Charter Township of Benton, Michigan. Financial Report with Supplemental Information December 31, 2015

Transcription

1 Charter Township of Benton, Michigan Financial Report with Supplemental Information

2 Contents Report Letter 1-2 Management's Discussion and Analysis 3-6 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position 7-8 Statement of Activities 9-10 Fund Financial Statements: Governmental Funds: Balance Sheet 11 Reconciliation of the Balance Sheet to the Statement of Net Position 12 Statement of Revenue, Expenditures, and Changes in Fund Balances 13 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 14 Proprietary Funds: Statement of Net Position 15 Statement of Revenue, Expenses, and Changes in Net Position 16 Statement of Cash Flows 17 Fiduciary Funds: Statement of Fiduciary Net Position 18 Statement of Changes in Fiduciary Net Position - Trust Fund Pension and Retiree Health Insurance 19 Notes to Financial Statements 20-48

3 Contents (Continued) Required Supplemental Information 49 Budgetary Comparison Schedule - General Fund 50 Budgetary Comparison Schedule - Major Special Revenue Funds - Police Fund 51 Budgetary Comparison Schedule - Major Special Revenue Funds - Fire Fund 52 Note to Required Supplemental Information 53 Schedule of Changes in the Charter Township Net Pension Liability and Related Ratios 54 Schedule of Charter Township Contributions 55 Schedule of Investment Returns 56 OPEB System Schedule 57 Other Supplemental Information 58 Nonmajor Governmental Funds: Combining Balance Sheet 59 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances 60 Fiduciary Funds: Combining Statement of Net Position - Fiduciary Funds 61 Combining Statement of Changes in Fiduciary Net Position - Trust Funds 62

4 Independent Auditor's Report To the Members of the Township Board Charter Township of Benton Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Charter Township of Benton (the "Charter Township"), as of and for the year ended and the related notes to the financial statements, which collectively comprise the Charter Township of Benton'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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Charter Township of Benton as of December 31, 2015, and the respective changes in its financial position and cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. 1

5 To the Members of the Township Board Charter Township of Benton Emphasis of Matter As discussed in Note 12 to the financial statements, during the year ended, the Charter Township adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. As a result of implementing this pronouncement, the Charter Township's net pension liability has been recognized on the governmentwide statements and the 2014 financial statements have been restated. Our opinion is not modified with respect to this matter. Other Matters Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, retirement system and OPEB system schedules, and the major fund budgetary comparison schedules, as listed in the table of contents, 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, which 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 supplemental 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 Charter Township of Benton's basic financial statements. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The accompanying other supplemental information, as identified in the table of contents, 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 other supplemental information, as identified in the table of contents, is fairly stated in all material respects in relation to the basic financial statements as a whole. June 14,

6 Management s Discussion and Analysis Our discussion and analysis of the Charter Township of Benton, Michigan s (the Charter Township ) financial performance provides an overview of the Charter Township s financial activities for the fiscal year ended. Please read it in conjunction with the Charter Township s financial statements. Financial Highlights As discussed in further detail in this discussion and analysis, the following represents the most significant financial highlights for the year ended : The Charter Township s General Fund revenue exceeded budget by approximately $195,000, which can primarily be attributed to the permit and plan review fees earned as a result of development and growth in the Charter Township. The General Fund expenditures were under budget by approximately $453,000. The Charter Township amended the General Fund Budget to include the payoff of two drains at large assessments; the Woodridge and Barnes & Hamilton districts. As a result, the General Fund saved approximately $35,000. The Charter Township, once again, fully funded its annual required contribution of $277,000 related to the Retiree Health Benefit Obligation, bringing the trust balance to $1,155,000. The Charter Township was required to adopt GASB Statement No. 68. GASB Statement No. 68 requires governmental units to recognize the net pension liability and the pension expense on their government-wide financial statements. The Charter Township recorded a liability of $10,291,000. The Sanitary Sewer Fund expenditures were under budget by approximately $562,000. This can be primarily attributed to the decrease in wastewater treatment fees and the repair and maintenance costs being significantly under budget. These savings are in part a result of the sewer line improvement projects. Using this Annual Report This annual report consists of a series of financial statements. The statement of net position and the statement of activities provide information about the activities of the Charter Township as a whole and present a longer-term view of the Charter Township s finances. This longer-term view uses the accrual basis of accounting so that it can measure the cost of providing services during the current year and whether the taxpayers have funded the full cost of providing government services. The fund financial statements present a short-term view; they tell us how the taxpayers resources were spent during the year, as well as how much is available for future spending. The fund financial statements also report the Charter Township s operations in more detail than the government-wide financial statements by providing information about the Charter Township s most significant funds. The fiduciary fund statements provide financial information about activities for which the Charter Township acts solely as a trustee or agent for the benefit of those outside of the government. 3

7 Management s Discussion and Analysis (Continued) Charter Township of Benton as a Whole The following table shows, in a condensed format, the current year s net position compared to the prior two years: Governmental Activities Business-type Activities Total Assets Current assets $ 9,112,483 $ 8,703,811 $ 8,897,462 $ 9,747,564 $ 10,125,687 $ 7,662,133 $ 18,860,047 $ 18,829,498 $ 16,559,595 Noncurrent assets 62, ,161 27, , ,161 27,150 Capital assets: Assets not subject to depreciation 813, , ,614 1,442,011 1,917,761 1,479,415 2,255,625 2,761,944 2,293,029 Assets subject to depreciation 5,527,022 4,695,516 4,488,798 32,137,135 29,589,094 29,819,079 37,664,157 34,284,610 34,307,877 Total assets 15,515,624 14,747,671 14,227,024 43,326,710 41,632,542 38,960,627 58,842,334 56,380,213 53,187,651 Deferred Outflows of Resources 1,292, ,292, Liabilities Current liabilities 963, ,250 1,072,714 2,931,009 1,982,924 1,752,025 3,894,657 2,965,174 2,824,739 Long-term liabilities 11,470,065 1,325,054 1,459,390 23,153,585 23,273,612 21,127,913 34,623,650 24,598,666 22,587,303 Total liabilities 12,433,713 2,307,304 2,532,104 26,084,594 25,256,536 22,879,938 38,518,307 27,563,840 25,412,042 Deferred Inflows of Resources 5,881,534 5,592,835 5,701, ,881,534 5,592,835 5,701,280 Net Position Net investment in capital assets 6,045,550 5,539,982 4,770,366 10,943,036 10,024,192 9,187,271 16,988,586 15,564,174 13,957,637 Restricted 598, , , , , ,642 Unrestricted (8,150,831) 936, ,632 6,299,080 6,351,814 6,893,418 (1,851,751) 7,288,284 7,676,050 Total net position $ (1,506,830) $ 6,847,532 $ 5,993,640 $ 17,242,116 $ 16,376,006 $ 16,080,689 $ 15,735,286 $ 23,223,538 $ 22,074,329 The total financial position of the governmental and business-type activities has decreased during the year. The governmental activities net position decreased $8,354,362, or approximately percent, over the prior year, due to the implementation of GASB Statement No. 68, which was implemented retroactively to January 1, Business-type activities increased $866,110, or approximately 5.29 percent, over the prior year. 4

8 Management s Discussion and Analysis (Continued) The following table shows the current year s changes in net position compared to the prior two years: Summary of Condensed Statement of Activities Governmental Activities Business-type Activities Total Revenue Program revenue: Charges for services $ 1,166,330 $ 1,156,507 $ 1,011,796 $ 5,791,368 $ 5,477,492 $ 5,157,133 $ 6,957,698 $ 6,633,999 $ 6,168,929 Operating grants and contributions 113, ,652 28, , ,652 28,460 Capital grants and contributions ,506 51,092 45,135 36,506 51,092 45,135 General revenue: Property taxes 5,530,606 5,558,865 5,549, ,530,606 5,558,865 5,549,065 State-shared revenue 1,279,569 1,292,656 1,257, ,279,569 1,292,656 1,257,427 Investment income 22,000 8,929 4, , ,169 99, , , ,534 Cable franchise fees 127, , , , , ,133 Other miscellaneous income 242, , , , , ,977 Sale of fixed assets 1,751 24, ,751 24,000 - Total revenue 8,483,495 8,500,806 8,272,653 5,941,215 5,629,753 5,302,007 14,424,710 14,130,559 13,574,660 Program Expenses General government 1,420,274 1,438,990 1,464, ,420,274 1,438,990 1,464,659 Public safety 5,778,911 5,437,010 5,584, ,778,911 5,437,010 5,584,537 Public works 667, , , , , ,606 Community and economic development 2,235 1,745 23, ,235 1,745 23,187 Recreation and culture 42,884 67,473 71, ,884 67,473 71,226 Interest on long-term debt 12,405 31,321 38, ,405 31,321 38,152 Water and sewer ,075,105 5,334,436 5,333,973 5,075,105 5,334,436 5,333,973 Total program expenses 7,924,486 7,646,914 7,826,367 5,075,105 5,334,436 5,333,973 12,999,591 12,981,350 13,160,340 Transfers Change in Net Position $ 559,009 $ 853,892 $ 446,286 $ 866,110 $ 295,317 $ (31,966) $ 1,425,119 $ 1,149,209 $ 414,320 During the past fiscal year, governmental activities expenses increased $277,572, or approximately 3.63 percent. Business-type activities expenses decreased $259,331, or approximately 4.86 percent. 5

9 Management s Discussion and Analysis (Continued) Budget Overruns There were no budget overruns. The Charter Township s Funds The General Fund had an increase in fund balance of $185,067. The Police Fund had an increase in fund balance of $129,892 and the Fire Fund had an increase in fund balance of $94,264. The Debt Service Fund had a decrease in fund balance of $448,702, due to the purchase of a fire truck in the current year for $441,373. Of the enterprise funds, the Sanitary Sewage System Fund had an increase in net position of $821,029 and the Water System Fund had an increase in net position of $45,081. Long-term Debt and Capital Assets The Charter Township issued General Obligation Bonds for phase two of the sanitary sewer improvement project. $1.2 million was issued with a 2.62 percent interest rate and a 15-year repayment term. The Charter Township purchased approximately $1,183,000 of governmentaltype fixed assets, and $3,383,000 of business-type fixed assets. The Future While the Charter Township has been impacted by the Small Business Personal Property Tax Exemption the previous two years, 2016 will be the first year for the Eligible Manufacturing Personal Property Exemption. The State of Michigan has indicated that the Charter Township will receive 100 percent reimbursement for a millage levied for both essential and nonessential services. Going forward the nonessential reimbursement will be on the funds available in the pool. The Charter Township will continue to stay informed of implementation of the legislation and the planned reimbursement calculations so that the Charter Township can plan accordingly. The Charter Township will be eligible for the Stormwater, Asset Management, and Wastewater (SAW) Grant in The Charter Township has applied for $2 million in grant funds for the development of an asset management plan for the sanitary sewer system. If the Township is awarded the full amount, the Charter Township will be required to match $350,000. Of the $2 million, only $500,000 can be used towards the construction cost to improve the sanitary sewer system. The Charter Township will need to use its sewer funds to adhere to the schedule of capital improvements outlined by the asset management plan. In addition to sanitary sewer system improvements, the Sewer Fund will also need to purchase a vactor truck to replace its aging truck. The Sewer Fund will need to allocate approximately $450,000 for this upcoming purchase. The 2015 audit report is on file with the Charter Township s clerk. If you have any questions about this report, please contact the Charter Township of Benton Clerk s Office. 6

10 Statement of Net Position Governmental Activities Primary Government Business-type Activities Total Assets Cash and cash equivalents (Note 3) $ 2,915,176 $ 6,467,535 $ 9,382,711 Investments 2,005,008-2,005,008 Receivables: Property taxes receivable 3,950,654-3,950,654 Other receivables - Net 79, , ,152 Due from other governmental units 279, ,649 Special assessments receivable 136, , ,246 Internal balances (Note 5) (335,833) 335,833 - Prepaid expenses 81,776 39, ,430 Unspent debt proceeds - 1,773,197 1,773,197 Land held for resale 62,505-62,505 Capital assets: Assets not subject to depreciation (Note 4) 813,614 1,442,011 2,255,625 Assets subject to depreciation (Note 4) 5,527,022 32,137,135 37,664,157 Total assets 15,515,624 43,326,710 58,842,334 Deferred Outflows of Resources - Deferred outflows related to pension plan (Note 10) 1,292,793-1,292,793 Liabilities Accounts payable 227,228 1,321,137 1,548,365 Due to other governmental units 7, , ,767 Accrued liabilities and other 228, , ,560 Unearned revenue 104, ,521 Noncurrent liabilities: Due within one year: Compensated absences (Note 7) 248,850 5, ,326 Capital leases (Note 6) - 810, ,000 Current portion of long-term debt (Note 7) 147, , ,118 Due in more than one year: Compensated absences (Note 7) 382,007 49, ,285 Capital leases (Note 6) - 17,155,000 17,155,000 Net OPEB obligation (Note 9) 649, ,032 Net pension liability (Note 10) 10,291,058-10,291,058 Long-term debt (Note 7) 147,968 5,949,307 6,097,275 Total liabilities 12,433,713 26,084,594 38,518,307 Deferred Inflows of Resources Property taxes and special assessments levied for the following year 5,556,466-5,556,466 Deferred inflows related to pension plan (Note 10) 325, ,068 Total deferred inflows of resources 5,881,534-5,881,534 The Notes to Financial Statements are an Integral Part of this Statement. 7

11 Statement of Net Position (Continued) Governmental Activities Primary Government Business-type Activities Total Net Position Net investment in capital assets $ 6,045,550 $ 10,943,036 $ 16,988,586 Restricted for: Community development 81,847-81,847 Rental ordinance 85,786-85,786 Fire 129, ,264 Police 287, ,478 Street lighting 14,076-14,076 Unrestricted (8,150,831) 6,299,080 (1,851,751) Total net position $ (1,506,830) $ 17,242,116 $ 15,735,286 The Notes to Financial Statements are an Integral Part of this Statement. 8

12 Expenses Charges for Services Program Revenue Operating Grants and Contributions Capital Grants and Contributions Functions/Programs Primary government: Governmental activities: General government $ 1,420,274 $ 164,623 $ 5,000 $ - Public safety 5,778, ,612 97,638 - Public works 667, ,095 11,283 - Community and economic development 2, Recreation and culture 42, Interest on long-term debt 12, Total governmental activities 7,924,486 1,166, ,921 - Business-type activities: Sanitary sewage system 2,145,858 2,889, Water system 2,929,247 2,901,508-36,506 Total business-type activities 5,075,105 5,791,368-36,506 Total primary government $ 12,999,591 $ 6,957,698 $ 113,921 $ 36,506 General revenue: Property taxes State-shared revenue Investment income Cable franchise fees Other miscellaneous income Gain on sale of fixed assets Change in Net Position Total general revenue Net Position - Beginning of year - As restated Net Position - End of year The Notes to Financial Statements are an Integral Part of this Statement. 9

13 Statement of Activities Year Ended Primary Government Governmental Activities Business-type Activities Total $ (1,250,651) $ - $ (1,250,651) (5,287,661) - (5,287,661) (48,399) - (48,399) (2,235) - (2,235) (42,884) - (42,884) (12,405) - (12,405) (6,644,235) - (6,644,235) - 744, ,002-8,767 8, , ,769 (6,644,235) 752,769 (5,891,466) 5,530,606-5,530,606 1,279,569-1,279,569 22, , , , , , ,235 1,751-1,751 7,203, ,341 7,316, , ,110 1,425,119 (2,065,839) 16,376,006 14,310,167 $ (1,506,830) $ 17,242,116 $ 15,735,286 10

14 Governmental Funds Balance Sheet General Fund Police Fund Fire Fund Debt Service Fund Nonmajor Assets Cash and cash equivalents (Note 3) $ 473,799 $ 1,344,572 $ 928,760 $ - $ 168,045 $ 2,915,176 Investments (Note 3) 2,005, ,005,008 Receivables: Property taxes receivable 412,957 2,194,905 1,342, ,950,654 Special assessments receivable 136, ,798 Other receivables 55,580-23, ,255 Due from other governmental units 279, ,649 Due from other funds (Note 5) , , ,225 Prepaid expenses 26,753 34,805 20, ,776 Land held for resale 62, ,505 Total assets $ 3,453,049 $ 3,574,282 $ 2,315,445 $ 346,974 $ 453,296 $ 10,143,046 Liabilities Accounts payable $ 80,355 $ 90,753 $ 56,120 $ - $ - $ 227,228 Due to other governmental units 4,843 1,767 1, ,782 Due to other funds (Note 5) 597,225-35, ,225 Advances from other funds (Note 5) , ,833 Accrued liabilities and other 98,485 88,058 40, ,078 Unearned revenue 104, ,521 Total liabilities 885, , , , ,534,667 Deferred Inflows of Resources Special assessments - Unavailable revenue 63, ,515 Property taxes and special assessments levied for the following year 677,546 3,009,028 1,869, ,556,466 Total deferred inflows of resources 741,061 3,009,028 1,869, ,619,981 Fund Balances Nonspendable: Assets held for resale 62, ,505 Prepaid expenses 26,753 34,805 20, ,776 Restricted: Community Development ,847 81,847 Fire ,264-35, ,264 Rental Ordinance ,786 85,786 Police - 287, ,478 Street lighting 14, ,076 Assigned: Police - 62, ,393 Fire , ,656 Debt Service ,141-11,141 Capital Improvements , ,251 Retiree Health Obligations 650, ,000 Unassigned 1,073, ,073,225 Total fund balances 1,826, , ,138 11, ,884 2,988,398 Total liabilities, deferred inflows of resources, and fund balances $ 3,453,049 $ 3,574,282 $ 2,315,445 $ 346,974 $ 453,296 $ 10,143,046 Funds Total The Notes to Financial Statements are an Integral Part of this Statement. 11

15 Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Fund Balance Reported in Governmental Funds $ 2,988,398 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds 6,340,636 Deferred inflows of resources (special assessments and other receivables are expected to be collected over several years and are not available to pay for current year expenditures) are not recognized in the funds 63,515 Long-term liabilities are not due and payable in the current period and are not reported in the funds (295,086) Accrued interest is not due and payable in the current period and is not reported in the funds (1,071) Employee compensated absences are payable over a long period of years and do not represent a claim on current financial resources; therefore, they are not reported as fund liabilities (630,857) Net pension liabilities, pension-related deferred outflows and inflows, and net OPEB obligations are not current financial resources and are not reported in the funds (9,972,365) Net Deficit of Governmental Activities $ (1,506,830) The Notes to Financial Statements are an Integral Part of this Statement. 12

16 Governmental Funds Statement of Revenue, Expenditures, and Changes in Fund Balances Year Ended General Fund Police Fund Fire Fund Debt Service Fund Nonmajor Funds Revenue Property taxes $ 573,330 $ 2,988,747 $ 1,968,529 $ - $ - $ 5,530,606 Licenses and permits 290,140 14, , ,019 Federal grants , ,449 State-shared revenue and grants 1,290,852 4, ,295,041 Charges for services 605,198-10, ,992 Fines and forfeitures - 22, ,292 Investment income 21, ,000 Other revenue 240, ,558 50, ,418 Total revenue 3,022,395 3,287,631 2,123,513-57,278 8,490,817 Expenditures General government 1,741, ,023 1,872,006 Public safety 309,432 3,157,739 1,885, ,373-5,793,772 Public works 609, ,663 Community and economic development 2, ,235 Recreation and culture 50, ,673 Debt service , ,692 Total expenditures 2,713,986 3,157,739 1,885, , ,023 8,487,041 Excess of Revenue Over (Under) Expenditures 308, , ,285 (600,065) (72,745) 3,776 Other Financing Sources (Uses) Proceeds from sale of capital assets - - 6, ,500 Transfers in , , ,863 Transfers out (123,342) - (150,521) - - (273,863) Total other financing (uses) sources (123,342) - (144,021) 151, ,500 6,500 Net Change in Fund Balances 185, ,892 94,264 (448,702) 49,755 10,276 Fund Balances - Beginning of year 1,641, , , , ,129 2,978,122 Fund Balances - End of year $ 1,826,559 $ 384,676 $ 313,138 $ 11,141 $ 452,884 $ 2,988,398 Total The Notes to Financial Statements are an Integral Part of this Statement. 13

17 Governmental Funds Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended Net Change in Fund Balances - Total Governmental Funds $ 10,276 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, these costs are allocated over their estimated useful lives as depreciation: Capital outlay 1,182,542 Depreciation expense (376,856) Net book value of assets disposed of (4,749) Special assessment revenue is recorded in the statement of activities when the assessment is set; it is not reported in the funds until collected or collectible within 60 days of year end (9,073) Repayment of debt principal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt) 146,287 Change in accumulated employee sick and vacation pay reported in the statement of activities does not require the use of current resources and therefore, is not reported in the fund statements until it comes due for payment 43,117 Governmental funds report expenditures for pension and other postemployment benefits as they make contributions; in the statement of activities, the OPEB cost is recognized as contributions are required and the change in net pension liability does not require the use of current financial resources (432,535) Change in Net Deficit of Governmental Activities $ 559,009 The Notes to Financial Statements are an Integral Part of this Statement. 14

18 Proprietary Funds Statement of Net Position Enterprise Funds Sanitary Sewage System Fund Water System Fund Total Assets Current assets: Cash and cash equivalents (Note 3) $ 2,512,742 $ 3,954,793 $ 6,467,535 Receivables: Special assessments receivable - Due within one year 8,690 33,972 42,662 Other receivables - Net 542, , ,897 Prepaid expenses 15,860 23,794 39,654 Total current assets 3,079,636 4,389,112 7,468,748 Noncurrent assets: Unspent bond proceeds 1,773,197-1,773,197 Advances to other funds (Note 5) - 335, ,833 Special assessment receivables - Greater than one year 49, , ,786 Capital assets (Note 4): Assets not subject to depreciation 323,052 1,118,959 1,442,011 Assets subject to depreciation 9,917,070 22,220,065 32,137,135 Total noncurrent assets 12,063,005 23,794,957 35,857,962 Total assets 15,142,641 28,184,069 43,326,710 Liabilities Current liabilities: Accounts payable 1,235,535 85,602 1,321,137 Due to other governmental units 111, ,985 Accrued liabilities and other 58, , ,411 Compensated absences (Note 7) 2,288 3,188 5,476 Capital leases (Note 6) - 810, ,000 Current portion of long-term debt (Note 7) 495, ,000 Total current liabilities 1,903,415 1,027,594 2,931,009 Noncurrent liabilities: Compensated absences (Note 7) 20,588 28,690 49,278 Capital leases (Note 6) - 17,155,000 17,155,000 Long-term debt (Note 7) 5,949,307-5,949,307 Total noncurrent liabilities 5,969,895 17,183,690 23,153,585 Total liabilities 7,873,310 18,211,284 26,084,594 Net Position Net investment in capital assets 5,569,012 5,374,024 10,943,036 Unrestricted 1,700,319 4,598,761 6,299,080 Total net position $ 7,269,331 $ 9,972,785 $ 17,242,116 The Notes to Financial Statements are an Integral Part of this Statement. 15

19 Proprietary Funds Statement of Revenue, Expenses, and Changes in Net Position Year Ended Sanitary Sewage System Fund Enterprise Funds Water System Fund Total Operating Revenue Sewage disposal charges $ 2,923,316 $ - $ 2,923,316 Sale of water - 2,901,508 2,901,508 Total operating revenue 2,923,316 2,901,508 5,824,824 Operating Expenses Cost of sewage treatment 1,844,951-1,844,951 Cost of water - 1,145,682 1,145,682 Depreciation 268,998 1,054,690 1,323,688 Total operating expenses 2,113,949 2,200,372 4,314,321 Operating Income 809, ,136 1,510,503 Nonoperating Revenue (Expenses) Interest income 77,027 36, ,341 Interest expense (31,909) (728,875) (760,784) Bond issuance costs (33,456) - (33,456) Total nonoperating revenue (expenses) 11,662 (692,561) (680,899) Income - Before contributions 821,029 8, ,604 Capital Contributions - 36,506 36,506 Change in Net Position 821,029 45, ,110 Net Position - Beginning of year - As restated 6,448,302 9,927,704 16,376,006 Net Position - End of year $ 7,269,331 $ 9,972,785 $ 17,242,116 The Notes to Financial Statements are an Integral Part of this Statement. 16

20 Proprietary Funds Statement of Cash Flows Year Ended Sanitary Sewage System Fund Enterprise Funds Water System Fund Total Cash Flows from Operating Activities Receipts from customers $ 2,881,027 $ 2,915,459 $ 5,796,486 Payments to suppliers (1,583,723) (434,313) (2,018,036) Payments to employees (290,067) (782,015) (1,072,082) Net cash provided by operating activities 1,007,237 1,699,131 2,706,368 Cash Flows from Noncapital Financing Activities - Transfers from other funds - 108, ,330 Cash Flows from Capital and Related Financing Activities Collection of customer assessments (principal and interest) 67,707 76, ,892 Purchase of capital assets (2,146,400) (114,854) (2,261,254) Principal and interest paid on capital debt (436,909) (1,508,875) (1,945,784) Bond issuance costs (33,456) - (33,456) Proceeds from debt issuance 1,200,000-1,200,000 Proceeds from contributed capital - 36,506 36,506 Net cash used in capital and related financing activities (1,349,058) (1,511,038) (2,860,096) Cash Flows from Investing Activities - Interest received on investments 17,185 24,739 41,924 Net (Decrease) Increase in Cash and Cash Equivalents (324,636) 321,162 (3,474) Cash and Cash Equivalents - Beginning of year 4,610,575 3,633,631 8,244,206 Cash and Cash Equivalents - End of year $ 4,285,939 $ 3,954,793 $ 8,240,732 Cash and cash equivalents $ 2,512,742 $ 3,954,793 $ 6,467,535 Unspent bond proceeds 1,773,197-1,773,197 Total cash and cash equivalents $ 4,285,939 $ 3,954,793 $ 8,240,732 Reconciliation of Operating Income to Net Cash from Operating Activities Operating income $ 809,367 $ 701,136 $ 1,510,503 Adjustments to reconcile operating income to net cash from operating activities: Depreciation 268,998 1,054,690 1,323,688 Amortization of bond discount 1,616-1,616 Changes in assets and liabilities: Receivables 199,611 13, ,562 Unearned revenue (243,516) - (243,516) Prepaid expenses (5,234) (14,484) (19,718) Accounts payable (132,936) (8,160) (141,096) Accrued and other liabilities 109,331 (48,002) 61,329 Net cash provided by operating activities $ 1,007,237 $ 1,699,131 $ 2,706,368 Noncash Transactions - During the year, the Charter Township had fixed-asset purchases of approximately $1.1 million that were included in accounts payable at year end in the Sanitary Sewage System Fund. The Notes to Financial Statements are an Integral Part of this Statement. 17

21 Fiduciary Funds Statement of Fiduciary Net Position Trust Fund - Pension and Retiree Health Insurance Agency Funds Assets Cash and cash equivalents $ 102,939 $ 586,349 Investments: U.S. government or agency securities 701,498 - Common stock 3,617,062 - Corporate bonds 5,034,058 - Bank investment pool funds 7,916,366 - Other assets 126,621 - Total assets 17,498,544 $ 586,349 Liabilities - Due to other governmental units - $ 586,349 Net Position Held in Trust for Pension and Other Employee Benefits $ 17,498,544 The Notes to Financial Statements are an Integral Part of this Statement. 18

22 Fiduciary Funds Statement of Changes in Fiduciary Net Position - Trust Fund Pension and Retiree Health Insurance Year Ended Trust Fund - Pension and Retiree Health Insurance Additions Investment income: Interest and dividends $ 381,231 Net change in fair value of investments (425,511) Contributions: Employer 1,131,986 Employee 160,486 Total contributions 1,292,472 Total additions 1,248,192 Deductions Benefit payments 1,657,910 Administrative expenses 53,269 Total deductions 1,711,179 Net Decrease in Net Position Held in Trust (462,987) Net Position Held in Trust for Pension and Other Employee Benefits - Beginning of year 17,961,531 Net Position Held in Trust for Pension and Other Employee Benefits - End of year $ 17,498,544 The Notes to Financial Statements are an Integral Part of this Statement. 19

23 Notes to Financial Statements Note 1 - Nature of Business and Significant Accounting Policies The accounting policies of the Charter Township of Benton, Michigan (the "Charter Township") conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The following is a summary of the significant accounting policies used by the Charter Township of Benton, Michigan. Reporting Entity The Charter Township of Benton is governed by an elected seven-member board of trustees. In accordance with accounting principles generally accepted in the United States of America, there are no component units to be included in the financial statements. The Police and Fire Retirement System has been blended into the Charter Township s financial statements as the Pension Trust Fund. The system is governed by a fivemember pension board that includes three individuals chosen by the Charter Township board. The system is reported as if it were part of the primary government because of the fiduciary responsibility that the Charter Township retains relative to the operations of the retirement system. The Charter Township has excluded the Housing Commission from this report since the Charter Township is not able to impose its will on the Housing Commission. The Housing Commission was created by ordinance of the Charter Township of Benton, Michigan. The purpose is to provide safe, sanitary, and decent housing for qualifying senior and low-income families. In August 2003, the Charter Township created Brownfield Redevelopment Authority (the "Authority") to revitalize selected environmentally distressed areas within Charter Township limits. The Authority had no assets as of and no activity for the year then ended. Accounting and Reporting Principles The Charter Township follows accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. Accounting and financial reporting pronouncements are promulgated by the Governmental Accounting Standards Board (GASB). 20

24 Notes to Financial Statements Note 1 - Nature of Business and Significant Accounting Policies (Continued) Report Presentation Governmental accounting principles require that financial reports include two different perspectives - the government-wide perspective and the fund-based perspective. 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 government-wide financial statements are presented on the economic resources measurement focus and the full accrual basis of accounting. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The statements also present a schedule reconciling these amounts to the modified accrual-based presentation found in the fundbased statements. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenue includes (1) charges to customers or applicants for goods, services, or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions, including special assessments. Taxes and other items not properly included among program revenue are reported instead as general revenue. For the most part, the effect of interfund activity has been removed from these statements. Exceptions to this general rule are charges between the Charter Township's water and sewer function and various other functions of the Charter Township. Eliminations of these charges would distort the direct costs and program revenue reported for the various functions concerned. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Fund Accounting The Charter Township accounts for its various activities in several different funds in order to demonstrate accountability for how it has spent certain resources; separate funds allow it to show the particular expenditures for which specific revenue was used. The various funds are aggregated into three broad fund types as follows: 21

25 Notes to Financial Statements Note 1 - Nature of Business and Significant Accounting Policies (Continued) Governmental Funds include all activities that provide general governmental services that are not business-type activities. This includes the General Fund, special revenue funds, debt service funds, capital project funds, and permanent funds. The Charter Township reports the following funds as major governmental funds: General Fund - The General Fund is the Charter Township's primary operating fund. It accounts for all financial resources used to provide general government services, other than those specifically assigned to another fund. Police Fund - The Police Fund accounts for the activities of the police protection department. Fire Fund - The Fire Fund accounts for the activities of the fire protection department. Debt Service Fund - The Debt Service Fund accounts for capital construction and subsequent debt service for major capital projects of the Charter Township. Proprietary Funds include enterprise funds (which provide goods or services to users in exchange for charges or fees). The Charter Township reports the following funds as major enterprise funds: Sanitary Sewage System Fund - The Sanitary Sewage System Fund accounts for the activities of the sewage collection system. Water System Fund - The Water System Fund accounts for the activities of the water distribution system. Fiduciary Funds include amounts held in a fiduciary capacity for others. These amounts will not be used to operate our government programs. Activities that are reported as fiduciary include the following: Trust Funds - The trust funds account for the activities of the Police and Fire Employees' Retirement System and Retiree Health Insurance Fund by accumulating resources for pension benefit payments and health insurance premium payments to qualified police and fire employees. Agency Funds - The agency funds account for assets held by the Charter Township in a trustee capacity. Agency funds are custodial in nature (assets and liabilities) and do not involve the measurement of results of operations. 22

26 Notes to Financial Statements Note 1 - Nature of Business and Significant Accounting Policies (Continued) Interfund Activity - During the course of operations, the government has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds and advances to/from other funds. While these balances are reported in fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Balances between the funds included in governmental activities (i.e., the governmental funds) are eliminated so that only the net amount is included as internal balances in the governmental activities column. Similarly, balances between the funds included in business-type activities (i.e., the enterprise funds) are eliminated so that only the net amount is included as internal balances in the business-type activities column. Furthermore, certain activity occurs during the year involving transfers of resources between funds. In fund financial statements, these amounts are reported at gross amounts as transfers in/out. While reported in fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as transfers in the governmental activities column. Similarly, balances between the funds included in business-type activities are eliminated so that only the net amount is included as transfers in the business-type activities column. Basis of Accounting The governmental funds use the current financial resources measurement focus and the modified accrual basis of accounting. This basis of accounting is intended to better demonstrate accountability for how the government has spent its resources. Expenditures are reported when the goods are received or the services are rendered. Capital outlays are reported as expenditures (rather than as capital assets) because they reduce the ability to spend resources in the future; conversely, employee benefit costs that will be funded in the future (such as pension and retiree healthcare-related costs, or sick and vacation pay) are not counted until they come due for payment. In addition, debt service expenditures, claims, and judgments are recorded only when payment is due. Revenue is not recognized until it is collected, or collected soon enough after the end of the year that it is available to pay for obligations outstanding at the end of the year. For this purpose, the Charter Township considers amounts collected within 60 days of year end to be available for recognition. The following major revenue sources meet the availability criterion: state-shared revenue, district court fines, and interest associated with the current fiscal period. Conversely, special assessments and federal grant reimbursements will be collected after the period of availability; receivables have been recorded for these, along with a "deferred inflow of resources." 23

27 Notes to Financial Statements Note 1 - Nature of Business and Significant Accounting Policies (Continued) Proprietary funds and fiduciary funds use the economic resources measurement focus and the full accrual basis of accounting. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Specific Balances and Transactions Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Prepaid Items - Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements. Receivables and Payables - In general, outstanding balances between funds are reported as "due to/from other funds." Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as "advances to/from other funds." Any residual balances outstanding between governmental activities and the business-type activities are reported in the governmentwide financial statements as internal balances. All trade and property tax receivables are shown as net of allowance for uncollectible amounts. Unspent Debt Proceeds - Unspent debt proceeds include the remaining proceeds from the sewer bonds sold during 2014 and 2015 for sanitary system improvements. Land Held for Resale - Land held for resale includes land and pre-development costs, and is stated at the lower of cost or market value. Capital Assets - Capital assets, which include property, plant, equipment, intangible assets, and infrastructure assets, are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined by the Charter Township as assets with an initial individual cost of more than $1,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. 24

28 Notes to Financial Statements Note 1 - Nature of Business and Significant Accounting Policies (Continued) Capital assets are depreciated using the straight-line method over the following useful lives: Capital Asset Class Water and sewer treatment systems Buildings and improvements Vehicles Tools and equipment Office equipment Intangible assets Lives 10 to 50 years 15 to 50 years 3 to 15 years 5 to 15 years 3 to 7 years 20 years Long-term Obligations - In the government-wide financial statements and the proprietary fund types in the fund financial statements, long-term debt, and other longterm obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method; bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed at the time they are incurred. In the fund financial statements, governmental fund types recognize bond issuances as an other financing source, as well as bond premiums and discounts. The General Fund and Debt Service Fund are generally used to liquidate governmental long-term debt. Deferred Inflows of Resources In addition to assets, the statement of net position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government-wide statements report deferred outflows from the difference between projected and actual investment earnings of the pension plan and changes in assumptions related to economic and demographic factors. 25

29 Notes to Financial Statements Note 1 - Nature of Business and Significant Accounting Policies (Continued) In addition to liabilities, the statement of net position and/or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The Charter Township has three types of items that qualify for reporting in this category. One item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenue from special assessments. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. A second item, property taxes received in advance of the period levied, are reported as deferred inflows of resources in the government-wide statement of net position and governmental funds balance sheet. Lastly, the government-wide statements report a deferred inflow from the difference between projected and actual experience of the pension plan. Net Position Flow Assumption Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Fund Balance Flow Assumption Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. 26