CITY OF BOONE INDEPENDENT AUDITOR S REPORTS BASIC FINANCIAL STATEMENTS SUPPLEMENTARY AND OTHER INFORMATION SCHEDULE OF FINDINGS JUNE 30, 2017

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1 INDEPENDENT AUDITOR S REPORTS BASIC FINANCIAL STATEMENTS SUPPLEMENTARY AND OTHER INFORMATION SCHEDULE OF FINDINGS JUNE 30, 2017

2 Table of Contents Page Officials 3 Independent Auditor s Report 4-5 Management s Discussion and Analysis 6-11 Basic Financial Statements: Exhibit Government-wide Financial Statement: Cash Basis Statement of Activities and Net Position A Governmental Fund Financial Statement: Statement of Cash Receipts, Disbursements and Changes in Cash Balances B Proprietary Fund Financial Statement: Statement of Cash Receipts, Disbursements and Changes in Cash Balances C 17 Fiduciary Fund Financial Statement: Statement of Cash Receipts, Disbursements and Changes in Cash Balances D 18 Notes to Financial Statements Other Information: Budgetary Comparison Schedule of Receipts, Disbursements and Changes in Balances Budget and Actual (Cash Basis) All Governmental Funds and Proprietary Funds Notes to Other Information Budgetary Reporting 37 Schedule of City s Proportionate Share of the Net Pension Liability IPERS 38 Schedule of City s Contributions IPERS 39 Notes to Other Information Pension Liability IPERS 40 Schedule of City s Proportionate Share of the Net Pension Liability MFPRSI 41 Schedule of City s Contributions MFPRSI 42 Notes to Other Information Pension Liability MFPRSI 43 Supplementary Information: Schedule Schedule of Cash Receipts, Disbursements and Changes in Cash Balances Nonmajor Governmental Funds Schedule of Indebtedness 2 47 Bond and Note Maturities Schedule of Receipts by Source and Disbursements by Function All Governmental Funds 4 50 Independent Auditor s 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 53-57

3 Officials Name Title Term Expires (Before January 2018) John L.Slight Mayor Jan Steven Ray Mayor Pro tem Jan Gary Nystrom Council Member Jan Nick Mallas Council Member Jan C. Scott Porter (To November 2017) Council Member Jan Greg Piklapp Council Member Jan Steven Ray Council Member Jan Kevin Hicks Council Member Jan BJ McGinn Council Member Jan David Byrd (From November 2017) Council Member Jan William Skare City Administrator Indefinite Ondrea Elmquist Treasurer/Finance Officer Indefinite Jim Robbins Attorney Indefinite (After January 2018) John L.Slight Mayor Jan Steven Ray Mayor Pro tem Jan Steven Ray Council Member Jan Kevin Hicks Council Member Jan BJ McGinn Council Member Jan Greg Piklapp Council Member Jan David Byrd Council Member Jan Elijah Stines Council Member Jan Holly Stecker Council Member Jan William Skare City Administrator Indefinite Ondrea Elmquist Treasurer/Finance Officer Indefinite Jim Robbins Attorney Indefinite 3

4 HOUSTON & SEEMAN, P.C. CERTIFIED PUBLIC ACCOUNTANTS 724 Story Street, Suite 601 Boone, IA Kevin N. Houston, CPA Telephone: (515) Eric G. Seeman, CPA Fax: (515) To the Honorable Mayor and Members of the City Council: Independent Auditor s Report 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 City of Boone, Iowa, as of and for the year ended June 30, 2017, and the related Notes to Financial Statements, which collectively comprise the City s basic financial statements 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 the cash basis of accounting described in Note 1. This includes determining the cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. 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 U.S. generally accepted auditing standards 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 City 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 City 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 the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective cash basis financial position of the governmental activities, the business type activities, each major fund and the aggregate remaining fund information of the City of Boone as of June 30, 2017, and the respective changes in cash basis financial position for the year then ended in accordance with the basis of accounting described in Note 1. Member American Institute of Certified Public Accountants

5 Basis of Accounting As described in Note 1, these financial statements were prepared on the basis of cash receipts and disbursements, which is a basis of accounting other than U.S. generally accepted accounting principles. Our opinions are not modified with respect to this matter. Other Matters Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Boone s basic financial statements. We previously audited, in accordance with the standards referred to in the third paragraph of this report, the financial statements for the twelve years ended June 30, 2016 (which are not presented herein) and expressed unmodified opinions on those financial statements which were prepared on the basis of cash receipts and disbursements. The supplementary information included in Schedules 1 through 4 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. 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 financial statements or to the basic financial statements themselves, and other additional procedures in accordance with U.S. generally accepted auditing standards. In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The other information, Management s Discussion and Analysis, the Budgetary Comparison Information, the Schedule of the City s Proportionate Share of the Net Pension Liability IPERS, the Schedule of City s Contributions IPERS, the Schedule of City s Proportionate Share of Net Pension Liability MFPRSI, and the Schedule of City s Contributions - MFPRSI on pages 6 through 11 and 35 through 43 has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 24, 2018 on our consideration of the City of Boone s internal control over financial reporting and 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 the 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 City of Boone s internal control over financial reporting and compliance. Houston & Seeman, P.C. January 24, 2018

6 MANAGEMENT S DISCUSSION AND ANALYSIS The City of Boone provides this Management s Discussion and Analysis of its financial statements. This narrative overview and analysis of the financial activities is for the fiscal year ended June 30, We encourage readers to consider this information in conjunction with the City s financial statements, which follow FINANCIAL HIGHLIGHTS The City s governmental activities receipts decreased 22%, or approximately $3.4 million, from fiscal year The City s governmental activities disbursements decreased 14%, or approximately $1.9 million from fiscal year The City s governmental activities cash balance at June 30, 2017 increased 6%, or approximately $514,000 from June 30, USING THIS ANNUAL REPORT The annual report consists of a series of financial statements and other information, as follows: Management s Discussion and Analysis introduces the basic financial statements and provides an analytical overview of the City s financial activities. The Government-wide Financial Statement consists of a Cash Basis Statement of Activities and Net Position. This statement provides information about the activities of the City as a whole and presents an overall view of the City s finances. The Fund Financial Statements tell how governmental services were financed in the short term as well as what remains for future spending. Fund financial statements report the City s operations in more detail than the government-wide financial statement by providing information about the most significant funds. Notes to the Financial Statements provide additional information essential to a full understanding of the data provided in the basic financial statements. Other Information further explains and supports the financial statements with a comparison of the City s budget for the year and the City s proportionate share of the net pension liability and related contributions. Supplementary Information provides detailed information about the nonmajor governmental funds and the City s indebtedness. BASIS OF ACCOUNTING The City maintains its financial records on the basis of cash receipts and disbursements and the financial statements of the City are prepared on that basis. The cash basis of accounting does not give effect to accounts receivable, accounts payable and accrued items. Accordingly, the financial statements do not present financial position and results of operations of the funds in accordance with U.S. generally accepted accounting principles. Therefore, when reviewing the financial information and discussion within this annual report, readers should keep in mind the limitations resulting from the use of the cash basis of accounting. 6

7 REPORTING THE CITY S FINANCIAL ACTIVITIES Government-wide Financial Statement One of the most important questions asked about the City s finances is, Is the City as a whole better off or worse off as a result of the year s activities? The Statement of Activities and Net Position reports information which helps answer this question. The Cash Basis Statement of Activities and Net Position presents the City s net position. Over time, increases or decreases in the City s net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Cash Basis Statement of Activities and Net Position is divided into two kinds of activities: Governmental Activities include public safety, public works, health and social services, culture and recreation, community and economic development, general government, debt service and capital projects. Property tax and state and federal grants finance most of these activities. Business Type Activities include the waterworks and the sanitary sewer system. These activities are financed primarily by user charges. Fund Financial Statements The City has three kinds of funds: 1) Governmental funds account for most of the City s basic services. These focus on how money flows into and out of the funds and the balances at year-end that are available for spending. The governmental funds include: 1) the General Fund, 2) the Special Revenue Funds, such as Road Use Tax, Tax Increment Financing, Group Insurance and Local Option Sales Tax, 3) the Debt Service Fund, 4) the Capital Projects Fund and 5) the Permanent Fund. The governmental fund financial statements provide a detailed, short-term view of the City s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City s programs. The required financial statement for governmental funds is a Statement of Cash Receipts, Disbursements and Changes in Cash Balances. 2) Proprietary funds account for the City s Enterprise Funds. Enterprise Funds are used to report business type activities. The City maintains three Enterprise Funds to provide separate information for the water, storm water, and sewer funds, considered to be major funds of the City. The required financial statement for proprietary funds is a Statement of Cash Receipts, Disbursements and Changes in Cash Balances. 3) Fiduciary funds account for the City s Private Purpose Trusts. These funds are used to report resources that are not available to fund City programs. The required financial statement for fiduciary funds is a Statement of Cash Receipts, Disbursements and Changes in Cash Balances. Reconciliations between the government-wide financial statement and the fund financial statements follow the fund financial statements. 7

8 GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of financial position. The City s cash balance for governmental activities increased $514,000 from a year ago, from $9.3 million to $9.8 million. The analysis that follows focuses on the changes in cash basis net position of governmental activities. Changes in Cash Basis Net Position of Governmental Activities (Expressed in Thousands) Year ended June 30, Receipts and transfers: Program receipts: Charges for services and sales $ Operating grants, contributions and restricted interest 1,844 2,062 Capital grants, contributions and restricted interest General receipts: Property tax 6,313 6,423 Local option sales tax 1,245 1,085 Hotel/motel tax Franchise taxes Unrestricted investment earnings Bond proceeds - 3,165 Other general receipts Transfers, net Total receipts and transfers 11,976 15,361 Disbursements: Public safety 3,848 3,634 Public works 1,755 1,713 Health and social services Culture and recreation 1,607 1,370 Community and economic development General government Debt service 1,576 2,271 Capital projects 1,631 3,435 Total disbursements 11,462 13,401 Change in cash basis net position 514 1,960 Cash basis net position beginning of year 9,306 7,346 Cash basis net position end of year $ 9,820 9,306 The City s total receipts for governmental activities decreased by approximately 22%. The total cost of all programs and services decreased by approximately 14%. 8

9 The cost of all governmental activities this year was $11,461,545 compared to $13,400,884 last year. However, as shown in the statement of activities and changes in cash balance on pages 13-14, the amount that our taxpayers ultimately financed for these activities was only $8,052,969 because some of the cost was paid by those who directly benefited from the programs ($943,450) or by other governments and organizations that subsidized certain programs with grants and contributions ($2,355,813). Overall, the City s governmental program receipts, including intergovernmental aid and fees for service, increased in 2017 from approximately $3,285,000 to approximately $3,299,000, principally due to an increase in charges for services and sales. The City paid for the remaining public benefit portion of governmental activities with approximately $7,716,000 in tax (some of which could only be used for certain programs) and with other receipts, such as interest and general entitlements. Changes in Cash Basis Net Position of Business Type Activities (Expressed in Thousands) Year ended June 30, Receipts and transfers: Program receipts: Charges for services and sales: Water $ 2,805 2,631 Sewer 3,096 3,026 Storm water General receipts: Unrestricted investment earnings Bond proceeds Transfers, net (624) (799) Total receipts 5,630 5,073 Disbursements: Water 2,011 1,912 Sewer 2,478 2,269 Storm water Total disbursements and transfers 4,679 4,308 Change in cash basis net position Cash basis net position beginning of year 3,938 3,173 Cash basis net position end of year $ 4,889 3,938 Total business type activities receipts for the fiscal year increased 11% compared to last year. The cash balance increased by approximately $951 thousand from the prior year. Total disbursements for the fiscal year increased 9% to a total of $4.7 million. INDIVIDUAL MAJOR GOVERNMENTAL FUND ANALYSIS The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The focus of the City s funds is to provide information on near-term inflows, outflows and cash balances of spendable resources. The following are the major reasons for the changes in cash balances from the prior year for the City s major funds. 9

10 The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the General Fund has a balance of $2,460,000, an increase of $415,000 from the prior year. The Road Use Tax Fund cash balance decreased by $69,000 to $865,000 during the year. The Group Insurance Fund increased by $477,000 during the fiscal year. The fund has a balance of $2,166,000. The Employee Benefit Fund cash balance decreased by $186,000 to $382,000 during the year. The Local Option Sales Tax Fund was established in 1990 to collect a 1% local option sales and service tax. The City collected $1,245,000 during this year, a 15% increase from the previous year. The proceeds of the tax are designated 5% for human services, 20% for property tax relief, and 75% for capital projects. The Tax Increment Financing Fund was established in a prior fiscal year to account for the financing of capital improvements within the established TIF district, which contributes to urban and economic development. At the end of the year, the fund had a balance of $352,000. The Mary Garvey Fund was established when the City received a very generous donation from the estate of a former citizen. The funds were partially used by the City to assist the building of the Family Resource Center. At the end of the year, the fund had a balance of $230,000. The General Obligation Bonds/Notes Debt Service Fund is used to pay the principal and interest of the City s general obligation debt. The cash in this fund decreased by $21,000 during the year with a balance of $465,000 at the end of the year. The City has a Cemetery Perpetual Care Fund which is a permanent fund. The cash in this fund increased by $6,000 during the year with a balance at the end of the year of $461,000. INDIVIDUAL MAJOR BUSINESS TYPE FUND ANALYSIS The cash balance of the Sewer Fund increased by approximately $495,000 to $2,133,000. The Water Fund increased by approximately $453,000 to $2,375,000, due primarily to an increase in customers served and an increase in water meter rates. BUDGETARY HIGHLIGHTS In accordance with the Code of Iowa, the City Council annually adopts a budget following required public notice and hearings for all funds. The budget may be amended during the year utilizing similar statutorily prescribed procedures. Over the course of the year, the City amended its operating budget once. The amendment was approved on May 15, 2017, to increase revenues and increase expenditures in certain City departments. 10

11 DEBT ADMINISTRATION Outstanding Debt at Year-End (Expressed in Thousands) General obligation bonds $ 4,445 5,590 General obligation notes 3,695 3,910 Revenue bonds and notes 10,747 11,910 $ 18,887 21,410 At year-end, the City had approximately $18,887,000 in bonds and other long-term debt compared to approximately $21,410,000 last year as shown above. The Constitution of the State of Iowa limits the amount of general obligation debt that cities can issue to 5 percent of the assessed value of all taxable property within the City s corporate limits. The City s outstanding general obligation debt of $8,140,000 is below the City s $30,500,000 legal debt limit. More detailed information about the City s long-term liabilities is presented in Note 3 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES The City s elected and appointed officials and citizens considered many factors when setting the 2018 fiscal year budget, tax rates, and fees that will be charged for various City activities. Amounts available for appropriation in the budget are $17 million, an increase of 3% from the final 2017 budget. Budgeted disbursements are $18 million, an increase of 6% from the final 2017 budget. If these estimates are realized, the City s budgeted cash balance is expected to decrease by approximately $1,119,000 by the close of CONTACTING THE CITY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers and creditors with a general overview of the City s finances and to show the City s accountability for the money it receives. If you have questions about this report or need additional financial information, contact Ondrea Elmquist, Treasurer/Finance Officer, th Street, City of Boone, Iowa

12 Basic Financial Statements

13 Program Receipts Operating Grants, Capital Grants, Charges for Contributions, Contributions, Service and Restricted and Restricted Disbursements and Sales Interest Interest Functions / Programs: Governmental activities: Public safety $ 3,847,756 $ 410,175 $ 16,292 $ - Public works 1,755, ,675 1,584,720 - Health and social services 52, Culture and recreation 1,606, ,294 88,174 - Community and economic development 179,008 71, General government 813,845 97, Debt service 1,575, Capital projects 1,631, , ,183 Total governmental activities 11,461, ,450 1,843, ,183 Business-type activities: Water 2,010,548 2,804, Sewer 2,478,280 3,096, Storm Water 190, , Total business-type activities 4,679,335 6,098, Total $ 16,140,880 $ 7,041,595 $ 1,843,630 $ 512,183 General Receipts and Transfers: Property tax levied for: General purposes Tax increment financing Debt service Special assessments Local option sales tax Hotel/motel tax Franchise taxes Unrestricted interest on investments Bond proceeds Miscellaneous Transfers Total general receipts and transfers Change in cash basis net position Cash basis net position beginning of year Cash basis net position end of year Cash Basis Net Position Restricted Nonexpendable: Cemetery perpetual care Expendable: Streets Urban renewal purposes Debt service Capital projects Other purposes Unrestricted Total cash basis net position CITY OF BOONE Cash Basis Statement of Activities and Net Position As of and for the year ended June 30, 2017 See notes to financial statements. 13

14 Exhibit A Net (Disbursements) Receipts Governmental Business-Type Activities Activities Total $ (3,421,289) $ - $ (3,421,289) (28,894) - (28,894) (52,500) - (52,500) (1,296,072) - (1,296,072) (107,594) - (107,594) (715,953) - (715,953) (1,575,535) - (1,575,535) (964,445) - (964,445) (8,162,282) - (8,162,282) - 794, , , ,006-6,357 6,357-1,418,810 1,418,810 (8,162,282) 1,418,810 (6,743,472) 5,252,977-5,252, , , , ,212 50,423-50,423 1,244,567-1,244, , , , ,262 30,503 37,870 68, , ,000 48,819-48, ,579 (623,579) - 8,676,548 (467,709) 8,208, , ,101 1,465,367 9,305,759 3,938,276 13,244,035 $ 9,820,025 $ 4,889,377 $ 14,709,402 $ 461,290 $ - $ 461, , , , , ,441 1,258,000 1,723,441 1,841,258-1,841,258 4,544, ,469 4,884,361 1,289,921 3,291,908 4,581,829 $ 9,820,025 $ 4,889,377 $ 14,709,402 14

15 Special Revenue Local Tax Road Use Group Employee Option Increment General Tax Insurance Benefit Sales Tax Financing Receipts: Property tax $ 3,059,772 $ - $ 1,592,028 $ 516,311 $ - $ - Tax increment financing collections ,594 Other city tax 45, ,244,567 - Licenses and permits 410, Use of money and property 256,959-15, Intergovernmental 266,680 1,571, Charges for services 111, Special assessments Miscellaneous 122,571-29, Total receipts 4,273,892 1,571,783 1,637, ,074 1,245, ,594 Disbursements: Operating: Public safety 2,493, , , ,737 - Public works 116,580 1,212, , ,474 40,000 - Health and social services ,500 - Culture and recreation 1,040,054 28, , , ,264 - Community and economic development 8, ,110-28,454 General government 376, ,275 70,396 9,746 - Debt service Capital projects Total disbursements 4,036,449 1,240,999 1,160, , ,247 28,454 Excess (deficiency) of receipts over (under) disbursements 237, , ,863 (396,108) 745, ,140 Other financing sources (uses): Operating transfers in 190, , Operating transfers out (13,208) (399,917) - - (544,650) (589,000) Total other financing sources (uses) 177,662 (399,917) - 210,000 (544,650) (589,000) Change in cash balances 415,105 (69,133) 476,863 (186,108) 201,128 25,140 Cash balances beginning of year 2,045, ,020 1,689, , , ,196 Cash balances end of year $ 2,460,376 $ 864,887 $ 2,166,202 $ 382,104 $ 1,010,384 $ 352,336 Cash Basis Fund Balances CITY OF BOONE Statement of Cash Receipts, Disbursements and Changes in Cash Balances Governmental Funds As of and for the year ended June 30, 2017 Nonspendable - Cemetary perpetual care $ - $ - $ - $ - $ - $ - Restricted for: Urban renewal purposes ,336 Debt service Streets - 864, Capital projects Other purposes - - 2,166, ,104 1,010,384 - Unassigned 2,460, Total cash basis fund balances $ 2,460,376 $ 864,887 $ 2,166,202 $ 382,104 $ 1,010,384 $ 352,336 See notes to financial statements. 15

16 Exhibit B Debt Service Permanent Other General Special Cemetery Nonmajor Mary Obligation Assessment Perpetual Governmental Garvey Bonds/Notes Bonds Care Funds Total $ - $ 367,212 $ - $ - $ 84,866 $ 5,620, , ,612 1,448, ,353 1, , , ,018 2,348, , , , , , , ,513 1, ,212 50,423 6,160 1,039,089 11,352, ,878 3,847, ,305 1,755, ,500 30, ,790 1,606, , , , ,845-1,575, ,575, ,631,072 1,631,072 30,000 1,575, ,977,078 11,461,545 (28,484) (1,208,323) 50,423 6,160 (937,989) (109,313) - 1,186, ,540 2,344, (173,981) (1,720,756) - 1,186, , ,579 (28,484) (21,398) 50,423 6,160 (355,430) 514, , ,839 (1,569,355) 455,130 3,301,241 9,305,759 $ 230,126 $ 465,441 $ (1,518,932) $ 461,290 $ 2,945,811 $ 9,820,025 $ - $ - $ - $ 461,290 $ - $ 461, , , , , ,841,258 1,841, , ,076 4,544, (1,518,932) - 348,477 1,289,921 $ 230,126 $ 465,441 $ (1,518,932) $ 461,290 $ 2,945,811 $ 9,820,025 16

17 Statement of Cash Receipts, Disbursements and Changes in Cash Balances Proprietary Funds As of and for the year ended June 30, 2017 Exhibit C Enterprise Funds Non-Major Water Sewer Storm Water Total Operating receipts: Use of money and property $ 22,801 $ 15,069 $ - $ 37,870 Charges for services 2,804,995 3,096, ,864 6,098,145 Total operating receipts 2,827,796 3,111, ,864 6,136,015 Operating disbursements: Business-type activities 1,502,728 1,276, ,507 2,969,409 Total operating disbursements 1,502,728 1,276, ,507 2,969,409 Excess of operating receipts over operating disbursements 1,325,068 1,835,181 6,357 3,166,606 Non-operating (disbursements): Debt service (507,820) (1,202,106) - (1,709,926) Excess of receipts over disbursements 817, ,075 6,357 1,456,680 Bond proceeds - 118, ,000 Transfers in - 410, ,000 Transfers out (364,202) (665,877) (3,500) (1,033,579) Change in cash balances 453, ,198 2, ,101 Cash balances beginning of year 1,921,764 1,638, ,292 3,938,276 Cash balances end of year $ 2,374,810 $ 2,133,418 $ 381,149 $ 4,889,377 Cash Basis Fund Balances Restricted for: Debt service $ 578,000 $ 680,000 $ - $ 1,258,000 Customer deposits 339, ,469 Unrestricted 1,457,341 1,453, ,149 3,291,908 Total cash basis fund balances $ 2,374,810 $ 2,133,418 $ 381,149 $ 4,889,377 See notes to financial statements. 17

18 Statement of Cash Receipts, Disbursements and Changes in Cash Balances Fiduciary Funds As of and for the year ended June 30, 2017 Exhibit D Miles of Swim Downtown Character Lights Team Fireworks Beautification Counts Receipts: Miscellaneous $ 635 $ 5,648 $ 3,861 $ 100 $ - Total receipts 635 5,648 3, Disbursements: Culture and recreation - 6, Community and economic development - - 4, Total disbursements - 6,188 4, Excess (deficiency) of receipts over (under) disbursements 635 (540) (139) Cash balances beginning of year (709) 1,131 (998) 374 2,326 Cash balances end of year $ (74) $ 591 $ (1,137) $ 474 $ 2,326 Cash Basis Fund Balances Restricted for: Private purpose trust funds $ (74) $ 591 $ (1,137) $ 474 $ 2,326 Total cash basis fund balances $ (74) $ 591 $ (1,137) $ 474 $ 2,326 See notes to financial statements. 18

19 Note 1 Summary of Significant Accounting Policies CITY OF BOONE Notes to Financial Statements The City of Boone is a political subdivision of the State of Iowa located in Boone County. It was first incorporated in 1871 and operates under the Home Rule provisions of the Constitution of Iowa. The City operates under the Mayor-Council form of government with the Mayor and Council Members elected on a non-partisan basis. The City provides numerous services to citizens including public safety, public works, health and social services, culture and recreation, community and economic development, and general government services. The City also provides water and sewer utilities for its citizens. A. Reporting Entity For financial reporting purposes, the City of Boone has included all funds, organizations, agencies, boards, commissions and authorities. The City has also considered all potential component units for which it is financially accountable and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization s governing body and (1) the ability of the City to impose its will on that organization or (2) the potential for the organization to provide specific benefits to or impose specific financial burdens on the City. The following component units are entities which are legally separate from the City, but are so intertwined with the City that they are, in substance part of the City. However, the financial transactions of these component units have not been displayed because they are not material. The Friends of the Ericson Public Library has been incorporated under Chapter 504A of the Code of Iowa to receive donations for the benefit of the Ericson Public Library. Each year from book sales the Friends of the Ericson Public Library purchase equipment for the benefit of the Ericson Public Library. The Boone City Parks Foundation has been incorporated under Chapter 504A of the Code of Iowa to serve as a catalyst for community betterment and continue the tradition of fine Boone parks by supplementing the City s limited funding. Jointly Governed Organizations The City also participates in several jointly governed organizations that provide goods or services to the citizenry of the City but do not meet the criteria of a joint venture since there is no ongoing financial interest or responsibility by the participating governments. City officials are members of the following boards and commissions: Boone County Assessor s Conference Board, Boone County Solid Waste Management Commission, Central Iowa Regional Transportation Planning Alliance, and Boone County E911 Board. B. Basis of Presentation Government-Wide Financial Statements The Cash Basis Statement of Activities and Net Position reports information on all of the nonfiduciary activities of the City. For the most part, the effect of interfund activity has been removed from this statement. Governmental activities, which are supported by tax and intergovernmental revenues, are reported separately from business type activities, which rely to a significant extent on fees and charges for services. 19

20 Notes to Financial Statements Note 1 Summary of Significant Accounting Policies (continued) Government-Wide Financial Statements (continued) The Cash Basis Statement of Activities and Net Position presents the City s nonfiduciary net position. Net position is reported in the following categories/components: Nonexpendable restricted net position is subject to externally imposed stipulations which require the cash balance to be maintained permanently by the City, including the City s Permanent Fund. Expendable restricted net position results when constraints placed on the use of cash balances are either externally imposed or imposed by law through constitutional provisions or enabling legislation. Unrestricted net position consists of cash balances not meeting the definition of the preceding categories. Unrestricted net position is often subject to constraints imposed by management, which can be removed or modified. The Cash Basis Statement of Activities and Net Position demonstrates the degree to which the direct disbursements of a given function are offset by program receipts. Direct disbursements are those clearly identifiable with a specific function. Program receipts include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants, contributions, and interest on investments restricted to meeting the operational or capital requirements of a particular function. Property tax and other items not properly included among program receipts are reported instead as general receipts. Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. All remaining governmental funds are aggregated and reported as nonmajor governmental funds. The City reports the following major governmental funds: The General Fund is the general operating fund of the City. All general tax receipts and other receipts not allocated by law or contractual agreement to some other fund are accounted for in this fund. From the fund are paid the general operating disbursements, the fixed charges and the capital improvement costs that are not paid from other funds. Special Revenue: The Road Use Tax Fund is used to account for the road use tax allocation from the State of Iowa to be used for road construction and maintenance. The Group Insurance Fund is used to account for employee health benefits. The Employee Benefit Fund is used to account for employee benefits. The Local Option Sales Tax Fund is used to account for the proceeds from the 1% local option sales and the related designation of payments for property tax relief, human services, and capital projects authorized by the local option sales tax resolution. 20

21 Notes to Financial Statements Note 1 Summary of Significant Accounting Policies (continued) The Tax Increment Financing Fund is used to account for urban renewal projects financed by tax increment financing. The Mary Garvey Fund is used to account for a donation from a former citizen for various public purposes. The Debt Service Fund is utilized to account for the payment of interest and principal on the City s general long-term debt. The Capital Projects Fund is utilized to account for all resources used in the acquisition and construction of capital facilities. The Permanent Fund is utilized to account for the cemetery perpetual care funds. The City reports the following major proprietary funds: The Water Fund accounts for the operation and maintenance of the City s water system. The Sewer Fund accounts for the operation and maintenance of the City s waste water treatment and sanitary sewer system. The City also reports the following proprietary fund: The Storm Water Fund accounts for the operation and maintenance of the City s storm water system The City also reports the following fiduciary funds: The Private Purpose Trust Funds are used to account for fiduciary assets held by the City in a custodial capacity or as an agent on behalf of others. C. Measurement Focus and Basis of Accounting The City of Boone maintains its financial records on the basis of cash receipts and disbursements and the financial statements of the City are prepared on that basis. The cash basis of accounting does not give effect to accounts receivable, accounts payable and accrued items. Accordingly, the financial statements do not present financial position and results of operations of the funds in accordance with U.S. generally accepted accounting principles. Under the terms of grant agreements, the City funds certain programs by a combination of specific costreimbursement grants, categorical block grants and general receipts. Thus, when program disbursements are paid, there are both restricted and unrestricted cash basis net position available to finance the program. It is the City s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants and then by general receipts. When a disbursement in governmental funds can be paid using either restricted or unrestricted resources, the City s policy is generally to first apply the disbursement toward restricted fund balance and then to lessrestrictive classifications committed, assigned and then unassigned fund balances. 21

22 Notes to Financial Statements Note 1 Summary of Significant Accounting Policies (continued) Proprietary funds distinguish operating receipts and disbursements from non-operating items. Operating receipts and disbursements generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. All receipts and disbursements not meeting this definition are reported as non-operating receipts and disbursements. D. Governmental Cash Basis Fund Balances In the governmental fund financial statements, cash basis fund balances are classified as follows: Nonspendable Amounts which cannot be spent because they are legally or contractually required to be maintained intact. Restricted Amounts restricted to specific purposes when constraints placed on the use of the resources are either externally imposed by creditors, grantors or state of federal laws or imposed by law through constitutional provisions or enabling legislation. Assigned Amounts the City Council intends to use for specific purposes. Unassigned All amounts not included in the preceding classifications. E. Budgets and Budgetary Accounting The budgetary comparison and related disclosures are reported as Other Information. Note 2 Cash and Pooled Investments The City s deposits in banks at June 30, 2017, were entirely covered by federal depository insurance or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. This chapter provides for additional assessments against the depositories to insure there will be no loss of public funds. The City is authorized by statute to invest public funds in obligations of the United States government, its agencies and instrumentalities; certificates of deposit or other evidences of deposit at federally insured depository institutions approved by the City Council; prime eligible bankers acceptances; certain high rated commercial paper; perfected repurchase agreements; certain registered open-end management investment companies; certain joint investment trusts; and warrants or improvement certificates of a drainage district. At June 30, 2017, the City had the following investments: Carrying Fair Amount Value U.S. Government and Agencies Securities $1,358,643 $1,505,907 Certificates of Deposit 1,984,270 1,984,270 Money Market Accounts 41,842 41,842 $3,384,755 $3,532,019 The City uses the fair value hierarchy established by generally accepted accounting principles based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets, Level 2 inputs are significant other observable inputs, Level 3 inputs are significant unobservable inputs. 22

23 Note 2 Cash and Pooled Investments (continued) CITY OF BOONE Notes to Financial Statements The recurring fair value of the U.S. Government and Agencies Securities, Certificates of Deposit, and Money Market Accounts were determined using quoted market prices. (Level 1 inputs) In addition, the City had investments in the Iowa Public Agency Investment Trust which are valued at an amortized cost of $74,586 pursuant to Rule 2a-7 under the Investment Company Act of There were no limitations or restrictions on withdrawals for the IPAIT investments. The City s investment in the Iowa Public Agency Investment Trust is unrated. Interest Rate Risk The City s investment policy limits the investment of operating funds (funds expected to be expended in the current budget year or within 15 months of receipt) to instruments that mature within 397 days. Funds not identified as operating funds may be invested in investments with maturities longer than 397 days but the maturities shall be consistent with the needs and use of the City. Note 3 Bonds and Notes Payable Annual debt service requirements to maturity for general obligation bonds and notes and revenue notes are as follows: Year General Obligation General Obligation Revenue Ending Bonds Notes Capital Loan Notes Total June 30, Principal Interest Principal Interest Principal Interest Principal Interest 2018 $ 1,170,000 $ 69,203 $ 220,000 $ 126,245 $ 1,729,000 $ 250,658 $ 3,119,000 $ 446, ,000 68, , , , ,531 1,729, , ,000 59, , , , ,888 1,771, , ,000 48, , , , ,766 1,619, , ,000 40, , , , ,244 1,564, , ,000 29, ,000 92, , ,175 1,392, , ,000 19, ,000 83, , ,890 1,322, , ,000 10, ,000 74, ,000 91,268 1,352, , ,000 64, ,000 76,800 1,017, , ,000 53, ,000 59,235 1,058, , ,000 41, ,000 42,570 1,088,000 84, ,000 29, ,000 25,568 1,128,000 54, ,000 14, ,000 8, ,000 22,915 Total $ 4,445,000 $ 345,609 $ 3,695,000 $ 1,026,557 $10,747,000 $ 1,469,708 $18,887,000 $ 2,841,874 Revenue Bonds and Notes The City has pledged future water customer receipts, net of specified operating disbursements, to repay $3,965,000 in water revenue capital loan notes. Proceeds from the bonds provided refinancing of the water revenue bonds issued in August 1998 for the construction of water treatment plant and for improvements to the water system. The notes are payable solely from water customer net receipts and are payable through Annual principal and interest payments on the notes are expected to require less than 40 percent of net receipts. The total principal and interest remaining to be paid on the notes is $1,014,665. For the current year, principal and interest paid and total customer net receipts were $507,030 and $1,325,068, respectively. 23

24 Note 3 Bonds and Notes Payable (continued) CITY OF BOONE Notes to Financial Statements The City has pledged future sewer customer receipts, net of specified operating disbursements, to repay $13,664,000 in sewer revenue capital loan notes. Proceeds from the notes provided refinancing of the sewer revenue bonds issued June 2009, October 2009, and February 2010 for the construction of improvements to the sewer system and waste water treatment plant. The notes are payable solely from sewer customer net receipts and are payable through Annual principal and interest payments on the notes are expected to require less than 60 percent of net receipts. The total principal and interest remaining to be paid on the notes is $11,202,043. For the current year, principal and interest paid and total customer net receipts were $9,996,568 and $1,835,181, respectively. The resolutions providing for the issuance of the water revenue capital loan notes and sewer revenue capital loan notes include the following provisions: a. The bonds and notes will only be redeemed from the future earnings of the enterprise activity and the bond and note holders hold a lien on the future earnings of the funds. b. Sufficient monthly transfers shall be made to separate water and sewer revenue note sinking accounts within the Enterprise Funds for the purpose of making the note principal and interest payments when due. c. Additional monthly transfers to separate water and sewer revenue accounts shall be made until specific minimum balances have been accumulated. These accounts are restricted for making the annual principal and interest payments whenever there is insufficient money in the debt service account. d. All funds remaining in the sewer rental account after the payment of all maintenance and operating expenses and required transfers shall be placed in a sewer revenue improvement account until a minimum of $100,000 is accumulated. Additional monthly transfers to a separate water revenue improvement account will be made until a minimum of $300,000 is accumulated. These accounts are restricted for the purpose of paying for any improvement, extension or repair to the system or for note and interest payments which the other accounts might be unable to make. Note 4 Iowa Public Employees Retirement System (IPERS) Plan Description IPERS membership is mandatory for employees of the City, except for those covered by another retirement system. Employees of the City are provided with pensions through a cost-sharing multiple employer defined benefit pension plan administered by Iowa Public Employees Retirement System (IPERS). IPERS issues a stand-alone financial report which is available to the public by mail at 7401 Register Drive P.O. Box 9117, Des Moines, Iowa, or at IPERS benefits are established under Iowa Code chapter 97B and the administrative rules thereunder. Chapter 97B and the administrative rules are the official plan documents. The following brief description is provided for general informational purposes only. Refer to the plan documents for more information. Pension Benefits A regular member may retire at normal retirement age and receive monthly benefits without an early-retirement reduction. Normal retirement age is age 65, any time after reaching age 62 with 20 or more years of covered employment, or when the member s years of service plus the member s age at the last birthday equals or exceeds 88, whichever comes first. These qualifications must be met on the member s first moth of entitlement to benefits. Members cannot begin receiving retirement benefits before age 55. The formula used to calculate a Regular member s monthly IPERS benefit includes: A multiplier based on years of service The member s highest five-year average salary, except members with service before June 30, 2012 will use the highest three-year average salary as of that date if it is greater than the highest five-year average salary. 24