR

E T

OW

NS

HIP

0060

08

Ann

a S

D7.

002.

7035

.52

3.60

0.00

0.00

48.8

20.

2713

35.5

772

0.14

5141

.735

800

7009

A

nna

Cor

p. A

SD

7.00

2.70

35.5

20.

600.

002.

0047

.82

0.27

4434

.697

50.

1480

40.7

440

0080

10

Bot

kins

SD

7.00

2.70

40.7

13.

600.

000.

0054

.01

0.17

9144

.338

50.

1085

48.1

482

0090

11

Bot

kins

Cor

p., B

SD

7.00

2.70

40.7

10.

600.

002.

2053

.21

0.17

9543

.658

80.

1100

47.3

563

0095

12

Bot

kins

Cor

p., A

SD

7.00

2.70

35.5

20.

600.

002.

0047

.82

0.27

4434

.697

50.

1480

40.7

440

FRA

NK

LIN

TO

WN

SH

IP01

0013

A

nna

SD

7.00

2.70

35.5

23.

400.

000.

0048

.62

0.28

2334

.893

60.

1512

41.2

684

0110

14

Ann

a C

orp.

AS

D7.

002.

7035

.52

0.60

0.00

2.00

47.8

20.

2771

34.5

672

0.14

9140

.688

601

2015

S

idne

y S

D7.

002.

7053

.12

3.40

0.00

0.00

66.2

20.

2739

48.0

852

0.22

2451

.493

601

2516

S

idne

y C

orp.

, SS

D7.

002.

7053

.12

0.10

0.00

3.20

66.1

20.

2645

48.6

299

0.21

8651

.669

1G

RE

EN

TO

WN

SH

IP01

3017

Fa

irlaw

n S

D7.

002.

7043

.49

2.80

0.00

0.00

55.9

90.

1572

47.1

879

0.10

9749

.845

901

4018

G

raha

m S

D7.

002.

7036

.67

2.80

0.50

0.00

49.6

70.

2104

39.2

189

0.17

1741

.144

1JA

CK

SO

N T

OW

NS

HIP

0150

19

Jack

son

Cen

ter S

D7.

002.

7051

.02

3.40

0.00

0.00

64.1

20.

3769

39.9

529

0.19

9751

.318

101

6020

Ja

ckso

n C

ente

r Cor

p., J

CS

D7.

002.

7051

.02

0.40

0.00

4.00

65.1

20.

3684

41.1

293

0.19

6852

.305

2LO

RA

MIE

TO

WN

SH

IP01

7021

B

radf

ord

SD

, RFD

7.00

2.70

34.4

74.

820.

600.

0049

.59

0.21

9438

.712

00.

1655

41.3

805

0180

22

Har

din-

Hou

ston

SD

, HF,

HA

D7.

002.

7040

.69

4.50

0.60

0.00

55.4

90.

2294

42.7

633

0.18

3345

.320

001

9023

R

ussi

a S

D, R

FD7.

002.

7051

.87

4.82

0.60

0.00

66.9

90.

2468

50.4

576

0.09

0460

.936

102

1024

R

ussi

a C

orp.

, RS

D, R

FD7.

002.

7051

.87

3.62

0.00

1.20

66.3

90.

2473

49.9

714

0.09

0160

.407

502

1525

V

ersa

illes

SD

, RFD

7.00

2.70

48.2

84.

820.

600.

0063

.40

0.32

1443

.023

40.

2363

48.4

165

0185

26

Har

din-

Hou

ston

SD

, RFD

7.00

2.70

40.6

94.

820.

600.

0055

.81

0.22

5543

.223

60.

1756

46.0

114

0195

27

Rus

sia

SD

, RFD

, HA

D7.

002.

7051

.87

4.82

0.60

0.00

66.9

90.

2468

50.4

576

0.09

0460

.936

101

8728

H

ardi

n-H

oust

on S

D, H

AD

, RFD

7.00

2.70

40.6

94.

820.

600.

0055

.81

0.22

5543

.223

60.

1756

46.0

114

RA

TES

OF

TAX

ATI

ON

FO

R 2

011

SHEL

BY

CO

UN

TY, O

HIO

In p

ursu

ance

of l

aw, I

, Lin

da S

. Mei

ning

er, T

reas

urer

of S

helb

y C

ount

y, O

hio

do h

ereb

y gi

ve n

otic

e th

at th

e nu

mbe

r of d

olla

rs a

nd c

ents

levi

ed o

n ea

ch $

1000

of p

rope

rty

liste

d fo

r tax

atio

n in

sai

d co

unty

for t

he ta

x ye

ar a

s fo

llow

s:

C-2-3

MC

LEA

N T

OW

NS

HIP

0220

29

Ann

a S

D, L

FD7.

002.

7035

.52

2.20

1.50

0.00

48.9

20.

2688

35.7

708

0.14

5041

.829

102

3030

Fo

rt Lo

ram

ie S

D, L

FD, L

AD

7.00

2.70

52.8

22.

203.

000.

0067

.72

0.32

6045

.645

20.

2247

52.5

047

0240

31

Fort

Lora

mie

Cor

p., L

FD, L

AD

7.00

2.70

52.8

20.

403.

003.

9569

.87

0.31

5947

.795

20.

2182

54.6

214

0250

32

Min

ster

SD

, LFD

7.00

2.70

53.1

72.

201.

500.

0066

.57

0.32

5944

.877

80.

0931

60.3

698

0260

33

New

Bre

men

SD

, LFD

, LA

D7.

002.

7051

.55

2.20

3.00

0.00

66.4

50.

3810

41.1

349

0.21

9151

.892

802

2534

A

nna

SD

, LFD

, LA

D7.

002.

7035

.52

2.20

3.00

0.00

50.4

20.

2621

37.2

045

0.14

1043

.313

202

5535

M

inst

er S

D, L

FD, L

AD

7.00

2.70

53.1

72.

203.

000.

0068

.07

0.31

9746

.311

50.

0913

61.8

540

OR

AN

GE

TO

WN

SH

IP02

7036

S

idne

y S

D7.

002.

7053

.12

2.70

0.00

0.00

65.5

20.

2719

47.7

050

0.22

9950

.456

802

7537

S

idne

y C

orp.

SS

D7.

002.

7053

.12

0.30

0.00

3.00

66.1

20.

2645

48.6

299

0.21

8651

.669

1P

ER

RY

TO

WN

SH

IP02

8038

Fa

irlaw

n S

D, P

PS

Res

.7.

002.

7043

.49

2.10

0.80

0.00

56.0

90.

1551

47.3

899

0.10

6250

.133

702

8563

Sid

ney

Cor

p, F

airla

wn

SD

7.00

2.70

43.4

92.

100.

000.

6055

.89

0.15

3047

.340

20.

1065

49.9

366

SA

LEM

TO

WN

SH

IP02

9039

A

nna

SD

, PP

S R

es.

7.00

2.70

35.5

23.

200.

800.

0049

.22

0.27

1435

.863

40.

1438

42.1

411

0300

40

Fairl

awn

SD

, PP

S R

es7.

002.

7043

.49

3.20

0.80

0.00

57.1

90.

1498

48.6

227

0.10

3551

.272

403

1041

Ja

ckso

n S

D. P

PS

Res

.7.

002.

7051

.02

3.20

0.80

0.00

64.7

20.

3749

40.4

544

0.19

7951

.915

203

2042

P

t. Je

ffers

on C

orp.

SS

D, P

PS

7.00

2.70

53.1

20.

600.

802.

7066

.92

0.26

3649

.279

60.

2160

52.4

662

0330

43

Riv

ersi

de S

D, P

PS

Res

.7.

002.

7054

.30

3.20

0.80

0.00

68.0

00.

4259

39.0

420

0.37

9942

.165

403

4044

S

idne

y S

D, P

PS

Res

.7.

002.

7053

.12

3.20

0.80

0.00

66.8

20.

2659

49.0

550

0.21

6352

.366

2TU

RTL

E C

RE

EK

TO

WN

SH

IP03

5045

A

nna

SD

, LFD

, LA

D7.

002.

7035

.52

2.10

3.00

0.00

50.3

20.

2626

37.1

045

0.14

1243

.213

203

6046

Fo

rt Lo

ram

ie S

D, L

FD, L

AD

7.00

2.70

52.8

22.

103.

000.

0067

.62

0.32

6545

.545

20.

2250

52.4

047

0370

47

Har

din-

Hou

ston

SD

, LFD

, HA

D7.

002.

7040

.69

2.10

2.10

0.00

54.5

90.

2277

42.1

579

0.17

8044

.874

903

7548

H

ardi

n-H

oust

on S

D, L

FD, L

AD

7.00

2.70

40.6

92.

103.

000.

0055

.49

0.22

3243

.105

30.

1741

45.8

306

0365

49

Sid

ney

Cor

p. ,

HH

SD

7.00

2.70

40.6

90.

500.

001.

6052

.49

0.23

3440

.239

20.

1834

42.8

613

VA

N B

UR

EN

TO

WN

HIP

0380

50

Ann

a S

D (K

FD)

7.00

2.70

35.5

25.

600.

000.

0050

.82

0.28

4536

.360

00.

1615

42.6

125

0390

51

Ann

a S

D, N

Fire

(NK

FD)

7.00

2.70

35.5

27.

600.

000.

0052

.82

0.28

3637

.837

70.

1605

44.3

438

0400

52

Bot

kins

SD

(KFD

)7.

002.

7040

.71

5.60

0.00

0.00

56.0

10.

1944

45.1

213

0.12

4749

.024

904

1053

K

ettle

rsvi

lle C

orp.

AS

D (K

FD)

7.00

2.70

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a S

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reas

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lby

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nty,

Ohi

o T

he R

educ

tion

Fact

ors

App

ly to

Rea

l Est

ate

Onl

y


APPENDIX D-1CHAMPAIGN COUNTY TEN-MILL CERTIFICATE

(ENERGY CONSERVATION BONDS ONLY)*

* Subject to final approval.

D-1-1

TE

N-M

ILL

CE

RT

IFIC

AT

E*

FO

R P

OL

ITIC

AL

SU

BD

IVIS

ION

S I

SS

UIN

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ED

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AN

D N

OT

ES

T

he

un

der

sign

ed,

CO

UN

TY

AU

DIT

OR

of

CH

AM

PA

IGN

CO

UN

TY

, O

HIO

, h

ereb

y c

erti

fies

in

co

nn

ecti

on

wit

h a

pro

po

sed

iss

ue

of

Bo

nd

s o

f th

e G

RA

HA

M L

OC

AL

SC

HO

OL

DIS

TR

ICT

in

th

e p

rinci

pal

am

ou

nt

of

$5

85

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, d

ated

as

of

Oct

ob

er 2

4,

20

12

, th

at t

he

rate

s re

qu

ired

to

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du

ce t

he

hig

hes

t an

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al d

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char

ges

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r th

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d

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bd

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s o

ver

lap

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g i

t, w

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re p

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le f

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ub

ject

to

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e 1

0 m

ill

lim

itat

ion

of

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icle

XII

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ecti

on

2,

Ohio

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tio

n,

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ed u

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n t

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ter

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min

g t

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ies

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e to

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mad

e th

eref

or

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gen

eral

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du

pli

cate

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ow

s:

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bd

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esse

d

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ati

on

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ds

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d N

ote

s

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tsta

nd

ing

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sen

t

Pri

nci

pal

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ou

nt

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t C

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rges

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fisc

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r in

wh

ich

they

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l th

e h

igh

est,

to w

it, 2

01

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uir

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Rate

For

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o P

revio

us

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mn

s

fo

r P

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amp

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unty

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unty

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0

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00

0 M

ILL

S

(b

) A

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s &

note

s

pay

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m o

r se

cure

d b

y

taxes

in

sid

e 1

0 m

ill

lim

itat

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: $

1,6

55

,00

0

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70

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$4

5,6

00

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325

6 M

ILL

S

St.

Par

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illa

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in

sid

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ILL

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ham

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cal

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ool

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s &

note

s p

ayab

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rom

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ship

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& n

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s in

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gin

al o

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:

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N/A

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(i.e

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s an

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s p

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mil

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mit

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ropo

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TA

L

1.0

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ILL

S

DA

TE

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his

_____ d

ay o

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ctober

_, 2012.

CO

UN

TY

AU

DIT

OR

* S

ub

ject

to

fin

al a

pp

roval

.

D-1-2

APPENDIX D-2SHELBY COUNTY TEN-MILL CERTIFICATE(ENERGY CONSERVATION BONDS ONLY)*

* Subject to final approval.

D-2-1

TE

N-M

ILL

CE

RT

IFIC

AT

E*

FO

R P

OL

ITIC

AL

SU

BD

IVIS

ION

S I

SS

UIN

G U

NV

OT

ED

GE

NE

RA

L O

BL

IGA

TIO

N B

ON

DS

AN

D N

OT

ES

T

he

un

der

sign

ed,

CO

UN

TY

AU

DIT

OR

of

SH

EL

BY

CO

UN

TY

, O

HIO

, h

ereb

y c

erti

fies

in

co

nn

ecti

on w

ith

a p

ropo

sed

iss

ue

of

Bo

nd

s o

f th

e G

RA

HA

M L

OC

AL

SC

HO

OL

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TR

ICT

in

th

e p

rin

cip

al a

mo

un

t o

f $

585

,000

, d

ated

as

of

Oct

ob

er 2

4,

201

2,

that

th

e ra

tes

req

uir

ed t

o p

rodu

ce t

he

hig

hes

t an

nu

al d

ebt

char

ges

fo

r th

e p

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ssu

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d a

ll o

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f sa

id s

ub

div

isio

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lap

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hic

h a

re p

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le f

rom

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ject

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e 10

mil

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mit

atio

n o

f A

rtic

le X

II,

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tion

2,

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io C

on

stit

uti

on

, b

ased

upon

the

fact

s h

erei

naf

ter

set

fort

h a

nd

ass

um

ing t

hat

all

lev

ies

wer

e to

be

mad

e th

eref

or

on

th

e gen

eral

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du

pli

cate

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as

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ow

s:

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lap

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g

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bd

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esse

d

Valu

ati

on

Bon

ds

an

d N

ote

s

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tsta

nd

ing

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sen

t

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nci

pal

Am

ou

nt

Deb

t C

ha

rges

for

fisc

al

yea

r in

wh

ich

they

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l th

e h

igh

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it, 2

01

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Req

uir

ed

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Rate

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in o

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N

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0

.00

00

0 M

ILL

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(b

) A

ll o

ther

bo

nd

s &

note

s

pay

able

fro

m o

r se

cure

d b

y

taxes

in

sid

e 1

0 m

ill

lim

itat

ion

:

N/A

N

/A

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0

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0 M

ILL

S

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y o

r

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lage

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(a)

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t

bo

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in o

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:

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0

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0 M

ILL

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(b

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:

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ILL

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ham

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cal

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ool

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tric

t

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tric

t

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nd

s &

note

s p

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rom

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in

sid

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ill

lim

itat

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:

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0

.00000 M

ILL

S

N/A

To

wn

ship

(if

any)

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ecia

l A

sses

smen

t b

ond

s

& n

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s in

ori

gin

al o

r

refu

nd

ed f

orm

:

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N/A

0.0

00

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ecia

l

Dis

tric

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(i.e

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S)

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Bo

nd

s an

d n

ote

s p

ayab

le

fro

m o

r se

cure

d b

y t

axes

insi

de

10

mil

l li

mit

atio

n:

N/A

N

/A

N/A

0.0

00

00

MIL

LS

P

ropo

sed

iss

ue:

$39,0

00

$32,1

75

0.3

0146 M

ILL

S

TO

TA

L

0.3

0146 M

ILL

S

DA

TE

D t

his

_____ d

ay o

f O

ctober

_, 2012.

CO

UN

TY

AU

DIT

OR

* S

ub

ject

to

fin

al a

pp

roval

.

D-2-2

E-1

APPENDIX EFINANCIAL STATEMENT

FINANCIAL STATEMENT FOR BOARD OF EDUCATIONOhio Revised Code Sections 133.04, 133.06 and 133.33

I, Bob Hoover, Treasurer of the Board of Education of the Graham Local School District in Champaign and ShelbyCounties, Ohio, do hereby certify that the following statements concerning the finances of such Board of Education and SchoolDistrict are true and correct:

1. Tax valuation of the School District as shown by the tax lists and duplicates for the calendar year 2012, the year mostrecently certified for collection:............................................................................................................................................ $ 236,841,930

2. Total principal amount of all outstanding securities of the Board of Education, including the present issue of$8,580,000 .............................................................................................................................................................................$ $17,899,000

3. Exempt securities included in item 2:(a) Notes issued in anticipation of the collection of current revenues under Section 133.10

O.R.C.: ........................................................................................................................................ $

(b) Notes issued in anticipation of the collection of taxes under Sections 133.10 or 133.301O.R.C.: ........................................................................................................................................ $

(c) Notes with maturities over one year and issued in anticipation of the collection of theproceeds from a specifically identified voter-approved tax levy under Section 5705.194 orSection 5705.21 O.R.C.:.............................................................................................................. $

(d) Securities issued under Sections 139.01 to 139.04 O.R.C. to participate in Federal aidprograms: .................................................................................................................................... $

(e) Securities issued prior to August 19, 1994 to finance energy conservation measures underSection 3313.372 O.R.C.:............................................................................................................ $

(f) Securities evidencing loans received under Sections 3313.483, 3317.0211 and 3317.64O.R.C.: ........................................................................................................................................ $

(g) Securities issued for school buses and other equipment used in transporting pupils underSection 133.06(D) O.R.C.: .......................................................................................................... $

(h) Securities issued to establish a self-insurance program for health care benefits under Section9.833 O.R.C.: .............................................................................................................................. $

(i) Other exempt securities: OASBO – Port Authority Lease Obligations .................................... $ 355,000

Total of items 3(a) to 3(i), inclusive:...................................................................................................................... $ 355,000

4. (a) Total securities subject to 9% limitation [item 2 minus item 3]: ................................................................................ $ $17,544,188(b) Bond retirement fund applicable to principal of such securities:................................................................................ $ -0-

(c) Net amount subject to 9% limitation: ......................................................................................................................... $ $17,544,188

5. Securities included in item 4(a), but issued without authority of an election:........................................................................ $ 590,000

6. (a) Securities included in item 5 issued for energy conservation measures under Section 3313.372O.R.C. after August 19, 1994 and Section 133.06(G) O.R.C.: ................................................................................... $ 590,000

(b) Bond retirement fund applicable to principal of such securities:................................................................................ $ -0-(c) Net amount subject to 9/10 of 1% limitation of Section 133.06(G) O.R.C.: .............................................................. $ 590,000

7. (a) Unvoted securities issued for other purposes [item 5 minus item 6(a)]:..................................................................... $ -0-(b) Bond retirement fund applicable to principal of such securities:................................................................................ $ -0-(c) Net amount subject to 1/10 of 1% limitation of Section 133.06(A) O.R.C.: .............................................................. $ -0-

8. Bonds or notes issued for the purchase of classroom facilities from the State under Chapter 3318 O.R.C.,included in item 4(a):............................................................................................................................................................. $ -0-

9. Bonds or notes included in item 4(a) but issued beyond 9% limitation by virtue of certification asapproved special needs district under Section 133.06(E) O.R.C.:.......................................................................................... $ -0-

IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of October, 2012.

/s/ Bob HooverTreasurer


F-1-1

APPENDIX F-1SPECIMEN OPINION OF BOND COUNSEL

(REFUNDING BONDS)

The form of the legal approving opinion of Peck, Shaffer & Williams LLP, Bond Counsel,is set forth below. The actual opinion will be delivered on the date of delivery of the bondsreferred to therein and may vary from the form set forth to reflect circumstances both factual andlegal at the time of such delivery. Recirculation of the Final Official Statement shall create noimplication that Peck, Shaffer & Williams LLP has reviewed any of the matters set forth in suchopinion subsequent to the date of such opinion.

[Closing Date]

RBC Capital Markets, LLCCincinnati, Ohio

Ladies and Gentlemen:

We have examined the transcript of proceedings submitted relating to the issuance of$7,990,000 School Improvement General Obligation Refunding Bonds, Series 2012 consisting ofCurrent Interest Bonds and Capital Appreciation Bonds (collectively, the "Refunding Bonds") ofthe Board of Education of the Graham Local School District (the "Issuer"), Counties ofChampaign and Shelby, Ohio, dated October 24, 2012, numbered CIB-1 upward and of thedenominations of $5,000 and any integral multiple thereof with respect to the Current InterestBonds and numbered from CAB-1 upward in denominations equal to the principal amounts that,when interest is accrued and compounded thereon from their respective dates on each InterestAccretion Date, will equal a $5,000 Maturity Amount (which means, with respect to a CapitalAppreciation Bond, the principal and interest due and payable at the stated maturity of theCapital Appreciation Bond) and any integral multiples thereof, with respect to the CapitalAppreciation Bonds. The Refunding Bonds mature, bear interest and are subject to redemptionupon the terms set forth therein. We have also examined an executed and authenticated CurrentInterest Bond and Capital Appreciation Bond, each of the first maturity.

Based on this examination, we are of the opinion, based upon laws, regulations, rulingsand decisions in effect on the date hereof, that:

1. The Refunding Bonds constitute valid obligations of the Issuer inaccordance with their terms, which unless paid from other sources, are payable from anad valorem tax to be levied upon all the taxable property in the Issuer, without limitationas to rate or amount.

2. Under the laws, regulations, rulings and judicial decisions in effect as ofthe date hereof, interest on the Refunding Bonds is excludible from gross income forfederal income tax purposes, pursuant to the Internal Revenue Code of 1986, as amended(the "Code"). Furthermore, interest on the Refunding Bonds will not be treated as aspecific item of tax preference, under Section 57(a)(5) of the Code, in computing thealternative minimum tax for individuals and corporations. In rendering the opinions in

F-1-2

this paragraph, we have assumed continuing compliance with certain covenants designedto meet the requirements of Section 103 of the Code. Interest on the Refunding Bonds isexempt from taxes levied by the State of Ohio and its subdivisions, including the Ohiopersonal income tax, and also excludible from the net income base used in calculating theOhio corporate franchise tax, the Ohio commercial activity tax, and municipal, schooldistrict, and joint economic development district income taxes in Ohio. We express noother opinion as to the federal or state tax consequences of purchasing, holding ordisposing of the Refunding Bonds.

The Issuer has designated the Refunding Bonds as "qualified tax-exempt obligations"with respect to investments by certain financial institutions under section 265 of the Code.

In giving this opinion, we have relied upon covenants and certifications of facts,estimates and expectations made by officials of the Issuer and others contained in the transcriptwhich we have not independently verified. It is to be understood that the enforceability of theRefunding Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium andother laws in effect from time to time affecting creditors' rights, and to the exercise of judicialdiscretion.

This opinion is not intended or provided to be used and cannot be used by an owner ofthe Series 2012 Bonds for the purpose of avoiding penalties that may be imposed on the ownerof such Series 2012 Bonds. Each owner of the Series 2012 Bonds should seek advice based onits particular circumstances from an independent tax advisor.

Very truly yours,

PECK, SHAFFER & WILLIAMS LLP

F-2-1

APPENDIX F-2SPECIMEN OPINION OF BOND COUNSEL

(ENERGY CONSERVATION BONDS)

The form of the legal approving opinion of Peck, Shaffer & Williams LLP, Bond Counsel,is set forth below. The actual opinion will be delivered on the date of delivery of the bondsreferred to therein and may vary from the form set forth to reflect circumstances both factual andlegal at the time of such delivery. Recirculation of the Final Official Statement shall create noimplication that Peck, Shaffer & Williams LLP has reviewed any of the matters set forth in suchopinion subsequent to the date of such opinion.

[Closing Date]

RBC Capital Markets, LLCCincinnati, Ohio

Ladies and Gentlemen:

We have examined the transcript of proceedings submitted relating to the issuance of$590,000 Energy Conservation General Obligation Bonds, Series 2012 (the "Bonds") of theBoard of Education of the Graham Local School District (the "Issuer"), Counties of Champaignand Shelby, Ohio, dated October 24, 2012, numbered R-1 upward and of the denominations of$5,000 and any integral multiple thereof. The Bonds mature, bear interest and are subject toredemption upon the terms set forth therein. We have also examined an executed andauthenticated Bond of the first maturity.

Based on this examination, we are of the opinion, based upon laws, regulations, rulingsand decisions in effect on the date hereof, that:

1. The Bonds constitute valid obligations of the Issuer in accordance withtheir terms, which unless paid from other sources, are payable from an ad valorem tax tobe levied upon all the taxable property in the Issuer, within the limitations prescribed bylaw.

2. Under the laws, regulations, rulings and judicial decisions in effect as ofthe date hereof, interest on the Bonds is excludible from gross income for federal incometax purposes, pursuant to the Internal Revenue Code of 1986, as amended (the "Code").Furthermore, interest on the Bonds will not be treated as a specific item of tax preference,under Section 57(a)(5) of the Code, in computing the alternative minimum tax forindividuals and corporations. In rendering the opinions in this paragraph, we haveassumed continuing compliance with certain covenants designed to meet therequirements of Section 103 of the Code. Interest on the Bonds is exempt from taxeslevied by the State of Ohio and its subdivisions, including the Ohio personal income tax,and also excludible from the net income base used in calculating the Ohio corporatefranchise tax, the Ohio commercial activity tax, and municipal, school district, and jointeconomic development district income taxes in Ohio. We express no other opinion as tothe federal or state tax consequences of purchasing, holding or disposing of the Bonds.

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The Issuer has designated the Bonds as "qualified tax-exempt obligations" with respect toinvestments by certain financial institutions under section 265 of the Code.

In giving this opinion, we have relied upon covenants and certifications of facts,estimates and expectations made by officials of the Issuer and others contained in the transcriptwhich we have not independently verified. It is to be understood that the enforceability of theBonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other laws ineffect from time to time affecting creditors' rights, and to the exercise of judicial discretion.

This opinion is not intended or provided to be used and cannot be used by an owner ofthe Bonds for the purpose of avoiding penalties that may be imposed on the owner of suchBonds. Each owner of the Bonds should seek advice based on its particular circumstances froman independent tax advisor.

Very truly yours,

PECK, SHAFFER & WILLIAMS LLP

APPENDIX GSUMMARY OF ANNUAL APPROPRIATION RESOLUTION

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PERMANENT APPROPRIATION RESOLUTIONGRAHAM LOCAL BOARD OF EDUCATION

Rev. Code, Sec. 5705.38

The Board of Education of the Graham Local School District, ChampaignCounty, Ohio, met in regular session on the 24th day of September, 2012,at the Graham Board Office with the following memberspresent:

Mr. Evilsizor, Mr. Miller, Mr. Mitchell, Ms. Turner, Mr. Wagner.

Mr. Evilsizor moved the adoption of the following resolution:

BE IT RESOLVED by the Board of Education of the Graham LocalSchool District, Champaign County, Ohio that to provide for the currentexpenses and other expenditures of said Board of Education, during thefiscal year ending June 30, 2013, the following sums be and the same arehereby set aside and appropriated for the several purposes for whichexpenditures are to be made and during said fiscal year, as follows:

General FundSalaries/Wages $8,520,000.00 -$80,000.00Benefits $3,300,000.00Contract Services $3,220,000.00 $20,000.00Supplies/Materials $580,000.00 $10,000.00Capital Outlay $30,000.00Other $360,000.00Advances-Transfers $84,000.00 -$10,000.00001 General Fund $16,094,000.00 -$60,000.00

Special Revenue Funds018 Pupil Support $200,000.00 $5,904.00019 M Jennings Foundation $3,000.00034 Classroom Fac Maintenance $320,000.00 $15,118.00300 Athletic Fund $225,000.00 $5,750.00432 EMIS $0.00451 One Net $5,400.00516 Title VI-B $419,897.71533 Title II-D $0.00 -$1,550.27572 Title 1 Fund $339,000.00 $13,615.13587 Early Childhood Spec Education $14,799.34590 Title VI-R Class Reduction $63,383.72Total Special Revenue Funds $1,590,480.77 $38,836.86

Debt Service Funds002 Bond Retirement $2,210,000.00Total Debt Service Funds $2,210,000.00 $0.00

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Capital Project Funds003 Permanent Improvement Fund $580,000.00 $38,500.00010 Classroom Facilities Assistance Fund $960,000.00Total Capital Project Funds $1,540,000.00 $38,500.00

Enterprise Funds006 Food Service $950,000.00 $58,438.00Total Enterprise Funds $950,000.00 $58,438.00

Agency Funds200 Activity Fund $75,000.00 $4,000.00022 District Agency Fund $500,000.00Total Agency Funds $575,000.00 $4,000.00

Private Purpose Trust Funds007 Special Trust Fund $10,000.00008 Endowment $2,000.00Total Private Purpose Trust Funds $12,000.00 $0.00

TOTAL ALL FUNDS $22,971,480.77 $79,774.86

Ms. Turner seconded the Resolution and the roll being called upon its adoption,the vote resulted as follows: Yes: Ms. Turner, Mr. Wagner, Mr. Evilsizor, Mr. Miller, Mr. Mitchell. No: None.

CERTIFICATE

Section 5705.39, R.C. -- "No appropriation measure shall become effective until thereis filed with the appropriating authority by the county auditor a certificate that the totalappropriations from each fund, taken together with all other outstanding appropriations,do not exceed such official estimate or amended official estimate." When the appropriationdoes not exceed such official estimate, the county auditor shall give such certificate forthwith upon receiving from the appropriating authority a certified copy of the appropriation measure.

The State of Ohio Champaign County, ss.

I, Robert L. Hoover, Treasurer of the Board of Education of the Graham Local SchoolDistrict in said County, and in whose custody the Files, Journals and Records of said Board arerequired by the Laws of the State of Ohio to be kept, do hereby certify that the foregoing AnnualAppropriation Resolution is taken and copied from the original Resolution now on file with said Board,that the foregoing Resolution has been compared by me with the said original and that the same istrue and correct copy there of.

Witness my signature, this 24th day of September, 2012.

Treasurer of the Board of Education of theGraham Local School District Champaign County, Ohio.

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APPENDIX HINVESTMENT POLICY OF THE DISTRICT

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6144 - INVESTMENTS

The Board of Education authorizes the Treasurer to make investments of available monies from the funds of the District in securities authorized by State law. These shall include:

Under no circumstances may the Treasurer invest in a derivative as defined by the Revised Code, reverse repurchase agreements, or other funds prohibited by law. The Treasurer shall also not make investments which s/he does not reasonably believe can be held until the maturity date or leverage any investment.

Provided the Treasurer has completed additional training that has been approved under the supervision of the Auditor of State, the Treasurer is authorized to invest to a maximum of twenty-five percent (25%) of the District's interim funds in either or a combined total of:

Investments made by the Treasurer must mature within five (5) years, unless they are matched to a specific obligation or debt of the District.

The Treasurer is also authorized to enter into written repurchase agreements in accordance with 135.14(E) of the Revised Code. Such agreements may be either overnight or within a time not to exceed thirty (30) days and may only involve securities listed in A-E above.

Graham Local School District

Bylaws & Policies

A. bonds, notes, or other obligations of or guaranteed by the United States, or those for which the faith of the United States is pledged for payment of principal and interest thereon;

B. bonds, notes, debentures, or any other obligations or securities directly issued by a Federal government agency or instrumentality;

C. interim deposits in Board-approved depositories;

D. bonds and other obligations of the State;

E. no-load money market mutual funds consisting exclusively of obligations described in A. and B. above or repurchase agreements secured by such obligations, provided such investments are made only through banks and savings and loan institutions authorized by R.C. 135.03;

F. the Ohio Subdivision Fund (STAR Ohio).

A. commercial paper notes issued by a for-profit corporation, business trust or association, real estate investment trust, common-law trust, unincorporated business, or general or limited partnership which has assets exceeding $500,000,000. Such notes must:

1. be rated at the time of purchase in the highest classification established by at least two (2) rating services;

2. have an aggregate value that does not exceed ten percent (10%) of the outstanding commercial paper of the issuing entity;

3. mature within 180 days after purchase.

B. Bankers acceptances of banks that are members of the FDIC and whose obligations:

1. are eligible for purchase by the Federal Reserve System;

2. mature no later than 180 days after purchase.

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The purpose of the investments is to maximize the returns on the District's excess cash balances consistent with safety of those monies and with the desired liquidity of the investments.

In making investments authorized by R.C. 135.14, the Treasurer may retain the services of an investment advisor, provided the advisor is licensed by the Division of Securities under R.C. 1707.141, or is registered with the Securities and Exchange Commission, or is an eligible institution.

Unless the District’s annual portfolio of investments is $100,000 or less, the Treasurer must place on file with the Auditor of State a written investment policy that has been approved by the Board of Education and signed by all entities conducting investment business with the Board. Earnings on an investment may become a part of the fund from which the investment was made, unless otherwise specified by law.

Interest

Earnings on an investment may become a part of the fund from which the investment was made, unless otherwise specified by law.

All interest earned is receipted into the General Fund with the following exceptions:

The Treasurer, acting in accord with the law, may withdraw funds from approved public depositories or sell negotiable instruments prior to maturity.

R.C. 133.23, 135.01-.21, 135.22, 45, 135.142, 3317.06, 3315.01, 3315.40, 5705.10

Revised 11/16/04

A. The Food Service (006) Fund shall receive the same percentage of interest as their fund balance is to the total balance.

B. Endowment Fund Accounts and Special Trust Fund Accounts receive the interest earned on their individual Account if the District holds the balance of the fund.

C. The Permanent Improvement Fund (003) shall receive the same percentage of interest as their fund balance is to the total balance.

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