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1 1. Call meeting to order. 2. Public comment. 3. Approval of minutes from previous meeting. Agenda Finance Committee Meeting Monday, July 16, 8:00 AM Shawano County Courthouse, Room 7 Members: Jerry Erdmann, Deb Noffke, Rosetta Stern, Arlyn Tober, Bill Switalla Page Finance Committee - 11 Jun Minutes - Pdf Motion to deviate from the order of the agenda, if necessary. 5. Treasurer's report for the month of May 2018 transactions. Treasurer's Report Presentation of the 2017 Audit Report by Baker Tilley Virchow Krause. Audit Results Shawano county 8-25 Shawano County 2017 FS-Final Shawano County 2017 Management Rpt-Final Discussion and possible approval on a resolution to seek authorization to conduct a county-wide advisory referendum regarding Dark Store tax loopholes. Dark Stores Referendum Resolution Discussion on Funding for Capital Improvement Program Projects. 9. Discussion and possible action on Ceridian. 10. Finance Department's financial report. Budget to Actual & Balance Sheet Approval of vouchers for period June 5, 2018 through July 2, Vouchers through GENACCTS for Board Mtg 158 June C&C Payroll Budget Jounral Entries Set next meeting date. 13. Adjournment. Page 1 of 167

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3 Minutes Finance Committee Meeting Monday, June 11, 2018, 8:00 AM Shawano County Courthouse, Room 7 Members Present: Members Excused: Erdmann, Noffke, Switalla, and Tober Stern Others Present: 1. Call meeting to order. Brent Miller, Administrative Coordinator; Nitta Charnon, Finance Director; Debra Wallace, Treasurer; and Mindy Reinke, Office Assistant III The meeting was called to order by Chairman Tober at 8:00 a.m. 2. Approval of minutes from previous meeting. Motion by Erdmann, seconded by Switalla to approve the May 14, 2018 Finance Committee minutes as presented. Vote: 3 yes; 0 no; 2 absent. Motion carried. 3. Motion to deviate from the order of the agenda, if necessary. Motion by Switalla, seconded by Erdmann to deviate from the order of the agenda if necessary. Vote: 3 yes; 0 no; 2 absent. Motion carried. 4. Public comment. None Chairman Tober deviated to item #11 5. Treasurer's report for the month of April 2018 transactions. The Treasurer's report for activity for the month of April 2018 transactions was presented for the Committee's review. 6. Discussion and possible approval on selection of PMA investments from bids. Motion by Noffke, seconded by Switalla to wait for bids to come in and have Wallace chose a short-term investment option with a 2% interest rate or higher. Vote: 4 yes; 0 no; 1 absent. 7. Discussion and reapproval on the special charges change with regard to clean up costs on the tax bills. Wallace asked for reconfirmation on the special charges change regarding clean up costs on the tax bills. Per Finance Committee action in 2017, motion was made by Tober, seconded by Erdmann to approve paying specials back to the municipality as the County gets paid by the owners. Page 1 of 3 Page 3 of 167

4 Per committee discussion at today's meeting, motion by Noffke, seconded by Tober for special charges to be placed on the tax bills going forward but they will not be paid to the municipality until the property owner has paid those taxes. Vote: 4 yes; 0 no; 1 absent. Motion carried. 8. Discussion and possible approval of 2018 Tax Deed Bid prices. Parcel # acre lot & building located at N4998 US Hwy 45, Tigerton in the Town of Morris. Minimum bid was set at $10,000. Two bids received. Accepted highest bid for this parcel for $12,600 Parcel # acre lot located on Ann Ct., Shawano in the Town of Wescott. Minimum bid was set at $3,300. One bid was received. Accepted bid for this parcel for $3, Parcel # acre lot. Located on Highview Rd., Pulaski in the Village of Pulaski. Minimum bid was set at $3,000. One bid was received. Accepted bid for this parcel for $3,300. Parcel # acre lot & building located at 715 S. Webb St., Wittenberg in the Village of Wittenberg. Minimum bid was set at $25,000. Two bids received. Accepted highest bid for this parcel for $25,610. Parcel # acre lot & building located at 123 Pine St., Tigerton in the Village of Tigerton. Minimum bid was set at $4,000. Received and accepted offer for this parcel for $4, Disscussion and possible approval of 2018 Tax Deed suggested starting bids for sale of properties and properties to be purchased. Parcel # acre lot & building located at N4889 Broadway Rd., Bonduel in the Town of Hartland. Motion by Switalla, seconded by Noffke, to set the minimum bid price for this parcel at approximately $7,000. Vote: 4 yes; 0 no; 1 absent. Motion carried. Parcel # and Parcel # acre lot & building and.14 acre lot and building located at W6085 Ash Circle, Shawano in the Town of Wescott. Motion by Noffke, seconded by Switalla, to combine these two parcels and to set the minimum bid price for both parcels combined at approximately $8,000. Vote: 4 yes; 0 no; 1 absent. Motion carried. Parcel # acre lot, Parcel # acre lot, and Parcel # acre lot. All parcels located on Highview Rd., Pulaski in the Village of Pulaski. Motion by Erdmann, seconded by Tober, to set the minimum bid price for each parcel at $2,000. Vote: 4 yes; 0 no; 1 absent. Motion carried. 10. Discussion and approval on Mini-CIP for the Treasurer's Office. Wallace asked that the program for Transcendent general receipting to be brought to the CIP Committee as a Mini-CIP. Having this program the Treasurer's Office will be able to export information rather than manual entering for less margin for error. Motion by Switalla, seconded by Erdmann to approve Mini-CIP and send to CIP Committee. Vote: 4 yes; 0 no; 1 absent. Motion carried. Chairman Tober deviated to item #14 and continued with the agenda Page 2 of 3 Page 4 of 167

5 11. Discussion and possible approval of reclass of Office Assistant III to Office Specialist. Motion by Tober, seconded by Erdmann to approve reclass of Office Assistant III to Office Specialist within the Department of Administration and forward it to the Administration Committee. Any changes will take effect 01/01/2019. Vote: 3 yes; 0 no; 2 absent. Motion carried. Noffke arrived at 8:04 a.m. 12. Discussion and possible approval of Reclass of Accountant A to Accounting Lead. Motion by Tober, seconded by Switalla to approve a reclass of Accounting A to Accounting Lead and send to the Administration Committee for approval and to send to Carlson Dettman. Any changes will take effect 01/01/2019. Vote: 4 yes; 0 no; 1 absent. Motion carried. 13. Discussion and possible approval on a resolution to combine the Employee Wellness Program fund and the Future Health Insurance Assessments fund. Miller informed the committee that this was passed at the May meeting and approval with a resolution is needed. Motion by Switalla, seconded by Noffke to approve a resolution to combine the Employee Wellness Program fund and the Future Health Insurance Assessments fund. Vote: 4 yes; 0 no; 1 absent. Chairman Tober deviated back to item #5 14. Discussion on budget guidelines. Discussion held regarding the budget for No decisions have been made at this time. 15. Finance Department's financial report. Financial reports for the April 2018 activity were presented to the Committee for review. 16. Approval of vouchers for period May 8, 2018 through June 4, Motion by Tober, seconded by Erdmann to approve the listing of vouchers paid May 8, 2018 through June 4, 2018; the listing of General Accounts paid May 8, 2018 through June 4, 2018; May Committee & Commissions and budget entries. Vote: 4 yes; 0 no; 1 absent. Motion carried. 17. Set next meeting date. Reconfirm date set last month of July 16, 2018 at 8:00 a.m. 18. Adjournment. Motion by Noffke, seconded by Switalla to adjourn the meeting at 9:39 a.m. Vote: 4 yes; 0 no; 1 absent. Motion carried. Recorded by: Mindy Reinke- Office Assistant III Page 3 of 3 Page 5 of 167

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8 Audit Results Shawano County Year Ended 12/31/17 Page 8 of 167

9 Agenda SECTION BAKER TILLY VIRCHOW KRAUSE, LLP YOUR EXPERIENCED CLIENT SERVICE TEAM AUDIT RESULTS STATUS OF OUR AUDIT... I FINANCIAL RESULTS... II REQUIRED COMMUNICATIONS... III COMPONENTS OF VALUE ACCOUNTING AND AUDITING STANDARDS UPDATE... IV This presentation was prepared as part of our audit, has consequential limitations, is restricted to those charged with governance and, if appropriate, Management, and should not be used by anyone other than those specified parties. Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. Page 9 of 167

10 Your Experienced Client Service Team Baker Tilly's team of professionals brings significant state and local government expertise to Shawano County. Collectively, they bring over 60 years of auditing public sector client experience to your audit. Their enthusiasm and commitment result in proactive, innovative service focused on your business issues. The team members can be reached as indicated below: Carla A. Gogin, CPA Partner Carla Gogin, partner with Baker Tilly Virchow Krause, LLP, is a member of the public sector practice group. She has been with the firm since 1993, serving the financial needs of state and local government clients and serving in various firm leadership roles. She has assisted many municipalities and counties implement new Governmental Accounting Standards Board (GASB) pronouncements and to understand new auditing standards impacting the profession. Carla is the Engagement partner-in-charge for the Shawano County audit. John W. Rader, CPA, MBA Director John.Rader@bakertilly.com John Rader is a director with the public sector practice group. He has over 25 years of experience auditing governments. He specializes in providing financial auditing and consulting services to governmental units including counties, cities, villages and towns as well as the University of Wisconsin Athletic Department, airports, healthcare facilities and several state agencies. John is a Director assisting with the Shawano County audit. Shawano County Page 1 Page 10 of 167

11 Your Experienced Client Service Team Abby J. Peterson Senior Accountant Abby Peterson, senior accountant in the public sector practice group, has been with Baker Tilly Virchow Krause, LLP since She specializes in providing accounting and auditing services to state and local government entities. Abby is a Senior Accountant assisting with the Shawano County audit. Stephanie M. Nelson Manager Stephanie.Nelson@bakertilly.com Stephanie Nelson, Manager with Baker Tilly Virchow Krause, LLP, has over five years of experience with Baker Tilly. She specializes in providing accounting and auditing services to state and local government entities, including municipalities, counties and school districts. Stephanie manages all aspects of the Shawano County audit. Andrew Salewski Accountant Andrew.Salewski@bakertilly.com Andrew Salewski, staff accountant with Baker Tilly Virchow Krause, LLP, has been with the firm since Andrew is a member of the state and local government team and specializes in providing auditing and accounting services to municipal clients. Dustin Kratcha Accountant Dustin.Kratcha@bakertilly.com Dustin Kratcha, staff accountant with Baker Tilly Virchow Krause, LLP, has been with the firm since Dustin is a member of the state and local government team and specializes in providing auditing and accounting services to municipal clients. Shawano County Page 2 Page 11 of 167

12 Section I Status of Our Audit Shawano County Page 1 Page 12 of 167

13 Status of Our Audit and Areas of Audit Emphasis Status of the audit We have completed our audit of the County s financial statements for the year ended December 31, Our audit was performed in accordance with auditing standards generally accepted in the United States of America and standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. We have issued an unmodified opinion on the financial statements. We are in the process of completing our audit of the Schedule of Expenditures of Federal and State Awards Required by the Uniform Guidance and State Single Audit Guidelines. Shawano County Page 3 Page 13 of 167

14 Section II Financial Results <Client Name> Page 4 Page 14 of 167

15 Financial Results Financial Results General Fund (page 57) Actual Final Amended Budget Variance Revenues and other financing sources $ 20,181,428 $ 19,023,702 $ 1,157,726 Expenditures and other financing uses (18,804,463) (19,922,400) 1,117,937 Revenues over (under) expenditures 1,376,965 $ (898,698 ) $ 2,275,663 Fund balance beginning of year 18,380,199 Fund Balance End of Year $ 19,757,164 Shawano County Page 4 Page 15 of 167

16 Financial Results General Fund Balance History $20,000,000 $17,500,000 $15,000,000 $12,500,000 $10,000,000 $7,500,000 $5,000,000 Nonspendable Restricted Committed Assigned Unassigned $2,500,000 $ Fund Balance Components Unassigned $ 9,743,067 $ 10,925,961 $ 11,754,636 Assigned 3,060,116 2,563,106 3,242,925 Committed 2,247,619 2,362,635 2,342,877 Restricted 277, , ,821 Nonspendable 1,965,308 2,196,790 2,024,905 Total $ 17,293,473 $ 18,380,199 $ 19,757,164 MINIMUM FUND BALANCE POLICY (PAGE 47) The county has also adopted a minimum unassigned general fund balance policy of 20% to 25% of the subsequent year s budgeted appropriations for the General, Public Health, Human Services, and Library funds. These funds are to be maintained for cash flow and working capital purposes. The minimum fund balance is calculated as follows: 2018 Budget General Fund $ 19,529,066 Public Health 702,616 Human Services 9,463,868 Library 761,513 $ 30,457,063 Minimum 20% $ 6,091,413 Maximum 25% $ 7,614,266 The county s unassigned general fund balance totaled $11,754,636 on December 31, Shawano County Page 5 Page 16 of 167

17 Financial Results Financial Results Other Governmental Funds (pages 6-7 / 71-72) Human Services Fund County Roads and Bridges Debt Service Nonmajor Governmental Funds Revenues $ 9,718,967 $ 4,653,862 $ 964,520 $ 5,062,303 Expenditures (9,729,281) (5,077,446) (736,858) (5,197,309) Other financing sources (uses) 304, (60,942) Net change in fund balances 294,668 (423,854) (227,662) 195,948 Fund balance beginning of year 1,049,323 2,293,940 (194,462) 1,707,386 Fund Balance End of Year $ 1,343,991 $ 1,870,356 $ (33,200) $ 1,511,438 Nonmajor Funds Special revenue funds $ 2,358,886 Capital projects (847,448) Total $ 1,511,438 Shawano County Page 6 Page 17 of 167

18 Financial Results Financial Results Proprietary funds (pages 11-12) Highway Water and Sewer Utility Lakeland Industries Internal Services Funds Revenues $ 10,993,348 $ 57,008 $ 220,407 $ 1,639,837 Expenditures (10,600,672) (47,680) (220,755) (1,506,041) Nonoperating revenues 52, ,244 Transfers 83,339-8,424 - Change in net position 528,371 9,328 8, ,040 Net Position beginning of year 15,363, , ,954 3,431,846 Net Position End of Year $ 15,892,074 $ 149,287 $ 203,030 $ 3,588,886 Shawano County Page 7 Page 18 of 167

19 Financial Results G.O. Debt Outstanding Legal Debt Margin (page 41) Pursuant of Section Wisconsin Statutes, the total indebtedness of the county for general purposes may not exceed 5% of the value of the taxable property located therein for state purposes. Equalized Value $ 3,096,344,300 Debt Margin Percentage 5% Legal Debt Limit 154,817,215 Outstanding General Obligation Debt $ 1,964,007 Less amount available in the Debt service Fund (33,200) Total Amount of Debt Applicable to Debt Margin 1,930,807 Legal Debt Margin $ 152,886,408 Percentage of Debt Capacity Used 1.26% Prior Year 1.75% Debt Service Compared to Governmental Expenditures Governmental Funds Principal $ 666,557 Interest 70,301 Debt service expenditures 736,858 Total governmental expenditures $ 39,150,200. Less: Capital outlay (2,564,454) Non-capital governmental expenditures 36,585,746 Percentage of debt service compared to non-capital governmental expenditures 2.01% Prior Year 2.60% Shawano County Page 8 Page 19 of 167

20 Section III Required Communications <Client Name> Page 9 Page 20 of 167

21 Required Communications Refer to the Required Communications Document. Our Responsibility Under Auditing Standards Generally Accepted in the United States of America, Government Auditing Standards, the Uniform Guidance, and the State Single Audit Guidelines Other Information in Documents Containing Audited Financial Statements Planned Scope and Timing of the Audit Qualitative Aspects of the Entity s Significant Accounting Practices Accounting policies Significant accounting estimates Financial statement disclosures Difficulties encountered during the audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and corrected misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. See the separate document for a listing. Disagreements with management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the financial statements or the auditor s report. No such disagreements arose during the course of the audit. Management s consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Shawano County Page 9 Page 21 of 167

22 Required Communications Representations requested from management Independence We are not aware of any relationships between Baker Tilly Virchow Krause, LLP and Shawano County that, in our professional judgment, may reasonably be thought to bear on our independence. Other significant matters, finding or issues In the normal course of our professional association with the County, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, business conditions affecting the entity, and business plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the County s auditors. Shawano County Page 10 Page 22 of 167

23 Section IV Accounting and Auditing Standards Update Shawano County P Page 23 of 167

24 Accounting and Auditing Standards Update The Governmental Accounting Standards Board (GASB) approved the following: > Statement No. 84 Fiduciary Activities > Statement No. 86 Certain Debt Extinguishment Issues > Statement No Leases Shawano County Page 11 Page 24 of 167

25 Communication to Those Charged with Governance and Management Material Weaknesses > Internal Control Environment > Internal Control over Financial Reporting Prior Year Recommendations > Treasurer s Department > Decentralized Cash Collections > Information Technology Informational Points > Cyber Security > Government Fraud Prevention and Detection: Vendor Fraud > GASB Updates > Upcoming Lease Standard > New Reporting Requirements for Fiduciary Activities > Government Fraud Prevention and Detection Shawano County Page 12 Page 25 of 167

26 SHAWANO COUNTY Shawano, Wisconsin FINANCIAL STATEMENTS Including Independent Auditors Report As of and for the Year Ended December 31, 2017 Page 26 of 167

27 SHAWANO COUNTY TABLE OF CONTENTS As of and for the Year Ended December 31, 2017 Independent Auditors' Report i iii Basic Financial Statements Statement of Net Position 1 Statement of Activities 2 Balance Sheet Governmental Funds 3 4 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 5 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 6 7 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 8 Statement of Net Position Proprietary Funds 9 10 Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds Statement of Cash Flows Proprietary Funds Statement of Assets and Liabilities Agency Fund 15 Notes to Financial Statements Required Supplementary Information Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund 57 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Human Services 58 Schedule of Proportionate Share of the Net Pension (Asset)/Liability Wisconsin Retirement System 59 Schedule of Employer Contributions Wisconsin Retirement System 59 Notes to Required Supplementary Information 60 Page 27 of 167

28 SHAWANO COUNTY TABLE OF CONTENTS (cont.) As of and for the Year Ended December 31, 2017 Supplementary Information Detailed Comparison of Budgeted and Actual Revenues General Fund Detailed Comparison of Budgeted and Actual Expenditures General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Debt Service 67 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual County Roads and Bridges 68 Combining Balance Sheet Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds Combining Statement of Net Position Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds Combining Statement of Cash Flows Internal Service Funds Page 28 of 167

29 INDEPENDENT AUDITORS' REPORT To the County Board Shawano County Shawano, Wisconsin Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Shawano County, Wisconsin, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise Shawano County'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. Auditors' 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 auditors' 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 over financial reporting relevant to Shawano County'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 Shawano County'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. Page i Page 29 of 167

30 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, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Shawano County, Wisconsin, as of December 31, 2017 and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the required supplementary information 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 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. Management has omitted the management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinions on the basic financial statements are not affected by this missing information. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Shawano County's basic financial statements. The supplementary information as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects, in relation to the basic financial statements as a whole. Prior-Year Comparative Information We have previously audited Shawano County's 2016 financial statements, and we expressed unmodified audit opinions on the respective financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information in our report dated June 26, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2016, is consistent, in all material respects, with the audited financial statements from which it has been derived. Page ii Page 30 of 167

31 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we will issue a report on our consideration of Shawano County'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 Shawano County's internal control over financial reporting and compliance. Madison, Wisconsin June 26, 2018 Page iii Page 31 of 167

32 SHAWANO COUNTY STATEMENT OF NET POSITION As of December 31, 2017 (With summarized financial information as of December 31, 2016) Primary Government Totals Component Unit Governmental Activities Business-type Activities ASSETS Cash and investments $ 26,875,416 $ 6,141,858 $ 33,017,274 $ 33,321,054 $ 115,855 $ 108,789 Receivables Taxes 15,685,444-15,685,444 15,545, Delinquent taxes 2,006,422-2,006,422 2,025, Accounts 832, ,337 1,013,897 1,048, Loans 616,740 2, , ,558 61,534 74,208 Other 560, , , Due from other governments 1,560, ,576 2,052,270 2,350, Inventories and prepaid items 494, ,562 1,357,500 1,319, Capital Assets, Nondepreciable Land 6,974, ,246 7,475,661 7,334, Construction in progress 1,142,743-1,142,743 1,048, Capital Assets, Depreciable Land improvements 3,004, ,511 3,661,214 3,712, Buildings and improvements 23,414,386 2,945,578 26,359,964 24,643, Machinery and equipment 8,988,281 17,778,995 26,767,276 25,464,084 12,918 12,918 Intangibles 3,951,226-3,951,226 3,824, Infrastructure 78,056,354-78,056,354 76,078, Less: Accumulated depreciation (61,067,356) (13,202,104) (74,269,460) (71,008,855) (12,918) (12,918) Total Assets 113,096,966 16,360, ,457, ,199, , ,997 DEFERRED OUTFLOWS OF RESOURCES Pension related amounts 6,126,175 1,186,817 7,312,992 10,605, LIABILITIES Accounts payable 1,187, ,408 1,340,350 1,084, Accrued and other current liabilities 1,741,249 20,031 1,761,280 2,385, Due to other governments 1,249,296 1,696 1,250,992 3,266, Unearned revenues 257,285 57, , , Long-term Obligations Due within one year 1,561, ,670 1,822,846 1,768, Due in more than one year 2,838, ,872 3,170,699 4,470, Total Liabilities 8,835, ,199 9,660,974 13,357, DEFERRED INFLOWS OF RESOURCES Property taxes 15,685,444-15,685,444 15,545, Pension related amounts 2,476, ,532 2,954,010 3,996, Total Deferred Inflows of Resources 18,161, ,532 18,639,454 19,542, NET POSITION Net investment in capital assets 63,090,745 8,680,226 71,770,971 69,241, Restricted 4,890,962-4,890,962 3,840, Unrestricted 24,243,737 7,564,165 31,807,902 32,823, , ,997 TOTAL NET POSITION $ 92,225,444 $ 16,244,391 $ 108,469,835 $ 105,905,461 $ 177,389 $ 182,997 See accompanying notes to the financial statements. Page 1 Page 32 of 167

33 SHAWANO COUNTY STATEMENT OF ACTIVITIES For the Year Ended December 31, 2017 (With summarized financial information as of December 31, 2016) Net (Expense) Revenue Program Revenues and Changes in Net Position Operating Capital Grants Primary Government Component Unit Charges for Grants and and Governmental Business-type Totals Functions/Programs Expenses Services Contributions Contributions Activities Activities Page 33 of 167 Primary Government Governmental Activities General government $ 5,251,006 $ 2,266,201 $ 127,456 $ - $ (2,857,349) $ - $ (2,857,349) $ (2,488,185) $ - $ - Public safety 12,175, , ,758 - (11,062,042) - (11,062,042) (10,358,259) - - Public works 4,842,777 22,114 1,243, ,500 (2,994,502) - (2,994,502) (1,935,261) - - Health and human services 13,791,951 3,008,121 8,823,754 - (1,960,076) - (1,960,076) (2,031,792) - - Culture and recreation 2,347, , ,154 - (1,771,022) - (1,771,022) (1,590,435) - - Conservation and development 1,218, ,308 2,986,265-2,081,961-2,081,961 (370,686) - - Interest and fiscal charges 62, (62,688) - (62,688) (85,922) - - Total Governmental Activities 39,690,544 6,905,278 13,577, ,500 (18,625,718) - (18,625,718) (18,860,540) - - Business-type Activities Highway 10,600,672 10,993, , , ,757 Utility 47,680 57, ,328 9,328 10,686 Lakeland Industries 220, , (348) (348) 24, Total Business-type Activities 10,869,107 11,270, , , , Total Primary Government $ 50,559,651 $ 18,176,041 $ 13,577,048 $ 582,500 (18,625,718) 401,656 (18,224,062) (18,186,569) - - Component Unit Economic Development $ 182,304 $ 48,672 $ 125,000 $ (8,632) 35,919 General Revenues Taxes Property taxes, levied for general purposes 14,962,402-14,962,402 14,749, Property taxes, levied for debt service 583, , , Sales tax 2,725,224-2,725,224 2,545, Interest on delinquent taxes and other taxes 622, , , Federal and state grants and other contributions not restricted to specific functions 1,313,154-1,313,154 1,318, Public gifts and grants 24,342-24, , Interest and investment earnings 273,021 42, , ,199 3,024 1,614 Gain on disposal of assets 62,153 10,269 72, , Miscellaneous 161,316 8, , , Transfers (83,339) 83, Total General Revenues and Transfers 20,644, ,119 20,788,436 20,548,907 3,024 1,614 Change in net position 2,018, ,775 2,564,374 2,362,338 (5,608) 37,533 NET POSITION - Beginning 90,206,845 15,698, ,905, ,543, , ,464 NET POSITION - ENDING $ 92,225,444 $ 16,244,391 $ 108,469,835 $ 105,905,461 $ 177,389 $ 182,997 See accompanying notes to the financial statements. Page 2

34 SHAWANO COUNTY BALANCE SHEET GOVERNMENTAL FUNDS As of December 31, 2017 (With summarized financial information as of December 31, 2016) Special Revenue Fund General Human Services Debt Service ASSETS Cash and investments $ 16,601,298 $ 1,947,986 $ - Receivables Taxes 9,698,549 1,619, ,883 Delinquent taxes 2,006, Accounts 209, ,639 - Loans Long term ,000 Due from other funds 2,043, Due from other governments 799, ,516 - Inventories 7, Prepaid items 220,747 14,917 - Advance to other funds 363, TOTAL ASSETS $ 31,950,246 $ 4,601,354 $ 1,026,883 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts payable $ 509,065 $ 456,118 $ - Accrued and other current liabilities 1,418, Funds held in trust 51,120 2,998 - Due to other funds Due to other governments 170,031 1,079,265 - Unearned revenues 118,228 99,686 - Advance from other funds ,420 Total Liabilities 2,267,031 1,638, ,420 Deferred Inflows of Resources Property taxes 9,698,549 1,619, ,883 Interest on delinquent taxes 174, Loans and long-term receivables ,380 Other 53, Total Deferred Inflows of Resources 9,926,051 1,619, ,263 Fund Balances (Deficit) Nonspendable Inventories and prepaids 227,963 14,917 - Delinquent property taxes 1,433, Long term advance to other funds 363, Restricted 391,821 1,329,074 33,200 Committed 2,342, Assigned 3,242, Unassigned (deficit) 11,754, Total Fund Balances (Deficit) 19,757,164 1,343,991 33,200 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES $ 31,950,246 $ 4,601,354 $ 1,026,883 Page 3 Page 34 of 167

35 Capital Projects Fund Nonmajor County Roads Governmental and Bridges Funds Total Governmental Funds $ 1,864,221 $ 3,356,643 $ 23,770,148 $ 24,719,972 2,879,435 1,021,281 15,685,444 15,545, ,006,422 2,025,647 6,135 12, , , , , , , , ,043, , ,710 1,560,694 1,547, ,216 9,035-3, , , , ,980 $ 4,749,791 $ 5,347,259 $ 47,675,533 $ 47,193,043 $ - $ 114,845 $ 1,080,028 $ 831, ,418,587 1,853, ,118 42,089-2,043,585 2,043, , ,249,296 3,264,700-39, , , , ,980-2,197,801 6,216,319 6,694,350 2,879,435 1,021,281 15,685,444 15,545, , , ,739 1,030,119 1,424, ,378 45,714 2,879,435 1,638,020 16,943,065 17,262,307-3, , , ,433,522 1,439, , ,980-2,378,121 4,132,216 2,606,298 1,870,356-4,213,233 5,095, ,242,925 2,563,106 - (870,664) 10,883,972 10,743,431 1,870,356 1,511,438 24,516,149 23,236,386 $ 4,749,791 $ 5,347,259 $ 47,675,533 $ 47,193,043 See accompanying notes to the financial statements. Page 4 Page 35 of 167

36 SHAWANO COUNTY RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION As of December 31, 2017 (With summarized financial information as of December 31, 2016) Total Fund Balances - Governmental Funds $ 24,516,149 $ 23,236,386 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the funds. 63,392,817 61,813,480 Some receivables that are not currently available are reported as unavailable revenues in the fund financial statements but are recognized as revenue when earned in the government-wide statements. 1,257,621 1,716,773 The net pension liability/(asset) does not relate to current financial resources and is not reported in the governmental funds (783,561) (1,590,109) Deferred outflows of resources related to pensions do not relate to current financial resources and are not reported in the governmental funds. 6,126,175 8,866,758 Deferred inflows of resources related to pensions do not relate to current financial resources and are not reported in the governmental funds. (2,476,478) (3,346,358) Internal service funds are reported in the statement of net position as governmental activities 3,588,886 3,431,846 Some liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Bonds and notes payable (1,964,007) (2,630,564) Compensated absences (1,408,684) (1,260,280) Accrued interest on long-term obligations (23,474) (31,087) NET POSITION OF GOVERNMENTAL ACTIVITIES $ 92,225,444 $ 90,206,845 See accompanying notes to the financial statements. Page 5 Page 36 of 167

37 SHAWANO COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December 31, 2017 (With summarized financial information as of December 31, 2016) Special Revenue Fund Capital Projects Fund Human County Roads General Services Debt Service and Bridges REVENUES Taxes $ 13,201,249 $ 1,420,429 $ 583,132 $ 2,937,000 Intergovernmental 2,825,671 4,936,640 4,158 1,710,979 Licenses and permits 197, Fines and forfeits 359,942 38, Public charges for services 1,476,116 3,147, Intergovernmental charges for services 1,399,006 45, ,836 - Miscellaneous 643, , ,883 Total Revenues 20,103,825 9,718, ,520 4,653,862 EXPENDITURES Current General government 4,516, Public safety 10,817, Public works 6, ,077,446 Health and human services 564,768 9,729, Culture and recreation 1,403, Conservation and development 1,100, Capital Outlay Debt Service Principal ,557 - Interest and fiscal charges ,301 - Total Expenditures 18,409,306 9,729, ,858 5,077,446 Excess of Revenues Over (Under) Expenditures 1,694,519 (10,314) 227,662 (423,584) OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets - 9, Transfers in 77, , Transfers out (395,157) Total Other Financing Sources (Uses) (317,554) 304, Net Change in Fund Balances 1,376, , ,662 (423,584) FUND BALANCES - Beginning (Deficit) 18,380,199 1,049,323 (194,462) 2,293,940 FUND BALANCES - ENDING $ 19,757,164 $ 1,343,991 $ 33,200 $ 1,870,356 Page 6 Page 37 of 167

38 Nonmajor Governmental Funds Total Governmental Funds $ 751,860 $ 18,893,670 $ 18,496,037 4,024,497 13,501,945 12,098, , ,117 64, , ,752 46,364 4,669,574 3,949,177 47,922 1,869,463 1,677, , , ,062 5,062,303 40,503,477 37,831,632-4,516,082 4,455,261 62,761 10,880,696 10,268,801 69,487 5,153,452 5,662,749 1,849,116 12,143,165 11,742, ,092 2,018,034 2,058,851 37,399 1,137,459 1,051,770 2,564,454 2,564, , , ,370-70,301 96,242 5,197,309 39,150,200 36,459,458 (135,006) 1,353,277 1,372,174-9,825 65,204 1,065,886 1,438,646 1,253,664 (1,126,828) (1,521,985) (1,288,152) (60,942) (73,514) 30,716 (195,948) 1,279,763 1,402,890 1,707,386 23,236,386 21,833,496 $ 1,511,438 $ 24,516,149 $ 23,236,386 See accompanying notes to the financial statements. Page 7 Page 38 of 167

39 SHAWANO COUNTY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2017 (With summarized financial information for the year ended December 31, 2016) Net change in fund balances - total governmental funds $ 1,279,763 $ 1,402,890 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 net position the cost of these assets is capitalized and they are depreciated over their estimated useful lives with depreciation expense reported in the statement of activities. Capital assets are reported as an expenditure in the fund financial statements but are capitalized in the government-wide financial statements 6,199,340 4,425,538 Depreciation is reported in the government-wide statements - less internal service funds (4,095,571) (3,696,817) Net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins) is to decrease net position. (524,432) (403,115) Receivables not currently available are reported as deferred revenue in the fund financial statements but are recognized as revenue when earned in the government-wide financial statements. (459,152) (124,956) Debt proceeds provide current financial resources to governmental funds, but issuing these obligations increases long-term liabilities in the statement of net position. Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal payments 666, ,370 Some expenses in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Compensated absences (148,404) 131,301 Accrued interest on debt 7,613 10,320 Net pension liability/ (asset) 806,548 (4,030,768) Deferred outflows of resources related to pensions (2,740,583) 6,379,546 Deferred inflows of resources related to pensions 869,880 (3,346,358) Internal service funds are used by management to charge the costs of technology services, workers compensation, collision insurance, property insurance, and extended leave costs to individual funds. The change in net position of the internal service funds is reported with governmental activities. 157,040 30,853 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 2,018,599 $ 1,611,804 See accompanying notes to the financial statements. Page 8 Page 39 of 167

40 SHAWANO COUNTY STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2017 (With summarized financial information for the year ended December 31, 2016) Business-type Activities - Enterprise Funds Highway Water and Sewer Utility Nonmajor Lakeland Industries Total Enterprise Funds ASSETS Current Assets Cash and investments $ 5,868,727 $ 60,719 $ 212,412 $ 6,141,858 $ 5,593,822 Receivables Accounts 164,535 4,751 12, , ,601 Loans 2, ,746 4,266 Due from other governments 491, , ,074 Inventories 854, , ,139 Prepaid items 7, , Total Current Assets 7,390,146 65, ,463 7,680,079 7,268,562 Noncurrent Assets Capital Assets, Nondepreciable Land 499,056 2, , ,202 Construction in progress ,750 Capital Assets, Depreciable Land improvements 566,524 89, , ,099 Buildings 2,667, ,526 62,856 2,945,578 2,943,852 Intangible Assets Machinery and equipment 17,689,550 22,881 66,564 17,778,995 16,814,748 Less: Accumulated depreciation (12,834,417) (246,410) (121,277) (13,202,104) (12,538,091) Net Capital Assets 8,587,909 84,174 8,143 8,680,226 8,413,560 Total Noncurrent Assets 8,587,909 84,174 8,143 8,680,226 8,413,560 Total Assets 15,978, , ,606 16,360,305 15,682,122 DEFERRED OUTFLOWS OF RESOURCES Pension related amounts 1,186, ,186,817 1,738,687 LIABILITIES Current Liabilities Accounts payable 142, , , ,076 Accrued liabilities Capital lease payable Due to other governments 1, ,696 1,696 Funds held in trust ,031 20,031 23,789 Unearned revenues 57, , ,186 Current maturities of compensated absences 261, , ,791 Total Current Liabilities 463, , , ,538 Noncurrent Liabilities Capital lease payable Compensated absences 176, , ,163 Advance from other funds Net pension liability 155, , ,067 Total Noncurrent Liabilities 331, , ,230 Total Liabilities 795, , ,199 1,071,768 DEFERRED INFLOWS OF RESOURCES Pension related amounts 477, , ,425 NET POSITION Net investment in capital assets 8,587,909 84,174 8,143 8,680,226 8,413,560 Unrestricted 7,304,165 65, ,887 7,564,165 7,285,056 TOTAL NET POSITION $ 15,892,074 $ 149,287 $ 203,030 $ 16,244,391 $ 15,698,616 Page 9 Page 40 of 167

41 Governmental Activities - Internal Service Funds $ 3,105,268 $ 3,007,260 10,341 8, , ,194 3,363,686 3,326, ,293 68, ,540,050 3,548, ,531 4,391 (2,756,939) (2,751,045) 1,071, ,996 1,071, ,996 4,435,621 4,196, ,531 79, , ,017 53, , , , , , , , , , , ,996 2,758,271 2,561,850 $ 3,588,886 $ 3,431,846 See accompanying notes to the financial statements. Page 10 Page 41 of 167

42 SHAWANO COUNTY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS For the Year Ended December 31, 2017 (With summarized financial information as of December 31, 2016) Business-type Activities - Enterprise Funds Nonmajor Highway Water and Sewer Utility Lakeland Industries OPERATING REVENUES Public charges for services $ 4,764,619 $ 55,332 $ 220,407 Interdepartmental charges for services 6,146, Other operating revenues 82,026 1,676 - Total Operating Revenues 10,993,348 57, ,407 OPERATING EXPENSES Operation and maintenance 9,561,771 39, ,673 Depreciation 1,038,901 7,858 1,082 Total Operating Expenses 10,600,672 47, ,755 Operating Income (Loss) 392,676 9,328 (348) NONOPERATING REVENUES (EXPENSES) Interest income 42, Gain (loss) on disposal of capital assets 10, Total Nonoperating Revenues (Expenses) 52, Income (loss) before Contributions and Transfers 445,032 9,328 (348) CONTRIBUTIONS AND TRANSFERS Capital contributions - - 8,424 Transfers in 83, Total Contributions and Transfers 83,339-8,424 Change in Net Position 528,371 9,328 8,076 NET POSITION - Beginning 15,363, , ,954 NET POSITION - ENDING $ 15,892,074 $ 149,287 $ 203,030 Page 11 Page 42 of 167

43 Total Enterprise Funds Governmental Activities - Internal Service Funds $ 5,040,358 $ 5,484,060 $ 197,263 $ 401,522 6,146,703 6,470,253 1,442,574 1,319,133 83,702 71, ,270,763 12,026,310 1,639,837 1,720,655 9,821,266 10,296,621 1,178,280 1,418,382 1,047,841 1,055, , ,980 10,869,107 11,352,339 1,506,041 1,695, , , ,796 25,293 42,087 22,640 10,334 5,971 10,269 19,435 12,910 (411) 52,356 42,075 23,244 5, , , ,040 30,853 8, ,339 34, ,763 34, , , ,040 30,853 15,698,616 14,948,082 3,431,846 3,400,993 $ 16,244,391 $ 15,698,616 $ 3,588,886 $ 3,431,846 See accompanying notes to the financial statements. Page 12 Page 43 of 167

44 SHAWANO COUNTY STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2017 (With summarized financial information as of December 31, 2016) Business-type Activities - Enterprise Funds Nonmajor Highway Water and Sewer Utility Lakeland Industries CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 11,189,917 $ 56,747 $ 219,717 Cash payments to suppliers (3,600,126) (40,223) (220,658) Cash payments to employees and for employee benefits (5,886,951) - - Net Cash Flows From Operating Activities 1,702,840 16,524 (941) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in (out) 83, Net Cash Flows From Noncapital Financing Activities 83, CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital lease proceeds Contribution received for construction - - 8,424 Acquisition of capital assets (1,295,813) - (8,424) Net Cash Flows From Capital and Related Financing Activities (1,295,813) - - CASH FLOWS FROM INVESTING ACTIVITIES Interest income received 42, Change in Cash and Cash Equivalents 532,453 16,524 (941) CASH AND CASH EQUIVALENTS - Beginning 5,336,274 44, ,353 CASH AND CASH EQUIVALENTS - ENDING $ 5,868,727 $ 60,719 $ 212,412 RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income (loss) $ 392,676 $ 9,328 $ (348) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,038,901 7,858 1,082 Changes in assets, deferred outflows, liabilities and deferred inflows Accounts receivable (58,265) (261) (690) Due from other governments 311, Inventories (108,541) - - Prepaid items (7,222) - - Accounts payable (24,041) (401) 2,773 Due to other governments Accrued liabilities (11,149) - - Deferred inflow of resources (56,664) - - Funds held in trust - - (3,758) Pension related deferrals and liabilities 225, NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,702,840 $ 16,524 $ (941) NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Noncash asset retirement $ - $ - $ - Page 13 Page 44 of 167

45 Governmental Activities - Total Enterprise Funds Internal Service Funds $ 11,466,381 $ 12,554,088 $ 1,637,621 $ 1,718,365 (3,861,007) (3,731,797) (772,850) (851,595) (5,886,951) (6,203,329) (504,058) (526,020) 1,718,423 2,618, , ,750 83,339 34, ,339 34, ,751 8, (1,304,237) (914,331) (516,790) (166,407) (1,295,813) (914,331) (273,039) (166,407) 42,087 22,641 10,334 5, ,036 1,761,760 98, ,314 5,593,822 3,832,062 3,007,260 2,826,946 $ 6,141,858 $ 5,593,822 $ 3,105,268 $ 3,007,260 $ 401,656 $ 673,971 $ 133,796 $ 25,293 1,047,841 1,055, , ,980 (59,216) 254,499 (2,216) (2,290) 311, , (108,541) 101, (7,222) 5,655 63,117 24,450 (21,669) 56,474 26,819 5,849 - (358) - - (11,149) (9,084) (188,564) 10,468 (56,664) 63, (3,758) (836) , , $ 1,718,423 $ 2,618,962 $ 360,713 $ 340,750 $ - $ 104,781 $ 9,323 $ 37,920 See accompanying notes to the financial statements. Page 14 Page 45 of 167

46 SHAWANO COUNTY STATEMENT OF ASSETS AND LIABILITIES AGENCY FUND December 31, 2017 (With summarized financial information as of December 31, 2016) ASSETS Cash and cash equivalents $ 1,589,130 $ 1,313,010 LIABILITIES Accounts payable $ 1,589,130 $ 1,313,010 See accompanying notes to the financial statements. Page 15 Page 46 of 167

47 SHAWANO COUNTY INDEX TO NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE Page I. Summary of Significant Accounting Policies 17 A. Reporting Entity 17 B. Government-Wide and Fund Financial Statements 18 C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation 21 D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity Deposits and Investments Receivables Inventories and Prepaid Items Capital Assets Deferred Outflows of Resources Compensated Absences Long-Term Obligations Deferred Inflows of Resources Equity Classifications Summarized Comparative Information Pension 29 II. Stewardship, Compliance, and Accountability 30 A. Excess Expenditures and Other Financing Uses Over Appropriations 30 B. Deficit Balances 30 C. Limitations on the County s Tax Levy 30 III. Detailed Notes on All Funds 31 A. Deposits and Investments 31 B. Receivables 34 C. Capital Assets 37 D. Interfund Receivables/Payables, Advances and Transfers 39 E. Long-Term Obligations 41 F. Lease Disclosures 43 G. Net Position/Fund Balances 44 H. Minimum Fund Balance Policy 47 I. Component Unit Shawano County Economic Progress, Inc. 48 IV. Other Information 48 A. Employees Retirement System 48 B. Risk Management 54 C. Commitments and Contingencies 55 D. Effect of New Accounting Standards on Current-Period Financial Statements 56 Page 16 Page 47 of 167

48 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Shawano County, Wisconsin ( county ) conform to generally accepted accounting principles as applicable to governmental units. The accepted standard-setting body for establishing governmental accounting and financial reporting principles is the Governmental Accounting Standards Board (GASB). A. REPORTING ENTITY This report includes all of the funds of Shawano County. The reporting entity for the county consists of the primary government, governed by an elected 27 member board and its component unit. Component units are legally separate organizations for which the primary government is financially accountable or other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity s financial statements to be misleading. The primary government is financially accountable if (1) it appoints a voting majority of the organization s governing body and is able to impose its will on that organization; (2) it appoints a voting majority of the organization s governing body and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government; (3) the organization is fiscally dependent on and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Certain legally separate, tax exempt organizations should also be reported as a component unit if all of the following criteria are met: (1) the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; (2) the primary government, or its component units, is entitled to, or has the ability to access, a majority of the economic resources received or held by the separate organization; and (3) the economic resources received or held by an individual organization that the primary government, or its component units, is entitled to, or had the ability to otherwise access, are significant to the primary government. Component units are reported using one of two methods, discrete presentation or blending. Generally, component units should be discretely presented in a separate column in the financial statements. A component unit should be reported as part of the primary government using the blending method if it meets any one of the following criteria: (1) the primary government and its component unit have substantively the same governing body and a financial benefit or burden relationship exists; (2) the primary government and the component unit have substantially the same governing body and management of the primary government has operational responsibility for the component unit; (3) the component unit serves or benefits, exclusively or almost exclusively, the primary government rather than its citizens; or (4) the total debt of the component unit will be paid entirely or almost entirely from resources of the primary government. Discretely Presented Component Unit Shawano County Economic Progress, Inc., (SCEPI) The government-wide financial statements include the SCEPI as a component unit. SCEPI is a legally separate organization established to foster economic development in Shawano County. It is funded by contributions from the county, county municipalities, and various businesses. SCEPI is included because the county contributes a substantial amount of funding towards their operations. As a component unit, SCEPI s financial statements have been presented as a discrete column in the financial statements. Separate financial statements are not issued. Page 17 Page 48 of 167

49 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Government-Wide Financial Statements The statement of net position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The county does not allocate indirect expenses to functions in the statement of activities. 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. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the county are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position/fund balance, revenues, and expenditures/expenses. Separate financial statements are provided for governmental funds and 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. Funds are organized as major funds or nonmajor funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the county or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10% of the corresponding total for all funds of that category or type, and Page 18 Page 49 of 167

50 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) b. The same element of the individual governmental fund or enterprise fund that met the 10% test is at least 5% of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or enterprise fund that the county believes is particularly important to financial statement users may be reported as a major fund. The county reports the following major governmental funds: General accounts for the county s primary operating activities. It is used to account for and report all financial resources except those accounted for and reported in another fund. Human Services Special Revenue Fund Used to account for and report grants and local revenues legally restricted or committed to supporting expenditures for the Human Services related programs. Debt Service Fund used to account for and report financial resources that are restricted, committed, or assigned to expenditure for the payment of general long-term debt principal, interest, and related costs, other than enterprise debt. County Roads and Bridges Fund Capital Projects Fund this fund is used to account for the maintenance and construction of the county s roads and bridges. Significant revenues include state and federal aids and a portion of the local tax levy. The county reports the following major enterprise funds: Highway Fund the highway fund is used to support the maintenance of County, State and Federal highways on a cost reimbursement basis. Water and Sewer Utility Fund the water and sewer utility fund accounts for utilities provided to the nursing home previously owned by the county. Page 19 Page 50 of 167

51 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) The county reports the following nonmajor governmental and enterprise funds: Special Revenue Funds used to account for and report the proceeds of specific revenue sources that are legally restricted or committed to expenditures for specified purposes (other than debt service or capital projects). Public Health City-County Library Jail Assessment Crime Prevention Wisconsin Farmers Fund Wisconsin Development Fund CDBG Housing Loans Environmental Impact Fee Projects Wolf River ADRC Aging Transportation Airport Capital Projects Funds used to account for and report financial resources that are restricted, committed, or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Mielke Theater Expansion Capital Improvement Projects Enterprise Fund the Lakeland Industries fund accounts for client workshop and resale programs of the Community Programs department. In addition, the county reports the following fund types: Internal service funds are used to account for technology systems, leased vehicles, extended leaves of absence, self-funded workers compensation, collision and property insurance services provided by one department or agency to other departments or agencies of the county, or to other governmental units, on a cost-reimbursement basis. Agency funds are used to account for the receipt and disbursement of various taxes, deposits and assessments held by the county in a trustee capacity or as an agent for individuals, private organizations, and/or other governmental units. Page 20 Page 51 of 167

52 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Government-Wide Financial Statements The government-wide statement of net position and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Property taxes are recognized as revenues in the year for which they are levied. Taxes receivable for the following year are recorded as receivables and deferred inflows. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider are met. Unbilled receivables are recorded as revenues when services are provided. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges for actual services between the county s funds and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the county considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt, claims, judgments, compensated absences, and pension expenditures, which are recorded as a fund liability when expected to be paid with expendable available financial resources. Property taxes are recorded in the year levied as receivables and unearned revenues. They are recognized as revenues in the succeeding year when services financed by the levy are being provided. Intergovernmental aids and grants are recognized as revenues in the period the county is entitled to the resources and the amounts are available. Amounts owed to the county which are not available are recorded as receivables and unavailable revenues. Amounts received before eligibility requirements (excluding time requirements) are met and recorded as liabilities. Amounts received in advance of meeting time requirements are recorded as deferred inflows. Revenues susceptible to accrual include property taxes, miscellaneous taxes, public charges for services and interest. Other general revenues such as fines and forfeitures, inspection fees, recreation fees, and miscellaneous revenues are recognized when received in cash or when measurable and available under the criteria described above. Proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as described previously in this note. Agency funds follow the accrual basis of accounting and do not have a measurement focus. Page 21 Page 52 of 167

53 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements (cont.) The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the Highway, Water and Sewer Utility, and Lakeland Industries are charges to customers for sales and services. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. All Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles 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 amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY 1. Deposits and Investments For purposes of the statement of cash flows, the county considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of County funds is restricted by state statutes. Available investments are limited to: a. Time deposits in any credit union, bank, savings bank or trust company maturing in three years or less. b. Bonds or securities of any County, city, drainage district, technical college district, village, town, or school district of the state. Also, bonds issued by a local exposition district, a local professional baseball park district, a local professional football stadium district, a local cultural arts district, the University of Wisconsin Hospitals and Clinics Authority, or the Wisconsin Aerospace Authority. c. Bonds or securities issued or guaranteed by the federal government. d. The local government investment pool. e. Any security maturing in seven years or less and having the highest or second highest rating category of a nationally recognized rating agency. Page 22 Page 53 of 167

54 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 1. Deposits and Investments (cont.) f. Securities of an open-end management investment company or investment trust, subject to various conditions and investment options. g. Repurchase agreements with public depositories, with certain conditions. The county has adopted a written, formal investment policy. That policy follows the state statute for allowable investments. As described in Note III.A., the county is exposed to the following deposit and investment risks: custodial credit risk (deposits and investments), interest rate risk, credit risk, and concentration of credit risk. The county does not have an additional custodial credit risk policy. For credit risk, the county will minimize credit risk, which is the risk of loss due to the failure of the security issuer or backer, by limiting investments to types of securities listed within the policy, authorizing the financial institution, broker/deal, intermediaries, and investment advisers, diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issue will be minimized, and collateralizing funds in excess of $500,000 in any approved financial institution. For interest rate risk, the county will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in the market interest rates, by structuring the investment portfolio so that securities mature to meet cash requirements of ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity, and investing operating funds primarily in shorter-term securities, money market mutual funds, government agency and treasury money markets, or similar investment pools, and purchasing long-term investments that mature within five years, and laddering investments to meet cash flow needs. The policy does not address concentration of credit risk. Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on methods and inputs as outlined in Note III. A. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. Investment income on commingled investments of governmental accounting funds is allocated to all of the participating funds based upon average monthly balances. In addition, other funds earn interest on investments specifically held by their fund. The difference between the bank balance and carrying value is due to outstanding checks and/or deposits in transit. Page 23 Page 54 of 167

55 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 1. Deposits and Investments (cont.) The Wisconsin Local Government Investment Pool (LGIP) is part of the State Investment Fund (SIF), and is managed by the State of Wisconsin Investment Board. The SIF is not registered with the Securities and Exchange Commission, but operates under the statutory authority of Wisconsin Chapter 25. The SIF reports the fair value of its underlying assets annually. Participants in the LGIP have the right to withdraw their funds in total on one day s notice. At December 31, 2017, the fair value of the county s share of the LGIPs assets was substantially equal to the amount as reported in these statements. PMA Financial Network, Inc. is the administrator for the Wisconsin Investment Series Cooperative (WISC). The investment manager for WISC is PMA Financial Network, Inc. The WISC is not registered with the Securities and Exchange Commission, but invests its funds in accordance with applicable Wisconsin statutes. The WISC has the characteristics of a mutual fund and accordingly, reports the value of its underlying assets at fair value. At December 31, 2017 the County's share of the WISC's assets was substantially equal to the amount reported above. See Note III.A. for further information. 2. Receivables a. Property and Sales Taxes Property taxes are levied in December on the assessed value as of the prior January 1. They are not legally available for appropriation until the ensuing year. In addition to property taxes for the county, taxes are collected for and remitted to the state and County governments as well as the local school district and technical college district. Property tax calendar 2017 tax roll: Lien date and levy date December 2017 Tax bills mailed December 2017 Payment in full, or January 31, 2018 First installment due January 31, 2018 Second installment due July 31, 2018 Personal property taxes in full January 31, 2018 Tax sale 2017 delinquent real estate taxes October 2020 Property taxes are due, in the year subsequent to levy, on the last day of January, and collected by local treasurers through that date, at which time unpaid taxes are assigned to the county and appropriate receivables and payables are recorded. Tax collections become the responsibility of the county and taxes receivable include unpaid taxes levied for all taxing entities within the county. The county makes restitution to local districts in August for payables recorded at the settlement date without regard to collected funds. A lien is placed on all properties for which a portion of the current tax levy remains unpaid as of September 1. The interest and penalties on taxes not paid within 60 days of the end of the current fiscal period are shown as unavailable revenue until they are received in cash. Page 24 Page 55 of 167

56 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 2. Receivables (cont.) a. Property and Sales Taxes (cont.) The portion of County property taxes receivable at December 31, 2017, which relates to taxes initially levied by other municipalities and uncollected within sixty days after year-end, has been reflected in the accompanying financial statements as nonspendable fund balance in the general fund in the amount of $1,433,522. The county has a.5% sales tax which is collected by the State of Wisconsin. Total revenues of $2,725,224 from this tax for the 2017 fiscal year are recorded in the general fund. The county has accrued two months of the subsequent year s collections as receivable. b. Allowances No allowance for uncollectible delinquent taxes has been provided because of the county s demonstrated ability to recover any losses through the sale of the applicable property. Accounts receivable in all funds have been adjusted for all known uncollectible accounts. c. Due To/From/Advances During the course of operations, transactions occur between individual funds that may result in amounts owed between funds. Short-term interfund loans are reported as due to and from other funds. Long-term interfund loans (noncurrent portion) are reported as advances from and to other funds. Interfund receivables and payables between funds within governmental and business-type activities are eliminated in the statement of net position. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. d. Loans Receivable The county has received federal and state grant funds for economic development loan programs to various businesses. The county records a loan receivable when the loan has been made and funds have been disbursed. It is the county s policy to record unavailable revenue for the net amount of the receivable balance. As loans are repaid, revenue is recognized. When new loans are made from the repayments, expenditures are recorded. Interest received from loan repayments is recognized as revenue when received in cash. Any unspent loan repayments at year end are presented as restricted fund balance in the fund financial statements. Page 25 Page 56 of 167

57 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 3. Inventories and Prepaid Items Governmental fund inventory items are charged to expenditure accounts when purchased. Year-end inventory was not significant. Proprietary fund inventories are generally used for construction or for operation and maintenance work. They are not for resale. They are valued at cost based on first-in, firstout method, and charged to construction or operation and maintenance expense when used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements using the consumption method. 4. Capital Assets Government-Wide Statements Capital assets are reported in the government-wide financial statements. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets, $25,000 for infrastructure assets, and an estimated useful life in excess of two years. An exception to this is the technology services internal service fund where all capital assets, regardless of cost, is capitalized. All capital assets are valued at historical cost or estimated historical cost if actual amounts are unavailable. Donated capital assets are recorded at their estimated acquisition value at the date of donation. Additions to and replacements of capital assets of business-type activities are recorded at original cost, which includes material, labor, overhead, and an allowance for the cost of funds used during construction when significant. For tax-exempt debt, the amount of interest capitalized equals the interest expense incurred during construction netted against any interest revenue from temporary investment of borrowed fund proceeds. No interest was capitalized during The cost of property replaced, retired or otherwise disposed of, is deducted from capital assets and, generally, together with removal costs less salvage, is charged to accumulated depreciation. Depreciation/amortization of all exhaustible capital assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation/amortization reflected in the statement of net position. Depreciation/amortization is provided over the assets estimated useful lives using the straightline method of depreciation/amortization. The range of estimated useful lives by type of asset is as follows: Governmental Activities Business-Type Activities Land improvements Years Years Buildings and improvements Years Years Machinery and equipment 3-10 Years 3-20 Years Infrastructure Years - Intangible assets 3-7 Years - Page 26 Page 57 of 167

58 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 4. Capital Assets (cont.) Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements. 5. Deferred Outflows of Resources A deferred outflow of resources represents a consumption of net position/fund balance that applies to a future period and will not be recognized as an outflow of resources (expense/expenditure) until that future time. 6. Compensated Absences Under terms of employment, employees are granted sick leave and vacations in varying amounts. Only benefits considered to be vested are disclosed in these statements. All vested vacation and sick leave pay is accrued when incurred in the government-wide and proprietary financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements, or are payable with expendable available resources. Payments for vacation and sick leave will be made at rates in effect when the benefits are used. Accumulated vacation and sick leave liabilities at December 31, 2017 are determined on the basis of current salary rates and include salary related payments. 7. Long-Term Obligations All long-term obligations to be repaid from governmental and business-type resources are reported as liabilities in the government-wide statements. The long-term obligations consist primarily of notes and bonds payable, accrued compensated absences, and the net pension liability. Other post-employment benefits are provided by the county through an implicit rate subsidy, but they have not been accrued in these financial statements because they are not material. Long-term obligations for governmental funds are not reported as liabilities in the fund financial statements. The face value of debts (plus any premiums) are reported as other financing sources and payments of principal and interest are reported as expenditures. The accounting in proprietary funds is the same as it is in the government-wide statements. For the government-wide statements and proprietary fund statements, bond premiums and discounts are amortized over the life of the issue using the effective interest method. The balance at year end is shown as an increase or decrease in the liability section of the statement of net position. Page 27 Page 58 of 167

59 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 8. Deferred Inflows of Resources A deferred inflow of resources represents an acquisition of net position/fund balance that applies to a future period and therefore will not be recognized as an inflow of resources (revenue) until that future time. 9. Equity Classifications Government Wide Statements Equity is classified as net position and displayed in three components: a. Net investment in capital assets Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent debt proceeds) of any bonds, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net position Consists of net position with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or, 2) law through constitutional provisions or enabling legislation. c. Unrestricted net position All other net position that does not meet the definition of restricted or net investment in capital assets. When both restricted and unrestricted resources are available for use, it is the county s policy to use restricted resources first, then unrestricted resources as they are needed. Fund Statements Governmental fund balances are displayed as follows: a. Nonspendable - Includes fund balance amounts that cannot be spent either because they are not in spendable form or because legal or contractual requirements require them to be maintained intact. b. Restricted - Consists of fund balances with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or 2) law through constitutional provisions or enabling legislation. Page 28 Page 59 of 167

60 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 9. Equity Classifications (cont.) Fund Statements (cont.) c. Committed - Includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the County Board. Any changes to the constraints imposed require the same formal action of the county that originally created the commitment. d. Assigned - Includes spendable fund balance amounts that are intended to be used for specific purposes that are not considered restricted or committed. The County Board has authorized the Finance Committee to assign fund balance. All remaining positive spendable amounts in governmental funds, other than the general fund, that are neither restricted nor committed, are also assigned. e. Unassigned - Includes residual positive fund balance within the general fund which has not been classified within the other above mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those purposes. Proprietary fund equity is classified the same as in the government-wide statements. The county considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents / contracts that prohibit doing this, such as in grant agreements requiring dollar for dollar spending. Additionally, the county would first use committed, then assigned and lastly unassigned amounts of unrestricted fund balance when expenditures are made. 10. Summarized Comparative Information The basic financial statements include certain prior-year summarized comparative information in total, but not at the level of detail required for a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the government s financial statements for the year end December 31, 2016, from which the summarized information was derived. 11. Pension For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Wisconsin Retirement System (WRS) and additions to/deductions from WRS fiduciary net position have been determined on the same basis as they are reported by WRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Page 29 Page 60 of 167

61 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE II STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. EXCESS EXPENDITURES AND OTHER FINANCING USES OVER APPROPRIATIONS The following funds had an excess of expenditures and other financing uses over appropriations at the legal level of budgetary control for the year ended December 31, 2017: Fund Budgeted Expenditures and Other Financing Uses Actual Expenditures and Other Financing Uses Excess Expenditures Over Budget and Other Financing Uses City-County Library $ 613,981 $ 614,092 $ 111 Aging Transportation 27,750-27,750 Jail Assessment 60,000 62,426 2,426 Capital Improvement Projects 1,843,885 2,725, ,511 CDBG Housing Loans 16,411 28,739 12,328 Wisconsin Farmers Fund Crime Prevention Environmental Impact Fee Projects 98, , ,886 The county controls expenditures at the department level. Some individual departments experienced expenditures which exceeded appropriations. The detail of those items can be found in the county s year-end budget to actual report. B. DEFICIT BALANCES Generally accepted accounting principles require disclosure of individual funds that have deficit balances at year end. As of December 31, 2017, the following individual fund held a deficit balance: Fund Amount Reason Capital Improvement Projects $ 870,627 Unfunded costs It is anticipated that future grant revenues, and transfers from other funds will provide sufficient funding to eliminate this deficit. C. LIMITATIONS ON THE COUNTY S TAX LEVY Wisconsin law limits the county s future tax levies. Generally, the county is limited to its prior tax levy dollar amount, increased by the greater of the percentage change in the county s equalized value due to new construction, or zero percent. Changes in debt service from one year to the next are generally exempt from this limit with certain exceptions. The county is required to reduce its allowable levy by the estimated amount of fee revenue it collects for certain services, if those services were funded in 2013 by the property tax levy. Levies can be increased above the allowable limits if the amount is approved by referendum. Page 30 Page 61 of 167

62 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The county s cash and investments at year end were comprised of the following: Bank and Carrying Investment Associated Value Balances Risks Demand deposits $ 19,287,043 $ 19,509,382 Custodial credit U.S. treasuries 1,191,403 1,191,403 Interest rate and custodial credit Negotiable Certificates of Deposit 742, ,399 Custodial credit, credit, concentration of credit, interest rate U.S. agencies - implicit 995, ,780 Credit, custodial credit, concentration of credit, interest rate State & Local Bonds 1,823,422 1,823,422 Custodial credit, credit, concentration of credit, interest rate Corporate Bonds 101, ,990 Custodial credit, credit, concentration of credit, interest rate Local Government Investment Pool 10,459,972 10,459,972 Credit Petty Cash 4,395 - N/A Total Cash and Investments $ 34,606,404 $ 34,824,348 Reconciliation to financial statements Per statement of net position Unrestricted cash and investments $ 33,017,274 Per statement of assets and liabilities - agency fund 1,589,130 Total Cash and Investments $ 34,606,404 Deposits in each local and area bank are insured by the FDIC in the amount of $250,000 for time and savings accounts (including NOW accounts) and $250,000 for demand deposit amounts (interest-bearing and noninterest bearing). In addition, if deposits are held in an institution outside of the state in which the government is located, insured amounts are further limited to a total of $250,000 for the combined amount of all deposit accounts. Bank accounts are also insured by the State Deposit Guarantee Fund in the amount of $400,000. However, due to the nature of this fund, recovery of material principal losses may not be significant to individual municipalities. This coverage has been considered in computing the amounts in Category 1 above. Page 31 Page 62 of 167

63 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) The Securities Investor Protection Corporation (SIPC), created by the Securities Investor Protection Act of 1970, is an independent government-sponsored corporation (not an agency of the U.S. government). SIPC member provides account protection up to a maximum of $500,000 per customer, of which $100,000 may be in cash. $500,000 of the county s investments are covered by SIPC. The county categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The valuation methods for recurring fair value measurements are as follows: > Interactive Data s IDSI Institutional Bond Quotes December 31, 2017 Investment Type Level 1 Level 2 Level 3 Total Corporate bonds $ - $ 101,990 $ - $ 101,990 State & local bonds - 1,823,422-1,823,422 U.S. agencies implicit 995, ,780 U.S. treasuries 1,191, ,191,403 Negotiable certificates of deposit 742, ,399 Totals $ 2,929,582 $ 1,925,412 $ - $ 4,854,994 Custodial Credit Risk Deposits Custodial credit risk is the risk that in the event of a financial institution failure, the county s deposits may not be returned to the county. The county maintains collateral agreements with its banks. At December 31, 2017, the banks had pledged various government securities in the amount of $27,061,047 to secure a portion of the county s deposits. Page 32 Page 63 of 167

64 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Custodial Credit Risk (cont.) Investments For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the county will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of December 31, 2017, the county s investments were exposed to custodial credit risk as follows: U.S. Treasuries Neither insured nor registered and held by counterparty s trust department or agent not in the county s name $ 1,191,403 U.S. Agencies Neither insured nor registered and held by counterparty s trust department or agent not in the county s name $ 995,780 State & Local Bonds Neither insured nor registered and held by counterparty s trust department or agent not in the county s name $ 1,425,412 Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of December 31, 2017, the county s investments were rated as follows: Investment Type Standard & Poor s Moody s Investor Service U.S. agencies - implicit AA+ AAA, NR, WR State & local bonds AA, AA+, AAA AA2, AA1, AAA Corporate bonds AAA AAA Negotiable certificates of deposit AA+ AAA The county also had investments in the following external pools which are not rated: Local Government Investment Pool Page 33 Page 64 of 167

65 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. As of December 31, 2017, the county s investments were as follows: Investment Type Fair Value Less than 1 year Maturity 1 year 4 years More than 4 years U.S. treasuries $ 1,191,403 $ 395,411 $ 546,412 $ 249,580 U.S. agencies implicitly guaranteed 995, , ,669 - Corporate bonds 101,990 77,087 24,903 - Negotiable certificates of deposit 742, ,399 - State & local bonds 1,823, ,160 1,144,871 78,392 Total $ 4,854,994 $ 1,475,769 $ 3,051,254 $ 327,971 Concentration of Credit Risk Concentration of credit risk is the risk that the County has a high percentage of its investments invested in one type of investment. At December 31, 2017, the County did not have any investment types that exceeded 5% of their total portfolio. See Note I.D.1. for further information on deposit and investment policies. B. RECEIVABLES All of the receivables are expected to be collected within one year except for $2,006,422 in delinquent taxes not collected within 60 days at year end, a portion of the outstanding loans, and $295,000 of receivables reported in the debt service fund as long-term. Page 34 Page 65 of 167

66 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES (cont.) Governmental funds report unavailable or unearned revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Property taxes receivable for the subsequent year are not earned and cannot be used to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable revenue and unearned revenue reported in the governmental funds were as follows: Unearned Unavailable Property taxes receivable for subsequent year $ 15,685,444 $ - County portion of tax certificates - 174,124 (including interest) Long-term receivable - 413,380 Grants - 616,739 Other receivables 257,285 53,378 Total Unearned/Unavailable Revenue for Governmental Funds $ 15,942,729 $ 1,257,621 Delinquent Property Taxes General Fund Delinquent property taxes of the general fund represent unpaid property taxes on real estate, including state and local government equities therein. Under state statutes, the county annually reimburses the state and local governments for their equities in property taxes not collected from the property owner. Unless redeemed by the property owner, the county will eventually obtain tax deed ownership of the properties comprising delinquent taxes. In the past, the county has generally been able to recover its investment in delinquent taxes by sale of the tax deeded properties. Delinquent property taxes purchases from other taxing authorities are reported as nonspendable fund balance at year-end. Page 35 Page 66 of 167

67 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES (cont.) Delinquent Property Taxes General Fund (cont.) On December 31, 2017, the county s general fund showed a receivable of $2,006,422 in delinquent taxes as follows: Tax certificates $ 1,614,414 Tax deeds 59,407 Subtotal 1,673,821 Interest on delinquent taxes and use value penalty 332,601 Total $ 2,006,422 An aging of the total delinquent taxes of $1,673,821 on December 31, 2017 follows: Year Acquired Total Tax Certificates 2010 $ 36, , , , , , ,815 Subtotal 1,614,414 Tax Deeds 59,407 Delinquent property taxes at December 31, ,673,821 Less: 60 day collections after December 31, 2017 (240,299) Nonspendable Fund Balance $ 1,433,522 Page 36 Page 67 of 167

68 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) C. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2017 was as follows: Beginning Ending Balance Additions Deletions Balance Governmental Activities Capital assets not being depreciated/ amortized Land $ 1,248,703 $ 92,157 $ - $ 1,340,860 Right of way 5,580,129 53,426-5,633,555 Total 6,828, ,583-6,974,415 Construction in progress 1,024, , ,123 1,142,743 Total Capital Assets Not Being Depreciated/Amortized 7,853, , ,123 8,117,158 Capital assets being depreciated/amortized Land improvements 3,048,035 13,832 57,164 3,004,703 Buildings 21,700,001 1,942, ,470 23,414,386 Machinery and equipment 8,649, , ,998 8,988,281 Intangibles 3,824, , ,456 3,951,226 Total 37,222,209 3,187,475 1,051,088 39,358,596 Infrastructure Roads 70,300,243 3,288,210 1,310,759 72,277,694 Bridges 5,778, ,778,660 Total 76,078,903 3,288,210 1,310,759 78,056,354 Total Capital Assets Being Depreciated/Amortized 113,301,112 6,475,685 2,361, ,414,950 Total Capital Assets 121,154,240 7,038,838 2,660, ,532,108 Less: Accumulated depreciation/ amortization for Land improvements (831,029) (246,967) 57,167 (1,020,829) Buildings (11,152,113) (780,627) 146,810 (11,785,930) Machinery and equipment (5,999,372) (671,150) 366,100 (6,304,422) Intangibles (3,023,241) (320,316) 380,778 (2,962,779) Total (21,005,755) (2,019,060) 950,855 (22,073,960) Infrastructure Roads (35,407,125) (2,298,908) 875,885 (36,830,148) Bridges (2,057,884) (105,364) - (2,163,248) Total (37,465,009) (2,404,272) 875,885 (38,993,396) Total Accumulated Depreciated/Amortized (58,470,764) (4,423,332) 1,826,740 (61,067,356) Net Capital Assets Being Depreciated/Amortized 54,830,348 2,052, ,107 56,347,594 Total Governmental Activities Capital Assets, Net of Depreciation/Amortization $ 62,683,476 $ 2,615,506 $ 834,230 $ 64,464,752 Page 37 Page 68 of 167

69 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) C. CAPITAL ASSETS (cont.) Depreciation/amortization expense was charged to functions as follows: Governmental Activities General government $ 895,931 Health and human services 134,265 Public safety 757,003 Public works 2,556,146 Culture and recreation 74,693 Conservation and development 5,294 Total Governmental Activities Depreciation/Amortization Expense $ 4,423,332 Beginning Ending Business-type Activities Balance Additions Deletions Balance Capital assets not being depreciated Land $ 505,202 $ - $ 3,956 $ 501,246 Construction in progress 23,750-23,750 - Total Capital Assets Not Being Depreciated 528,952-27, ,246 Capital assets being depreciated Land improvements 664,099-7, ,511 Buildings 2,943,852 31,890 30,164 2,945,578 Machinery and equipment 16,814,748 1,285, ,414 17,778,995 Total Capital Assets Being Depreciated 20,422,699 1,317, ,166 21,381,084 Total Capital Assets 20,951,651 1,317, ,872 21,882,330 Less: Accumulated Depreciation for Land improvements (556,619) (9,887) 7,588 (558,918) Buildings and improvements (2,260,531) (109,798) 30,164 (2,340,165) Machinery and equipment (9,720,941) (930,595) 348,515 (10,303,021) Total Accumulated Depreciation (12,538,091) (1,050,280) 386,267 (13,202,104) Net Business-type Capital Assets Being Depreciated 7,884, ,271 (27,101) 8,178,980 Total Business-type Capital Assets, Net of Depreciation $ 8,413,560 $ 267,271 $ 605 $ 8,680,226 Page 38 Page 69 of 167

70 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) C. CAPITAL ASSETS (cont.) Depreciation expense was charged to functions as follows: Business-type Activities Highway $ 1,038,901 Water and Sewer Utility 7,858 Lakeland Industries 1,082 Total Business-type Activities Depreciation Expense $ 1,047,841 Depreciation expense may be different from business-type activity accumulated depreciation additions because of salvage, cost of removal, internal allocations, or costs associated with the disposal of assets. D. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS Interfund Receivables/Payables The following is a schedule of interfund receivables and payables including any overdrafts on pooled cash and investment accounts: Receivable Fund Payable Fund Amount General Fund Nonmajor Governmental Funds $ 2,043,585 Total Fund Financial Statements 2,043,585 Less: Fund eliminations (2,043,585) Total Government-wide Financial Statements $ - The principal purpose of the interfund between the general fund and the nonmajor governmental funds is to fund the purchase of land and a building for the capital project fund. All amounts are due within one year. Page 39 Page 70 of 167

71 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) D. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) Advances The following is a schedule of interfund advances: Receivable Fund Payable Fund Amount Amount Not Due Within One Year General Fund Internal Services Self-funded $ 50,000 $ 50,000 property insurance deductible General Fund Internal Services Extended leave 200, ,000 General Fund Debt Service Fund 113, ,420 Totals Fund Financial Statements 363,420 $ 363,420 Less: Fund eliminations (363,420) Total Government-wide Financial Statements $ - The principal purpose of the two internal services fund interfund advances is to provide financing for the creation of the self-funded property insurance deductible fund and the extended leave fund. The principal purpose of the Debt Service Fund advance is to provide financing for the internal bond reimbursement schedule pertaining to the repayment of the bonds issued to construct and expand the landfill operated by the solid waste management board. No repayment schedules have been established for the internal service fund advances. None of the advances are interest bearing. Transfers The following is a schedule of interfund transfers: Fund Transferred To Fund Transferred From Amount Nonmajor Capital Projects Fund General $ 100,000 General Nonmajor Capital Projects Fund 77,603 Nonmajor Capital Projects Fund Nonmajor Special Revenue Fund 965,886 Highway Nonmajor Capital Projects Fund 83,339 Human Services General 295,157 Total Fund Financial Statements 1,521,985 Less: Fund eliminations (1,438,646) Total Transfers Government-wide Statement of Activities $ 83,339 Page 40 Page 71 of 167

72 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) D. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) Transfers (cont.) Generally, transfers are used to (1) move unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations; (2) move revenues from the fund that is required to collect them to the fund that is required to allow to expend them; and (3) move receipts restricted to or allowed for debt service from the funds collecting the receipts to the debt service funds as debt service payments become due. E. LONG-TERM OBLIGATIONS Long-term obligations activity for the year ended December 31, 2017 was as follows: Amounts Beginning Ending Due Within GOVERNMENTAL ACTIVITIES Balance Increases Decreases Balance One Year Bonds and Notes Payable General obligation debt $ 2,630,564 $ - $ 666,557 $ 1,964,007 $ 568,877 Capital lease payable - 267,140 23, ,751 53,176 Other Liabilities Compensated absences 1,260, , ,188 1,408, ,123 Net pension liability 1,590, , ,561 - Total Governmental Activities Long-Term Liabilities $ 5,480,953 $ 1,255,732 $ 2,336,682 $ 4,400,003 $ 1,561,176 Amounts Beginning Ending Due Within BUSINESS-TYPE ACTIVITIES Balance Increases Decreases Balance One Year Other Liabilities Compensated absences $ 448,954 $ 250,642 $ 261,791 $ 437,805 $ 261,670 Net pension liability 309, , ,737 - Total Business-Type Activities Long-Term Liabilities $ 758,201 $ 250,642 $ 415,121 $ 593,542 $ 261,670 General Obligation Debt All general obligation notes and bonds payable are backed by the full faith and credit of the county. Notes and bonds in the governmental funds will be retired by future property tax levies accumulated by the debt service fund. Business-type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. Page 41 Page 72 of 167

73 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) E. LONG-TERM OBLIGATIONS (cont.) General Obligation Debt (cont.) In accordance with Wisconsin Statutes, total general obligation indebtedness of the county may not exceed 5% of the equalized value of taxable property within the county s jurisdiction. The debt limit as of December 31, 2017, was $154,817,215. Total general obligation debt outstanding at year-end was $1,964,007. Governmental Activities General Obligation Debt Date of Final Interest Original Balance Issue Maturity Rates Indebtedness 12/31/17 General Obligation Refunding Bonds 07/29/10 03/01/ % $ 1,300,000 $ 590,000 General Obligation Promissory Notes 04/15/10 03/01/ % 1,200, ,000 State Trust Fund Loan 10/15/10 03/15/ % 439, ,007 General Obligation Promissory Notes 02/15/12 03/01/ % 1,480, ,000 Total Governmental Activities General Obligation Debt $ 1,964,007 Debt service requirements to maturity are as follows: Other Debt Information Governmental Activities General Obligation Debt Years Principal Interest Totals 2018 $ 568,877 $ 52,255 $ 621, ,302 34, , ,828 15, , ,000 2, ,000 Totals $ 1,964,007 $ 103,916 $ 2,067,923 Estimated payments of other long-term liabilities (vested compensated absences and net pension liability) are not included in the debt service requirements to maturity schedules. The compensated absences liabilities attributable to governmental activities will be liquidated primarily by the general fund and the human services fund. The net pension liability will be funded by future contributions and changes in the market. Page 42 Page 73 of 167

74 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) E. LONG-TERM OBLIGATIONS (cont.) Other Debt Information (cont.) The county issued general obligation notes in 2006 and 2010 with the proceeds being used to finance the Solid Waste Management Board landfill development projects. By agreement, the county is reimbursed from the landfill operations for the annual principal and interest payments on the debt. The debt costs are included in the costs charged to the users of the landfill. On December 31, 2017, a total of $435,000 of landfill debt was outstanding. $560,000 is reported as a long-term receivable due from the Solid Waste Management Board landfill operations. Annual principal and interest payments due to the county on December 31, 2017 are detailed below. Year Ended Long-term Receivable December 31 Principal Interest Totals 2018 $ 265,000 $ 28,240 $ 293, ,000 8, , ,000 3, ,000 Totals $ 560,000 $ 40,140 $ 600,140 F. LEASE DISCLOSURES Lessee Capital Lease In 2017 the leased vehicles internal service fund acquired capital assets through a lease/purchase agreement. The gross amount of these assets under capital leases is $267,140, which are included in capital assets in the internal service fund. The future minimum lease obligations and the net present value on these minimum lease payments as of December 31, 2017, are as follows: Years Principal and Interest 2018 $ 53, , , , ,350 Totals $ 243,751 Page 43 Page 74 of 167

75 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) G. NET POSITION/FUND BALANCES Governmental and business-type activities net position reported on the government wide statement of net position at December 31, 2017 includes the following: Governmental Activities Net Investment in Capital Assets Land $ 6,974,415 Construction in progress 1,142,743 Other capital assets, net of accumulated depreciation 56,347,594 Less: Long-term debt outstanding (1,964,007) Add: Noncapital debt 590,000 Total Net Investment in Capital Assets 63,090,745 Restricted Grants and donations 38,436 Register of deeds redaction fees 82,847 Land information programs 256,482 Public safety programs 41,695 Northern hardwoods demo forest 3,099 Human service grants 1,410,671 Debt service 156,346 Public health programs 23,693 Library 132,484 Wisconsin farmers fund 111 Community development funds 1,224,333 Environmental impact fees 1,477,239 Airport 43,526 Total Restricted 4,890,962 Unrestricted 24,243,737 Total Governmental Activities Net Position $ 92,225,444 Page 44 Page 75 of 167

76 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) G. NET POSITION/FUND BALANCES (cont.) Governmental Activities (cont.) Governmental fund balances reported on the fund financial statement at December 31, 2017 include the following: FUND BALANCES Nonmajor Human County Roads Debt Governmental General Fund Services & Bridges Service Funds Totals Page 76 of 167 Nonspendable: Inventories $ 7,216 $ - $ - $ - $ - $ 7,216 Prepaid items 220,747 14, , ,645 Non-county levy portion of DPPT receivable 1,433, ,433,522 Advances 363, ,420 Total Nonspendable 2,024,905 14, ,981 2,043,803 Restricted for: - Grants and donations 15, ,257 Register of deeds redaction fees 82, ,847 Land information programs 256, ,482 Public safety programs 34, ,383 37,519 Northern hardwoods demo forest 3, ,099 Human service programs - 1,329, ,329,074 Inmate welfare/training ,176 4,176 Wisconsin farmers fund Environmental impact fees ,477,239 1,477,239 Aging programs ,355 65,355 Airport ,526 43,526 Community development funds , ,594 Public health ,643 23,643 Debt service ,200-33,200 City-county library , ,915 Mielke theater improvement funds ,179 23,179 Total Restricted 391,821 1,329,074-33,200 2,378,121 4,132,216 Page 45

77 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) G. NET POSITION/FUND BALANCES (cont.) Page 77 of 167 Governmental Activities (cont.) Nonmajor Human County Roads Debt Governmental FUND BALANCES (cont.) General Fund Services & Bridges Service Funds Totals Committed to: Sales tax for future capital projects $ 994,706 $ - $ - $ - $ - $ 994,706 Radio Sheriff 218, ,633 Jail inmate programming 141, ,980 Employee wellness program 63, ,042 Future health insurance assessments 38, ,630 Retirement payout 1, ,105 Maintenance 100, ,893 Fairground improvements 16, ,718 Sheriff equipment 2, ,116 Court equipment 5, ,000 Software upgrades and license renewals 23, ,097 Inmate welfare 126, ,610 Forest management 10, ,000 Environmental hazard clean up 141, ,014 Comprehensive planning projects 15, ,627 County department budget carryovers 429, ,366 UWEX-strong bones program 9, ,405 Construction work in progress 17, ,566 Other 1, ,687 County highway construction and maintenance - - 1,870, ,870,356 Total Committed 2,357,165-1,870, ,227,521 Assigned to: Sales tax to be applied to subsequent year s budget 2,716, ,716,000 Fund balance applied for subsequent year s budget 375, ,772 Courthouse improvement and maintenance 22, ,150 Security 20, ,024 Indigent counsel 23, ,106 Public safety programs 48, ,405 Parks project and programs 31, ,793 Property purchases 5, ,675 Total Assigned 3,242, ,242,925 Unassigned (deficit): 11,740, (870,664) 10,869,684 Total $ 19,757,164 $1,343,991 $ 1,870,356 $ 32,000 $ 1,511,438 $ 24,516,149 Page 46

78 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) G. NET POSITION/FUND BALANCES (cont.) Business-type Activities Net Investment in Capital Assets Land $ 501,246 Other capital assets, net of accumulated depreciation 8,178,980 Total Net Investment in Capital Assets 8,680,226 Unrestricted 7,564,165 Total Business-type Activities Net Position $ 16,244,391 H. MINIMUM FUND BALANCE POLICY The county has also adopted a minimum unassigned general fund balance policy of 20% to 25% of the subsequent year s budgeted appropriations for the General, Public Health, Human Services, and Library funds. These funds are to be maintained for cash flow and working capital purposes. The minimum fund balance is calculated as follows: 2017 Budget General Fund $ 19,529,066 Public Health 702,616 Human Services 9,463,868 Library 761,513 $ 30,457,063 Minimum 20% $ 6,091,413 Maximum 25% $ 7,614,266 The county s unassigned general fund balance totaled $11,740,348 on December 31, Page 47 Page 78 of 167

79 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE III DETAILED NOTES ON ALL FUNDS (cont.) I. COMPONENT UNIT SHAWANO COUNTY ECONOMIC PROGRESS, INC. This report contains Shawano Economic Progress, Inc. (SCEPI), which is included as a component unit. Financial information is presented as a discrete column in the statement of net position and statement of activities. In addition to the basic financial statements and the preceding notes to financial statements, which apply, the following additional disclosures are considered necessary for a fair presentation. a. Basis of Accounting/Measurement Focus SCEPI follows the modified accrual basis of accounting and the flow of current financial resources measurement focus. b. Deposits and Investments At year-end, the carrying amount of SCEPI s deposits was $115,855 and the bank balance was $129,974. All of the bank balance was covered by federal depository insurance. c. Capital Assets Beginning Ending Useful Life Balance Additions Depletions Balance (Years) Equipment $ 12,918 $ - $ - $ 12,918 5 Less: Accumulated Depreciation (12,918) - - (12,918) Net Capital Assets $ - $ - $ - $ - NOTE IV OTHER INFORMATION A. EMPLOYEES RETIREMENT SYSTEM Plan description. The WRS is a cost-sharing multiple-employer defined benefit pension plan. WRS benefits and other plan provisions are established by Chapter 40 of the Wisconsin Statutes. Benefit terms may only be modified by the legislature. The retirement system is administered by the Wisconsin Department of Employee Trust Funds (ETF). The system provides coverage to all eligible State of Wisconsin, local government and other public employees. All employees, initially employed by a participating WRS employer on or after July 1, 2011, and expected to work at least 1,200 hours a year and expected to be employed for at least one year from employee s date of hire are eligible to participate in the WRS. ETF issues a standalone Comprehensive Annual Financial Report (CAFR), which can be found at Page 48 Page 79 of 167

80 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) A. EMPLOYEES RETIREMENT SYSTEM (cont.) Vesting. For employees beginning participation on or after January 1, 1990, and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998, and prior to July 1, 2011, are immediately vested. Participants who initially became WRS eligible on or after July 1, 2011, must have five years of creditable service to be vested. Benefits provided. Employees who retire at or after age 65 (54 for protective occupation employees, 62 for elected officials and State executive participants) are entitled to receive an unreduced retirement benefit. The factors influencing the benefit are: (1) final average earnings, (2) years of creditable service, and (3) a formula factor. Final average earnings is the average of the participant's three highest years' earnings. Creditable service is the creditable current and prior service expressed in years or decimal equivalents of partial years for which a participant receives earnings and makes contributions as required. The formula factor is a standard percentage based on employment category. Employees may retire at age 55 (50 for protective occupation employees) and receive reduced benefits. Employees terminating covered employment before becoming eligible for a retirement benefit may withdraw their contributions and forfeit all rights to any subsequent benefits. The WRS also provides death and disability benefits for employees. Post-retirement adjustments. The Employee Trust Funds Board may periodically adjust annuity payments from the retirement system based on annual investment performance in accordance with s , Wis. Stat. An increase (or decrease) in annuity payments may result when investment gains (losses), together with other actuarial experience factors, create a surplus (shortfall) in the reserves, as determined by the system s consulting actuary. Annuity increases are not based on cost of living or other similar factors. For Core annuities, decreases may be applied only to previously granted increases. By law, Core annuities cannot be reduced to an amount below the original, guaranteed amount (the floor ) set at retirement. The Core and Variable annuity adjustments granted during recent years are as follows: Year Core Fund Adjustment Variable Fund Adjustment % 10% (2.1) (42) 2010 (1.3) (1.2) (7.0) (7) 2013 (9.6) (5) Page 49 Page 80 of 167

81 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) A. EMPLOYEES RETIREMENT SYSTEM (cont.) Contributions. Required contributions are determined by an annual actuarial valuation in accordance with Chapter 40 of the Wisconsin Statutes. The employee required contribution is one-half of the actuarially determined contribution rate for General category employees and Executives and Elected Officials. Starting January 1, 2016, the Executives and Elected Officials category merged into the General Employee category. Required contributions for protective employees are the same rate as general employees. Employers are required to contribute the remainder of the actuarially determined contribution rate. The employer may not pay the employee required contribution unless provided for by an existing collective bargaining agreement. During the reporting period, the WRS recognized $1,080,801 in contributions from the county. Contribution rates as of December 31, 2017 are: Employee Category Employee Employer General (Executives & Elected Officials) 6.8% 6.8% Protective with Social Security 6.8% 10.6% Protective without Social Security 6.8% 14.9% Pension Liability, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At December 31, 2017, the county reported a liability of $939,298 for its proportionate share of the net pension liability. The net pension liability was measured as of December 31, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2015 rolled forward to December 31, No material changes in assumptions or benefit terms occurred between the actuarial valuation date and the measurement date. The county proportion of the net pension liability was based on the county s share of contributions to the pension plan relative to the contributions of all participating employers. At December 31, 2016, the county s proportion was %, which was a decrease of % from its proportion measured as of December 31, For the year ended December 31, 2017, the county recognized pension expense of $2,465,846. Page 50 Page 81 of 167

82 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) A. EMPLOYEES RETIREMENT SYSTEM (cont.) At December 31, 2017, the county reported deferred outflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 358,155 $ 2,954,010 Changes of actuarial assumptions 982,072 - Net differences between projected and actual earnings on pension plan investments Changes in proportion and differences between employer contributions and proportionate share of contributions 4,675, ,194 - Employer contributions subsequent to the measurement date 1,176,045 - Totals $ 7,312,992 $ 2,954,010 $1,176,045 reported as deferred outflows related to pension resulting from the WRS Employer s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability (asset) in the year ended December 31, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows: Year Ended December 31: Deferred Outflows of Resources Deferred Inflows of Resources 2018 $ 2,224,032 $ 943, ,224, , ,824, , (138,223) 124, ,411 - Thereafter - - Page 51 Page 82 of 167

83 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) A. EMPLOYEES RETIREMENT SYSTEM (cont.) Actuarial assumptions. The total pension liability in the December 31, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial Valuation Date: December 31, 2015 Measurement Date of Net Pension Liability (Asset) December 31, 2016 Actuarial Cost Method: Entry Age Asset Valuation Method: Fair Market Value Long-Term Expected Rate of Return: 7.2% Discount Rate: 7.2% Salary Increases: Inflation Seniority/Merit 3.2% 0.2% - 5.6% Mortality: Wisconsin 2012 Mortality Table Post-retirement Adjustments*: 2.1% * No post-retirement adjustment is guaranteed. Actual adjustments are based on recognized investment return, actuarial experience and other factors. 2.1% is the assumed annual adjustment based on the investment return assumption and the post-retirement discount rate. Actuarial assumptions are based upon an experience study conducted in 2015 using experience from The total pension liability for December 31, 2015 is based upon a roll-forward of the liability calculated from the December 31, 2015 actuarial valuation. Page 52 Page 83 of 167

84 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) A. EMPLOYEES RETIREMENT SYSTEM (cont.) Long-term expected return on plan assets. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Core Fund Asset Class Current Asset Allocation % Destination Target Asset Allocation % Long-Term Expected Nominal Rate of Return % Long-Term Expected Real Rate of Return % Global Equities 50% 45% 8.3% 5.4% Fixed Income Inflation Sensitive Assets Real Estate Private Equity/Debt Multi-Asset Total Core Fund Variable Fund Asset Class U.S. Equities International Equities Total Variable Fund New England Pension Consultants Long-Term US CPI (Inflation) Forecast: 2.75% Asset Allocations are managed within established ranges, target percentages may differ from actual monthly allocations. Page 53 Page 84 of 167

85 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) A. EMPLOYEES RETIREMENT SYSTEM (cont.) Single discount rate. A single discount rate of 7.20% was used to measure the total pension liability. This single discount rate was based on the expected rate of return on pension plan investments of 7.20% and a long term bond rate of 3.78%. Because of the unique structure of WRS, the 7.20% expected rate of return implies that a dividend of approximately 2.1% will always be paid. For purposes of the single discount rate, it was assumed that the dividend would always be paid. The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments (including expected dividends) of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the county s proportionate share of the net pension liability/(asset) to changes in the discount rate. The following presents the county s proportionate share of the net pension liability/(asset) calculated using the discount rate of 7.20 percent, as well as what the county s proportionate share of the net pension liability/(asset) would be if it were calculated using a discount rate that is 1-percentage-point lower (6.20 percent) or 1-percentage-point higher (8.20 percent) than the current rate: 1% Decrease to Discount Rate (6.20%) Current Discount Rate (7.20%) 1% Increase to Discount Rate (8.20%) County s proportionate share of the net pension (asset) / liability $ 12,357,061 $ 939,298 $ (7,852,898) Pension plan fiduciary net position. Detailed information about the pension plan s fiduciary net position is available in separately issued financial statements available at At December 31, 2017, the county reported a payable to the pension plan which represents contractually required contributions outstanding as of the end of the year. B. RISK MANAGEMENT The county is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers compensation; and health care of its employees. The county purchases commercial insurance to provide coverage for most of these risks with minimal deductibles However, other risks are covered and financed by the county s self-funded insurance program. Page 54 Page 85 of 167

86 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) B. RISK MANAGEMENT (cont.) Workers Compensation The county has established a workers compensation fund to finance workers compensation awards for County employees. The program is funded by charges to County departments. As a part of the plan, an insurance policy has been purchased which picks up worker s compensation claims in excess of $50,000 per individual. The claims liability of $246,453 reported in the fund at December 31, 2017, is due within one year, and is based on the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the fund s claims liability amount for 2015, 2016 and 2017 follows: Workers Compensation December 31, December 31, Unpaid claims, beginning of fiscal year $ 435,017 $ 424,549 Incurred claims (including IBNRs) and changes in estimates 92,133 89,335 Claim payments (280,698) (78,867) Unpaid Claims, End of Fiscal Year $ 246,453 $ 435,017 C. COMMITMENTS AND CONTINGENCIES Claims and judgments are recorded as liabilities if all the conditions of Governmental Account Standards Board pronouncements are met. The liability and expenditure for claims and judgments are only reported in governmental funds if it has matured. Claims and judgments are recorded in the government-wide statements and proprietary funds as expenses when the related liabilities are incurred. From time to time, the county is party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the county Attorney that the likelihood is remote that any such claims or proceedings will have a material adverse effect on the county s financial position or results of operations. The county has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. Page 55 Page 86 of 167

87 SHAWANO COUNTY NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2017 NOTE IV OTHER INFORMATION (cont.) D. EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT-PERIOD FINANCIAL STATEMENTS The Governmental Accounting Standards Board (GASB) has approved the following: > Statement No. 83, Certain Asset Retirement Obligations > Statement No. 84, Fiduciary Activities > Statement No. 85, Omnibus 2017 > Statement No. 86, Certain Debt Extinguishment issues > Statement No. 87, Leases > Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements When they become effective, application of these standards may restate portions of these financial statements. Page 56 Page 87 of 167

88 R E Q U I R E D S U P P L E M E N T A R Y I N F O R M A T I O N Page 88 of 167

89 SHAWANO COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND For the Year Ended December 31, 2017 Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Taxes $ 12,429,713 $ 12,429,713 $ 13,201,249 $ 771,536 Intergovernmental 2,718,637 2,737,569 2,825,671 88,102 Licenses and permits 174, , ,883 23,103 Fines and forfeits 313, , ,942 35,689 Public charges for services 1,400,809 1,397,500 1,476,116 78,616 Intergovernmental charges for services 1,486,022 1,485,706 1,399,006 (86,700) Miscellaneous 396, , , ,380 Total Revenues 18,919,672 18,946,099 20,103,825 1,157,726 EXPENDITURES Current General government 4,671,457 4,950,858 4,516, ,776 Public safety 10,950,984 11,352,565 10,817, ,630 Public works 10,728 10,728 6,519 4,209 Health and human services 583, , ,768 29,556 Culture and recreation 1,351,817 1,421,156 1,403,942 17,214 Conservation and development 1,080,696 1,111,612 1,100,060 11,552 Total Expenditures 18,649,347 19,441,243 18,409,306 1,031,937 Excess of Revenues Over Expenditures 270,325 (495,144) 1,694,519 2,189,663 OTHER FINANCING SOURCES (USES) Transfers in - 77,603 77,603 - Transfers out (670,206) (481,157) (395,157) 86,000 Total Other Financing Sources (Uses) (670,206) (403,554) (317,554) 86,000 Net Change in Fund Balance (399,881) (898,698) 1,376,965 2,275,663 FUND BALANCE - Beginning 18,380,199 18,380,199 18,380,199 - FUND BALANCE - ENDING $ 17,980,318 $ 17,481,501 $ 19,757,164 $ 2,275,663 See independent auditors' report and notes to the required supplementary information. Page 57 Page 89 of 167

90 SHAWANO COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HUMAN SERVICES For the Year Ended December 31, 2017 Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 1,420,429 $ 1,420,429 $ 1,420,429 $ - Intergovernmental 4,608,676 4,609,818 4,936, ,822 Fines and forfeitures 48,000 48,000 38,848 (9,152) Public charges for services 2,863,703 2,863,703 3,147, ,391 Intergovernmental charges for services 21,622 21,622 45,699 24,077 Miscellaneous 100, , ,257 29,492 Total Revenues 9,063,195 9,064,337 9,718, ,630 EXPENDITURES Current Health and human services 9,378,352 9,560,338 9,729,281 (168,943) Total Expenditures 9,378,352 9,560,338 9,729,281 (168,943) Excess of Revenues Over (Under) Expenditures (315,157) (496,001) (10,314) 485,687 OTHER FINANCING SOURCES Sale of capital assets - - 9,825 9,825 Transfers in 295, , ,157 - Total Other Financing Sources 295, , ,982 9,825 Net Change in Fund Balance (20,000) (200,844) 294, ,512 FUND BALANCE - Beginning 1,049,323 1,049,323 1,049,323 - FUND BALANCE - ENDING $ 1,029,323 $ 848,479 $ 1,343,991 $ 495,512 See independent auditors' report and notes to the required supplementary information. Page 58 Page 90 of 167

91 SHAWANO COUNTY SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION (ASSET) / LIABILITY - WISCONSIN RETIREMENT SYSTEM For the Year Ended December 31, 2017 Proportionate Plan Fiduciary Proportion Proportionate Share of the Net Net Position of the Net Share of the Pension (Asset) / as a Percentage Pension Net Pension Liability as a of the Total Fiscal (Asset) / (Asset) / Covered Percentage of Pension Year Ending Liability Liability Payroll Covered Payroll Liability 12/31/ % $ 939,298 $ 15,349, % 99.12% 12/31/ % 1,899,176 15,136, % 98.20% 12/31/ % (2,933,022) 14,980, % % SCHEDULE OF EMPLOYER CONTRIBUTIONS - WISCONSIN RETIREMENT SYSTEM For the Year Ended December 31, 2017 Contributions in Relation to the Contributions Contractually Contractually Contribution as a Percentage Fiscal Required Required Deficiency Covered of Covered Year Ending Contributions Contributions (Excess) Payroll Payroll 12/31/17 $ 1,176,044 $ 1,176,044 $ - $ 15,895, % 12/31/16 1,104,568 1,104,568-15,349, % 12/31/15 1,111,393 1,111,393-15,136, % See independent auditors' report and accompanying notes to the required supplementary information. Page 59 Page 91 of 167

92 SHAWANO COUNTY NOTES TO REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended December 31, 2016 BUDGETARY INFORMATION The county follows these procedures in establishing the budgetary data reflected in the basic financial statements: a. During October, county management submits to the county Board a proposed operating budget for the calendar year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. After submission to the governing body, public hearings are held to obtain taxpayer comments. Following the public hearings, the proposed budget, including authorized additions and deletions, is legally enacted by county Board action. b. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the governmental funds. Budget is defined as the originally approved budget plus or minus approved amendments. Individual amendments throughout the year were not material in relation to the original budget. Budget appropriations not expended during the year are closed to fund balance unless authorized by the governing body to be forwarded into the succeeding year s budget. c. During the year, formal budgetary integration is employed as a management control device for the governmental funds. d. Expenditures may not exceed appropriations provided in detailed budget accounts maintained for each activity or department of the county. County management may authorize transfers of budgeted amounts within departments. All transfers between departments and overall changes to the budget during the year require initial approval by management and are subsequently authorized by a 2/3 vote of the county Board. WISCONSIN RETIREMENT SYSTEM The amounts determined for each fiscal year were determined as of the calendar year-end that occurred within the fiscal year. The county is required to present the last ten fiscal years of data; however accounting standards allow the presentation of as many years as are available until ten fiscal years are presented. Changes in benefit terms. There were no changes of benefit terms for any participating employer in the Wisconsin Retirement System. Changes in Assumptions. There were no changes in assumptions. See independent auditors report and accompanying notes to the required supplementary information Page 60 Page 92 of 167

93 S U P P L E M E N T A R Y I N F O R M A T I O N Page 93 of 167

94 SHAWANO COUNTY DETAILED COMPARISON OF BUDGETED AND ACTUAL REVENUES GENERAL FUND For the Year Ended December 31, 2017 Budget Variance with Original Final Actual Final Budget TAXES General property $ 9,623,113 $ 9,623,113 $ 9,853,113 $ 230,000 Forest crop 30,000 30,000 79,447 49,447 Sales tax 2,361,000 2,361,000 2,725, ,224 Retained sales tax Real estate transfer tax 80,000 80,000 91,362 11,362 Use value penalty revenue 3,000 3,000 4,362 1,362 Interest on taxes 315, , ,707 64,707 Gain (loss) on tax deed sales ,236 49,236 Payment in lieu of taxes 17,500 17,500 18,626 1,126 Total Taxes 12,429,713 12,429,713 13,201, ,536 INTERGOVERNMENTAL State shared taxes 1,286,000 1,286,000 1,291,834 5,834 Computer aid 25,000 25,000 19,278 (5,722) State and Federal Aids Law enforcement 88,090 91, ,690 46,100 Emergency government 64,321 64,321 83,156 18,835 Court cost reimbursement 183, , , Victim-witness program 66,773 66,773 57,640 (9,133) Resource aid payment 83,600 83, ,114 35,514 Child support program 377, , ,195 (21,092) Veterans service officer 10,000 10,000 10,000 - Soil and water conservation 265, , ,151 (7,206) Park and recreation aid 169, , ,049 29,054 Private sewage replacement Land records 91,000 91,000 90,184 (816) Land conservation 2,902 2,902 2,365 (537) Other federal grants - 15,432 14,228 (1,204) Other state grants 5,204 5,204 2,761 (2,443) Total Intergovernmental 2,718,637 2,737,569 2,825,671 88,102 LICENSES AND PERMITS Marriage license/domestic partnerships 10,700 10,700 11, Work permits (87) Occupational drivers licenses (80) Vehicle licenses 1,400 1,400 1,318 (82) Zoning permits 52,000 52,000 65,650 13,650 Sanitary permits 88,300 88,300 95,345 7,045 Hunting and fishing (63) Other permits 21,000 21,000 22,976 1,976 Total Licenses and Permits 174, , ,883 23,103 (Continued) Page 61 Page 94 of 167

95 SHAWANO COUNTY DETAILED COMPARISON OF BUDGETED AND ACTUAL REVENUES (cont.) GENERAL FUND For the Year Ended December 31, 2017 Budget Variance with Original Final Actual Final Budget FINES AND FORFEITURES County ordinance forfeitures $ 160,000 $ 171,120 $ 222,231 $ 51,111 State fines and forfeitures 115, ,833 96,472 (19,361) Juvenile ordinance forfeitures 8,000 8,000 5,433 (2,567) Bond forfeitures 11,000 11,000 23,244 12,244 Restitution surcharge 18,300 18,300 12,562 (5,738) Total Fines and Forfeitures 313, , ,942 35,689 PUBLIC CHARGES FOR SERVICES Clerk Treasurer 4,000 4, (3,153) Finance Printing (72) Divorce mediation fees 5,300 5,300 4,770 (530) Land records 96,750 96, ,189 49,439 Circuit court 167, , ,804 (3,696) District attorney 3,500 3,500 4, Register in probate 38,851 35,542 28,853 (6,689) Register of deeds 206, , ,798 21,798 Coroner 20,000 20,000 24,388 4,388 Law enforcement 76,500 76,500 51,502 (24,998) Jail 343, , ,504 (3,946) Child support 11,515 11,515 14,697 3,182 Parks 307, , ,165 34,965 University extension 18,910 18,910 27,129 8,219 Public safety 100, ,383 95,723 (4,660) Tree planting Miscellaneous - - 3,371 3,371 Total Public Charges for Services 1,400,809 1,397,500 1,476,116 78,616 (Continued) Page 62 Page 95 of 167

96 SHAWANO COUNTY DETAILED COMPARISON OF BUDGETED AND ACTUAL REVENUES (cont.) GENERAL FUND For the Year Ended December 31, 2017 Budget Variance with Original Final Actual Final Budget INTERGOVERNMENTAL CHARGES FOR SERVICES Other Governments Judicial $ 57,821 $ 57,821 $ 60,255 $ 2,434 General government 32,300 32,300 49,966 17,666 Law enforcement 54,300 54,300 52,180 (2,120) Prisoner room and board 341, , ,752 (74,963) Land Records Departmental Charges Property and liability insurance 256, , ,120 (25,424) Indirect cost reimbursements 495, , ,473 - Printing 49,450 49,134 40,993 (8,141) Photocopies 49,840 49,840 40,809 (9,031) Central services-mail 1,100 1, (174) Register of Deeds 8,220 8,220 8, Financial services 3,100 3,100 3, Maintenance 40,440 40,440 53,558 13,118 Clerk of Courts 35,000 35,000 35, Corporation Counsel 17,200 17,200 17,199 (1) Family Court Commissioner 22,600 22,600 22, Law enforcement services 20,719 20,719 17,610 (3,109) Planning and Development Total Intergovernmental Charges for Services 1,486,022 1,485,706 1,399,006 (86,700) MISCELLANEOUS Loan repayments 3,395 3,395 3,394 (1) Interest income 115, , , ,453 Finance charges 10,150 10,150 5,213 (4,937) Rent of county offices and buildings 106, , ,525 3,750 Sale of county property 38,000 38,000 37,728 (272) Refund of prior year expenses 42,817 42,817 80,855 38,038 Insurance recoveries and dividends ,083 11,083 Donations ,502 13,402 Telephone/soda commissions 22,300 22,300 16,077 (6,223) Other 57,461 57,461 42,548 (14,913) Total Miscellaneous 396, , , ,380 TOTAL REVENUES $ 18,919,672 $ 18,946,099 $ 20,103,825 $ 1,157,726 Page 63 Page 96 of 167

97 SHAWANO COUNTY DETAILED COMPARISON OF BUDGETED AND ACTUAL EXPENDITURES GENERAL FUND For the Year Ended December 31, 2017 Budget Variance with Original Final Actual Final Budget GENERAL GOVERNMENT County board $ 57,331 $ 54,931 $ 50,940 $ 3,991 Commissions and committees 60,693 60,693 60,777 (84) Land and site preparation 4,675 4,675-4,675 Rental property 13,162 85,666 2,161 83,505 Administration 280, , ,980 (3,365) Labor relations 2,000 2, ,064 Employee development and training 1,500 1,500-1,500 Risk management 9,604 9,604 9,604 - Property and liability insurance 297, , ,892 25,852 Wellness program 15,500 15,500 1,369 14,131 Corporation counsel 219, , ,513 12,640 County Clerk General administration 145, , ,312 (1,487) Elections 57,070 57,070 41,776 15,294 Central services-postage 5,602 5,602 4,123 1,479 Special studies 1,500 11,948 11,948 - Printing 62,554 62,554 54,342 8,212 Copy machines 51,400 51,400 42,572 8,828 Financial Administration Financial services 443, , ,746 (15,332) Special accounting 33,000 33,000 34,301 (1,301) Treasurer 233, , ,073 (32,233) Property tax lister 139, , ,573 3,791 Courthouse maintenance 637, , ,747 10,338 Courthouse outlay 30,915 30,915 15,127 15,788 District Attorney 206, , ,671 9,153 Victim-witness program 128, , ,177 17,231 Circuit court branch I 73,456 73,456 70,323 3,133 Circuit court branch II 50,740 53,728 54,991 (1,263) Clerk of Courts 611, , ,372 11,806 Family court commissioner 33,467 33,467 34,128 (661) Mediation in divorce 14,138 14,138 12,679 1,459 Judicial court commissioner 1,147 1,147 1,298 (151) Register in probate 133, , ,667 9,833 Coroner 76,392 88,219 92,608 (4,389) Register of Deeds 268, , ,725 16,569 Surveyor 28,829 28,829 28, Land records 135, , , ,837 Miscellaneous 68,217 63,217 69,689 (6,472) Contingency 37,785 3,858-3,858 Total General Government 4,671,457 4,950,858 4,516, ,776 (Continued) Page 64 Page 97 of 167

98 SHAWANO COUNTY DETAILED COMPARISON OF BUDGETED AND ACTUAL EXPENDITURES (cont.) GENERAL FUND For the Year Ended December 31, 2017 Budget Variance with Original Final Actual Final Budget PUBLIC SAFETY Sheriff Administration $ 742,650 $ 746,630 $ 741,319 $ 5,311 Support services 1,193,064 1,186,064 1,104,814 81,250 Criminal investigation 693, , ,299 (1,807) Part-time deputies 59,603 59,603 57,214 2,389 Traffic 2,701,555 2,712,650 2,627,096 85,554 Data processing 326, , , ,537 Dive Team 2,000 2,000 1, Process servers, municipal deputies 45,105 45,105 43,097 2,008 Travel and training 18,000 18,000 18,043 (43) Vehicle maintenance/squad cars 367, , ,141 (67,659) Water safety patrol 9,290 25,370 9,941 15,429 Highway safety grants ,196 (29,196) Snowmobile law enforcement 7,631 11,215 4,208 7,007 Tribal law enforcement 16,432 16,432 15, ATV law enforcement 4,269 17,599 2,407 15,192 K-9 Unit 1,450 1,450 6,555 (5,105) Courthouse security 136, ,924 95,956 16,968 MEG unit - federal forfeitures (275) CEASE - MEG unit (14) Emergency management 121, , ,124 7,397 Hazardous material 11,617 11,617 3,011 8,606 Fire protection 1,000 1,000-1,000 Jail Jail operations 2,990,546 3,049,587 2,971,805 77,782 Training 70,469 70,469 19,777 50,692 Jail kitchen 345, , ,426 (34,654) Work release center 820, , ,773 32,327 Inmate programming 4,000 4,000 9,374 (5,374) Computer outlay 164, , ,271 3,128 Inmate welfare 45,000 45,000 40,303 4,697 Homeland security - - 1,105 (1,105) Other public safety 50,000 50,000 13,602 36,398 Total Public Safety 10,950,984 11,352,565 10,817, ,630 PUBLIC WORKS Solid waste administration 9,328 9,328 5,330 3,998 Clean sweep program 1,400 1,400 1, Total Public Works 10,728 10,728 6,519 4,209 (Continued) Page 65 Page 98 of 167

99 SHAWANO COUNTY DETAILED COMPARISON OF BUDGETED AND ACTUAL EXPENDITURES (cont.) GENERAL FUND For the Year Ended December 31, 2017 Budget Variance with Original Final Actual Final Budget HEALTH AND HUMAN SERVICES Child support program $ 466,756 $ 466,756 $ 441,407 $ 25,349 Veterans service officer 96, ,968 99,540 7,428 Veterans relief 1,600 1,600 2,694 (1,094) Dog licenses 19,000 19,000 21,127 (2,127) Total Health and Human Services 583, , ,768 29,556 CULTURE AND RECREATION Historical society 4,610 5,558 3,831 1,727 Parks operations 509, , ,998 (29,334) Parks outlay/projects - 31,793-31,793 Snowmobile trails and aids 113, , ,979 (29,054) ATV trail maintenance 54,276 54,276 54,950 (674) Mielke park and theater 16,993 16,993 12,187 4,806 Crawford Center 79,915 79,915 69,540 10,375 University Extension Extension office administration 51,778 51,778 53,369 (1,591) Community resource development 63,039 63,039 37,509 25,530 Family living 80,615 80,615 84,321 (3,706) Agriculture/agribusiness 69,564 69,564 72,331 (2,767) 4-H and youth development 163, , ,728 2,517 Pesticide certification training 1,675 1, County fairgrounds 14,519 51,117 49,369 1,748 Other culture 1,794 1,794 1, Library fee 126, , ,736 4,469 Total Culture and Recreation 1,351,817 1,421,156 1,403,942 17,214 CONSERVATION AND DEVELOPMENT Economic development 75,000 75,000 74,998 2 Regional planning commission 50,425 50,425 50,425 - Planning and development 153, , , Zoning 228, , ,291 5,716 Sanitation 84,854 84,854 82,266 2,588 Land conservation 480, , ,448 (12,071) Forestry management 8,290 18,290 3,830 14,460 Total Conservation and Development 1,080,696 1,111,612 1,100,060 11,552 TOTAL EXPENDITURES $ 18,649,347 $ 19,441,243 $ 18,409,306 $ 1,031,937 Page 66 Page 99 of 167

100 SHAWANO COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - DEBT SERVICE For the Year Ended December 31, 2017 Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Taxes $ 583,132 $ 583,132 $ 583,132 $ - Intergovernmental - - 4,158 4,158 Intergovernmental charges for services 153, , , ,111 Miscellaneous Total Revenues 736, , , ,663 EXPENDITURES Debt Service Principal 666, , ,557 - Interest and fiscal charges 66,600 70,300 70,301 (1) Total Expenditures 733, , ,858 (1) Net Change in Fund Balance 3, , ,662 FUND BALANCE (DEFICIT) - Beginning (194,462) (194,462) (194,462) - FUND BALANCE (DEFICIT) - ENDING $ (190,762) $ (194,462) $ 33,200 $ 227,662 Page 67 Page 100 of 167

101 SHAWANO COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL COUNTY ROADS AND BRIDGES For the Year Ended December 31, 2017 Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 2,937,000 $ 2,937,000 $ 2,937,000 $ - Intergovernmental 1,727,061 1,727,061 1,710,979 (16,082) Miscellaneous 50,000 50,000 5,883 (44,117) Total Revenues 4,714,061 4,714,061 4,653,862 (60,199) EXPENDITURES Current Public works 5,264,061 5,264,061 5,077, ,615 Net Change in Fund Balance (550,000) (550,000) (423,584) 126,416 FUND BALANCE - Beginning 2,293,940 2,293,940 2,293,940 - FUND BALANCE - ENDING $ 1,743,940 $ 1,743,940 $ 1,870,356 $ 126,416 See independent auditors' report and notes to the required supplementary information. Page 68 Page 101 of 167

102 SHAWANO COUNTY COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS As of December 31, 2017 (With summarized financial information as of December 31, 2016) Special Revenue Wisconsin Wisconsin CDBG Environmental Public Health City-County Library Jail Assessment Crime Prevention Farmers Fund Development Fund Housing Loans Impact Fee Projects ASSETS Cash and investments $ - $ 134,442 $ 8,970 $ 3,403 $ 111 $ 590,920 $ 19,575 $ 1,477,239 Receivables Taxes 269, , Accounts 12, Loans , ,106 - Due from other governments 70, Prepaid items 50 2, TOTAL ASSETS $ 352,211 $ 855,733 $ 9,519 $ 3,403 $ 111 $ 813,153 $ 419,681 $ 1,477,239 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable $ 3,868 $ 4,527 $ 5,343 $ 20 $ - $ 2,902 $ - $ - Due to other funds 54, Unearned revenues , Total Liabilities 58,641 4,527 5, , Deferred Inflows of Resources Property taxes 269, , Loans , ,106 - Total Deferred Inflows of Resources 269, , , ,106 - Fund Balances Nonspendable 50 2, Restricted 23, ,915 4,176 3, ,019 19,575 1,477,239 Unassigned (deficit) Total Fund Balances 23, ,484 4,176 3, ,019 19,575 1,477,239 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 352,211 $ 855,733 $ 9,519 $ 3,403 $ 111 $ 813,153 $ 419,681 $ 1,477,239 Page 69 Page 102 of 167

103 Wolf River ADRC Special Revenue Aging Transportation Airport Total Special Revenue Funds Mielke Theater Expansion Capital Projects Capital Improvement Projects Total Capital Projects Funds Total Nonmajor Governmental Funds $ - $ 88,927 $ 45,845 $ 2,369,432 $ 22,945 $ 964,266 $ 987,211 $ 3,356, ,682 1,021, ,021, , , , , , , ,710 1, , ,981 $ 261,293 $ 88,927 $ 78,544 $ 4,359,814 $ 23,179 $ 964,266 $ 987,445 $ 5,347,259 $ 71,156 $ - $ 1,064 $ 88,880 $ - $ 25,965 $ 25,965 $ 114, , ,585-1,800,000 1,800,000 2,043,585-23,572 1,272 30,443-8,928 8,928 39, ,968 23,572 2, ,908-1,834,893 1,834,893 2,197, ,682 1,021, ,021, , , ,682 1,638, ,638,020 1, , ,981-65,355 43,526 2,354,942 23,179-23,179 2,378,121 (37) - - (37) - (870,627) (870,627) (870,664) 1,325 65,355 43,526 2,358,886 23,179 (870,627) (847,448) 1,511,438 $ 261,293 $ 88,927 $ 78,544 $ 4,359,814 $ 23,179 $ 964,266 $ 987,445 $ 5,347,259 Page 70 Page 103 of 167

104 SHAWANO COUNTY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2017 Special Revenue Public Health City-County Library Jail Assessment Crime Prevention Wisconsin Farmers Fund Wisconsin Development Fund REVENUES Taxes $ 266,451 $ 452,727 $ - $ - $ - $ - Intergovernmental 264, , Fines and forfeits , Public charges for services 23,052 23, Intergovernmental charges for services 47, Miscellaneous 2,639 19, ,327 Total Revenues 605, ,839 64, ,327 EXPENDITURES Current Public safety , Public works Health and human services 619, Culture and recreation - 614, Conservation and development ,926 Capital Outlay Total Expenditures 619, ,092 62, ,926 Excess of Revenues Over (Under) Expenditures (14,379) (5,253) 1,614 (118) (729) 53,401 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances (14,379) (5,253) 1,614 (118) (729) 53,401 FUND BALANCES - Beginning 38, ,737 2,562 3, ,618 FUND BALANCES (DEFICIT) - ENDING $ 23,693 $ 132,484 $ 4,176 $ 3,383 $ 111 $ 588,019 Page 71 Page 104 of 167

105 CDBG Housing Loans Environmental Impact Fee Projects Special Revenue Wolf River Aging ADRC Transportation Airport Total Special Revenue Funds Mielke Theater Expansion Capital Projects Capital Improvement Projects Total Capital Project Funds Total Nonmajor Governmental Funds $ - $ - $ - $ - $ 32,682 $ 751,860 $ - $ - $ - $ 751,860-2,344,576 1,186,608-32,682 3,941,997-82,500 82,500 4,024, , , , , , ,922 14,982 8,155 2, , ,705 1,698-1, ,403 14,982 2,352,731 1,188, ,599 4,978,105 1,698 82,500 84,198 5,062, , , ,487 69, , ,201,974 27,750-1,849, ,849, , ,092 28, , , ,564,454 2,564,454 2,564,454 28,739-1,201,974 27,750 69,487 2,632,855-2,564,454 2,564,454 5,197,309 (13,757) 2,352,731 (13,259) (27,113) 12,112 2,345,250 1,698 (2,481,954) (2,480,256) (135,006) ,065,886 1,065,886 1,065,886 - (965,886) (965,886) - (160,942) (160,942) (1,126,828) - (965,886) (965,886) - 904, ,944 (60,942) (13,757) 1,386,845 (13,259) (27,113) 12,112 1,379,364 1,698 (1,577,010) (1,575,312) (195,948) 33,332 90,394 14,584 92,468 31, ,522 21, , ,864 1,707,386 $ 19,575 $ 1,477,239 $ 1,325 $ 65,355 $ 43,526 $ 2,358,886 $ 23,179 $ (870,627) $ (847,448) $ 1,511,438 Page 72 Page 105 of 167

106 SHAWANO COUNTY COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS As of December 31, 2017 (With summarized financial information for the Year Ended December 31, 2016) Technology Services Self-Funded Workers Compensation Self-Funded Comprehensive/ Collision Ins. ASSETS Current Assets Cash and investments $ 1,565,574 $ 1,173,527 $ 20,614 Accounts receivable 10, Prepaid items 159,779 88,298 - Total Current Assets 1,735,694 1,261,825 20,614 Noncurrent Assets Capital Assets, Nondepreciable Construction in progress 17, Capital Assets, Depreciable Intangible Assets 3,540, Machinery and equipment 4, Less: Accumulated depreciation (2,731,119) - - Total Noncurrent Assets 830, Total Assets 2,566,309 1,261,825 20,614 LIABILITIES Current Liabilities Accounts payable 92,663 13,868 - Capital lease payable Accrued liabilities - 246,453 - Total Current Liabilities 92, ,321 - Noncurrent Liabilities Capital lease payable Advance from other funds Total Noncurrent Liabilities Total Liabilities 92, ,321 - NET POSITION Net investment in capital assets 830, Unrestricted 1,643,031 1,001,504 20,614 TOTAL NET POSITION $ 2,473,646 $ 1,001,504 $ 20,614 Page 73 Page 106 of 167

107 Self-Funded Property Ins. Deductible Extended Leave Leased Vehicles Total Internal Service Funds $ 97,998 $ 244,818 $ 2,737 $ 3,105,268 $ 3,007, ,341 8, , ,194 97, ,818 2,737 3,363,686 3,326, ,293 68, ,540,050 3,548, , ,531 4, (25,820) (2,756,939) (2,751,045) ,320 1,071, ,996 97, , ,057 4,435,621 4,196, ,531 79, ,176 53, , , , , , , ,575-50, , , ,000 50, , , , ,000 50, , , , , , ,996 47,998 44, ,758,271 2,561,850 $ 47,998 $ 44,818 $ 306 $ 3,588,886 $ 3,431,846 Page 74 Page 107 of 167

108 SHAWANO COUNTY COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS For the Year Ended December 31, 2017 (With summarized financial information for the Year Ended December 31, 2016) Technology Services Self-Funded Workers Compensation Self-Funded Comprehensive/ Collision Ins. OPERATING REVENUES Public charges for services $ 197,263 $ - $ - Interdepartmental charges for services 1,062, ,387 20,000 Total Operating Revenues 1,259, ,387 20,000 OPERATING EXPENSES Operation and maintenance 956, ,471 33,338 Depreciation 301, Total Operating Expenses 1,258, ,471 33,338 Operating Income (Loss) 1,141 75,916 (13,338) NONOPERATING REVENUES (EXPENSES) Interest income 10, Gain (loss) on disposal of capital assets (1,355) - - Total Nonoperating Revenues (Expenses) 8, Change in Net Position 10,120 75,916 (13,338) NET POSITION (DEFICIT) - Beginning 2,463, ,588 33,952 NET POSITION - ENDING $ 2,473,646 $ 1,001,504 $ 20,614 Page 75 Page 108 of 167

109 Self-Funded Property Ins. Deductible Extended Leave Leased Vehicles Total Internal Service Funds $ - $ - $ - $ 197,263 $ 401,522 10,000 95,362 15,682 1,442,574 1,319,133 10,000 95,362 15,682 1,639,837 1,720,655-21,326 3,821 1,178,280 1,418, , , ,980-21,326 29,641 1,506,041 1,695,362 10,000 74,036 (13,959) 133,796 25, ,334 5, ,265 12,910 (411) ,265 23,244 5,560 10,000 74, ,040 30,853 37,998 (29,218) - 3,431,846 3,400,993 $ 47,998 $ 44,818 $ 306 $ 3,588,886 $ 3,431,846 Page 76 Page 109 of 167

110 SHAWANO COUNTY COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended December 31, 2017 (With summarized financial information for the Year Ended December 31, 2016) Technology Services Self-Funded Workers Compensation CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,257,190 $ 239,387 Cash payments to suppliers (426,994) (287,371) Cash payments to employees and for employee benefits (442,434) (61,624) Net Cash Flows From Operating Activities 387,762 (109,608) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital lease proceeds - - Acquisition of capital assets (263,915) - Net Cash Flows From Capital and Related Financing Activities (263,915) - CASH FLOWS FROM INVESTING ACTIVITIES Interest income received 10,334 - Change in Cash and Cash Equivalents 134,181 (109,608) CASH AND CASH EQUIVALENTS - Beginning 1,431,393 1,283,135 CASH AND CASH EQUIVALENTS - ENDING $ 1,565,574 $ 1,173,527 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income (loss) $ 1,141 $ 75,916 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 301,941 - Changes in assets and liabilities Accounts receivable (2,216) - Prepaid items 70,615 (7,498) Accounts payable 16,281 10,538 Accrued liabilities - (188,564) NET CASH FLOWS FROM OPERATING ACTIVITIES $ 387,762 $ (109,608) NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Noncash asset retirement $ 9,323 $ - Page 77 Page 110 of 167

111 Self-Funded Comprehensive/ Collision Ins. Self-Funded Property Ins. Deductible Extended Leave Leased Vehicles Total Internal Service Funds $ 20,000 $ 10,000 $ 95,362 $ 15,682 $ 1,637,621 $ 1,718,365 (33,338) - (21,326) (3,821) (772,850) (851,595) (504,058) (526,020) (13,338) 10,000 74,036 11, , , , , (252,875) (516,790) (166,407) (9,124) (273,039) (166,407) ,334 5,971 (13,338) 10,000 74,036 2,737 98, ,314 33,952 87, ,782-3,007,260 2,826,946 $ 20,614 $ 97,998 $ 244,818 $ 2,737 $ 3,105,268 $ 3,007,260 $ (13,338) $ 10,000 $ 74,036 $ (13,959) $ 133,796 $ 25, , , , (2,216) (2,290) ,117 24, ,819 5, (188,564) 10,468 $ (13,338) $ 10,000 $ 74,036 $ 11,861 $ 360,713 $ 340,750 $ - $ - $ - $ - $ 9,323 $ 37,920 Page 78 Page 111 of 167

112 SHAWANO COUNTY Shawano, Wisconsin COMMUNICATION TO THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT As of and for the Year Ended December 31, 2017 Page 112 of 167

113 SHAWANO COUNTY TABLE OF CONTENTS Page No. Required Communication of Internal Control Related Matters Identified in the Audit to Those Charged with Governance 1 Internal Control Environment 2 Internal Control Over Financial Reporting 3 Other Communications to Those Charged with Governance Two Way Communication Regarding Your Audit 4 6 Communication of Other Control Deficiencies, Recommendations and Informational Points to Management that are not Material Weaknesses or Significant Deficiencies 7 15 Required Communications by the Auditor to Those Charged with Governance Management Representations Page 113 of 167

114 REQUIRED COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS IDENTIFIED IN THE AUDIT TO THOSE CHARGED WITH GOVERNANCE Page 114 of 167

115 To the Honorable Members of the Board of Supervisors Shawano County Shawano, Wisconsin In planning and performing our audit of the financial statements of Shawano County as of and for the year ended December 31, 2017, in accordance with auditing standards generally accepted in the United States of America, we considered its internal control over financial reporting (internal control) as a basis for designing our auditing 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 its internal control. Accordingly, we do not express an opinion on the effectiveness of its internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control that we consider to be material weaknesses. 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 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. We consider the following deficiencies in the county s internal control to be material weaknesses. > Internal Control Over Financial Reporting > Internal Control Environment Shawano County s written response to the material weaknesses identified in our audit has not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. This communication is intended solely for the information and use of management, the County Board, and others within the organization and is not intended to be, and should not be, used by anyone other than these specified parties. Madison, Wisconsin June 26, 2018 Page 1 Page 115 of 167

116 Auditing standards require that we perform procedures to obtain an understanding of your government and its internal control environment as part of the annual audit. This includes an analysis of significant transaction cycles and an analysis of the county s year-end financial reporting process and preparation of your financial statements. INTERNAL CONTROL ENVIRONMENT A properly designed system of internal control includes adequate staffing as well as policies and procedures to properly segregate duties. This includes systems that are designed to limit the access or control of any one individual to your government s assets or accounting records, and to achieve a higher likelihood that errors or irregularities in your accounting processes would be discovered by your staff in a timely manner. There are certain controls that are not currently in place related to cash and monthly and year-end accounting. As a result, there is a risk that erroneous or unauthorized transactions or misstatements could occur without the knowledge of management or the governing body. Our recommendations for strengthening controls are listed below. > Bank reconciliations should be prepared timely throughout the year by someone independent of the collection process and be reviewed and approved by someone other than the preparer. For 2017, bank reconciliations were not being reviewed. All journal entry numbers should be accounted for in JD Edwards. A control should exist that allows for ensuring completeness. Both the Treasurer s department and the Finance departments are performing reconciliations between financial institution amounts and county records. There is very little collaboration or good communication for this important procedure, which results in inefficiencies, redundant processes, and an increased risk of misstatements to cash. Since the controls listed above or other compensating controls are not currently in place, errors of irregularities could occur as part of the accounting processes that might not be discovered by management or the governing body. Therefore, the absence of these controls is considered to be a material weakness. We recommend that a designated employee review these risks and develop controls over these financial areas. Management s Response (12/31/17) We acknowledge that it is our responsibility as a relates to those non-audited services provided by Baker Tilly, including that we assume all management responsibilities; oversee the services by designating an individual, preferably with senior management, who possesses suitable skill, knowledge, or experience; evaluate the adequacy and results of the services performed; and accept responsibility for the results of the services. Shawano County continues to evaluate our processes and controls and are implementing new procedures and systems to mitigate the deficiencies that we currently face within our current systems. Page 2 Page 116 of 167

117 INTERNAL CONTROL OVER FINANCIAL REPORTING Properly designed systems of internal control provide your organization with the ability to process and record monthly and year-end transactions and annual financial reports. Our audit included a review and evaluation of the county s internal controls relating to financial reporting. Common attributes of a properly designed system of internal control for financial reporting are as follows: There is adequate staffing to prepare financial reports throughout the year and at year-end. Material misstatements are identified and corrected during the normal course of duties. Complete and accurate financial statements including footnotes are prepared. Complete and accurate schedule of expenditures of federal and state awards is prepared. Financial reports are reviewed for completeness and accuracy. Our evaluation of the county s internal controls over financial reporting has identified control deficiencies that are considered material weaknesses surrounding the preparation of financial statements and footnotes, adjusting journal entries identified by the auditors and an independent review of financial reports. Management has not prepared financial statements that are in conformity with generally accepted accounting principles. In addition, material misstatements in the general ledger were identified during the financial audit. Management s Response (12/31/17) As part of the audit conducted by Baker Tilly, they assisted with preparation of the financial statements and related notes. We have reviewed, approved and accepted responsibility for those financial statement and related notes. The County has also implemented controls to review the reports, financial statement checklists, and minimize journal entries as part of the financial reporting process. Page 3 Page 117 of 167

118 OTHER COMMUNICATIONS TO THOSE CHARGED WITH GOVERNANCE Page 118 of 167

119 TWO WAY COMMUNICATION REGARDING YOUR AUDIT As part of our audit of your financial statements, we are providing communications to you throughout the audit process. Auditing requirements provide for two-way communication and are important in assisting the auditor and you with more information relevant to the audit. As this past audit is concluded, we use what we have learned to begin the planning process for next year s audit. It is important that you understand the following points about the scope and timing of our next audit: a. We address the significant risks of material misstatement, whether due to fraud or error, through our detailed audit procedures. b. We will obtain an understanding of the five components of internal control sufficient to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures. We will obtain a sufficient understanding by performing risk assessment procedures to evaluate the design of controls relevant to an audit of financial statements and to determine whether they have been implemented. We will use such knowledge to: Identify types of potential misstatements. Consider factors that affect the risks of material misstatement. > Design tests of controls, when applicable, and substantive procedures. We will not express an opinion on the effectiveness of internal control over financial reporting or compliance with laws, regulations, and provisions of contracts or grant programs. For audits done in accordance with Government Auditing Standards, our report will include a paragraph that states that the purpose of the report is solely to describe the scope of testing of internal control over financial reporting and compliance and the result of that testing and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance and that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering internal control over financial reporting and compliance. The paragraph will also state that the report is not suitable for any other purpose. c. The concept of materiality recognizes that some matters, either individually or in the aggregate, are important for fair presentation of financial statements in conformity with generally accepted accounting principles while other matters are not important. In performing the audit, we are concerned with matters that, either individually or in the aggregate, could be material to the financial statements. Our responsibility is to plan and perform the audit to obtain reasonable assurance that material misstatements, whether caused by errors or fraud, are detected. d. We address the significant risks of material noncompliance, whether due to fraud or error, through our detailed audit procedures. Page 4 Page 119 of 167

120 TWO WAY COMMUNICATION REGARDING YOUR AUDIT (cont.) e. We will obtain an understanding of the five components of internal control sufficient to assess the risk of material noncompliance related to the federal and state awards whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures. We will obtain a sufficient understanding by performing risk assessment procedures to evaluate the design of controls relevant to an audit of the federal and state awards and to determine whether they have been implemented. We will use such knowledge to: Identify types of potential noncompliance. Consider factors that affect the risks of material noncompliance. Design tests of controls, when applicable, and other audit procedures. Our audit will be performed in accordance with U.S. generally accepted auditing standards, Government Auditing Standards, OMB s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and the State Single Audit Guidelines. We will not express an opinion on the effectiveness of internal control over financial reporting or compliance with laws, regulations, and provisions of contracts or grant programs. For audits done in accordance with Government Auditing Standards, the Uniform Guidance, and the State Single Audit Guidelines, our report will include a paragraph that states that the purpose of the report is solely to describe (a) the scope of testing of internal control over financial reporting and compliance and the result of that testing and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance, (b) the scope of testing internal control over compliance for major programs and major program compliance and the result of that testing and to provide an opinion on compliance but not to provide an opinion on the effectiveness of internal control over compliance and, (c) that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering internal control over financial reporting and compliance and the Uniform Guidance and the State Single Audit Guidelines in considering internal control over compliance and major program compliance. The paragraph will also state that the report is not suitable for any other purpose. f. The concept of materiality recognizes that some matters, either individually or in the aggregate, are important for reporting material noncompliance while other matters are not important. In performing the audit, we are concerned with matters that, either individually or in the aggregate, could be material to the entity s federal and state awards. Our responsibility is to plan and perform the audit to obtain reasonable assurance that material noncompliance, whether caused by error or fraud, is detected. g. Your financial statements contain a component, as defined by auditing standards generally accepted in the United States of America, which we also audit. We are very interested in your views regarding certain matters. Those matters are listed here: a. We typically will communicate with your top level of management unless you tell us otherwise. b. We understand that the county has the responsibility to oversee the strategic direction of your organization, as well as the overall accountability of the entity. Management has the responsibility for achieving the objectives of the entity. c. We need to know your views about your organization s objectives and strategies, and the related business risks that may result in material misstatements. Page 5 Page 120 of 167

121 TWO WAY COMMUNICATION REGARDING YOUR AUDIT (cont.) d. Which matters do you consider warrant particular attention during the audit, and are there any areas where you request additional procedures to be undertaken? e. Have you had any significant communications with regulators or grantor agencies? f. Are there other matters that you believe are relevant to the audit of the financial statements or the federal or state awards? Also, is there anything that we need to know about the attitudes, awareness, and actions of the county concerning: a. The county s internal control and its importance in the entity, including how those charged with governance oversee the effectiveness of internal control? b. The detection or the possibility of fraud? We also need to know if you have taken actions in response to developments in financial reporting, laws, accounting standards, governance practices, or other related matters, or in response to previous communications with us. With regard to the timing of our audit, here is some general information. We do preliminary financial audit work during the months of October-December and sometimes early January. Our final financial fieldwork is scheduled during the spring to best coincide with your readiness and report deadlines. After fieldwork, we wrap up our financial audit procedures at our office and issue drafts of our report for your review. Final copies of our report and other communications are issued after approval by your staff. This is typically 6-12 weeks after final fieldwork, but may vary depending on a number of factors. We typically perform the single audit fieldwork four to six weeks after the financial audit. After single audit fieldwork, we wrap up our single audit procedures at our office and then issue drafts of our report for your review. Final copies of our Report on Federal and State Awards are issued after approval by your staff. This is typically 4-6 weeks after final single audit fieldwork, but may vary depending upon a number of factors. Keep in mind that while this communication may assist us with planning the scope and timing of the audit, it does not change the auditor s sole responsibility to determine the overall audit strategy and the audit plan, including the nature, timing, and extent of procedures necessary to obtain sufficient appropriate audit evidence. We realize that you may have questions on what this all means, or wish to provide other feedback. We welcome the opportunity to hear from you. Page 6 Page 121 of 167

122 COMMUNICATION OF OTHER CONTROL DEFICIENCIES, RECOMMENDATIONS AND INFORMATIONAL POINTS TO MANAGEMENT THAT ARE NOT MATERIAL WEAKNESSES OR SIGNIFICANT DEFICIENCIES Page 122 of 167

123 PRIOR YEAR RECOMMENDATIONS TREASURER S DEPARTMENT The Treasurer s department is responsible for a wide variety of financial responsibilities of the county as defined by state statutes and county policy. One of the primary responsibilities is the collection and custody of cash and investments of the county. We noted the following areas of internal control that could be strengthened during our review of the Treasurer s department: The department does not currently utilize a cash register. It uses a cash drawer that is not always locked and would be accessible to someone being unmonitored at the counter. We recommend that the county determine if a cash register system or more secured collection point could be installed. The county utilizes a tax collection system (Ascent) to record tax collections for current as well as delinquent real estate and property taxes. These collections are then subsequently posted by a manual journal entry into the county s financial accounting system (JD Edwards). This system accounts for all of the delinquent taxes owed to the county, as well as penalties and interest accrued. Transactions posted to the Ascent system are not interfaced with JD Edwards. The need to manually post entries compared to interfacing systems results in weakened controls over the ability to accurately report and safeguard county tax collections. We recommend the county work with its vendor to determine if interfacing these two systems is possible. The wire transfer agreement should be kept up to date when changes in key personnel occur. We noted that this agreement was recently updated during March, We are available to assist the county with any of these recommendations. Status (12/31/17) This recommendation still pertains. Page 7 Page 123 of 167

124 PRIOR YEAR RECOMMENDATIONS (cont.) DECENTRALIZED CASH COLLECTIONS Many governments collect cash at numerous decentralized locations that are separate from the primary system of accounting procedures and controls. The opportunity for theft is often higher at those locations because one person is frequently involved in most, if not all, aspects of a transaction (i.e., lack of segregation of duties). Examples in your government that fit this situation include: Land Information Clerk of Courts Human Services Library Register in Probate County Clerk Highway Jail Parks Management is responsible for designing and implementing controls and procedures to detect and prevent fraud. As a result, we recommend that management review its decentralized cash collection procedures and controls on a periodic basis and make changes as necessary to strengthen the internal control environment. Reviewing the adequacy of the controls is a responsibility of the governing body. Below are example procedures and controls to help mitigate the risk of loss at decentralized cash collection points: Implement a centralized receipting process with adequate segregation of duties For cash collections, ensure pre-numbered receipts are being used and all receipts in the sequence are being reviewed by someone other than the person receipting the cash and receipts tie to deposits Perform surprise procedures at decentralized locations (cash counts, walkthrough of processes, etc.) Require regular cash deposits to minimize collections on-hand Page 8 Page 124 of 167

125 PRIOR YEAR RECOMMENDATIONS (cont.) DECENTRALIZED CASH COLLECTIONS (cont.) Limit the number of separate bank accounts Segregate duties as much as possible the person receipting cash should be separate from the person preparing deposits and the person reconciling bank accounts should be separate from the cash collection activity Perform month-to-month or year-to-year comparisons to look for unusual changes in collections If collecting from a drop box site, consider sending two people to collect the funds, especially during peak times As always, the cost of controls and staffing must be weighed against the benefits of safeguarding your assets. Status (12/31/17) This recommendation still pertains. INFORMATION TECHNOLOGY As part of our 2017 audit, we evaluated information technology controls as they relate to financially significant applications. Our procedures primarily focused on documenting and evaluating general computer controls, including: Logical access to data and applications Change and incident management System development and deployment Data backup and recovery From our review, we have identified the following areas where we recommend controls be reviewed and potentially strengthened. LOGICAL AND PHYSICAL ACCESS SECURITY We noted generic accounts exist within the active directory. All financially impacted applications and the network should have a login and password which is unique for every user and the user name should not be shared by anyone. Also, the user should not have more than one username. Generic, shared, temporary and system accounts should be removed/disabled. Strong passwords are not required for the JD Edwards or Ascent systems. Passwords should be changed every 90 days, require a minimum of 6 characters, require strong (complex) passwords, and password history should be remembered so users can't reuse recent (3-6) previous passwords. Additionally, user accounts should lock after 3-5 failed login attempts. There is no formal periodic review of user access rights for Kronos or Ascent and there is no documentation of the review of user access for JD Edwards or the network. Access should be reviewed once a year by management to ensure users don't have access beyond their job responsibilities (least privilege). The specific access rights/privileges current users have to each system should be reviewed for accuracy. Documentation of these reviews should be retained. Page 9 Page 125 of 167

126 INFORMATION TECHNOLOGY (cont.) LOGICAL AND PHYSICAL ACCESS SECURITY (cont.) Access violations are not being logged and reviewed. The operating system, database, and applications should be monitored to identify any security violations. The county should proactively monitor both internal access on the network and financial applications as well as external access. DATA BACKUP AND RECOVERY Proactive, periodic restores should take place in case the system were to ever crash. A formal disaster recovery process should be developed and periodically tested. Documentation of testing results should be maintained. INFORMATIONAL POINTS CYBER SECURITY Cybersecurity continues to be a top concern and is critical for governments of all sizes and types. Information demands from the board and directors, citizens/customers, investors and analysts, and industry regulators continue to increase which makes it critical to ensure key data is protected. Potential business impacts on security incidents can include: Lost IP Business interruption Regulatory fines and penalties Legal and PR fees Remediation costs Reputation The AICPA has recently developed a cybersecurity risk management reporting framework that includes a new System and Organization Controls (SOC) for Cybersecurity engagement, through which the enterprise-wide cybersecurity risk management program is reviewed. Although not required for governments, this new standard can be used to help the County begin to put in place a cybersecurity program. We recommend reviewing this new standard and performing an initial cyber-risk assessment to identify the types and location of data on your system as well as considering the sensitivity or potential regulations associated with your data. Once this is done the cybersecurity program objectives can be further defined so informed decisions can be made. Our professionals are also available to assist with your cybersecurity questions, assessments, and programs. Page 10 Page 126 of 167

127 INFORMATIONAL POINTS (cont.) GOVERNMENT FRAUD PREVENTION AND DETECTION: VENDOR FRAUD Vendor fraud poses a unique threat to governments. Due to the public and transparent nature of operations, government entities have an increased susceptibility for this type of criminal activity. Since governments publish a significant amount of information online for example, meeting minutes, which often contain vendor names, contract amounts and project status it is easier for fraudsters to create falsified documents. Fraud specialists have noted recent fraud cases where criminals falsified vendor change requests for legitimate vendors, including company addresses and bank account information for Electronic Fund Transfers (EFT). When governments unwittingly process these fraudulent changes, the perpetrators can collect payments on legitimate and approved vendor invoices while legitimate vendors go unpaid. Preventing vendor fraud completely may be impossible; however, governments can go a long way towards protecting themselves by taking appropriate safety and control measures. Help ensure your vendor transactions are secure and authentic by: > Performing a risk assessment that focuses on vendor accounts payable activities. > Periodically revisiting your control activities > Educate your employees on potential fraud schemes > Identify which vendors may be high-risk targets. Our fraud experts are also available to assist with your fraud risk questions, assessments, and programs. GASB UPDATES The Government Accounting Standard Board (GASB) has been very active in recent years, issuing new standards at a fast pace. Over the next few years, your government will have many new standards to evaluate and implement. Here are the standards likely to impact you the most in the upcoming year: GASB 86 provides guidance for accounting for Certain Debt Extinguishment Issues There were two significant GASB statements issued in While the implementation dates for these are a few years away, they are anticipated to have significant impacts on many government financial statements: GASB 84 improves guidance regarding the identification of Fiduciary Activities and how they should be reported, effective for years ending December 31, 2019 GASB 87 improves accounting and financial reporting for Leases, effective for years ending December 31, 2020 Looking even further ahead, the Technical Agenda, below, outlines significant areas GASB is currently working on: Major Projects Financial Reporting Model Revenue and Expense Recognition Page 11 Page 127 of 167

128 INFORMATIONAL POINTS (cont.) GASB UPDATES (cont.) Practice Issues Capitalization of Interest Cost Conduit Debt Debt Disclosures Equity Ownership Issues Implementation Guidance Pre-Agenda Research Going Concern Cloud Computing Note Disclosure reexamination Public-Private Partnerships Social Impact Bonds Through our firm involvement on AICPA committees, Baker Tilly follows these developments closely so that we can help you prepare for the changes as they evolve. This participation also allows us to share with GASB the experiences and perspectives of our clients to potentially influence the direction of future projects. Full lists of projects, as well as many resources, are available on GASB s website which is located at UPCOMING LEASE STANDARD In June 2017, the Governmental Accounting Standards Board (GASB) issued new guidance to establish a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. This standard is effective for fiscal years ending on or after December 31, Statement No. 87, Leases, requires recognition of certain lease assets and liabilities for leases that were previously classified as operating leases and recognize as inflows of resources or outflow of resources based on the payment provisions of the contract. Under the new standard a lease is defined as a contract that conveys control of the right to use another entity s nonfinancial asset (underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Control is defined by 1) the right to obtain the present service capacity from the use of the underlying asset and 2) the right to determine the nature and manner of use of the underlying asset. Any contract that meets this definition should be accounted for under the lease guidance, unless specifically excluded in this statement. Leases include contracts that, although not explicitly identified as leases, meet the above definition of a lease. The following are contract exclusions and exceptions from applying lease accounting: Intangible assets (mineral rights, patents, software, copyrights) Biological assets (including timber, living plants, and living animals) Service concession arrangements (See GASB Statement 60) Assets financed with outstanding conduit debt unless both the asset and conduit debt are reported by lessor Supply contracts (such as power purchase agreements that do not convey control of the right to use the underlying power generating facility) Page 12 Page 128 of 167

129 INFORMATIONAL POINTS (cont.) UPCOMING LEASE STANDARD (cont.) Inventory Short-term leases - max possible term 12 months or less Leases that transfer ownership and do not contain termination options Leases of assets that are investments Certain regulated leases (e.g., airport-airline agreements) We recommend the Country review this standard and start planning how this will affect your financial reporting. An inventory of all contracts that might meet the definition of a lease should be started. The contract listing should include key terms of the contracts such as: Description of contract Underlying asset Contract term Options for extensions and terminations Service components, if any Dollar amount of lease In addition, the County should begin to establish a lease policy to address the treatment of common lease types, including a dollar threshold for each lease. We are available to discuss this further and help you develop an action plan. NEW REPORTING REQUIREMENTS FOR FIDUCIARY ACTIVITIES In January 2017, the Governmental Accounting Standards Board (GASB) issued new guidance to address how governments report fiduciary activities which is effective for fiscal years ending on or after December 31, Statement No. 84, Fiduciary Activities, supersedes reporting of agency funds and replaces it with a newly coined custodial fund, and requires several additional reporting requirements for fiduciary funds. Under current guidance, Statement 34 requires that governments report fiduciary activities in fiduciary funds, but that statement does not provide a clear definition of what constitutes a fiduciary activity. GASB sought to reduce inconsistencies in reporting and provide a clear foundation for future reporting. The new guidance will impact a significant amount of local governments. Many local governments have activities that may be considered fiduciary, including: Student activity funds of a school district Tax collection funds Circuit court fund of a municipality or county Jail inmate accounts Nursing home patient accounts Cemetery trust funds Page 13 Page 129 of 167

130 INFORMATIONAL POINTS (cont.) NEW REPORTING REQUIREMENTS FOR FIDUCIARY ACTIVITIES (cont.) Postemployment benefit plans Under the recently issued Statement 84, governments will need to apply specific criteria to determine if a fiduciary activity exists. The criteria focuses on determining if a government is controlling the assets of the potential fiduciary activity and determining who the beneficiaries are. A few of the major changes that will impact many governments include: Pension/OPEB Plans as Fiduciary Component Units: Pension and other postemployment benefit (OPEB) plans will need to be evaluated to determine if they meet the fiduciary component unit criteria. Other Fiduciary Activities: There are various other types of assets that a government controls which will need to be evaluated under the new standard. Part of this evaluation will include identification of the beneficiary of the funds, consideration of how the assets are derived and the extent of administrative or direct financial involvement with the assets. The following is a summary of two significant changes in the reporting requirements: The standard requires that governments recognize a liability to the beneficiaries in a fiduciary fund only when an event has occurred that compels the government to disburse fiduciary resources. Presentation of additions and deductions on the statement of changes in fiduciary net position for all fiduciary funds, including custodial funds The time to start assessing your government s fiduciary activities is approaching. Start with reading the new statement and reviewing the non-authoritative flowchart provided by GASB in the appendix of the statement. This will give you an understanding of the new criteria and requirements and help you identify the fiduciary reporting changes that will impact your financial statements. GOVERNMENT FRAUD PREVENTION AND DETECTION When it comes to preventing and detecting fraud in government, being proactive is critical. In fact, government is the second most likely industry to be impacted by fraud. According to the audit standards, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. To get started, your government should conduct a fraud risk assessment to identify where and how fraud might occur and what individuals may be in a position to commit fraud. Once you ve identified your entity s fraud risk areas, the next step is to develop a fraud risk assessment and investigation policy. As you begin your fraud risk assessment or develop tools to prevent and detect fraud, it is important to keep in mind the following information provided by the Association of Certified fraud Examiners: > Misappropriation of assets accounts for 80 percent of fraud > The primary internal control weaknesses observed are lack of internal controls, lack of management review, override of existing internal controls and poor tone at the top Page 14 Page 130 of 167

131 INFORMATIONAL POINTS (cont.) GOVERNMENT FRAUD PREVENTION AND DETECTION (cont.) > A tip is the most effective tool to catch a fraudster followed by management review > The professional requirements and objectives of a financial audit are different than a forensic audit. Due to the nature of a financial audit, less than 10 percent of frauds have been discovered as a result of a financial audit conducted by an independent accounting firm. The County has not gone through a formal fraud risk assessment and does not have a plan to prevent and detect fraud. We recommend that this be done and then updated on a regular basis. Page 15 Page 131 of 167

132 REQUIRED COMMUNICATIONS BY THE AUDITOR TO THOSE CHARGED WITH GOVERNANCE Page 132 of 167

133 To the Honorable Members of the Board of Supervisors Shawano County Shawano, Wisconsin Thank you for using Baker Tilly Virchow Krause, LLP as your auditor. We have completed our audit of the financial statements of Shawano County for the year ended December 31, 2017, and have issued our report thereon dated June 26, This letter presents communications required by our professional standards. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA, GOVERNMENT AUDITING STANDARDS, THE UNIFORM GUIDANCE AND THE STATE SINGLE AUDIT GUIDELINES The objective of a financial statement audit is the expression of an opinion on the financial statements. We conducted the audit in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards, OMB s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and the State Single Audit Guidelines. These standards require that we plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements prepared by management with your oversight are free of material misstatement, whether caused by error or fraud. Our audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit does not relieve management or those charged with governance of their responsibilities. We considered Shawano County s internal control over financial reporting 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 Shawano County s internal control over financial reporting. We will consider the internal control over compliance with types of requirements that could have a direct and material effect on a major federal and major state program to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for a major federal and state program and to test and report on internal control over compliance in accordance with the Uniform Guidance and the State Single Audit Guidelines, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. As part of obtaining reasonable assurance about whether Shawano County s financial statements are free of 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 is not an objective of our audit. Also, in accordance with the Uniform Guidance and the State Single Audit Guidelines, we will examine, on a test basis, evidence about Shawano County s compliance with the types of compliance requirements described in the OMB Compliance Supplement and the State Single Audit Guidelines that could have a direct and material effect on each of its major federal and state programs for the purpose of expressing an opinion on Shawano County s compliance with those requirements. While our audit provides a reasonable basis for our opinion on compliance, it does not provide a legal determination on Shawano County s compliance with those requirements. Page 16 Page 133 of 167

134 OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA, GOVERNMENT AUDITING STANDARDS, THE UNIFORM GUIDANCE AND THE STATE SINGLE AUDIT GUIDELINES (cont.) We will issue a separate document which contains the results of our audit procedures to comply with the Uniform Guidance and the State Single Audit Guidelines. OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS Our responsibility does not extend beyond the audited financial statements identified in this report. We do not have any obligation to and have not performed any procedures to corroborate other information contained in client prepared documents, such as official statements related to debt issues. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously communicated to you in our letter about planning matters dated June 26, 2017 and our meeting with you on July 17, QUALITATIVE ASPECTS OF THE ENTITY S SIGNIFICANT ACCOUNTING PRACTICES Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by Shawano County are described in Note I to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during We noted no transactions entered into by Shawano County during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: a. The estimate of the self-insurance claims liability, which is based on a historical claims analysis and report prepared by the insurance actuaries. b. Management s estimate of depreciation expense is based upon estimated useful lives of the related capital asset. c. The estimate of the net pension liability and the deferred outflows and deferred inflows related to pensions, which impact the reported pension expense, are based upon information provided by the Wisconsin Retirement System. Page 17 Page 134 of 167

135 QUALITATIVE ASPECTS OF THE ENTITY S SIGNIFICANT ACCOUNTING PRACTICES (cont.) Accounting Estimates (cont.) We evaluated the key factors and assumptions used to develop all of these estimates in determining that they are reasonable in relation to the financial statements taken as a whole. Financial Statement Disclosures The disclosures in the notes to the financial statements are neutral, consistent, and clear. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing our audit. CORRECTED AND UNCORRECTED MISSTATEMENTS Professional standards require us to accumulate all known and likely misstatement identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. The following is a summary of material financial statement misstatements (audit adjustments): Amount To record lease payable in leased vehicle fund $ 267,140 To adjust Highway fund for GASB ,509 To reclassify fund balance amounts within the general fund 1,396,452 To adjust receivable and deferred revenue for landfill in debt service fund 266,760 In addition, we prepared GASB No. 34 conversion entries which are summarized in the Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position and the Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities in the financial statements. DISAGREEMENTS WITH MANAGEMENT For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditors report. We are pleased to report that no such disagreements arose during the course of our audit. Page 18 Page 135 of 167

136 CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters. If a consultation involves application of an accounting principle to the governmental unit s financial statements or a determination of the type of auditors opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter. This letter follows this required communication. INDEPENDENCE We are not aware of any relationships between Baker Tilly Virchow Krause, LLP and Shawano County that, in our professional judgment, may reasonably be thought to bear on our independence. Relating to our audit of the financial statements of Shawano County for the year ended December 31, 2017, Baker Tilly Virchow Krause, LLP hereby confirms that we are, in our professional judgment, independent with respect to the county in accordance with the Code of Professional Conduct issued by the American Institute of Certified Public Accountants, and provided no services to Shawano County other than audit services provided in connection with the audit of the current year s financial statements and nonaudit services which in our judgment do not impair our independence. Financial statement preparation Adjusting journal entries Tax 16 preparation Data collection form preparation None of these nonaudit services constitute an audit under generally accepted auditing standards, including Government Auditing Standards. OTHER AUDIT FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as Shawano County s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. OTHER MATTERS We applied certain limited procedures to the required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. Page 19 Page 136 of 167

137 OTHER MATTERS (cont.) We were engaged to report on the supplementary information which accompanies the financial statements but is not RSI. With respect to the supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. RESTRICTION ON USE This information is intended solely for the use of the County Board and management and is not intended to be, and should not be, used by anyone other than the specified parties. We welcome the opportunity to discuss the information included in this letter and any other matters. Thank you for allowing us to work with you. Madison, Wisconsin June 26, 2018 Page 20 Page 137 of 167

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