VILLAGE OF PIGEON PIGEON, MICHIGAN HURON COUNTY FINANCIAL REPORT FEBRUARY 29, 2016

Transcription

1 VILLAGE OF PIGEON PIGEON, MICHIGAN HURON COUNTY FINANCIAL REPORT FEBRUARY 29, 2016

2 REPORT OF INDEPENDENT AUDITORS MANAGEMENT S DISCUSSION AND ANALYSIS TABLE OF CONTENTS PAGE NUMBER i - iii iv x BASIC FINANCIAL STATEMENTS 1 Government-Wide Financial Statements: Statement of Net Position 2 Statement of Activities 3 Fund Financial Statements: Balance Sheet Governmental Funds 4 Reconciliation of Governmental Fund Balances to Governmental Activities Net Position 5 Statement of Revenue, Expenditures and Change in Fund Balances Governmental Funds 6 Reconciliation of the Statement of Revenue, Expenditures and Change in Fund Balances of Governmental Funds to the Statement of Activities 7 Statement of Net Position Proprietary Funds 8 Reconciliation of Proprietary Funds Net Position to Business-Type Activities Net Position 9 Statement of Revenue, Expenses and Change in Fund Net Position Proprietary Funds 10 Reconciliation of the Statement of Revenue, Expenses and Change in Net Position of Proprietary Funds to the Statement of Activities 11 Statement of Cash Flows Proprietary Funds 12 Notes to the Financial Statements 13 34

3 TABLE OF CONTENTS PAGE NUMBER REQUIRED SUPPLEMENTARY INFORMATION 35 Statement of Revenue, Expenditures and Change in Fund Balance Budget to Actual General Fund Statement of Revenue, Expenditures and Change in Fund Balance Budget to Actual Major Street Fund 40 Statement of Revenue, Expenditures and Change in Fund Balance Budget to Actual Local Street Fund 41 Schedule of Changes in the Employer s Net Pension Liability and Related Ratios 42 Schedule of Employer s Contribution 43 SUPPLEMENTARY INFORMATION 44 Nonmajor Governmental Funds: Combining Balance Sheet 45 Combining Statement of Revenue, Expenditures and Change in Fund Balance 46 Statement of Revenue, Expenditures and Change in Fund Balance Budget to Actual Municipal Street Fund 47 Statement of Revenue, Expenditures and Change in Fund Balance Budget to Actual Trunkline Fund 48 Statement of Revenue, Expenditures and Change in Fund Balance Budget to Actual Debt Service Fund 49 Proprietary Fund Types: Schedule of Revenue, Expenses and Change in Net Position Budget to Actual Sewer Operating Fund 50 Schedule of Revenue, Expenses and Change in Net Position Budget to Actual Water Operating Fund 51 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 Schedule of Findings 54 55

4 INDEPENDENT AUDITOR S REPORT To the Village Council Village of Pigeon, Michigan Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Village of Pigeon, Michigan, as of and for the year ended February 29, 2016, and the related notes to the financial statements, which collectively comprise the Village s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. i

5 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Village of Pigeon, Michigan, as of February 29, 2016, 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. Emphasis of Matter Change in Accounting Principle As discussed in Note 12 to the financial statements, the Village of Pigeon implemented Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions, and Governmental Accounting Standards Board Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages iv to x and 36 to 43 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 Village of Pigeon, Michigan s basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements 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 combining and individual nonmajor fund financial statements are fairly stated in all material respects in relation to the basic financial statements as a whole. ii

6 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 4, 2016, on our consideration of the Village of Pigeon, Michigan 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 the Village of Pigeon, Michigan s internal control over financial reporting and compliance. NIETZKE & FAUPEL, P.C. PIGEON, MICHIGAN August 4, 2016 iii

7 Village of Pigeon, Michigan Management s Discussion and Analysis As the management of the Village of Pigeon, Michigan, we offer the readers of the Village s financial statements this narrative overview and analysis of the financial activities of the Village for the fiscal year ended February 29, We encourage readers to consider the information presented here. Financial Highlights The assets of the Village exceed its liabilities at the close of the most recent fiscal year by $8,130,435 (net position). Of this amount, $552,281 (unrestricted net position) may be used to meet the government s ongoing obligations to citizens and creditors. The government s total net position increased by $119,241. As of the close of the current fiscal year, the Village s governmental funds reported combined ending fund balances of $1,247,994. Of this amount, $515,853 is available for spending at the government s discretion (unassigned fund balances). At the end of the current fiscal year, unassigned fund balance for the general fund was $518,874 or 84.3% (percent) of the total general fund expenditures. The Village s total debt decreased by $119,316 during the fiscal year. During the fiscal year 2016, the Village recognized its net pension liability in the amount of $368,318 in accordance with the new accounting standard related to reporting assets and liabilities for the Village s employee retirement plan. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Village of Pigeon s basic financial statements. The Village is reporting these financial statements utilizing the reporting structure that all state and local governments must follow. These requirements restructured much of the information that governmental units have presented in the past. The Village s basic financial statements are made up of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements - The government-wide financial statements are designed to provide readers with a broad overview of the Village s finances, in a manner similar to a private sector business. The statement of net position presents information on all of the Village s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Village is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected special assessments). iv

8 Village of Pigeon, Michigan Management s Discussion and Analysis Both of the government-wide financial statements distinguish functions of the Village that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Village include general government (including administration), public safety, public works and recreation and culture operations. The business-type activities of the Village include the water and sewer operations. The government-wide financial statements can be found on pages 2 and 3 of the financial report. Fund financial statements - A fund is a group of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The Village, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Village can be divided into two categories: governmental funds and propriety funds. Governmental funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare this information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and change in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Village maintains six individual governmental funds. Information is presented separately, in the governmental fund balance sheet, and in the governmental fund statement of revenues, expenditures, and change in fund balances for the General, Major Street, Local Street, and Debt Service Funds, each of which are considered to be major funds. Data from the other two governmental funds is combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in the financial report. The Village adopts an annual appropriated budget for its general and special revenue funds. Budgetary comparison statements or schedules have been provided in the financial report to demonstrate compliance with those budgets. The basic governmental fund financial statements can be found on pages 4 through 7 of the financial report. Proprietary Funds - Enterprise funds are used to report the same functions presented as businesstype activities in the government-wide financial statements. The Village uses enterprise funds to account for its sanitary sewer and water operations. The basic proprietary fund financial statements can be found on pages 8 through 12 of the financial report. v

9 Village of Pigeon, Michigan Management s Discussion and Analysis Notes to the financial statements - The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 13 through 34 of the financial report. Other information - In addition to the basic financial statements and related notes, the financial report also presents certain required supplementary information concerning the Village s budgetary information for the three major governmental funds. Schedules for the Village s net pension liability and the employer contributions to the retirement plan are also required by the new accounting standard implemented during the current fiscal year. This required supplementary information can be found on pages 35 through 43 of the financial report. The combining and individual fund statements referred to earlier in connection with the non-major governmental funds are presented immediately following the required supplementary information. Combining, individual fund statements and schedules can be found on pages 44 through 51 of the financial report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the Village, assets exceeded liabilities by $8,130,435 at the close of the fiscal year, which is an increase of $119,241, or 1.5% over the prior year. A significant portion of the Village s net position reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The Village uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Village s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The table below shows the Village s net position as of February 29, 2016 and Village s Statement of Net Position February 29, 2016 Governmental Business Activities Activities Current and other assets $ 1,495,313 $ 440,585 $ 1,935,898 $ 1,632,189 Capital assets 5,576,444 5,212,089 10,788,533 11,092,101 Total Assets 7,071,757 5,652,674 12,724,431 12,724,290 Deferred outflows 49,822 10,936 60,758 43,826 Long-term liabilities outstanding 2,129,355 2,430,511 4,559,866 4,661,098 Other liabilities 60,756 34,132 94,888 95,824 Total Liabilities 2,190,111 2,464,643 4,654,754 4,756,922 Net investment in capital assets 3,759,122 2,847,871 6,606,993 6,794,302 Restricted 706, , , ,595 Unrestricted 465,990 86, , ,297 Total Net Position $ 4,931,468 $3,198,967 $ 8,130,435 $ 8,011,194 vi

10 Village of Pigeon, Michigan Management s Discussion and Analysis Of the remaining balance of net position, approximately 11.9% or $971,161 are restricted resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position of $552,281 may be used to meet the government s ongoing obligations to citizens and creditors. At the end of the current fiscal year, except for the Trunkline Fund, the Village is able to report positive balances for the governmental activities. The table below shows the change in net position for the fiscal year ended February 29, 2016 and Village s Change in Net Position February 29, 2016 Governmental Business Activities Activities General revenue: Property taxes $ 710,727 $ 49, , ,770 State shared revenues 241, , ,704 Unrestricted investment earnings 772 1,181 1,954 1,274 Miscellaneous 49,321-49,321 60,203 Program revenue: Charges for services 75, , , ,213 Operating grants and contributions 51,000-51,000 57,030 Total revenue 1,128,589 _810,430 1,939,019 1,943,193 Expenses: General government 192, , ,411 Public safety 121, , ,198 Public works 236, , ,468 Streets 254, , ,618 Recreation 43,664-43,664 52,547 Interest on long-term debt 92,018-92,018 94,891 Unallocated depreciation 20,219-20,219 21,502 Sewer - 203, , ,131 Water - _655, , ,320 Total expenses 961, ,575 1,819,778 1,793,086 Change in net position 167,386 (48,145) 119, ,107 Net position beginning of the year 4,764,082 3,247,112 8,011,194 8,167,495 Adjustment for pension reporting (306,408) Net position end of the year $4,931,468 $ 3,198,967 $8,130,435 $8,011,194 Governmental activities Governmental activities increased the Village s net position by $167,386 or 3.5% of beginning governmental activities net position. Revenues continue to exceed the expenses of the governmental activities which allows the Village to provide resources for the future. vii

11 Village of Pigeon, Michigan Management s Discussion and Analysis Business-Type activities Business-type activities decreased the Village s net position by $(48,145) or (1.5)% of beginning business-type activities net position due to operating expenses (including depreciation expense) exceeding the operating revenue of the Water Fund for the fiscal year. Financial Analysis of the Government s Funds As noted earlier, the Village uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental Funds - The focus of the Village s governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Village s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. The General Fund is the chief operating fund of the Village. At the end of the fiscal year, the unassigned fund balance of the General Fund was $518,874. As a measure of the General Fund s liquidity, it may be useful to compare unassigned fund balance to total general fund expenditures; unassigned fund balance represents 84.3% of total General Fund expenditures. During the current fiscal year, the fund balance of the Village s General Fund increased by $45,273. The primary funds utilized by the Village for street construction and maintenance are the Municipal Street Funds. The Village transferred $48,000 to the Local Street Fund from the Municipal Street Fund during the fiscal year to pay for street maintenance. After the transfers to the Local Street Fund, the fund balance of the Municipal Street Fund increased by $153,558 during the fiscal year, leaving a fund balance of $308,735. At the conclusion of the fiscal year, the Major Street Fund had a fund balance of $167,882, which decreased by $(2,927) and the Local Street Fund had a fund balance of $110,905, an increase of $6,295. The Municipal Street Fund is a special revenue fund that is used to account for restricted revenues for the Village s streets and allocate those revenues between the Major and Local Street Funds as they are needed. Included in the restricted revenues for the streets are the Village s local property tax millage for streets and the Village s share of the County property tax millage for streets and roads. Also included in the restricted revenue of the Municipal Street Fund is the contribution from the Local Township Board that is to be used by the Village for its streets. During the fiscal year 2016, $201,558 of restricted revenue was received for the Village s streets. Transfers were made to the Local Street fund in the amount of $48,000 during the current fiscal year. This leaves a combined fund balance of $587,522 for the Municipal Street Funds of restricted street funds that can be used in future years. Proprietary funds - The Village s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the Water and Sewer Funds at the end of the year amounted to $104,308. The Water Fund ended the fiscal with a deficit unrestricted net position of $(266,470) compared to $(263,130) for the prior year, which is an increase of the deficit of $(3,340). The Sewer Fund had an increase in unrestricted net position for the year of $52,658 compared to $37,061 for the prior year. Other factors concerning the finances of these two funds can be seen on pages 8 through 12 of the financial statements. viii

12 Village of Pigeon, Michigan Management s Discussion and Analysis General Fund Budgetary Highlights Differences between the original and final amended budgets for General fund expenditures included department of public works, which increased by $7,284; the recreation department, which increased by $3,005; and capital outlay, which increased $29,317. Overall, the General fund expenditure budget was increased from $631,043 to $665,734, an increase of $34,691. Budget to actual comparisons for the Village s general fund were mostly favorable, with the exception of professional fees expenditures for the public works category. Capital Asset and Debt Administration Capital assets - The Village s net investment in capital assets for its governmental and business-type activities as of February 29, 2016, amounted to $6,606,993. This investment in capital assets includes land, buildings and improvements, water and sewer systems, equipment and infrastructure. The table below shows the Village s capital assets as of February 29, 2016 and Village s Capital Assets (Net of depreciation) Governmental Business-Type Activities Activities Land $ 500,000 $ 201,000 $ 701,000 $ 706,000 Buildings and improvements 1,401,193 2,190,200 3,591,393 3,564,125 Equipment 1,143, ,233 1,773,121 1,749,605 Infrastructure 8,520,092 6,172,942 14,693,034 14,624,690 Total capital assets 11,565,173 9,193,375 20,758,548 20,644,420 Accumulated depreciation (5,988,729) (3,981,286) (9,970,015) (9,552,319) Net Governmental Fund Capital Assets $5,576,444 $5,212,089 $10,788,533 $11,092,101 Additional information on the Village s capital assets can be found in Note 1 and 6 on pages 17 and 23 of the financial report. Long-term debt - At the end of the current fiscal year, the Village had total debt outstanding of $4,191,548. These amounts are summarized below. Village s Long-Term Debt General Obligation and Revenue Bonds Governmental Business-Type Activities Activities Revenue bonds $ - $2,349,000 $2,349,000 $2,398,000 General obligation bonds 1,725,000-1,725,000 1,775,000 Capital improvement bonds 58,000-58,000 66,000 Capital leases ,525 Drain assessment 45,655 15,218 60,873 66,407 Accrued compensated absences 10,008-10,008 13,065 Bond discount (11,333) - (11,333) (12,133) Total long-term debt $1,827,330 $2,364,218 $4,191,548 $4,310,864 ix

13 Village of Pigeon, Michigan Management s Discussion and Analysis The Village s total debt decreased during the current fiscal year by $119,316. Additional information on the Village s long-term debt can be found in Note 7 on pages 25 through 28 of the financial report. Economic Factors and Next Year s Budgets and Rates Inflationary trends in the region compare favorably to national indices. The County s unemployment rate as of February 2016 was 4.8 percent which is the same as the statewide rate. The Village plans to keep abreast on the taxable value situation with both real and especially personal property taxes and adjust the 2016 budget to account for any changes. Requests for Information This financial report is designed to provide a general overview of the Village s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Steven Corrion, Village Clerk, 29 S. Main Street, Pigeon, MI x

14 BASIC FINANCIAL STATEMENTS 1

15 STATEMENT OF NET POSITION FEBRUARY 29, 2016 BUSINESS - GOVERNMENTAL TYPE ACTIVITIES ACTIVITIES TOTALS ASSETS Cash and deposits $ 974,472 $ 346,857 $ 1,321,329 Receivables: Accounts receivable 17, , ,822 Due from other governments 21,522-21,522 Internal balances 325,660 (325,660) - Accrued interest receivable Inventory - 20,920 20,920 Restricted assets: Cash and deposits 156, , ,303 Capital assets, not being depreciated 500, , ,000 Capital assets, net of accumulated depreciation 5,076,444 5,011,089 10,087,533 TOTAL ASSETS 7,071,757 5,652,674 12,724,431 DEFERRED OUTFLOWS Related to pensions 49,822 10,936 60,758 TOTAL DEFERRED OUTFLOWS 49,822 10,936 60,758 LIABILITIES Accounts payable 10,650 3,863 14,513 Accrued interest 29,732 30,269 60,001 Accrued payroll liabilities 4,698-4,698 Accrued wages 3,154-3,154 Customer deposits 12,523-12,523 Noncurrent liabilities: Long-term liabilities due within one year 67,151 53, ,534 Bonds, notes and loans payable 1,750,171 2,310,835 4,061,006 Compensated absences 10,008-10,008 Net pension liability 302,025 66, ,318 TOTAL LIABILITIES 2,190,111 2,464,643 4,654,754 NET POSITION Net investment in capital assets 3,759,122 2,847,871 6,606,993 Restricted for: Public safety 2,834-2,834 Streets 587, ,522 Debt service 116, , ,899 Capital projects - 104, ,906 Unrestricted 465,990 86, ,281 TOTAL NET POSITION $ 4,931,468 $ 3,198,967 $ 8,130,435 The accompanying notes are an integral part of the financial statements. 2

16 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED FEBRUARY 29, 2016 PROGRAM REVENUES OPERATING NET (EXPENSES) REVENUES & CHANGES IN NET POSITION CHARGES FOR GRANTS AND GOVERNMENTAL BUSINESS-TYPE EXPENSES SERVICES CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTALS GOVERNMENTAL ACTIVITIES: General government $ 192,417 $ - $ - $ (192,417) $ (192,417) Public safety 121, (121,481) (121,481) Public works 236,548 75,570 - (160,978) (160,978) Streets 254,794-50,000 (204,794) (204,794) Recreation 43,664-1,000 (42,664) (42,664) Interest on long-term debt 92, (92,018) (92,018) Unallocated depreciation 20, (20,219) (20,219) TOTAL GOVERNMENTAL ACTIVITIES 961,203 75,631 51,000 (834,572) (834,572) BUSINESS-TYPE ACTIVITIES: Sewer 203, , $ 40,636 40,636 Water 655, , (139,837) (139,837) TOTAL BUSINESS-TYPE ACTIVITIES 858, , (99,200) (99,200) TOTAL GOVERNMENT $ 1,819,778 $ 835,005 $ 51,000 (834,572) (99,200) (933,772) GENERAL REVENUE: Property taxes 710,727 49, ,600 State shared revenues 241, ,138 Unrestricted investment earnings 772 1,181 1,954 Miscellaneous 49,321-49,321 TOTAL GENERAL REVENUE 1,001,958 51,055 1,053,013 CHANGE IN NET POSITION 167,386 (48,145) 119,241 NET POSITION - BEGINNING OF THE YEAR, AS RESTATED 4,764,082 3,247,112 8,011,194 NET POSITION - END OF THE YEAR $ 4,931,468 $ 3,198,967 $ 8,130,435 The accompanying notes are an integral part of the financial statements. 3

17 BALANCE SHEET - GOVERNMENTAL FUNDS FEBRUARY 29, 2016 OTHER NONMAJOR TOTAL MAJOR LOCAL DEBT GOVERNMENTAL GOVERNMENTAL GENERAL STREET STREET SERVICE FUNDS FUNDS ASSETS Cash and deposits $ 148,278 $ 155,110 $ 107,082 $ - $ 308,735 $ 719,205 Receivables: Accounts receivable 17, ,160 Due from other governments 4,492 12,989 4, ,522 Due from other funds 364, ,944 Restricted assets: Cash and deposits 40, , ,498 TOTAL ASSETS $ 575,372 $ 168,099 $ 111,124 $ 116,000 $ 308,735 $ 1,279,330 LIABILITIES AND FUND BALANCES LIABILITIES: Accounts payable $ 7,504 $ 217 $ 219 $ - $ 1,077 $ 9,017 Accrued payroll liabilities 4, ,698 Accrued wages 3, ,154 Customer deposits 12, ,523 Due to other funds ,944 1,944 TOTAL LIABILITIES 27, ,021 31,336 FUND BALANCES: Restricted 2, , , , , ,356 Committed 25, ,785 Unassigned (Deficit) 518, (3,021) 515,853 TOTAL FUND BALANCES 547, , , , ,714 1,247,994 TOTAL LIABILITIES AND FUND BALANCES $ 575,372 $ 168,099 $ 111,124 $ 116,000 $ 308,735 $ 1,279,330 The accompanying notes are an integral part of the financial statements. 4

18 RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO GOVERNMENTAL ACTIVITIES NET POSITION FEBRUARY 29, 2016 Total governmental fund balances $ 1,247,994 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds. The cost of the assets is $11,565,173 less the accumulated depreciation of $5,988,729. 5,576,444 Internal service fund is not included in the governmental funds. 216,294 Interest accrued on long-term liabilities is not reported in the funds. (29,732) Long-term liabilities, including compensated absences, notes payable and bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. (1,827,330) Deferred outflows of resources are not reported in the funds. Related to pensions 49,822 Net pension liability is not reported in the funds. (302,025) Net position - governmental activities $ 4,931,468 The accompanying notes are an integral part of the financial statements. 5

19 TOTAL MAJOR LOCAL DEBT OTHER NONMAJOR GOVERNMENTAL GENERAL STREET STREET SERVICE GOVERNMENTAL FUNDS FUNDS REVENUE: Taxes $ 409,907 $ - $ - $ 149,650 $ 151,169 $ 710,727 Licenses and permits Intergovernmental 114,714 72,705 27,874-25, ,138 Charges for services 83, ,785 Fines and other 1, ,129 Interest and rentals Contributions 1, ,000 51,000 Miscellaneous 49, ,364 TOTAL REVENUE 660,614 72,727 27, , ,403 1,138,315 EXPENDITURES: Current: General government 190, ,120 Public safety 115, ,253 Public works 231, ,630 Streets - 73,766 67,700-26, ,334 Recreation 31, ,250 Capital outlay 33, ,948 Debt service 13,140 1,888 1, , ,298 TOTAL EXPENDITURES 615,341 75,654 69, ,383 26, ,833 EXCESS OF REVENUE OVER (UNDER) VILLAGE OF PIGEON, MICHIGAN STATEMENT OF REVENUE, EXPENDITURES AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED FEBRUARY 29, 2016 EXPENDITURES 45,273 (2,927) (41,705) 12, , ,481 OTHER FINANCING SOURCES (USES): Operating transfers in , ,000 Operating transfers (out) (48,000) (48,000) TOTAL OTHER FINANCING SOURCES (USES) ,000 - (48,000) - EXCESS OF REVENUE AND OTHER SOURCES OVER (UNDER) EXPENDITURES AND OTHER (USES) 45,273 (2,927) 6,295 12, , ,481 FUND BALANCE - BEGINNING OF THE YEAR 502, , , , ,179 1,034,513 FUND BALANCE - END OF THE YEAR $ 547,493 $ 167,882 $ 110,905 $ 116,000 $ 305,714 $ 1,247,994 The accompanying notes are an integral part of the financial statements. 6

20 RECONCILIATION OF THE STATEMENT OF REVENUE, EXPENDITURES AND CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED FEBRUARY 29, 2016 Net change in fund balances - governmental funds $ 213,481 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, assets with an initial, individual cost of more than $1,000 are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays differ from depreciation in the current period: Capital outlays $ 67,897 Depreciation expense (179,826) (111,929) The net gain (loss) of certain activities of the internal service fund is reported with governmental activities. 1,439 The (increase) decrease in accrued compensated absences is not reported with governmental funds. 3,057 The (increase) decrease in accrued interest on long-term debt is not reported with governmental funds. 930 Repayment of long-term debt is an expenditure in the governmental funds, but not in the statement of activities. 62,150 Amortization of bond discounts is an expense in the statement of activities, but not in the governmental funds. (800) Some expenses reported in the statement of activities do not require the use of current fiscal resources and therefore, are not reported as expenditures in the governmental funds. Pension related items (943) Change in net position - governmental activities $ 167,386 The accompanying notes are an integral part of the financial statements. 7

21 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS SEWER WATER TOTALS ASSETS CURRENT ASSETS: Cash and deposits $ 346,104 $ ,857 GOVERNMENTAL ACTIVITIES- INTERNAL SERVICE FUND $ $ 255,267 Receivables: Accounts receivable 42,572 91, ,662 - Inventory - 20,920 20,920 - TOTAL CURRENT ASSETS 388, , , ,267 NONCURRENT ASSETS: VILLAGE OF PIGEON, MICHIGAN STATEMENT OF NET POSITION - PROPRIETARY FUNDS FEBRUARY 29, 2016 Restricted assets: Cash and deposits 124, , ,805 - Capital assets, not being depreciated 201, ,000 - Capital assets, net of accumulated depreciation 1,254,268 3,756,821 5,011,089 77,217 TOTAL NONCURRENT ASSETS 1,579,402 3,897,492 5,476,894 77,217 TOTAL ASSETS 1,968,078 4,010,256 5,978, ,484 LIABILITIES CURRENT LIABILITIES: Accounts payable 1,478 2,385 3,863 1,633 Accrued interest 16,420 13,849 30,269 - Due to other funds - 363, ,000 - Current portion of noncurrent liabilities 21,383 32,000 53,383 - TOTAL CURRENT LIABILITIES 39, , ,515 1,633 NONCURRENT LIABILITIES: Bonds, notes and loans payable 1,111,835 1,199,000 2,310,835 - TOTAL NONCURRENT LIABILITIES 1,111,835 1,199,000 2,310,835 - TOTAL LIABILITIES 1,151,116 1,610,234 2,761,350 1,633 NET POSITION Net investment in capital assets 322,050 2,525,821 2,847,871 77,217 Restricted for: Capital projects 53,453 51, ,906 - Debt service 70,681 89, ,899 - Unrestricted (deficit) 370,778 (266,470) 104, ,634 TOTAL NET POSITION $ 816,962 $ 2,400,022 $ 3,216,984 $ 330,851 The accompanying notes are an integral part of the financial statements. 8

22 RECONCILIATION OF PROPRIETARY FUNDS NET POSITION TO BUSINESS-TYPE ACTIVITIES NET POSITION FEBRUARY 29, 2016 Total enterprise fund balances $ 3,216,984 Amounts reported for business-type activities in the statement of net position are different because: Adjustment to reflect the consolidation of Internal Service Fund activities related to enterprise funds. 37,340 Deferred outflows of resources are not reported in the funds. Related to pensions 10,936 Net pension liability is not reported in the funds. (66,293) Net position - business-type activities $ 3,198,967 The accompanying notes are an integral part of the financial statements. 9

23 STATEMENT OF REVENUE, EXPENSES, AND CHANGE IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED FEBRUARY 29, 2016 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES- ENTERPRISE FUNDS INTERNAL SEWER WATER TOTALS SERVICE FUND OPERATING REVENUE: Charges for services $ 243,742 $ 515,632 $ 759,374 $ 104,905 TOTAL OPERATING REVENUE 243, , , ,905 OPERATING EXPENSES: Salaries 15,297 27,740 43,036 8,207 Employee benefits 9,435 15,371 24,806 6,880 Administrative fee 12, ,901 2,479 Contracted services - 3,574 3,574 - Depreciation 64, , ,615 32,255 Equipment rental 8,382 14,826 23,208 - Insurance 4,114 8,338 12,452 5,677 Miscellaneous 5,152 6,761 11,913 9,599 Office supplies 2,732 1,847 4,580 - Operating supplies 836 2,311 3,147 3,813 Professional fees 2,725 1,600 4,325 1,925 Purchases - Water - 348, ,472 - Rentals ,500 Repairs and maintenance 21,763 13,442 35,205 29,587 Utilities 6,090 12,614 18,705 - Capital outlay TOTAL OPERATING EXPENSES 153, , , ,922 OPERATING INCOME (LOSS) 90,107 (83,557) 6,550 1,983 NONOPERATING REVENUE (EXPENSES): Current property taxes - 49,874 49,874 - Interest earned ,181 - Interest expense (49,545) (56,407) (105,952) (135) TOTAL NONOPERATING REVENUE (EXPENSES) (49,131) (5,766) (54,897) (135) CHANGE IN NET POSITION 40,976 (89,323) (48,347) 1,848 NET POSITION - BEGINNING OF THE YEAR 775,986 2,489,345 3,265, ,003 NET POSITION - END OF THE YEAR $ 816,962 $ 2,400,022 $ 3,216,984 $ 330,851 The accompanying notes are an integral part of the financial statements. 10

24 RECONCILIATION OF THE STATEMENT OF REVENUE, EXPENSES AND CHANGE IN NET POSITION OF PROPRIETARY FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED FEBRUARY 29, 2016 Net change in net position - proprietary funds $ (48,347) Amounts reported for business-type activities in the statement of activities are different because: Internal service fund activities related to business-type activities are consoliated in the statement of activities. 409 Some expenses reported in the statement of activities are not required to be reported as expenses in the proprietary funds. Pension related items (207) Change in net position - business-type activities $ (48,145) The accompanying notes are an integral part of the financial statements. 11

25 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED FEBRUARY 29, 2016 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES ENTERPRISE FUNDS INTERNAL SEWER WATER TOTALS SERVICE FUND CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers $ 238,159 $ 514,236 $ 752,395 $ - Receipts from interfund services ,905 Payments to suppliers of goods and services (51,801) (429,994) (481,795) (59,544) Payments to employees (15,297) (27,740) (43,037) (8,207) Payments for interfund services (20,778) (15,331) (36,109) (2,479) NET CASH PROVIDED BY OPERATING ACTIVITIES 150,284 41, ,456 34,675 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Due to other funds - 19,000 19,000 - NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES - 19,000 19,000 - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Property tax levy received - 49,874 49,874 - Acquisition of capital assets (21,499) (24,732) (46,231) - Principal paid on long-term debt (20,384) (30,000) (50,384) (4,525) Interest and fees paid on bonds (49,832) (56,745) (106,577) (135) NET CASH (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (91,715) (61,603) (153,318) (4,660) CASH FLOWS FROM INVESTING ACTIVITIES: Interest on investments ,181 - NET CHANGE IN CASH AND RESTRICTED CASH 58,982 (664) 58,318 30,016 CASH AND RESTRICTED CASH - BEGINNING OF THE YEAR 411, , , ,251 CASH AND RESTRICTED CASH - END OF THE YEAR $ 470,238 $ 141,424 $ 611,662 $ 255,267 CASH FLOWS FROM OPERATING ACTIVITIES: Operating income (loss) $ 90,107 $ (83,557) $ 6,550 $ 1,983 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 64, , ,615 32,255 (Increase) decrease in current assets: Accounts receivable (5,583) (1,396) (6,979) - Inventory - (15,428) (15,428) - Increase (decrease) in current liabilities: Accounts payable 1, , NET CASH PROVIDED BY OPERATING ACTIVITIES $ 150,284 $ 41,172 $ 191,456 $ 34,675 The accompanying notes are an integral part of the financial statements. 12

26 NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Village of Pigeon operates a council-president form of government under provisions of a revised charter, and provides the following services as authorized by its charter: public safety, (police and inspection), highways and streets, sanitation, water, parks and recreation, public improvements, planning and zoning, and general administration. The Village s financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing U.S. GAAP for state and local governments through its pronouncements (Statements and Interpretations). The accounting policies of the Village conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The more significant accounting policies established in U.S. GAAP and used by the Village are discussed below. Reporting Entity: This report includes all of the funds of the Village of Pigeon. The reporting entity for the Village consists of (a) the primary government, (b) organizations for which the primary government is financially accountable and (c) other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity s financial statements to be misleading or incomplete. A legally separate organization should be reported as a component unit if the elected officials of the primary government are financially accountable to the organization. The primary government is financially accountable if it appoints a voting majority of the organization s governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to or burdens on the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government. A legally separate tax exempt organization should be reported as a component unit of a reporting entity if all of the following criteria are met: (1) the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; (2) the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization; (3) the economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. Based upon the application of these criteria, the Village has no component units. Government Wide and Fund Financial Statements: Government-Wide Financial Statements The statement of net position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-exchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. (Continued) 13

27 NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 29, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) Government Wide and Fund Financial Statements: (Continued) Government-Wide Financial Statements (Continued) The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The Village does not allocate indirect expenses to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the reporting entity are organized into funds each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of selfbalancing accounts, which constitute its assets, liabilities, net position/fund equity, revenues, and expenditures/expenses. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Funds are organized as major funds or non-major funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the Village or meets the following criteria: 1. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type, and 2. The same element of the individual governmental fund or enterprise fund that met the 10 percent test is at least 5 percent of the corresponding total for all governmental and enterprise funds combined. 3. In addition, any other governmental or enterprise fund that the Village believes is particularly important to financial statement users may be reported as a major fund. The Village reports the following major funds: Major Governmental Funds General Fund - accounts for the Village s primary operating activities. It is used to account for and report all financial resources except those required to be accounted for in another fund. Major Street Fund a special revenue fund used to account for and report the proceeds of specific revenue sources (State gas and weight taxes) that are restricted or committed to expenditures for specified purposes (the Village s major streets). (Continued) 14