ORUTSARARMIUT NATIVE COUNCIL. Year Ended December 31, 2016

Transcription

1 ORUTSARARMIUT NATIVE COUNCIL Management s Discussion and Analysis, Basic Financial Statements, Additional Supplementary Information, and Compliance Reports Year Ended December 31, 2016

2 ORUTSARARMIUT NATIVE COUNCIL Management s Discussion and Analysis, Basic Financial Statements, Additional Supplementary Information, and Compliance Reports Year Ended December 31, 2016

3 ORUTSARARMIUT NATIVE COUNCIL Table of Contents Exhibit Page Independent Auditor s Report 1-3 Management s Discussion and Analysis 4-9 Financial Statements: Statement of Net Position A-1 10 Statement of Activities B-1 11 Governmental Funds: Balance Sheet C-1 12 Reconciliation of the Balance Sheet to the Statement of Net Position C-2 13 Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficit) D-1 14 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities D-2 15 Statement of Revenues, Expenditures and Changes in Fund Balance Original, Final Budget and Actual: General Fund E-1 16 NAHASDA Special Revenue Fund E-2 17 BIA 638 Special Revenue Fund E-3 18 Notes to the Basic Financial Statements Additional Supplementary Information: Major Governmental Funds: Schedule of Revenues, Expenditures and Changes in Fund Balance -- Budget and Actual: General Fund F-1 29 NAHASDA Special Revenue Fund F-2 30 BIA 638 Special Revenue Fund F-3 31 Other Governmental Funds: Combining Balance Sheet G-1 32 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) G-2 33 Schedule of Expenditures of Federal Awards H-1 34 Notes to Schedule of Expenditures of Federal Awards 35

4 ORUTSARARMIUT NATIVE COUNCIL Table of Contents, Continued Page Compliance Reports: 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 Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance as Required by the Uniform Guidance Schedule of Findings and Questioned Costs Corrective Action Plan 43

5 Independent Auditor's Report Members of the Council Orutsararmiut Native Council Bethel, Alaska Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Orutsararmiut Native Council, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise Orutsararmiut Native 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 Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements G Street Suite 800 Anchorage, Alaska Phone Fax Offices in Juneau and Soldotna A Professional Corporation

6 Members of the Council Orutsararmiut Native Council We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Orutsararmiut Native Council as of December 31, 2016, and the respective changes in financial position and the respective budgetary comparison for the General Fund, NAHASDA Special Revenue Fund and Bureau of Indian Affairs (BIA) 638 Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4-9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Orutsararmiut Native Council s basic financial statements. The Additional Supplementary Information as listed in the Table of Contents, which includes the major governmental funds: budget to actual schedules, and the other governmental funds: combining balance sheet and combining statement of revenues, expenditures, and changes in fund balances (deficits), are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis 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, and is also not a required part of the basic financial statements. 2

7 Members of the Council Orutsararmiut Native Council The Additional Supplementary Information, as listed on the previous page, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Additional Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 17, 2017, on our consideration of the Orutsararmiut Native Council's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Orutsararmiut Native Council s internal control over financial reporting and compliance. Anchorage, Alaska August 17,

8 ORUTSARARMIUT NATIVE COUNCIL Management s Discussion & Analysis Year Ended December 31, 2016 This section of the annual financial report of the Orutsararmiut Native Council (the Council) provides an overview and analysis of the Council s financial activities for the year ended December 31, 2016, with comparable information presented for the year ended December 31, This analysis pertains to the Council s financial performance as a whole. Readers should also review the notes to the financial statements and the financial statements themselves to enhance their understanding of the Council s financial performance. Financial Highlights Key financial highlights for 2016 are as follows: The assets of the Council s governmental activities exceeded its liabilities at the close of most recent fiscal year by $9,528,311 (net position). Of this amount, $8,324,309 is the net investment in capital assets and $1,204,002 is unrestricted. The unrestricted net position of $1,204,002 at the close of the fiscal year represents a $1,283,097 improvement (a 1,622% change) from the prior year level. Total revenues in the government-wide financial statements were $6,333,897 during the current fiscal year, an increase of $1,835,829 or 41% over last year, while total expenses were $4,068,633, representing an increase of $132,781, or 3% from last year. A class action legal settlement accounted for most of the increase in revenues. The Council s ability to pay current liabilities with current assets (current ratio) was approximately 1.19 at December 31, 2016 and.98 at December 31, 2015, indicating that liquidity improved over the prior year with current assets at a sufficient level to pay for current liabilities. Using the Annual Report This annual report consists of a series of financial statements and notes to those statements. The Statement of Net Position and the Statement of Activities provide information about the activities of the Orutsararmiut Native Council as a whole and present a longer-term view of the Council s finances. Fund financial statements follow after the Government-wide Financial Statements. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Council s operations in more detail than the government-wide statements by providing information about the Council s most significant funds. 4

9 Overview of the Financial Statements Management s Discussion and Analysis (MD&A) (Required Supplementary Information) Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Budgetary Information for Major Funds Notes to Basic Financial Statements Additional Supplementary Information Compliance Reports The Orutsararmiut Native Council s basic financial statements are comprised of 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The basic financial statements include two kinds of statements that present different views of the Council s activities: Government-wide financial statements provide both short-term and long-term information about the Council s overall financial status. Fund financial statements focus on individual parts of the Council, reporting the Council s operations in more detail than the government-wide statements. Fund financial statements include the governmental fund statements which tell how basic services were financed in the short-term, as well as what remains for future spending. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by additional supplementary information on individual fund activity. Government-Wide Financial Statements The government-wide statements are designed to provide readers with a broad overview of the Council s finances in a manner similar to private sector business. 5

10 The statement of net position includes all of the Council s assets and liabilities, with the difference between the two reported as net position. Over time, the increases and decreases in net position are important because they serve as a useful indicator of whether the financial condition of the Council as a whole is improving or deteriorating. The cause of this change may be the result of several factors, some financial and some not, such as facility conditions, required but unfunded social programs, and other factors. Ultimately, the Council s goal is to provide services to our tribal members, not to generate profits as commercial entities do. The statement of activities presents information showing how the Council s net position changed during the recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. The government-wide financial statements include all the Council s governmental activities, which accounts for all of the Council s basic services such as housing, community, and environmental services. There are no business-type activities within the Orutsararmiut Native Council. Fund Financial Statements The fund financial statements provide detailed information about the Council s most significant or major funds not the Council as a whole. Funds are accounting devices the Council uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by state law and/or by governmental accounting standards. The Council establishes other funds to control and manage money for a particular purpose or to show that it is properly using certain fund revenues (such as federal, state, and local grants). The Council has only governmental funds: Governmental Funds All of the basic services of the Orutsararmiut Native Council are reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on current inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the governmentwide financial statements. By doing so, readers may better understand the long-term impact of the Council s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 6

11 The Orutsararmiut Native Council maintains several individual governmental funds. Fund financial reports provide detailed information about the Council s major funds. The Council uses many funds to account for a multitude of financial transactions; however, the fund financial statements focus on the Council s most significant funds. The Council s major governmental funds are the General Fund, the NAHASDA Special Revenue Fund, and the BIA 638 Special Revenue Fund. Individual fund data for each nonmajor governmental fund is provided in the form of combining statements and individual budget to actual statements (when applicable) elsewhere in the report. Notes to the Financial Statements The notes to the financial statements provide additional financial information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. Government-wide Financial Analysis As noted above, net position may serve over time as a useful indicator of a government s financial position. In the case of the Orutsararmiut Native Council, assets exceeded liabilities by $9,528,311 at the close of the most recent fiscal year. Condensed Statement of Net Position Governmental Activities Assets: Current and other assets $ 7,327,729 7,977,801 Capital assets 8,522,011 7,593,388 Total Assets 15,849,740 15,571,189 Liabilities: Other liabilities 6,178,643 8,110,458 Long-term liabilities 142, ,684 Total liabilities 6,321,429 8,308,142 Net Position: Net investment in capital assets 8,324,309 7,342,142 Unrestricted 1,204,002 (79,095) Total net position $ 9,528,311 7,263,047 7

12 The following table shows the changes in net position for fiscal year 2016 compared to 2015: Change in Net Position Revenues: Program revenues: Charges for services $ 162, ,359 Operating grants and contributions 3,523,062 3,473,179 Capital grants and contributions 1,297, ,935 General revenues 1,351,279 20,596 Total revenues 6,333,897 4,498,069 Expenses: Governmental activities: Administration 813, ,005 Rehab/housing 917, ,597 Community services 2,239,708 2,160,527 Environmental 87, ,731 Unallocated interest 11,155 6,992 Total expenses 4,068,633 3,935,852 Change in net position 2,265, ,217 Net position, beginning of year 7,263,047 6,700,830 Net position, end of year $ 9,528,311 7,263,047 Approximately 76% and 96% of all revenues came from grants and contributions in 2016 and 2015, respectively. Analysis of the Council s Governmental Funds The Orutsararmiut Native Council s governmental funds are accounted for using the modified accrual basis of accounting. Governmental funds reported a combined fund balance of $1,204,002,.which is an increase of $1,283,097 over last year. Current year excess revenues and other financing sources over expenditures for the General Fund were $1,279,676. Fund balance for the Senior Center improved by $3,421. The financial results were mainly due to the following: General Fund indirect cost recoveries increased by 8% to $744,534 and local revenues were higher than 2016 amounts by $1,287,209 or 1,220%. A final settlement was awarded resulting from a class action lawsuit originated by the Ramah Navajo Chapter for recovery of under-paid indirect costs. The Council s share of the approved net settlement was $1,280,036. 8

13 Increased local contributions at the Senior Center in combination with significant cost reductions offset a 39% reduction in grant funding, resulting in excess revenues over expenditures in the Senior Center Special Revenue Fund of $3,421. General Fund Budgetary Highlights General Fund revenues were $1,392,742 more than total budget estimates of $0. The variance between the final budget and actual expenditures resulted in excess expenditures over appropriated amounts of $15,622. Key excess expenditures over budgeted amounts consisted of debt service payments in excess of budget totaling $58,671. Capital Assets The Council s capital assets for its governmental activities as of December 31, 2016 totaled $8,522,011 (net of accumulated depreciation of $2,123,422). Outstanding debt related to the acquisition of capital assets totaled $197,702 at year-end. Capital assets are comprised of community buildings, HUD homes and modernization projects, and various business equipment. All capital assets are in service for governmental activities. Capital assets, net of depreciation, increased $928,623 during the year with the majority of the increase being in the form of completed and in-progress HUD homes. The net book value of retired capital assets during the year was $76,961. Additional information on the Council s capital assets can be found in the notes to the financial statements. Current Issues The Orutsararmiut Native Council is financially stable and has been over the past several years. As indicated in the preceding financial information, the Council is heavily dependent on federal grants. Federal grants are generally awarded on a year by year basis, with no guarantee that future funding levels will increase, or even be available. In the long-term, the current program and staffing levels will be dependent on increased funding to meet inflation. Careful financial planning and the use of current negotiated indirect cost rates each year will enable the Council to continue providing its valued services to the community. Contacting the Council s Financial Management This financial report is designed to provide the readers with a general overview of the Orutsararmiut Native Council s finances and to demonstrate the Council s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Finance Department of Orutsararmiut Native Council, P.O. Box 927, Bethel, Alaska

14 BASIC FINANCIAL STATEMENTS

15 ORUTSARARMIUT NATIVE COUNCIL Exhibit A-1 Statement of Net Position December 31, 2016 Assets: Cash and cash equivalents $ 7,221,750 Receivables: Grants 41,182 Other 47,161 Prepaid items 7,591 Inventory 10,045 Capital assets: Nondepreciable 1,975,203 Depreciable, net 6,546,808 Total assets $ 15,849,740 Liabilities: Accounts payable $ 56,461 Accrued payroll liabilities 81,826 Unearned revenue 5,985,440 Long-term liabilities: Due within one year 54,916 Due in more than one year 142,786 Total liabilities 6,321,429 Net Position: Net investment in capital assets 8,324,309 Unrestricted 1,204,002 Total net position 9,528,311 Total liabilities and net position $ 15,849,740 The notes to the financial statements are an integral part of this statement. 10

16 Exhibit B-1 ORUTSARARMIUT NATIVE COUNCIL Statement of Activities Year Ended December 31, 2016 Functions/Programs Net (Expense) Revenue and Change Program Revenues in Net Position Operating Capital Total Primary Direct Indirect Total Charges Grants and Grants and Governmental Expenses Expenses Expenses for Services Contributions Contributions Activities Governmental activities: Administration $ 813,067 (744,534) 68,533 77, ,301 Rehabilitation/housing 917, ,942 1,100,531 79, ,562 1,266, ,229 Community services 2,239, ,488 2,774,196 5,296 2,723,455 31,228 (14,217) Environmental 87,114 27, , ,045 - (1,173) Unallocated interest 11,155-11, (11,155) Total governmental activities $ 4,068,633-4,068, ,219 3,523,062 1,297, ,985 General revenues: Interest income 10,858 Lawsuit settlement 1,280,036 Other income 24,014 Gain on sale of capital assets 36,371 Total general revenues 1,351,279 Change in net position 2,265,264 Net position, beginning of year 7,263,047 Net position, end of year $ 9,528,311 The notes to the financial statements are an integral part of this statement. 11

17 Exhibit C-1 ORUTSARARMIUT NATIVE COUNCIL Balance Sheet - Governmental Funds December 31, 2016 Assets Major Funds Other Total General Governmental Governmental Fund NAHASDA BIA 638 Funds Funds Cash and cash equivalents $ 7,221, ,221,750 Receivables: Grants ,328 30,854 41,182 Other ,161 47,161 Prepaid items 7, ,591 Inventory 10, ,045 Due from other funds 151,016 5,223, ,274 6,119,736 Total assets $ 7,390,402 5,223,446 10, ,289 13,447,465 Liabilities and Fund Balances (Deficits) Liabilities: Accounts payable $ 56, ,461 Accrued payroll liabilities 81, ,826 Unearned revenue - 5,223, ,994 5,985,440 Due to other funds 5,968,720-10, ,688 6,119,736 Total liabilities 6,107,007 5,223,446 10, ,682 12,243,463 Fund balances (deficits): Nonspendable 17, ,636 Unassigned 1,265, (79,393) 1,186,366 Total fund balances (deficits) 1,283, (79,393) 1,204,002 $ 7,390,402 5,223,446 10, ,289 13,447,465 The notes to the financial statements are an integral part of this statement. 12

18 ORUTSARARMIUT NATIVE COUNCIL Exhibit C-2 Reconciliation of the Balance Sheet to the Statement of Net Position Year Ended December 31, 2016 Amounts reported for governmental activities in the statement of net position are different because: Total fund balances - governmental funds $ 1,204,002 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in governmental funds. Governmental funds - capital assets $ 10,645,433 Less accumulated depreciation (2,123,422) Total capital assets 8,522,011 Long-term liabilities are not due and payable in the current period and, therefore, are not reported as fund liabilities. Note payable (197,702) Net position of governmental activities $ 9,528,311 The notes to the financial statements are an integral part of this statement. 13

19 Exhibit D-1 ORUTSARARMIUT NATIVE COUNCIL Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) - Governmental Funds Year Ended December 31, 2016 Major Funds Other General Governmental Fund NAHASDA BIA 638 Funds Totals Revenues: Intergovernmental: Federal $ - 1,952,671 1,204,272 1,172,049 4,328,992 State , ,423 Local: Charges for services 77,834 79,089-5, ,219 Interest income 10, ,858 Lawsuit settlement 1,280, ,280,036 Other 24, , ,998 Total revenues 1,392,742 2,031,760 1,204,272 1,668,752 6,297,526 Expenditures: Current: Administration 792, ,901 Rehabilitation/housing - 696, ,042 Community Services ,823 1,279,019 2,190,842 Environmental ,941 85,941 Capital outlay - 1,266,109 3,840 27,388 1,297,337 Debt service: Principal 53, ,544 Interest 11, ,155 Total expenditures 857,600 1,962, ,663 1,392,348 5,127,762 Indirect cost allocation (744,534) 182, , ,983 - Total expenditures after indirect cost allocation 113,066 2,145,093 1,204,272 1,665,331 5,127,762 Excess (deficiency) of revenues over/(under) expendidtures 1,279,676 (113,333) - 3,421 1,169,764 Other financing sources: Proceeds from sale of assets - 113, ,333 Net change in fund balance 1,279, ,421 1,283,097 Fund balances (deficit), beginning of year 3, (82,814) (79,095) Fund balances (deficit), end of year $ 1,283, (79,393) 1,204,002 The notes to the financial statements are an integral part of this statement. 14

20 Exhibit D-2 ORUTSARARMIUT NATIVE COUNCIL Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities Year Ended December 31, 2016 Net change in fund balances - governmental funds $ 1,283,097 Amounts reported for governmental activities in the 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 capitalized and allocated over the estimated useful lives and reported as depreciation expense. The amount by which capital outlays of $1,297,337 exceeded depreciation of $291,752 in the current period. 1,005,585 Proceeds from the sale of capital assets provide current financial resources but have no effect on net position. (113,333) The gain on the disposal of capital assets does not affect current financial resources but increases net position. 36,371 The issuance of long-term debt provides current financial resources to governmental funds, while repayment of the principle of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any affect on net position. This is the amount by which principal payments on long-term debt of $53,544 exceeded proceeds from long-term debt of $0. 53,544 Change in net position of governmental activities $ 2,265,264 The notes to the financial statements are an integral part of this statement. 15

21 Exhibit E-1 ORUTSARARMIUT NATIVE COUNCIL General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Original, Final Budget and Actual Year Ended December 31, 2016 Variance with Original Original and and Final Final Budget- Budget Actual Positive Amounts Amounts (Negative) Revenues: Local sources: Charges for services $ - 77,834 77,834 Interest income - 10,858 10,858 Lawsuit settlement - 1,280,036 1,280,036 Other - 24,014 24,014 Total revenues - 1,392,742 1,392,742 Expenditures: Current: Administration 835, ,901 43,049 Debt service: Principal - 53,544 (53,544) Interest 6,028 11,155 (5,127) Subtotal expenditures 841, ,600 (15,622) Indirect cost allocation (822,590) (744,534) (78,056) Total expenditures after indirect cost allocation 19, ,066 (93,678) Excess (deficiency) of revenues over/under expenditures $ (19,388) 1,279,676 1,299,064 Fund balance, beginning of year 3,719 Fund balance, end of year $ 1,283,395 The notes to the financial statements are an integral part of this statement. 16

22 Exhibit E-2 ORUTSARARMIUT NATIVE COUNCIL NAHASDA Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Original, Final Budget and Actual Year Ended December 31, 2016 Variance with Original Original and and Final Final Budget- Budget Actual Positive Amounts Amounts (Negative) Revenues: Intergovernmental: Federal sources $ 2,066,005 1,952,671 (113,334) Local sources - charges for services - 79,089 79,089 Total revenues 2,066,005 2,031,760 (34,245) Expenditures: Current - rehabilitation/housing 477, ,042 (218,213) Capital outlay 1,254,911 1,266,109 (11,198) Subtotal expenditures 1,732,740 1,962,151 (229,411) Indirect cost allocation 333, , ,323 Total expenditures after indrect cost allocation 2,066,005 2,145,093 (79,088) Excess (deficiency) of revenues over/(under) expenditures - (113,333) (113,333) Other financing sources: Proceeds from sale of assets - 113, ,333 Net change in fund balance $ Fund balance, beginning of year - Fund balance, end of year $ - The notes to the financial statements are an integral part of this statement. 17

23 Exhibit E-3 ORUTSARARMIUT NATIVE COUNCIL BIA 638 Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Original, Final Budget and Actual Year Ended December 31, 2016 Variance with Original Original and and Final Final Budget- Budget Actual Positive Amounts Amounts (Negative) Revenues: Intergovernmental: Federal sources $ 1,652,601 1,204,272 (448,329) Expenditures: Current - community services 1,376, , ,165 Capital outlay - 3,840 (3,840) Subtotal expenditures 1,376, , ,325 Indirect cost allocation 275, ,609 (12,996) Total expenditures after indirect cost allocation 1,652,601 1,204, ,329 Excess of revenues over expenditures $ Fund balance, beginning of year - Fund balance, end of year $ - The notes to the financial statements are an integral part of this statement. 18

24 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements December 31, 2016 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Orutsararmiut Native Council (the Council) is recognized by the U.S. Department of the Interior as the Council representing the native people of Bethel, Alaska. The Council administers federal contracts and grants for the benefit of tribal members. The Council 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. There are no component units for which the Council is considered to be financially accountable. The Council is legally separate and fiscally independent of other state and local governments. Furthermore, there are no component units combined with the Council for financial statement presentation purposes, and it is not included in any other governmental reporting entity. Consequently, the Council s financial statements present only the funds of those Council entities for which its elected governing board is financially accountable. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. The effect of interfund activity has been removed from these statements. Governmental activities, which are normally supported by intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Council does not presently have any business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. In the fund financial statements, major individual governmental funds are reported as separate columns. All other funds are presented in a single column as All other governmental funds. C. Measurement Focus, Basis of Accounting and Basis of Presentation The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental agencies. The Governmental Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A. 19

25 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued 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 when a liability is incurred, regardless of the timing of related cash flows. Grants and similar programs are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible in the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Council considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred, as under accrual accounting, however debt service expenditures as well as expenditures related to compensated absences and claims and judgments are recorded only when payment is due. 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 reported in another fund. The NAHASDA Special Revenue Fund accounts for monies received from the U.S. Department of Housing and Urban Development to be used for housing rehabilitation and improvements. The BIA 638 Contract Special Revenue Fund accounts for monies received from the Bureau of Indian Affairs to be used for tribal operations, social services, and adult vocational training. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Intergovernmental revenue includes primarily federal source revenues. Federal government cost reimbursable grants and contracts are recorded to the extent of allowable expenditures in the period in which the expenditures were incurred. Other local source revenue is recorded on a basis consistent with its nature in relation to measurement and availability standards. D. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates. 20

26 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued E. Assets, Liabilities and Net Position / Fund Balance 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 three months or less from the date of acquisition. Investments are presented at fair value. Changes in fair value of investments are recognized as a component of interest and investment income. There are no statutory limitations on the type of investments allowed. The Council has no formal investment policy. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either due to/from other funds (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as due to/from other funds. All accounts receivable are shown net of allowances for doubtful accounts. An allowance for uncollectible receivables is established based on historical information related to the specific transaction; however, there was no allowance at year-end because all receivables were deemed collectible. Inventories and Prepaid Items Office supplies are recorded as expenditures when purchased and there are no material inventory amounts of these supplies. Accounting for inventory of building materials is on the consumption method. The consumption method records the expenditure when consumed rather than when purchased. Inventories are valued at cost using the first-in, first-out (FIFO) method. Payments made to vendors for services that are applicable to future accounting periods are recorded as prepaid items in both the government-wide and fund financial statements. Inventories and prepaid items do not reflect current available resources and, thus, an equivalent portion of fund balance is classified as nonspendable in the fund financial statements. Capital Assets Capital assets, which include property and equipment, are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the Council as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the useful life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. 21

27 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued Capital assets of the Council are depreciated using the straight-line method over the following estimated useful lives: Buildings Improvements other than buildings Machinery and equipment years years 5-10 years Compensated Absences Permanent 12-month employees earn annual leave. Annual leave has been accrued by the Council and is recorded as a liability in the General Fund. Unearned Revenue Amounts for which asset recognition criteria have been met but for which revenue recognition criteria have not been met are classified as unearned revenue. Long-term Debt In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net position. In the fund financial statements, the face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts are reported as other financing uses. Issuance costs, whether or not withheld from actual debt proceeds received, are reported as debt service expenditures. Net Position / Fund Balance In the government-wide financial statements, net position is classified in the following categories: Net Investment in Capital Assets This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt attributed to the acquisition, construction, or improvement of assets. Restricted Net Position This amount is restricted by external creditors, grantors, contributors, laws or regulations of other governments. Unrestricted Net Position This amount is all net position that does not meet the definition of invested in capital assets, net of related debt or restricted net position. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, the Council classifies governmental fund balance as follows: Non-spendable fund balance - includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual restraints. Examples include prepaid expenses, inventory, supplies, and long-term receivables. Such constraint is binding until amounts become spendable. 22

28 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued Restricted fund balance - includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers such as grantors, creditors, and contributors, or amounts constrained due to constitutional provisions or enabling legislation. Such constraint is binding unless modified or rescinded by external body, laws, or regulation. Committed fund balance - includes fund balance amounts that are constrained for specific purposes that are internally imposed by the tribal council members through formal action and remain binding unless removed by the tribal council by subsequent formal action. Assigned fund balance - includes the portion of fund balance that reflects the Council s intended use of resources. The tribal council members, by majority vote, may assign fund balances to be used for specific purposes. Unassigned fund balance - includes positive fund balance within the General Fund which has not been classified within the above mentioned categories and negative fund balances in other governmental funds. The Council s policy regarding the order of spending for restricted and unrestricted fund balance when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available is for committed amounts to be reduced first, followed by the assigned amount, and then the unassigned amounts. The Council has not adopted a minimum fund balance policy. Fair Value of Financial Investments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following financial instruments are recorded at fair value or at amounts that approximate fair value: (1) cash and cash equivalents, (2) receivables, net, (3) certain other current assets, (4) accounts payable, and (5) other current liabilities. The carrying amounts reported in the balance sheet and Statement of Net Position for the above financial instruments closely approximates their fair value due to the short-term nature of these assets and liabilities. II. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the General Fund and the Special Revenue Funds established for federal and state grants. Amounts reflected in the financial statements represent the budget available to be expended in the current period. Budgetary control is exercised at the fund level. All amendments during the year were not considered material. 23

29 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued B. Fund Deficits The fund balance deficits of ($75,834) within the Senior Center and ($3,559) in the Family Support Services Special Revenue Funds are expected to be funded by future revenues and program income. III. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments Cash and equivalents consist of bank accounts and various petty cash balances. Detail of the carrying and bank balances at December 31, 2016, was as follows: Carrying Balance Bank Balance Operating checking, savings accounts, and imprest funds $ 7,221,750 7,382,461 Credit risk is the risk of loss of principal stemming from a borrower s failure to repay a loan or otherwise meet contractual obligations. Custodial credit risk is the risk that in the event of a bank or counter party failure the government s deposits may not be returned. As of December 31, 2016, cash is collateralized with securities under a repurchase agreement with the Council s financial institution. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of a government s financial instruments or its cash flows. The Council can limit this risk by using the segmented time distribution method on certificates of deposit with maturities of less than one year. The Council was not exposed to interest rate risk during the year. The Council has no formal deposit or investment policies that address specific risk exposures. B. Receivables Governmental fund receivables at December 31, 2016 consisted of grants receivable from federal and state granting agencies totaling $41,182. Other receivables of $47,161 consisted of contractual amounts due from the State of Alaska, Department of Fish and Game, related to a cooperative research project. Management has determined that all receivable amounts are collectible. 24

30 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued C. Interfund Receivables and Payables Interfund receivables and payables are shown as due to and due from in each individual fund. These balances represent short-term borrowings at December 31, 2016 and were as follows: Receivable Fund Payable Fund Amount General Fund Other Governmental Funds $ 140,688 General Fund BIA ,328 NAHASDA General Fund 5,223,446 Other Governmental Funds General Fund 745,274 $ 6,119,736 The outstanding balances between funds results mainly from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. D. Capital Assets Capital asset activity for the year ended December 31, 2016 follows: Governmental Activities: Balance January 1, 2016 Additions Deletions Balance December 31, 2016 Capital assets not being depreciated: Land $ 1,085, ,085,000 Work in process 584,748 1,254,886 (949,431) 890,203 Total assets not being depreciated 1,669,748 1,254,886 (949,431) 1,975,203 Capital assets being depreciated: Buildings 7,068, ,431 (96,202) 7,921,283 Machinery and equipment 706,496 42, ,947 7,774, ,882 (96,202) 8,670,230 Less accumulated depreciation for: Buildings (1,403,987) (235,880) 19,240 (1,620,627) Machinery and equipment (446,923) (55,872) - (502,795) Total accumulated depreciation (1,850,910) (291,752) 19,240 (2,123,422) Total capital assets being depreciated, net 5,923, ,130 (76,962) 6,546,808 Total Government Capital Assets $ 7,593,388 1,955,016 (1,026,393) 8,522,011 25

31 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued Depreciation was charged to the following functions: Administration $ 20,166 Rehabilitation/Housing 221,547 Community Service 48,866 Environmental 1,173 $ 291,752 E. Unearned Revenue Governmental funds defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current year, the various components of unearned revenue reported in the governmental funds were as follows: Unearned Revenue U.S. Department of: Interior $ 730,880 Housing and Urban Development 5,223,446 State of Alaska 31,114 Total $ 5,985,440 F. Long-term Debt Changes in long-term debt are shown below: Balance January 1, 2016 Additions Deletions Balance December 31, 2016 Note payable $ 251,246 - (53,544) 197,702 Following is a summary of long-term debt for the year ended December 31, 2016: Note payable.75 percent under prime, currently 2.5 percent, due in monthly installment of $4,936 including interest, scheduled to be fully paid by June of 2020; secured by a deed of trust on the land and building. Total outstanding debt Less current portion Long-term debt net of current portion $ 197,702 (54,916) $ 142,786 26

32 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued Future payments are as follows: Year Ending December 31, Principal Interest Total 2017 $ 54,916 4,316 59, ,305 2,927 59, ,728 1,504 59, , ,960 Total $ 197,702 8, ,656 IV. OTHER INFORMATION A. Contingencies Amounts received or receivable from grantors are subject to audit and adjustment by grantor agencies. Any disallowed claims including amounts already collected would become a liability of the general or other applicable fund. Management s position is that any disallowed claims would be immaterial. B. Economic Dependency The council received 21% and 31% of its revenue from the U.S. Department of the Interior and U.S. Department of Housing and Urban Development, respectively. A reduction in the annual funding from these agencies would have a significant impact on the Council s ability to sustain operations at current levels. C. 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 was no significant reduction in coverage during the year and no insurance claims exceeded coverage in the last three years. D. BIA Lawsuit Settlement During 2016 the Council entered into an agreement with the Bureau of Indian Affairs whereby the Council agreed to receive a lump sum to settle claims filed in the lawsuit Ramah Navajo Chapter, et al., v. Jewel. The final settlement payment received from the federal government, net of contingent attorney s fees was $1,280,036. These funds were received from the federal government; however, based on the settlement agreement these funds are not considered federal financial assistance, and when expended are not subject to the federal cost principles or restrictions. 27

33 ORUTSARARMIUT NATIVE COUNCIL Notes to the Financial Statements, Continued E. Subsequent Accounting Pronouncements The Governmental Accounting Standards Board has adopted several new accounting standards with upcoming implementation dates covering several topics as follows: GASB 74 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Effective for fiscal years beginning after June 15, GASB 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Effective for fiscal years beginning after June 15, GASB 77 Tax Abatement Disclosures. Effective for fiscal years beginning after December 15, GASB 78 Pension Provided through Certain Multiple Employer Defined Benefit Pension Plans. Effective for fiscal years beginning after December 15, GASB 80 Blending Requirements for Certain Component Units an Amendment of GASB Statement No. 14. Effective for fiscal years beginning after June 15, GASB 81 Irrevocable Split Interest Agreements. beginning after December 15, Effective for fiscal years GASB 82 Pension Issues an Amendment of GASB Statement No. 67, No. 68, and No. 73. GASB 83 Certain Retirement Obligations. Effective for fiscal years beginning after June 15, GASB 84 Fiduciary Activities. Effective for fiscal years beginning after December 15, These statements are not expected to have any significant impact on the financial statements of the Council. 28

34 ADDITIONAL SUPPLEMENTARY INFORMATION

35 Exhibit F-1 ORUTSARARMIUT NATIVE COUNCIL General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Year Ended December 31, 2016 Variance with Final Final Budget- Budget Actual Positive Amounts Amounts (Negative) Revenues: Local sources: Charges for services $ - 77,834 77,834 Interest income - 10,858 10,858 Lawsuit settlement - 1,280,036 1,280,036 Other - 24,014 24,014 Total revenues - 1,392,742 1,392,742 Expenditures: Current: Administration: Salaries and benefits 461, ,065 11,477 Board of directors 38,776 38,775 1 Travel and training 21,153 21,510 (357) Insurance 96,284 87,453 8,831 Supplies 55,236 56,635 (1,399) Maintenance 14,813 14,813 - Equipment lease 18,934 18,935 (1) Telephone 26,014 26,014 - Utilities 15,772 1,984 13,788 Contractual 14,812 14,813 (1) Legal 11,325 11,325 - Audit and accounting 28,254 28,254 - Other 33,035 22,325 10,710 Total administration 835, ,901 43,049 Debt service: Principal - 53,544 (53,544) Interest 6,028 11,155 (5,127) Total debt service 6,028 64,699 (58,671) Subtotal expenditures 841, ,600 (15,622) Indirect cost allocation (822,590) (744,534) (78,056) Total expenditures after indirect cost allocation 19, ,066 (93,678) Excess (deficiency) of revenues over/(under) expenditures $ (19,388) 1,279,676 1,299,064 Fund balance, beginning of year 3,719 Fund balance, end of year $ 1,283,395 29

36 Exhibit F-2 ORUTSARARMIUT NATIVE COUNCIL NAHASDA Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Year Ended December 31, 2016 Variance with Final Final Budget- Budget Actual Positive Amounts Amounts (Negative) Revenues: Intergovernmental: Federal sources $ 2,066,005 1,952,671 (113,334) Local sources - charges for services - 79,089 79,089 Total revenues 2,066,005 2,031,760 (34,245) Expenditures: Current: Rehabilitation/housing: Salaries 271,542 Travel 37,185 Supplies 5,355 Insurance 7,086 Rent 12,000 Utilities 79,089 Professional 15,181 Contractual 16,579 Materials 65,387 Repairs 31,786 Rental assistance grants 131,949 Other 22,903 Total rehabilitation/housing 477, ,042 (218,213) Capital outlay 1,254,911 1,266,109 (11,198) Subtotal expenditures 1,732,740 1,962,151 (229,411) Indirect cost allocation 333, , ,323 Total expenditures after indirect cost allocation 2,066,005 2,145,093 (79,088) Excess (deficiency) of revenues over/(under) expenditures - (113,333) (113,333) Other financing sources: Proceeds from sale of assets - 113, ,333 Net change in fund balance $ Fund balance, beginning of year - Fund balance, end of year $ - 30

37 Exhibit F-3 ORUTSARARMIUT NATIVE COUNCIL BIA 638 Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Year Ended December 31, 2016 Variance with Final Final Budget- Budget Actual Positive Amounts Amounts (Negative) Revenues: Intergovernmental: Federal sources $ 1,652,601 1,204,272 (448,329) Expenditures: Current: Community services: Salaries and benefits 406,109 Board of directors 64,751 Travel and training 71,228 Supplies 18,518 Telephone 3,684 Insurance 1,446 Rent 22,032 Contractual 13,676 Assistance payments 287,480 Dues 5,907 Repairs 7,404 Enrollment 5,767 Other 3,821 Total community services 1,376, , ,165 Capital outlay - 3,840 (3,840) Subtotal expenditures 1,376, , ,325 Indirect cost allocation 275, ,609 (12,996) Total expenditures after indirect cost allocation 1,652,601 1,204, ,329 Excess of revenues over expenditures $ Fund balance, beginning of year - Fund balance, end of year $ - 31

38 Exhibit G-1 ORUTSARARMIUT NATIVE COUNCIL Other Governmental Funds Combining Balance Sheet December 31, 2016 Assets Special Revenue Funds Total Department Title VI Family Heating Other of Fish Older Child Support Senior Assistance Tribal EPA Governmental and Game Americans Welfare Services Center LIHEAP Transit IGAP NALEMP Funds Receivables: Grants $ - 13,399 2, ,874-1,510 3,075 30,854 Other 47, ,161 Due from other funds , , ,274 Liabilities and Fund Balances $ 47,161 13,399 2,996 14,394-9, ,880 1,510 3, ,289 Liabilities: Unearned revenue $ ,953 13, , ,994 Due to other funds 47,161 13,399 2,996-62,673 9,874-1,510 3, ,688 Total liabilities 47,161 13,399 2,996 17,953 75,834 9, ,880 1,510 3, ,682 Fund balances (deficits) - unassigned (3,559) (75,834) (79,393) $ 47,161 13,399 2,996 14,394-9, ,880 1,510 3, ,289 32

39 ORUTSARARMIUT NATIVE COUNCIL Exhibit G-2 Other Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) Year Ended December 31, 2016 Special Revenue Funds / Total Department Family Other U.S. Fish of Fish Older Child Support Senior Tribal EPA EPA Governmental and Wildlife and Game American Welfare Services Center LIHEAP Transit IGAP Brownfield IMLS NALEMP Funds Revenues: Intergovernmental: Federal $ 117, ,399 19,996 30,511 66, , ,165 72,211 37,759 11,179 3,075 1,172,049 State ,201 85, , ,423 Local sources: Charges for services , ,296 Other - 136, , ,984 Total revenues 117, , ,399 19, , , , ,165 72,211 37,759 11,179 3,075 1,668,752 Expenditures: Current: Community services: Salaries and benefits 66,629 77,726 58,397 17,388 96, ,965 6, , ,977 Travel and training 13, ,168-11,604 1,874-29, ,538 Supplies 8,841 7,112 24,624-6,701 1,484 47,750 14, , ,117 Contractual 650 1, , ,806 Rent , , ,791 Assistance payments , ,873 Other ,826 14,997-2, ,917 Total community services 89,176 86, ,701 17, , , , , ,179-1,279,019 Environmental: Salaries and benefits ,653 24,817-2,337 68,807 Travel and training ,020 3, ,814 Supplies , ,541 Telephone Total environmental ,905 28,699-2,337 85,941 Capital outlay - 27, ,388 Subtotal expenditures 89, , ,701 17, , , , ,025 54,905 28,699 11,179 2,337 1,392,348 Indirect cost allocation 28,152 22,814 20,698 2,608 17,523 25,855 45,089 83,140 17,306 9, ,983 Total expenditures after indirect cost allocation 117, , ,399 19, , , , ,165 72,211 37,759 11,179 3,075 1,665,331 Excess of revenues over expenditures , ,421 Fund balances (deficits), beginning of year (3,559) (79,255) (82,814) Fund balances (deficits), end of year $ (3,559) (75,834) (79,393) 33

40 ORUTSARARMIUT NATIVE COUNCIL Exhibit H-1 Schedule of Expenditures of Federal Awards Year Ended December 31, 2016 Catalog of Federal Domestic Total Federal Grant Assistance Grant Share of Grant Title Number Number Award Expenditures U.S. Department of Housing and Urban Development Direct Programs: Indian Housing Development Block Grant 55-IT $ 13,624,058 1,952,671 U.S Department of Defense Direct Programs: Native American Lands Environmental Mitigation NALEMP-FY ,366 3,075 U.S. Department of the Interior Direct: PL GT-OSGT ,248,418 1,204,272 Passed through U.S. Fish and Wildlife Service: Partners for Fisheries F16AC , ,000 Fish and Wildlife Partners for Fisheries Program F12AC ,952 12, , ,328 Total Department of the Interior 1,550,421 1,321,600 U.S. Department of Transportation Passed through the Bureau of Indian Affairs: BIA IRR G2GE ,777, ,165 Institute of Museum and Library NG ,000 11,179 U.S. Department of Heath and Human Services Direct: Older Americans Act Title VI T6PARTAB , ,399 Older Americans Act Sec AKNSIT ,738 6,000 Title IV-B G16RGAKFPSS ,822 19,996 LIHEAP G-16JFAKLIEA , ,591 LIHEAP G-17JFAKLIEA ,344 7,283 LIHEAP G-15JFAKLIEA ,962 34,550 Total , ,424 Passed through State of Alaska, DHSS: Nutrition, Transportation and Support Services ,577 22,006 Nutrition, Transportation and Support Services ,459 10,674 Total ,036 32,680 Nutrition, Transportation and Support Services ,577 13,966 Nutrition, Transportation and Support Services ,459 19,356 Total ,036 33,322 Total /93.045/ Cluster 401,810 72,002 Foster Care Title IV-E 603-PA ,511 Total Department of Health and Human Services 1,307, ,332 Environmental Protection Agency Direct: EPA Brownfields RP-00J ,000 37,759 Indian General Assistance Program GA-00J ,000 72,211 Total EPA 335, ,970 Total federal financial assistance $ 18,681,427 4,328,992 See accompanying notes to the Schedule. 34

41 ORUTSARARMIUT NATIVE COUNCIL Notes to Schedule of Expenditures of Federal Awards Year Ended December 31, 2016 Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards (the Schedule ) includes the federal award activity of Orutsararmiut Native Council 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 Orutsararmiut Native Council, it is not intended to and does not present the basic financial statements of Orutsararmiut Native Council. Note 2. Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the modified 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. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Orutsararmiut Native Council has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform guidance. Note 3. Passed Through Awards No amounts were passed through to subrecipients. 35

42 COMPLIANCE REPORTS

43 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor s Report Members of the Governing Board Orutsararmiut Native Council Bethel, Alaska We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Orutsararmiut Native Council as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise Orutsararmiut Native Council s basic financial statements, and have issued our report thereon dated August 17, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Orutsararmiut Native 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 our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Orutsararmiut Native Council s internal control. Accordingly, we do not express an opinion on the effectiveness of Orutsararmiut Native 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify a certain deficiency in internal control, described in the accompanying schedule of findings and questioned costs, as Finding , that we consider to be a significant deficiency G Street Suite 800 Anchorage, Alaska Phone Fax Offices in Juneau and Soldotna A Professional Corporation

44 Members of the Governing Board Orutsararmiut Native Council Compliance and Other Matters As part of obtaining reasonable assurance about whether Orutsararmiut Native Council s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Response to Findings Orutsararmiut Native Council s responses to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs and corrective action plan. Orutsararmiut Native Council s response was not subjected to the auditing procedures applied in the audit of the financial statements and, according, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Anchorage, Alaska August 17,

45 Report on Compliance For Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance Independent Auditor s Report Members of the Council Orutsararmiut Native Council Bethel, Alaska Report on Compliance for Each Major Federal Program We have audited Orutsararmiut Native Council s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Orutsararmiut Native Council s major federal programs for the year ended December 31, Orutsararmiut Native Council s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Orutsararmiut Native Council s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Orutsararmiut Native Council s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Orutsararmiut Native Council s compliance G Street Suite 800 Anchorage, Alaska Phone Fax Offices in Juneau and Soldotna A Professional Corporation

46 Members of the Council Orutsararmiut Native Council Opinion on Each Major Federal Program In our opinion, Orutsararmiut Native Council complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, Report on Internal Control Over Compliance Management of Orutsararmiut Native 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 our audit of compliance, we considered Orutsararmiut Native Council s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Orutsararmiut Native Council s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Anchorage, Alaska August 17,

47 ORUTSARARMUIT NATIVE COUNCIL Federal Schedule of Findings and Questioned Costs Year ended December 31, 2016 Section I Summary of Auditor s Results Financial Statements Type of auditor s report issued on whether he financial statements audited were prepared in accordance with GAAP: Unmodified Is a going concern emphasis-of-matter paragraph included in the audit report? Yes X No Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? X Yes None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs (2 CFR (a)(1)): Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None reported Any material noncompliance with the provisions of laws, regulations, contracts, or grant agreements related to a major program (2 CFR (a)(2))? Yes X No Type of auditor s report issued on compliance for major programs Unmodified Any audit findings disclosed that are required to be reported in accordance with OMB Uniform Guidance, 2 CFR ( a) (3) or (4)? Yes X No Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster Indian Housing Development Block Grant Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee? Yes X No 40

48 ORUTSARARMUIT NATIVE COUNCIL Federal Schedule of Findings and Questioned Costs, Continued Section II Financial Statement Findings Finding Internal Controls over Payroll Significant Deficiency Condition: Criteria: Context: Cause: Effect: Recommendation: Management Response: During our review over the internal controls over payroll we discovered one employee whose salary was calculated incorrectly during the year, which lead to an overpayment. Internal controls should be in place to ensure that all payroll amounts are calculated correctly. We tested 40 payroll transactions and found one error within our sample. Lack of review over employees salary schedules. The employee was overpaid by $5,462 during the year. The Council should develop policies and procedures to ensure that all salaries are reviewed before payroll is processed. See Corrective Action Plan. Section III Federal Award Findings and Questioned Costs The Orutsararmuit Native Council did not have any Federal Award Findings. Section IV Status of Prior Year Findings Finding Internal Controls over Payroll Significant Deficiency Condition: Status: Some employee timesheets, which are used as the approval mechanism for payroll transactions were not signed by the applicable supervisor. This specific issue was resolved; however, we identified another deficiency related to the payroll internal control system. 41

49 ORUTSARARMUIT NATIVE COUNCIL Federal Schedule of Findings and Questioned Costs, Continued Finding Internal Controls over Allowable Costs and Indirect Changes, CFDA #15.022, Grant #05GT043 Significant deficiency/ Noncompliance Condition: Status: The indirect rate charged to the PL grant was higher than the approved indirect cost rate of the Council. This finding has been resolved. 42

50 Corrective Action Plan December 31, 2016 Financial Statement Findings Finding Name of Contact: Corrective Action Plan: Internal Controls over Payroll James Paul, Controller Salary employees are reviewed to ensure hourly rate is calculated correctly. Correct calculation as follows: 7.50 hours per day at 5 days per week for 52 weeks = 1950 hours/annual salary amount = hourly rate. Hourly rate is used when salaried employee goes on personal time off (PTO) or payoff accrued PTO balance. Proposed Completion Date: August 18,