CITY OF LEWISTON, IDAHO

Transcription

1 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended September 30, 2016 Prepared by: Administrative Support Services Daniel J. Marsh Administrative Services Director

2 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended September 30, 2016 TABLE OF CONTENTS Page FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS Statement of Net Position Statement of Activities FUND FINANCIAL STATEMENTS Balance Sheet - Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Position - Fiduciary Funds Statement of Changes in Fiduciary Net Position - Fiduciary Funds NOTES TO FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION (RSI) Budgetary Comparison Schedule General Fund Budgetary Comparison Schedule Transportation Budgetary Comparison Schedule Economic Development Schedule of Pension Funding Police Retirement Fund Schedule of Changes in Net Pension Liability And Related Ratio Police Retirement Fund Schedule of Contributions Modified Approach for Infrastructure Reporting SUPPLEMENTARY INFORMATION - COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Major Governmental Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budgetary Basis - Budget and Actual Capital Projects Fund

3 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED) Page Nonmajor Governmental Funds Combining Balance Sheet Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budgetary Basis - Budget and Actual Cemetery Fund Library Fund Public Transportation Cemetery Perpetual Care Internal Service Funds Combining Balance Sheet Combining Statement of Revenues, Expenses, and Changes in Fund Equity GAAP Basis Combining Statement of Cash Flows Capital Assets Used in Governmental Funds Capital Assets Used in the Operation of Governmental Funds Comparative Schedules by Source and 2015 Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function and Activity STATISTICAL DATA SINGLE AUDIT SECTION Independent Auditor s Report - Government Auditing Standards Single Audit Act Schedule of Findings and Questioned Costs Schedule of Expenditures of Federal Awards Modified Accrual Basis

4 1216 Idaho Street Post Office Box 555 Lewiston, Idaho (208) Fax: (208) INDEPENDENT AUDITOR'S REPORT Members of City Council City of Lewiston, Idaho Lewiston, Idaho Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Lewiston, Idaho, as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the City of Lewiston, Idaho'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 of 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. Moscow Office: 609 South Washington, Suite 202, Moscow, Idaho 83843, (208) Grangeville Office: 109 South Mill Street, Grangeville, Idaho 83530, (208) Orofino Office: 216 Johnson Avenue, Orofino, Idaho 83544, (208) Pullman Office: 1230 SE Bishop Blvd., Pullman, Washington 99163, (509)

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, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Lewiston, Idaho, as of September 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and other required supplementary information on pages 14 through 32 and 78 through 84, respectively, 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 City of Lewiston, Idaho s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements, budgetary comparison schedules, capital asset schedules, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements, budgetary comparison schedules, capital asset schedules, and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have 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 them.

6 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 17, 2017, on our consideration of the City of Lewiston, Idaho's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 Lewiston, Idaho s internal control over financial reporting and compliance. February 17, 2017

7 STATEMENT OF NET POSITION September 30, 2016 Governmental Business-Type Component Activities Activities Total Unit ASSETS CURRENT ASSETS Cash $ 7,192,895 $ 5,905,811 $ 13,098,706 $ 2,148,642 Investments 9,094, ,897 9,951,272 Receivables Delinquent taxes 385, ,376 25,601 Accounts 1,202,873 1,494,860 2,697,733 Intergovernmental 1,634,999 1,634,999 Unbilled receivables 585, ,179 Inventory 156, , ,753 Total current assets 19,666,919 8,980,099 28,647,018 2,174,243 NONCURRENT ASSETS Restricted investments 2,726,746 2,726, ,248 Notes receivable 866, ,897 Advance to/from City other funds (818,001) 818,001 0 Advance from other City business-type fund 0 Net pension asset 3,532,700 3,532,700 Capital assets, net of accumulated depreciation Land 12,924, ,034 13,039,717 Buildings and system 16,706,447 36,575,859 53,282,306 Equipment 4,924,798 1,231,553 6,156,351 Infrastructure 33,003,936 33,003,936 Infrastructure on modified method 10,545,495 10,545,495 Construction in progress 5,114,047 2,788,697 7,902,744 Total noncurrent assets 86,801,002 44,255, ,056, ,248 Total assets 106,467,921 53,235, ,703,910 2,383,491 53,235,989 2,383,491 DEFERRED OUTFLOWS OF RESOURCES Defined benefit pension 8,384, ,100 9,204,577 See accompanying notes

8 STATEMENT OF NET POSITION September 30, 2016 Governmental Business-Type Component Activities Activities Total Unit LIABILITIES CURRENT LIABILITIES Vouchers payable $ 1,702,021 $ 632,311 $ 2,334,332 $ 25,144 Claims payable 460, ,000 Accrued salaries and benefits 680, , ,930 Compensated absences payable 170,601 16, ,903 Due to other governments 221, ,097 Current portion of bonds payable - payable from restricted assets 380, , ,000 Unearned revenue 83,862 83,862 Total current liabilities 3,392,665 1,067,459 4,460, ,144 LONG-TERM OBLIGATIONS Bonds payable 1,770,000 1,770,000 1,781,000 Net pension obligation 13,243,880 1,451,300 14,695,180 Compensated absences payable 1,876, ,326 2,055,937 Total long-term obligations 16,890,491 1,630,626 18,521,117 1,781,000 Total liabilities 20,283,156 2,698,085 22,981,241 1,947,144 DEFERRED INFLOWS OF RESOURCES Defined benefit pension 4,598, ,500 4,991,355 NET POSITION Net investment in capital assets 83,219,406 40,195, ,414,628 Restricted for: System expansion projects 2,645,825 2,645, ,248 Permanently restricted for: Cemetery perpetual care - expendable 884, ,8490 Unrestricted 5,866,132 8,124,457 13,990, ,099 Total net position $ 89,970,387 $ 50,965,504 $ 140,935,891 $ 436,347 89,970,387 50,965, ,347 See accompanying notes

9 STATEMENT OF ACTIVITIES Year Ended September 30, 2016 See accompanying notes Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-Type Component Expenses Services Contributions Contributions Activities Activities Total Unit FUNCTIONS/PROGRAMS Governmental Activities General government $ 2,536,969 $ 292,866 $ (2,244,103) $ (2,244,103) Police protection 7,022,993 $ 378,146 (6,644,847) (6,644,847) Fire protection 7,892,172 1,867, ,694 (5,111,701) (5,111,701) Cemetery 181,409 64,205 2,406 (114,798) (114,798) Community development 1,517, ,007 $ 300,237 (365,409) (365,409) Transportation 4,639, ,203 2,537,384 2,197, , ,035 Recreation 534, ,800 50,665 (99,712) (99,712) Library 1,101,782 8,711 7,723 (1,085,348) (1,085,348) Service center 33,193 (33,193) (33,193) Parks and facilities 3,286,670 54,216 (3,232,454) (3,232,454) Interest on long-term debt 151,405 (151,405) (151,405) Total governmental activities $ 28,897,762 $ 3,764,785 $ 3,889,018 $ 2,498,024 (18,745,935) (18,745,935) Business-Type Activities Water $ 4,233,811 $ 4,215,103 $ (18,708) (18,708) Sewer 4,622,800 5,700,709 $ 126,252 1,204,161 1,204,161 Sanitation 5,425,692 4,976,616 (449,076) (449,076) Golf course 142, ,883 (2,838) (2,838) Total business-type activities $ 14,425,024 $ 15,032,311 $ 126,252 $ 0 733, ,539 Component Unit Community development $ 1,722,334 $ 0 $ 0 $ 0 $ (1,722,334) General revenues: Property taxes, levied for general purposes 17,173,892 17,173,892 1,708,744 State sales tax not restricted to specific programs 3,310,085 3,310,085 Franchise taxes 569, ,938 State liquor 635, ,202 Interest and investment earnings 193,830 63, ,485 8,008 Other general revenues 974, ,497 1,438,679 22,857, ,152 23,385,281 1,716,752 Change in net position 4,111,194 1,261,691 5,372,885 (5,582) Net position, beginning 85,859,193 49,703, ,563, ,929 Net position, ending $ 89,970,387 $ 50,965,504 $ 140,935,891 $ 436,347 89,970,387 50,965, ,935, ,347

10 BALANCE SHEET - GOVERNMENTAL FUNDS September 30, 2016 See accompanying notes Other Total Capital Economic Governmental Governmental General Transportation Projects Development Funds Funds ASSETS Cash $ 2,983,377 $ 587,632 $ 1,152,401 $ 343,117 $ 382,321 $ 5,448,848 Investments 3,399,048 1,096, ,282 5,379,540 Receivables Delinquent taxes 378,110 7, ,376 Accounts 911, ,434 26,785 42,350 1,154,293 Intergovernmental 689,923 37, , ,757 1,630,731 Advances from other City funds 134, ,203 Notes receivable 866, ,897 Inventory, at cost 11,409 11,409 Total assets $ 8,507,794 $ 1,901,777 $ 1,938,002 $ 1,210,014 $ 1,453,710 $ 15,011,297 LIABILITIES AND FUND BALANCES LIABILITIES Vouchers payable $ 405,430 $ 103,166 $ 679,825 $ 1,303 $ 45,149 $ 1,234,873 Claims payable 70,000 70,000 Accrued salaries and benefits 548,451 57,059 77, ,945 Interfund payable 818, ,001 Advances to other City funds 134, ,203 Total liabilities 1,023, ,225 1,497,826 1, ,787 2,940,022 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 493,472 8, ,267 Unavailable revenue - note repayments 866, ,897 Unavailable revenue - held in trust 2,324 2,324 Total deferred inflows of resources 495,796 8, , ,371,488 FUND BALANCES Nonspendable for: Inventory 11,409 11,409 Committed for: Road and bridge 416, ,040 Drug enforcement 62,604 62,604 Perpetual care 884, ,849 Assigned, reported in: Unemployment claims 129, ,975 Special revenue 1,316, , ,074 1,970,605 Capital projects 440, ,176 Building reserve fund 977, ,154 Unassigned, reported in: General fund 5,806,975 5,806,975 Total fund balances 6,988,117 1,732, , ,814 1,196,923 10,699,787 Total liabilities and fund balances $ 8,507,794 $ 1,901,777 $ 1,938,002 $ 1,210,014 $ 1,453,710 $ 15,011,297

11 RECONCILIATION OF THE STATEMENT OF NET POSITION TO THE BALANCE SHEET - GOVERNMENTAL FUNDS September 30, 2016 Total fund balances - Governmental Funds $ 10,699,787 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 as assets in governmental funds: Cost of capital assets 155,549,228 Accumulated depreciation (76,043,340) See accompanying notes Deferred outflows and deferred inflows for pension liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Deferred outflows 8,167,477 Deferred inflows (4,470,055) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds: Compensated absences to employees (1,969,862) Net pension asset 3,532,700 Net pension liability (12,849,580) Certificates of participation (2,150,000) Property taxes receivable to be collected this year; but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. 442,229 Other accounts receivable to be collected; but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. 929,259 Internal service funds are used by management to charge employee medical insurance, workers compensation, information technology, and service center equipment to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. 8,132,544 Total net position - Governmental Activities $ 89,970,387 89,970,387

12 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Year Ended September 30, 2016 Other Total Capital Economic Governmental Governmental General Transportation Projects Development Funds Funds REVENUES Property taxes $ 13,498,388 $ 1,669,825 $ 556,426 $ 1,531,000 $ 17,255,639 Licenses and permits 1,214,034 5,773 1,219,807 Intergovernmental revenues 4,754, ,595 3,509,716 $ 320,237 6,067 9,259,120 Charges for services 4,075,470 1,135,483 14,613 68,021 5,293,587 Earnings on investments 44,384 2,611 2, , ,642 Other 652,331 73, ,955 30, ,767 1,910,224 Total revenues 24,239,112 3,556,257 4,495, ,516 2,419,175 35,061,019 See accompanying notes EXPENDITURES Current General government 3,526,564 13,491 3,540,055 Police protection 6,747,417 6,747,417 Fire protection and ambulance 7,845,145 7,845,145 Cemetery 182, ,757 Community development 1,159, ,182 1,512,712 Transportation 3,587,680 4,137,285 7,724,965 Recreation, parks, and facilities 3,432, ,302 3,699,258 Library 202,598 1,140,918 1,343,516 Public transportation 715, ,373 Capital outlay 261, , ,034 Debt service 623,167 9, ,276 Total expenditures 23,596,428 3,587,680 4,628, ,182 2,317,433 34,483,508 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 642,684 (31,423) (132,826) (2,666) 101, ,511 OTHER FINANCING SOURCES (USES) Transfers in 186, ,841 Transfers out (161,841) (25,000) (186,841) Total other financing sources (uses) (161,841) ,841 0 NET CHANGE IN FUND BALANCES 480,843 (31,423) (132,826) (2,666) 263, ,511 FUND BALANCES AT BEGINNING OF YEAR 6,507,274 1,764, , , ,340 10,122,276 FUND BALANCES AT END OF YEAR $ 6,988,117 $ 1,732,757 $ 440,176 $ 341,814 $ 1,196,923 $ 10,699, ,843 (31,423) (132,826) (2,666) 263,583 6,988,117 1,732, , ,814 1,196,923 10,699,787

13 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended September 30, 2016 Net change in fund balances - Total Governmental Funds $ 577,511 Amounts reported for governmental activities in the statement of activities are different because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. However, for governmental activities, those costs are shown in the statement of net position and allocated over their estimated useful lives as annual depreciation: Current year capital outlay 6,397,039 Current year depreciation (2,830,327) Unrecovered basis in assets disposed - loss on sale of equipment (15,000) See accompanying notes Amounts borrowed on long-term debt are reported in the governmental funds as other financing sources. Amounts repaid on long-term debt are reported in the governmental funds as expenditures. However, for governmental activities, the borrowing and repayment of funds is reflected as outstanding long-term debt: Current year repayment of long-term debt 360,000 Current year compensated absences (89,261) Net pension liability and the related deferred outflows and deferred inflows are not considered available for the governmental funds in the current year. Current year net pension liability, deferred outflows, and deferred inflows 187,382 Some amounts receivable will not be collected for several months after the fiscal year-ends and they are not considered available revenues in the governmental funds. Instead, they are counted as deferred tax revenues. They are however, recorded as revenues in the statement of activities: Current year taxes receivable 442,229 Current year accounts and notes receivable 929,259 Prior year taxes receivable (523,976) Prior year accounts and notes receivable (1,059,705) Internal service funds are used by management to charge employee medical insurance and service center equipment to individual funds. The net revenue of the internal service funds is reported with governmental activities. (263,957) Change in net position - Governmental Activities $ 4,111,194 4,111,194

14 STATEMENT OF NET POSITION - PROPRIETARY FUNDS September 30, 2016 See accompanying notes Business-Type Activities - Enterprise Funds Governmental Activities Internal Water Wastewater Sanitation Golf Totals Service Funds ASSETS CURRENT ASSETS Cash $ 1,141,523 $ 3,266,176 $ 1,485,114 $ 12,998 $ 5,905,811 $ 1,328,007 Investments 253, , ,897 4,130,875 Receivables Accounts 641, , ,075 11,010 1,494,860 48,580 Intergovernmental 0 4,268 Unbilled receivables 396, ,477 44, ,179 Due from other funds 125,705 83, ,654 Inventory 137, , ,992 Total current assets 2,443,359 4,078,452 2,643,934 24,008 9,189,753 5,656,722 NONCURRENT ASSETS Restricted investments 95,258 2,631,488 2,726,746 Advances to other City funds 1,171,760 1,171,760 Capital assets, net 15,328,754 22,979,352 1,179,321 1,223,716 40,711,143 3,713,518 Total noncurrent assets 15,424,012 25,610,840 2,351,081 1,223,716 44,609,649 3,713,518 Total assets 17,867,371 29,689,292 4,995,015 1,247,724 53,799,402 9,370,240 DEFERRED OUTFLOWS OF RESOURCES Defined benefit pension 365, ,600 94, , ,000

15 STATEMENT OF NET POSITION - PROPRIETARY FUNDS September 30, 2016 See accompanying notes Business-Type Activities - Enterprise Funds Governmental Activities Internal Water Wastewater Sanitation Golf Totals Service Funds LIABILITIES CURRENT LIABILITIES Vouchers payable $ 47,873 $ 409,265 $ 157,312 $ 17,861 $ 632,311 $ 467,148 Claims payable 0 390,000 Accrued salaries and benefits 50,940 50,636 12, ,887 26,895 Compensated absences payable 4,928 7,878 2,867 15,673 4,983 Due to other governments 221, ,097 Current portion of advance from other City fund 47,492 47,492 Unearned revenue 28,820 42,735 12,307 83,862 Total current liabilities 132, , ,490 77,660 1,114, ,026 LONG-TERM OBLIGATIONS Advance from other City fund 515, ,921 Net pension liability 646, , ,000 1,451, ,300 Compensated absences payable 55,331 96,685 27, ,955 42,570 Total long-term obligations 701, , , ,921 2,147, ,870 Total liabilities 833,992 1,465, , ,581 3,261,498 1,325,896 DEFERRED INFLOWS OF RESOURCES Defined benefit pension 172, ,300 47, , ,800 NET POSITION Net investment in capital assets 15,328,754 22,979,352 1,179, ,795 40,195,222 3,713,518 Restricted for: System expansion projects 641,451 2,004,374 2,645,825 Unrestricted 1,256,774 3,426,370 3,494,965 (53,652) 8,124,457 4,419,026 Total net position 17,226,979 28,410,096 4,674, ,143 50,965,504 8,132,544 Total liabilities and net position $ 18,233,171 $ 30,048,892 $ 5,089,715 $ 1,247,724 $ 54,619,502 $ 9,587,240 18,233,171 30,048,892 5,089,715 1,247,724 54,619,502 9,587,240

16 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION - PROPRIETARY FUNDS Year Ended September 30, 2016 Business-Type Activities - Enterprise Funds Governmental Activities Internal Water Wastewater Sanitation Golf Totals Service Funds OPERATING REVENUES Charges for sales and services $ 4,190,231 $ 5,694,178 $ 4,976,616 $ 115,000 $ 14,976,025 $ 6,574,945 Permits, fees, and customer installations 24,872 6,531 31,403 Total operating revenues 4,215,103 5,700,709 4,976, ,000 15,007,428 6,574,945 See accompanying notes OPERATING EXPENSES Production and treatment 997,148 1,641,183 2,638,331 Transmission and distribution 1,425,907 1,425,907 Collection and transmission 804,590 4,893,535 5,698,125 Transfer station 393, ,532 Depreciation 785,275 1,051, ,225 57,400 2,029, ,736 Selling, general, and administrative 978,644 1,111,762 74,542 2,164,948 1,002,484 Retirement actuarial charges 13,600 13,400 3,400 30,400 7,000 Garage services 0 777,392 Insurance 0 5,803,662 Total operating expenses 4,200,574 4,622,800 5,425, ,942 14,381,008 8,298,274 OPERATING INCOME (LOSS) 14,529 1,077,909 (449,076) (16,942) 626,420 (1,723,329) NONOPERATING REVENUES (EXPENSES) Interest revenue 11,218 25,785 26, ,655 71,186 Other 230, ,764 16,905 24, ,395 1,388,186 Interest expense (10,779) (10,779) Total nonoperating revenues (expenses) 242, ,549 43,548 14, ,271 1,459,372 NET INCOME (LOSS) 256,590 1,413,458 (405,528) (2,829) 1,261,691 (263,957) NET POSITION AT BEGINNING OF YEAR 16,970,389 26,996,638 5,079, ,972 49,703,813 8,396,501 NET POSITION AT END OF YEAR $ 17,226,979 $ 28,410,096 $ 4,674,286 $ 654,143 $ 50,965,504 $ 8,132, ,590 1,413,458 (405,528) (2,829) 1,261,691 (263,957) 17,226,979 28,410,096 4,674, ,143 50,965,504 8,132,544

17 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS Year Ended September 30, 2016 See accompanying notes Business-Type Activities - Enterprise Funds Governmental Activities Internal Water Wastewater Sanitation Golf Totals Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 3,993,889 $ 5,499,261 $ 4,973,681 $ 118,000 $ 14,584,831 Cash received from interfund charges 0 $ 6,576,122 Cash paid for payroll (1,672,168) (1,633,949) (463,280) (3,769,397) (940,087) Cash paid for operating expenses (1,760,984) (1,515,015) (4,822,108) (56,681) (8,154,788) (6,529,461) Other income (expense) 230, ,764 16,905 24, ,395 1,388,186 Net cash provided (used) by operating activities 791,580 2,660,061 (294,802) 86,202 3,243, ,760 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Repayment to other City fund (44,419) (44,419) Payments on loans to other City funds 120,870 80, ,637 Net cash provided (used) by noncapital financing activities 120, ,767 (44,419) 157,218 0 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Purchase and construction of capital assets (1,046,008) (2,336,165) (24,883) (3,407,056) (934,276) Equity buy-in fees from LOSD 39,608 39,608 Interest paid (10,779) (10,779) Net cash used by capital financing activities (1,046,008) (2,296,557) 0 (35,662) (3,378,227) (934,276) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (684) (452,879) (253,305) (706,868) (23,588) Sale of investments 0 268,144 Interest received 11,218 25,785 26, ,655 71,186 Net cash provided (used) by investing activities 10,534 (427,094) (226,662) 9 (643,213) 315,742 Net change in cash (123,024) (63,590) (440,697) 6,130 (621,181) (123,774) Cash and cash equivalents at beginning of year 1,264,547 3,329,766 1,925,811 6,868 6,526,992 1,451,781 Cash and cash equivalents at end of year $ 1,141,523 $ 3,266,176 $ 1,485,114 $ 12,998 $ 5,905,811 $ 1,328,007

18 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS Year Ended September 30, 2016 See accompanying notes Business-Type Activities - Enterprise Funds Governmental Activities Internal Water Wastewater Sanitation Golf Totals Service Funds RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ 14,529 $ 1,077,909 $ (449,076) $ (16,942) $ 626,420 $ (1,723,329) Adjustment to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 785,275 1,051, ,225 57,400 2,029, ,736 Net change in deferred pension expense 13,600 13,400 3,400 30,400 7,000 Changes in: Accrued revenue (221,214) (201,448) (2,935) 3,000 (422,597) 1,177 Inventory (59,438) (59,438) (499) Accrued expenses 27, ,571 1,679 17, , ,489 Other income 230, ,764 16,905 24, ,395 1,388,186 Net cash provided (used) by operating activities $ 791,580 $ 2,660,061 $ (294,802) $ 86,202 $ 3,243,041 $ 494, ,580 2,660,061 (294,802) 86,202 3,243, ,760

19 STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS September 30, 2016 Employee Retirement Plan ASSETS Cash $ 55,276 Investments Cash equivalents 200,586 U.S. Treasury obligations 70,421 Corporate obligations 531,037 Foreign obligations 200,494 Domestic common stocks 2,511,565 Foreign stocks 1,615,763 Mutual funds - equities 4,033,907 Mutual funds - fixed income 2,150,593 Mutual funds - balanced 335,752 Total assets 11,705,394 LIABILITIES 0 NET POSITION Held in trust for pension benefits 11,705,394 Total net position $ 11,705,394 See accompanying notes

20 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION - FIDUCIARY FUNDS Year Ended September 30, 2016 Employee Retirement Plan ADDITIONS Contributions Employer contributions $ 522,607 Total contributions 522,607 Investment earnings Interest and dividends 231,632 Net increase in fair value of investments 787,877 Investment expenses (73,085) Net investment loss 946,424 Total additions 1,469,031 DEDUCTIONS Disbursed to beneficiaries 1,025,159 Administrative expenses 2,250 Total deductions 1,027,409 Change in net position 441,622 NET POSITION AT BEGINNING OF YEAR 11,263,772 NET POSITION AT END OF YEAR $ 11,705, ,622 11,705,394 See accompanying notes

21 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Financial Reporting Entity. The City of Lewiston was incorporated by the Washington Territorial Legislature on January 15, The creation of Idaho Territory in March 1863 extinguished the laws of Washington as far as they applied to Idaho, and the Idaho Territorial Legislature enacted a new charter incorporating the City of Lewiston on December 27, On October 30, 1969, the City of Lewiston was reorganized under the provisions of State Law, 1967, Chapter 429. The City of Lewiston operates under a Council/Manager form of government and provides the following services as authorized by its charter: public safety, public works, culture, recreation, and community development. Component Units. The Urban Renewal Agency of the City of Lewiston is included in these financial statements as a discretely presented component unit, a governmental fund type. The entity was formed in October 1999 by the City of Lewiston for the purpose of assisting in the rehabilitation, conservation, redevelopment, or any combination of areas as necessary in the interest of the public welfare of the residents of the City of Lewiston. Upon completion of the Urban Renewal Agency s projects, the benefit of these projects is contributed to the City of Lewiston for their future use and maintenance. A seven-member board, appointed by City Council, manages the operation. The City s management also provides the Agency with management, oversight, and financial services in support of the operations. Complete financial statements for the Urban Renewal Agency may be obtained from the City of Lewiston s Administrative Service Director by request, P.O. Box 617, Lewiston, Idaho Joint Venture. The City previously operated the Lewiston-Nez Perce County Airport as a joint venture with Nez Perce County. Effective October 1, 2010, the Joint Airport Authority was formed to manage all airport activities and operations. The capital assets and improvements continue to be held jointly by the City and Nez Perce County. Each entity reports their fifty percent ownership in the capital assets on the statement of net position. B. Measurement Focus Basis of Accounting and Basis of Presentation Economic Resources Measurement Focus and Accrual Basis of Accounting. Under this measurement focus, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting. Under this measurement focus, revenues are recorded when they become measurable and available. For this purpose, the City considers revenues to be available if they are collected within sixty (60) days of the end of the current fiscal year-end. All material revenues are considered measurable and available and are, thus, susceptible to accrual. Fines and permits revenues are not susceptible to accrual because, generally, they are not measurable until received in cash. The City reports unearned revenue in its fund financial statements.

22 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus Basis of Accounting and Basis of Presentation (Continued) Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting (Continued). Unearned revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Unearned revenues also arise when the City receives resources before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for unearned revenue is removed from the combined balance sheet and revenue is recognized. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable. An exception to this general rule is principal and interest on general long-term obligations, which are recognized when due. General capital asset acquisitions are reported as expenditures in governmental funds. Restricted Resources Program expenses are allocated to restricted program revenue first and then to the next highest level of restricted net position/fund balances when both restricted and unrestricted resources are available. Expenses are allocated to committed, assigned, and then unassigned when all are present. Governmental Accounting Standards Board Statement No. 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB 54 requires the fund balance amounts to be properly reported within one of the fund balance categories listed below: Nonspendable. Includes amounts that cannot be spent because they are either (1) not in spendable form or (2) legally or contractually required to be maintained intact. Restricted. Includes amounts that can be spent only for the specific purpose stipulated by external resource providers, constitutional provisions, or enabling legislation. Committed. Includes amounts that can only be used for the specific purposes determined by a formal resolution of the government s highest level of decision-making authority (City Council). Assigned. Includes amounts that are intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed, which can be determined by City Council as a resolution or determined by an outside source. Unassigned. Residual classification of fund balance that includes all spendable amounts that have not been restricted, committed, or assigned.

23 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus Basis of Accounting and Basis of Presentation (Continued) Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting (Continued). Government-Wide Statements The government-wide financial statements include the statements of net position and the statement of activities. These statements report financial information for the City as a whole excluding fiduciary activities such as employee pension plans. Individual funds are not displayed but the statements distinguish governmental activities, generally supported by taxes, intergovernmental revenues, and other non-exchange transactions, from business-type activities, generally financed in whole or in part with fees charged to external customers. Eliminations have been made to minimize the double-counting of internal activities. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the function program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) fees and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. These revenues are subject to externally imposed restrictions to these program uses. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. The Government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, including the reclassification or elimination of internal activity (between or within funds). Interfund services provided and used are not eliminated in the process of consolidation. Fund Financial Statements The fund financial statements provide information about the City s fund categories. Separate statements for each fund category governmental, proprietary, and fiduciary are presented. The emphasis of fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. All remaining funds are aggregated and reported as non-major funds. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. Governmental Funds. All governmental funds are accounted for using the current financial resources measurement focus and the modified accrual basis of accounting. The City reports the following major governmental funds: General Fund. This is the City s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund.

24 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus Basis of Accounting and Basis of Presentation (Continued) Governmental Funds (Continued). Transportation. The Transportation Fund is responsible for the construction and maintenance of streets and traffic services within the City. Major revenue sources include general property taxes and highway user fees. Capital Projects. The Capital Projects Fund generally deals with capital projects in excess of $25,000, are non-recurring, have a multi-year useful life, and result in a capital asset for the Governmental Funds. Economic Development. The "Economic Development Fund" accounts for the activities of HUD and EDA grants. Proprietary Funds. All proprietary funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues/expenses generally result from providing services and producing and delivering goods related with the fund s principal ongoing operations. All revenues/expenses not meeting this definition are reported as nonoperating. Enterprise Funds. Enterprise funds are used to account for activities that are similar to those often found in the private sector and are included as proprietary funds. The City reports the following major enterprise funds: Water Fund. This activity provides and distributes water primarily to City residents outside of the Lewiston Orchards. There is one other water district that provides water to the Lewiston Orchards and is not included in these financial statements. Wastewater Fund. This activity provides sewer collection services primarily to City residents outside of the Lewiston Orchards and wastewater treatment services for these residents and the two sewer districts in the Lewiston Orchards. There are two other sewer districts that provide sewer collection services to residents of the Lewiston Orchards and are not included in these financial statements. Sanitation Fund. This activity provides sanitation services to all City residents. Golf Fund. This activity subcontracts operation of the City-owned golf course. Internal Service Funds. Internal service funds are used to allocate fleet maintenance and information system services and are included as proprietary funds; employee medical insurance expenses; and Workers Compensation insurance expenses to other funds of the City on a cost reimbursement basis. The internal service funds are included in governmental activities for government-wide reporting purposes. As a general rule, the revenue and expenses of the internal service fund has been eliminated from the government-wide financial statements. The excess revenue or expenses for the fund are allocated to the appropriate functional activity. Fiduciary Funds. The City reports one type of Fiduciary Fund: Pension Trust Fund.

25 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued) Fiduciary Funds (Continued). The Pension Trust Fund is used to account for the Police Retirement Trust where the contributions and earnings will benefit City employees. These revenues are not available to finance City operations. All pension trust funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. Component Unit. The City reports the Urban Renewal Agency of the City of Lewiston, Idaho, (Agency) as a component unit. The Agency is an independent public body formed for the rehabilitation, conservation, and/or redevelopment of selected areas within the City. The Agency operations are accounted for using the economic resources measurement focus and the accrual basis of accounting. Implementation of GASB Accounting Pronouncements. The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB No. 68) for fiscal year The net effect of GASB No. 68 for the City-wide financial statements is described in the note on changes in accounting principles. Pensions. For purposes of measuring the net pension liability and pension expense, information about the fiduciary net position of the Public Employees Retirement System of Idaho (PERSI) and additions to/deductions from the Plan s fiduciary net position have been determined on the same basis as they are reported by PERSI. The liability is measured as of July 1, 2015, and current year payments after that date are reported as deferred outflows. PERSI records investments at fair value and benefit payments are recorded when due. C. Assets, Liabilities, and Equity 1. Deposits and Investments The City s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the City to invest in obligations of the State of Idaho and its agencies, U.S. Treasury and U.S. agencies, City coupon and local improvement district bonds, repurchase agreements, tax and revenue anticipation bonds, notes, and the State Treasurer s Local Government Investment Pool. The Perpetual Care Fund and Police Retirement Fund are governed by the Prudent Man Investor Rule, which does not restrict investments to the preceding items. Investments are stated at fair value as quoted for the purchase and sale of units. Deposits in the Idaho State Treasurer's Local Government Investment Pool are stated at fair value, which is the same as the value of the pool shares. The Idaho State Treasurer oversees the Local Government Investment Pool under the Joint Exercises of Power provisions of Idaho Code. The State Treasurer combines deposits from all governmental entities in the State, which participate in the Pool and purchases the following types of investments: Local Certificates of Deposit Repurchase Agreements U.S. Government Securities Bonds and debentures of "A" rated companies

26 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) The entities participating in the Pool own a percentage of each investment held. This percentage is calculated by dividing the individual entity's deposits by the total deposits held in the pool. The purpose of this is to: Increase the overall rate of return. Reduce the risk of default. Place each entity under the FDIC and SLIC limits of $250,000. Investments held at year-end are disclosed in Note 3A. 2. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either interfund receivables/payables (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the noncurrent portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements. All trade accounts receivable are shown net of an allowance for doubtful accounts. Trade accounts receivable allowance for uncollectibles is calculated based upon past experience and management's assessment of the current receivables. At September 30, 2016, the allowance for uncollectibles is $934,978. Substantially, all property taxes are collected; therefore, no allowance is provided for property taxes. The City s property taxes are levied by Nez Perce County in November and payable on December 20 and June 20 following the levy date. Taxes are remitted to the City in the month following collection. The taxes are delinquent and a lien is filed the day following the due date. A tax deed is issued on property three years from the date of delinquency. At fiscal year-end, the receivables represent delinquent taxes. Amounts not paid within 60 days are recorded as unearned revenue for the fund financial statements. The City is a participant in the Community Development Block Grant Program. As part of the program, the City makes low-interest loans available to individuals for approved home rehabilitation expenditures. These loans are recorded as expenditures in the year the money is loaned and set up as receivables and unearned revenue. When the loan is repaid, the unearned revenue is recognized as project income. At September 30, 2016, the balance of these notes receivable is $836, Inventory Inventory is valued at cost, which approximates market, using the first-in, first-out method. Inventory in the general fund consists of expendable supplies held for consumption. The cost of inventories are recorded as expenditures when consumed rather than when purchased.

27 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) 4. Restricted Assets Agreements with other local sewer districts require amounts to be set aside for future maintenance and replacement of jointly used facilities. These amounts are reported as restricted assets. Patrons who hook up to the water or wastewater collection system are required to pay an equity buy-in fee. State law restricts these fees for future maintenance and replacement of the facilities. Restricted assets in the Capital Projects Fund consists of amounts donated for specific capital projects, which are restricted for improvements to the local airport. When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, then unrestricted resources as needed. 5. Capital Assets The City s property, plant, and equipment with useful lives of more than two years are stated at historical cost. Infrastructure assets are reported at estimated historical cost as determined in Donated capital assets are valued at the estimated fair value at the date of donation. The City generally capitalizes assets that meet the following guidelines: Asset Category Cost Life Equipment and vehicles $ 5,000 3 years Buildings 10, years Streets 20,000 per City block 10 years Other infrastructure 20, years The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. Amortization of leased assets is included in depreciation expense. Interest incurred during the construction phase of capital assets is reflected in the capitalized value of the asset constructed for proprietary funds. Assets are depreciated on the straight-line method over the following estimated useful lives: Equipment and vehicles Computer equipment Buildings Water and wastewater collection and treatment systems 3-10 years 3-5 years years years

28 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) 5. Capital Assets (Continued) Streets New construction Overlays Seal coats Street lighting systems Traffic control systems 20 years 10 years 5 years years years Modified Approach for Infrastructure Reporting. In accordance with GASB 34, the City has reported all capital assets including infrastructure in the government-wide statement of net position. The City elected to use the Modified Approach as defined by GASB 34 for reporting its airport infrastructure. As a result, no accumulated depreciation or depreciation expense has been recorded for the airport infrastructure. A more detailed discussion of the Modified Approach is presented in the required supplementary information section of this report. 6. Compensated Absences Full time, permanent employees are granted vacation benefits in varying amounts to specified maximums depending on tenure with the City. Vacation benefits are reported as accrued in the government-wide, proprietary, and fiduciary financial statements. Only the amount of vacation benefits expected to be paid from current financial resources are accrued in the governmental fund financial statements. The balance of the vacation benefits are accrued in the general longterm debt account and are reflected as compensated absences payable, on the statement of net position. No liability is recorded for nonvesting accumulating rights to receive sick pay benefits. However, a liability is recognized for that portion of accumulating sick leave benefits that is estimated will be taken as terminal leave prior to retirement. 7. Deferred Outflow/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. For example, grant expenditures paid in advance of meeting timing requirements. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. Accordingly, the items, unavailable revenue, are reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: property taxes and note repayments. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.

29 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) 8. Restricted Net Position Reservations or restrictions of equity represent amounts that are not appropriable or are legally segregated for a specific purpose. 9. Cash Flow Statement The City considers all bank accounts, restricted, and unrestricted cash to be cash for the statement of cash flow purposes. 10. Use of Estimates Management of the City uses estimates and assumptions in preparing financial statements in accordance with United States generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that management uses. 2. BUDGETARY AND LEGAL COMPLIANCE A. Budgetary Information The City Council follows these procedures in establishing the budgetary data reflected in the financial statements: Prior to September 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted at various times during the year to obtain taxpayer comments. Prior to the submission to the county auditor on the Thursday following the first Tuesday in September, the budget is legally enacted through passage of an ordinance. The budget covers all governmental and proprietary fund types. The City adopts budgets on the modified accrual basis of accounting for all governmental fund types and adjusts for encumbrances. The City adopts budgets on the accrual basis of accounting for proprietary fund types. The City Manager is authorized to transfer budgeted amounts between departments within any fund; however, expenditures from the emergency fund or any revisions that alter the total expenditures of any fund must be approved by the City Council. The legal level of budgetary control is the fund level. The City Council made supplemental budgetary appropriations during the year of $5,053,350 as a result of unanticipated revenue.

30 NOTES TO FINANCIAL STATEMENTS 2. BUDGETARY AND LEGAL COMPLIANCE (CONTINUED) A. Budgetary Information (Continued) Encumbrance accounting is employed for capital projects in the governmental fund types. For budgetary purposes, the encumbrances (i.e., purchase orders, contracts) are considered expenditures when incurred. Major funds: Capital Projects $ 299,321 Economic Development 154,494 $ 453,815 For GAAP reporting purposes, encumbrances outstanding at year-end are reported as restrictions of fund balances and do not constitute expenditures or liabilities because the commitments will be reappropriated and honored during the subsequent year. Unencumbered appropriations lapse at year-end. 3. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments Deposits and investment policies are disclosed in Note 1C. The carrying amount of the City's deposits at year-end is covered by federal depository insurance for the first $250,000 at each institution. The bank has pledged securities from its local government pool as collateral for the repurchase agreement. The balance was uninsured and uncollateralized. Cash is classified as follows in the basic financial statements: Cash, Governmental Activities $7,192,895 Cash, Business-Type Activities 5,905,811 Cash, Fiduciary Funds 55,276

31 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Deposits and Investments (Continued) Investments made by the City at year-end amounted to $24,328,136. As of September 30, 2016, the City had the following investments and maturities: Governmental Activities Interest Fair Less than Rate Value Certificates of deposit $ 1,920, % $ 1,920,445 Idaho State Local Government Investment Pool (average w eighted yield) 416, % 416,056 Idaho State Diversified Bond Fund (average w eighted yield) 1,737, % 1,737,771 Perpetual Care Cash and equivalents 1,366 1,366 Mutual funds - corporate bonds 250, ,611 Mutual funds - equities 53,564 53,564 Common stocks 578, ,741 Internal Service Fund Certificates of deposit 5, % 5,983 Idaho State Local Government Investment Pool (average w eighted yield) % 7 Idaho State Diversified Bond Fund (average w eighted yield) 4,129, % 4,129,831 Business-Type Activities $ 9,094,375 Certificates of Deposit 856, % $ 856,897 Current assets $ 856,897 Certificates of Deposit 1,085, % $ 1,085,628 Idaho State Local Government Investment Pool (averaged w eighted yield) 479, % 479,955 Idaho State Diversified Bond Fund (average w eighted yield) 1,161, % 1,161,163 Fiduciary Funds Investment Maturities (In Years) Restricted investments $ 2,726,746 Cash equivalents 183,436 $ 183,436 U.S. Treasury obligations $ 70, % 70,421 Corporate obligations 136, , % 531,037 Foreign obligations 200, % 200,494 Domestic common stocks 2,511,565 2,511,565 Foreign stocks 1,615,763 1,615,763 Mutual funds - equities 4,033,907 4,033,907 Mutual funds - fixed income 2,150,593 2,150,593 Mutual funds - balances 335, ,752 Accrued Income 17,150 17,150 Total investments $ 11,650,118

32 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Deposits and Investments (Continued) Interest Rate Risk: Interest rate risk is the risk that changes in interest rate will reduce the value of the City s investments. As a means of limiting its exposure to losses, no security, which has a variable interest rate, will be purchased or accepted as collateral. Also, the use of leveraging (borrowing money to purchase an investment), trading, and speculating are not allowed under the City s investment policy. Custodial Risk. Custodial risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have a policy for custodial risk. The investments held by Perpetual Care Fund above and the Fiduciary Funds are both held by US Bank in street name. Credit Risk: The City s general investment policy objectives are safety, liquidity, and yield, and its standard of care to be used by investment officials is formulated around the prudent-person rule: investments are made as a prudent person should be expected to make, with discretion and intelligence, to produce reasonable income, preserve capital and, in general, avoid speculative investments. As of September 30, 2016, the City s investment in the Idaho State Treasurer s Local Government Investment Pool is no longer rated by Standard and Poor s Rating Services. The City s investment in corporate bonds and obligations held through US Bank are rated A to AAA by Moody s Investor Service. Concentration of Credit Risk: The City places no limit on the amount they may invest in any one issuer. No more than five percent of the City s investments are invested in any one issuer of debt obligations. B. Receivables Delinquent taxes represent delinquent property amounts due from individuals. substantially all property taxes are collected. Accounts receivable represent: Ambulance billings from insurance and individuals $ 531,359 Ambulance billings turned over to collection 984,883 Ambulance allow ance for uncollectible accounts (807,883) Franchise fees due from private utilities 172,377 Other, due generally from individuals 428,711 Other allow ance for uncollectible accounts (106,574) Governmental Activities $ 1,202,873 Customer utility billings for water, w astew ater collection, and sanitation $ 1,503,371 Other 11,010 Allowance for uncollectible accounts (19,521) Business-Type Activities $ 1,494,860 Intergovernmental receivables represent: Due from the U.S. Government, construction grants $ 544,829 State of Idaho, shared tax collections 547,108 State of Idaho, grants and reimbursements 365,196 Nez Perce County, property taxes collected 177,866 Governmental Activities $ 1,634,999 Over time,

33 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) B. Receivables (Continued) Unbilled receivables represent estimated amounts due from individuals for utility services provided. Residential customer utilities are generally billed monthly. C. Capital Assets Beginning Ending Balance Additions Deletions Balance CAPITAL ASSETS Governmental Activities Capital assets, not being depreciated Land $ 7,236,344 $ 7,236,344 Airport land and improvements 5,688,340 5,688,340 Airport runways 9,986,456 $ 659,446 10,645,902 Construction in progress 2,752,635 2,261,006 5,013,641 Capital assets, being depreciated Buildings 18,808, ,227 19,598,388 Equipment 2,099, ,300 $ 31,682 2,411,275 Equipment - airport 31,195 25,846 57,041 Airport navigational 1,066,043 14,357 1,080,400 Stormwater systems 10,791,899 10,791,899 Streets 84,721,000 1,802,000 86,523,000 Traffic signals 4,623, ,000 5,155,000 Street lights 1,348,000 1,348, ,152,730 6,428,182 31, ,549,230 Internal Service Fund Building 16,377 16,377 Equipment 10,496, , ,302 11,028,321 10,512, , ,302 11,044,698 Total Governmental Activities $ 159,665,115 $ 7,369,797 $ 440,984 $ 166,593,928 Business-Type Activities Capital assets, not being depreciated Land $ 115,034 $ 115,034 Construction in progress 1,387,046 $ 3,270,046 $ 1,868,395 2,788,697 Capital assets, being depreciated Buildings 3,037,631 3,037,631 Equipment 3,151, ,654 $ 326,778 2,960,105 Water system 27,414,690 1,099, ,334 27,895,982 Sewer system 36,821,702 2,595,197 1,208,090 38,208,809 Golf course 1,893,960 24,883 1,918,843 Total Business-Type Activities $ 73,821,292 $ 7,125,406 $ 4,021,597 $ 76,925,101

34 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Capital Assets (Continued) Beginning Ending Balance Additions Deletions Balance ACCUMULATED DEPRECIATION Governmental Activities Buildings $ 8,602,912 $ 682,079 $ 9,284,991 Equipment 1,083, ,063 $ 16,682 1,257,034 Airport navigational 683,838 37, ,064 Stormwater system 5,316, ,102 5,479,253 Streets 54,448,000 1,725,000 56,173,000 Traffic signals 2,743,000 58,000 2,801,000 Street lights 321,000 6, ,000 73,198,554 2,861,470 16,682 76,043,342 Internal Service Fund Building 15, ,376 Equipment 7,009, , ,964 7,314,804 7,025, , ,964 7,331,180 Total Governmental Activities $ 80,223,961 $ 3,569,207 $ 418,646 $ 83,374,522 Business-Type Activities Capital assets, being depreciated Buildings $ 1,637,882 $ 125,510 $ 1,763,392 Equipment 1,841, ,526 $ 306,927 1,728,552 Water system 12,948, ,155 77,727 13,695,739 Sewer system 17,309, ,577 18,196 18,229,589 Golf course 750,086 46, ,686 Total Business-Type Activities $ 34,487,440 $ 2,129,368 $ 402,850 $ 36,213,958 Net capital assets, Governmental Activities $ 83,219,406 Net capital assets, Business-Type Activities 40,711,143

35 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Capital Assets (Continued) Depreciation expense was charged to the following functions: Governmental Activities Business-Type Activities General Government $ 103,943 Water $ 785,275 Police protection 158,608 Wastewater 1,051,865 Fire protection 31,931 Sanitation 135,225 Transportation 1,993,662 Golf 57,400 Airport 97,449 Recreation, parks, and facilities 345,534 Library 130,343 Allocated Internal Service Fund Depreciation 707,737 D. Bonds Payable The City has issued Certificates of Participation, Series 2007 to finance full funding of the City s Police Officer Retirement Fund. The City s obligation to make payments is a limited obligation of the City, payable from the revenues and other amounts deposited in the City s Retirement Fund, together with all other general fund revenues of the City. Debt service for the Certificates of Participation is as follows: Governmental Activities Employee Retirement Plan Maturity Interest Fiscal Year Ending at 5.680% Principal Totals 2017 $ 111,328 $ 380,000 $ 491, , , , , , , , , , , , ,632 Totals $ 319,500 $ 2,150,000 $ 2,469,500

36 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) D. Bonds Payable (Continued) The Urban Renewal Agency of the City of Lewiston, Idaho (component unit) issued Revenue Allocation Bonds - Series 2012 A in the original amount of $2,500,000. The debt is due in annual principal installments, with a variable interest rate from 3.68 to 2.82 percent payable in March and September of each year. Debt funds not expended for the construction project in downtown will be applied to repay the original debt. Revenue Allocation Bonds are limited obligations of the Agency and are not general obligations of the Agency or the City of Lewiston, Idaho. These bonds and other issued debt and the related interest are payable solely from property tax revenues from the designated Revenue Allocation Area, reserve funds, and any unobligated funds of the Agency. Debt service for the bonds is as follows: Maturity Fiscal Years Ending Component Unit Water System and Enhancing Downtown Parking Interest at Variable rate Principal Totals 2017 $ 58,639 $ 148,000 $ 206, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,848 Totals $ 342,955 $ 1,922,000 $ 2,264,955 E. Changes in General Long-Term Obligations The following is a summary of changes in long-term debt for the year ended September 30, 2016: Due Within 10/01/15 Additions Reductions 9/30/16 One Year Governmental Activities Compensated absences $ 1,976,257 $ 23,403 $ 1,999,660 $ 166,638 Certificates of participation 2,510,000 $ 360,000 2,150, ,000 $ 4,486,257 $ 23,403 $ 360,000 $ 4,149,660 $ 546,638 Internal Service Funds Compensated absences $ 59,797 $ 0 $ 12,244 $ 47,553 $ 3,963 The amount reported as compensated absences will be paid out entirely from the general fund.

37 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) E. Changes in General Long-Term Obligations (Continued) Due Within 10/01/15 Additions Reductions 9/30/16 One Year Business-Type Activities Compensated absences $ 188,077 $ 7,551 $ 0 $ 195,628 $ 16,302 Component Unit Bonds Payable $ 2,066,000 $ 0 $ 144,000 $ 1,922,000 $ 148,000 Total interest expense amounted to $151,315 in the governmental activities. Total interest expense amounted to $10,779 in the business activities. Total interest expense amounted to $62,551 in the component unit. F. Interfund Transactions The City of Lewiston has approved the following transactions between funds to transfer expenditures and revenues to provide services and construct assets. Transfer Fund Recipient Fund Comment Amount Cemetery perpetual care Cemetery State law requirement $ 25,000 Recreation General Fund closure 161,841 Interfund activities at September 30, 2016, also included the following: Interfund Interfund Purpose Receivable Payable Water $ 125,705 Capital projects Police station remodel $ 125,705 Sanitation 563,413 Golf Irrigation system 563,413 Sanitation 692,296 Capital projects Library construction 692,296 G. Committed Fund Balance City Council has committed that the transportation fund set aside funds to supplement road and bridge projects. (There were no additional funds committed for the year ended September 30, 2016, other than interest earned on the invested funds.) The balance in committed funds at September 30, 2016, totaled $416,040.

38 NOTES TO FINANCIAL STATEMENTS 3. DETAILED NOTES ON ALL FUNDS (CONTINUED) H. Restricted Assets The City of Lewiston has entered into an agreement with the Lewiston Orchards Sewer District No. 1 and Central Orchards Sewer District that payments representing depreciation on jointly-used capital assets shall be deposited in a special fund, together with any interest earned thereon, to be used solely for the purpose of replacement of or additions to jointly-shared capital assets of the City's sewage collection and treatment system. In addition, State law restricts the use of buy-in fees for water and wastewater systems to specified system replacement and expansion expenditures. At September 30, 2016, such restricted assets totaled $2,645,825. An agreement between the City of Lewiston and the U.S. Army Corps of Engineers provided the City a lump-sum payment of $231,000 for maintenance and operation of the sewage pump stations for a period of 50 years. The payment is reflected as unearned revenue and is being amortized as a reduction of maintenance and operation expense over a period of 50 years. The balance in unearned revenue at September 30, 2016, was $42,735. A similar agreement was reached with the U.S. Army Corps of Engineers providing the City a lumpsum payment of $131,000 for maintenance and operation of the water system for a period of 50 years. This payment is also reflected as unearned revenue and is being amortized as a reduction of maintenance and operation expense over a period of 50 years. The balance in unearned revenue at September 30, 2016, was $28, OTHER INFORMATION A. Risk Management 1. Unemployment Effective January 1, 1978, the City established a reserve for funding future unemployment claims. Monthly contributions of $3,500 were placed into an investment account by each fund until a total of $100,000 had been accumulated. Claims are paid out of current earnings on the reserve account. Unemployment claims in excess of earnings are charged to individual departments. 2. Comprehensive Liability The City of Lewiston purchases liability and property insurance through Idaho Counties Risk Management Program (ICRMP). ICRMP assumes or reinsures all risk covered for claims. Participants are charged an annual insurance premium. The amounts of settlements have not exceeded the insurance coverage for any of the last three years. The general insurance limits are as follows: General liability Automobile liability Errors and omissions Employee dishonesty bond Law enforcement liability Property $3,000,000 per claim $3,000,000 per claim $3,000,000 per claim $500,000 per claim $3,000,000 per claim Replacement cost with a $2,500 deductible

39 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) A. Risk Management (Continued) 3. Medical Insurance Effective October 1, 2001, the City of Lewiston purchased medical insurance through Houston Casualty Co. for medical claims in excess of $60,000. The City of Lewiston assumes the risk for claims below $60,000 and charges each City fund a monthly premium based upon market insurance rates. A liability of Incurred But Not Reported (IBNR) claims in the amount of $390,000 has been accrued based upon the City's historical claims experience. A reconciliation of medical insurance claims for the fiscal year follows: Claims Claims Liability Incurred Claims Liability October 1 Claims Paid September 30 September 30, 2016 $ 390,000 $ 4,720,310 $ 4,720,310 $ 390,000 September 30, ,000 4,318,512 4,318, ,000 September 30, ,000 2,790,727 2,790, , Workers Compensation Effective January 1, 2007, the City of Lewiston purchased Workers Compensation insurance through Midwest Employers Casualty Company for Workers Compensation claims in excess of $500,000 for public safety employees and $400,000 for all other employees. The City of Lewiston assumes the risk for claims below these amounts and charges each City fund a monthly premium based upon market insurance rates. A reconciliation of Workers Compensation insurance claims for the fiscal year follows: Claims Claims Liability Incurred Claims Liability October 1 Claims Paid September 30 September 30, 2016 $ 0 $ 343,308 $ 343,308 $ 0 September 30, , ,380 0 September 30, , ,990 0 B. Contingent Liabilities Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures, which may be disallowed by the grantor, cannot be determined at this time although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City Attorney, the resolution of these matters will not have a material adverse effect on the financial condition of the City.

40 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) C. Deferred Compensation Plan The City of Lewiston offers its employees two deferred compensation plans created in accordance with Internal Revenue Code, Section 457. The Plans, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the Plans is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. Plan assets are available only for payment of benefits to plan participants and their beneficiaries. Accordingly, the Plan assets are not reflected in the City's financial statements. D. Public Employees Retirement System of Idaho (PERSI) Plan Description. All permanent full-time employees of the City except firefighters who were hired before October 1, 1980, participate in the Public Employees Retirement System of Idaho (PERSI) Base Plan, a cost-sharing, multiple-employer public retirement system created by the Idaho State Legislature. It is a defined benefit plan requiring that both the member and the employer contribute. Designed as a mandatory system for eligible state and school district employees, the legislation provided for political subdivisions to participate by contractual agreement with PERSI. The cost to administer the Plan is financed through the contributions and investment earnings of the Plan. The City contributes to the Firefighters Retirement Fund Plan (FRF) for firefighters who were hired before October 1, The FRF is a cost-sharing, multiple-employer defined benefit pension plan administered by PERSI that covers a closed group of firefighters who were hired before October 1, 1980, and who received benefits in addition to those provided under the PERSI Base Plan. The cost to administer the Plan is financed through the contributions and investment earnings of the FRF. Additional FRF funding is obtained from receipts from a state fire insurance premium tax. PERSI issues a publicly available financial report that includes financial statements and the required supplementary information for PERSI Base Plan and the FRF. That report may be obtained on the PERSI website at Pension Benefits. After five years of credited service, members become fully vested in retirement benefits earned to date. Members are eligible for retirement benefits upon attainment of the ages specified for their employment classification. For each year of credited service, the annual service retirement allowance is 2.0 percent (2.3 percent for police/firefighters under the Base Plan) of the average monthly salary for the highest consecutive 42 months for covered members of the Base Plan. The Base Plan is required to provide a 1 percent minimum cost of living increase per year provided the Consumer Price Index increases 1 percent or more. The PERSI board has the authority to provide higher cost of living increases to a maximum of the Consumer Price Index movement or 6 percent, whichever is less; however, any amount above the 1 percent minimum is subject to review by the Idaho Legislature. The FRF cost of living increase is based upon the increase in the statewide average firefighter s wage. The retirement benefit for covered members of the FRF is based on Idaho Code, Title 72, Chapter 14. Member and Employer Contributions. Member and employer contributions paid to PERSI are set by statute and are established as a percent of covered compensation. Contribution rates are determined by the PERSI board within limitations, as defined by state law. The Board may make periodic changes to employer and employee contribution rates (expressed as percentages of annual covered payroll) that are adequate to accumulate sufficient assets to pay benefits when due.

41 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) D. Public Employees Retirement System of Idaho (PERSI) (Continued) The contribution rates for employees are set by statute at 60 percent of the employer rate. The employer contribution rate is set by the Retirement Board and was percent of covered compensation for general employees and percent for police and firefighters under the Base Plan, and effective January 1, 2015, percent for FRF members. The City contributions required and paid were $2,179,890, $2,455,988 and $2,505,037 for the three years ended September 30, 2016, 2015, and 2014, respectively. Pension Liabilities, Pension Expense (Revenue), and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. At September 30, 2016, the City reported for PERSI a liability of $12,484,300 for its proportionate share of the net pension liability under the Base Plan and a net pension asset of $3,532,700 under PERSI-FRF. The net pension liability and asset were measured as of July 1, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City s proportion of the net pension liability was based on the City s share of contributions in the Base Plan pension plan and the FRF pension plan relative to the total contributions of all participating PERSI employers. For 2016, the City s proportion was percent for the base plan and percent for the FRF. For the year ended September 30, 2016, the City recognized a net gain on pension expense of $813,600 ($851,000 gain for governmental funds, $30,400 expense for business-type funds, and $7,000 expense for internal service funds) for PERSI. At September 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PERSI BASE PLAN Deferred Outflows of Resources Employer contributions made subsequent to the measurement date of June 30, 2016 $ 510,000 Deferred Inflows of Resources Differences between expected and actual experience $ 1,244,000 Changes in assumptions or other inputs $ 277,600 Net difference between projected and actual earnings on pension plan investments $ 6,076,400 $ 2,839,200 PERSI FRF PLAN Deferred Outflows of Resources Employer contributions made subsequent to the measurement date of June 30, 2016 $ 56,000 Deferred Inflows of Resources Differences between expected and actual experience $ 1,632,300 Changes in assumptions or other inputs $ 0 Net difference between projected and actual earnings on pension plan investments $ 772,200

42 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) D. Public Employees Retirement System of Idaho (PERSI) (Continued) The employer contribution will be recognized in pension expense in the following fiscal years. Other deferred outflows and inflows are being amortized over 4.9 years. The projected amount to be included in pension expense (benefit) is as follows: Base Plan FRF 2017 $ 522,700 $ 128, ,700 72, ,448, , , ,800 Actuarial Assumptions. Valuations are based upon actuarial assumptions, benefit formulas, and employee groups. Level percentages of payroll normal costs are determined using the Entry Age Normal Cost Method. Under the Entry Age Normal Cost Method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated as a level percentage of each year s earnings of the individual between entry age and assumed exit age. PERSI amortizes any unfunded actuarial accrued liability based on a level percentage of payroll for the Base Plan. The maximum amortization period permitted under Idaho Code is 25 years. There is no unfunded liability for FRF at this time. The total pension liability in the July 1, 2016, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Mortality Table - RP combined table for healthy males and females with appropriate offsets. Inflation 3.25% Salary inflation 3.75% Salary increases 4.25%-10% Investment return 7.1% Discount rate 7.1% Sensitivity a 1% change in the discount rate would affect the City s net pension liability under the Base Plan is as follows: 1% Decrease 7.1% rate used 1% Increase City Net Pension Liability $ 24,489,000 liability $ 12,484,000 liability $ 2,500,000 asset Sensitivity a 1% change in the discount rate would affect the City s net pension liability under the FRF Plan as follows: 1% Decrease 7.1% rate used 1% Increase City Net Pension Liability $ 1,451,000 asset $ 3,533,000 asset $ 5,293,000 asset E. Police Retirement Fund Plan Description. The City maintains a single-employer, defined benefit pension plan that is reported as a pension trust fund in these financial statements. The "Plan" covers police officers hired prior to July 2, 1979, and is closed to new participants. State statute and City ordinance establish Plan requirements. Amendments to the Plan must be approved by City ordinance. The City pays all costs of Plan administration.

43 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) E. Police Retirement Fund (Continued) Plan Membership. At September 30, 2016, pension plan membership consisted of the following: Inactive plan members or beneficiaries currently receiving benefits 33 Inactive plan members entitled to but not yet receiving benefits 0 Active plan members 0 33 Plan Benefits. The Plan provides a retirement allowance ranging from 30 percent to 65 percent of the member's highest three-year average salary after reaching age 55 or 15 years of service. An assumed 4 percent of cost of living increase in the general wage level of the membership is assumed after retirement. The Plan also provides death and disability benefits. Contributions. The City s policy states the desire of being 100 percent funded by September 30, The schedule of employer contributions at September 30, 2016: Fiscal Year Actuarially Actual Contribution Ending Determined Employer Deficiency September 30 Contribution Contribution (Excess) 2007 $ 600,000 $ 4,832,000 $ (4,232,000) , , , , , , , ,714 50, , ,476 (476) , , , , , , , ,726 (133,726) , ,607 (133,607) Investments. Investments consist of cash, cash equivalents, and corporate equities. All assets were valued at "cash value" for actuarial value purposes. The investment return assumption is 6.80 percent per year, net of investment expenses.

44 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) E. Police Retirement Fund (Continued) Net Pension Liability. The components of the net pension liability of the City at September 30, 2016, were as follows: Total pension liability $ 13,916,274 Plan fiduciary net position 11,705,394 City's net pension liability $ 2,210,880 Plan fiduciary net position as a percentage of the total pension liability 84.11% Pension Liabilities, Pension Expense (Revenue), and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. At September 30, 2016, the City reported a liability of $2,210,880 for its proportionate share of the net pension liability under the Police Retirement Fund. The net pension liability and asset were measured as of September 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. For the year ended September 30, 2016, the City recognized a pension expense of $663,618. At September 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of POLICE RETIREMENT PLAN Resources Employer contributions made subsequent to the measurement date of September 30, 2014 $ 0 Deferred Inflows of Resources Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments $ 652,277 $ 135,855 The employer contribution will be recognized in pension expense in the following fiscal years. Other deferred outflows and inflows are being amortized over 5 years. The projected amount to be included in pension expense (benefit) is as follows: 2017 $ 185, , , (33,963) Thereafter 0

45 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) E. Police Retirement Fund (Continued) Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of September 30, 2014, using the following actuarial assumptions, applied to all periods included in the measurement: Mortality Table - RP-2000 Mortality for Healthy and Disabled Annuitants, with age adjustments. Generational improvements per projection per Scale AA. Inflation 2.75% Salary inflation No active employees Salary increases No active employees Investment return 6.80% Discount rate 6.80% Long-Term Expected Rate of Return. The long-term expected rate of return on pension plan investment was determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions are per Milliman s investment consulting practice as of September 3, Asset Class Long-term Expected Arithmetic Real Rate of Return Core fixed income 1.85% US REITs 3.28% Commodities 1.41% Global equities 3.86% Assumed inflation - mean 2.75% Assumed inflation - standard deviation 1.90% Portfolio Geometric Nominal Mean Return 6.17% Portfolio standard deviation 10.49% Long-term expected rate of return, net of investment expenses 6.80% Discount Rate. An alternative evaluation of projected solvency was used to determine the discount rate of 6.80 percent. Based on circumstances taken into account during the actuarial calculations, the City s fiduciary net position is always projected to be sufficient to cover benefit payments and administrative expenses.

46 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) E. Police Retirement Fund (Continued) Sensitivity Analysis. The following presents the net pension liability of the City of Lewiston, calculated using the discount rate of 6.80 percent, as well as what the City s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.80 percent) or 1 percentage point higher (7.80 percent) than the current rate. Sensitivity a 1% change in the discount rate would affect the City s net pension liability under the Police Retirement Fund is as follows: 1% Decrease 7.05% rate used 1% Increase City Net Pension Liability $ 3,667,874 liability $ 2,210,880 liability $ 973,930 liability F. Water and Sewer Rates 1. The following rates and charges were in effect during the period October 1, 2015 through September 30, 2016: Water Rates The charge for water consumed is as follows: Rate per 100 cubic feet $ 2.43 Rate for irrigation of City-owned property (per 100 cubic feet) 2.43 Charges for water consumed beyond the City limits were established at one and one-half times the charge for water consumed within the City. In addition to the foregoing rate schedule, all water service users shall pay a meter fee ranging from $7.52 per month for a 3/4" meter to $93.14 per month for an 8" meter. Wastewater Collection and Treatment Rates All single residences, including mobile homes $ All duplex and triplex residences (per unit) All apartment houses or similar types of multiple dwellings, for first unit For each remaining unit All hotels, motels, mobile home parks, and mobile home tourist facilities, for first unit For each remaining unit 21.70

47 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) F. Water and Sewer Rates (Continued) 1. The following rates and charges were in effect during the period October 1, 2015 through September 30, 2016 (Continued): Rooming houses, for first unit $ For each remaining unit Schools. For each month school is not in session For each month school is in session, per each 100 persons within the school facility Hospitals, laundromats, small industry, car washes, restaurant, taverns and commercial establishments not otherwise designated, 1,000 cubic feet of water used Provided, however, that the minimum monthly charge shall be Major industry, determined by contract with the City, based on cost of wastewater treatment for the particular plant based upon the sum of the following monthly charge: $6.63 per 1,000 cubic feet outflow; plus $0.55 per pound of BOD or COD; plus $0.50 per pound of suspended solids; plus any additional charges attributable to treatment of waste involved All other users not under separate agreement All connections outside the City limits shall be charged at one and one-half (1½) times the above rates The City of Lewiston had 5,951 active meters and 13,524 active accounts as of September 30, For the period of October 1, 2015 through September 30, 2016, information on water flow (millions of gallons) is as follows: Master meter, total water flow 1,358.5 Water billed to customers 1,043.5 Approximate amount utilized for flushing mains, street usage, wastewater plant, breaks, and golf course 73.0 Approximate amount unaccounted for 17.2%

48 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) G. Fund Deficits A deficit fund balance of $(11,078) exists in the public transportation fund. This deficit will be eliminated in future years with additional revenue and/or reduction in expenditures. H. Contingency Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures, which may be disallowed by the grantor, cannot be determined at this time although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City Attorney, the resolution of these matters will not have a material adverse effect on the financial condition of the City. I. Fund Balance Classifications Restricted. Restricted on the government-wide statements represent amounts whose use is restricted by creditors, grantors, laws and regulations of other governments, or through enabling legislation. Restrictions are for debt service by the bond holder on the outstanding bond. Nonspendable Fund Balance. The fund balance includes inventory held for operational use by the City and is not in a spendable form. Committed Fund Balance. The fund balance is committed and can only be used for specific purposes pursuant to constraints imposed by formal action and cannot be used for any other purpose unless the City Council removes the constraint. Committed fund balance includes funds for drug enforcement and cemetery perpetual care. Assigned Fund Balance. The fund balance is assigned for use for specific purposes, including the payment of unemployment claims, capital projects, and special revenue funds. The special revenue funds include the following: Transportation Established to account for the City s operation and maintenance of roads, bridges, and traffic signals. Economic Development Established to account for the City s grants and activities related to economic growth and stabilization of business and individuals. Cemetery Established to operate and account for the activities of the City owned cemetery. Library Established to account for activity of the City library. Public Transportation Established to account for the revenue and expense of the operation of the City s public transportation system. Building reserve fund Established to reserve funds for the construction of City buildings.

49 NOTES TO FINANCIAL STATEMENTS 4. OTHER INFORMATION (CONTINUED) I. Fund Balance Classifications (Continued) Unassigned Fund Balance. The fund balance has not been assigned to other funds and has not been restricted, committed, or assigned to specific purposes within the general fund. J. Subsequent Event Management has evaluated subsequent events through February 17, 2017, the date the financial statements were available to be issued.

50 REQUIRED SUPPLEMENTARY INFORMATION

51 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND Year Ended September 30, 2016 Actual Amounts Variance Budgeted Amounts Budgetary With Original Final Basis Final Budget REVENUES Property taxes $ 12,792,200 $ 12,792,200 $ 13,005,954 $ 213,754 Licenses and permits 1,032,370 1,032,370 1,214, ,664 Intergovernmental revenues 4,752,440 4,778,740 4,754,505 (24,235) Charges for services 4,607,460 4,607,460 4,075,470 (531,990) Earnings on investments 61,510 61,510 44,384 (17,126) Other 2,294,710 2,356, ,331 (1,704,259) Total revenues 25,540,690 25,628,870 23,746,678 (1,882,192) EXPENDITURES Personnel services 17,935,410 17,983,310 17,543, ,945 Supplies and materials 1,088,750 1,121, , ,027 Services and charges 3,802,850 3,811,740 3,415, ,185 Capital outlay 2,582,920 2,641,310 1,107,758 1,533,552 Debt service 130, , , Total expenditures 25,540,690 25,688,730 23,103,994 2,584,736 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 0 (59,860) 642, ,544 OTHER FINANCING SOURCES (USES) Operating transfers out (161,841) (161,841) Total other financing sources (uses) 0 0 (161,841) (161,841) NET CHANGE IN FUND BALANCE 0 (59,860) 480, ,703 FUND BALANCE AT BEGINNING OF YEAR 5,251,692 5,311,552 6,507,274 1,195,722 FUND BALANCE AT END OF YEAR $ 5,251,692 $ 5,251,692 $ 6,988,117 $ 1,736,425 (59,860) 480,843 5,251,692 6,988,117 Budgetary basis revenues differ from GAAP basis revenues due to activities within the Police Retirement Fund GAAP basis revenues $ 24,239,112 Property taxes levied for Police Retirement Fund (492,434) Budget basis revenues $ 23,746,678 Budgetary basis expenditures differ from GAAP basis expenditures due to activities within the Police Retirement Fund GAAP basis expenditures $ 23,596,428 Debt service payments (492,434) Budget basis expenditures $ 23,103,994

52 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - TRANSPORTATION Year Ended September 30, 2016 Actual Amounts Variance Budgeted Amounts Budgetary With Original Final Basis Final Budget REVENUES Property taxes $ 1,672,650 $ 1,672,650 $ 1,669,825 $ (2,825) Licenses and permits 15,000 15,000 5,773 (9,227) Intergovernmental revenues 776, , ,595 (108,275) Charges for services 1,161,180 1,161,180 1,135,483 (25,697) Earnings on investments 1,000 1,000 2,611 1,611 Other 21,000 31,760 73,970 42,210 Total revenues 3,647,700 3,658,460 3,556,257 (102,203) EXPENDITURES Personnel services 1,948,260 1,948,260 1,931,447 16,813 Supplies and materials 331, , ,723 38,777 Services and charges 1,304,420 1,339,980 1,301,906 38,074 Capital outlay 63,520 63,520 61,604 1,916 Total expenditures 3,647,700 3,683,260 3,587,680 95,580 NET CHANGE IN FUND BALANCE 0 (24,800) (31,423) (6,623) FUND BALANCE AT BEGINNING OF YEAR 1,344,685 1,369,485 1,764, ,695 FUND BALANCE AT END OF YEAR $ 1,344,685 $ 1,344,685 $ 1,732,757 $ 388,072 (24,800) (31,423) 1,344,685 Note: The budgetary comparison schedule is presented on the modified accrual basis of accounting, which is the same basis of accounting used by the City in the fund financial statements.

53 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - ECONOMIC DEVELOPMENT Year Ended September 30, 2016 Actual Amounts Variance Budgeted Amounts Budgetary With Original Final Basis Final Budget REVENUES Intergovernmental revenues $ 170,000 $ 563,270 $ 320,237 $ (243,033) Earnings on investments Other 19,700 19,700 30,201 10,501 Total revenues 189, , ,516 (232,484) EXPENDITURES Capital outlay 199, , ,624 87,376 Total expenditures 199, , ,624 87,376 NET CHANGE IN FUND BALANCE (10,000) (10,000) (155,108) (145,108) FUND BALANCE AT BEGINNING OF YEAR 356, , ,328 (13,705) FUND BALANCE AT END OF YEAR $ 346,033 $ 346,033 $ 187,220 $ (158,813) (10,000) (155,108) 346,033 Budgetary basis expenditures differ from GAAP basis expenditures due to the inclusion of encumbrances for budgetary basis reporting GAAP basis expenditures $ 353,182 Prior year encumbrances (2,152) Current year encumbrances 154,594 Budget basis expenditures $ 505,624

54 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PENSION FUNDING Year Ended September 30, 2016 Base Plan Contribution Net Pension Actuarially Actual Contribution as a % of Share of PERSI Net Liability as % Fiscal Determined Employer Deficiency Covered Covered Pension Liability of Covered Year Contribution Contribution (Excess) Payroll Payroll % Amount Payroll 2007 $ 1,034,706 $ 1,034,706 $ 0 $ 9,884, % (1) (1) ,087,116 1,087, ,371, % (1) (1) ,165,692 1,165, ,145, % (1) (1) ,224,926 1,224, ,696, % (1) (1) ,166,658 1,166, ,159, % (1) (1) ,186,852 1,186, ,335, % (1) (1) ,242,038 1,242, ,662, % (1) (1) ,393,838 1,393, ,224, % (1) $ 4,430,800 36% ,442,507 1,442, ,659, % % 8,032,800 63% ,461,322 1,461, ,825, % % 12,484,300 97% FRF Plan Contribution Net Pension Actuarially Actual Contribution as a % of Share of PERSI Net Liability as % Fiscal Determined Employer Deficiency Covered Covered Pension Liability of Covered Year Contribution Contribution (Excess) Payroll Payroll % Amount Payroll 2007 $ 860,403 $ 860,403 $ 0 $ 3,060, % (1) (1) , , ,652, % (1) (1) ,106,587 1,106, ,935, % (1) (1) ,154,409 1,154, ,101, % (1) (1) ,111,311 1,111, ,085, % (1) (1) ,125,802 1,125, ,029, % (1) (1) ,123,589 1,123, ,990, % (1) (1) ,201,110 1,201, ,156, % (1) $ (2,502,100) -60% , , ,132, % % (3,642,700) -88% , , ,313, % % (3,532,700) -82% (1) PERSI has not provided calculations for years prior to implementation of GASB Statement No. 68.

55 REQUIRED SUPPLEMENTARY INFORMATION POLICE RETIREMENT FUND - SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIO Year Ended September 30, 2016 Fiscal Year Ending September 30, Total Pension Liability Service cost $ 0 $ 0 $ 0 N/A N/A N/A N/A N/A N/A N/A Interest on total pension liability 916, , ,662 N/A N/A N/A N/A N/A N/A N/A Effect of plan changes N/A N/A N/A N/A N/A N/A N/A Effect on economic/demographic gains (losses) 190, N/A N/A N/A N/A N/A N/A N/A Effect of assumption changes or inputs 338, N/A N/A N/A N/A N/A N/A N/A Benefit payments (1,025,159) (1,000,155) (975,761) N/A N/A N/A N/A N/A N/A N/A Net change in total pension liability 419,451 (77,800) (49,099) N/A N/A N/A N/A N/A N/A N/A Total pension liability, beginning 13,496,823 13,574,623 13,623,722 N/A N/A N/A N/A N/A N/A N/A Total pension liability, ending (a) 13,916,274 13,496,823 13,574,623 N/A N/A N/A N/A N/A N/A N/A Fiduciary Net Position Employer contributions 522, , ,982 N/A N/A N/A N/A N/A N/A N/A Member contributions N/A N/A N/A N/A N/A N/A N/A Investment income net of investment expenses 946,424 (235,367) 772,317 N/A N/A N/A N/A N/A N/A N/A Benefit payments (1,025,159) (1,000,155) (975,761) N/A N/A N/A N/A N/A N/A N/A Administrative expenses (2,250) (16,450) (3,073) N/A N/A N/A N/A N/A N/A N/A Net change in plan fiduciary net position 441,622 (729,246) 317,465 N/A N/A N/A N/A N/A N/A N/A Fiduciary net position, beginning 11,263,772 11,993,018 11,675,553 N/A N/A N/A N/A N/A N/A N/A Fiduciary net position, ending (b) 11,705,394 11,263,772 11,993,018 N/A N/A N/A N/A N/A N/A N/A Net pension liability, ending = (a)-(b) 2,210,880 2,233,051 1,581,605 N/A N/A N/A N/A N/A N/A N/A Fiduciary net position as a % of total pension liability 84.11% 83.45% 88.35% N/A N/A N/A N/A N/A N/A N/A Covered payroll N/A N/A N/A N/A N/A N/A N/A Net pension liability as of % of covered payroll N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Note to schedule: This schedule is presented to illustrate the requirement to show information for 10 years. However, recalculations of prior years are not required.

56 REQUIRED SUPPLEMENTARY INFORMATION POLICE RETIREMENT FUND - SCHEDULE OF CONTRIBUTIONS Year Ended September 30, 2016 Fiscal Year Ending September 30, Actuarially determined contribution $ 389,000 $ 389,000 $ 760,000 $ 760,000 $ 524,000 $ 524,000 $ 474,000 $ 474,000 $ 600,000 $ 600,000 Contributions in relation to the actuarially determined contribution 522, , , , , , , ,832,000 Contribution deficiency (excess) $ (133,607) $ (133,726) $ 236,018 $ 238,768 $ (476) $ 50,286 $ 196 $ 473,998 $ 600,000 $ (4,232,000) Covered employee payroll $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 83,000 $ 118,000 $ 281,048 Contributions as a percentage of coveredemployee payroll N/A N/A N/A N/A N/A N/A N/A 0.00% % Note to schedule: Valuation date: Actuarially determined contribution rates are calculated as of September 30 of even-numbered years for the biennium that follows the valuation date. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method Level percent of payroll, closed Remaining amortization period 4 years Asset valuation method Fair market value Inflation 2.75% Salary increases No active employees Investment rate of return 6.80% Retirement age No active employees Mortality RP-2000 Mortality for Heathy and Disabled Annuitants, with age adjustments. Generational improvements per projection per Scale AA.

57 REQUIRED SUPPLEMENTARY INFORMATION MODIFIED APPROACH FOR INFRASTRUCTURE REPORTING Year Ended September 30, 2016 Effective October 1, 2010, a Joint Airport Authority was formed to manage all airport activities and operations. The Lewiston-Nez Perce County Regional Airport has approximately 3,220,000 square feet of airfield pavement. The airport has implemented a pavement management system, which inventories the pavement network, identifies the pavement condition on a periodic basis, and compiles the pavement condition in a pavement maintenance management software Micro PAVER. The U.S. Army Corps of Engineers developed the PCI reporting method for airport pavements. The PCI is established by visually inspecting sample units of the airport s pavement sections and assessing the type and severity of the pavement s surface distresses, such as cracking, depressions, patching, raveling, rutting, and shoving. The software uses this information to assign a PCI for each pavement segment, with a possible range from 0 to 100. Using the PCI, the Pavement Condition Rating (PCR) is assigned to each segment, ranging from Poor to Failing to Good." The rating system is broken down as follows: PCI Rating 0-55 Poor to Failing Fair Satisfactory Good The 2002 Pavement Condition Index Report is used as a reference for the GASB 34 reporting requirements for airfield pavements using the Modified Approach. The last PCI rating report was reflected in the year ending September 30, In July 2016, an inspection was performed resulting in PCI report dated October 7, The average PCI rating for The Lewiston-Nez Perce County Regional Airport was 72.

58 CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGETARY BASIS - BUDGET AND ACTUAL Year Ended September 30, 2016 Actual Amounts Variance Budgeted Amounts Budgetary With Original Final Basis Final Budget REVENUES Property taxes $ 420,500 $ 420,500 $ 556,426 $ 135,926 Intergovernmental revenues 4,528,880 4,618,880 3,509,716 (1,109,164) Charges for services 30,000 14,613 (15,387) Earnings on investments ,249 1,849 Other 427, , ,955 (36,115) Total revenues 5,407,450 5,518,850 4,495,959 (1,022,891) EXPENDITURES Capital outlay General government 14,580 13,491 1,089 Transportation 5,236,250 5,236,250 4,242, ,798 Recreation, parks, and facilities 266, , Library 99, , ,598 14,592 Debt service 45,460 45,460 45,457 3 Total expenditures 5,380,920 5,779,930 4,770,300 1,009,630 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 26,530 (261,080) (274,341) (13,261) NET CHANGE IN FUND BALANCES 26,530 (261,080) (274,341) (13,261) FUND BALANCES AT BEGINNING OF YEAR 706, , ,517 (279,416) FUND BALANCES AT END OF YEAR $ 732,853 $ 732,853 $ 440,176 $ (292,677) (261,080) (274,341) Budgetary basis expenditures differ from GAAP basis expenditures due to the inclusion of encumbrances for budgetary basis reporting GAAP basis expenditures $ 4,628,785 Interfund loan payment 36,348 Prior year encumbrances (194,154) Current year encumbrances 299,321 Budget basis expenditures $ 4,770,300

59 COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS September 30, 2016 Permanent Fund Total Special Revenue Cemetery Nonmajor Public Perpetual Governmental Cemetery Recreation Library Transportation Care Funds ASSETS Cash $ 59,616 $ 322,357 $ 348 $ 382,321 Investments 884, ,282 Receivables Accounts 9,083 $ 33, ,350 Intergovernmental 144, ,757 Total assets $ 68,699 $ 0 $ 322,357 $ 177,805 $ 884,849 $ 1,453,710 LIABILITIES AND FUND BALANCES Vouchers payable $ 8,199 $ 29,790 $ 7,160 $ 45,149 Accrued salaries and benefits 1,795 28,120 47,520 77,435 Due to other City funds 134, ,203 Total liabilities 9,994 $ 0 57, ,883 $ 0 256,787 FUND BALANCES Committed for: Perpetual care 884, ,849 Assigned for: Special revenue 58, ,447 (11,078) 312,074 Total fund balances 58, ,447 (11,078) 884,849 1,196,923 Total liabilities and fund balances $ 68,699 $ 0 $ 322,357 $ 177,805 $ 884,849 $ 1,453,710

60 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS Year Ended September 30, 2016 Permanent Fund Total Special Revenue Cemetery Nonmajor Public Perpetual Governmental Cemetery Recreation Library Transportation Care Funds REVENUES Property taxes $ 80,000 $ 1,181,000 $ 270,000 $ 1,531,000 Intergovernmental revenues 6,067 6,067 Charges for services 61,267 4,348 $ 2,406 68,021 Earnings (loss) on investments ,240 73,320 Other 2,938 6, , ,767 Total revenues 144,222 $ 0 1,197,495 1,001,812 75,646 2,419,175 EXPENDITURES Current Cemetery 179,997 2, ,757 Library 1,140,918 1,140,918 Public transportation 715, ,373 Capital outlay 278, ,385 Total expenditures 179, ,140, ,758 2,760 2,317,433 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (35,775) 0 56,577 8,054 72, ,742 OTHER FINANCING SOURCES (USES) Transfers in 25, , ,841 Transfers out (25,000) (25,000) Total other financing sources (uses) 25, , (25,000) 161,841 NET CHANGE IN FUND BALANCES (10,775) 161,841 56,577 8,054 47, ,583 FUND BALANCES AT BEGINNING OF YEAR 69,480 (161,841) 207,870 (19,132) 836, ,340 FUND BALANCES AT END OF YEAR $ 58,705 $ 0 $ 264,447 $ (11,078) $ 884,849 $ 1,196,923 (10,775) 161,841 56,577 8,054 47,886 58, ,447 (11,078) 884,849 1,196,923

61 CEMETERY FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGETARY BASIS - BUDGET AND ACTUAL Year Ended September 30, 2016 Variance Favorable Budget Actual (Unfavorable) REVENUES Property taxes $ 80,000 $ 80,000 Charges for services 53,000 61,267 $ 8,267 Earnings on investments (13) Other 3,500 2,938 (562) Total revenues 136, ,222 7,692 EXPENDITURES Current Personnel services 62,840 62, Supplies and materials 19,650 19, Services and charges 101,540 97,939 3,601 Total expenditures 184, ,997 4,033 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (47,500) (35,775) 11,725 OTHER FINANCING SOURCES Transfers in 47,500 25,000 (22,500) Total other financing sources 47,500 25,000 (22,500) NET CHANGE IN FUND BALANCE 0 (10,775) (10,775) FUND BALANCE AT BEGINNING OF YEAR 43,122 69,480 26,358 FUND BALANCE AT END OF YEAR $ 43,122 $ 58,705 $ 15,583

62 LIBRARY FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGETARY BASIS - BUDGET AND ACTUAL Year Ended September 30, 2016 Variance Favorable Budget Actual (Unfavorable) REVENUES Property taxes $ 1,181,000 $ 1,181,000 Intergovernmental revenues 22,500 6,067 $ (16,433) Charges for services 3,500 4, Earnings on investments 2, (2,189) Other 78,910 6,019 (72,891) Total revenues 1,288,160 1,197,495 (90,665) EXPENDITURES Current Personnel services 887, , ,651 Supplies and materials 135, ,660 12,500 Services and charges 239, ,923 6,257 Capital outlay 26,500 17,666 8,834 Total expenditures 1,288,160 1,140, ,242 NET CHANGE IN FUND BALANCE 0 56,577 56,577 FUND BALANCE AT BEGINNING OF YEAR 117, ,870 90,625 FUND BALANCE AT END OF YEAR $ 117,245 $ 264,447 $ 147,202

63 PUBLIC TRANSPORTATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGETARY BASIS - BUDGET AND ACTUAL Year Ended September 30, 2016 Variance Favorable Budget Actual (Unfavorable) REVENUES Property taxes $ 270,000 $ 270,000 Earnings on investments 2 $ 2 Other 639, ,810 92,490 Total revenues 909,320 1,001,812 92,492 EXPENDITURES Current Personnel services 534, ,622 (27,572) Supplies and materials 58,050 39,188 18,862 Services and charges 183, ,563 69,257 Capital outlay 133, ,071 21,329 Total expenditures 909, ,444 81,876 NET CHANGE IN FUND BALANCE 0 174, ,368 FUND BALANCE AT BEGINNING OF YEAR 0 (185,446) (185,446) FUND BALANCE AT END OF YEAR $ 0 $ (11,078) $ (11,078) Budgetary basis expenditures differ from GAAP basis expenditures due to the inclusion of encumbrances for budgetary basis reporting GAAP basis expenditures $ 993,758 Prior year encumbrances (166,314) Budget basis expenditures $ 827,444

64 CEMETERY PERPETUAL CARE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGETARY BASIS - BUDGET AND ACTUAL Year Ended September 30, 2016 Variance Favorable Budget Actual (Unfavorable) REVENUES Charges for services $ 2,500 $ 2,406 $ (94) Earnings (loss) on investments 75,000 73,240 (1,760) Total revenues 77,500 75,646 (1,854) EXPENDITURES Current Services and charges 2,800 2, Total expenditures 2,800 2, EXCESS OF REVENUES OVER EXPENDITURES 74,700 72,886 (1,814) OTHER FINANCING SOURCES (USES) Transfers out (25,000) (25,000) Total other financing sources (uses) (25,000) (25,000) 0 NET CHANGE IN FUND BALANCE 49,700 47,886 (1,814) FUND BALANCE AT BEGINNING OF YEAR 887, ,963 (50,301) FUND BALANCE AT END OF YEAR $ 936,964 $ 884,849 $ (52,115)

65 INTERNAL SERVICE FUNDS COMBINING BALANCE SHEET September 30, 2016 Fleet Health Workers Information Maintenance Plan Trust Comp Trust Systems Totals ASSETS CURRENT ASSETS Cash $ 464,876 $ 102,789 $ 541,555 $ 218,787 $ 1,328,007 Investments 7 2,744,145 1,386,723 4,130,875 Accounts receivable 48, ,580 Intergovernmental 4,268 4,268 Inventory 144, ,992 Total current assets 614,143 2,894,934 1,928, ,367 5,656,722 CAPITAL ASSETS Machinery and equipment 10,664, ,605 11,044,698 Less accumulated depreciation (7,234,676) (96,504) (7,331,180) Total capital assets 3,429, ,101 3,713,518 Total assets 4,043,560 2,894,934 1,928, ,468 9,370,240 DEFERRED OUTFLOWS OF RESOURCES Defined benefit pension 112, , ,000 LIABILITIES AND FUND EQUITY CURRENT LIABILITIES Vouchers payable 55, ,360 3,973 81, ,148 Claims payable 390, ,000 Accrued salaries and benefits 14,744 12,151 26,895 Compensated absences payable 38,139 9,414 47,553 Total current liabilities 108, ,360 3, , ,596 NONCURRENT LIABILITIES Net pension liability 203, , ,300 Total liabilities 311, ,360 3, ,593 1,325,896 DEFERRED INFLOWS OF RESOURCES Defined benefit pension 66,200 62, ,800 FUND EQUITY Unreserved 3,777,590 2,178,574 1,924, ,075 8,132,544 Total fund equity 3,777,590 2,178,574 1,924, ,075 8,132,544 Total liabilities and fund equity $ 4,155,760 $ 2,894,934 $ 1,928,278 $ 608,268 $ 9,587,240

66 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND EQUITY - GAAP BASIS Year Ended September 30, 2016 Fleet Health Plan Workers Comp Information Maintenance Trust Trust System Totals OPERATING REVENUES Charges for services $ 1,406,104 $ 3,820,443 $ 500,000 $ 848,398 $ 6,574,945 Total operating revenues 1,406,104 3,820, , ,398 6,574,945 OPERATING EXPENSES Depreciation 669,658 38, ,736 Administration 283,353 30, , ,182 Personnel services 458, ,302 Garage services 777, ,392 Retirement actuarial charges 3,600 3,400 7,000 Health insurance 5,401, ,838 5,803,662 Total operating expenses 1,450,650 5,685, , ,042 8,298,274 OPERATING INCOME (LOSS) (44,546) (1,864,734) 67, ,356 (1,723,329) NONOPERATING REVENUES Interest earned ,317 23, ,186 Other revenues 13,785 1,374,401 1,388,186 Total nonoperating revenues 13,895 1,421,718 23, ,459,372 NET INCOME (LOSS) (30,651) (443,016) 91, ,390 (263,957) FUND EQUITY AT BEGINNING OF YEAR 3,808,241 2,621,590 1,832, ,685 8,396,501 FUND EQUITY AT END OF YEAR $ 3,777,590 $ 2,178,574 $ 1,924,305 $ 252,075 $ 8,132,544 (30,651) (443,016) 91, ,390 3,777,590 2,178,574 1,924, ,075 8,132,544

67 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS Year Ended September 30, 2016 Fleet Health Workers Information Maintenance Plan Trust Comp Trust Systems Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from interfund charges $ 1,405,954 $ 3,822,350 $ 500,000 $ 847,818 $ 6,576,122 Cash paid for payroll (469,925) (470,162) (940,087) Cash paid for operating expenses (261,152) (5,632,287) (434,943) (201,079) (6,529,461) Other income (expense) 13,785 1,374,401 1,388,186 Net cash provided (used) by operating activities 688,662 (435,536) 65, , ,760 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Purchase and construction of capital assets (849,205) (85,071) (934,276) Net cash used by capital financing activities (849,205) 0 0 (85,071) (934,276) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (23,588) (23,588) Sale of investments 268, ,144 Interest received ,317 23, ,186 Net cash provided by investing activities , ,742 Net change in cash (160,433) (120,075) 65,194 91,540 (123,774) Cash and cash equivalents at beginning of year 625, , , ,247 1,451,781 Cash and cash equivalents at end of year $ 464,876 $ 102,789 $ 541,555 $ 218,787 $ 1,328,007 RECONCILE OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ (44,546) $ (1,864,734) $ 67,595 $ 118,356 $ (1,723,329) Adjustments to reconcile operating income (loss) (loss) to net cash provided (used) by operating activities: Depreciation 669,658 38, ,736 Net change in deferred pension expense 3,600 3,400 7,000 Changes in: Accrued revenue (150) 1,907 (580) 1,177 Inventory (499) (499) Accrued expenses 46,814 52,890 (2,538) 17, ,489 Other revenue 13,785 1,374,401 1,388,186 Net cash provided (used) by operating activities $ 688,662 $ (435,536) $ 65,057 $ 176,577 $ 494,760

68 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS COMPARATIVE SCHEDULES BY SOURCE September 30, 2016 and GOVERNMENTAL FUNDS CAPITAL ASSETS Land $ 12,924,683 $ 12,924,683 Buildings and improvements 19,893,015 19,260,839 Accumulated depreciation (9,284,989) (8,602,912) Machinery and equipment 2,411,274 2,099,656 Accumulated depreciation (1,257,034) (1,083,653) Streets 102,167,716 97,812,858 Accumulated depreciation (61,652,253) (59,764,151) Traffic control system 6,503,000 5,971,000 Accumulated depreciation (3,128,000) (3,064,000) Airport 11,649,540 11,083,694 Accumulated depreciation (721,064) (683,838) Total governmental funds capital assets $ 79,505,888 $ 75,954,176 INVESTMENT IN GOVERNMENTAL FUNDS CAPITAL ASSETS BY SOURCE: General fund $ 28,086,596 $ 25,659,775 Special revenue funds 51,419,292 50,294,401 Total governmental funds capital assets by source $ 79,505,888 $ 75,954,176

69 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY FUNCTION AND ACTIVITY Year Ended September 30, 2016 Land Machinery and and Buildings Infrastructure Equipment Total FUNCTION AND ACTIVITY Facilities $ 103,432 $ 103,432 Police 408, ,384 Fire 475, ,783 Community development 30,450 30,450 Administrative support services 699, ,127 Airport $ 7,957,638 $ 10,645,903 1,137,441 19,740,982 Transportation services 106,985, , ,259,048 Recreation 17,495 17,495 Library 324, ,723 Transit 77,987 77,987 Other (unclassified) 26,411,819 26,411,819 Total capital assets $ 34,369,457 $ 117,631,057 $ 3,548, ,549,230 Accumulated depreciation (76,043,342) Total capital assets used in the operation of governmental funds $ 79,505,888

70 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY Year Ended September 30, 2016 Governmental Governmental Funds Capital Funds Capital Assets Assets 10/1/15 Additions Deductions 9/30/16 FUNCTION AND ACTIVITY Equipment Facilities $ 74,033 $ 29,399 $ 103,432 Police 373,811 34, ,384 Fire 433,405 67,178 $ 24, ,783 Community development 37,332 6,882 30,450 Administrative support services 699, ,127 Airport 31,195 25,846 57,041 Airport navigational 1,066,043 14,357 1,080,400 Transportation services 149, , ,894 Recreation 7,495 10,000 17,495 Library 308,599 16, ,723 Transit 16,155 61,832 77,987 Total equipment 3,196, ,503 31,682 3,548,716 Land Airport 5,688,340 5,688,340 Other (unclassified) 7,236,344 7,236,344 Total land 12,924, ,924,684 Buildings Airport 2,269,298 2,269,298 Other (unclassified) 16,991,539 2,183,936 19,175,475 Total buildings 19,260,837 2,183, ,444,773 Infrastructure Airport runways 9,986, ,446 10,645,902 Streets 97,812,858 2,669, ,482,155 Traffic signals 4,623, ,000 5,155,000 Street lights 1,348,000 1,348,000 Total infrastructure 113,770,314 3,860, ,631,057 Total capital assets $ 149,152,730 $ 6,428,182 $ 31,682 $ 155,549,230

71 1216 Idaho Street Post Office Box 555 Lewiston, Idaho (208) Fax: (208) INDEPENDENT AUDITOR'S REPORT - GOVERNMENT AUDITING STANDARDS Members of City Council City of Lewiston, Idaho Lewiston, Idaho We have audited, in accordance with the 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, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Lewiston, Idaho, as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the City of Lewiston, Idaho's basic financial statements and have issued our report thereon dated February 17, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Lewiston, Idaho s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Lewiston, Idaho s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Lewiston, Idaho s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Moscow Office: 609 South Washington, Suite 202, Moscow, Idaho 83843, (208) Grangeville Office: 109 South Mill Street, Grangeville, Idaho 83530, (208) Orofino Office: 216 Johnson Avenue, Orofino, Idaho 83544, (208) Pullman Office: 1230 SE Bishop Blvd., Pullman, Washington 99163, (509)

72 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Lewiston, Idaho s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of the financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. February 17, 2017

73 1216 Idaho Street Post Office Box 555 Lewiston, Idaho (208) Fax: (208) INDEPENDENT AUDITOR'S REPORT - SINGLE AUDIT ACT Members of City Council City of Lewiston, Idaho Lewiston, Idaho Report on Compliance for Each Major Federal Program We have audited the City of Lewiston, Idaho s compliance with the types of compliance requirements described in the OMB Compliance Supplement, that could have a direct and material effect on each of the City of Lewiston, Idaho s major federal programs for the year ended September 30, The City of Lewiston, Idaho s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the City of Lewiston, Idaho s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Lewiston, Idaho s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City of Lewiston, Idaho s compliance. Opinion on Each Major Federal Program In our opinion, the City of Lewiston, Idaho, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30, Moscow Office: 609 South Washington, Suite 202, Moscow, Idaho 83843, (208) Grangeville Office: 109 South Mill Street, Grangeville, Idaho 83530, (208) Orofino Office: 216 Johnson Avenue, Orofino, Idaho 83544, (208) Pullman Office: 1230 SE Bishop Blvd., Pullman, Washington 99163, (509)

74 Report on Internal Control Over Compliance Management of the City of Lewiston, Idaho, is responsible for establishing and maintaining effective internal control over compliance with the requirements referred to above. In planning and performing our audit of compliance, we considered the City of Lewiston, Idaho's internal control over compliance with the types of requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Lewiston, Idaho s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. February 17, 2017