BELTRAMI COUNTY BEMIDJI, MINNESOTA BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2017

Transcription

1 BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2017

2 TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2017 INTRODUCTORY SECTION ORGANIZATION 1 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 2 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) 5 BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET POSITION 17 STATEMENT OF ACTIVITIES 18 FUND FINANCIAL STATEMENTS BALANCE SHEET GOVERNMENTAL FUNDS 19 RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT-WIDE STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES 21 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 22 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES GOVERNMENTAL ACTIVITIES 24 STATEMENT OF NET POSITION INTERNAL SERVICE FUND 25 STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN FUND NET POSITION - INTERNAL SERVICE FUND 26 STATEMENT OF CASH FLOWS INTERNAL SERVICE FUND 27 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS 28 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION INVESTMENT TRUST FUND 29 NOTES TO THE FINANCIAL STATEMENTS 30 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A SCHEDULE OF THE COUNTY S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY 78 SCHEDULE OF THE COUNTY CONTRIBUTIONS 79 BUDGETARY COMPARISON SCHEDULE GENERAL FUND 80 BUDGETARY COMPARISON SCHEDULE ROAD AND BRIDGE SPECIAL REVENUE FUND 83 BUDGETARY COMPARISON SCHEDULE HEALTH AND HUMAN SERVICES SPECIAL REVENUE FUND 84 BUDGETARY COMPARISON SCHEDULE FORFEITED TAX SPECIAL REVENUE FUND 85

3 TABLE OF CONTENTS (CONTINUED) YEAR ENDED DECEMBER 31, 2017 FINANCIAL SECTION (CONTINUED) REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A (CONTINUED) BUDGETARY COMPARISON SCHEDULE SOLID WASTE SPECIAL REVENUE FUND 86 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 87 SUPPLEMENTARY INFORMATION DESCRIPTIONS OF FUNDS 88 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS 91 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS 93 COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS 95 SCHEDULE OF INTERGOVERNMENTAL REVENUE 100 REPORTS RELATED TO GOVERNMENT AUDITING STANDARDS AND SINGLE AUDIT INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 102 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE 104 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 107 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 122 INDEPENDENT AUDITORS REPORT ON MINNESOTA LEGAL COMPLIANCE 124

4

5 INTRODUCTORY SECTION

6

7 ORGANIZATION DECEMBER 31, 2017 Elected Term Expires Commissioners Chair Tim Sumner District 4 January 2021 Vice-Chair Richard Anderson District 3 January 2019 Commissioner Keith Winger District 1 January 2019 Commissioner Reed Olson District 2 January 2021 Commissioner Jim Lucachick District 5 January 2021 County Attorney - Interim David Frank January 2019 County Auditor-Treasurer JoDee Treat January 2019 County Sheriff Phil Hodapp January 2019 Appointed Administrator Kay Mack Indefinite Assessor Joseph Skerik December 2020 Engineer Bruce Hasbargen June 2018 Coroner Dr. Roberta Zimmerman Indefinite Health and Human Services Director Rebecca Secore Indefinite Environmental Services Director Brent Rud Indefinite County Recorder Charlene Sturk Indefinite (1)

8 This Page Has Been Intentionally Left Blank.

9 FINANCIAL SECTION

10

11 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of County Commissioners Beltrami County Bemidji, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Beltrami County, Minnesota (the County), as of and for the year ended December 31, 2017, and the related notes of the financial statements, which collectively comprise the 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 relevant to the 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 the 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. (2)

12 Board of County Commissioners Beltrami County Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the County 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 management s discussion and analysis, budgetary comparison information, the schedule of the County s proportionate share of the net pension liability, and the schedule of the County contributions, 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County s basic financial statements. The supplementary information listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is also presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary information and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information, and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. (3)

13 Board of County Commissioners Beltrami County Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 30, 2018, on our consideration of the 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 solely to describe the scope of our 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 Beltrami County s 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 Beltrami County s internal control over financial reporting and compliance. CliftonLarsonAllen LLP Brainerd, Minnesota July 30, 2018 (4)

14 This Page Has Been Intentionally Left Blank.

15 REQUIRED SUPPLEMENTARY INFORMATION

16

17 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 This section of Beltrami County s (the County) annual financial report presents our discussion and analysis of the County s financial performance during the fiscal year ended December 31, The Management s Discussion and Analysis (MD&A) is Required Supplementary Information specified in the Governmental Accounting Standard Board s (GASB) Statement No. 34. Certain comparative information between the current year, 2017, and the prior year, 2016, is required to be presented in the MD&A. FINANCIAL HIGHLIGHTS Key financial highlights for the fiscal years include the following: County-wide net position increased 3.3% from the prior year; this is primarily due to an increase in tax revenues, and increase in operating capital grants and an increase in State Aid. Overall fund-level revenues totaled $77,560,944 and were $8,571,598 less than expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS The financial section of the annual report consists of four parts Independent Auditors Report, required supplementary information which includes the management s discussion and analysis (this section), the basic financial statements, and supplementary information. The basic financial statements include two kinds of statements that present different views of the County: The first two statements are County-wide financial statements which provide both short-term and long-term information about the County s overall financial status. The remaining statements are fund financial statements which focus on individual parts of the County, reporting the County s operations in more detail than the County-wide statements. The governmental funds statements tell how basic services such as general government, human services, and highways and streets were financed in the short-term, as well as what remains for future spending. Fiduciary funds statements provide information about the financial relationships in which the County acts solely as a trustee or agent for the benefit of others to whom the resources belong. The internal service fund statements provide information about the County s short-term disability self-insurance fund. (5)

18 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) The financial statements also include notes that explain some of the information in the statements and provide more detailed data. Figure A-1 shows how the various parts of this annual report are arranged and related to one another. Figure A-1 Annual Report Format (6)

19 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Figure A-2 summarizes the major features of the County s financial statements, including the portion of the County s activities they cover and the types of information they contain. The remainder of this overview section of management s discussion and analysis highlights the structure and contents of each of the statements. Figure A-2. Major Features of the County s Government-Wide and Fund Financial Statements Type of Statements Scope Required Financial Statements Accounting Basis and Measurement Focus Type of Asset and Deferred Outflows of Resources/Liability and Deferred Inflows of Resources Information Type of Inflow/Outflow Information Government-Wide Governmental Funds Fiduciary Funds Entire County s government (except fiduciary funds). Statement of net position. Statement of activities. Accrual accounting and economic resources focus. All assets, deferred outflows of resources, liabilities, and deferred inflows of resources, both financial and capital, short-term and longterm. All revenues and expenses during year, regardless of when cash is received or paid. The activities of the County that are not proprietary or fiduciary. Balance sheet. Statement of revenues, expenditures and changes in fund balances. Modified accrual accounting and current financial resources focus. Only assets and deferred outflows of resources expected to be used up and liabilities and deferred inflows of resources that come due during the year or soon thereafter, no capital assets included. Revenues for which cash is received during or soon after the end of the year, expenditures when goods or services have been received and payment is due during the year or soon thereafter. Instances in which the County is the trustee or agent for someone else s resources. Statement of fiduciary net position. Statement of changes in fiduciary net position. Accrual accounting and economic resources focus. All assets, deferred outflows of resources, liabilities, and deferred inflows of resources, both short-term and long-term, agency funds do not currently contain capital assets, although they can. All revenues and expenses during year, regardless of when cash is received or paid. COUNTY-WIDE STATEMENTS The County-wide statements report information about the County as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the County s assets, deferred outflows of resources, liabilities and deferred inflows of resources. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. Two County-wide statements report the County s net position and how they have changed. Net position the difference between the County s assets and deferred outflows of resources and liabilities and deferred inflows of resources is one way to measure the County s financial health or position. Over time, increases or decreases in the County s net position are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the overall health of the County, you need to consider additional non-financial factors such as changes in the County s property tax base and the condition of County buildings and other facilities. (7)

20 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 COUNTY-WIDE STATEMENTS (CONTINUED) In the County-wide financial statements the County s activities are shown in one category: Governmental activities The County s basic services are included here. Property taxes and state aids finance most of these activities. FUND FINANCIAL STATEMENTS The fund financial statements provide more detailed information about the County s funds focusing on its most significant or major funds not the County as a whole. Funds are accounting devices the County uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by state law and by bond covenants. The County establishes other funds to control and manage money for particular purposes (e.g., repaying its long-term debts) or to show that it is properly using certain revenues (e.g., federal grants). THE COUNTY HAS THREE KINDS OF FUNDS: Governmental funds The County s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps to determine whether there are more or fewer financial resources that can be spent in the near future to finance the County s programs. Because this information does not encompass the additional long-term focus of the County-wide statements, we provide additional information at the bottom of the governmental funds statements that explain the relationship (or differences) between them. Internal service funds The County uses this fund to manage the short-term disability selfinsurance activities. Fiduciary funds The County is the fiscal agent, or fiduciary, for assets that belong to others. The County is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. All of the County s fiduciary activities are reported in a separate statement of fiduciary net position. We exclude these activities from the County-wide financial statements because the County cannot use these assets to finance its operations. (8)

21 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 FINANCIAL ANALYSIS OF THE COUNTY AS A WHOLE NET POSITION The County s net position was $168,927,321 on December 31, 2017 (see Table A-1). Table A-1 The County's Net Position Governmental Activities Percentage Change Current and Other Assets $ 41,393,732 $ 42,096,028 (1.7)% Capital Assets 171,315, ,908, Total Assets 212,709, ,004, Deferred Outflows of Resources 10,798,058 17,738,054 (39.1) Current Liabilities 10,404,199 6,783, Long-Term Liabilities 35,194,477 44,745,818 (21.3) Total Liabilities 45,598,676 51,529,057 (11.5) Deferred Inflows of Resources 8,981,228 2,638, Net Position Net Investment in Capital Assets 156,990, ,910, Restricted 7,932,030 7,206, Unrestricted 4,004,829 10,457,876 (61.7) Total Net Position $ 168,927,321 $ 163,575, (9)

22 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 FINANCIAL ANALYSIS OF THE COUNTY AS A WHOLE (CONTINUED) CHANGES IN NET POSITION The County-wide total revenues were $79,484,051 for the year ended December 31, Property taxes and intergovernmental revenues accounted for 81.7% of total revenue for the year. (See Table A- 2). Table A-2 Change in Net Position Revenues Program Revenues Charges for Services 13,217,434 Governmental Activities for the fiscal year ended December 31, Total % Change $ $ 12,999, % Operating Grants and Contributions 21,067,097 20,121, Capital Grants and Contributions 5,835,286 5,175, General Revenues Taxes 28,765,047 27,898, Unrestricted State Aid 9,261,910 8,598, Investment Earnings 416, , Other 920, ,304 (1.7) Total Revenues 79,484,051 75,981, Expenses General Government 11,966,841 11,933, Public Safety 12,559,631 9,802, Highways and Streets 8,971,008 10,151,527 (11.6) Sanitation 5,230,657 3,759, Human Services 29,253,733 28,308, Health 2,112,436 2,416,132 (12.6) Culture and Recreation 1,157,876 2,157,307 (46.3) Conservation of Natural Resources 2,137,660 1,758, Economic Development 458, , Interest and Fiscal Charges on Long-Term Liabilities 283, , Total Expenses 74,132,288 70,949, Change in Net Position 5,351,763 5,032, Net Position - Beginning of Year 163,575, ,543, Net Position - End of Year $ 168,927,321 $ 163,575, Total revenues surpassed expenses, increasing net position $5,351,763 over last year. (10)

23 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 FINANCIAL ANALYSIS OF THE COUNTY AS A WHOLE (CONTINUED) CHANGES IN NET POSITION (CONTINUED) The County-wide cost of all governmental activities this year was $74,132,288. Some of the cost was paid by the users of the County s programs ($13,217,434). The federal and state governments subsidized certain programs with grants and contributions ($26,902,383). Most of the County s remaining costs ($34,012,471), however, were paid for by County taxpayers and the taxpayers of our state. This portion of governmental activities was paid for with $28,765,047 of property and other taxes, $9,261,910 of state aid, and with investment earnings and other general revenues. Figure A-3 Sources of County's Revenues for Fiscal 2017 Investment Earnings 1% Unrestricted State Aid 12% Other 1% Charges for Services 17% Operating Grants and Contributions 26% Property Taxes 36% Capital Grants and Contributions 7% (11)

24 This Page Has Been Intentionally Left Blank.

25 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 FINANCIAL ANALYSIS OF THE COUNTY AS A WHOLE (CONTINUED) CHANGES IN NET POSITION (CONTINUED) Figure A-4 County's Expenses for Fiscal 2017 Culture and Recreation 1% Health 3% Conservation of Natural Resources 3% Economic Development 1% Interest and Fiscal Services 1% General Government 16% Human Services 39% Sanitation 7% Highways and Streets 12% Public Safety 17% Table A-3 Change in Net Position Total Cost of Services Percentage Net Revenue (Cost) Percentage Change Change General Government $ 11,966,841 $ 11,933, % $ (8,732,156) $ (8,455,708) (3.3)% Public Safety 12,559,631 9,802, (11,196,423) (8,310,548) (34.7) Highways and Streets 8,971,008 10,151,527 (11.6) 1,191,806 (946,591) Sanitation 5,230,657 3,759, (589,304) 234,510 (351.3) Human Services 29,253,733 28,308, (14,952,001) (13,441,475) (11.2) Health 2,112,436 2,416,132 (12.6) 1,509,986 (111,803) Culture and Recreation 1,157,876 2,157,307 (46.3) (1,043,713) (2,024,756) 48.5 Conservation of Natural Resources 2,137,660 1,758, ,780 1,066,004 (49.2) Economic Development 458, , (458,613) (393,513) (16.5) Interest and Fiscal Charges on Long-Term Liabilities 283, , (283,833) (268,505) (5.7) Total $ 74,132,288 $ 70,949,127 $ (34,012,471) $ (32,652,385) (12)

26 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 FINANCIAL ANALYSIS OF THE COUNTY AT THE FUND LEVEL The financial performance of the County as a whole is reflected in its governmental funds as well. As the County completed the year, its governmental funds reported a combined fund balance of $28,269,939. Revenues for the County s governmental funds were $77,560,944 while total expenditures were $86,132,542. The County s total fund balance at year end shows a decrease of $5,997,669 before the adjustment for an increase in inventory. GENERAL FUND The General Fund includes the primary operations of the County in providing services to citizens and some capital outlay projects. The following schedule presents a summary of General Fund Revenues: Table A-4 General Fund Revenues December 31, 2017 Year Ended December 31, 2016 Change Increase (Decrease) Fund Percent Taxes $ 11,194,057 $ 10,765,572 $ 428, % Intergovernmental 7,102,059 7,385,544 (283,485) (3.8) Charges for Services 2,324,158 2,485,508 (161,350) (6.5) Investment Earnings 413, , , Miscellaneous and Other 1,402,790 1,454,376 (51,586) (3.5) Total General Fund Revenue $ 22,436,715 $ 22,342,847 $ 93, Total General Fund revenue increased by $93,868, or 0.4%, from the previous year. This increase is primarily attributed to an increase in tax revenues. (13)

27 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 FINANCIAL ANALYSIS OF THE COUNTY AT THE FUND LEVEL (CONTINUED) GENERAL FUND (CONTINUED) The following schedule presents a summary of General Fund Expenditures: Table A-5 General Fund Expenditures Year Ended Change December 31, December 31, Increase (Decrease) Percent General Government $ 10,899,680 $ 10,665,138 $ 234, % Public Safety 10,545,405 10,180, , Culture and Recreation 746,620 1,011,889 (265,269) (26.2) Economic Development 8,157 15,587 (7,430) (47.7) Total Expenditures $ 22,199,862 $ 21,873,020 $ 326, The General Fund had total fund balance of $17,048,361 at the end of the current fiscal year. The fund balance of the General Fund decreased $2,363,642 during the current fiscal year. OTHER MAJOR FUNDS ANALYSIS The Road and Bridge Fund had total fund balance of $2,369,976 at the end of the current fiscal year. The fund balance of the Road and Bridge Fund decreased $4,354,689, before the adjustment for the change in inventory. The decrease in fund balance during the current fiscal year was primarily due to additional road projects in The Human Services Fund had total fund balance of $19,728 at the end of the current fiscal year. The General Revenue Fund transferred $3,025,000 from reserves to cover the shortfall in Human Services Fund. These additional expenditures are primarily related to foster care out of home placements. The Forfeited Tax Fund had total fund balance of $1,945,694 at the end of the current fiscal year. The fund balance of the Forfeited Tax Fund increased $470,815 due to timing of cash flow due to flowthrough grant dollars and additional charges for services. The Solid Waste Fund had total fund balance of $2,090,616 at the end of the current fiscal year. The fund balance of the Solid Waste Fund increased $745,738 during the current fiscal year primarily due to a grant received for $1,600,000 related to transfer station construction. The Debt Service Fund had total fund balance of $636,087 at the end of the current fiscal year. The fund balance of the Debt Service Fund decreased $232,541 during the current fiscal year primarily due to scheduled repayments of outstanding debt. The Capital Projects Fund had total fund balance of $1,587,275 at the end of the current fiscal year. The fund balance of the Capital Project Fund increased $70,676 during the current fiscal year. (14)

28 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 GENERAL FUND BUDGETARY HIGHLIGHTS Actual revenues were $58,389 less than expected primarily due to less grants received than were budgeted for. The actual expenditures were $612,497 less than budget due mostly to costs containment in many County departments. The County did not have any budget amendments to the General Fund in CONSTRUCTION PROJECTS AND DEBT SERVICE The Capital Projects Fund has historically received $280,000 from the PILT distribution, to be used for one-time capital improvements. In 2017, the County continued improvements out of the Capital Projects Fund for the courtroom remodel project. An annual levy is made to fund the bond payments for all previous bond issues. CAPITAL ASSETS By the end of 2017, the County had invested approximately $237,000,000 in a broad range of capital assets, including buildings, computers, equipment, and infrastructure. (See Table A-6). (More detailed information about capital assets can be found in Note 3.A.3 to the financial statements.) Total depreciation expense for the year was $5,302,425. Table A-6 The County's Capital Assets Percentage Change Land $ 3,180,770 $ 3,198,770 (0.6)% Right of Way 2,333,210 2,084, Construction-in-Progress 19,138,088 12,685, Infrastructure 141,994, ,453, Buildings 49,856,118 48,250, Improvements Other than Buildings 623, ,808 - Machinery, Equipment, and Vehicles 19,647,731 17,409, Less: Accumulated Depreciation (65,458,836) (60,796,953) 7.7 Total $ 171,315,435 $ 157,908, (15)

29 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2017 LONG-TERM LIABILITIES At year-end, the County had $36,714,586 in long-term liabilities (including portions due within one year) outstanding. Additional information on the County s long-term liabilities is presented in Note 3.C.2. Table A-7 The County's Long-Term Liabilities Percentage Change General Obligation Bonds $ 10,770,000 $ 9,045, % Revenue Bonds Payable 2,745,000 3,160,000 (13.1) Compensated Absences Payable 2,215,266 2,147, Net Pension Liability 20,984,320 31,620,435 (33.6) Total $ 36,714,586 $ 45,972,638 (20.1) FACTORS BEARING ON THE COUNTY S FUTURE AND 2017 BUDGET The County is dependent on the State of Minnesota for a significant portion of its revenue. Recent experience demonstrates that the legislature may decrease revenues in the future. The County has positioned itself, through managed attrition, for the expected reductions. The County will continue to review its Capital Improvement Plan with particular focus on the Highway Department s construction plans and projects. The County has set the 2018 expenditure budget at $89,099,550 an increase of 8.9% over the 2017 expenditure budget. The majority of that increase is due to an increase in Highway projects funded by Beltrami County Sales & Use Tax, State funding and Federal funding. The County is in the fourth year full of the.5% Local Transit Sales and Use Tax. It continues to inject significant money into the infrastructure recognized in the Accelerated Road Improvement plan. Starting in 2015, the State of Minnesota passed legislation approving Beltrami County to receive an additional $3,000,000 per year for the next ten years in order to assist the County in their local costs incurred for tribal out of home foster care placements. Even with the infusion of this funding, the County s Fund Balance continues to erode. The Department of Human Services, Red Lake Nation and Beltrami County continue to work jointly on a solution. CONTACTING THE COUNTY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the County s finances and to demonstrate the County s accountability for the money it receives. If you have questions about this report or need additional financial information, contact JoDee Treat, County Auditor Treasurer at (218) (16)

30 This Page Has Been Intentionally Left Blank.

31 BASIC FINANCIAL STATEMENTS

32

33 GOVERNMENT-WIDE FINANCIAL STATEMENTS

34

35 STATEMENT OF NET POSITION DECEMBER 31, 2017 Governmental Activities ASSETS Cash and pooled investments $ 29,931,252 Petty cash and change funds 14,525 Undistributed cash with agency fund 1,025,000 Taxes receivable - delinquent 662,771 Special assessments receivable - delinquent 273,023 Accounts receivable - net 1,626,462 Accrued interest receivable 164,441 Due from other governments 6,670,331 Inventories 1,006,733 Prepaid items 19,194 Nondepreciable capital assets Land 3,180,770 Right of way 2,333,210 Construction in progress 19,138,088 Depreciable capital assets Infrastructure (net) 104,236,279 Buildings (net) 34,695,999 Improvements other than buildings (net) 474,197 Machinery, vehicles, furniture, equipment (net) 7,256,892 Total assets 212,709,167 DEFERRED OUTFLOWS OF RESOURCES Refunding loss on bonds 338,872 Pension related 10,459,186 Total deferred outflows of resources 10,798,058 LIABILITIES Accounts payable 2,977,817 Salaries payable 1,499,502 Contracts payable 992,428 Due to other governments 751,698 Accrued interest payable 84,191 Unearned revenue 1,397,036 Compensated absences payable - Due within one year 221,527 General obligation bonds payable - Due within one year 1,030,000 Revenue bonds payable - Due within one year 425,000 Compensated absences payable - Due in more than one year 1,993,739 General obligation bonds payable - Due in more than one year 9,891,384 Revenue bonds payable - Due in more than one year 2,325,034 Net pension liability - Due in more than one year 20,984,320 Total liabilities 44,573,676 DEFERRED INFLOWS OF RESOURCES Property taxes collected for subsequent period 1,025,000 Pension related 8,981,228 10,006,228 NET POSITION Net investment in capital assets 156,990,462 Restricted for Recorder equipment 67,377 HAVA 84,833 E911 69,609 Missing heirs 41,770 Natural resource development 2,955,756 Debt service 576,865 Consolidated conservation 1,099,123 Economic development 591,941 Law library 56,504 Transportation 2,307,589 Aquatic invasive species 67,440 Other purposes 13,223 Unrestricted 4,004,829 Total net position $ 168,927,321 See accompanying notes to the financial statements. (17)

36 STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2017 FUNCTION/PROGRAMS Net (Expense) Revenue and Program Revenues Operating Capital Changes in Net Position Fees, Charges, Grants and Grants and Governmental Expenses Fines, and Other Contributions Contributions Activities Governmental activities General government $ 11,966,841 $ 2,313,625 $ 921,060 $ - $ (8,732,156) Public safety 12,559, , ,950 - (11,196,423) Highways and streets 8,971,008 1,019,955 3,341,216 5,801,643 1,191,806 Sanitation 5,230,657 4,641, (589,304) Human services 29,253,733 1,071,785 13,229,947 - (14,952,001) Health 2,112,436 1,143,320 2,479,102-1,509,986 Culture and recreation 1,157,876 7, ,413 - (1,043,713) Conservation of natural resources 2,137,660 2,298, ,409 33, ,780 Economic development 458, (458,613) Interest 283, (283,833) Total governmental activities $ 74,132,288 $ 13,217,434 $ 21,067,097 $ 5,835,286 $ (34,012,471) General revenues Property taxes $ 21,357,350 Transit sales and use tax 3,464,056 Mortgage registry and deed tax 1,211,935 Payments in lieu of tax 2,731,706 Grants and contributions not restricted to specific programs 9,261,910 Unrestricted investment earnings 416,445 Miscellaneous 920,832 Total general revenues 39,364,234 Change in net position 5,351,763 Net position - beginning of year 163,575,558 Net position - end of year $ 168,927,321 See accompanying notes to the financial statements. (18)

37 FUND FINANCIAL STATEMENTS

38 BALANCE SHEET GOVERNEMENTAL FUNDS DECEMBER 31, 2017 Health and Road and Human General Bridge Services ASSETS Cash and pooled investments $ 19,120,566 $ 1,542,603 $ 288,992 Petty cash and change funds 5,950-8,150 Undistributed cash with agency fund 492, , ,000 Taxes receivable Delinquent 305,440 97, ,666 Special assessments Noncurrent Accounts receivable 61,265 11,316 54,027 Allowance for doubtful accounts Accrued interest receivable 164, Due from other funds 94,034 18,938 - Due from other governments 417,093 3,600,449 2,336,214 Prepaid items 19, Inventories - 1,006,733 - Total assets $ 20,679,983 $ 6,400,628 $ 3,272,049 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts payable $ 202,573 $ 240,875 $ 2,002,064 Salaries payable 737, , ,862 Contracts payable - 849,710 - Due to other funds 10,402-94,034 Due to other governments 463,975 30,320 25,281 Unearned revenue 1,397, Total liabilities 2,811,174 1,270,813 2,688,241 Deferred inflows of resources Unavailable taxes and special assessments 222,996 73, ,902 Unavailable grants 105,452 2,563,352 40,178 Unavailable timber contracts Other unavailable resources Property taxes collected for subsequent period 492, , ,000 Total deferred inflows of resources 820,448 2,759, ,080 Fund balances Nonspendable 19,194 1,006,733 - Restricted 410, Committed 194, Assigned 2,849,626 1,363,243 19,728 Unassigned 13,575, Total fund balances 17,048,361 2,369,976 19,728 Total liabilities, deferred inflows of resources, and fund balances $ 20,679,983 $ 6,400,628 $ 3,272,049 See accompanying notes to the financial statements. (19)

39 Forfeited Tax Solid Waste Debt Service Capital Projects Other Governmental Funds Total Governmental Funds $ 1,572,123 $ 2,317,630 $ 627,874 $ 1,729,993 $ 2,616,144 $ 29,815, , , ,025, , , , ,023 1,380, , ,666,224 (39,762) (39,762) , ,972 14, , ,686 6,670, , ,006,733 $ 2,927,751 $ 3,030,193 $ 712,056 $ 1,729,993 $ 2,638,724 $ 41,391,377 $ 2,237 $ 502,218 $ - $ - $ 12,252 $ 2,962,219 33,259 12, ,499, , , , , ,972 1, , , , ,397,036 38, , ,718 58,773 7,715, ,768 24, , ,084 2,716, , ,853-1, , , ,025, , ,645 75,969-7,749 5,405, ,025,927 1,945, ,087-1,747,568 4,739,810-2,090, ,634 3,109, ,587,275-5,819, ,575,043 1,945,694 2,090, ,087 1,587,275 2,572,202 28,269,939 $ 2,927,751 $ 3,030,193 $ 712,056 $ 1,729,993 $ 2,638,724 $ 41,391,377 (20)

40 This Page Has Been Intentionally Left Blank.

41 RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT-WIDE STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES DECEMBER 31, 2017 Fund balances - total governmental funds $ 28,269,939 Amounts reported for governmental activities in the statement of net position are different because: Capital assets, net of accumulated depreciation, used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. 171,315,435 The County's net pension liability and related deferred inflows and outflows of resources are recorded on the statement of net position. Balances at year-end are: Net pension liability $ (20,984,320) Deferred outflows of resources - pension related 10,459,186 Deferred inflows of resources - pension related (8,981,228) (19,506,362) Other long-term assets (deferred inflows of resources) are not available to pay for current-period expenditures and, therefore, are deferred in the governmental funds. 4,380,583 Internal service funds are used by management to account for the management of short-term disability self-insurance to individual funds. The assets and liabilities that are included in governmental activities in statement of net position are: 99,729 The loss on refunding is reported as a deferred outflow of resources on the statement of net position and amortized over the life of the bonds. 338,872 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the governmental funds. General obligation bonds - including issuance premium (10,921,384) Revenue bonds (2,750,034) Compensated absences (2,215,266) Accrued interest payable (84,191) (15,970,875) Net position of governmental activities $ 168,927,321 See accompanying notes to the financial statements. (21)

42 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2017 General Road and Bridge Health and Human Services REVENUES Taxes $ 11,194,057 $ 5,987,602 $ 7,382,798 Special assessments - 192,520 - Licenses and permits 170, Intergovernmental 7,102,059 8,669,800 17,649,068 Charges for services 2,324,158 1,019,955 1,625,040 Fines and forfeits 113, Gifts and contributions 83, Interest on investments 413, Miscellaneous 1,035, ,065 Total revenues 22,436,715 15,869,877 27,246,971 EXPENDITURES Current General government 10,899, Public safety 10,545, ,165 - Highways and streets - 19,999,111 - Sanitation Human services ,579,969 Health - - 2,022,913 Culture and recreation 746, Conservation Economic development 8, Capital outlay General government Sanitation Debt service Principal Interest Administrative (fiscal) charges Total expenditures 22,199,862 20,219,276 30,602,882 Excess of revenues over (under) expenditures 236,853 (4,349,399) (3,355,911) Other financing sources (uses) Transfers in 421,515-3,025,000 Transfers out (3,075,000) (23,500) - Bonds and notes issued Proceeds from sale of assets 29, Compensation for loss of general capital assets 23,948 18,210 - Total other financing sources (uses) (2,600,495) (5,290) 3,025,000 Net change in fund balance (2,363,642) (4,354,689) (330,911) Fund balance - beginning of year 19,412,003 6,674, ,639 Increase in inventory - 50,249 - Fund balance - end of year $ 17,048,361 $ 2,369,976 $ 19,728 See accompanying notes to the financial statements. (22)

43 Forfeited Tax Solid Waste Debt Service Capital Projects Other Governmental Funds Total $ 375,224 $ - $ 980,122 $ - $ 189,780 $ 26,109,583-2,475, ,643 2,701,303-2, , ,745 1,607, , , ,440 36,442,791 2,073,292 1,799, ,045 9,086, , , , , , , ,315-79,370 16,765 2,117,807 3,096,761 6,281,653 1,186, ,370 1,083,507 77,560, ,425 11,098, ,618 10,774, ,485 20,196,596-4,244, ,244, ,579, ,022, , ,159,028 1,919, ,126 2,097, , , , ,694-3,787, ,787, ,190, ,190, , , , ,875 2,331,443 8,032,644 1,424, ,694 1,033,110 86,132, ,318 (1,750,991) (238,541) 70,676 50,397 (8,571,598) - - 6,000-50,000 3,502,515 (294,503) (6,000) - - (103,512) (3,502,515) - 2,500, ,500, ,042-2, ,887 (294,503) 2,496,729 6,000 - (53,512) 2,573, , ,738 (232,541) 70,676 (3,115) (5,997,669) 1,474,879 1,344, ,628 1,516,599 2,575,317 34,217, ,249 $ 1,945,694 $ 2,090,616 $ 636,087 $ 1,587,275 $ 2,572,202 $ 28,269,939 (23)

44 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES - GOVERNMENTAL ACTIVITIES YEAR ENDED DECEMBER 31, 2017 Net change in fund balances - total governmental funds $ (5,997,669) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Expenditures for general capital assets, infrastructure, and other related capital asset adjustments $ 18,797,773 Net book value of capital assets disposed (88,727) Current year depreciation (5,302,425) 13,406,621 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 1,923,107 Pension expenditures on the governmental funds are measured by current-year employer contributions. Pension expenses on the statement of activities are measured by the change in net pension liability and the related deferred inflows and outflows of resources. (2,600,618) The governmental funds report bond proceeds as financing sources, while repayment of bond principal is reported as an expenditure. In the statement of net position, however, issued debt increases long-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability. Bond proceeds (2,500,000) Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal repayments General obligation bonds 775,000 Revenue bonds 415,000 1,190,000 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in accrued interest payable (24,474) Amortization of discounts, premiums, and loss on refunding (24,728) Change in compensated absences (68,063) Change in inventories 50,249 (67,016) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of certain activities of the internal service funds is reported with governmental activities. (2,662) Change in net position of governmental activities $ 5,351,763 See accompanying notes to the financial statements. (24)

45 STATEMENT OF NET POSITION INTERNAL SERVICE FUND DECEMBER 31, 2017 Short-Term Disability ASSETS Cash and pooled investments $ 115,327 LIABILITIES Accounts payable 15,598 NET POSITION Unrestricted $ 99,729 See accompanying notes to the financial statements. (25)

46 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION INTERNAL SERVICE FUND YEAR ENDED DECEMBER 31, 2017 Short-Term Disability Operating revenues Premiums $ 113,472 Operating expenses Claims paid 97,471 Administrative and fiscal services 18,824 Total operating expenses 116,295 Operating income (loss) (2,823) Nonoperating revenues (expenses) Interest income 161 Change in net position (2,662) Total net position - beginning of year 102,391 Total net position - end of year $ 99,729 See accompanying notes to the financial statements. (26)

47 STATEMENT OF CASH FLOWS INTERNAL SERVICE FUND YEAR ENDED DECEMBER 31, 2017 Short-Term Disability CASH FLOWS FROM OPERATING ACTIVITIES Receipts from internal services provided $ 113,472 Payments to suppliers (18,824) Payments for claims (87,808) Net cash provided by (used) operating activities 6,840 CASH FLOWS FROM INVESTING ACTIVITIES Investment earning received 161 Net increase (decrease) in cash and cash equivalents 7,001 Cash and cash equivalents - beginning of year 108,326 Cash and cash equivalents - end of year $ 115,327 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ (2,823) ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Increase) decrease in accounts payable 9,663 Net cash provided by (used) operating activities $ 6,840 See accompanying notes to the financial statements. (27)

48 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS DECEMBER 31, 2017 Investment Trust Agency ASSETS Cash and cash equivalents $ 1,118,984 $ 3,269,717 Due from other governments - 114,494 Accrued interest receivable 13,380 - Total assets $ 1,132,364 $ 3,384,211 LIABILITIES Accounts payable - $ 178,455 Due to other governments - 3,205,756 Total liabilities - $ 3,384,211 NET POSITION Net position, held in trust for pool participants $ 1,132,364 See accompanying notes to the financial statements. (28)

49 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION INVESTMENT TRUST FUND YEAR ENDED DECEMBER 31, 2017 Investment Trust ADDITIONS Investments earnings: Interest $ 5,815 DEDUCTIONS Distributions to participants 1,975 Change in net position 3,840 Total net position - beginning of year 1,128,524 Total net position - end of year $ 1,132,364 See accompanying notes to the financial statements. (29)

50 This Page Has Been Intentionally Left Blank.

51 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Beltrami County s (the County) financial statements are prepared in accordance with generally accepted accounting principles (GAAP) for the year ended December 31, The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (statements and interpretations). The more significant accounting policies established in GAAP and used by the County are discussed below. A. Financial Reporting Entity The County was established February 28, 1866 and is an organized county having the powers, duties, and privileges granted counties by Minnesota Statutes Chapter 373. As required by accounting principles generally accepted in the United States of America, these financial statements present the County (Primary Government) and its component units for which the County is financially accountable. There is financial accountability if the Primary Government appoints a voting majority of an organization s governing body and has the ability to impose its will on that governing body; or there is the potential for the organization to provide specific financial benefits or to impose specific financial burden on the Primary Government. Based on the criteria for determining component units, the County is not required to include any component units. The County is governed by a five-member Board of Commissioners elected from districts within the County. The Board is organized with a chair and vice-chair elected at the annual meeting in January of each year. A County Administrator appointed by the County Board serves as the clerk of the Board but has no vote. Joint Ventures The County participates in several joint ventures which are described in Note 7.C. The County also participates in jointly-governed organizations which are described in Note 7.D. B. Basic Financial Statements 1. Government-Wide Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) display information about the Primary Government. These statements include the financial activities of the overall County government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. (30)