Financial Statements and Independent Auditors Report. New River Solid Waste Association Raiford, Florida. September 30, 2017

Transcription

1 Financial Statements and Independent Auditors Report Raiford, Florida September 30, 2017

2 Financial Statements and Independent Auditors Report Raiford, Florida September 30, 2017 Table of Contents Independent Auditors Report 1 Management s Discussion and Analysis (Unaudited) 3 Basic Financial Statements: Statement of Net Assets 9 Statement of Revenues, Expenses, and Changes in Fund Net Assets 10 Statement of Cash Flows 11 Notes to Financial Statements 12 Required Supplementary Information Other Postemployment Benefits 32 Proportionate Share of Net Pension Liability-Florida Retirement System 33 Schedule of Contributions-Florida Retirement System 34 Proportionate Share of Net Pension Liability-Health Insurance Subsidy 35 Schedule of Contributions-Health Insurance Subsidy 36 Additional Elements Required by the Rules of the Auditor General: Independent Auditors Management Letter 37 Independent Auditors Report on Compliance with Section , Florida Statutes 39 Report on Internal Control over Financial Reporting and on Compliance and other Matters/Communication with Those Charged with Governance 40 Schedule of Findings 43

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4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the, as of September 30, 2017, and the changes in financial position and 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, other post-employment benefit and pension information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated April 27, 2018 on our consideration of the 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 New River Solid Waste Association s internal control over financial reporting and compliance. April 27,

5 Management s Discussion and Analysis (Unaudited)

6 Management s Discussion and Analysis (Unaudited) September 30, 2017 The s (the Association ) discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the Association s financial activity, and (c) identify changes in the Association s financial position (its ability to address the next and subsequent year challenges). Since the Management s Discussion and Analysis (MD&A) is designed to focus on the current year s activities, resulting changes and currently known facts, please read it in conjunction with the Association s financial statements which follows this discussion. Financial Highlights The Association has tried several times to issue Requests for Proposals (RFP) for Landfill Gas-to-Energy projects to develop a beneficial use for its landfill gas that other landfills in the country have made into a profit-making venture. Currently, the Association has issued another RFP with a renewed interest from private developers to clean up our landfill gas to natural gas standards that could be placed in the natural gas pipeline distribution system in the State of Florida. It is anticipated that the RFP responses and evaluation will be presented to the Association s Board of Directors by mid-summer The Association s Phase II Escrow Account balance is $2,083,391. Funds from this account have been used to permit and construct a borrow pit and a bridge over a tributary to access Phase II property. The Alachua County / Interlocal Agreement expires on December 31, Alachua County has decided to negotiate a new ten-year contract with the Association. The initial meeting occurred on April 4, It is anticipated that an agreement will be reached by mid-summer If an agreement is not reached, New River will receive a 72% reduction in the amount of the municipal solid waste it has received over the past twenty years effective January 1, Effective April 30, 2018, Darrell O Neal will be retiring as the Executive Director of the after 24 years of service. On April 12, 2018, the Association s Board of Directors appointed Perry Kent, Assistant Director, to be the next Executive Director effective May 1, Included in Mr. O Neal s final comments he made to the Board at their April 12, 2018 Board Meeting, he stated that shortly after he started working for the Association in 1994, the Association had to borrow $3,500,000 to build cell 2. Since then cell s 3-6 have been built without borrowing additional funds and the Association has $40,419,000 in designated, restricted and unrestricted cash balances as of March 31, He listed this along with other accomplishments the Association has made over the past 24 years. 3

7 Management s Discussion and Analysis (Unaudited) September 30, 2017 USING THIS ANNUAL REPORT The financial statement s focus is on the Association as a whole. This discussion and analysis is intended to serve as an introduction to the s basic financial statements, which are comprised of two components: 1) the financial statements, and 2) notes to the financial statements. Financial Statements The financial statements are designed to provide readers with a broad overview of the Association s finances, in a manner similar to a private-sector business. The Statement of Net Assets presents information on all of the Association s assets and liabilities, with the difference between the two reported as net assets. The focus of the statement of net assets is designed to be similar to bottom line results for a commercial enterprise. Over time, the increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Association is improving or deteriorating. The Statement of Revenues, Expenses and Changes in Fund Net Assets presents information showing how the Association s net assets changed during the most recent fiscal year, focusing on both the gross and net costs of various activities that are supported by the government s revenues. The statement of cash flows presents the change in the Association s cash and cash equivalents during the period reported on. This information can assist the user of the report in determining how the Association financed its activities and met their cash requirements. The notes to the financial statements provide additional information that is essential to a full understanding of the data provided. Proprietary Funds The Association maintains one proprietary fund type - an Enterprise Fund. The Association uses an enterprise fund to account for its solid waste disposal system. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. They can be found following this discussion. 4

8 Management s Discussion and Analysis (Unaudited) September 30, 2017 FINANCIAL ANALYSIS Statement of Net Assets As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. For the current year, the Association s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $33,636,881. The following table reflects the condensed Statement of Net Assets for the current year as compared to the prior year. For more detailed information see the Statement of Net Assets Assets and Deferred Outflow of Resources: Current and Other Assets $ 40,784,508 $ 37,074,488 Capital Assets 13,307,835 14,451,331 Deferred Outflow of Resources 327, ,498 Total Assets and Deferred Outflow of Resources 54,419,701 51,930,317 Liabilities and Deferred Inflow of Resources: Long-Term Liabilities 20,469,561 22,033,010 Other Liabilities 301, ,100 Deferred Inflow of Resources 11,701 87,089 Total Liabilities 20,782,820 22,323,199 Net Assets: Invested in Capital Assets, Net of Related Debt 13,307,835 14,451,331 Restricted: Landfill Closure Costs (nonexpendable) 609, ,047 Unrestricted 19,719,795 14,418,740 Total Net Assets $ 33,636,881 $ 29,637,118 Approximately 39 percent of the Association s net assets reflect its investment in capital assets (e.g. land, buildings, improvements, infrastructure, and vehicles and equipment) less any related debt used, if any, to acquire those assets which are still outstanding. The Association uses these assets to provide services to its customers; consequently, these assets are not available for future spending. At September 30, 2017, the Association was able to report positive balances in all categories of net assets. 5

9 Management s Discussion and Analysis (Unaudited) September 30, 2017 FINANCIAL ANALYSIS (continued) Statement of Revenues, Expenses and Changes in Fund Net Assets The following table reflects condensed Statements of Revenues, Expenses and Changes in Net Assets for the current year as compared to the prior year. For more detailed information see the Statement of Revenues, Expenses and Changes in Fund Net Assets Revenues: Program Revenues: Charges for Services $ 8,624,761 $ 8,086,772 General Revenues Net Investment Income (Loss) 57, ,643 Rental Revenue 16,360 15,883 Gain on Disposal of Fixed Assets 100,000 26,216 Other 46,113 36,173 Total Revenues 8,844,755 8,449,687 Expenses: Personal Services 1,380,933 1,520,044 Operating Expenses 2,094,136 2,327,835 Closure and Monitoring Costs (1,498,504) 1,109,730 Depreciation 2,078,427 1,967,343 Host Fees Paid to Member Counties 790, ,000 Total Expenses 4,844,992 7,714,952 Change in Net Assets 3,999, ,735 Total Net Assets - October 1 29,637,118 28,902,383 Total Net Assets - September 30 $ 33,636,881 $ 29,637,118 6

10 Management s Discussion and Analysis (Unaudited) September 30, 2017 FINANCIAL ANALYSIS (continued) Capital Assets The Association s investment in capital assets for its business-type activities as of September 30, 2017 amounts to $13.3 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, vehicles, equipment and landfill site costs. The Association purchased $900,800 in property, plant and equipment during the fiscal year and $34,131 remains in construction projects at year-end. Major capital assets added during the current fiscal year included the following: 2015 Bandit 2680 Horizontal Grinder - $453, CAT 930M Wheel Loader - $177,904 Capital Assets (Net of Depreciation) Land $ 682,400 $ 682,400 Construction in Progress 210, ,186 Land Improvements 846,221 1,001,832 Building and Improvements 281, ,797 Machinery and Equipment 1,797,922 1,790,170 Landfill 9,489,918 10,494,946 Total $ 13,307,835 $ 14,451,331 Additional information on the Association s capital assets can be found in the Notes to the Financial Statements in this report 7

11 Management s Discussion and Analysis (Unaudited) September 30, 2017 FINANCIAL ANALYSIS (concluded) Long-Term Debt At the end of the current fiscal year, the Association had total debt outstanding of approximately $20.5 million. This debt consisted of $18.4 million in estimated landfill closure and monitoring costs, $290,922 in accrued compensated absences, $835,735 in net OPEB obligations and $1,000,536 in net pension obligations. A summary of long-term debt obligations of the Association follows: Accrued Compensated Absences $ 290,622 $ 269,035 Accrued Closing/Long-Term Care Costs 18,439,542 19,938,046 Net Pension Liability-FRS/HIS 1,000, ,947 Net OPEB Obligation 835, ,660 Total $ 20,566,435 $ 22,092,688 Additional information on the Association s long-term debt can be found in the Notes to the Financial Statements in this report. Requests for Information This financial report is designed to provide a general overview of the New River Solid Waste Association s finances for all those with an interest in the Association s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Association s Director at P.O. Box 647, Raiford, Florida

12 Statement of Net Assets September 30, 2017 Assets and Deferred Outflow of Resources Current Assets Cash and Equivalents $ 18,498,018 Investments 8,652,143 Accounts Receivable 790,444 Prepaid Expense 49,984 Total Current Assets 27,990,589 Capital Assets, Net 13,307,835 Restricted Assets Cash and Equivalents 2,788,932 Investments 10,004,987 Total Restricted Assets 12,793,919 Total Assets 54,092,343 Deferred Outflow of Resources 327,358 Total Assets and Deferred Outflow of Resources 54,419,701 Liabilities, Deferred Inflow of Resources and Net Assets Current Liabilities Accounts Payable 204,684 Accrued Compensated Absences 96,874 Total Current Liabilities 301,558 Long-Term Liabilities Accrued Compensated Absences 193,748 Accrued Closing/Long-Term Care Costs 18,439,542 Net Pension Liability-FRS/HIS 1,000,536 Net OPEB Obligation 835,735 Total Long-Term Liabilities 20,469,561 Total Liabilities 20,771,119 Deferred Inflow of Resources 11,701 Total Liabilities and Deferred Inflow of Resources 20,782,820 Net Assets Invested in Capital Assets, Net of Related Debt 13,307,835 Restricted: Net Landfill Closure Assets (Nonexpendable) 609,251 Unrestricted 19,719,795 Total Net Assets $ 33,636,881 The notes to financial statements are integral to this statement. 9

13 Statement of Revenues, Expenses, and Changes in Fund Net Assets For the Year Ended September 30, 2017 Operating Revenues Charges for Services $ 8,624,761 Rental Revenue 16,360 Miscellaneous Revenue 46,113 Total Operating Revenues 8,687,234 Operating Expenses Personal Services 1,380,933 Materials, Supplies and Operating Costs 2,094,136 Landfill Closing and Long-Term Care Costs (1,498,504) Depreciation Expense 2,078,427 Total Operating Expenses 4,054,992 Operating Income 4,632,242 Nonoperating Revenues (Expenses) Net Investment Income (Loss) 57,521 Host Fees Paid to Member Counties (790,000) Gain on Disposal of Fixed Assets 100,000 Total Nonoperating Revenues (Expenses) (632,479) Change in Net Assets 3,999,763 Total Net Assets - October 1 29,637,118 Total Net Assets - September 30 $ 33,636,881 The notes to financial statements are integral to this statement. 10

14 Statement of Cash Flows For the Year Ended September 30, 2017 Cash Flows From Operating Activities Cash Received From Customers $ 9,584,612 Cash Paid to Suppliers (1,981,534) Cash Paid to Employees (1,418,621) Assessments Paid to Member Counties (323,201) Net Cash Provided by Operating Activities 5,861,256 Cash Flows From NonCapital Financing Activities Host Fees Distributed to Member Counties (790,000) Cash Flows From Capital and Financing Activities Acquisition of Capital Assets (934,931) Proceeds from Sale of Capital Assets 100,000 Net Cash Used for Capital and Financing Activities (834,931) Cash Flows From Investing Activities Investment Income 57,521 Investment Maturities (38,464) Net Cash Used by Investing Activities 19,057 Net Increase in Cash 4,255,382 Cash - October 1 17,031,568 Cash - September 30 $ 21,286,950 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income $ 4,632,242 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation/Amortization 2,078,427 Accounts Receivable 574,177 Prepaids 9,649 Deferred Outlow of Resources 77,140 Accounts Payable 91,262 Accrued Expenses 21,587 Accrued Closure/Long-Term Care Costs (1,498,504) Net OPEB Obligation (112,925) Net Pension Obligation-FRS 63,589 Deferred Inflow of Resources (75,388) Net Cash Provided by Operating Activities $ 5,861,256 The notes to financial statements are integral to this statement. 11

15 Notes to Financial Statements For the Year Ended September 30, 2017 Note 1 - Summary of Significant Accounting Policies The accounting policies of the (the Association ) conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant policies: Reporting Entity The governments of Baker, Bradford and Union Counties established the Association to provide a regional approach to solid waste management, for the citizens of the region encompassing Baker, Bradford and Union Counties, without regard to political or governmental boundaries, in order to promote and protect the public health, welfare and safety of the citizens of the region. Pursuant to Section (2)(b), Florida Statute which requires that a local resource recovery and management program be established by special act of the legislature or by interlocal agreement, the Counties executed an Interlocal Agreement on July 5, The purpose of the Agreement was to effectively, efficiently and economically dispose of the solid waste generated within the region and to provide associated services related to solid waste management through the creation of the Association. The members of the Board of Directors for the Association are appointed by each government. In the event there is a complete dissolution of the Association and such dissolution involves the disposition of the property of the Association, such property shall be distributed or liquidated so that each County receives an equal share of the assets, property and liabilities. Generally accepted accounting principles require that this financial statement present the Association (the primary government) and any component units. Component units generally are legally separate entities for which a primary government is financially accountable. Financial accountability ordinarily involves meeting both of the following criteria; the primary government is accountable for the potential component unit (i.e., the primary government appoints the voting majority of its board) and the primary government is able to impose its will upon the potential component unit, or there is a possibility that the potential component unit may provide specific financial benefits or impose specific financial burdens on the primary government. There were no entities that would be considered component units of the Association. Basic Financial Statements The basic financial statements (i.e., the Statements of Net Assets, the Statements of Revenues, Expenses and Changes in Fund Net Assets and the Statements of Cash Flows) report information on all of the Business-type activities of the Association. Business-type activities rely to a significant extent on fees and charges for support. The Association collects tipping fees from customers that send solid waste to the landfill. The Statement of Revenues, Expenses and Changes in Fund Net Assets 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. Program revenues include 1) charges to customers 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 properly included among program revenues are reported instead as general revenues. 12

16 Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Note 1 - Summary of Significant Accounting Policies (continued) Measurement Focus, Basis of Accounting and Financial Statement Presentation The basic financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The Association s activities are grouped, in the financial statements in this report, into one generic enterprise fund as follows: The Enterprise Fund is used to account for operations that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is to recover costs (expenses, including depreciation) in providing services to customers of New River Solid Waste Association, primarily through user charges called tipping fees. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statement to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Association has elected not to follow subsequent private-sector guidance. Amounts reported as revenues include 1) charges to customers for goods, services or privileges provided; 2) operating grants and contributions; and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Proprietary funds distinguish operating revenues and expenses from non-operating 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 single enterprise fund are charges to customers for disposal of solid waste. Operating expenses for the enterprise fund included the cost of providing services and a landfill site, administrative expenses, and depreciation and amortization of capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Assets, Liabilities and Fund Equity Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Use of Restricted Funds When both restricted and unrestricted resources are available for use, it is the Association s policy to use restricted resources first, then unrestricted resources as they are needed. 13

17 Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Note 1 - Summary of Significant Accounting Policies (concluded) Assets, Liabilities and Fund Equity (continued) Deposits with Financial Institutions All cash and equivalents are deposited with financial institutions that are certified as Qualified Public Depositories (QPD s), as required under the Florida Public Deposits Act. This law requires every qualified public depository to deposit with the State Treasurer eligible collateral equal to or in excess of an amount to be determined by the State Treasurer and requires the State Treasurer to ensure that funds are entirely collateralized throughout the fiscal year. As of September 30, 2017, the Association s deposit with QPD s totaled approximately $21.3 million. Uncollectible Accounts Receivable An allowance for uncollectible accounts receivable has not been established, due to management s belief that uncollectible accounts are immaterial. Restricted Assets Certain assets, cash and investments for landfill closure, are classified as restricted on the statement of net assets because they are limited as to use by the Florida Department of Environmental Protection. Additionally, an employee vending machine cash account is classified as restricted cash. Capital Assets Capital assets, which include property, plant and equipment, are reported in the basic financial statements. Capital assets are defined by the Association as items with an individual cost of $1,000 or more and an estimated useful life of one year or more. Such assets are recorded at historical cost if purchased or estimated historical cost if donated. The costs of creating landfill cells that are used to collect and hold the waste are capitalized and depreciated over their useful lives. Compensated Absences The policy of the Association is to pay employees upon termination for unused annual leave. The employees are eligible to receive payment for up to 360 hours of their unused annual leave. After ten years of creditable service, employees are also eligible to receive payment for 50% of unused sick leave up to 720 hours when terminating employment with the Association. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Budgets and Budgetary Accounting Annual budgets were adopted on a cash basis. Such basis does not conform to generally accepted accounting principles. Appropriations made under this budget lapse at year end. 14

18 Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Note 2 Investments The Association follows Section of the Florida Statutes for investment of funds. The Statute allows governments to invest or reinvest any surplus public funds in: a. The Local Government Surplus Funds Trust Fund (SBA) or any intergovernmental investment pool authorized under the Florida Interlocal Cooperation Act of b. Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency. c. Interest-bearing time deposits or savings accounts in qualified public depositories. d. Direct obligations of the U.S. Treasury In accordance with GASB Statement No.40, as of September 30, 2017, the Association had the following investments: 2017 Maturity is Investment Maturities (in years) Investment Type Fair Value Not Applicable Less Than More Than 10 Federal Agriculture Mortgage Corporation $ 765,618 $ - $ - $ - $ 765,618 $ - Federal Home Loan Mortgage Corporation 1,320, , , Florida Local Government Investment Trust 10,004,987 10,004, TD Asset Mgmt US Govt Instl Svs 2,175,699 2,175,699 U.S. Treasury Obligations 4,389,854-1,420,593 2,609, ,202 - Total $ 18,657,130 $ 12,180,686 $ 2,051,117 $ 3,299,507 $ 1,125,820 $ - Interest Rate Risk: The Association does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Concentration of Credit Risk: The Association does not have a policy that limits the amount that may be invested in any type of investment. Custodial Credit Risk: This is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. As of September 30, 2017, the Association held approximately $8.7 million in uninsured and uncollateralized debt obligations. The Association invests in the Florida Local Government Investment Trust (FLGIT). The FLGIT is a local government pool created by the Florida Association of Court Clerks and the Florida Association of Counties for the purpose of providing public entities with an investment program that focuses on longer term securities with the highest credit ratings. The FLGIT reports all share information at Net Asset Value (NAV) and reflects in its share value at fair value in accordance with GASB 31. The effective maturity of the underlying investments is five years or less. At September 30, 2017, the FLGIT was invested in corporate bonds, government related securities, asset-backed securities, agency discount notes and treasury notes. This investment type is subject to some market risk due to the fluctuating prices and liquidity risk due to advance redemption notification requirements. However, it has a professional investment advisor and an investment advisory board. At year end, the Association had $10,004,987 invested with FLGIT. 15

19 Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Note 2 Investments (Continued) The Association s debt investment ratings at September 30, 2017 are presented below: S & P Quality Rating Investments Fair Value AAA AA Unrated Federal Home Loan Mortgage Corp (Freddie Mac) $ 1,320,972 $ - 1,320,972 - Federal Agricultural Mortgage Corp 765, ,618 Florida Local Government Investment Trust 10,004,987 10,004, TD Asset Mgmt US Govt Instl Svs 2,175,699 2,175,699 U.S. Treasury Obligations 4,389,854 4,389, Total $ 18,657,130 $ 16,570,540 $ 1,320,972 $ 765,618 Note 3 - Related Party Transactions Tipping Fees, Assessment Fees and Revenue Sharing The Association is jointly governed by Baker, Bradford and Union Counties Board of County Commissioners. The Association provided revenue sharing (host fees) funds to member counties which are shared equally. However, Union County received an additional host fee in the amount of $100,000 for fiscal year 2017 for hosting out-of-region waste. For the fiscal year September 30, 2017, Baker, Bradford and Union County Board of County Commissioners were provided $790,000. Receivables owed by the County Commissions were $87,478 as of September 30, The following schedule shows the revenue billed to each related party: Tipping Fee County Association Revenue Assessments Revenue Baker County Board of County Commissioners $ 525,692 $ - $ 525,692 Bradford County Board of County Commissioners 733,095 (209,188) 523,907 Union County Board of County Commissioners 345,968 (114,013) 231,955 Total $ 1,604,755 $ (323,201) $ 1,281,554 Bradford and Union County charge assessments on specified tons brought to the Association. Bradford and Union County customers were charged an assessment of $14 per ton. These charges are disbursed monthly to the Bradford and Union County Board of County Commissioners; and therefore deducted from revenue of the Association. Note 4 Concentrations In the normal course of business, the Association extends unsecured credit to customers principally in north-central Florida. In November 1997, the Association entered into a contract with the Alachua County Board of County Commissioners to accept waste from the citizens of Alachua and Gilchrist Counties. Tipping Fees charged to Alachua County Board of County Commissioners made up approximately 75% of charges for services reported by the Association in

20 Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Note 5 - Risk Management The Association purchased insurance to limit the exposure of the following risks of loss: theft of, damage to and destruction of assets; natural disasters and injuries to employees. Commercial insurance has also been purchased by the Association to cover the risk of loss due to employee errors or omissions and health insurance. Settled claims resulting from these risks have not exceeded insurance coverage in any of the past three years. Note 6 - Capital Assets Capital assets activity for the year ended September 30, 2017 was as follows: Beginning Ending Balance Increases Decreases Balance Capital Assets not Being Depreciated: Land $ 682,400 $ - $ - $ 682,400 Construction in Progress 176,186 34, ,317 Total Capital Assets not Depreciated 858,586 34, ,717 Capital Assets Being Depreciated: Land Improvements 3,450, ,450,451 Buildings and Improvements 723,331 4,995 2, ,626 Machinery and Equipment 5,733, , ,141 6,260,483 Landfill 23,054, ,626-23,192,301 Total Capital Assets Being Depreciated 32,961, , ,841 33,628,861 Less Accumulated Depreciation for: Land Improvements 2,448, ,611-2,604,230 Buildings and Improvements 417,534 29,735 2, ,569 Machinery and Equipment 3,943, , ,141 4,462,561 Landfill 12,559,729 1,142,654-13,702,383 Total Accumulated Depreciation 19,369,157 2,078, ,841 21,213,743 Total Capital Assets Being Depreciated, Net 13,592,745 (1,177,627) - 12,415,118 Total Capital Assets, Net $ 14,451,331 $ (1,143,496) $ - $ 13,307,835 The costs of normal maintenance and repairs that do not add to the value of the asset or materially extended asset lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects when constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of assets constructed. Depreciation on all assets is provided on the straight-line basis over the following estimated useful lives: Years Buildings Improvements 5-35 Landfill 5-39 Equipment

21 Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Note 7 - Long-Term Obligations Changes in Long-Term Debt The following is a summary of changes in long-term debt for the year ended September 30, 2017: Beginning Ending Due Within Balances Additions Reductions Balances One Year Accrued Closing/Long Term Care Costs $ 19,938,046 $ - $ 1,498,504 $ 18,439,542 $ - Accrued Compensated Absences 269,036 21, ,622 96,874 Net Pension Obligation-FRS/HIS 936,947 63,589 1,000,536 Net OPEB Obligation 948, , ,735 - Long-Term Liabilities $ 22,092,689 $ 85,175 $ 1,611,429 $ 20,566,435 $ 96,874 Note 8 - Pension Plan Florida Retirement System General Information - All of the Association s eligible employees participate in the Florida Retirement System (FRS). As provided by Chapters 121 and 112, Florida Statutes, the FRS provides two cost sharing, multiple employer defined benefit plans administered by the Florida Department of Management Services, Division of Retirement, including the FRS Pension Plan ( Pension Plan ) and the Retiree Health Insurance Subsidy ( HIS Plan ). Under Section , Florida Statutes, the FRS also provides a defined contribution plan ( Investment Plan ) alternative to the FRS Pension Plan, which is administered by the State Board of Administration ( SBA ). As a general rule, membership in the FRS is compulsory for all employees working in a regularly established position for a state agency, county government, district school board, state university, community college, or a participating city or special district within the State of Florida. The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefits are established by Chapter 121, Florida Statutes, and Chapter 60S, Florida Administrative Code. Amendments to the law can be made only by an act of the Florida State Legislature. The State of Florida annually issues a publicly available financial report that includes financial statements and required supplementary information for the FRS. The latest available report may be obtained by writing to the State of Florida Division of Retirement, Department of Management Services, P.O. Box 9000, Tallahassee, Florida , or from the Web site: Pension Plan Plan Description The Pension Plan is a cost-sharing multiple-employer defined benefit pension plan, with a Deferred Retirement Option Program ( DROP ) for eligible employees. Benefits Provided - Benefits under the Pension Plan are computed on the basis of age, average final compensation, and service credit. For Pension Plan members enrolled before July 1, 2011, Regular class members who retire at or after age 62 with at least six years of credited service or 30 years of service regardless of age are entitled to a retirement benefit payable monthly for life, equal to 1.6% of their final average compensation based on the five highest years of salary, for each year of credited service. Vested members with less than 30 years of service may retire before age 62 and receive reduced retirement benefits. Special Risk Administrative Support class members who retire at or after age 55 with at least six years of credited service or 25 years of 18

22 Note 8 - Pension Plan (continued) Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) service regardless of age are entitled to a retirement benefit payable monthly for life, equal to 1.6% of their final average compensation based on the five highest years of salary, for each year of credited service. Special Risk class members (sworn law enforcement officers, firefighters, and correctional officers) who retire at or after age 55 with at least six years of credited service, or with 25 years of service regardless of age, are entitled to a retirement benefit payable monthly for life, equal to 3.0% of their final average compensation based on the five highest years of salary for each year of credited service. Senior Management Service class members who retire at or after age 62 with at least six years of credited service or 30 years of service regardless of age are entitled to a retirement benefit payable monthly for life, equal to 2.0% of their final average compensation based on the five highest years of salary for each year of credited service. Elected Officers class members who retire at or after age 62 with at least six years of credited service or 30 years of service regardless of age are entitled to a retirement benefit payable monthly for life, equal to 3.0% (3.33% for judges and justices) of their final average compensation based on the five highest years of salary for each year of credited service. For Plan members enrolled on or after July 1, 2011, the vesting requirement is extended to eight years of credited service for all these members and increasing normal retirement to age 65 or 33 years of service regardless of age for Regular, Senior Management Service, and Elected Officers class members, and to age 60 or 30 years of service regardless of age for Special Risk and Special Risk Administrative Support class members. Also, the final average compensation for all these members will be based on the eight highest years of salary. As provided in Section , Florida Statutes, if the member is initially enrolled in the Pension Plan before July 1, 2011, and all service credit was accrued before July 1, 2011, the annual costof- living adjustment is three percent per year. If the member is initially enrolled before July 1, 2011, and has service credit on or after July 1, 2011, there is an individually calculated cost-ofliving adjustment. The annual cost-of-living adjustment is a proportion of three percent determined by dividing the sum of the pre-july 2011 service credit by the total service credit at retirement multiplied by three percent. Plan members initially enrolled on or after July 1, 2011, will not have a cost-of-living adjustment after retirement. In addition to the above benefits, the DROP program allows eligible members to defer receipt of monthly retirement benefit payments while continuing employment with a FRS employer for a period not to exceed 60 months after electing to participate. Deferred monthly benefits are held in the FRS Trust Fund and accrue interest. There are no required contributions by DROP participants Contributions Effective July 1, 2011, all enrolled members of the FRS, other than DROP participants, are required to contribute three percent of their salary to the FRS. In addition to member contributions, governmental employers are required to make contributions to the FRS based on state-wide contribution rates established by the Florida Legislature. These rates are updated as of July 1 of each year. The employer contribution rates by job class for the periods from October 1, 2016 through June 30, 2017 and from July 1, 2017 through September 30, 2017, respectively, were as follows: Regular 5.86% and 6.26% and Senior Management Service 20.11% and 21.05%. These employer contribution rates include 1.66% and 1.66% HIS Plan subsidy for the periods October 1, 2016 through June 30, 2017 and from July 1, 2017 through September 30, 2017, respectively. The Association s contributions, including employee contributions, to the Pension Plan totaled $61,802 for the plan year ended June 30, Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At September 30, 2017, the Association reported a liability of 19

23 Note 8 - Pension Plan (continued) Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) $673,494 for its proportionate share of the Pension Plan s net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, The Association s proportionate share of the net pension liability was based on the Association s fiscal year contributions relative to the fiscal year contributions of all participating members. At June 30, 2017, the Association's proportionate share was %, which was a decrease of % from its proportionate share measured as of June 30, For the fiscal year ended September 30, 2017, the Association recognized pension expense (FRS, HIS and Investment Plan matching) of $90,946. In addition, the Association reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: DEFERRED DEFERRED OUTFLOWS INFLOWS DESCRIPTION OF RESOURCES OF RESOURCES Diffferences between expected and actual experience $ 96,174 $ 38,095 Change of assumptions 258,104 (25,388) Net difference between projected and actual earnings on Pension Plan investments (115,951) (56,051) Changes in proportion and differences between Association Pension Plan contributions and proportionate share of contributions 37,637 23,600 Association Pension Plan contributions subsequent to the prior measurement date - Association Pension Plan contributions subsequent to the measurement date 8,601 - $ 284,565 $ (19,744) Deferred outflows or resources related to employer contributions paid subsequent to the measurement date and prior to the employer s fiscal year end will be recognized as a reduction of the net pension liability in the subsequent reporting period. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension expense will be recognized as follows: 20

24 Note 8 - Pension Plan (continued) Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Fiscal Year Ending September 30 Amount 2018 $ (36) 2019 $ (36) 2020 $ (36) 2021 $ (36) 2022 $ (36) 2023 $ (36) Thereafter $ (14) Actuarial Assumptions The total pension liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumption, applied to all periods included in the measurement: Inflation 2.60% Acturial Cost Method Salary Increases Investment rate of return Entry Age 3.25% average, including inflation 7.10% net of pension plan investment expense, including inflation Mortality rates were based on the Generational RP-2000 with Projection Scale BB tables The most recent experience study for the FRS Pension Plan was completed in 2014 for the period July1, 2008 through June 30, The long-term expected rate of return on Pension Plan investments was not based on historical returns, but instead is based on a forward-looking capital market economic model. The allocation policy s description of each asset class was used to map the target allocation to the asset classes shown below. Each asset class assumption is based on a consistent set of underlying assumptions and includes an adjustment for the inflation assumption. The target allocation and best estimates of arithmetic and geometric real rates of return for each major asset class are summarized in the following table: 21

25 Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) Note 8 - Pension Plan (continued) COMPOUND ANNUAL ANNUAL TARGET ARITHMETIC (GEOMETRIC) STANDARD ASSET CLASS ALLOCATION (1) RETURN RETURN DEVIATION Cash 1.00% 3.00% 3.00% 1.80% Fixed Income 18.00% 4.50% 4.40% 4.20% Global Equity 53.00% 7.60% 6.60% 17.00% Real Estate 10.00% 6.60% 5.90% 12.80% Private Equity 6.00% 11.50% 7.80% 30.00% Strategic Investments 12.00% 6.10% 5.60% 9.70% Assumed Inflation - Mean 2.60% 1.90% (1) as outlined in the Pension Plan's investment policy Discount Rate - The discount rate used to measure the total pension liability was 7.10%. The Pension Plan s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the discount rate for calculation the total pension liability is equal to the long-term expected rate of return. Sensitivity of the Association s Proportionate Share of the Net Position Liability to Changes in the Discount Rate The following represents the Association s proportionate share of the net pension liability calculated using the discount rate of 7.10%, as well as what the Association s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.10%) or one percentage point higher (8.10%) than the current rate: FRS NET PENSION LIABILITY CURRENT 1% DECREASE DISCOUNT RATE 1% INCREASE 6.10% 7.10% 8.10% Association's Proportionate share of the net pension liability $ 1,218,984 $ 673,494 $ 220,613 Pension Plan Fiduciary Net Position - Detailed information regarding the Pension Plan s fiduciary net position is available in the separately issued FRS Pension Plan and Other State-Administered Systems Comprehensive Annual Financial Report. Payables to the Pension Plan - At September 30, 2017, the Association reported no payables for outstanding contributions to the Pension Plan required for the fiscal year ended September 30,

26 Note 8 - Pension Plan (continued) Notes to Financial Statements For the Year Ended September 30, 2017 (Continued) HIS Plan Plan Description The HIS Plan is a cost-sharing multiple-employer defined benefit pension plan established under Section , Florida Statutes, and may be amended by the Florida legislature at any time. The benefit is a monthly payment to assist retirees of State-administered retirement systems in paying their health insurance costs and is administered by the Florida Department of Management Services, Division of Retirement. Benefits Provided For the fiscal year ended September 30, 2017, eligible retirees and beneficiaries received a monthly HIS payment of $5 for each year of creditable service completed at the time of retirement, with a minimum HIS payment of $30 and a maximum HIS payment of $150 per month. To be eligible to receive these benefits, a retiree under a State-administered retirement system must provide proof of health insurance coverage, which may include Medicare. Contributions The HIS Plan is funded by required contributions from FRS participating employers as set by the Florida Legislature. Employer contributions are a percentage of gross compensation for all active FRS members. For the fiscal year ended September 30, 2017, the HIS contribution for the period October 1, 2016 through June 30, 2017 and from July 1, 2017 through September 30, 2017 was 1.66% and 1.66%, respectively. The Association contributed 100% of its statutorily required contributions for the current and preceding three years. HIS Plan contribution are deposited in a separate trust fund from which payments are authorized. HIS Plan benefits are not guaranteed and are subject to annual legislative appropriation. In the event legislative appropriation or available funds fail to provide full subsidy benefits to all participants, benefits may be reduced or cancelled. The Association s contributions to the HIS Plan totaled $16,597 for the plan year ended September 30, Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At September 30, 2017, the Association reported a liability of $327,041 for its proportionate share of the HIS Plan s net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, The Association s proportionate share of the net pension liability was based on the Association s fiscal year contributions relative to the fiscal year contributions of all participating members. At June 30, 2017, the Association's proportionate share was % percent, which was a decrease of % from its proportionate share measured as of June 30, The Association reported deferred outflows of resources and deferred in flows of resources related to pensions-his from the following sources: 23