NATIVE VILLAGE OF KIVALINA

Transcription

1 Basic Financial Statements, Supplemental Information and Compliance Reports Year Ended December 31, 2016 '

2 Table of Contents INDEPENDENT AUDITOR'S REPORT BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Position Statement of Activities Governmental Funds: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Notes to Basic Financial Statements SUPPLEMENTAL INFORMATION Governmental Nonmajor Funds: Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Schedule of Expenditures of Federal Awards I 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

3 Independent Auditor's Report Council Members Native Village of Kivalina Kivalina, Alaska Report on the Financial Statements I have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Native Village of Kivalina, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise Native Village of Kivalina'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 opinions. Opinions In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Native Village of Kivalina as of December 31, 2016, and the 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. 1

4 Council Members Native Village of Kivalina 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 Kivalina'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 financial statements. The accompanying schedule of expenditures of federal 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 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. The 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 1with 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 March 8, 2018, on my consideration of Native Village of Kivalina's internal control over financial 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 Kivalina's internal control over financial reporting and compliance.,~/ ~rcl/4---- Eagle River, Alaska March 8,

5 - _.,. Statement of Net Position December 31, 2016 Governmental Activities Assets Current assets: Cash $ 332,659 Receivables: Grants and contracts 54,536 Other 2,411 Total current assets 389,606 Noncurrent assets: Equipment and vehicle assets 65,801 Less accumulated depreciation {42,792) Total noncurrent assets 23,009 Total assets $ 412,615 Liabilities Current liabilities: Accounts payable $ 878 Accrued payroll liabilities 8,223 Unearned grant revenue 203,185 Total/current liabilities 212,286 Net Position Invested in capital assets, net of related debt 23,009 Unrestricted 177,320 Total net position $ 200,329 See accompanying notes to financial statements. 3

6 Statement of Activities Year Ended December 31, 2016 Functions/Programs Exp_enses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Net (Expense) Revenue and Changes in Net Position Prima!}'. Government Governmental Activities Total Governmental activities: General government Community and social service Environmental stewardship Roads Health Housing Total governmental activities $ 176, , ,139 65,124 31, ,158 1g_o_3, , , ,643 65,124 31, ,980 1,301,877 76,175 76,175 24,461 24,461 (1,496) (1,496) (1,178) (1,178) 97,962 97,962 General revenues Miscellaneous 15,994 15,994 Transfers Total general revenues and transfers Change in net position Net position, beginning of year Net position, ending $ -- 15,994 15, , ,956 86,373 86, , ,329 See accompanying notes to financial statements. 4

7 Balance Sheet - Governmental Funds December 31, 2016 General Fund Assets Cash $ 171,670 Accounts receivable: Grants and contracts Other 2,411 Due from other funds 30,370 HUD IHBG 3,473 BIA Climate Change 100,509 BIA ,363 Nonmajor Maniilag Funds Total 30, ,659 35,383 15,680 54,536 2,411 30,370 Total Assets $ 204,451 3, ,509 30,363 35,383 45, ,976 Liabilities and Fund Equity liabilities: Accounts payable $ 878 Accrued payroll liabilities 8,223 Unearned grant revenue 18,030 Due to other funds Total Liabilities 27, ,509 3, ,509 30,363 30, ,223 24,166 30, ,185 11,217 15,680 30,370 35,383 45, ,656 Fund Balances: Unrestricted Unassigned 177,320 Total Fund Balances 177, , ,320 Total Liabilities and Fund Balance: $ 204,451 3, ,509 30,363 35,383 45, ,976 See accompanying notes to financial statements. 5

8 Reconciliation of the Balance Sheet to the Statement of Net Position Year Ended December 31, 2016 Fund Balances - total governmental funds $ 177,320 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 $ 65,801 (42,792) 23,009 Net Position of Governmental Funds $ 200,329 See accompanying notes to financial statements. 6

9 Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds Year Ended December 31, 2016 HUD BIA BIA General IHBG Climate Change 638 Nonmajor Total Governmental Governmental Maniilag Funds Funds Revenues: Grant income Contributions and donations Miscellaneous Total revenues $ 545,980 85,419 71, ,085 15, , ,980 85,419 71,348 35, , ,056 81, ,821 15, , ,665 1,317,871 Expenditures: Current: General government Community and social services Environmental stewardship Roads Health Housing Total expenditures 169,987 71,348 85, , , ,980 85,419 71, ,987 25,789 77, , , ,643 35,644 29,480 65,124 31,486 31, ,980 92, ,665 1,194,318 Excess (deficiency) of revenues over expenditures Other operating (uses) sources - Operating transfers (out) in Net change in fund balances Fund balances, beginning of year Fund balances, end of year 99,092 24, ,553 53,767 $ 177,320 24, ,553 (24,461) 123,553 53, ,320 See accompanying notes to financial statements.

10 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 $ 123,553 Amounts reported for governmental activities in Statement of activities are different because: Governmental funds report capital outlays as expenditures. However in the Statement of Activities, the cost of those assets is depreciated over their estimated useful lives: Expenditures for capital assets Less current year depreciation (9,597) (9,597) Change in net position of governmental activities $ 113,956 See accompanying notes to financial statements. 8

11 Notes to Basic Financial Statements December 31, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POI.HCIES The financial reporting entity Native Village of Kivalina is a remove village located in the Northwest Arctic Borough, Alaska. The Native Village Council has been determined to be an Indian Tribal Government, which exercises governmental function for the purpose of the Indian Tribe Government Tax Status Act of 1982, as amended. The Council provides essential governmental services for its members. These services include the promotion and protection of the Tribal member's family, social, cultural, educational, and economic well-being. Activities conducted in servicing the goals of the Council are financed primarily from federal sources. As defined by accounting principles generally accepted in the United States of America that are established by the Governmental Accounting Standards Board (GASS), the financial reporting entity consists of all the funds of the Native Village of Kivalina. There are no other legally separate organizations for which the elected officials of the Native Village of Kivalina 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 Community, orb) the possibility that the organization will provide a financial benefit to or impose a financial burden on the Community. Basic financial statements In accordance with GASS Statement No. 34- 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 Native Village 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 businesstype, are reported on the government-wide 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 Native Village as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The Council has no business-type activities. Generally, the effect of interfund activity has been removed from the government-wide financial statements. 9

12 Notes to Basic Financial Statements, continued The government-wide Statement of Net Position reports all financial and capital resources of the Native Village. It is displayed in a format of assets less liabilities equals net position, with the assets and liabilities shown in order of relative liquidity. Net position are required to be displayed in three components: 1) invested in capital assets, net of related debt, 2) restricted, and 3) unrestricted. Invested in capital assets, net of related 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 position are those with constraints placed on their use by either; 1) externally imposed by creditors (such as through debt covenants), granters, contributors, or laws or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net position not otherwise classified as restricted, are shown as unrestricted. Generally the Native Village would first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. The government-wide Statement of Activities demonstrates the degree to which both direct and indirect expenses of the various functions and programs of the Native Village 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. 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 Native Community reports the following major governmental funds: The General Fund is the Native Village'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 provides funds to support a variety of social service programs for the people of Kivalina. 10

13 Notes to Basic Financial Statements, continued I The HUD IHBG Special Revenue Fund accounts for the activities and balances associated with the HUD IHBG grant. The BIA Climate Change Special Revenue Fund accounts for the activities and balances associated with the BIA Climate Change grant. The Maniilaq Special Revenue Funds accounts for the activities and balances associated with various grants to the Council from Maniilaq. 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 of liquid resources, and 3) demonstrate how the Native Village'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 both the government-wide and proprietary fund financial statements to the extent that those standards do not contradict guidance of the Governmental Accounting Standards Board. Governments have the option of following subsequent private-sector guidance for businesstype activities and enterprise funds, subject to the same limitations. The Council has elected not to follow subsequent private-sector guidance. 11

14 Notes to Basic Financial Statements, continued The government-wide financial statements provide short- and long-term information about the Council's overall status. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time the liabilities are incurred, regardless of when the related cash flows take place. Generally it is the Council's policy to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. 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 types of deposits or investments. 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. For expenditures driven grants, receivables are recognized when the qualifying expenditures are incurred and all other eligibility requirements have been met. Capital assets Under GASS 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 infrastructure Land improvements Equipment and vehicles 30 years 5-15 years 5-7 years 12

15 Notes to Basic Financial Statements, continued Unearned liabilities Unearned liabilities arise in the governmental funds when revenue does not meet the "measurable" and "available" criteria for recognition in the current period. Unearned liabilities 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. Fund balances and net position In the government-wide financial statements, equity is classified as net position and displayed in three components: a. Net investment in capital assets - consists of capital assets including restricted capital assets, net of accumulated depreciation and any related debt. b. Restricted net position - consists of amounts with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. The Council has no restricted net position. c. Unrestricted net position - all other net position that does not meet the definition of "restricted" or "net investment in capital assets", are unrestricted. 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 form- prepaid 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, committe<;l, 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 Council-the Native Village's highest level of decision making authority. Those committed amounts cannot be used for any other purpose unless the 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. 13

16 Notes to Basic Financial Statements, continued Assigned Fund Balance. This classification reflects the amounts constrained by the Council's "intent" to be used for specific purposes, but are neither restricted nor committed. The Native Villlage's 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 Council'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 officially 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 Native Village of Kivalina is a tribal government and is exempt from income taxes. 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. 14

17 Notes to Basic Financial Statements, continued NOTE 2 - CASH AND INVESTMENTS The majority of the Native Village's cash is maintained in checking and savings accounts at a local institution. Its bank and book balances at December 31, 2016, were $334,721 and $332,659, respectively. $250,000 of the bank balance was insured by the Federal Depository Insurance Corporation, the remaining amount was uninsured. The Native Village has not adopted an official investment or deposit policy. NOTE 3 - ACCOUNTS RECEIVABLE, DUE FROM OTHER GOVERNMENTS, AND CERTAIN INTERFUND TRANSACTIONS, RECEIVABLE AND PAYABLE BALANCES The following interfund receivables and payables are included in the fund financial statements at December 31, 2016: Due From HUD Non Due To IHBG Manillaq Major Total General Fund $ 3,473 11,217 15,680 30,370 Total $ 3,473 11,217 15,680 30,370 These are interfund balances at December 31, 2016 that are generally short-term loans to cover temporary cash deficits in various funds. The balances are expected to be repaid in

18 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: Depreciable assets: Machinery and equipment $ 65,801 65,801 Total assets being depreciated 65,801 65,801 Accumulated depreciation (33,195) (9,597) (42,792) Total assets being depreciated, net Total governmental activites capital assets, net $ 32,606 (9,597) 32,606 (9,597) 23,009 23,009 Of the depreciation expense recorded in the statement of net activities, $6,923 was recorded in administration, $1,496 was recorded in environmental and $1,178 was recorded in the housing function. NOTE 5- RELATED PARTIES Due to the nature and size of the community, it is inevitable that transactions will occur between entities, Native Village or Council members, and/or employees of these entities. The services provided are not considered significant for individual disclosure. NOTE 6 - RISK MANAGEMENT The Native Village 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. NOTE 7 - 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 Native Village. In management's opinion, disallowances, if any, will not be material. 16

19 Notes to Basic Financial Statements, continued NOTE 8 - CONCENTRATION OF SUPPORT The Community received the majority of its governmental activities support from the federal government for the year ended December 31, A significant reduction in the level of this support, if this were to occur, may have an effect on the Village's programs and activities. NOTE 9 - SUBSEQUENT EVENTS Subsequent event procedures have been performed as of March 8, This is also the date the financials were available to be issued. 17

20 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2016 Assets Cash Grants receivable Due from other funds $ BIA Child EPA Roads Care IGAP 15,680 13,886 3,454 Denali SAMHSA Commission Total 10,000 2,777 30,117 15,680 $ 15,680 13,886 3,454 10,000 2,777 45,797 Liabilities and Fund Equity Liabilities: Unearned grant liabilities Due to other funds Total liabilities $ 15,680 13,886 3,454 15,680 13,886 3,454 10,000 2,777 30,117 15,680 10,000 2,777 45,797 Fund equity - Unrestricted $ 15,680 13,886 3,454 10,000 2,777 45,797 18

21 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds Year Ended December 31, 2016 SOA BIA EPA Climate Roads IGAP Change Denali Commission Total Revenues: Federal $ 29, ,224 60,738 Other Total revenues 29, ,224 60,738 17, ,665 17, ,665 Expenditures: Current: Community and social service 60,738 Environmental stewardship 121,224 Roads 29,480 Total expenditures 29, ,224 60,738 17,223 77, ,224 29,480 17, ,665 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 $ 19

22 Schedule of Expenditures of Federal Awards Year Ended December 31, 2016 Federal Grant or Contract Title U.S. Department of the Interior Bureau of Indian Affairs - P.L Consolidated Tribal Gvnmt. Total 638 Contract Grant Number A16AV00613 CFDA Number Total Grant Award $183, $183, Eligible Expenditures , BIA - Climate Change A16AV $182, , Passed thru the State of Alaska DCRA - DCCED Community Coastal Impact Assistance Program Total U.S. Department of the Interior 10 CP $129, , , U.S. Environmental Protection Agency Indian General Assistance Program - IGAP OOJ $505, , U.S. Department of Housing and Urban Development Indian Housing Block Grant - NAHASDA 55IT $ , Denali Commission - Community Coordinator and Other Environmental Resilience Support Services U.S. Department of Transportation - passed through the BIA - Highway Planning and Construction Cluster: TTP passed through the BIA A13AV00474 TTP passed through Manilaaq A09AV00101 Total U.S. Department of Transportation - Highway Planning and Construction Cluster Total All Federal Financial Assistance $238, $38, $0.00 $38, ,094, , , , , , The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of NVK 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 of NVK, it is not intended to and does not present the financial position, changes in net assets, or cash flows of NVK 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 NVK has not elected to use the 10% de miminus indirect cost rate. 20

23 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 Kivalina Kivalina, 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, each major fund, and the aggregate remaining fund information of the Native Village of Kivalina, 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 Kivalina's basic financial statements and have issued my report thereon dated March 8, Internal Control Over Financial Reporting In planning and performing my audit of the financial statements, I considered Native Village of Kivalina'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 Kivalina's internal control. Accordingly, I do not express an opinion on the effectiveness of the Native Village of Kivalina's internal control. My consideration of internal control was for the limited purpose described in the preceding paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, I identified certain deficiencies in internal control that I consider to be a material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or 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. I consider the deficiencies described in the accompany schedule of findings and questioned costs as item to be a material weakness. 21

24 Management and Council Members Native Village of Kivalina Compliance and Other Matters As part of obtaining reasonable assurance about whether the Native Village of Kivalina'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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as items , and Native Village of Kivalina's Response to Findings Native Village of Kivalina's response to the finding identified in my audit is described in the accompanying schedule of findings and questioned costs. Native Village of Kivalina's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, I express no opinion on it. 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.,w ~rrf~ Eagle River, Alaska March 8,

25 ~ Brad Cage, CPA I Hillcrest Drive Eagle River, AK J Phone (907) _/ Independent Auditor's Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance Management and the Council Members Native Village of Kivalina Kivalina, Alaska Report on Compliance for Each Major Program I have audited Native Village of Kivalina'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 Kivalina's major federal programs for the year ended December 31, Native Village of Kivalina'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 Kivalina'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 Kivalina'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 qualified opinion on compliance for each major federal program. However my audit does not provide a legal determination on Native Village of Kivalina's compliance. Basis for Qualified Opinion on HUD, , NAHASDA As described in the accompanying schedule of findings and questioned costs, Native Village of Kivalina, did not comply with requirements regarding , NAHASDA as described in findings regarding reporting, regarding eligibility and regarding procurement. Compliance with such requirements is necessary, in my opinion, for Native Village of Kivalina to comply with the requirements applicable to that program. Qualified Opinion on HUD, , NAHASDA In my opinion, except for the noncompliance described in the basis for qualified opinion paragraph, Native Village of Kivalina 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,

26 Management and Council Members Native Village of Kivalina Other Matters Native Village of Kivalina's response to the noncompliance findings identified in my audit is described in the accompanying schedule of findings and questioned costs. Native Village of Kivalina's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, I express no opinion on the response. Report on Internal Control over Compliance Management of Native Village of Kivalina 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 Kivalina's internal control over compliance with the types of requirements 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 an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, I do not express an opinion on the effectiveness of Native Village of Kivalina'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 have not been 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. I 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 Kivalina'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 Kivalina's written 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 of my 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. ~.J ~"cf?4- Eagle River, Alaska March 8,

27 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 identified? Significant deficiency not considered a material weakness identified? Material Noncompliance related to the financial statements identified? Unmodified X Yes No Yes X No X Yes No -,---- FEDERAL AWARDS Type of auditor report issued on compliance over major programs: Material weakness in internal control over major programs identified? Significant deficiency not considered a material weakness identified? Audit findings that are required to be reported in accordance with 2 CFR section (a)? Qualified X Yes No Yes ~ No X Yes No IDENTIFICATION OF MAJOR PROGRAMS CFDA Numbers Name of Federal Program or Cluster of Programs HUD - NAHASDA Dollar threshold used to distinguish between Type A and Type B programs: Qualified as a low-risk auditee? $750,000 Yes X No FINDINGS RELATED TO THE FINANCIAL STATEMENTS Native Village of Kivalina did have a finding that relates to the financial statements that is required to be reported in accordance with Government Auditing Standards. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS Native Village of Kivalina did have findings and/or questioned costs related to federal awards that is required to be reported in accordance with the Uniform Guidance. 25

28 Schedule of Findings and Questioned Costs, Continued FINDINGS - FINANCIAL STATEMENT AUDIT Material Weakness Finding Transaction Supporting Documentation Statement of Condition I noted deficiencies in the supporting documentation for disbursements, several travel expenses did not contain adequate supporting documentation such as the business/grant purpose of the travel. Criteria Cause Effect Recommendation Auditee reply Internal controls should be in place that ensure all disbursements are appropriately approved with accurate account coding indicated on the approval forms, and accompanied by proper documentation. Management did not ensure that all required supporting documentation was retained with the check/direct debit/credit card statements and payments. By not having adequate supporting documentation, the NVK risks that items will be improperly recorded in the general ledger. In addition, it also causes an increased risk that improper or unallowable expenses are incurred. This may lead to misstatements of the financial statements. I recommend that the Council adopt internal control policies and procedures to ensure that all credit/debit card transactions as well as travel expenses are properly approved by the appropriate person, and that the appropriate supporting documentation is attached to all transactions and filed by vendor. See corrective action plan. FINANCIAL STATEMENT AND FEDERAL AWARD FINDINGS Material Weaknesses Finding , Late Single Audit Report, All Federal Awards, Reporting Statement of Condition Criteria Questioned Costs Cause I noted that the Native Village of Kivalina did not submit the single audit within the required 9-month timeframe. The Native Village of Kivalina'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. 26