CITY OF RUNAWAY BAY, TEXAS
Annual Financial Report for the Year Ended September 30, 2016
CITY OF RUNAWAY BAY, TEXAS ANNUAL FINANCIAL REPORT TABLE OF CONTENTS PAGE
Principal Officials
1
FINANCIAL SECTION
Independent Auditor's Report
3
Management's Discussion and Analysis
5
Basic Financial Statements: Government-wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Governmental Funds Balance Sheet Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Enterprise Funds Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Notes to Financial Statements
14 15
16 17
18 19
20 21
22
REQUIRED SUPPLEMENTARY INFORMATION
Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund Schedule of Changes in the City's Net Pension Asset and Related Ratios Schedule of Employer Contributions and Related Ratios
46 47
48
SUPPLEMENTARY INFORMATION
Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Economic Development Corporation Fund Other Special Revenue Fund Debt Service Fund Statement of Revenues, Expenses and Changes in Net Position - Budget and Actual Water and Sewer Fund Marina and Mowing Fund
50 51 52 53 54 55 56
OVERALL COMPLIANCE AND INTERNAL CONTROL SECTION
Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
58
City of Runaway Bay, Texas Principal Officials
City Council John W. Boyd, Mayor Dan Ticer, Mayor Pro-T em Jerry St. John, Council member Roland Ray, Council member Janice Sivley, Council member Berry White, Council member
Adm in istrative Oneta Berghoefer, City Administrator
FINANCIAL SECTION
INDEPENDENT AUDITOR'S REPORT
To the Honorable Mayor and Members of the City Council City of Runaway Bay, Texas
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Runaway Bay, Texas (City), as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Runaway Bay, Texas, as of September 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
3
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, schedule of changes in the City's net pension asset and related ratios, and schedule of employer contributions and related ratios be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying financial information listed as supplemental information is presented for purposes of additional analysis and is not a required part of the basic financial statements. The accompanying financial information listed as supplemental information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying financial information listed as supplemental information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2016, on our consideration of the City of Runaway Bay's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Runaway Bay's internal control over financial reporting and compliance.
Snow Garrett Williams December 12, 2016
4
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS
The City of Runaway Bay's management's discussion and analysis (MD&A) provides an overview of the City's financial activities for the fiscal year ended September 30, 2016. The MD&A should be read in conjunction with the accompanying financial statements and the notes to those financial statements. FINANCIAL HIGHLIGHTS
•
The assets and deferred outflows of resources of the City exceeded liabilities at the close of fiscal year 2016 by $3,279,930 (net position). Of this amount, $347,766 is restricted for specific purposes and $843,869 represents unrestricted net position that may be used to meet the City's ongoing obligations to citizens and creditors. As required by Governmental Accounting Standards Board (GASB) Statement No. 34, net position also reflects $2,088,295 that is the net investment in capital assets.
•
In contrast to the government-wide statements, the governmental fund statements report a combined fund balance at year-end of $705,419; of which $340,317 represents restricted fund balance, $32,172 represents assigned fund balance, and unassigned fund balance amounted to $332,930.
•
The general fund's unassigned fund balance of $332,930 equals 29% of total general fund expenditures.
•
The City's total long-term liabilities decreased by a net amount of $76,779 during the current fiscal year primarily as a result of scheduled annual debt service payments net against note payable proceeds.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City's financial statements. The City's financial statements comprise four components: 1) government-wide financial statements, 2) fund financial statements, 3) notes to the financial statements, and 4) other required supplementary information. This report also contains other supplementary information in addition to the basic financial statements. The Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances in a manner similar to private sector business. They present the financial picture of the City from an economic resource measurement focus using the accrual basis of accounting. These statements include all assets and deferred outflows of resources of the City as well as all liabilities (including long-term debt). Additionally, certain eliminations have occurred as prescribed by GASB Statement No. 34 in regards to interfund activity, payables, and receivables.
The statement of net position presents information on all of the City's assets, deferred outflows of resources and liabilities, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.
5
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The statement of activities presents information showing how net position changed during the most recent fiscal year using the full accrual basis of accounting. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other business functions that are intended to recover all or a significant portion of their costs through user fees and charges. The governmental activities of the City include general government, public safety, highways and streets, culture and recreation, and economic opportunity. The business-type activity of the City includes water and sewer and marina and mowing operations. All governmental and business-type activities included in the government-wide financial statement are functions of the City (known as the primary government). The government-wide financial statements can be found on pages 14 and 15 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements, however, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate the comparison between governmental funds and governmental activities. The City maintains four individual governmental funds, which includes two special revenue funds, one Debt Service Fund and the General Fund. Information is presented separately in the governmental fund balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund and the Debt Service Fund, which are classified as major funds. Data from the other non major governmental funds, the Other Special Revenue Fund and the Economic Development Corporation (EDC) Fund are included in a single, aggregated presentation. The City adopts an annual appropriated budget for all of its governmental funds. Budgetary comparison statements (original versus final) have been provided in this report in the required supplemental information and supplemental information sections to demonstrate compliance with these budgets. 6
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The governmental fund financial statements can be found on pages 16 through 18 of this report. Proprietary funds. Proprietary funds can be further classified into two different types of funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Runaway Bay uses two enterprise funds to account for its water and sewer operation and marina and mowing operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among a government's various functions. The City allocates costs directly to the operating department and accordingly does not account or report for any internal service funds. The proprietary fund financial statements can be found on pages 19 through 21 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The accounting used for the fiduciary funds is much like that for proprietary funds. The City of Runaway Bay does not hold any resources for the benefit of parties outside the City government and accordingly neither accounts nor reports for fiduciary funds. Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found beginning on page 22 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information including a budgetary comparison statement for the General Fund, and the schedule of changes in the City's net pension asset and related ratios, and the schedule of employer contributions and related ratios. The required supplementary information can be found beginning on page 46 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities by $3,279,930 as of September 30, 2016. In the year of implementation of GASB Statement No. 68, as amended by GASB Statement No. 71, a restatement to beginning net position was required for recording the beginning net pension asset and for recording deferred outflows of resources for contributions made after the measurement date of the beginning net pension asset and the beginning of the reporting entity's fiscal year. Therefore, beginning net positions were restated for the year ended September 30, 2015.
7
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Governmental Activities
Business-type Activities
Total
2016
2015
2016
2015
793,022
$ 547,406
$ 477,290
$ 1,557,959
$1,270,312
809,062 1,819,615
729,693 1,522,715
2,166,921 2,714,327
2,118,848 2,596,138
2,975,983 4,533,942
2,848,541 4,118,853
43,147
12,379
14,358
3,850
57,505
16,229
84,714 206,997 291,711
75,835 79,070 154,905
824,772 195,034 1,019,806
910,431 164,371 1,074,802
909,486 402,031 1,311,517
986,266 243,441 1,229,707
744,677 Net investment in capital assets 347,766 Restricted 478,608 Unrestricted $1,571,051 Total Net Position
672,617 283,200 424,372 $ 1,380,189
1,343,618
1,213,060
365,261 $1,708,879
312,126 $1,525,186
2,088,295 347,766 843,869 $ 3,279,930
1,885,677 283,200 736,498 $2,905,375
2016 Current and other assets Capital assets, net of depreciation Total assets Deferred outflows- pension Long-term liabilities Other liabilities Total liabilities
$1,010,553
2015 $
Net Position:
Investment in capital assets (e.g., land, buildings, infrastructure, machinery and equipment, and construction in progress) less any related debt used to acquire those assets that is still outstanding is $2,088,295. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional $347,766 (or 11%) of the City's net position represents resources that are subject to external restrictions on how they may be used. All restricted assets of the City are being held for purposes established by state and local laws and debt service requirements on the City's outstanding debt. The remaining balance of unrestricted net position ($843,869) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all categories of net pOSition, both for the City as a whole, as well as for its separate governmental and businesstype activities. The same situation held true for the prior fiscal year. The City's net position increased by $374,555 during the current fiscal year. The City's governmental activities increased net position by $190,862, which included transfers to the business-type activities of $178,797. The total cost of all governmental activities this year was $1,088,747. The amount that taxpayers paid for these activities through property taxes was $714,159 or 66%.
8
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Governrrental
Business-type
ActivITies
ActivITies
2016
2015
2016
Total
2015
2016
2015
Revenues: A"ogram revenues: Charges for services
$
Operating grants and contributions
323,685 121,438
CapITal grants and contributions
$
271,625
$
62,330
1,110,613
$
1,086,630
$
10,520
1,434,298
$
131,958
65,138
1,358,255 62,330
65,138
General revenues: A"operty taxes
714,159
659,864
714,159
659,864
Sales and other taxes
212,752
146,671
212,752
146,671
21,234
57,844
29,559
61,490
50,793
119,334
1,458,406
1,198,334
1,150,692
1,148,120
2,609,098
2,346,454
General government
309,129
291,577
309,129
291,577
F\Jblic Safety Hghways and streets
451,857
451,857
267,932
412,846 234,338
267,932
412,846 234,338
recreation
49,970
49,437
49,970
49,437
Econonic opportuntty
7,009
10,069
7,009
10,069
Other Total revenues EXpenses:
Qj~ure and
Water and sewer Marina and mow ing nterest on long-term debt Total expenses Change in net posITion before transfers Transfers Change in net posITion Net position, beginning of year
1,031,772
1,010,273
1,031,772
135,523
122,533
135,523
122,533
2,850
3,400
2,850
3,400
1,088,747
1,001,667
1,145,796
1,154,305
2,234,543
2,155,972
369,659
196,667
4,896
(6,185)
374,555
190,482
(178,797)
54,542
178,797
(54,542)
190,862
251,209
183,693
(60,727)
374,555
190,482
1,380,189
997,356
1,525,186
1,544,967
2,905,375
2,542,323
A"ior period adjustment
131,624
Net posttion, beginning of year, restated
Net posttion, end of year
1,010,273
$
1,380,189
1,128,980
1,571,051
$ 1,380,189
40,946 1,525,186
$
1,708,879
172,570
1,585,913
$
1,525,186
2,905,375
$
3,279,930
2,714,893
$
2,905,375
Governmental activities. Governmental activities increased the City of Runaway Bay's net position by $190,862. Key elements of this increase are as follows:
• •
Increase in property tax revenue due to the increase in both rates and assessed values; and Increase in sales taxes due to a one-time sales tax allocation payment of $71,823 received in September 2016.
9
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Governmental Activities-Revenues by Source 1% taxes
15%
Charges for services
Property taxes 49%
22%
Operating and capital grants and _ _~, contri buti ons
13%
Business-type activities. Business-type activities increased the City's net position by $183,693. Key elements of this increase are as follows:
• • •
Increase in water sales revenue; Increase in rental income received from marina slips; and Increase in transfers from governmental activities to make annual debt payments.
FINANCIAL ANALYSIS OF GOVERNMENTAL FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental funds. The general government functions are reported in the general, special revenue, and debt service funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's annual financing and budgeting requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $705,419, an increase of $136,810 in comparison with the prior year. Unassigned fund balance was $332,930 and assigned fund balance was $32,172 at the end of the fiscal year. The remainder of fund qalance is restricted to indicate that it is not available for new spending because it has already been set aside to pay debt service ($181,006), to fund economic development ($111,640), and other special revenue and court related expenditures ($47,671).
10
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
The general fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the general fund was $332,930, which is 47% of the total fund balance. As a measure of the general fund's liquidity, we compare unassigned fund balance to total fund expenditures. Unassigned fund balance represents 29%, or slightly more than 106 days of total fund expenditures. The fund balance of the City's general fund increased by $86,196 during the current fiscal year. Key factors in the increase are as follows: • • • •
Increase Increase Increase Increase
in in in in
property tax revenue due to an increase in both rates and assessed values; sales tax revenue due to a one-time sales tax allocation payment; intergovernmental revenue; and collection of court fines.
The debt service fund has a total fund balance of $181,006, all of which is restricted for the payment of debt service. The net increase in fund balance during the current year in the debt service fund was $5,162. GENERAL FUND BUDGETARY HIGHLIGHTS
Significant amendments to the original 2015-2016 general fund annual budget can be briefly summarized as follows: • Increase in license and permit revenues; • Increase in court fines revenue; • Increase in intergovernmental revenue; • Increase in general government, public safety, highways and streets, and capital outlay expenditures; and • Decrease in transfers in. Comparing budget to actual amounts, the City was under the final general fund budgeted revenue estimate by $25,223, or 2.1 %. The primary revenue that came in below estimated budget amounts was intergovernmental revenue, which is comprised of fire department, Wise County, and FEMA grant funds. Of the FEMA grant funds received in the fiscal year, $104,110 is reported as unearned revenue and will be recognized as revenue when the funds are expended. Total expenditures were 13.7% less than the final budgeted amounts. Actual expenditures were less than budget primarily due to less expenditures than expected in general government, public safety, highways and streets, culture and recreation, and capital outlay expenditures. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets. The City's investment in total capital assets for its governmental and business-type activities as of September 30, 2016, amounts to $2,975,983 (net of accumulated depreciation). Investment in capital assets related to governmental activities ($809,062) includes land, buildings and improvements, vehicles, equipment, and office equipment. The City's investments in capital assets related to business-type activities ($2,166,921) include land, buildings and improvements, vehicles, and machinery and equipment.
11
CITY OF RUNAWAY BAY, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Major capital asset events during the current fiscal year include the following: • • • •
Purchase of four trucks and a police vehicle; Street improvements; Purchase of a backhoe and mini excavator; and Purchase of a new pump and sewer jetter.
Additional information on the City's capital assets can be found in Note G beginning on page 31 of this report. Long-term liabilities. At the end of the current fiscal year, the City had total long-term liabilities outstanding of $909,487. Of this amount, $497,000 represents general obligation bonds secured by ad valorem tax revenue. In addition, the City had notes payable of $390,688 and compensated absences of $21,799.
The City's total long-term liabilities decreased by a net amount of $76,779 (8%) during the current fiscal year. Debt related to governmental activities retired during the fiscal year totaled $28,479. Debt related to business-type activities retired during the fiscal year totaled $178,564. Additionally, the City added notes payable totaling $131,867 related to the purchase of a police vehicle, mini excavator, and a sewer machine in fiscal year 2016. State statutes limit the total property tax rate to $2.50 per $100 assessed valuation. The City's total property tax rate for fiscal year 2016 was $0.6433 per $100 assessed valuation, of which $0.19172 was for annual debt service. Additional information on the City's long-term debt can be found in Note H beginning on page 33 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES
The annual budget is developed to provide efficient, effective and economic uses of the City's resources, as well as, a means to accomplish the highest priority objectives. Through the budget, the City Council sets the direction of the City, allocates its resources and establishes its priorities. In considering the City budget for fiscal year 2017, the City Council and management considered the following factors: • •
Increase in capital infrastructure improvements in the water and sewer fund; and Increase in capital infrastructure improvements in the marina and mowing fund.
REQUEST FOR INFORMATION
This financial report is designed to provide our citizens, taxpayers, and investors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need any additional financial information, contact the City Administrator's office at 101 Runaway Bay Drive, Runaway Bay, Texas, 76426.
12
BASIC FINANCIAL STATEMENTS
CITY OF RUNAWAY BAY, TEXAS Statement of Net Position September 30,2016
Governmental Activities
Primary Government Business-Type Activities
Total
Assets Cash and cash equivalents Receivables Property taxes, net of allowances for uncollectibles Accounts, net of allowances for uncollectibles Inventory Restricted assets Cash and cash equivalents Net pension asset Capital assets Land and construction in progress Other capital assets, net of depreciation
$
786,367
$
295,964
20,601
Total capital assets Total assets Deferred Outflows of Resources Deferred outflows - pensions
$ 1,082,331
20,601
19,159
109,675 17,035
128,834 17,035
104,190 80,236
100,960 23,772
205,150 104,008
71,800 737,262
55,505 2,111,416
127,305 2,848,678
809,062
2,166,921
2,975,983
1,819,615
2,714,327
4,533,942
43,147
14,358
57,505
79,033 23,774
94,074
173,107 23,774
104,110 80
11,233 89,727
115,343 89,807
37,919 46,795
179,788 644,984
217,707 691,779
291,711
1,019,806
1,311,517
744,677
1,343,618
2,088,295
365,261
188,455 159,311 843,869
1,708,879
$ 3,279,930
Liabilities Accounts payable and accrued expenses Due to other governments Liabilities payable from restricted assets Unearned revenue Customer deposits Noncurrent liabilities Due within one year Due in more than one year Total liabilities Net Position Net investment in capital assets Restricted for: Debt service Other purposes Unrestricted Total net position
188,455 159,311 478,608
$
1,571,051
The accompanying notes are an integral part of these financial statements.
$
14
CITY OF RUNAWAY BAY, TEXAS Statement of Activities For the Fiscal Year Ended September 30, 2016
Functions/Programs Primary government Govemmental Activities General govemment Public safety Highways and streets Culture and recreation Economic opportunity Interest on long-term debt
Ex~enses
$
309,129 451,857 267,932 49,970 7,009 2,850
Prosram Revenues Operating Capital Charges for Granta and Grants and Services Contributions Contributions
86,861 221,714
$
$
$
Prima!}: Government Governmental Business-type Activities Activities
$
52,953 68,485
65,138
65,138
15,110
Total govemmental activities
1,088,747
323,685
121,438
Business-type activities Water and sewer Marina and mowing Total business-type activities
1,010,273 135,523 1,145,796
984,282 126,331 1,110,613
10,520
$ 2,234,543
$ 1,434,298
Total primary govemment
Net!Ex~ense)Revenue
(222,268) (112,052) (199,447) (34,860) (7,009) (2,850)
$
131,958
$
65,138
714,159 57,910 152,329 2,513 3,575 8,899 8,760 (178,797) 769,348 190,862
Net position, beginning of year
The accompanying notes are an integral part of these financial statements.
1,571,051
(15,471) (9,192) (24,663)
(15,471) (9,192) (24,663)
(24,663)
(603,149)
1,594 27,965 178,797 208,356 183,693
1,380,189
$
(222,268) (112,052) (199,447) (34,860) (7,009) (2,850) (578,486)
(578,486)
General revenues: Taxes Property taxes Franchise taxes Sales tax Other taxes Interest income Gain on sale of assets Miscellaneous Transfers Total general revenues and transfers Change in net position Net position, end of year
$
(578,486)
10,520
$
Total
$
714,159 57,910 152,329 2,513 5,169 8,899 36,725 977,704 374,555
1,525,186
2,905,375
1,708,879
$ 3,279,930
15
CITY OF RUNAWAY BAY, TEXAS Balance Sheet Governmental Funds September 30,2016
General
Debt Service Fund
Cash and cash equivalents Receivables Property taxes, net of allowances for uncollectible taxes of $15,556 Receivable from other govemments Other
$ 571,703
$ 181,006
13,152 12,500 855
7,449
Total assets
$ 598,210
$ 188,455
$
$
Nonmajor Governmental Funds
Total Governmental Funds
$
$
Assets
137,848
20,601 18,304 855
5,804
",$___..;.1..;.43;.:,.;.;65;.;2;..
890,557
$
930,317
$
76,333 23,774
Liabilities and Fund Balance
Liabilities Accounts payable and accrued expenses Due to other govemments Uneamed revenue Property taxes Other Pool deposits Total liabilities
76,203 23,774
$
13,152 104,110 80
7,449
217,319
7,449
Fund Balances Restricted for. Debt service Economic opportunity Occupancy tax Court technology Court security Assigned to: Cemetery Police Unassigned
7,780 332,930
Total fund balances
380,891
181,006
$ 598,210
$ 188,455
Total liabilities and fund balances
130
20,601 104,110 80 130
224,898
181,006
181,006 111,640 7,490 4,119 36,062
111,640 7,490 4,119 36,062 24,392
24,392 7,780 332,930
143,522
705,419
...$__~_1_43_,6.;.;5_2_
Amounts reported for govemmental activities in the statement of net position are different because: Capital assets used in govemmental activities are not financial resources expenditures and, therefore, are not reported in the funds.
809,062
Property taxes receivable less allowances are not available to pay for current period expenditures and, therefore, are deferred in the funds.
20,601
Net pension asset and deferred outflows of resources are not financial resources, and therefore, are not reported in the funds.
123,383
Some liabilities, including notes, accrued interest payable, and compensated absences payable, are not due and payable in the current period and, therefore, are not reported in the funds.
(87,414 1
Net position of govemmental activities - statement of net position
The accompanying notes are an integral part of these financial statements.
$
1,571,051
16
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended September 30,2016
Revenues Property taxes Sales and other taxes Intergovernmental Court fines Licenses and permits Charges for services Interest Donations Miscellaneous Total revenues
General Fund
Debt Service Fund
$ 504,683
$ 215,288
Nonmajor Governmental Funds
Total Governmental Funds
$
$ 52,283
160,469 176,151 221,714 66,416 34,255 3,245 10,250 8,935 1,186,118
1,300 330
215,288
719,971 212,752 176,151 221,714 66,416 35,555 3,575 10,250 8,935
53,913
1,455,319
1,452
300,638 401,716 238,942 38,098 7,009
Expenditures Current: General government Public safety Highways and streets Culture and recreation Economic opportunity Debt service: Principal Interest and other Capital outlay
166,667
Total expenditures
1,144,609
31,329
8,461
1,184,399
41,509
183,959
45,452
270,920
Excess of revenues over expenditures Other financing sources (uses) Proceeds from sale of capital assets Loan/Lease proceeds Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year
299,186 401,716 238,942 38,098
7,009
28,479 2,850 166,667
28,479 2,850
(178,797)
8,899 35,788 (178,797)
(178,797)
(134,110)
8,899 35,788
44,687 86,196
5,162
45,452
136,810
294,695
175,844
98,070
568,609
$ 380,891
$ 181 ,006
The accompanying notes are an integral part of these financial statements.
$
143,522
$
705,419
17
CITY OF RUNAWAY BAY, TEXAS Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended September 30,2016
Amounts reported for governmental activities in the statement of activities are different because:
$
Net change in fund balances - total governmental funds
136,810
Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of capital assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current year. Capital outlay Depreciation expense Change in expense
$
166,667 (87,298) 79,369
Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.
(5,812)
Compensated absences reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the funds.
(1,570)
Pension expense in the funds is recorded as contributions when made to the TMRS plan. Pension expense in governmental activities is recorded as the TMRS plan's pension expense. This is the effect between the two statements.
(10,626)
The issuance of long-term debt (e.g. notes payable) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items. Note payable proceeds Principal repayments - Notes Change in expense
$
(35,788) 28,479
Change in net position of governmental activities - statement of activities
The accompanying notes are an integral part of these financial statements.
(7,309)
$
190,862
18
CITY OF RUNAWAY BAY, TEXAS Statement of Net Position Enterprise Funds September 30, 2016 Water and Sewer
Marina and Mowing
Total
Assets
Current assets Cash and cash equivalents Receivables Accounts, net of allowances for uncollectibles of $52,272 Inventories Total current assets Restricted assets Cash and cash equivalents Net pension asset Capital assets Land Buildings and improvements Vehicles Machinery and equipment Accumulated depreciation Total capital assets Total assets Deferred Outflows of Resources Deferred outflows - pensions
$
192,885
$
103,079
$
295,964
109,400 17,035
275
109,675 17,035
319,320
103,354
422,674
81,577 17,900
19,383 5,872
100,960 23,772
2,000 3,657,210 160,743 650,395 (2,680,032}
53,505 455,694 55,313 (187,907)
55,505 4,112,904 160,743 705,708 (2,867,939}
1,790,316
376,605
2,166,921
2,209,113
505,214
2,714,327
11,463
2,895
14,358
67,121 1,383 59,932 105,000
26,953 86 13,387
94,074 1,469 73,319 105,000
233,436
40,426
273,862
81,577
11,233 8,150
11,233 89,727
Liabilities
Current liabilities Accounts payable and accrued expenses Current portion of compensated absences Current portion of notes payable Current portion of bonds payable Total current liabilities Liabilities payable from restricted assets Unearned revenue Customer deposits Notes payable Bonds payable
238,790 392,000
14,194
252,984 392,000
Total liabilities
945,803
74,003
1,019,806
994,594 280,179
349,024 85,082
1,343,618 365,261
434,106
$ 1,708,879
Net Position
Net investment in capital assets Unrestricted Total net position
$ 1,274,773
$
The accompanying notes are an integral part of these financial statements.
19
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenses and Changes in Net Position Enterprise Funds For the Fiscal Year Ended September 30,2016
Operating revenues Charges for services Rental income Miscellaneous Total operating revenues Operating expenses Salaries and wages Employee benefits Purchased professional and technical services Purchased utilities Other purchased services Repairs and maintenance Insurance Supplies and other expenses Depreciation and amortization Total operating expenses Operating income Non-operating revenues (expenses) Intergovernmental revenue Interest income Interest expense Total non-operating revenues (expenses) Net gain (loss) before transfers Transfers in Change in net position Net position, beginning of year Net position, end of year
Water and Sewer Fund
Marina and Mowing
$
$
Total
$ 1,015,551
7,849
31,269 95,062 20,116
992,131
146,447
1,138,578
105,920 41,066 177,964 63,805 282,175 145,968 12,911 200 155,264
30,821 14,221 26,126 194 9,574 25,494 1,740 7,772 17,903
136,741 55,287 204,090 63,999 291,749 171,462 14,651 7,972 173,167
985,273
133,845
1,119,118
6,858
12,602
19,460
10,520 1,210 (25,000)
384 (1,678)
10,520 1,594 (26,678)
(13,270)
(1,294)
(14,564)
(6,412)
11,308
4,896
164,272
14,525
178,797
157,860
25,833
183,693
1,116,913
408,273
1,525,186
$ 1,274,773
$ 434,106
$ 1,708,879
984,282
The accompanying notes are an integral part of these financial statements.
95,062 27,965
20
CITY OF RUNAWAY BAY, TEXAS Statement of Cash Flows Enterprise Funds For the Fiscal Year Ended September 30,2016
Water and Sewer Fund Cash Flows from Operating Activities: Receipts from customers Payments to suppliers Payments to employees
$
Total
148,007 (66,340) (30,932)
$ 1,145,958
162,050
50,735
212,785
164,272 10,520
14,525 11 ,233
178,797 21,753
Net cash provided by noncapital financing activities
174,792
25,758
200,550
Cash Flows from Capital and Related Financing Activities: Purchase of capital assets Proceeds from long-term debt Principal payments on long-term debt Interest paid
(211,505) 96,079 (165,962) (28,729)
(9,735) (12,602) P,678)
(221,240) 96,079 (178,564) (30,407)
(310,117)
(24,015)
(334,132)
1,210
384
1,594
1,210
384
1,594
27,935
52,862
80,797
246,527
69,600
316,127
274,462
$ 122,462
$
396,924
$
Net cash provided by operating activities Cash Flows from Noncapital Financing Activities: Cash received from other funds Cash received from grant funding
Net cash used by capital and related financing activities
997,951 (726,918) (108,983)
Marina and Mowins
Cash Flows from Investing Activities: Interest received Net cash provided by investing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
$
(793,258) P39,915)
RECONCILIATION OF CASH AND CASH EQUIVALENTS FROM THE STATEMENT OF CASH FLOWS TO THE STATEMENT OF NET POSITION Cash and cash equivalents Restricted cash and cash equivalents
$
192,885 81,577
$
103,079 19,383
$
295,964 100,960
Total cash and cash equivalents
$
274,462
$
122,462
$
396,924
Operating income Adjustments to reconcile operating income to net cash provided by operations: Depreciation (Increase) decrease in: Accounts receivable Inventory Net pension asset Deferred outflows- pension Increase (decrease) in: Accounts payable and accrued expenses Customer deposits Compensated absences
$
6,858
$
12,602
$
19,460
Net cash provided by operating activities
$
RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
The accompanying notes are an integral part of these financial statements.
155,264
17,903
173,167
(1,119) (3,574) 11,335 (8,488)
1,310 2,729 (2,020)
191 (3,574) 14,064 (10,508)
(2,102) 6,939 (3,063)
18,072 250 (111 )
15,970 7,189 (3,174)
162,050
$
50,735
$
212,785
21
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note A. Summary of Significant Accounting Policies Financial Reporting Entity The financial statements of the City of Runaway Bay are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The City's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The financial statements of the City of Runaway Bay include all primary government organizations, for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also finanCially accountable for legally separate organizations if its officials appoint a voting majority of an organization's governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government. A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it. A primary government has the ability to impose its will on an organization if it can significantly influence the programs, projects, or activities of, or the level of services performed or provided by, the organization. A financial benefit or burden relationship exists if the primary government (a) is entitled to the organization's resources; (b) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or (c) is obligated in some manner for the debt of the organization. Some organizations are included as component units because of their fiscal dependency on the primary government. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes or set rates or charges, or issue bonded debt without approval by the primary government. The following entity was found to be a blended component unit of the City for financial statement purposes because the component unit serves the City. Runaway Bay Economic Development Corporation - The City created the Corporation under the Texas Development Corporation Act of 1979 for the purpose of promoting, assisting, and enhancing economic and development activities on behalf of the City. There are seven Board members, of which all are appointed by the City Council. It is funded through voter-authorized sales tax. The Corporation is authorized to sell bonds or other forms of indebtedness. Upon dissolution of the Corporation, the assets of the Corporation shall be distributed to the City of Runaway Bay, Texas. The Corporation provides all of its services within the City of Runaway Bay, Texas.
22
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note A. Summary of Significant Accounting Policies (Continued) The accounting pOlicies of the City of Runaway Bay, Texas conform to accounting principles generally accepted in the United States of America as applicable to governments. The following are the most significant policies. Government-wide and fund financial statements The government-wide financial statements include the statement of net position and the statement of activities. Government-wide statements report information on all of the activities of the City. The effect of interfund transfers has been removed from the government-wide statements but continues to be reflected on the fund statements. Governmental activities are supported mainly by taxes and intergovernmental revenues. The statement of activities reflects the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included in program revenues are reported as general revenues. Separate financial statements are provided for governmental and proprietary funds. The General fund and the Debt Service fund meet the criteria as major governmental funds. The Water and Sewer fund and the Marina and Mowing fund meet the criteria as major proprietary funds. Each major fund is reported in a separate column in the fund financial statements. The governmental non-major fund includes the Economic Development Corporation fund and the Other Special Revenue fund. The amounts for these funds are reflected in a single column in the appropriate fund financial statements. Measurement Focus. Basis of Accounting. and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants are recognized as revenue when all applicable eligibility requirements imposed by the provider are met. Revenues are classified as program revenues and general revenues. Program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. General revenues include all taxes, investment earnings, and various other revenues.
23
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note A. Summary of Significant Accounting Policies (Continued)
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Measurable and available revenues include revenues expected to be received within 60 days after the fiscal year ends. Expenditures generally are recorded when a liability is incurred; however, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when the liability has matured and payment is due. The City reports the following major governmental funds: The General Fund is the general operating fund of the City and is always classified as a major fund. It is used to account for all financial resources except those required to be accounted for in another fund. The Debt Service Fund accounts for the accumulation of financial resources for the payment of principal, interest and related costs on long-term obligations paid primarily from taxes levied or collected by the City.
The City reports the following major proprietary funds: The Water and Sewer Fund is used to account for operations that are financed and operated in a manner similar to a private business enterprise - where the intent of the City is that the cost (expenses) of providing goods or services to the general public on a continuing basis is to be financed or recovered primarily through user charges for water and sewer services provided by the City. The Marina and Mowing Fund is used to account for operations that are financed and operated in a manner similar to a private business enterprise - where the intent of the City is that the cost (expenses) of providing goods or services to the general public on a continuing basis is to be financed or recovered primarily through user charges for marina rental and mowing services provided by the City.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating expenses for the proprietary funds include the cost of personnel and contractual services, supplies, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.
24
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note A. Summary of Significant Accounting Policies (Continued) Budgets and Budgetary Accounting The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. On or before the first day of September of each year and at least thirty days prior to adoption of a tax rate for the current fiscal year, the City Administrator submits to the City Council a balanced budget for the ensuing fiscal year. 2. The City Council holds one or more public hearings on the proposed budget prior to the final adoption. 3. The City Council adopts the proposed budget, with or without amendment, after public hearings and before the first day of the ensuing fiscal year. 4. Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds, Debt Service Fund, and Enterprise Funds. 5. Annual budgets for the General Fund, Special Revenue Funds, Debt Service Fund, and Enterprise Funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. 6. Unused appropriations of the above annually budgeted funds lapse at the end of each fiscal year. 7. The City Council may authorize additional appropriations during the year. 8. During the fiscal year, the Council authorizes and approves amendments to the budget, which provides for and approves all expenditures and transfers. Cash Equivalents For purposes of the statement of cash flows, the City considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Inventory The Water and Sewer fund inventory is valued at cost and is reported as an asset on the statement of net position.
25
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note A. Summary of Significant Accounting Policies (Continued)
Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g. streets, bridges, sidewalks, curbs and drainage systems) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial individual cost of $5,000 or more and an estimated useful life in excess of one year. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset's life are not capitalized. Capital assets are depreciated using the straight line method over the following estimated useful lives: Buildings and Improvements Vehicles Equipment
12 - 35 years 5 years 5 - 12 years
Infrastructure acquired prior to October 1, 2003 has not been recorded. The City has elected not to report major general infrastructure assets retroactively in accordance with GASB Statement No. 34. Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities. Certificates of obligation and bonds payable are reported net of the applicable premium or discount. In the fund financial statements, the face amount of the debt issued is reported as other financial sources net of the applicable premium or discount. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures. Deferred Outflowsllnflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City currently has deferred outflows of resources related to the pension plan. See additional information in Note K. In addition to liabilities, the statement of financial position includes a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City does not have any of this type of item.
26
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note A. Summary of Significant Accounting Policies (Continued) Fund Balance The City adopted a fund balance policy in accordance with GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Governmental fund balances classified as restricted are balances with constraints placed on the use of resources by creditors, grantors, contributors or laws and regulations of other governments. Fund balances classified as committed can only be used for specific purposes pursuant to constraints imposed by the City Council through an ordinance or resolution. Assigned fund balances are constrained by intent to be used for specific purposes but are neither restricted nor committed. Assignments are made by City management based on Council directions. For the classification of both net position and fund balances, the City considers an expenditure to be made from the most restrictive first when more than one classification is available. Concentration of Credit Risk The City has property taxes receivable from residents and businesses all of whom are located in the City. Also, the City has utility charges receivable from residents and businesses located in the City and surrounding areas. Risk Management The City 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. These risks are covered by the City's participation in the Texas Municipal League Intergovernmental Risk Pool (TMLlRP) for liability, property, and workers' compensation insurance. These are self-sustaining risk pools operated on a statewide basis for the benefit of several hundred Texas cities and other public entities. The City pays annual premiums to the TMLlRP, which retains risk of loss up to $1,000,000 for property and liability insurance and unlimited for workers' compensation and obtains independent coverage for losses in excess of these amounts. The City retains no risk except for deductible amounts ranging from $500 to $25,000. There have been no significant reductions in coverage in the past fiscal year and there have been no settlements exceeding insurance coverage in the current year or the past three fiscal years. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
27
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note A. Summary of Significant Accounting Policies (Continued) Pensions For purposes of measuring the net pension asset, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Note B. Reconciliation of Government-wide and Fund Financial Statements Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net position: The governmental fund balance sheet includes a reconciliation between fund balance for total governmental funds and net position as reported in the government-wide statement of net position. One element of that reconciliation explains "some liabilities, including notes, accrued interest payable, and compensated absences payable, are not due and payable in the current period and, therefore, are not reported in the funds." The details of this $87,414 difference are as follows: Notes payable Accrued interest payable Compensated absences Net adjustment to reduce fund balance - total governmental funds to arrive at net position - governmental activities
$ (64,385) (2,700) (20,329) $ (87,414)
Note C. Deposits. Securities. and Investments Chapter 2256 of the Texas Government Code (the Public Funds Investment Act) authorizes the City to invest its funds under a written investment policy (the "Investment Policy") that primarily emphasizes safety of principal, availability of liquidity to meet the City's obligations and market rate of return. The Investment Policy defines what constitutes the legal list of investments allowed under the policy, which excludes certain investment instruments allowed under Chapter 2256 of the Texas Government Code. The City's deposits and investments are invested pursuant to the Investment Policy. The Investment Policy includes a list of authorized investment instruments and a maximum allowable stated maturity of any individual investment. In addition, it includes an "Investment Strategy" that specifically addresses each fund's investment options and describes the priorities of safety of principal, liquidity, yield and diversification. The City is authorized to invest in the following investment instruments provided that they meet the guidelines of the Investment Policy: 28
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note C. Deposits, Securities, and Investments (Continued) 1. Obligations of the United States Government, its agencies and instrumentalities; 2. Fully insured or collateralized certificates of deposit from a bank doing business in the State of Texas and under the terms of a written depository agreement with that bank, not to exceed one year to stated maturity; 3. Repurchase agreements and reverse repurchase agreements as defined by the Act, not to exceed 180 days to stated maturity, provided an executed Bond Market Master Repurchase Agreement is on file with the City and the counterparty bank or primary dealer. Flex repurchase agreements used specifically for capital projects may extend beyond two years but only to match the expenditure plan of the projects; 4. No-load, SEC registered money market funds, each approved specifically before use by the City; and 5. Constant dollar Texas Local Government Investment Pools as defined by the Public Funds Investment Act. As of September 30, 2016, the City had interest bearing checking accounts included in cash and cash equivalents. The City does not have any types of investments as listed above and is not exposed to interest rate risk, credit risk, or concentration of credit risk. Custodial Credit Risk - Deposits are exposed to custodial credit risk if they are not covered by depository insurance and the deposits are uncollateralized with securities held by the pledging financial institution, or collateralized with securities held by the pledging financial institution's trust department or agent but not in the City's name. On September 30, 2016, the City's cash and cash equivalents were insured or collateralized with securities held by the City or by its agent in the City's name. Note D. Local Tax Revenues and Receivables Ad valorem taxes are levied each October 1st from valuations assessed as of the prior January 1st and are recognized as revenue when they become available beginning on the date of levy, October 1st. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1st of the year following the year in which imposed. On January 1st of each year a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. Available means collected within the current period or expected to be collected soon enough thereafter to be used to pay current liabilities. Taxes not expected to be collected within sixty days of the fiscal year end are recorded as unearned revenues and are recognized when they become available. Taxes collected prior to the levy date to which they apply are recorded as unearned revenues and recognized as revenue of the period to which they apply. Note E. Restricted Assets Restricted assets in the Enterprise funds are held for the customer deposits in the Water and Sewer fund and the Marina and Mowing fund, and unearned revenue related to the FEMA grants in the Marina and Mowing fund.
29
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note F. Interfund Activity Interfund transfers during the fiscal year ended September 3D, 2016 are as follows:
Fund Level Transfers Out
$ 178,797 $ 178,797
Debt service fund Transfers in Water and sewer fund Marina and mowing fund
$
178,797
Govemment-wde Transfers Out Business-type activities Transfers in Governmental activities
$ 178,797 $ 178,797
Transfers are generally used to transfer funds from the Debt Service fund to the Water and Sewer fund and Marina and Mowing fund to supplement debt payments.
30
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note G. Caeital Assets Capital asset activity for the year ended September 30, 2016 was as follows: Balance Governmental activities Capital assets not being depreciated Land Total capital assets not being depreciated Other capital assets Buildings and improvements Vehicles Equipment Office equipment
10/1/2015
Additionsl Transfers
Disposalsl Transfers
9130/2016
$ 71,800
$
$
$ 71,800
71,800
71,800
830,594 515,352 67,124 27,861
33,566 133,101
70,223
1,440,931
166,667
70,223
Less accumulated depreciation for: Building and improvements Vehicles Equipment Office equipment
372,000 341,547 44,028 25,463
42,580 41,169 3,069 480
Total accum ulated depreciation
783,038
87,298
Other capital assets, net
657,893
79,369
$ 729,693
$ 79,369
Total other capital assets
Governmental activities capital assets, net
Balance
70,223
70,223
864,160 578,230 67,124 27,861 1,537,375
414,580 312,493 47,097 25,943
800,113 737,262
$
$ 809,062
31
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note G. Capital Assets (Continued) Balance 10/1/2015 Business-type activities Capital assets not being depreciated Land
Total capital assets not being depreciated
$
55,505
Additionsl Transfers
Disposalsl Transfers
$
$
Balance 9130/2016
$
55,505
55,505
55,505
Other capital assets Buildings and improvements Vehicles Machinery and equipment
4,112,904 160,743 498,311
221,240
13,843
4,112,904 160,743 705,708
Total other capital assets
4,771,958
221,240
13,843
4,979,355
Less accumulated depreciation for: Buildings and improvements Vehicles Machinery and equipment
2,221,285 90,961 396,369
140,492 9,743 22,932
13,843
2,361,777 100,704 405,458
Total accumulated depreciation
2,708,615
173,167
13,843
2,867,939
Other capital assets, net
2,063,343
48,073
Business-type activities capital assets, net
$ 2,118,848
$
2,111,416
48,073
$
$2,166,921
Depreciation expense was charged to function/programs of the primary government as follows: General Government Public Safety Highways and Streets Culture and Recreation Total Governmental activities
$
5,869 44,834 24,723 11,872 $ 87,298
Water and Sewer IVIarina and Mowing Total Business-type activities
$155,264 17,903 $173,167
32
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note H. Long-Term Liabilities Long-term liabilities of the City consist of general obligation bonds, notes payable, long-term capital leases, and compensated absences. Retirement of the governmental funds' debt is provided from the debt service tax together with interest earned within the Debt Service fund. Retirement of the enterprise funds' debt is provided from the revenue of the system and the debt service tax. Longterm debt on September 30, 2016 consists of the following:
Governmental activities Notes Payable Legacy Texas Bank • • • •
Secured to finance the purchase of a Dodge Charger. Principal price of $35,788. Payable in six semi-annual installments of $6,423. Outstanding balance of $30,109 at September 30, 2016, bearing interest of 4.25%.
Legacy Texas Bank • • • •
Secured to finance the purchase of two trucks. Principal price of $55,000. Payable in five annual installments of $12,346. Outstanding balance of $34,276 at September 30,2016, bearing interest of 3.92%.
Business-type activities General Obligation Bonds • • • • •
Series 2012 General Obligation Refunding Bonds. Original balance of $915,000. Payable in semi-annual installments of $39,682 to $60,349, maturing December 1, 2020. Interest payable June 1 and December 1 at 3.25%. Outstanding balance of $497,000 at September 30,2016.
Notes Payable USW Utility Group • • • •
Unsecured to finance upgrades to the Water Treatment Plant. Face amount of $301,378 with no stated interest. Payable in monthly installments of $2,511 over ten years. Outstanding balance of $151,598 at September 30, 2016, imputed interest of 3.25%.
First Financial Bank, N.A. • • • •
Unsecured to finance marina repairs and upgrades. Principal price of $65,250. Payable in five annual installments of $14,525. Outstanding balance of $27,581 at September 30,2016, bearing interest of4.16%. 33
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note H. Long-Term Liabilities (Continued) Legacy Texas Bank • • • •
Secured to finance the purchase of a truck. Principal price of $52,769. Payable in five annual installments of $11,846. Outstanding balance of $32,890 at September 30,2016, bearing interest of 3.92%.
Legacy Texas Bank • • • •
Secured to finance the purchase of a truck. Principal price of $26,728. Payable in three annual installments of $9,642. Outstanding balance of $18,155 at September 30, 2016, bearing interest of 4.00%.
Legacy Texas Bank • • • •
Secured to finance the purchase of a mini excavator. Principal price of $42,891. Payable in eight semi-annual installments of $5,887. Outstanding balance of $42,891 at September 30,2016, bearing interest of 4.25%.
Legacy Texas Bank • • • •
Secured to finance the purchase of a sewer machine. Principal price of $53,188. Payable in ten semi-annual installments of $5,972. Outstanding balance of $53,188 at September 30, 2016, bearing interest of 4.25%.
34
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note H. Long-Term Liabilities (Continued) The following is a summary of the changes by type of long-term liabilities for the year ended September 30, 2016: Balance 10/1/2015 Governmental activities Notes Payable Compensated Absences Total Governmental activities Business-tv~e activities General Obligation Bonds Notes Payable Capital Leases Compensated Absences Total Business-type activities
Totals
$
57,076 18,759 75,835
598,000 286,303 21,485 4,643 910,431 $ 986,266
Additions
Retirements
$ 35,788 27,247 63,035
$
28,479 25,677 54,156
Balance 9130/2016 $
Due Within One Year
64,385 20,329 84,714
$ 22,668 15,251 37,919
497,000 326,303
105,000 73,319
5,535 101,614
101,000 56,079 21,485 8,708 187,272
1,470 824,773
1,470 179,788
$164,649
$ 241,428
$ 909,487
$217,707
96,079
The annual requirements to amortize long-term debt as of September 30, 2016 are as follows:
Governmental activities Fiscal Year Ending 2017 2018 2019 Total
Notes Payable Principal Interest $22,668 23,611 18,106
$ 2,523 1,582 644
$64,385
$ 4,749
35
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note H. Long-Term Liabilities (Continued) Business-type activities Fiscal Year Ending
General Obligation Bonds Principal Interest
Notes Payable Principal Interest
Total
2017 2018 2019 2020 2021 2022
$105,000 107,000 111,000 115,000 59,000
$15,307 11,879 8,369 4,729 959
$ 73,319 81,282 60,036 50,459 40,447 20,760
$10,159 8,401 5,213 3,396 1,634 278
$
203,785 208,562 184,618 173,584 102,040 21,038
Total
$497,000
$41,243
$326,303
$29,081
$
893,627
Note I. Compensated Absences Sick leave is recorded when paid because employees are not compensated for unused sick leave. Vacation is earned in varying amounts. Unused vacation leave is carried forward from one year to the next up to certain limits. The City has accrued for the estimated liability for compensated absences in the governmental and business-type activities in the government-wide financial statements and in the proprietary fund financial statements. The City's aggregate liability for compensated absences as of September 30,2016 was $21,799. Note J. Net Position The government-wide statement of net position reports $347,766 of restricted net position, of which $119,130 is restricted by enabling legislation.
36
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note K. Defined Benefit Pension Plan Plan Description The City participates as one of 866 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax-qualified plan under Section 401 (a) of the Internal Revenue Code. TMRS issues a publically available comprehensive annual financial report (CAFR) that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. Plan provisions for the City are as follows:
Employee deposit rate Matching ratio (City to employee) Years required for vesting Service retirement eligibility (expressed as age/years of service) Updated service credit Annuity increase (to retirees)
5.0%
1.5 to 1 5 60/5,0/20 0% 0% ofCPI
At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the City-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest.
37
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note K. Defined Benefit Pension Plan (continued) Employees covered by benefit terms. At the December 31, 2015 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total
7 14 14 35
Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the City matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the city. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 5% of their annual gross earnings during the fiscal year. The contribution rates for the City were 2.14% and 2.20% in calendar years 2015 and 2016, respectively. The City's contributions to TMRS for the year ended September 30, 2016, were $12,565, and were equal to the required contributions. Net Pension Asset The City's Net Pension Asset (NPA) was measured as of December 31, 2015 and the Total Pension Liability (TPL) used to calculate the NPA was determined by an actuarial valuation as of that date. Actuarial assumptions: The TPL in the December 31, 2015 actuarial valuation was determined using the following actuarial assumptions:
Inflation Overall payroll growth Investment Rate of Return
2.5% per year 2.10% per year 6.75%, net of pension plan investment expense, including inflation
38
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note K. Defined Benefit Pension Plan (continued) Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender-distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment, with male rates multiplied by 109% and female rates multiplied by 103%. For cities with fewer than twenty employees, more conservative methods and assumptions are used. The City, with 14 active employees, is considered a small city. First, lower termination rates are used for smaller cities, with a maximum multiplier of 100% for employers with 11 to 15 employees. There is also a load on the life expectancy for employers with less than 15 active employees. The life expectancy will be loaded by decreasing the mortality rates by one percent for every active employee less than 15. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment are used with male rates multiplied by 109% and female rates multiplied by 103% with a 3 year set-forward for both males and females. In addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3% floor. Actuarial assumptions used in the December 31, 2015 valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period December 31, 2010 through December 31, 2014. Healthy post-retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31, 2013. These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the 2014 valuation. There were no changes of benefit terms that affected measurement of the total pension liability during the measurement period. There were no changes between the measurement date of the net pension asset and the City's reporting date that are expected to have a significant effect on the net pension asset. After the Asset Allocation Study analysis and experience investigation study, the Board amended the long-term expected rate of return on pension plan investments from 7% to 6.75%. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS.
39
CITY OF RUNAWAY BAY, TEXAS
Notes to Financial Statements September 30, 2016 Note K. Defined Benefit Pension Plan (continued) The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under various alternative asset allocation portfolios, Gabriel Roeder Smith & Company, Consultants & Actuaries, focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). At its meeting on July 30, 2015, the TMRS Board approved a new portfolio target allocation. The target allocation and best estimates of real rates of return for each major asset class are summarized in the following table:
Asset Class Domestic Equity International Equity Core Fixed Income Non-Core Fixed Income Real Estate Real Return Absolute Return Private Equity Total
Target Allocation 17.5% 17.5% 10.0% 20.0% 10.0% 10.0% 10.0% 5.0% 100 %
Long-Term Expected Real Rate of Return (Arithmetic) 4.55% 6.10% 1.00% 3.65% 5.00% 4.03% 4.00% 8.00%
Discount Rate The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability.
40
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note K. Defined Benefit Pension Plan (continued) Increase (Decrease)
Changes in the Net Pension Asset
Plan Fiduciary Net Pension Asset Net Position (a) (b) (b) - (a) $464,029 $623,493 $ 159,464
Total Pension Liability Balance at 12131/2014 Changes for the year: Service Cost Interest Change of benefit terms Difference between expected and actual experience Changes of assumptions Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of em ployee contributions Administrative expense Other Changes Net Changes Balance at 12131/2015
(50,196) (33,485)
50,196 33,485
(2,395) 16,224
2,395 (16,224) 12,505 29,218 919
12,505 29,218 919 (21,538)
-
75,972 $540,001
(21,538) (560) (28) 20,516 $644,009
-
$
(560) (28) (55,456) 104,008
Sensitivity of the net pension asset to changes in the discount rate The following presents the net pension asset of the City, calculated using the discount rate of 6.75%, as well as what the City's net pension asset would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1% Decrease in Discount Rate (5.75%) ICity'S net pension asset
$36,045
Discount Rate (6.75%) $
104,008
1 % Increase in Discount Rate (7.75%) $159,621
41
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016
Note K. Defined Benefit Pension Plan (continued) Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separatelyissued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. The City's plan's fiduciary net position has been determined on the same basis as that used by TMRS. The TMRS plan is reported on the accrual basis of accounting. Benefits are recorded when payable in accordance with TMRS's plan terms. Refunds are recorded and paid upon receipt of an approved application for refund. Investments are reported at fair value. Pension Expense. Deferred Outflows of Resources. and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2016, the City recognized pension expense of $26,746. At September 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Differences between expected actual econom ic experience
and
$
Changes in actuarial assumptions Difference between projected actual investment earnings Contributions subsequent to measurement date Total
and the $
Deferred Inflows of Resources
-
$
1,256
10,511
-
38,670
-
9,580
-
58,761
$
1,256
The net amounts of the City's balances of deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30th:
2016 2017 2018 2019 Total
$
24,788 14,131 10,040
$
57,505
8,546
42
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30,2016 Note L. 401 (k) Retirement Plan The City also maintains a defined contribution retirement plan under Section 401 (k) of the Internal Revenue Code administered by Expert Plan Consulting Services, whereby participating employees elect to make contributions pursuant to a salary reduction agreement upon meeting age and length of service requirements. The City's total payroll for fiscal year 2016 was $614,839, and the payroll covered by the plan was $212,900. The City made voluntary deductible contributions for the fiscal year ended 2016 of $2,525, which represents 1 percent of the covered payroll. This percentage can vary from year to year. Note M. Other Postemployment Benefits The City also participates in the cost sharing multiple-employer defined benefit group-term life insurance plan operated by Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group-term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump-sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death); retired employees are insured for $7,500; this coverage is an "other postemployment benefit", or OPEB. Contributions The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre-fund retiree term life insurance during employees' entire careers. Schedule of Contribution Rates: (RETIREE - only portion of the rate) Annual
Actual
Plan!
Required
Calendar
Contribution
Made
of ARC
Year
(Rate)
(Rate)
Contributed
2013 2014 2015 2016
0.01% 0.01% 0.01% 0.02%
0.01% 0.01% 0.01% 0.02%
100.0% 100.0% 100.0% 100.0%
Contribution Percentage
43
CITY OF RUNAWAY BAY, TEXAS Notes to Financial Statements September 30, 2016 Note N. Runaway Bay Economic Development Corporation The Runaway Bay Economic Development Corporation was created, upon approval of the voters of a half-penny sales and use tax, pursuant to Section 4B of the Development Corporation Act of 1979, as amended Article 5190.6, Vernon's Texas Civil Statutes. The Corporation is considered to be a component unit of the City of Runaway Bay and is treated as a special revenue fund of the City. The expenditures of the half-penny sales tax can only be spent on projects and improvements that promote economic development activities within the City of Runaway Bay. Note O. Subsequent Events In November 2016, the City received insurance proceeds in the amount of $99,020 related to damage sustained to the marina during a tornado that occurred in May 2015. As of the report issuance date, recoverable depreciation from the storm damage was still pending.
44
REQUIRED SUPPLEMENTARY INFORMATION
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual General Fund For the Fiscal Year Ended September 30,2016
Budgeted Amounts
Variance with Final Budget Favorable (Unfavorable)
Original
Final
Actual Amounts
$ 494,783 120,614 50,400 187,300 40,000 63,600 1,000 5,000
$ 496,833 113,609 252,976 221,745 67,000 32,193 3,100 10,250 13,635
$ 504,683 160,469 176,151 221,714 66,416 34,255 3,245 10,250 8,935
962,697
1,211,341
1,186,118
(25,223)
Expenditures Current: General government Public safety Highways and streets Culture and recreation Capital outlay
297,353 424,312 260,826 59,468 113,325
326,875 465,070 270,726 54,743 183,973
299,186 401,716 238,942 38,098 166,667
27,689 63,354 31,784 16,645 17,306
Total expenditures
1,155,284
1,301,387
1,144,609
156,778
(192,587)
(90,046)
41,509
131,555
-
8,899 35,788
8,899
-
(57,266) (48,367)
Revenues Property taxes Sales and other taxes Intergovernmental Court fines Licenses and permits Charges for services Interest Donations Miscellaneous Total revenues
Excess (deficiency) of revenue over (under) expenditures Other financing sources Proceeds from sale of capital assets Loan/Lease proceeds Transfers in Total other financing sources Net change in fund balance Fund balance, beginning of year Fund balance, end of year
38,328 157,266
35,788 57,266
195,594
93,054
44,687
3,007
3,008
86,196
294,695
294,695
294,695
$ 297,702
$ 297,703
$ 380,891
The accompanying notes are an integral part of these financial statements.
$
7,850 46,860 (76,825) (31) (584) 2,062 145
(4,700)
-
$
83,188
46
City of Runaway Bay Schedule of Changes in the City's Net Pension Asset and Related Ratios Last Two Fiscal Years **
Measurement Date - December 31 st: * Total Pension Liability (a) Beginning Balance Service cost Interest Difference between expected and actual experience Changes of assumptions Benefit payments, including refunds of employee contributions End of Year Balance
2015 $
$
2014
464,029 50,196 33,485 (2,395) 16,224 (21,538) 540,001
$
623,493 12,505 29,218 919 (21,538) (560) (28) 644,009
$
$
415,871 45,430 29,716 1,152 (28,140) 464,029
Plan Fiduciary Net Position (b) Beginning Balance Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other End of Year Balance
$
$
$
584,460 5,205 28,917 33,429 (28,140) (349) (29) 623,493
Net Pension Asset (b) - (a) Beginning Balance Service Cost Interest Difference between expected and actual experience Changes of assumptions Contributions - employer Contributions - employee Net investment income Administrative expense Other End of Year Balance
Pian's fiduciary net position as a percentage of the total pension liability Covered-employee payroll Net pension asset as a percentage of covered-employee payroll
$
$
159,464 (50,196) (33,485) 2,395 (16,224) 12,505 29,218 919 (560) (28) 104,008
119.26% $584,358 17.80%
$
$
168,589 (45,430) (29,716) (1,152) 5,205 28,917 33,429 (349) (29) 159,464
134.37% $578,345 27.57%
* The amounts presented above are as of the measurement date of the collective net pension asset (liability). ** Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
The accompanying notes are an integral part of these financial statements.
47
City of Runaway Bay Schedule of Employer Contributions and Related Ratios Last Two Fiscal Years **
Year Ended September 30th:
*
2016
The City's actuarially determ ined contribution $ The amount of contributions recognized by the plan in relation to the actuarially determ ined contribution The difference between the City's actuarially determined contribution and the amount of contributions recognized by the plan in relation to the City's actuarially determined contribution
$
Covered-employee payroll
$
The amount of contributions recognized by the plan in relation to the City's actuarially determined contribution as a percentage of covered-payroll
12,565
2015
$
10,743 10,743
12,565
$ 574,922
$
2.19%
580,833 1.85%
Notes to Schedule of Contributions Valuation Date:
Actuarially determined contribution rates are calculated as of December 31 and become effective in January - 13 months later. Methods and Assumptions Used to Calculate the Actuarially Determined Contribution Rates:
Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method Inflation Salary Increases Investment Rate of Return Retirement Age
Mortality
Entry Age Normal Level Percentage of Payroll, Closed 25 Years 10 Year smoothed market; 15% soft corridor 2.50% 3.50% to 10.50% including inflation 6.75% Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of the period 2010 - 2014 RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB
Other Information:
There were no benefit changes during the year. *The amounts presented above are as of the City's applicable fiscal year-end. **Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
The accompanying notes are an integral part of these financial statements.
48
SUPPLEMENTARY INFORMATION
CITY OF RUNAWAY BAY, TEXAS Combining Balance Sheet Nonmajor Governmental Funds September 30, 2016
Special Revenue Funds Economic Other Development Special Corporation Revenue Fund
Total Nonmajor Governmental Funds
Assets Cash and cash equivalents Receivables Receivable from other governments
$
Total assets
$
105,836
$
32,012
$
5,804 111,640
137,848 5,804
$
32,012
$
143,652
$
130
$
130
Liabilities and Fund Balances Liabilities Accounts payable and accrued expenses
$
T otalliabilities Fund Balance Restricted for economic opportunity Restricted for occupancy tax Assigned to cemetery Total fund balances
130
130
$
111,640
$
$
111,640 7,490 24,392
$
143,522
7,490 24,392
$
111,640
$
The accompanying notes are an integral part of these financial statements.
31,882
50
CITY OF RUNAWAY BAY, TEXAS Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended September 30,2016
Revenues Sales and other taxes Charges for services Interest
Special Revenue Funds Economic Other Development Special Corporation Revenue Fund
Total Nonmajor Governmental Funds
$
$
$
52,283 1,300 330
171
546 1,300 159
51,908
2,005
53,913
1,452
1,452 7,009
7,009
1,452
8,461
Net changes in fund balances
44,899
553
45,452
Fund balances, beginning of year
66,741
31,329
98,070
Total revenues
Expenditures Current: General government Economic opportunity
7,009
Total expenditures
Fund balances, end of year
51,737
$
111,640
$
31,882
The accompanying notes are an integral part of these financial statements.
$
143,522
51
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Economic Development Corporation For the Fiscal Year Ended September 30, 2016
Budgeted Amounts
Revenues Sales tax Interest income Total revenues Expenditures Economic opportunity Total expenditures
Orisinal
Final
Actual Amounts
$ 25,800 50
$ 25,800 50
$ 51,737 171
25,850
25,850
51,908
26,058
25,850
25,850
7,009
18,841
25,850
25,850
7,009
18,841
Net change in fund balance Fund balance, beginning of year Fund balance, end of year
Variance with Final Budget Favorable (Unfavorable)
44,899 66,741
66,741
66,741
$ 66,741
$ 66,741
$ 111,640
The accompanying notes are an integral part of these financial statements.
$
$
25,937 121
44,899
52
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Other Special Revenue Fund For the Fiscal Year Ended September 30,2016
Actual Amounts
Variance with Final Budget Favorable (Unfavorable)
$
$
Budgeted Amounts Final
Orisinal Revenues Occupancy tax Charges for services Interest Total revenues
$
2,000 6,500 110
$
1,500 1,300 170
546 1,300 159
(954) (11 )
8,610
2,970
2,005
Expenditures General government Culture and recreation Economic opportunity
6,560 1,025 1,025
3,560 525 1,025
1,452
-
-
2,108 525 1,025
Total expenditures
8,610
5,110
1,452
3,658
Net change in fund balance Fund balance, beginning of year Fund balance, end of year
(2,140)
553
31,329
31,329
31,329
$ 31,329
$ 29,189
$ 31,882
The accompanying notes are an integral part of these financial statements.
(965)
$
2,693
53
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Debt Service Fund For the Fiscal Year Ended September 30, 2016
Budgeted Amounts
Variance with Final Budget Favorable (U nfavorable)
Original
Final
Actual Amounts
Revenues Property taxes
$ 192,748
$ 213,678
$ 215,288
Total revenues
192,748
213,678
215,288
1,610
22,801 2,435
31,946 2,435
28,479 2,850
3,467 (415)
25,236
34,381
31,329
3,052
167,512
179,297
183,959
4,662
(167,512)
(178,797)
(178,797)
(167,512)
(178,797)
(178,797)
Expenditures Debt and capitalized lease debt service: Principal retirement Interest and fiscal charges
Total expenditures Excess of revenues over expenditures Other financing uses Transfers out
Total other financing uses Net change in fund balance Fund balance, beginning of year Fund balance, end of year
500
5,162
175,844
175,844
175,844
$ 175,844
$ 176,344
$ 181,006
The accompanying notes are an integral part of these financial statements.
$
$
1,610
4,662
54
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenses, and Changes in Net Position - Budget and Actual Water and Sewer Fund For the Fiscal Year Ended September 30,2016 Variance with Final Budget Favorable (Unfavorable)
Budgeted Amounts Orisinal Revenues Charges for services Interest income Intergovernmental revenue Miscellaneous Total revenues Expenses Salaries and wages Employee benefits Purchased professional and technical services Purchased utilities Other purchased services Repairs and maintenance Insurance Supplies and other expenses Depreciation and amortization Interest and other charges Total expenses Excess (deficiency) of revenues over (under) expenditures Transfers Transfers in Transfers out Total transfers Change in net position Net position, beginning of year Net position, end of year
$ 1,016,720
Actual Amounts
Final
$
27,562 12
150,585 1,167,605
975,528
1,003,861
28,333
114,727 37,620
114,727 39,120
105,920 41,066
8,807 (1,946)
207,500 61,800 381,335 127,953 11,500 2,000 65,904 27,978
207,500 62,700 268,750 134,953 12,912 2,000 154,895 27,978
177,964 63,805 282,175 145,968 12,911 200 155,264 25,000
29,536 (1,105) (13,425) (11,015) 1 1,800 (369) 2,978
1,038,317
1,025,535
1,010,273
15,262
129,288
(50,007)
(6,412)
43,595
182,824 {157,266)
182,824 (57,266)
164,272
25,558
125,558
164,272
154,846
75,551
157,860
1,116,913
1,116,913
1,116,913
$ 1,271,759
$ 1,192,464
$ 1,274,773
300
The accompanying notes are an integral part of these financial statements.
984,282 1,210 10,520 7,849
$
956,720 1,198 10,520 7,090
$
759
(18,552) 57,266
-
38,714
$
82,309
55
CITY OF RUNAWAY BAY, TEXAS Statement of Revenues, Expenses, and Changes in Net Position - Budget and Actual Marina and Mowing Fund For the Fiscal Year Ended September 30,2016
Budgeted Amounts Original Revenues Charges for services Rental income Interest income Intergovernmental revenue Miscellaneous
$
34,255 100,000 300
Final
$
1,000
32,440 95,062 300 11,232 17,030
135,555
Actual Amounts
$
31,269 95,062 384
Variance with Final Budget Favorable (Unfavorable)
$
(1,171)
20,116
84 (11,232) 3,086
156,064
146,831
(9,233)
30,440 11,715
32,940 13,678
30,821 14,221
2,119 (543)
26,500 800 11,750 50,800 1,550 2,000
26,126 194 9,574 25,494 1,740 7,772 17,903 1,678
374 606 2,251 34,732
1,673
26,500 800 11,825 60,226 1,743 3,300 17,904 1,673
137,228
170,589
135,523
35,066
Excess (deficiency) of revenues over (under) expenditures
(1,673)
(14,525)
11,308
25,833
Transfers Transfers in
14,525
14,525
14,525
Change in net position
12,852
Total revenues
Expenses Sa/aries and wages Employee benefits Purchased professional and technical services Purchased utilities Other purchased services Repairs and maintenance Insurance Supplies and other expenses Depreciation Interest and other charges Total expenses
Net position, beginning of year Net position, end of year
-
25,833
408,273
408,273
408,273
$ 421,125
$ 408,273
$ 434,106
The accompanying notes are an integral part of these financial statements.
3 (4,472) 1 (5)
$
25,833
56
OVERALL COMPLIANCE AND INTERNAL CONTROL SECTION
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council City of Runaway Bay, Texas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Runaway Bay, Texas, as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated December 12, 2016. Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Runaway Bay's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Runaway Bay's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified .
58
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Runaway Bay's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Snow Garrett Williams December 12,2016
59
Management Letter
December 12, 2016 Honorable Mayor and Members of the City Council City of Runaway Bay, Texas In connection with our audit of the financial statements of the City of Runaway Bay, Texas, as of September 30, 2016, we have made a review of accounting procedures and internal control. While the primary objective of such a review is to afford us a basis of determining the scope of our audit procedures, it nevertheless presents us with an opportunity to submit, for management's consideration, suggestions for changes in procedures, which, in our opinion, could strengthen internal control or contribute to the improvement of operating efficiency. The comments in this letter are based upon observations made in the course of such a review. The review was not designed for the purpose of expressing an opinion on internal control, and it would not necessarily disclose all weaknesses in the system. The matters discussed herein were considered during our audit of the above-mentioned financial statements, and they did not modify the opinion expressed in our report on those financial statements. However, we offer for your review, comments and recommendations as noted on the following pages. We have discussed the following comments in detail with the appropriate staff of,the City to insure understanding of the comments and implementation of recommendations. If you have any questions regarding these or any other matters, please feel free to contact us. This letter is intended solely for the information and use of the City Council members, management, and others within the City and is not intended to be, and should not be, used by anyone other than these specified parties. Finally, we take this opportunity to thank you and your staff for your courtesy and cooperation during our audit. Thank you for your business.
Sincerely,
Snow Garrett Williams
City of Runaway Bay Page 2 CURRENT YEAR COMMENTS Adjusting Journal Entries Comment: As a result of our audit procedures and testing, we proposed audit adjustments and entries to the City's funds. Recommendation: We again commend the City for preparing several schedules and the related adjustments needed to the City's accounting system prior to our audit procedures for fiscal year 2016. Additionally, we suggest that the City review the content of the current year audit adjustments in order to understand the purpose for the adjustments, reclassifications or corrections and incorporate these entries into the City's monthly or yearend accounting transactions. Adjustments to Customer Utility Accounts Comment: During our testing of adjustments to customer utility accounts, we noted that there are no formal procedures established by the City to review and approve adjustments to customer utility accounts. Recommendation: We therefore recommend that the City develop and implement procedures to review and approve adjustments to customer utility accounts. Budget Variances Comment: We understand that with total budgets for all funds of more than $2 million, it is difficult to budget all line items and departments exactly. However, in our review and analysis of the City's financial statements, we noted that there were negative budget variances for some line items. Recommendation: We commend the City's efforts in scrutinizing the budget carefully throughout the year and suggest that the City continue reviewing budget reports closely and make amendments as necessary. FOLLOW-UP ON PRIOR YEAR COMMENTS Bank Signers Comment: During our review of cleared checks in the prior year, we noted several checks that did not have two signatures as required by the City's cash disbursement policy. Follow-up: We commend the City on developing policies and procedures which include reviewing checks for dual signatures before being mailed. Bank Reconciliation Comment: During our prior year testing of cash balances, we noted that the bank reconciliations for the First State Bank accounts were not completed. Follow-up: We commend the City on ensuring that bank reconciliations are prepared and reviewed for all bank accounts in a timely manner in order to ensure cash balances are accurate and complete.
City of Runaway Bay Page 3 Investment Policy Comment: During our review of the City's investment policy and City Council minutes in the prior year, we noted that the City's investment policy was not reviewed and approved by the City Council as required by the Texas Public Funds Investment Act. Follow-up: We commend the City on reviewing and formally approving its investment policy in the current year as required by State law. Accounts Payable Processing Comment: In the review of accounts payable processing controls in the prior year, we noted that City did not have a policy or procedure in place that required documentation that a product or service had been received prior to payment. Follow-up: We commend the City on reviewing its accounts payable policies and procedures and developing procedures regarding verifying the receipt of products or services prior to the payment of invoices. OBJECTIVE OF INTERNAL CONTROL
The objective of internal control is to provide reasonable, but not absolute, assurance that the City's assets will be safeguarded against loss from unauthorized use or disposition, and that the reliability of financial records for preparing financial statements and maintaining accountability for assets will be preserved. The concept of reasonable assurance recognizes that the cost of a system of internal control should not exceed the benefits derived and also recognizes that the evaluation of these factors necessarily requires estimates and judgments by management. Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Control procedures whose effectiveness depends upon the segregation of duties can be circumvented intentionally by management either with respect to the execution and recording of transactions or with respect to the estimates and judgments required in the preparation of financial statements. Further, projections of any evaluation of the internal control over financial reporting to future periods are subject to the risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
December 12, 2016 To the Honorable Mayor and City Council City of Runaway Bay, Texas
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Runaway Bay, Texas for the year ended September 30, 2016. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter to you dated June 17, 2016. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of Runaway Bay are described in Note A to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during fiscal year 2016. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. No significant estimates affecting the financial statements were noted. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In
Page 2 addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations
We have requested certain representations from management that are included in the management representation letter dated December 12, 2016. Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all of the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Finding or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to the Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund, the Schedule of Changes in the City's Net Pension Asset and Related Ratios, and the Schedule of Employer Contributions and Related Ratios, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
Page 2 addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations
We have requested certain representations from management that are included in the management representation letter dated December 11, 2016. Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all of the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Finding or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to the Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund, the Schedule of Changes in the City's Net Pension Asset and Related Ratios, and the Schedule of Employer Contributions and Related Ratios, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
Page 3 We were engaged to report on the Combining Balance Sheet and Combining Statement of Revenues, Expenditures, and Changes in Fund Balances for the Nonmajor Governmental Funds; the Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual for the Economic Development Corporation Fund, the Other Special Revenue Fund, and the Debt Service Fund; and the Statement of Revenues, Expenses and Changes in Net Position - Budget and Actual for the Water and Sewer Fund and the Marina and Mowing Fund; which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Restriction on Use This information is intended solely for the use of the City Council and management of the City of Runaway Bay and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours,
Snow Garrett Williams
