NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL

Transcription

1 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Basic Financial Statements, Supplemental Information And Compliance Reports Year Ended December 31, 2016

2 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Table of Contents INDEPENDENT AUDITOR'S REPORT BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Position... 3 Statement of Activities... 4 Governmental Funds: Balance Sheet - Governmental Funds... 5 Reconciliation of the Balance Sheet to the Statement of Net Position... 6 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds... 7 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities... 8 Proprietary Funds: Statement of Net Position... 9 Statement of Revenues, Expenses, and Changes in Net Position Statement of Cash Flows Notes to Basic Financial Statements SUPPLEMENTAL INFORMATION Governmental Nonmajor Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Schedule of Expenditures of Federal Awards COMPLIANCE REPORTS Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for Each Major Program And on Internal Control over Compliance Required by the Uniform Guidance Summary of Auditor's Results and Schedule of Findings and Questioned Costs Corrective Action Plan Schedule of Prior Audit Findings... 31

3 ~ {).P; -. Brad Cage, CPA ~ Hillcrest Drive Eagle River, AK F Phone (907) Independent Auditor's Report Members of the Council Native Village of Mekoryuk Tribal Council Mekoryuk, Alaska Report on the Financial Statements I have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Native Village of Mekoryuk Tribal Council, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise Native Village of Mekoryuk Tribal Council'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 My responsibility is to express opinions on these financial statements based on my audit. I conducted my 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 I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 misstatements 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 entities internal control. Accordingly, I 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit op1mons. Opinions In my 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 Native Village of Mekoryuk Tribal Council as of December 31, 2016, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1

4 Members of the Council Native Village of Mekoryuk Tribal Council Other Matters Required Supplementary Information Management has omitted the management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. My opinion on the basic financial statements is not affected by this missing information. Other Information My audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Native Village of Mekoryuk's basic financial statements. The combining non-major fund financial statements are presented for purposes of additional analysis and are not a required part of the basic fmancial statements. The accompanying schedule of expenditures offederal awards, as required by Title 2 U.S Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is also not a required part of the financial statements. The combining nonmajor fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. 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 my opinion, the combining nonmajor fund financial statements and schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated April 9, 2018, on my consideration of Native Vil1age of Mekoryuk Tribal Council's internal control over fmancial reporting and on my 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 my 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 Native Village of Mekoryuk Tribal Council's internal control over financial reporting and compliance. Eagle River, Alaska April 9,

5 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Statement of Net Position December 31, 2016 Governmental Activities Governmental Business-type Activities Activities Assets Cash $ 823,598 17,628 Grants receivable 123,283 Other receivable 278 7,438 Prepaid items 4,795 Capital assets: Construction in progress 1,324,565 Buildings 2,132, ,000 Vehicles and equipment 239, ,280 Less: accumulated depreciation (898,797) (254,914) 2,797,657 6,366 Total assets $ 3,749,611 31,432 Total 841, ,283 7,716 4,795 1,324,565 2,292, ,102 (1,153,711) 2,804,023 3,776,248 Liabilities Accounts payable $ 6,803 Accrued payroll and payroll liabilities 28,786 2,890 Unearned grant revenue 554,896 Compensated absences 23,269 Total liabilities 613,754 2,890 6,803 31, , ,375 Net Position Invested in capital assets, net of related debt 2,797,657 6,366 Unrestricted 338,200 22,176 Total net position $ 3,135,857 28,542 2,804, ,376 3,164,399 See accompanying notes to financial statements. 3

6 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Statement of Activities Year Ended December 31, 2016 Functions/Pro!:ams Direct Exp_enses Program Revenues Indirect Operating Expense Charges for Grants and Allocation Services Contributions Net (Expense) Revenue and Changes in Net Position Primary Government Capital Grants and Governmental Business-type Contributions Activities Activities Total Governmental activities Administration Social services Clinic Environmental Development and planning Capital outlay Total governmental activities $ 324, ,183 43, , , _5_1_ (92,038) 149,183 36, ,207 (92,038) 36, ,390 (232,499) (232,499) (6,551) (6,551) 1,144, , , ,144, ,228 nq,_228 Business-type activities Nuniwarmiut Reindeer and Seafood Products Total primary government 156, , ,068 (92,038) 184, ,390 (8,750) (8,750) 1,144, ,228 (8,750) ll_1478 General revenues Rental income Other Loss on disposal of fixed assets Transfers Total general revenues and transfers Change in net position Net position, January I, 2016 Net position, December 31, ,309 41, , , , ,734 1,183,962 (8,750) 1,175,212 1,951,895 37,292 1,175, $ 3,135,857 28,542 _ 2_,350,424 See accompanying notes to financial statements. 4

7 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Balance Sheet Governmental Funds December 31, 2016 Assets Cash and cash equivalents Grants Receivable Other receivables Prepaid items Due from other funds $ BIA General , , , ,283 EDA 100,133 Al2AV Total 907 Nonmajor Total 27, , ,598 23, , , ,283 $ 397, , ,133 27, ,397 1,075,237 Liabilities and Fund Equity Liabilities: Accounts payable Accrued payroll and payroll liabilities Unearned grant revenue Due to other funds Total liabilities $ 6,803 28, ,821 35, , , ,133 6,803 28,786 27, , ,896 23, ,283 27, , ,768 Fund Balance - Nonspendable Prepaid expenses Unassigned Total fund balance 4, , ,469 4, , ,469 $ 397, , ,133 27, ,397 1,075,237 See accompanying notes to financial statements. 5

8 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Reconciliation of the Balance Sheet to the Statement of Net Position Year Ended December 31, 2016 Fund Balances - total governmental funds $ 361,469 Amounts reported for governmental activities in Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds Governmental capital assets Less accumulated depreciation $ 3,696,454 (898,797) 2,797,657 Long term liabilities are not due and payable in the current period and, therefore, are not reported in the funds Compensated absences (23,269) Net Position of Governmental Funds $ 3,135,857 See accompanying notes to financial statements. 6

9 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds Year Ended December 31, 2016 BIA AVl2 Total General 638 EDA 907 Nonmajor Total Revenues: Federal sources $ 108, , , ,528 1,387,409 State sources 5,298 5,298 Clinic lease 36,590 36,590 Contract support recovery 92,038 92,038 Rental income 41,309 41,309 Local sources 412,425 4, ,569 Total revenues 582, , , , ,970 1,979,213 Expenditures: Current: Administration 232, ,210 Social services 108,583 40, ,183 Clinic 43,141 43,141 Environmental 103, ,207 Development and planning 338, , ,163 1,144,461 Capital outlay Total expenditures 275, , , , ,970 1,672,202 Excess of revenues over ( under) expenditures 307,01 I 307,01 I Other operating (uses) sources - Operating transfers (out) in Net change in fund balances I 307,01 I Fund balances, beginning of year 54,458 54,458 Fund balances, end of year $ 361, ,469 See accompanying notes to financial statements. 7

10 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Year Ended December 31, 2016 Net Change in Fund Balances - total governmental funds $ 307,011 Amounts reported for governmental activities in Statement of Net Assets are different because: Governmental funds report capital outlays as expenditures. However in the Statement of Activities, the cost of those assets is depreciated over their estimated useful lives: Expenditures for capital assets Less current year depreciation $ 969,278 (87,926) 881,352 Repayment of certain long-term liabilities is reported as an expenditure in governmental funds while they are recorded as a reduction in liabilities in the statement of net position: (4,401) Governmental funds only report the disposal of assets to the extent proceeds are received from the sale. In the statement of activities, a gain or loss is reported for each disposal. This is the amount by which proceeds exceeded the gain on disposal of fixed asset: Proceeds in excess of gain on disposal of fixed assets Change in Net Position of Governmental Funds $ 1,183,962 See accompanying notes to financial statements. 8

11 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Nuniwarmiut Reindeer and Seafood Products Proprietary Fund Statement of Net Position December 31, 2016 Assets Current assets: Cash and cash equivalents Accounts receivable Prepaid insurance Total current assets $ 17,628 7,438 25,066 Non-current assets: Capital assets: Buildings Machinery and equipment Less accumulated depreciation Total assets 160, ,280 (254,914) 6,366 $ 31,432 Liabilities and net position Current - payroll liabilities $ 2,890 Net Position: Investments in capital assets Unrestricted Total net position 6,366 22,176 28,542 Total liabilities and net position $ 31,432 See accompanying notes to financial statements. 9

12 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Statement of Revenues, Expenses, and Changes in Fund Net Position Nuniwarmiut Reindeer and Seafood Products Proprietary Fund Year Ended December 31, 2016 Operating revenues: Charges for services Other Total operating revenues $ 147, ,068 Operating expenses: Salaries and benefits Rent Commercial butcher Insurance Utilities Repair and maintenance Supplies Depreciation Other Total operating expenses 86,556 13,036 17,421 2,772 17,192 5,811 1,746 4,223 8, ,818 Operating income (loss) Transfers (out) in Change in net position Total net position, beginning Total net position, ending (8,750) (8,750) 37,292 $ 28,542 See accompanying notes to financial statements. 10

13 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Statement of Cash Flows - Nuniwarmiut Reindeer and Seafood Products Proprietary Fund Year Ended December 31, 2016 Cash flows from operating activities: Cash received from customers Other cash received Cash payments to suppliers Cash payments to employees Net cash provided by operating activities $ 142,252 (65,239) (84,003) (6,990) Cash flows from investing activities - purchase of fixed assets Cash flows from financing activities - Operating Transfers Net increase in cash and cash equivalents Cash and cash equivalents, January 1 Cash and cash equivalents, December 31 (6,990) 24,618 $ 17,628 Reconciliation of operating income to net cash provided by (used for) operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation Change in assets/liabilities: Increase in accounts receivable Decrease in prepaids Increase in accrued liabilities Net Cash Provided by Operating Activities $ (8,750) 4,223 (5,816) 800 2,553 $ (6,990) See accompanying notes to financial statements. 11

14 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements December 31, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial reporting entity The Native Village of Mekoryuk Tribal Council (the Council) is recognized by the U.S. Department of the Interior, as the local government representing the native people of the Native Village of Mekoryuk, Alaska. The Council administers contracts and grants for the benefit of the people of the Native Village of Mekoryuk, and has been determined to be an Indian tribal government which exercises governmental functions for the purpose of the Indian Tribal Government Tax Status Act of 1982, as amended. As defined by accounting principles generally accepted in the United States of America that are established by the Governmental Accounting Standards Board (GASB), the financial reporting entity consists of all the funds of the Native Village of Mekoryuk Tribal Council. There are no other legally separate organizations for which the elected officials of the Native Village of Mekoryuk Tribal Council are financially accountable. Financial accountability is defined as appointment of a voting majority of the organization's board, and either a) the ability to impose will by the Council, or b) the possibility that the organization will provide a financial benefit to or impose a financial burden on the Council. Basic financial statements In accordance with GASB Statement No Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, the basic financial statements include both government-wide and fund financial statements. The government-wide financial statements (Statement of Net Position and Statement of Activities) report on the Council as a whole. Governmental activities, which normally are supported by intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. All activities, both governmental and business-type, are reported on the governmentwide financial statements using the economic resources measurement focus and the accrual basis of accounting, which includes long-term assets and receivables as well as long-term debt and obligations. The government-wide financial statements focus more on the sustainability of the Council as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. Generally, the effect of interfund activity has been removed from the government-wide financial statements. The government-wide Statement of Net Position reports all financial and capital resources of the Council. Jt is displayed in a format of assets less liabilities equals net position, with the assets and liabilities shown in order of relative liquidity. Net assets are required to be displayed in three components: I) invested in capital assets, net ofrelated debt, 2) restricted, and 3) unrestricted. Invested in capital assets, net ofrelated debt is capital assets net of accumulated depreciation and reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvements of those assets. Restricted net assets are those with constraints placed on their use by either; 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net assets not otherwise classified as restricted, are shown as unrestricted. Generally the Council would first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. 12

15 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements, continued The government-wide Statement of Activities demonstrates the degree to which both direct and indirect expenses of the various functions and programs of the Council are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or identifiable activity. Indirect expenses for administrative overhead are allocated among the functions and activities using a full cost allocation approach and are presented separately to enhance comparability of direct expenses between governments that allocate direct expenses and those that do not. Interest on general long-term debt is not allocated to the various functions. Program revenues include: 1) charges to customers or users who purchase, use or directly benefit from goods, services, or privileges provided by a particular function or program and 2) grants and contributions that are restricted to meeting the operation or capital requirements of a particular function or program. Taxes, unrestricted investment income and other revenues not identifiable with particular functions or programs are included as general revenues. The general revenues support the net costs of the functions and programs not covered by program revenues. Also, part of the basic financial statements are fund financial statements for governmental funds and proprietary funds. The focus of the fund financial statements is on major funds, as defined by GASB Statement No. 34. Although this reporting model sets forth minimum criteria for determination of major funds ( a percentage of assets, liabilities, revenues, or expenditures/expenses of fund category and of the governmental and enterprise funds combined), it also gives governments the option of displaying other funds as major funds. Other nonmajor funds are combined in a single column on the fund financial statements. The Council reports the following major governmental funds: The General Fund is the Council's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The BIA 638 Special Revenue Fund accounts for the activities and balances associated with the BIA 638 grant. This grant primarily provides funding for social services for the Native people of Mekoryuk. The AV12907 Special Revenue Fund accounts for the activities and balances associated with the AV12907 grant. The EDA Special Revenue Fund accounts for the activities and balances associated with the EDA grant. 13

16 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements, continued The Council reports the following major proprietary fund: The Nuniwarmiut Reindeer and Seafood Products Enterprise Fund accounts for the activities of the Reindeer herd and processing and resale of related products. Measurement focus and basis of accounting The governmental fund financial statements are prepared on a current financial resources management focus and modified accrual basis of accounting. To conform to the modified accrual basis of accounting, certain modifications must be made to the accrual method. These modifications are outlined below: A. Revenue is recorded when it becomes both measurable and available (received within 60 days after year-end). Revenue considered susceptible to accrual includes: property taxes, sales and use taxes, transient occupancy taxes, licenses, fees and permits, intergovernmental revenues, charges for services, fines, forfeits and penalties, and interest. B. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. C. Disbursements for the purchase of capital assets providing future benefits are considered expenditures. Bond proceeds are reported as an other financing source. With this measurement focus, operating statements present increases and decreases in net current assets and unreserved fund balance as a measure of available spendable resources. This is the traditional basis of accounting for governmental funds and also is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate to: 1) demonstrate legal and covenant compliance, 2) demonstrate the sources and uses ofliquid resources, and 3) demonstrate how the Council's actual revenues and expenditures conform to the annual budget. Since the governmental funds financial statements are presented on a different basis than the governmental activities column of the government-wide financial statements, a reconciliation is provided immediately following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the government-wide financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. The Council has elected not to follow subsequent private-sector guidance. Proprietary funds distinguish operating revenues and expenses from nonoperating 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. The principal operating revenues of the Nuniwarmiut Reindeer and Seafood Products Enterprise Fund are charges to customers for sales and services. Operating expenses for the enterprise fund includes the cost of sales and services. Operating expenses for the enterprise fund includes the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 14

17 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements, continued Cash and investments The Council's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of 3 months or less from the date of acquisition. There are no statutory limitations on the type of investment allowed. Receivables and payables All outstanding balances between funds are reported as "due to/from other funds." These balances represent the numerous transactions that occur during the course of operations between individual funds for goods provided or services rendered. Receivables consist of both amounts due from federal sources and trade receivables. Management believes all accounts to be collectible and accordingly, no allowance for doubtful accounts is recorded. Inventories Inventories ( comprised mainly of fuel oil) are valued at cost using the first-in/first-out (FIFO) method. Inventories are recorded as expenditures when consumed rather than purchased. Capital assets Under GASB Statement No. 34, all capital assets, whether owned by governmental activities or business-type activities, are recorded and depreciated in the government-wide financial statements. No long-term capital assets or depreciation are shown in the governmental funds financial statements. Capital assets are defined as assets with an initial individual cost of more than $5,000 and an estimated useful life greater than one year. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at the 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 asset lives are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Buildings, structures and improvements Furniture, equipment and vehicles years 5 years Unearned Grant Revenues Unearned revenues arise in the governmental funds when revenue does not meet the "measurable" and "available" criteria for recognition in the current period. Unearned revenues also arise, in both governmental and proprietary funds, when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, revenue is recognized. Net Position In the government-wide financial statements, net position are reported in three categories: net position invested in capital assets (net of related debt, when applicable); restricted net position; and unrestricted net position. Restricted net position account for the portion of net position restricted by parties outside the Council. 15

18 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements, continued Fund balances and net position In the fund financial statements, governmental funds report aggregate amounts for five classifications of fund balances based on the constraints imposed on the use of these resources. The nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable formprepaid items or inventories; or (b) legally or contractually required to be maintained intact. The spendable portion of fund balances comprises the remaining four classifications: restricted, committed, assigned and unassigned. Restricted Fund Balance. This classification reflects the constraints imposed on resources either (a) externally by creditors, grantors, contributors, or laws and regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance. These amounts can only be used for specific purposes pursuant to constraints imposed by formal resolutions or ordinances of the Village Council, the highest level of decision making authority. Those committed amounts cannot be used for any other purpose unless the Village Council removes the specified use by taking the same type of action imposing the commitment. This classification also includes contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned Fund Balance. This classification reflects the amounts constrained by the Village Council's "intent" to be used for specific purposes, but are neither restricted nor committed. The Village Council has the authority to assign amounts to be used for specific purposes. Assigned fund balances include all remaining amounts ( except negative balances) that are reported in governmental funds, other than the General Fund, that are not classified as nonspendable and are neither restricted nor committed. Unassigned Fund Balance. This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds. Spending Policy. The Native Village's spending policy is to spend restricted fund balance first, followed by committed, assigned, and unassigned fund balance. Budgetary principles GASB Statement No. 34 requires that budgetary comparison statements for the General Fund and major special revenue funds be presented in the basic financial statements. These statements must display original budget, amended budget and actual results (on a budgetary basis). It should be noted that the Council does not have adopted annual budgets for its general and major special revenue funds. These budgets are project length and not annual budgets. As such, the financial statements do not contain this budgetary information. Income taxes The Native Village of Mekoryuk Tribal Council is a tribal government and is exempt from income taxes. 16

19 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements, continued Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reported period. As such, actual results could differ from those estimates. NOTE 2 - CASH AND INVESTMENTS The majority of the Council' s cash is maintained in checking and savings accounts at two local financial institutions. Its bank and book balances at December 31, 2016, for its governmental activities were $829,132 and $823,598, respectively. The bank and book balance for its business-type activities at December 31, 20 I 6 was $15,468 and $17,628, respectively. Of the governmental activities bank balance, $250,000 was insured by the Federal Depository Insurance Corporation, the remaining balance was uncollateralized. The entire bank balance of the business-type activities was insured by FDIC. There are no statutory limitations on the types of investments allowed, nor are there formal deposit and investment policies adopted by the Council. NOTE 3 -ACCOUNTS RECEIVABLE, DUE FROM OTHER GOVERNMENTS, AND CERTAIN INTERFUND TRANSACTIONS, RECEIVABLE AND PAY ABLE BALANCES The following interfund receivables and payables are included in the fund financial statements at December 31,2016: Due From Nonmajor EDA Fund Total General Fund $ 100,133 23, ,283 These are interfund balances at December 31, 2016 that are generally short-term loans to cover temporary cash deficits in various funds. These balances are expected to be repaid in

20 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements, continued NOTE 4- CAPITAL ASSETS Capital asset activities for the year ended December 31, 2016, were as follows: Beginning Balance Additions Deletions Ending Balance Governmental activities: Non-depreciable assets - Construction in progress Depreciable assets: Buildings Vehicles and equipment Total depreciable assets Less: accumulated deprecation $ 384,044 2,132, ,065 2,343,132 (810,871) 940,521 28,757 28,757 (87,926) 1,324,565 2,132, ,822 2,371,889 (898,797) Total $ 1,916, ,352 2,797,657 The entire $87,926 was charged to the administrative function. Capital asset activity for the Nuniwarmiut Reindeer and Seafood Products proprietary fund is as follows: Beginning Balance Additions Deletions Ending Balance Business-type activities: Depreciable assets: Buildings Vehicles and equipment Total depreciable assets Less: accumulated deprecation 160, , ,280 (250,691) {4,223) 160, , ,280 (254,914) Total $ 10,589 (4,223) 6,366 All the depreciation expense was charged to the Nuniwarmiut Reindeer and Seafood Products business-type activities. NOTES-RELATED PARTIES Due to the nature and size of the community, it is inevitable that transactions will occur between entities, Council or Board members, and/or employees of these entities. The services provided are not considered significant for individual disclosure. 18

21 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Notes to Basic Financial Statements, continued NOTE 6- COMPENSATED ABSENCES The following is a schedule of the compensated absences balance as of December 31, 2016: Beginning Balance Additions Deletions Ending Balance Accrued leave $ 18,868 4,401 23,269 There is no current portion for the compensated absences balance at year end. NOTE 7 - RISK MANAGEMENT The Council 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 commercial insurance purchased from independent third parties. There has been no significant reduction in insurance coverage during the year. NOTE 8 - CONTINGENCIES Amounts received or receivable from the federal government are subject to audit and adjustment. Any disallowed claims, including amounts already collected, would become a liability of the Council. In management's opinion, disallowances, if any, will not be material. NOTE 9-CONCENTRATIONS The Council receives most of its revenues in the form of grants from federal sources. Total federal revenues accounted for 70% of all revenues of the Council. A significant change in these revenues would have a significant impact, either positive or negative on the operations of the Council. NOTEl0-SUBSEQUENTEVENTS Subsequent event procedures have been performed as of April 9, This is also the date the financial statements were available to be issued. 19

22 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Combining Balance Sheet Nonmajor Governmental Funds December 31, 2016 IRR Roads 2% Assets Cash and cash equivalents $ 30,499 Grants receivable Due from other funds - BIA ICWA 44,952 EPA IGAP 23,150 AVCP Al4 Tribal ATG CDQ AV0511 Share Total 481 8,685 21,396 5, ,247 23,150 $ 30,499 44,952 23, ,685 21,396 5, ,397 Liabilities and Fund Equity Liabilities: Unearned grant revenue $ 30,499 Due to other funds Total liabilities 30,499 44,952 23,150 44,952 23, ,685 21,396 5,234 lll,247 23, ,685 21,396 5, ,397 Fund equity - Unassigned - $ 30,499 44,952 23, ,685 21,396 5, ,397 20

23 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds Year Ended December 31, 2016 BIA IRR Nunivak EPA IRR ICWA Roads 2% TCD IGAP Water CDQ A14 State AV0511 Port Total Revenues: Federal sources $ State of Alaska Local sources Total revenues 36,456 24,212 8,998 94,209 28,885 4,144 36,456 24,212 8,998 94,209 28,885 4,144 53, ,528 5,298 5,298 4,144 53,768 5, ,970 Expenditures: Current: Administration Social services Tribal court Environmental Housing assistance Development and planning Total expenditures 36,456 4,144 8,998 94,209 24,212 28,885 36,456 24,212_ 8,99_8 94,209 28,885 4,144 40, ,207 53,768 5, ,163 53,768 5, ,970 Excess of revenues over (under) expenditures Other operating (uses) sources - Operating transfers ( out) in Excess of revenues over expenditures and other financing uses Fund balances, beginning of year Fund balances, end of year $ 21

24 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Schedule of Expenditures of Federal Awards Year Ended December 31, 2016 Federal Grant Title Catalog of Federal Domestic Assistance Number Pass- Through Entity Identifying Number Total Grant Award Federal Ex2enditures Department of the Interior - Bureau oflndian Affairs: BIA 638 FY OJ BIA638 FY 12 BIA638 FY 13 BIA 638 FY 15 BIA lcwa FY 14 BlA ICWA FY 15 Total Department of the Interior - Bureau of Indian Affairs $ 186, , ,356 37,578 39, l13 632, ,766 73,050 28,900 31,382 5, ,039 Department of Transportation - Federal Highways Planning and Construction Cluster: Al4AV00511 Al2AV Al2AV00907 A09AV00120 Total Highway Planning and Construction Cluster , ,862 1,086, ,603 1,456,947 53,768 24, ,544 28, ,409 United States Department of Agriculture - Passed through Etolin Straits Development Group - Conservation Technical Assistance Program Total Department of Agriculture ,000 30,000 8,998 8,998 Environmental Protection Agency: IGAP FY 13!GAP FY 14 IGAPFY 15 Total Environmental Prated/ion Agency , , , ,032 8,079 17,084 69,046 94,209 Department of Commerce - Economic Adjustment Assistance , ,754 $ 3,410,241 1,387,409 The accompanying schedule of expenditures offederal awards (the Schedule) includes the federal grant activity ofnvm under programs of the federal government for the year ended December 31, The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations ofnvm, it is not intended to and does not present the financial position, changes in net assets, or cash flows of NVM. Expenditures reported on this Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in The Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass through entity identifiying numbers are presented where available. The NVM has not elected to use the I 0% de miminus indirect cost rate. 22

25 Brad Cage, CPA Hillcrest Drive Eagle River, AK Phone (907) 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 Management and Council Members Native Village of Mekoryuk Tribal Council Mekoryuk, Alaska I 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 Native Village of Mekoryuk Tribal Council, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the Native Village of Mekoryuk Tribal Council's basic financial statements and have issued my report thereon dated April 9, Internal Control Over Financial Reporting In planning and performing my audit of the financial statements, I considered Native Village of Mekoryuk Tribal Council's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Native Village of Mekoryuk Tribal Council's internal control. Accordingly, I do not express an opinion on the effectiveness of the Native Village of Mekoryuk Tribal Council'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. My 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 my audit I did not identify any deficiencies in internal control that I consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 23

26 Management and Council Members Native Village of Mekoryuk Tribal Council Compliance and Other Matters As part of obtaining reasonable assurance about whether the Native Village of Mekoryuk Tribal Council's financial statements are free of material misstatement, I 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 my audit, and accordingly, I do not express such an opinion. The results of my 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 my 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. Eagle River, Alaska April 9,

27 Brad Cage, CPA Hillcrest Drive Eagle River, AK Phone (907) Independent Auditor's Report on Compliance Applicable to Each Major Program and on Internal Control over Compliance in Accordance with the Uniform Guidance Management and the Council Members Native Village of Mekoryuk Tribal Council Mekoryuk, Alaska Report on Compliance for Each Major Program I have audited Native Village of Mekoryuk Tribal Council's compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Compliance Supplement that could have a direct and material effect on each of Native Village of Mekoryuk Tribal Council's major federal programs for the year ended December 31, Native Village of Mekoryuk Tribal Council's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and question costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility My responsibility is to express an opinion on compliance of each of Native Village of Mekoryuk Tribal Council's major federal programs based on my audit of the types of compliance requirements referred to above. I conducted my audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements of Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that I plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Native Village of Mekoryuk Tribal Council's compliance with those requirements and performing such other procedures as I considered necessary in the circumstances. I believe that my audit provides a reasonable basis for my opinion on compliance for each major federal program. However my audit does not provide a legal determination on Native Village of Mekoryuk Tribal Council's compliance. Basis for Qualified Opinion on DOT, Federal Highways, As described in the accompanying schedule of findings and questioned costs, Native Village of Mekoryuk Tribal Council, did not comply with requirements regarding , DOT, Federal Highways as described in findings regarding reporting, regarding special tests and provisions and 20 I regarding procurement. Compliance with such requirements is necessary, in my opinion, for Native Village of Mekoryuk Tribal Council to comply with the requirements applicable to that program. Qualified Opinion on DOT, Federal Highways, In my opinion, except for the noncompliance described in the basis for qualified opinion paragraph, Native Village of Mekoryuk Tribal Council complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended December 31,

28 Management and Council Members Native Village of Mekoryuk Tribal Council Report on Internal Control over Compliance Management of Native Village of Mekoryuk Tribal Council is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing my audit of compliance, I considered Native Village of Mekoryuk Tribal Council's internal control over compliance with the types ofrequirements that could have a direct and material effect on a major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing my opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, I do not express an opinion on the effectiveness of Native Village of Mekoryuk Tribal Council's internal control over compliance. My consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, I identified certain deficiencies in internal control over compliance that I consider to be material weaknesses. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. l consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as items , and to be material weaknesses. Native Village of Mekoryuk Tribal Council's written response to the internal control over compliance findings identified in my audit is described in the accompanying schedule of findings and questioned costs. Native Village of Mekoryuk Tribal Council's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, I express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope ofmy testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Eagle River, Alaska April 9,

29 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Summary of Auditor's Results and Schedule of Findings and Questioned Costs Year Ended December 31, 2016 FINANCIAL STATEMENTS Type of auditor report issued: Material weakness in internal control over financial reporting reported? Significant deficiency not considered a material weakness reported? Material Noncompliance related to the financial statements reported? FEDERAL AW ARDS Yes Yes Yes Unmodified _x_ No _x_ No ~ - No Type of auditor report issued on compliance over major programs: Qualified Material weakness in internal control over major programs reported? _X_Yes No Significant deficiency not considered a material weakness reported? Yes _K_ No Audit findings that are required to be reported in accordance with 2 CFR section (a)? _K Yes No IDENTIFICATION OF MAJOR PROGRAMS CFDA Numbers Name of Federal Program or Cluster of Programs DOT-Federal Highways Dollar threshold used to distinguish between Type A and Type B programs: Qualified as a low-risk auditee? Yes $750,000 X No FINDINGS RELATED TO THE FINANCIAL STATEMENTS Native Village of Mekoryuk Tribal Council did not have any findings that relate to the financial statements that is required to be reported in accordance with Government Auditing Standards. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AW ARDS Native Village of Mekoryuk Tribal Council did have findings and/or questioned costs related to federal awards that is required to be reported in accordance with the Uniform Guidance. 27

30 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Schedule of Findings and Questioned Costs, Continued Year Ended December 31, 2016 FINDINGS- FINANCIAL STATEMENT AUDIT No Financial statement findings noted. FEDERAL AW ARD FINDINGS Material Weaknesses Finding , Late Single Audit Report, Dept of Transportation, Federal Highway, , Reporting Statement of Condition I noted that the Native Village of Mekoryuk Tribal Council did not submit the single audit within the required 9-month timeframe. Criteria Questioned Costs Cause Effect Suggestion Auditee reply Repeat Finding The Native Village of Mekoryuk Tribal Council's granting agencies and the Uniform Guidance require that the single audit report be completed within 9 months of the fiscal year end. None The final audit documentation was not able to be finalized until after the 9 month time frame. Granting agencies could withhold future funding until all audits are current. Management needs to ensure that future audits be started as soon as possible. See corrective action plan. This finding was originally noted in 2012 as finding and repeated in 2014 and 2015 as finding and Finding Uncollateralized Cash, Dept of Transportation, Federal Highway, Statement of Condition I noted that the Native Village of Mekoryuk Tribal Council did not have their advanced funds fully collateralized or insured. Criteria Questioned Costs Cause Effect Suggestion Auditee reply Repeat Finding The Native Village of Mekoryuk Tribal Council advanced Federal Highway funds are required to be fully insured or collateralized. None Management has not obtained a collateralization agreement with their financial institutions. In the event of a bank failure, advanced funds could be lost. Management needs to ensure that all advanced cash if fully insured or collateralized. See corrective action plan. This finding was originally noted in 2014 as finding and repeated in 2015 as finding

31 NATIVE VILLAGE OF MEKORYUK TRIBAL COUNCIL Schedule of Findings and Questioned Costs, continued FEDERAL AW ARD FINDINGS Finding , Dept of Transportation, Federal Highway, , Procurement Statement of Condition During my audit, I noted that Native Village of Mekoryuk Tribal Council did not properly document their procurement for several different goods and services purchased. Nor did it appear that the vendor/subcontractor was checked to make sure that it was not on the suspended/debarred list. Criteria Questioned Costs Perspective Information Cause and Effect Suggestion Auditee reply Repeat Finding Native Village of Mekoryuk Tribal Council's staff must follow their procurement policies and obtain competitive bids for significant purchases of equipment/materials and/or contracts. This procurement should be documented and that documentation retained until no longer needed. This documentation should contain, at a minimum the type of procurement, documentation of multiple bids, price reasonableness and why winning bid was chosen. If procurement was an allowable sole source bid, documentation of that process as well as price reasonableness must be retained. Not determined 1 selected all 6 purchases of goods or services in excess of the 10,000 threshold for this major program. After discussion with management it appeared that at least several of these were procured, but adequate documentation of the entire process was not maintained for any of the six selected. The total amounts purchased with these six purchases was $496,894. Internal controls were not in place to ensure that prior to purchase, proper procurement procedures were followed. Management should ensure that all staff know that all material purchases must be properly procured and procurement documentation be retained until no longer needed, and if sole source, that must be documented as well. The procurement requirements of the new Uniform Guidance need to be used in developing the Council's new procurement policy. See corrective action plan. This finding was originally noted in 2014 as finding and repeated in 2015 as finding

32 NATIVE VILLAGE OF MEKORYUK Tribal Council P.O. Box 66 Mekoryuk, Alaska (907) Fax: (907) Corrective Action Plan Year Ended December 31, 2016 Responsible Finding Individual Bessie Weston, Executive 001 Director Bessie Weston, 002 Executive Director Bessie Weston, 003 Executive Director Management Views Management agrees with the finding. Management agrees with the finding. Management agrees with the finding. Corrective Action Management will ensure that future audits are started and completed within the required 9 month time frame. Management will ensure that all funds are fully insured or collateralized through either a collateralization agreement, or opening up a new bank account at a different financial institution in order to keep the funds fully insured by FDIC. Management will ensure that all procured goods and services contain the proper documentation of the procurement process. This will include at a minimum the nature of the procurement, documentation of the multiple bids, documentation of who was selected and why, and documentation that vendor/subcontractor is not suspended or debarred. Anticipated Completion Date To be implemented immediately. Tobe implemented immediately. Tobe implemented immediately. 30 PAST PRESIDENTS Moses Nayiruk Peter Smith, Sr. Tom Dotomain Jesse Moses Walter Amos George K. Whitman, Sr. Edward J. Shavings, Sr. George King, Sr. Henry J. Shavings Joseph David, Sr. Jerry David, Sr. Fred Don Howard T. Amos Samson Weston Hultman Kiokun Tom Amos Solomon Williams Daniel Olrun, Sr.