CITY OF ODESSA, MISSOURI. Fl NANCIAL STATEMENTS

Transcription

1 Fl NANCIAL STATEMENTS MARCH 31, 2018

2 TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Balance Sheet - Governmenta l Funds Reconciliation of the Governmenta l Funds Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficit) - Governmenta l Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficit) of Governmental Funds to the Statement of Activities Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds NOTES TO FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFOR MATION Budgetary Comparison Schedule - General Fund Budgetary Comparison Schedule - Park Fund Budgetary Comparison Schedule - Transportation Sales Tax Fund Budgeta ry Comparison Schedule - Ca pita l Improvement Fund Budgetary Compa rison Schedule - Debt Service Fund Notes to Required Supplementary Information Sched ule of Employer's Contributions Schedule of Changes in Net Pension Liability OTH ER SUPPLEMENTARY INFORMATION Sched ule of Expenditures of Federal Awards Notes to Sched ule of Expenditures of Federal Awards REPORTS REQUIRED UNDER GOVERNMENT AUDITING STANDARDS AND THE UNIFORM GUIDANCE Independent Auditors' Report on Internal Control Over Financial Reporting and on Complia nce and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by The Uniform Guidance

3 TABLE OF CONTENTS Page SCHEDULE OF FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS CORRECTIVE ACTION PLAN

4 DANA F. COLE & COMPANYLLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Mem bers of the Board of Aldermen City of Odessa, Missouri Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, and each major fund of the City of Odessa, Missouri, as of and for the eighteen month period ended March 31, 2018, and the related notes to the financial statements, which collectively comprise the City'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 fa ir presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fi nancial 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 perform ing procedu res to obtain audit evidence about the amounts and disclosures in the financial statements. The procedu res 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 releva nt 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. 1

5 Opinion In our opinion, the financial statements referred to above present fa irly, in all material respects, the respective financial position of the governmenta l activities, the business-type activities, and each major fund of the City of Odessa, Missouri, as of March 31, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the eighteen month period then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles genera lly accepted in the United States of America require that the management's discussion and analysis, budgetary comparison schedules, the schedule of emp loyer's contributions, and the sched ule of changes in net pension liability as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historica l context. We have applied certa in 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 fi nancial statements, and other knowledge we obtained during our audit of the basic fi nancial 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 assura nce. Other Information Our audit was conducted for the purpose of forming opinions on the financia l statements that collectively comprise the City of Odessa, Missouri's basic financial statements. The schedule of expenditures of federal awards is presented fo r purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Pa rt 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 schedule of expenditures of federal awa rds is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The 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 ge nerally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. 2

6 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 5, 2018, on our consideration of the City of Odessa, Missouri's internal control over financial reporti ng and on our tests of its compliance with certa in 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 compl iance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on complia nce. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Odessa, Missouri's internal control over financial reporting and compliance. Overland Park, Ka nsas September 5,

7 MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) The City of Odessa, Missouri, (the City) offers readers this narrative overview and analysis of the financial activities of the City for the eighteen month period ended March 31, During the September 25, 2017 meeti ng, the Board of Aldermen approved changing the fiscal year ending from September 30 to March 31. The City of Odessa, Missouri, reports the annual financial statements in accordance with the guidelines prescri bed in Government Accounting Standards Board's (GASS) Statement No. 34. We encourage readers to consider the information presented here in conjunction with the basic financial statements. FINANCIAL HIGHLIGHTS The assets of the City of Odessa, Missouri, exceeded its liabilities at the close of the eighteen month period ending March 31, 2018, by $28,111,030. Of th is amount, $7,770,082 represents unrestricted net assets and may be used to fu nd ongoing obligations. Total net position increased by $2,147,583. This increase is primarily attributable to the receipt of grants for waste water projects in which costs are capitalized and depreciated over their estimated life. As of the close of the eighteen month period ending March 31, 2018, the City of Odessa, Missouri's combined govern mental fu nd balances tota led $2,061, 773. This is an increase from the previous year fund balance by $998,945, primari ly due to the extended audit period and transfers from the proprietary funds. Total long-term liabilities for the City of Odessa, Missouri, decreased during the eighteen month period by $1, 724, 726. The City serviced all long-term obligations as planned. Within the current audit period, the City approved the issuance of Combi ned Water Works/Sewerage System Revenue Bonds Series The proceeds were used to refi nance the 2011 COPS bonds with the remainder to be used to fi nance the lagoon closure proj ect started within the eighteen month period ending March 31, OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is provided as an introduction to the basic financial statements. The basic fi nancial statements consist of three components: government-wide financial statements, fund financial statements, and notes to the financial statements. This report also conta ins required supplementary information and other supplementa ry information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide fi nancial statements are designed to provide readers with a broad overview of the City's finances in a manner similar to a private-sector business. The statement of net position presents all of the City's assets, liabi lities, and deferred outflows/inflows of resources, with the difference between them reported as net position. Net position is an important measure of the City's overall financial health. The increases and decreases in net position can be moni tored to determine whether the City's financial position is improving or deteriorating. 4

8 MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) Government-Wide Financial Statements (Continued) The statement of activities presents information showing how the City's net position changed during the most recent fiscal period. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused paid time off). The government-wide financial statements report functions of the City that are principa lly supported by taxes and intergovernmenta l revenues (governmental activities) separate from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (businesstype activities). The governmenta l activities for the City include general governm ent, public works and streets, solid waste, public safety, planning and development, and parks and recreation. The businesstype activities for the City include the electric, waterworks, and waste water systems. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure compliance with finance-related legal requirements. These funds are divided into two categories: governmenta l fu nds and proprieta ry funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the governmentwide financial statements, governmental fu nd financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the audit period. Such information may be useful in eva luating the City's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governm ental funds with similar information presented fo r governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term fi nancing decisions. Both the governmental fund balance sheet and the governmenta l fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmenta l funds and governmenta l activities. Proprietary Funds The City mainta ins one type of proprietary fund. Enterprise funds are used to report the same fu nctions presented as business-type activities in the government-wide financial statements. The City mainta ins three enterprise funds. The proprietary fund fi nancial statements provide separate information for the Electric Fund, Water Fund, and Waste Water Fund. 5

9 MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund fi nancial statements. Other Information In addition to the basic financial statements and accompanying notes, this report also contains certain required supplementary information rega rd ing budgetary and pension information. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve as a useful indicator of the City's financial position. As of March 31, 2018, assets and deferred outflows of resources exceed liabilities by $28, 111,030. The largest portion of the City's net position, $19,221,080, reflects its net investment in capita l assets (e.g. land, construction in progress, buildings, improvements, machinery and equipment, and infrastructure), less any related debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capita l assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. Governmental City of Odessa, Missouri Statement of Net Position Business-Type Activities Activities Total 3/31/18 9/30/16 3/31/18 9/30/16 3/31/18 9/30/16 Current and other assets 3,106,334 1,648,322 7,059,223 8,718,062 10,165,557 10,366,384 Capital assets 7,848,697 7,772,596 28,622,261 27,992,466 36,470,958 35,765,062 Tota I assets 10,955,031 9,420,918 35,681,484 36,710,528 46,636,515 46,131,446 Deferred outflows of resources 192, , , , , ,296 Long-term debt 1,917,123 2,340,327 15,382,882 16,709,404 17,300,005 19,049,731 Other liabilities 111, , ,652 1,364,145 1,110,034 1,799,957 Total liabilities 2,028,505 2,776,139 16,381,534 18,073,549 18,410,039 20,849,688 Deferred inflows of resources 453, ,999 77,211 56, , ,975 Invested in capital assets, net of related debt 5,931,574 5,476,861 13,289,506 11,333,189 19,221,080 16,810,050 Restricted 537, , ,179 1,590,126 1,119,868 1,842,380 Unrestricted 2,196,066 1,443,255 5,574,016 5,824,394 7,770,082 7,267,649 Total net position 8,665,329 7,172,370 19,445,701 18,747,709 28,111,030 25,920,079 6

10 MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued) At the end of the current audit period, the City is able to report positive balances in all categories of net position for the government as a whole. The City's combined net position during the eighteen month audit period increased $2,147,583. Overall governmental activities expenses increased by $1,843,063 and the business-type activities increased by $3, 736,005. Changes in Net Position The following table reflects the revenue and expenses from the City's activities for the eighteen month period ended March 31, 2018, and the year ended September 30, City of Odessa, Missouri's Statement of Changes in Net Position Governmental Business-Type Activities Activities Total Total 3/31/18 9/30/16 3/31/18 9/30/16 3/31/18 9/30/16 REVENUES Programs revenues Charges for services 1,820,935 1,384,240 11,425,582 7,679,930 13,246,517 9,064,170 Operating grants and state sources 7, ,453 7, ,453 Capital grants and contributions 250, , ,821 1,694,878 1,021,821 2,083,232 Property taxes 800, , , ,730 Sales taxes 2,451,890 1,307,370 2,451,890 1,307,370 Franchise taxes 283, , , ,212 Other general revenues 239,197 53, , , , ,022 Total revenues 5,853,386 3,971,661 12,640,841 9,535,528 18,494,227 13,507,189 EXPENSES General Government 830, , , ,769 Public Safety 2,661,950 1,915,918 2,661,950 1,915,918 Highways and Streets 870, , , ,249 Sanitation 387, , , ,706 Community Planning and Development 122,612 98, ,612 98,544 Parks and Recreation 661, , , ,693 Interest on long-term debt 131,640 98, ,640 98,216 Electric 6,274,008 4,193,960 6,274,008 4,193,960 Water 1,543,695 1,099,547 1,543,695 1,099,547 Waste water 2,862,783 1,650,974 2,862,783 1,650,974 Total expenses 5,666,158 3,823,095 10,680,486 6,944,481 16,346,644 10,767,576 7

11 MANAG EMENT'S DISCUSSION AND ANALYS IS (UNAUDITED) GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued) City of Odessa, Missouri's Statement of Changes in Net Position (Continued) Governmental Business-Type Activities Activities 3/31/18 9/30/16 3/31/18 9/30/16 Total Total 3/31/18 9/30/16 Excess before transfers 187, ,566 1,960,355 2,591,047 2,147,583 2,739,613 Transfers 1,262, ,507 (1,262,363) (558,507) CHANGE IN NET POSITION 1,449, , ,992 2,032,540 NET POSITION, beginning as restated 7,215,738 6,465,297 18,747,709 16,715,169 2,147,583 2,739,613 25,963,447 23,180,466 NET POSITION, ending 8,665,329 7,172,370 19,445,701 18,747,709 28,111,030 25,920,079 Governmental activities total revenues increased by $1,881,725. The increase is mainly attributable to the extended audit period and increased tax revenues due to increased sales and property tax valuations. Also included in sales tax revenues detailed above, are motor vehicle tax revenues. Expenses increased by $1,843,063 which is mainly attributable to the extended audit period. Business-type total revenues increased by $3,105,313 primarily from the extended audit period as well as an increase in other general revenues. Business-type expenses increased by $3, 736,005 due to the extended audit period and increased util ity revenues. FINANCIAL ANALYSIS OF THE CITY'S FUNDS The General Fund is the chief operating fund of the City. The fund balance of the General Fund at March 31, 2018, was $1,560,362. This represents an increase of $439,362. The Park Fund is the operating fund used to provide culture and recreation activities of the City. The fund balance of the Park Fund at March 31, 2018, was $75,030. This represents an increase of $52,023. The Transportation Sales Tax Fund and Capital Improvement Fund are used primarily for collection of tax and grant money for spending on capita l outlay and related debt service. At the end of the eighteen month period, the fund balance in the Transportation Sales Tax Fund increased by $224,868 to the ending balance of $342,825. The deficit fu nd balance in the Capital Improvement Fund noted in the prior year appears to be restored as the fund balance was $50,838 at the end of the audit period, however this is due to the additional funds on hand specifically borrowed for the lagoon closure project. The Debt Service Fund is used for the payment of General Obligation Bonds. The City does not currently have a debt service levy for property tax assessments. The ending fu nd balance decreased from the prior year amount by $85,977 to an ending fund balance of $32,718. 8

12 MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) FINANCIAL ANALYSIS OF THE CITY'S FUNDS (Continued) The enterprise funds consisting of the Electric Fund, Water Fund, and Waste Water Fund recorded an increase in net assets of $697,992. The enterprise fu nds saw an increase in both reven ues and expenses which was primarily attributable to the increase in the audit period from twelve to eighteen months. BUDGETARY HIGHLIGHTS The Board of Alderman adopted the budget for the eighteen month period ending March 31, 2018, in September 2017 when they voted to amend the fiscal year end date. Budget amendments were brought before the Board of Alderman for their approval as needed. While there were miscellaneous budget amendments processed throughout the year the most significa nt, outside of the extended fiscal year adjustment, was an amendment approved in December 2017 that addressed additional revenues and expenditures. In March 2017, va rious City departments/buildings incurred storm damage after a tornado passed through the area. The City passed a budget amendment to reflect the additional revenues from insurance proceeds and expenses associated with repairs/capita l outlay expenditures across the impacted departments. The wages for all ful l-time employees was increased 2.5% as well as the adoption of LAGERS Rule of 80. A safety and wellness plan was also implemented. The City purchased new accounting/util ity billing softwa re. The prior system had been utilized since approximately the 1980's and did not afford upgrade opportunities with which to improve efficiency. The City hired a Police Chief and Assista nt Police Chief to begin the process of rei nstating the police department, anticipated to occur by August 31, A 5 year street maintenance and repair plan was prepared internally. The City opted to lease a roller and paver for use by the street department in working on the street plan, rather than having the purchase and ongoing maintenance expenses for the machines. Due to SB 5 mandates, as interpreted by the Municipal Court Judge for the City, the budgets of the police department and court must be separated and the municipa l court clerk and police clerk roles cannot be performed by the same person. Therefore the City will need to establish a separate budget for the municipal court and hire a part-time employee to fulfill the role of municipal court clerk. The City has begun the process of havi ng a rate study of the electric rates conducted by the City's electric engineering fi rm, BHMG. The City's trash rates were increased from $10.80 to $12.80 per customer. This rate had not been increased since prior to The additional revenue will be used to offset the complete cost of providing trash service to the households and businesses as well as cover the cost of emptying the dumpsters provided for City wide disposal of ya rd waste. 9

13 MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of the eighteen month period ending in 2018 and the fiscal year ending 2016, the City had $36,4 70,958 and $35, 765,062 invested, respectively, in a broad ra nge of capital assets, including police and ambulance equipment, buildings, park facilities, streets, and electric, water and sewer lines. The change in capita l assets is a result of additions and improvements to the util ity systems and construction in progress along with depreciation expense and disposals. See Note 5 to the financial statements and the ta ble below for more detailed information on the City's capita l assets. City of Odessa, Missouri Ca pita I Assets (net of depreciation) Governmental Activities 3/31/18 9/30/16 Business-Type Activities 3/31/18 9/30/16 Total 3/31/18 9/30/16 Land Construction in progress Utility systems Buildings and improvements Equipment Infrastructure Furniture and fixtures Vehicles 2,037,847 2,037,847 68, ,773 2,271,132 2,392, , ,512 3,123,180 2,307,194 17,997 22, , , , ,837 11,283,969 15,900, , ,758 2,797,142 9,208,588 15,138, ,527 2,234, ,372 11,283,969 18,171, ,119 3,123,180 17, ,923 2,234,605 3,410,915 9,208,588 17,530, ,039 2,307,194 22, ,878 Total 7,848,697 7,772,597 28,622,261 27,992,465 36,470,958 35,765,062 Debt Administration Balances at September 30, 2016 and March 31, 2018, are shown in the ta ble below. See Note 6 for additional information on the City's long-term debt. City of Odessa, Missouri Outstanding Debt General obligation bonds Capital lease obligations Revenue bonds Loans Certificates of participation Total Governmental Business-Type Activities Activities 3/31/18 9/30/16 3/31/18 9/30/16 415, ,000 1,442,000 1,625,735 4,510,000 3,570,000 10,746,561 10,699,448 2,255,663 1,857,000 2,295,735 15,256,561 16,525,111 Total 3/31/18 9/30/16 415, ,000 1,442,000 1,625,735 4,510,000 3,570,000 10, 7 46,561 10,699,448 2,255,663 17,113,561 18,820,846 10

14 NOTES TO THE FINANCIAL STATEMENTS ECONOMIC FACTORS, NEXT YEAR'S BUDGET, AND RATES Overall due to a reduction in the number of months within the fiscal 2019 budget revenues and expend itures are significantly less than the budgeta ry compa rison schedules presented within the audit report. For instance, General Fund revenues for fiscal year 2019 are projected to tota l $3,34 7,880. This projected revenue represents a decrease of 31% from the budgeted revenues for the eighteen month period ended March 31, The City continues to plan for major street and public works improvement projects that have been identified and prioritized. In addition, they completed an updated Strategic Plan Study within the eighteen month period ending March 31, The City of Odessa, Missouri, began a Neighborhood Improvement District Proj ect in September 2007 for a new business. Sales tax revenues are expected to pay the debt associated to the development. In August 2008, the City entered in to a lease-purchase agreement for the construction of the aquatic center. The City has reached the half-way point in repayment of this obligation during the present audit period. The fiscal year 2019 budget has proj ected a reduction in capita l outlay expenditures due to the completion of multiple projects. The primary goal of all capital projects is to complete much needed infrastructu re repair and improvements. The City continues to apply for grants when appropriate to assist in funding in order to continue improvements to infrastructu re. The Board takes cautious measures to ensure there is sufficient revenue to susta in operations without service level reductions. Additional budgetary highl ights for next year's budget include: As previously mentioned in current audit period budgetary highl ights, the City is reinstating the City's Police Depa rtment and will be termi nating their agreement with Lafayette County for police services. This will result in higher expenses than what have been recorded under the City's contract with Lafayette County. After meeting with Medical Claims Assistance, Inc. (MCA), the billing service for the ambulance department, the budgeted revenues for the fiscal year have been adjusted to better reflect current activity and billing practices. The cost of insurance for the City increased significantly across all funds and departments. The City intends to issue a Request for Proposals to ensure the insurance expenditures are competitive with the rates of other companies. The Electric Fund budget includes allocated funds for the hiring of a new electric superintendent. It also budgets for the next phase of electric upgrades in Centennial Hills. In the Water Fund, the City has allocated funds for various system improvements including the replacement of the second VFD at the wells. 11

15 NOTES TO THE FINANCIAL STATEMENTS ECONOMIC FACTORS, NEXT YEAR'S BUDGET, AND RATES (Continued) Within the Waste Water Fund the City continues to move forward on the Southeast Lagoon closure proj ect. Once that lagoon closure is complete, the City plans to move forward with closing the lagoons and peek overflow basins at the Northwest and Southeast treatment plants. The new peak overflow basin at the Southeast plant will not be closed. The budget for the Transportation Sales Tax Fund includes allocations for street improvements as outlined in the street plan. REQUESTS FOR INFORMATION The City's fi nancial statements are designed to present users with a genera l overview of the City's fi nances and to demonstrate the City's accountability. Any questions regarding the report or request for additional information should be directed to the City Ad ministrator, City Clerk, or Finance Director, 125 S. 2nd Street, Odessa, Missouri

16 STATEMENT OF NET POSITION MARCH 31, 2018 ASSETS Cash and cash equ ivalents Certificates of deposit Receivables Taxes Accounts Gra nts Interest and other Unbilled revenues Inventories Pre pa ids Restricted assets Cash and cash equivalents Net pension asset Capital assets Nondepreciable Depreciable, net Governmenta l Activities 1,381, , , , , ,606 2,106,382 5,742,315 Business-Type Activities Total 2,950,530 4,331,663 1,373,600 1,373, , , ,125 50,000 50,000 20,404 20, , , , , , ,976 1,146,121 1,534, ,009 1,025, ,595 2,979,977 27,748,666 33,490,981 TOTAL ASSETS 10,955,031 35,681,484 46,636,515 DEFERRED OUTFLOWS OF RESOURCES Pension related amounts 192, , ,102 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 11,147,171 35,904,446 47,051,617 LIABILITIES Current Liabilities Accounts payable 71,085 Accrued liabilities 23,601 Unearned revenues 6,363 Court bonds and deposits 7,688 Customer deposits Accrued interest payable 2,645 Due other govern ments Total current liabilities 111, , ,364 11,195 34,796 6,363 7, , ,852 74,609 77,254 7,717 7, ,652 1,110,034 13

17 STATEMENT OF NET POSITION MARCH 31, 2018 LIABILITIES (Continued) Noncurrent Liabilities Due within one year Due in more than one year Tota l noncurrent liabilities Governmenta l Activities 304,123 1,613,000 1,917,123 Business-Type Activities Total 577, ,126 14,805,879 16,418,879 15,382,882 17,300,005 TOTAL LIABILITI ES 2,028,505 16,381,534 18,410,039 DEFERRED INFLOWS OF RESOURCES Pension related amounts 453,337 77, ,548 TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 2,481,842 16,458,745 18,940,587 NET POSITION Invested in capita l assets 5,931,574 Restricted Debt service 32,718 Renewal and replacement Parks and recreation 57,831 Capital projects 447, 140 Unrestricted 2,196,066 13,289,506 19,221, , , , ,554 57, , 140 5,574,016 7,770,082 TOTAL NET POSITION 8,665,329 19,445,701 28,111,030 The accompanying notes are an integral part of this statement. 14

18 STATEMENT OF ACTIVITIES FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Program Revenues Net (Expense) Revenue and Operating Capital Changes in Net Position Charges Grants Grants Primary Government Functions/programs Primary government Governmental activities General Government Public Safety Highways and Streets Sanitation Community Planning and Development Parks and Recreation Interest on long-term debt Total governmental activities Expenses 830,436 2,661, , , , , ,640 5,666,158 for and and Services 97,140 1,055,202 Contributions Contributions 432,328 41, , ,759 5,678 1,820, , ,000 Governmental Business-Type Activities Activities Total (733,296) (733,296) (1,606,748) (1,606,748) (870,128) (870,128) 44,572 44, , ,894 (461,199) (461,199) (131,640) (131,640) (3,589,545) (3,589,545) (Jl Business-type activities Electric Water Waste water Total business-type activities Total primary government 6,274,008 1,543,695 2,862,783 10,680,486 16,346,644 6,732,271 1,872,195 2,821, , ,425, , ,246,517 5,678 1,021, , , , , , ,154 1,516,917 1,516,917 (3,589,545) 1,516,917 (2,072,628) General revenues Property taxes levied for general purposes Property taxes levied for parks and recreation Sales tax Franchise taxes State sources Investment earnings Insurance recoveries for loss of capital assets Insurance refunds Gain on sale of capital assets Other Total general revenues 644, , , ,594 2,451,890 2,451, , ,335 1,410 1,410 15, , ,820 88, , ,926 67,501 67,501 8,883 71,026 79,909 58,893 27,586 86,479 3,776, ,438 4,220,211 Transfers 1,262,363 (1,262,363) CHANGE IN NET POSITION 1,449, ,992 2,147,583 NET POSITION, beginning of year (as restated) 7,215,738 18,747,709 25,963,447 NET POSITION, end of year 8,665,329 19,445,701 28,111,030 The accompanying notes are an integral part of this statement.

19 BALANCE SHEET GOVERNMENTAL FUNDS MARCH 31, 2018 ASSETS Transportation Capital Debt General Park Sales Tax Improvement Service Fund Fund Fund Fund Fund Total ASSETS Cash and cash equivalents 1,381,133 1,381,133 Receivables Taxes 123,953 45,208 38,623 38, ,407 Accounts 44,174 44,174 Restricted cash and cash equivalents 11,071 25, ,202 14,960 32, ,033 Pre pa ids 93,564 17, ,763 TOTAL ASSETS 1,653,895 87, ,825 53,583 32,718 2,170,510!-.lo. 0) LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable 64,871 3,469 2,745 71,085 Accrued liabilities 20,974 2,627 23,601 Unearned revenues 6,363 6,363 Payable from restricted assets Court bonds and deposits 7,688 7,688 Total,liabilities 93,533 12,459 2, ,737 FUND BALANCES Nonspendable for prepaids 93,564 17, ,763 Restricted Parks 57,831 57,831 Debt service 32,718 32,718 Capital outlay 53, ,825 50, ,140 Unassigned 1,413,321 1,413,321 Total fund balances 1,560,362 75, ,825 50,838 32,718 2,061,773 TOTAL LIABILITIES AND FUND BALANCES 1,653,895 87, ,825 53,583 32,718 2,170,510 The accompanying notes are an integral part of this statement.

20 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Tota l fund balance - total governmental funds 2,061,773 Capita l assets used in governmenta l activities are not fi nancial resources and, therefore, are not reported in the funds: Governmental capita l assets Less accumulated depreciation 11,620,237 (3,771,540) 7,848,697 Certa in assets used in governmenta l activities are not financial resources and, therefore, are not reported in the fu nds: Net pension asset Long-term amounts are not financial resources and, therefore are not reported in the funds: 844,606 Prepa id lease interest Interest on long-term debt is not accrued in the governmental funds, but rather is recognized as an expenditure when due. Long-term liabilities, including bonds payable and accrued compensated absences are not due and payable in the current period and, therefore, are not reported in the funds, net of unamortized premiums and discounts. Adjustments of deferred inflows of resources for revenues not considered available in the fund statements. Pension related deferred outflows and inflows of resources are not due and payable in the current year and, therefore, are not reported in the fu nds: Deferred outflows of resources - pension related amounts Deferred inflows of resources - pension related amounts 192,140 (453,337) 14,064 (2,645) (1,917,123) 77,154 (261,197) NET POSITION OF GOVERNMENTAL ACTIVITIES 8,665,329 The accompanying notes are an integral part of this statement. 17

21 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICIT) GOVERNMENTAL FUNDS FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 REVENUES Transportation Capital Debt General Park Sales Tax Improvement Service Elimina- Fund Fund Fund Fund Fund tions Total Taxes 1,764, , , ,008 3,157,403 Charges for services 1,431, ,759 1,625,867 Licenses, permits, and fees 124, ,551 Fines and forfeitures 70,516 70,516 Intergovernmental revenue 380, , ,176 Interest 9,784 1, ,324 1,282 15,837 Gain on sale of assets 7,410 1,473 8,883 Other 58,891 5,678 64,569 Total revenues 3,847, , , ,332 1,282 5,697, EXPENDITURES Current General Government 753, ,758 2, ,632 Public Safety 2,598,271 2,598,271 Highways and Streets 613, ,736 Sanitation 387, ,756 Community Planning and Development 117, ,789 Parks and Recreation 17, , ,887 Capital outlay 49, , , ,726 Debt service Principal 162,000 21, , ,735 Interest and fiscal costs 102, , ,272 Total expenditures 4,538, , , , ,315 6,116,804 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (691,690) _J6,559) 291, ,296 (285,033) (419,002) OTHER FINANCING SOURCES (USES) Insurance recoveries 88,083 88,083 Insurance refunds 67,501 67,501 Transfers in 1,065,468 58, , ,056 (257,638) 1,332,257 Transfers out (90,000) (67,116) (170,416) 257,638 (69,894) Total other financing sources (uses) 1,131,052 58,582 (67,116) 96, ,056 1,417,947 CHANGE IN FUND BALANCES 439,362 52, , ,669 (85,977) 998,945 FUND BALANCE (DEFICIT), beginning of year (as restated) 1,121,000 23, ,957 (317,831) 118,695 1,062,828 FUND BALANCE, end of year 1,560,362 75, ,825 50,838 32,718 2,061,773 The accompanying notes are an integral part of this statement

22 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICIT) OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Net change in fu nd balances - tota l governmenta l funds 998,945 Amounts reported for governmental activities in the statement of activities are different because: Governmenta l fu nds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the difference between capital asset additions ($527, 726) and depreciation ($447,745) in the current period. Governmenta l fu nds report the proceeds from the disposal of assets as revenues. However, in the statement of activities the revenues are reported less the amount of nondepreciated cost. This is the amount by which the cost exceeded any proceeds. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 79,981 5,083 (9,017) Bond proceeds provide current financial resources to governmental fu nds, but issuing debt increases long-term liabi lities in the statement of net position. Repayment of bond principal is an expend iture in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Also, governmental funds report the effect of premiums, discou nts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items: Principal payments Prepaid interest amortization 438,735 (895) 43 7,840 19

23 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICIT) OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds: Compensated absences Pension expense Accrued interest (15,53 1) (48,370) 660 (63,241) CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 1,449,591 The accompanying notes are an integral part of this statement. 20

24 STATEMENT OF NET POSITION PROPRIETARY FUNDS MARCH 31, 2018 tv Waste Elimina- Electric Water Water tions Total ASSETS Current assets Cash (claim on cash) and cash equivalents 2,774, ,852 (259,031) 2,950,530 Certificates of deposit 794, ,500 1,373,600 Receivables Accounts 326,989 90, , ,797 Interest 20,404 20,404 Grants 50,000 50,000 Unbilled revenues 181,507 55,498 84, ,457 Due from other funds 310,000 (310,000) Inventories 283,557 48, ,156 Prepaid expenses 57,818 24,873 41, , Total current assets 4,418,680 1,544,056 79,357 {310,000) 5,732,093 Noncurrent assets Restricted cash and cash equivalents 563, ,179 1,146,121 Net pension asset 75,028 70,724 35, ,009 Capital assets Nondepreciable 187, , ,595 Depreciable, net 2,335,146 4,325,666 21,087,854 27,748,666 Total noncurrent assets 2,974,116 4, ,391,034 29,949,391 TOTAL ASSETS 7,392,796 6,128,297 22,470,391 (310,000) 35,681,484 DEFERRED OUTFLOWS OF RESOURCES Pension related amounts 75,525 71,927 75, ,962 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 7,468,321 6,200,224 22,545,901 (310,000) 35,904,446

25 STATEMENT OF NET POSITION PROPRIETARY FUNDS MARCH 31, 2018 LIABILITIES Current liabilities Accounts payable Accrued liabilities Due to other funds Current maturities of long-term debt Customer deposits Accrued interest Due to other governments Total current liabilities Electric 311,101 3,283 16, , ,829 Waste Elimina- Water Water tions Total 9,171 21, ,279 3,627 4,285 11, ,000 (310,000) 10, , , , ,112 74,609 7,717 7,717 23, ,209 (310,000) 1,575,655 I\) I\) Noncurrent liabilities Long-term debt, net of current maturities 228,929 14,576,950 14,805,879 TOTAL LIABI LIT! ES 894, ,546 15,544,159 (310,000) 16,381,534 DEFERRED INFLOWS OF RESOURCES Resources to be recognized in future pension expense due to liabilities 26,154 24,908 26,149 77,211 TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 920, ,454 15,570,308 (310,000) 16,458,745 NET POSITION Invested in capital assets, net of related debt Restricted for debt service Restricted for renewal and replacement Unrestricted (deficit) TOTAL NET POSITION 2,345,291 4,202,047 6,547,338 4,287,938 6,656,277 13,289, , , , ,554 1,634,832 (262,863) 5,574,016 5,922,770 6,975,593 19,445,701 The accompanying notes are an integral part of this statement.

26 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Electric Water REVENUES Charges for services 6,732,271 1,872,195 Waste Water Total 2,821,116 11,425,582 I\) w EXPENSES Personnel 432, ,950 Operation and maintenance 286, ,542 Power purchases 5,256,290 Depreciation and amortization 298, ,470 Total expenses 6,274,008 1,525, ,581 1,277, ,786 1,428,251 5,256,290 1,100,867 1,913,118 2,075,234 9,875,204 OPERATING INCOME 458, , ,882 1,550,378 NONOPERATING REVENUES (EXPENSES) Interest income 17,251 6,660 Interest expense (11,185) Bond issuance costs (6,548) Rental income 17,854 Miscellaneous Insurance recoveries 1, ,444 Gain on sale of assets 67,313 Total nonoperating revenues (expenses) 85, , , ,983 (630,200) (641,385) (157,349) (163,897) 17,854 9,732 9, ,843 3,713 71,026 (673,018) (361,844) INCOME BEFORE CAPITAL GRANTS AND TRANSFERS 544, ,458 72,864 1,188,534

27 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 CAPITAL GRANTS AND TRANSFERS Electric Water Capital grants Transfers in 8,838 6,521 Transfers out (477,523) (288,197) Total capital grants and transfers (468,685) (281,676) Waste Water Total 771, ,821 54,535 69,894 (566,537) (1,332,257) 259,819 (490,542) rv +::- CHANGE IN NET POSITION 75, ,782 NET POSITION, beginning of year 6,471,811 5,632, , ,992 6,642,910 18,747,709 NET POSITION, end of year 6,547,338 5,922,770 6,975,593 19,445,701 The accompanying notes are an integral part of this statement.

28 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Enterprise Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers and others Cash payments to suppliers for goods and services Cash payments for employee services and benefits Waste Electric Water Water Total 7,072,612 1,897,369 2,974,191 11,944,172 (5,660,435) (606,335) (896,381) (7,163,151) (423,458) (394,248) (416,512) (1,234,218} Net cash provided by operating activities 988, ,786 1,661,298 3,546,803 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES I\) 01 Transfers in Transfers out 8,838 (477,523) 6,521 (288,197} 54,535 (566,537) 69,894 (1,332,257) Net cash used in noncapital financing activities (468,685} (281,676} (512,002} (1,262,363} CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets Proceeds from the sale of assets Capital grants Proceeds from loans Principal pa id on long-term debt Bond issuance costs Insurance recoveries for loss of capital assets Interest paid on capital debt (480,845) (277,694) (1,795,951) (2,554,490) 67,313 3,713 71, , , ,929 2,16q,184 2,394,113 (751,286) (2,910,715) (3,662,001) (6,548) (157,349) (163,897) 1, , ,843 (15,392) (675,045) (690,437) Net cash used in capital and related financing activities (412,147) (603,54 7} (2,598,328) (3,614,022} CASH FLOWS FROM INVESTING ACTIVITIES Cash received from interest 17,251 6, , ,983 Net cash provided by investing activities 17,251 6, , ,983

29 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Electric 125,138 Enterprise Funds Waste Water Water Tota l 18,223 (1,347,960) (1,204,599) CASH AND CASH EQUIVALENTS, beginning of year 3,213, ,629 1,671,108 5,301,250 CASH AND CASH EQUIVALENTS, end of year 3,338, , ,148 4,096,651 Unrestricted Restricted 2,774, ,942 3,338, ,852 (259,031) 2,950, ,179 1,146, , ,148 4,096,651 I\) m Reconciliation of Operating Income.to Net Cash Provided by Operating Activities Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization Rental and miscellaneous income Changes in assets and liabilities: Receivables, net Inventories and prepaids Pension related assets, outflows, and inflows Accounts paya ble Accrued liabilities Compensated absences Meter deposits Tota l adjustments 458, , ,441 (59,277) 18,702 (54,693) (3,252) (10,146) 25, , , ,882 1,550, ,470 1,100,867 1,913,118 17,854 9,732 27,586 7, , ,104 6,279 (34,219) (87,217) 19,052 18,699 56,453 2,126 (276,629) (329,196) (12,198) (46,747) (62,197) (3,350) 370 (13,126) 25, , ,416 1,996,425 Net cash provided by operating activities 988, ,786 1,661,298 3,546,803 The accompanying notes are an integral part of this statement.

30 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Odessa, Missouri (the City), was incorporated in 1880 and covers an area of approximately four square miles in Lafayette County, Missouri. The City is a fourth class city and operates under the aldermen-administrator form of govern ment. The City administrator is the chief administrative officer of the City. The City provides services to its 5,300 residents in many areas, including law enforcement, electric, water and sewer services, public works, and parks and recreation services. A. FINANCIAL REPORTING ENTITY The financial statements of the City have been prepa red in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmenta l Accounting Standards Board (GAS B) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The City of Odessa, Missouri, provides a range of municipal services, including general government administration, public safety service, recreation, street maintenance, and contracts for electric, waterworks, and sewerage. During the September 25, 2017 meeting, the Board of Aldermen approved changing the fiscal year end from September 30 to March 31. In determining the financial reporting entity, the City complies with the provisions of Statement 14 of the Governmental Accounting Sta ndards Board, The Financial Reporting Entity, as amended by Statement No. 39 of the Governmental Accounting Standards Board, Determining Whether Certain Organizations are Component Units. For financial reporti ng purposes, the City includes all funds, agencies, boards, commissions, and authorities that are controlled by or dependent on the City. B. BASIS OF PRESENTATION Government-Wide Statements The statement of net position and statement of activities report information on the City as a whole. They include all funds of the City. The effects of interfund activity have been re moved from these statements. Governmental activities, which normally are supported by taxes and intergovernmental recei pts, are reported separately from business-type activities, which rely to a sign ificant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct disbursements of a given function or segment are offset by program receipts. Direct disbursements are those that are clearly identifiable with a specific function or segment. Program receipts include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capita l requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general receipts. The City does not allocate indirect costs. 27

31 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. BASIS OF PRESENTATION (Continued) Fund Financial Statements The accounts of the City are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fu nd are accounted for by a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues or receipts, and expenditures or expenses, as appropriate. Government resources are allocated to, and accounted for, in individual funds based on the purpose for which they are to be spent and the means by which spending activities are controlled. The emphasis in fund financial statements is on the major funds in either the governmental or business-type activities categories. GASB Statement No. 34 sets forth minimum criteria for the determination of major funds, which should have a specific community focus. The fu nds of the City are described below: Governmenta l Fund Types Governmental funds are those through which most governmental functions of the City are financed. The acquisition, use, and balances of the City's expendable financial resources and the related liabilities (other than those in proprieta ry funds) are accounted for th rough governmental fu nds. The measurement focus is upon determination of changes in financial position. The following are the City's governmental fund types: Genera l Fund The General Fund is the general operating fund of the City. It is used to account for all financial resources exce'pt those required to be accounted for in another fund. Special Revenue Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted, committed, or assigned to expenditures for specified purposes the purpose of which is determined by the fund name. The reporti ng entity includes the following special revenue funds, which are reported as major funds: Park Fund - This fund accounts for taxes collected and expended for operations and improvements to the City's parks. 28

32 NOTES TO THE FI NANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. BASIS OF PRESENTATION (Continued) Fund Financial Statements (Continued) Governmenta l Fund Types (Continued) Special Revenue Funds (Continued) Transportation Sales Tax Fund - This fund accounts for sales taxes to be used to finance street improvements. Capital Improvement Fund - This fund is used to account for sales taxes and other resources to be used for the acquisition or construction of major capita l facilities other than those financed by the proprietary funds. Debt Service Fund The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, long-term debt principal, interest, and related costs other than bonds payable from the operations of the Enterprise Funds. Proprieta ry Fund Type The proprietary fund is used to account for the City's ongoing organizations and activities which are similar to those often found in the private sector. The measurement focus is based upon determination of net income. The City reports the following major proprietary funds: Electric Fund - This fu nd accounts for the acquisition, operation, and maintenance of the City's electric distribution system. Water Fund - This fu nd accounts for the acquisition, operation, and maintenance of the City's water treatment and distribution system. Waste Water Fund - This fund accounts for the acquisition, operation, and maintenance of the City's sanitary sewer treatment and distribution system. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fu nd statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred rega rd l ess of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. 29

33 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (Continued) As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments in lieu of taxes and other charges between the government's proprietary functions arid various other fu nctions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Government fund level fi nancial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measura ble and available. Revenues are considered to be available when they are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Grant revenues'.availability period is generally considered to be one year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when the liability has matured and payment is due. Business-type activities and all proprietary funds are accounted for using an economic resources measurement focus. With this measurement focus, all assets and all lia bilities associated with the operation of these funds are included on the balance sheet. Proprietary fund type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. Operating expenses for the enterprise fund include the cost of sales and services, administrative expenses, and depreciation on capita l assets. All revenues and expenses not meeting th is defi nition are reported as nonoperating revenues and expenses. D. ASSETS, LIABILITIES, AND EQUITY Cash and Cash Eauivalents For the purpose of financial reporting, "cash and cash equivalent" includes all demand and savings accounts, and certificates of deposits or short-term investments with an original matu rity of th ree months or less. The City mainta ins cash and investment pools which are available for use by most funds. Each fu nd type's portion of this pool is displayed in the financial statements as cash and cash equ ivalents. Investments made in accordance with bond ordinances are reflected as restricted cash and cash equivalents. Funds with overdrawn balances are not charged interest. 30

34 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUM MARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, AND EQUITY (Continued) Cash and Cash Equ ivalents (Continued) As provided for by GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, the City reflects money market investments with a matu rity of one year or less at the time of purchase at amortized cost, which approximates fair va lue. All other investments are required to be reported at fair value based on quoted market prices. Accounts Receivable Governmental activities accounts receivable consists of ambulance and sanitation charges and other miscellaneous services provided to citizens, net of an allowance for uncollectible accounts of $687,385. Business-type activities represent billed electric, water, and waste water charges, net of an allowance for uncollecti ble accounts of $230,876. Inventories Inventories, consisting of materials and supplies, are valued at lower of cost or market. Cost is determi ned using estimated replacement cost basis which approximates actual cost. Prepaid Items Prepa id balances are for payments made by the City in the current year to provide services occurring in the subsequent fiscal year, and the reserve for prepaid items has been recognized to signify that a portion of fu nd balance is not available for other subsequent expenditures. Prepaid expenses are accounted for using the consumption method. Restricted Assets Unspent proceeds and resources set aside for the repayment of revenue bonds and certificates of participation are classified as restricted assets on the applicable statements of net position because they are maintained in separate bank or trust accounts and their use is limited by applicable bond covenants. Restricted assets also include amounts held for court bonds and deposits in the General Fund and customer deposits in the Electric Fund. Ca pita I Assets Under GASB Statement No. 34, all capital assets, whether owned by governmental activities or business-type activities, are recorded and depreciated in the governmentwide financial statements. Under GASB No. 34, small cities have the option to capitalize 31

35 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUM MARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, AND EQUITY (Continued) Capital Assets (Continued) infrastructure purchased in previous years. The City of Odessa, Missouri, has chosen not to ca pitalize existing infrastructure but will capita lize any future infrastructu re that it acquires. No long-term capital assets or depreciation are shown in the governmental fund financial statements. Ca pital assets, including public domain infrastructure (e.g., roads, bridges, sidewa lks, and other assets that are immovable and of value only to the City) are defined as assets with an individual cost of more than $5,000 and an estimated useful life greater than one year. Donated fixed assets are va lued at their estimated fair market value on the date donated. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. Ca pital assets are depreciated using the stra ight-line method over the following estimated usefu I I ives: Equipment and vehicles Buildings and land improvements Infrastructure Water and sewer system 5-10 years years 30 years years Capital assets transferred between fu nds are transferred at their net book value (cost less accumulated depreciation), as of the date of the transfer. Deferred Inflows and Outflows of Resources In addition to assets, the statement of net position now reports a separate section for deferred outflows of resources. This financial statement element represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City's pension related amounts are reported in this category. In addition to liabilities, the statement of net position and balance sheet now report a separate section for deferred inflows of resources. This financial statement element represents an acquisition of net position that applies to a future periods and so will not be recognized as an inflow of resources (revenue) until that time. The City's pension related amounts are reported in this category. 32

36 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUM MARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, AND EQU ITY (Continued) Compensated Absences Under terms of the City's personnel policy, employees are granted paid time off (PTO) leave in amounts rangi ng from 20 to 240 hours, based upon length of service. Up to 320 hours of PTO earned can be carried over each year, and accumulated PTO is payable on separation of service. Vested or accumulated PTO is accrued when earned in the government-wide and proprieta ry financial statements. A liability is reported in the governmental funds only if it has matured as a result of employee resignations or retirements. Long-Term Debt In the government-wide and proprietary fund financial statements, outstanding debt is reported as liabilities. The governmental fu nd financial statements recognize the proceeds and payments of debt as other financing sources and uses of the current period. lssuance,costs are reported as expenditures. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Missouri Local Government Employees Retirement System (LAGERS) and additions to/deductions from LAGERS fiduciary net position have been determined on the same basis as they are reported by LAG ERS. For this purpose, benefit payments (includ ing refu nds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Fund Equity Government-Wide Statements Equity is classified as net position and displayed in three components: Invested in capital assets, net of related debt, consists of capital assets including restricted capita l assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net position consists of net assets with constrai nts placed on the use either by external groups - such as creditors, granters, contributors, or laws and regulations of other governments - or th rough constitutional provision or enabling legislation. It is the City's policy to use restricted net assets first, prior to the use of unrestricted net assets, when a disbursement is pa id for purposes in which both restricted and unrestricted net assets are availa ble. 33

37 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, AND EQU ITY (Continued) Fund Equity (Continued) Government-Wide Statements (Continued) Unrestricted net position does not meet the definition of "restricted" or "invested in capital assets, net of related debt." Fund Financial Statements Fund Balance Classification The governmenta l fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the City is bound to honor constrai nts on the specific purposes for which amounts in the respective governmenta l fu nds can be spent. The classifications used in the governmental fund financial statements are as follows: Nonspendable This classification includes amounts that cannot be spent beca use they either (a) are not in spendable form or (b) are legally or contractually required to be maintained intact. Restricted This classification includes amounts for which constrai nts have been placed on the use of the resources either (a) externally imposed by creditors (such as through a debt covenant), granters, contributors, or laws and regulations of other governments or (b} imposed by law through constitutional provisions or enabling legislation. Committed This classification includes amounts that can be used only for specific purposes pursuant to constrai nts imposed by formal action of the Board of Aldermen. These amounts cannot be used for any other purpose unless the Board of Aldermen removes or changes the specified use by ta king the same type of action (ordinance or resolution) that was employed when the funds were initially committed. This classification also incl udes contractual obligations to the extent that existing resou rces have been specifically committed for use in satisfying those contractual requirements. The City currently has no amounts classified in this category. 34

38 NOTES TO THE FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITI ES, AND EQUITY (Continued) Fund Equity (Continued) Fund Financial Statements (Continued) Fund Balance Classification (Continued) Assigned This classification includes amounts that are constrained by the City's intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the City Council or through the Council delegating th is responsibility to the City Administrator through the budgeta ry process. The City currently has no amounts classified in this category. Unassigned This classification includes the residual fund balance for the General Fund. The City would typica lly use restricted fund balances first, followed by committed resources, and then assigned resources, as appropriate opportun ities arise, but reserves the right to selectively spend unassigned resources first to defer the use of these other classified funds. E. USE OF ESTIMATES The preparation of basic financial statements in conformity with accounting pri nciples generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the basic fi nancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F. INTERNAL AND INTERFUND BALANCES AND ACTIVITES During the course of normal operations, the City has transactions between fu nds, including expenditures and transfers of resources, to provide services and construct assets. Legally authorized transfers are included in the fund financial statements of both governmental and proprietary funds. G. PROPERTY TAXES The details of the City's property tax calendar can be found in Note 3 of the financial statements. 35

39 NOTES TO THE FINANCIAL STATEMENTS NOTE 2. CASH AND INVESTMENTS The disclosures that follow have been prepared in accordance with the provisions of GASB Statement No. 40, Deposit and Investment Risk Disclosures. This statement esta blishes disclosure requirements for investment and deposit risks related to credit risk, concentrations of credit risk, interest rate risk, and foreign currency risk, A summary of the carrying values of deposits, investments and petty cash at March 31, 2018, is as follows: Tota l deposits Certificates of deposit Investments Petty cash Total 5,578,895 1,373, ,897 1,025 7,239,417 These ca rrying va lues are reflected on the statement of net position as follows: Cash and cash equiva lents Certificates of deposit Restricted cash and investments Tota l 4,331,663 1,373,600 1,534,154 7,239,417 Investment Policies The City follows state statutes which allow the City to deposit in open accounts and certificates of deposit, and to invest in direct obligations of the U.S. Government, U.S. Government agency obligations, and repurchase agreements. Restricted assets are invested in accordance with bond ordinances by the trustee in money market mutual funds. The carrying amount and maturity segment for the City's restricted investments at March 31, 2018, are as follows: Investment Maturity Waste Water Fund Fidelity Treasury Fund Federated Treasury Money Market Fund Federated Government Money Market Fund Under One Year 70, , , ,870 Credit Risk - The City's genera l credit risk policy is to apply the prudent person rule: Investments shall be made with the exercise of that judgment and care, under circumstances then prevailing, which ind ividuals of prudence, discretion, and intelligence exercise in the management of their own affa irs, not for speculation, but for investment, considering the proba ble safety of their capital, as well as the proba ble income to be derived. 36

40 NOTES TO THE FINANCIAL STATEMENTS NOTE 2. CASH AND INVESTMENTS (Continued) Interest Rate Risk - Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City does not have a formal policy for interest rate risk. However, the City does manage its exposure to fair value loss arising from interest rate changes on internally invested funds by reviewing the portfolio on an ongoing basis for changes in effective yield amounts. Custodial Credit Risk - The custodial credit risk for deposits is the risk that, in the event of the fa ilure of a depository financial institution, the City will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The City's pol icy is to collateralize bank deposits with secu rities held by the financial institution's agent and in the City's name. As of March 31, 2018, all of the City's deposits with financial institutions were fully insured or collateralized by securities held in the City's name in the form of joint safe-keeping receipts. Concentration of Credit Risk - The City places no limit on the amount it may invest in any one issuer. Investments that represent more than 5% of the City's investments consist of the money market mutual funds shown above. NOTE 3. PROPERTY TAX REVENUE The City's property tax is levied each November 1 on the assessed value as of the prior January 1 for all property located in the City. Assessed va luations are esta blished by the Lafayette County Assessor. The county collects the property tax and remits it to the City monthly. The assessed value for property located in the City as of January 1, 2017, that the levy was based on is as follows: Real estate Personal property Total current val uation 45,498,258 10,697,165 56,195,423 The City is perm itted by Missouri state statutes to levy taxes up to $1.00 of assessed va luation for general governmental services other than payment of principal and interest on long-term debt, up to $0.20 for recreation, and in unlimited amounts for the payment of principal and interest on long-term debt. The City's property tax levies for the eighteen month period ended March 31, 2018, per $100 assessed valuation, were as follows: General Parks Total Property taxes may attach as an enforceable lien on property as of January 1. Taxes are levied no later than November 1, and are due and payable at that time. All unpaid taxes levied by November 1 become delinquent January 1 of the following year. 37

41 NOTES TO THE FINANCIAL STATEMENTS NOTE 4. INTERGOVERNMENTAL REVENUE Due from other governments at March 31, 2018, consists of state motor vehicle taxes and fees and Waste Water Fund grants. Intergovernmental revenue during the eighteen month period ended March 31, 2018, consisted of the following: Capital General Improvement State Motor vehicle fuel tax 211,150 Motor vehicle sales tax and resistration fees 105,474 Financial institution tax 1,410 Transportation grant 250,000 County Use tax 22,822 Road and bridge tax 39, , ,000 NOTE 5. CAPITAL ASSETS Capita l asset activity for the eighteen month period ended March 31, 2018, was as follows: Balance October 1, 2016 Increases Decreases Balance March 31, 2018 Governmental Activities Capital assets, not being depreciated Land Construction in progress 2,037, ,773 (545,238) 2,037,847 68,535 Total capital assets, not being depreciated 2,651,620 (545,238) 2,106,382 Capital assets, being depreciated Buildings and improvements Land improvements Machinery and equipment Infrastructure Furniture and fixtures Vehicles 3,002, ,926 1,284,749 3,156,640 65, ,638 7,915 9,876 (33,500) 1,009,490 41,802 (16,201) 3,010, ,926 1,261,125 4,166,130 65, ,239 Total capital assets, being depreciated 8,494,473 1,069,083 (49,701) 9,513,855 38

42 NOTES TO THE FINANCIAL STATEMENTS NOTE 5. CAPITAL ASSETS (Continued) Governmental Activities (Continued) Balance October 1, 2016 Increases Balance March 31, Decreases 2018 Less accumulated depreciation for: Buildings and improvements (800,371) Land improvements (116,835) Machinery and equipment (1,100,237) Infrastructure (849,446) Furniture and fixtures (42,847) Vehicles (463,760) Total accumulated depreciation (3,373,496) (118,159) (10,701) (47,305) (193,504) (4,319) (73,757) (447,745) (918,530) (127,536) 33,500 (1,114,042) (1,042,950) (47,166) 16,201 (521,316) 49,701 (3,771,540) Total capital assets being depreciated, net 5,120, ,338 5,742,315 Governmental activities capital assets, net 7,772, ,338 (545,238) 7,848,697 Depreciation was charged to functions as follows: General Government Public Safety Highways and Streets Pa rks and Recreation 39,852 63, , ,681 Tota l depreciation expense - governmental activities 447,745 Business-Type Activities Business-type Activities - Electric Fund Balance October 1, 2016 Increases Balance March 31, Decreases 2018 Capital assets, not being depreciated Construction in progress 131,854 (131,854) 39

43 NOTES TO THE FINANCIAL STATEMENTS NOTE 5. CAPITAL ASSETS (Continued) Business-Type Activities (Continued) Business-type Activities - Electric Fund (Continued) Balance Balance October 1, March 31, 2016 Increases Decreases 2018 Capital assets, being depreciated Generation and distribution system 6,573, ,923 7,179,915 Buildings and improvements 1,072,780 1,072,780 Machinery, equipment, and vehicles 1,126,581 6,776 1,133,357 Total capital assets, being depreciated 8,773, ,699 9,386,052 Less accumulated depreciation for: Generation and distribution system (5,479,732) (180,597) (5,660,329) Buildings and improvements (360,419) (57,238) (417,657) Machinery, equipment, and vehicles (911,973) (60,946) (972,919) Total accumulated depreciation (6,752,124) (298,781) (7,050,905) Total capital assets being depreciated, net 2,021, ,918 2,335,147 Business-type activities - Electric Fund capital assets, net 2,153, ,918 (131,854) 2,335,147 Business-Type Activities - Water Fund Capital assets, not being depreciated Land 144, ,010 Construction in progress 180,297 (136,456) 43,841 Total capital assets, not being depreciated 324,307 (136,456) 187,851 Capital assets, being depreciated Treatment and distribution system 10,467, ,442 (21,229) 10,704,363 Buildings and improvements 61, ,706 (30,810) 186,147 Machinery, equipment, and vehicles 279,695 (7,151) 272,544 Total capital assets, being depreciated 10,808, ,148 (59,190) 11,163,054 40

44 NOTES TO THE FINANCIAL STATEMENTS NOTE 5. CAPITAL ASSETS (Continued) Business-TQe Activities (Continued) Business-TyQe Activities - Water Fund (Continued) Balance Balance October 1, March 31, 2016 Increases Decreases 2018 Less accumulated depreciation for: Treatment and distribution system (6,152,226) (481,501) 14,447 (6,619,280) Buildings and improvements (47,577) (7,069) 26,018 (28,628) Machinery, equipment, and vehicles (171,733) (24,901) 7,151 (189,483) Total accumulated depreciation (6,371,536) (513,471) 47,616 (6,837,391) Total capital assets being depreciated, net 4,436,560 (99,323) (11,574) 4,325,663 Business-type activities - Water Fund capital assets, net 4,760,867 (99,323) (148,030) 4,513,514 Business-TyQe Activities - Waste Water Fund Capital assets, not being depreciated Land 52,748 52,748 Construction in progress 2,484,991 (1,851,995) 632,996 Total capital assets, not being depreciated 2,537,739 (1,851,995) 685,744 Capital assets, being depreciated Collection and treatment system 5,939,638 2,127,851 8,067,489 Buildings and improvements 17,954,973 1,479,178 19,434,151 Machinery, equipment, and vehicles 724,873 40,917 (7,151) 758,639 Total capital assets, being depreciated 24,619,484 3,647,946 (7,151) 28,260,279 Less accumulated depreciation for: Collection and treatment system (2,140,234) (247,955) (2,388,189) Buildings and improvements (3,542,558) (803,574) (4,346,132) Machinery, equipment, and vehicles (395,916) (49,337) 7,151 (438,102) Total accumulated depreciation (6,078,708) (1,100,866) 7,151 (7,172,423) Total capital assets being depreciated, net 18,540,776 2,547,080 21,087,856 Business-type activities - Waste Water Fund capital assets, net 21,078,515 2,547,080 (1,851,995) 21,773,600 41

45 NOTES TO THE Fl NANCIAL STATEMENTS NOTE 6. LONG-TERM DEBT Governmenta l Activities Changes in the debt for the eighteen month period ended March 31, 2018, consisted of the following: Governmental Activities Balance Balance Due in October 1, Addi- Retire- March 31, One 2016 tions ments 2018 Year General obligation bonds 670, , , ,000 Ca pital leases payable 1,625, ,735 1,442, ,000 Compensated absences 44,592 60,123 44,592 60,123 60,123 Total governmental activities 2,340,327 60, ,327 1,917, ,123 General Obligation Bonds General Obligation Bonds outstanding at March 31, 2018, consist of Neigh borhood Improvement Limited General Obligation Bonds, Series 2010C, issued December 2010 in the aggregate principal amount of $1,265,000, for the purpose of providing funds to pay a portion of the costs of the Richie Bros. Development Neighborhood Improvement District Project A. The bonds bear interest rates of 1.0% to 3.65% and mature through March 1, The full faith and credit of the City are irrevocably pledged for the payment of the bonds; however, the City is not obligated nor authorized to levy taxes for the purpose of paying the debt service on the bonds and the taxing power of the City has not been pledged. The annual debt service requirements to amortize the Neighborhood Improvement Limited General Obligation Bonds outstanding as of March 31, 2018, are as follows: Year Principal Interest Total ,000 14, , ,000 9, , ,000 5, , ,000 29, ,170 42

46 NOTES TO THE FINANCIAL STATEMENTS NOTE 6. LONG-TERM DEBT (Continued) Governmenta l Activities (Continued) General Obl igation Bonds (Continued) The bonds are to be repaid with special assessments levied on real property located in the District. If the special assessments would not be sufficient to make the debt payments in any particular year, the City would be obligated to fund any deficiency from its General Fund or other legally available revenues. Capital Leases In August 2008, the City entered into a lease agreement to finance the construction of an aquatic center in the amount of $2,300,000, at an interest rate of 3.65%. Lease payments, including certain fees, are due in monthly installments through August The cumulative amount of assets acquired under the lease at March 31, 2018, is $2,071,814. The future minimum lease obligations and the net present value of these minimum lease payments as of March 31, 2018, are as follows: Interest Years Principal and Fees Total ,000 62, , ,000 57, , ,000 52, , ,000 46, , ,000 41, , , , , ,000 1,570 72,570 1,442, ,021 1,816,021 In August 2013, the City entered into a second lease agreement to finance the acquisition of a new ambulance chassis in the amount of $84,005, at an interest rate of 2.5%. Lease payments are due in semi-annual installments th rough August The cumulative amount of assets acquired under this lease at March 31, 2018, is $84,005. This lease was paid in full during the eighteen month period ending March 31,

47 NOTES TO THE FINANCIAL STATEMENTS NOTE 6. LONG-TERM DEBT (Continued) Business-Type Activities Changes in debt for the eighteen month period ended March 31, 2018, consisted of the following: Balance October 1, Addi tions Retirements Balance Due in March 31, One 2018 Year Business-Type Activities Electric Fund Compensated absences 26,738 16,593 26,738 16,593 16,593 Water Fund Revenue bonds Certificates of participation Compensated absences 500, , ,948 13,672 10, , ,948 13, ,929 10,322 10,322 Total Water Fund 765, , , ,251 10,322 Waste Water Fund Revenue bonds Loans payable Certificates of participation Unamortized premium Compensated absences 3,070,000 1,836,071 10,699, ,113 2,003, ,166 9,717 10, , ,000 2,003,715 19,848 9,717 4,281, ,000 10,746, ,000 89,318 13,232 10,088 10,088 Total Waste Water Fund 15,892,046 2,175,272 2,940,280 15,127, ,320 Total business-type activities 16,684,404 2,431,116 3,732,638 15,382, ,235 Revenue Bonds 2004B Sewerage System Revenue Bonds, dated May 28, 2004, due in annual installments through January 1, 2025, with interest rates of 2% to 5.25%. Series 2017, Combined Water Works and Sewerage System Refunding Revenue Bonds dated September 12, 2017, due in annual installments September 1, 2026 through September 1, 2030, with interest rates of 2.6%. 2,445,

48 NOTES TO THE FINANCIAL STATEMENTS NOTE 6. LONG-TERM DEBT (Continued) Business-Type Activities (Continued) Revenue Bonds (Continued) The annual debt service requirements to amortize the revenue bonds as of March 31, 2018, are as follows: Series 2017 Series 2004 Combined Waterworks Sewerage System and Sewerage System Yea rs Ending Bonds Bonds March 31, Principal Interest Principal Interest Total , ,062 53, , , ,000 53, , ,000 89,250 53, , ,000 72,250 53, , ,000 54,750 53, , ,000 55, , ,076 1,960, ,145,000 38,742 1,183,742 Total 2,445, ,062 2,065, ,518 5,561,580 Within the audit period, the City authorized the issuance of Combined Water Works and Sewerage System Revenue bonds Series 2017 to pay off the 2011 Certificates of Pa rticipation and to complete improvements to their water and wastewater systems. The annual debt service requirements for the 2017 Combined Water Works and Sewerage System bonds have been allocated between the Water Fund and the Waste Water Fund based upon their use of the proceeds and are as follows: Water Fund Waste Water Fund Years Principal Interest Principal Interest Tota l ,958 47,382 53, ,958 47,382 53, ,958 47,382 53, ,958 47,382 53, ,958 47,382 53, ,993 27, , ,702 1,165, ,937 4,326 1,018,063 34,416 1,183,742 Total 228,930 61,490 1,836, ,028 2,615,518 45

49 NOTES TO THE FINANCIAL STATEMENTS NOTE 6. LONG-TERM DEBT (Continued) Business-Type Activities (Continued) Series 2005, Waste Water Fund 1.5% loan from the Missouri Depa rtment of Natural Resources, dated June 1, 2005, due in semiannual installments th rough July 1, Series 2014 Combined Water Works and Sewerage System 1.46% loan from the Missouri Depa rtment of Natural Resou rces, dated August 26, 2014, due in semiannual installments through July 1, Series 2015 Combined Water Works and Sewerage System 1.46% loan from the Missouri Department of Natural Resou rces, dated July 29, 2015, due in semia nnual installments through January 1, 2036, with an interest rate of 1.25%. 461,000 7,775, The revenue bonds and the Series 2005 and 2014 loans are collateralized by a pledge of the net revenues to the extent necessary to meet the debt service requirements. The bond indentures contain limitations and restrictions on annual debt service requirements, and minimum amounts to be maintained in various debt service and revenue accounts, including a renewa l and replacement account in the Waste Water Fund, as well as minimum revenue bond coverages. The City is in compliance with all such financial limitations and restrictions. On August 26, 2014, the City authorized the issuance of Combined Waterworks and Sewerage System Revenue Bonds (State of Missouri - Direct Loan Program) Series 2014 in an amount not to exceed $8,000,000, as a result of its participation in the State of Missouri Direct Loan Program. Under the Direct Loan program, DNR acts as the purchaser of the bond and loans the City amounts equal to eligible costs related to the construction of a new waste water treatment facil ity. Interest is due semiannually, based on the outstanding loan balance. Principal is due semiannually in various installments from July 1, 2016 through July 1, On July 29, 2015, the City authorized the issuance of Combined Waterworks and Sewerage System Revenue Bonds (State of Missouri Direct Loan Program) Series 2015 in an amount not to exceed $3,000,000, as a result of its participation in the State of Missouri Direct Loan Program. Under the Direct Loan program, DNR acts as the purchaser of the bond and loans the City amounts equal to eligible costs related to the construction of waste water system improvements. Interest is due semiannually, based on the outstanding loan balance. Principal is due semiannually in various installments from January 1, 2017 through January 1,

50 NOTES TO TH E FINANCIAL STATEMENTS NOTE 6. LONG-TERM DEBT (Continued) Business-Type Activities (Continued) Loans (Continued) The annual debt service requirements to amortize the 2005, 2014, and 2015 loans outstanding as of March 31, 2018, are detailed below. The amounts of principal and interest detailed for the 2015 Direct Loans are the scheduled annual requirements to retire the maximum loan proceeds. As of March 31, 2018, the balance of outsta nding debt principal is less than the principal payments detailed below. Series 2005 Series 2014 Years Ending Loan Loan March 31, Principal Interest Principal Interest Series 2015 Loan Principal Interest Total ,000 6, , , ,000 5, , , ,000 5, , , ,000 4, , , ,000 3, ,000 99, ,000 5,880 2,355, , ,679, , ,454,000 32,674 Total 461,000 31,605 7,775,000 1,190,515 38,000 36,669 56,000 36,137 56,000 35, , ,000 33, , , , ,000 14,444 34,737 75,594 2,943, , , , , , ,490 3,966,302 3,964,185 2,155,118 12,800,726 The net revenues of the Water and Waste Water Funds are pledged over the terms of the revenue bonds and loan in amounts equal to the total principal and interest payments above. The Missouri State Constitution perm its a city, by vote of either two-thirds or foursevenths of the voting electorate, depending upon the date of the election, to incur general obligation indebtedness for "city purposes" not to exceed 10% of the assessed value of taxable tangi ble property and to incur additional general obligation indebtedness not to exceed, in the aggregate, an additional 10% of the assessed value of taxable ta ngible property, for the purpose of acquiring rights-of-way, construction, extending and improving streets and avenues, and/or sanitary or storm sewer systems, and purchasing or constructing waterworks, electric or other light plants, provided the total general obligation indebtedness does not exceed 20% of the assessed valuation of taxable property. NOTE 7. INTERFUND TRANSACTIONS Transfers are used to move revenues from the fund that a statute or the budget requires to collect them to the fund that a statute or the budget requires to expend them; to move unrestricted revenues collected in the General Fund to finance various programs accounted 47

51 NOTES TO THE FINANCIAL STATEMENTS NOTE 7. INTERFUND TRANSACTIONS (Continued) for in other funds in accordance with budgeta ry authorizations; and to report payments in lieu of taxes and indirect cost allocations from the enterprise funds to the General Fund. For the eighteen month audit period, these amounts were $567,726 and $497,742, respectively. lnterfund receivable and payable activity represents transactions between the different funds under the City's control. In most cases, these balances represent short term adva nces from one fund to another. The lnterfund balance between the Water and Waste Water funds totaled $310,000. lnterfund transfers for the eighteen month audit period ended March 31, 2018, consisted of the following: Transfers In Debt Capital Waste Transfers Out General Park Service Improvement Electric Water Water Total General 7,500 82,500 90,000 Transportation Sales Tax 58,278 8,838 67,116 Capital Improvement 51,082 58,278 6,521 54, ,416 Electric 477, ,523 Water 259,704 28, ,197 Waste Water 328, , ,537 Total 1,065,468 58, , ,789 8,838 6,521 54,535 1,659,789 = = NOTE 8. PENSION PLAN Plan DescriQtion The City of Odessa, Missouri, contributes to the Missouri Local Government Employees Retirement System (LAG ERS). LAG ERS is an agent multi-employer, statewide public employee retirement plan for units of local government which is legally separate and fiscally independent of the state of Missouri. LAG ERS was esta blished in 1967 and is administered in accordance with RSMo LAGERS serves 695 local participating employers. These participating employers include 302 cities, 60 counties, and 333 other public entities during the plan year ended June 30, Responsibility for the operation and administration of the plan is vested in the LAGERS Board of Trustees consisting of seven persons. Three trustees are elected by the employees who participate in the system, three trustees are elected by the members of the governing bodies of those political subdivisions which participate in the system, and one trustee is appointed by the governor. The regular term of office for mem bers of the LAG ERS Board of 48

52 NOTES TO THE FINANCIAL STATEMENTS NOTE 8. PENSION PLAN (Continued) Trustees is four years. Members of the LAG ERS Board of Trustees serve without compensation with respect to their duties, but are reimbursed by LAG ERS for their actual and necessary expenses incurred in the performance of their duties. For the City's eighteen month period ending March 31, 2018, the net pension asset is based on an actuarial valuation performed as of February 28, 2017, and a measurement date of June 30, Benefits Provided LAG ERS provides retirement, death, and disability benefits to employees of participating political subd ivisions. All benefits vests after 5 years of service. Employees who retire on or after age 60 (55 for police) with 5 or more years of service are entitled to an allowance for life based upon the benefit program then in effect for their political subd ivision. Employees may retire with an early retirement benefit with a minimum of 5 years of credited service and after attaining age 55 (50 for pol ice) and receive a reduced allowance. The LAG ERS Board of Trustees esta blishes the benefit plans and provisions that are available for adoption. The political subdivision's governing body adopts all benefits of the plan. Benefit terms provide for annual post retirement adjustments to each member's retirement allowance subsequent to the member's retirement date. The annual adjustment is based on the increase in the Consumer Price Index and is limited to 4% per year. Contributions Each participating unit of government is obligated by state law to make all required contributions to the plan. The required contributions are actuarially determi ned using the individual entry-age actuarial cost method. There are no long-term contracts for contributions to the plan. All actuarial liabilities are amortized over a period of 30 years or less. Ad ministrative costs of LAG ERS are financed through investment earni ngs of the system. Employee contributions are determined at the election of the governing body of the local government. Should the governing body elect to participate in the contributory plan, all employees must contribute four percent of gross salary. The governing body may elect to participate in the non-contributory plan which would result in no employee contributions. Actuarial Assumptions The pension liability for the June 30, 2017, measurement date was determined using the following actuarial assumptions applied to the measurement: Actuarial Cost Method Amortization Method Entry Age Normal and Mod ified Terminal Funding A level percentage of payroll amortization method is used to amortize the UAAL over a closed period of years. If the UAAL (excluding the UAAL associated with benefit changes) is negative, then this amount is amortized over the greater of (i) the remaining initial amortization period of (ii) 15 years. 49

53 NOTES TO FINANCIAL STATEMENTS NOTE 8. PENSION PLAN (Continued) Actuarial Assumptions (Continued) Remaining Amortization Period Asset Valuation Method Inflation Salary Increases Investment Rate of Return Retirement Age Morta l ity 15 years 5-Year smoothed market; 20% corridor 3.25% wage inflation; 2.50% price inflation 3.25% to 6.55% including wage inflation 7.25%, net of investment expenses Experience-based ta ble of rates that are specific to the type of eligibility condition The hea lthy retiree morta l ity ta bles, for post-retirement mortal ity, were the RP-2014 Hea lthy Annuitant mortality ta ble for males and females. The disabled retiree mortality tables, for post-retirement morta lity, were the RP-2014 disabled morta l ity table for males and females. The pre-retirement mortality tables used were the RP-2014 employees morta l ity table for males and females. Both the post-retirement and pre-retirement tables were adjusted for mortal ity improvement back to the observation period base year of The base year for males was then esta blished to be Mortality rates for a particula r calendar year are determined by applying the MP-2015 morta l ity improvement scale to the above described ta bles. Other information None Discount Rate Projected benefit payments are required to be discounted to their actuarial present values using a single discount rate that reflects (1) a long-term expected rate of return on pension plan investments and (2) tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating as of the measurement date (to the extent that the plan's proj ected fiduciary net position is not sufficient to pay benefits). The expected rate of return on pension investments is 7.25%, the municipal bond rate is 3.56% (based on the weekly rate closest to but not later than the measurement date of the 20-Year Municipal GO AA Index from Fidelity). The resulting single discount rate is 7.25 for both the General and Police Divisions. 50

54 NOTES TO FINANCIAL STATEMENTS NOTE 8. PENSION PLAN (Continued) Discount Rate (Continued) This rate considers the ability of the plan to meet benefit obligations in the future. To make th is determination, employer contributions, employee contributions, benefit payments, expenses, and investment returns are projected into the future. The Plan Net Position (assets) in future years ca n then be determined and compared to its obligation to make benefit payments in those years. As long as assets are projected to be on hand in a future year, the assumed valuation discount rate is used. In years where assets are not projected to be sufficient to meet benefit payments, the use of a "risk-free" rate is required, as described in the preceding paragraph. LAG ERS has provided ta bles to the City that provide background for the development of the single discount rate. These ta bles are described as follows: The Projection of Contributions ta ble shows the development of expected contributions in future years. Normal Cost contributions for future hires are not included (nor are their liabilities). The Projection of Plan Fiduciary Net Position ta ble shows the development of expected asset levels in future years. The Present Values of Projected Benefit Payments table shows the development of the Single Discount Rate (SDR). It breaks down the benefit payments into present val ues for funded and unfunded portions and shows the equivalent tota l at the SDR. Assumed Asset Allocation Activities undertaken by LAG ERS Investment Team include setti ng and implementing investment strategies; appointing and dismissing investment managers; monitoring investment allocation, liquidity, and performance; and ensuring safekeeping of assets. To achieve the goal of 7.25% long-term rate of retu rn, LAG ERS investment Team sets an investment strategy which is devised after analyzing the long-term view of the market and consulting with LAG ERS' Board of Trustees. The assumed asset allocation is as follows: Equ ities Fixed Income Real Assets/Return Strategic 45.80% 23.38% 20.98% 9.84% 51

55 NOTES TO THE FINANCIAL STATEMENTS NOTE 8. PENSION PLAN (Continued) Pension Liability Sensitivity The following ta ble presents the net pension asset (liability) for the City's proportionate share of the net pension asset (liability) as of June 30, 2017, calculated using the discount rate of 7.25% for the General and Police Divisions, as well as what the pension plan's net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: 1.00% Current 1.00% Decrease Rate Increase 6.25% 7.25% 8.25% General Division (137,318) 672,956 1,338,940 Police Division 122, , ,255 Deferred Outflows and Inflows of Resou rces (14,892) 1,025,616 1,873,195 The balances of deferred outflows and inflows of resources to be recognized in future pension expense consists of the following: Deferred Outflows of Resources Net difference between proj ects and actual earni ngs on pension plan investments Changes in assumptions Employer contributions subsequent to the measurement date 187, ,932 84, ,102 Deferred Inflows of Resources Differences between expected and actual experience 530,547 Changes in Net Pension Liability (Asset) Total Pension Liability (Asset) Service cost Interest on tota l pension liability Difference between expected and actual experience of the total pension liability 137, ,968 (399,644) 52

56 NOTES TO TH E FINANCIAL STATEMENTS NOTE 8. PENSION PLAN (Continued) Changes in Net Pension Liability (Asset) (Continued) Benefit payments, includ ing refunds of employee contributions Net change in total pension liability Tota l pension liability - beginning Tota l pension liability - ending Plan Fiduciary Net Position Contributions - employer Net investment income Benefit payments, including refunds of employee contributions Pension plan administrative expense Other Net change in fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending Net Pension Liability (Asset) (405,756) (146,391) 7,331,570 7,185, , ,246 (405,756) (7,079) (155,650) 500,622 7,710,173 8,210,795 (1,025,616) Pension Plan Fiduciary Net Position Additional financial and actuarial information supporting the preparation of the schedule of changes in fiduciary net position is included in the System's Comprehensive Annual Financial Report for the year ended June 30, The Comprehensive Annual Financial Report can be obta ined at or from Missouri Loca l Area Government Employee Retirement System (LAG ERS), PO Box 1665, Jefferson City, MO NOTE 9. COMMITMENTS AND CONTINGENCIES Lega l Matters The City is, or may be, a party in various litigation and claims as a result of law enforcement activities, zoning decisions, injuries, and va rious other matters arising in the ord i nary course of its activities. The City's management and legal counsel anticipate the potential claims against the City, if any, which are not covered by insurance, resulting from such matters would not materially affect the financial position of the City. Construction Comm itments Capital projects can extend over several years. The City has made commitments for completion of projects in progress as of March 31, 2018, for approximately $256,000. These commitments are related to repairing/replacing City facilities after it was struck by a tornado. 53

57 NOTES TO THE FINANCIAL STATEMENTS NOTE 9. COMMITM ENTS AND CONTI NGENCIES (Continued) Energy Purchase Agreement The City is a member of the Missouri Joint Municipal Electric Util ity Commission (MJMEUC). MJM EUC manages a power pool known as Missouri Public Energy Pool No. 1 (MOPEP). The City is also a member of MOPEP. The MOPEP members have an agreement with MJMEUC for the purchase of electric capacity and energy. The agreement requires MJMEUC to supply the full energy requirements of the City and includes a procedure for the City to dedicate its capacity to MOPEP. MOPEP operations are governed by a Pool Committee consisting of one rep resentative from each MOPEP member and is currently comprised of 60 members. The Pool Committee is charged with setting rates for all services provided by MJMEUC to MOPEP members. The rates include recovery of all of MJMEUC's costs incurred in connection with acquiring, providing, arrangi ng, or financing the provision of fu ll requirements service to MOPEP members. Such rates are based upon an annual budget and include, but are not limited to, all payments MJMEUC is required to make for reserves for coverage MJM EUC is required to maintain pursuant to any bond indentu re, financing lease, or loan agreement or other financial contract in order to procure, deliver, or finance resources intended to provide full requirement service, without regard to whether any particular resource is available to or used by any particular MOPEP member. Costs also include amounts required to fund MOPEP capital and/or operating reserves as may be established from time to time by the Pool Committee. The rates are established so as to charge each MOPEP member its proportionate share of all costs associated with MJM EUC's performance under the MOPEP agreement. Charges based on such rates are assessed and billed monthly. Rates are required to be established at least annually and are adjusted to recognize variances between budgeted and actual costs at least every six months. To meet the power and energy requirements of the City and the other MOPEP members, MJMEUC presently obtains power and energy from the following resources: (i) power purchased under long-term fi rm energy contracts, unit contingent energy contracts, and interruptible contracts; (ii) MJM EUC owned generation; (iii) member capacity; and (iv) spot market purchases. The City purchases its fu ll energy requirements from MJM EUC pursuant to the MOPEP agreement, but does not have any ownership interest in MJMEUC's resources. In the event a member would cancel their MOPEP agreement, the member would remain responsible for its allocated share of MJMEUC's costs associated with all resource obligations entered into by MJMEUC for MOPEP prior to the notice of cancellation. MJMEUC would utilize or sell the member's allocated share of output in exchange for providing the member a credit or offset equal to the fa ir market va lue of the output up to the amount of the member's obligation. As a result, a member would have a financial obligation after cancellation in the event that the fa ir market va lue of the output is less than the member's allocated share of MJM EUC's costs. Currently the City has no plans or intentions to begin cancellation proceedings. The City incurred costs of $5,256,290 from MJMEUC during the eighteen month period and owed MJMEUC $297,145 as of March 31,

58 NOTES TO THE FINANCIAL STATEMENTS NOTE 10. COM PLIANCE WITH MISSOURI STATUTES Missouri House Bill No. 103 amending RSMo Section beca me effective on August 28, The amendments to the statute now require municipalities to report an accounting of the percent of annual general operating revenue from fines and costs for traffic violations. Fines and costs for traffic violations Annual general operating revenue Fines and costs for traffic violations as a percentage of annual general operating revenue 39,918 3,895, % NOTE 11. RISK MANAG EMENT In its normal course of business, the City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; workers' compensation; and natura l disasters for which the City carries commercial insurance. There have been no significant reductions in insurance coverage from the prior year and no significant losses in the past three years. NOTE 12. RESTATEMENT Beginning fund balances in the Capital Improvement Fund have been restated to include an adjustment for reta inage payable as follows: Prior year balance Retainage payable adjustment Restated balance (361, 199 ) 43,368 ( ) NOTE 13. TORNADO DAMAG E On March 6, 2017, the City was struck by a tornado that caused sign ificant damage to City-owned buildings, vehicles, and other properties. Included in the financial statements for the eighteen month audit period ending March 31, 2018, are operating expenses for repairs and insurance recoveries for the loss of capital assets. NOTE 14. OPERATING LEASES The City has entered into va rious operating leases considered for accounting purposes to be an operating lease. 55

59 NOTES TO THE FINANCIAL STATEMENTS NOTE 14. OPERATI NG LEASES (Continued) In May 2017, the City entered into an operating lease with Caterpillar Financial Services Corporation for a Util ity Compactor Roller and an Asphalt Paver. Under the terms of these lease agreements, ten semi-annual payments of $5,553 and $18, 7 43, respectively, are due. There are purchase options available to the City for both pieces of equipment, but at the time of audit, they do not plan to exercise that option. Expenditures under this lease agreement for the eighteen month period ending March 31, 2018, totaled $47,959. Futu re minimum lease payments for the Util ity Compactor Roll and Asphalt Paver are as follows: For the Year Ending Total 47, , , ,959 Tota l 191,836 NOTE 15. SUBSEQUENT EVENTS In prepari ng the financial statements, the City has evaluated events and transactions for potential recognition or disclosure through September 5, 2018, the date the financial statements were available to be issued. 56

60 REQUIRED SUPPLEMENTARY INFORMATION

61 BUDG ETARY COMPARISON SCHEDULE GEN ERAL FUND EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Variance Original Final Positive Budget Budget Actual (Negative) REVENUES Taxes 1,623,604 2,520,314 1,764,836 (755,478) Charges for services 1,008,070 1,484,084 1,431,108 (52,976) Licenses, permits, and fees 80, , ,551 15,121 Fines and forfeitures 52,000 75,650 70,516 (5,134) Intergovernmental revenues 20,000 20, , ,176 Interest 9,784 9,784 Sale of assets 10,000 10,000 7,410 (2,590) Other 58,891 58,891 Total revenues 2,794, 174 4,219,478 3,847,272 (372,206) EXPENDITURES General Government 491, , ,764 10,463 Public Safety 1,817,717 2,713,506 2,621,686 91,820 Highways and Streets 422, , ,038 39,062 Sanitation 260, , ,756 2,994 Community Planning and Development 101, , ,789 38,322 Parks and Recreation 13,447 37,045 17,929 19,116 Total expenditures 3,106,675 4,740,739 4,538, ,777 DEFICIENCY OF REVENUES UNDER EXPENDITURES (312,501) (521,261) (691,690) (170,429) OTHER FINANCING SOURCES (USES) Insurance recoveries 89,494 67,501 (21,993) Insurance reimbursements 89,494 88,083 (1,411) Transfers in 375, ,305 1,065, ,163 Transfers out (62,500) (93,750) (90,000) 3,750 Tota l other financing sources (uses) 312, ,555 1,131, ,913 CHANGE IN FUND BALANCE (1) 126, , ,484 FUND BALANCE, beginning of year 1,121,000 FUND BALANCE, end of year 1,560,362 See accompa nying notes to required supplementary information. 57

62 BUDGETARY COMPARISON SCHEDULE PARK FUND EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Variance Original Final Positive Budget Budget Actual (Negative) REVENUES Taxes 321, ,175 Charges for services 160, ,320 Interest 1,500 Sale of assets Other 2,000 2,596 Total revenues 485, , ,552 51, ,759 2,439 1,396 1,396 1,473 1,473 5,678 3, ,858 59,767 EXPENDITURES Parks and Recreation 356, ,593 Debt service Principal 108, ,000 Interest and fiscal costs 69, ,887 Total expenditures 533, , ,958 (43,365) 162, ,459 (572) 778,417 (43,937) EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (48,582) (22,389) (6,559) 15,830 OTHER FINANCING SOURCES Transfers in 48,582 48,582 58,582 10,000 CHANGE IN FUND BALANCE 26,193 52,023 25,830 FUND BALANCE, beginning of year 23,007 FUND BALANCE, end of year 75,030 See accompanying notes to required supplementary information. 58

63 BUDG ETARY COMPARISON SCHEDULE TRANSPO RTATION SALES TAX FUND EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Original Budget Final Budget REVENUES Taxes 245, ,500 Interest Total revenues 245, ,500 Actual Variance Positive (Negative) 412,007 44, ,058 44,558 EXPENDITURES General Government Ca pital outlay 206, ,223 Total expenditures 207, , ,683 86, ,074 86,949 EXCESS OF REVENUES OVER EXPENDITURES 37, , , ,507 OTHER FINANCING USES Transfers out (37,977) (67,116) (67,116) CHANGE IN FUND BALANCE 93, , ,507 FUND BALANCE, beginning of year 117,957 FUND BALANCE, end of year 342,825 See accompanying notes to required supplementary information. 59

64 BUDG ETARY COMPARISON SCHEDULE CAPITAL IMPROVEMENT FUND EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Original Budget Final Budget REVENUES Taxes 245, ,587 Federal grants 150, ,000 Interest Tota l revenues 395, ,211 Actual Va riance Positive (Negative) 412,008 44, , ,000 3,324 2, , ,121 EXPENDITURES General Government 10,485 37,754 Capital outlay 292, ,320 Debt service Principal 21,802 21,802 Interest Tota l expenditures 325, ,293 12,758 24, , , ,036 26,257 EXCESS OF REVENUES OVER EXPENDITURES 70,221 98, , ,378 OTHER FINANCING SOURCES (USES) Debt proceeds 266,789 Debt issuance costs (18,000) Transfers in Transfers out (70,221) (119,745) Total other financing sources (uses) (70,221) 129,044 (266,789) 266,789 (170,416) (50,671) 96,373 (317,460) CHANGE IN FUND BALANCE 227, , ,707 FUND BALANCE (DEFICIT), beginning of year (317,831) FUND BALANCE, end of year 50,838 See accompanying notes to required supplementary information. 60

65 BUDGETARY COMPARISON SCHEDULE DEBT SERVICE FUND EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Original Budget Final Budget REVENUES Special assessments 144, ,691 Interest Total revenues 144, ,991 Actual Variance Positive (Negative) 290,691 1, , EXPENDITURES General Government 113, ,096 Debt service Principal 144, ,596 Interest Tota l expenditures 258, , ,410 (68,314) 255,000 28,596 28,596 (27,855) 577,006 (67,573) DEFICIENCY OF REVENUES UNDER EXPENDITURES (113,278) (218,442) (285,033) (66,591) OTHER FINANCING SOURCES (USES) Transfers in 113, , ,056 (27,500) CHANGE IN FUND BALANCE 8,114 (85,977) (94,091) FUND BALANCE, beginning of year 118,695 FUND BALANCE, end of year 32,718 See accompanying notes to required supplementary information. 61

66 OTHER SUPPLEMENTARY INFORMATION

67 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 NOTE 1. BUDGETARY INFORMATION Budgets for the City are prepa red and adopted on the same basis of accounting as reported in the fund financial statements. The City performs the following procedu res in establishing the budget: The Budget Committee submits to the City Council a proposed budget for the fiscal year commencing the fo llowing. The budget is legally enacted through the passage of an ordinance. Any revisions that alter the tota l expenditures of any fund must be approved by the City Council. The fund level constitutes the City's lega l level of budgetary control. Reported budgeted amounts are as originally adopted and amended by resolution. Appropriations lapse at fiscal year end but may be reappropriated in the following fiscal yea r. NOTE 2. EXCESS OF EXPENDITURES OVER APPROPRIATIONS For the eighteen month period ended March 31, 2018, expenditures exceeded appropriations in the Park Fund by $43,937, the Capital Improvement Fund by $6,414, and the Debt Service Fund by $67,573. These over expenditures were funded through the use of additional revenues, transfers, available fu nd ba lance, and interfund adva nces. The expenditures for all other funds were within budgeted appropriations. 62

68 SCHEDULE OF EMPLOYER'S CONTRIBUTIONS FOR THE EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Fiscal Year Ending June 30, Actuarially Contribution Determined Contribution Deficiency Covered Contribution in Relation (Excess) Employee (a) (b) (a-b) Payroll (d) Contributions as a Percentage of Covered Employee Payroll (b/d) ,917 84, ,794 1,448, , ,852 3,917 1,593, , ,282 1,977 1,693, , ,012 1,698, , ,784 1,550, , ,748 20,893 1,655, , ,716 10,128 1,678, , ,790 1,674, , ,186 1,816, , ,154 1,573, , ,823 1,753, , ,405 1,351, % 6.39% 6.22% 6.30% 7.27% 8.26% 9.27% 10.20% 9.81% 9.10% 8.89% 7.50% 63

69 SCHEDULE OF CHANGES IN NET PENSION LIABILITY EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 September 30, September 30, March 31, 2018 Net pension liability (asset) - beginning (1,167,520) (898,631) (378,602) Service Cost 151, ,271 Interest on tota l pension liability 494, ,095 Difference between expected and actual experience of the total pension liability (252,484) (214,374) Changes in assumptions 250,856 Contributions - employer (151,769) (147,843) Net investment (income) loss (150,132) 14,401 Pension plan administrative expense 7,829 7,233 Other 169,420 (34,610) 137, ,968 (399,644) (113,861) (955,246) 7, ,649 Net pension liability (asset) - ending (898,631) (378,602) (1,025,616) * Schedule is to be provided prospectively beginning with the fiscal year ending September 30,

70 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 Federal Granter/Pass-Through Grantor/ Pass-Through Entity CFDA Program Title Identifying Number Number Expenditu res U.S. Environmenta l Protection Agency Passed through the Missouri Depa rtment of Natural Resources Capitalization Gra nts for Clean Water - State Revolving Funds C ,434 U.S. Department of Housing and Urban Development Passed through the Missouri Depa rtment of Economic Development Community Development Block Grants/ States' Program and Non-Entitlement Grants in Hawaii 2014-PF , , ,000 TOTAL EXPENDITURES OF FEDERAL AWARDS 1,338,434 65

71 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 NOTE 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awa rds includes the federal grant activity of the City of Odessa, Missouri. The information in this sched ule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Pa rt 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the sched ule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the City. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The schedule of expenditures of federal awards is presented on the accrual basis of accounting. NOTE 3. INDIRECT COST RATE The City did not elect to use the de minimis cost rate. NOTE 4. SUBRECIPENTS The City of Odessa, Missouri, provided no federal awards to subrecipients. 66

72 DANA F. COLE & COMPANYLLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUD ITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COM PLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFO RMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the Board of Aldermen City of Odessa, Missouri We have aud ited, in accordance with the auditing standards generally accepted in the United States of America and the sta ndards applicable to fi nancial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmenta l activities, the business-type activities, and each major fund of the City of Odessa, Missouri, as of and for the eighteen month period ended March 31, 2018, and the related notes to the financial statements, which collectively comprise the City of Odessa, Missouri's basic financial statements, and have issued our report thereon dated September 5, Internal Control Over Financial Reporting In planning and performing our audit of the fi nancial statements, we considered the City of Odessa, Missouri'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 Odessa, Missouri's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Odessa, Missouri'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 combi nation of deficiencies, in internal control that is less severe than a material weakness, yet importa nt 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 that might be material weaknesses or sign ificant deficiencies, and therefore, material weaknesses or sign ificant deficiencies may exist that were not identified. 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. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs, that we consider to be sign ificant deficiencies as items and

73 Compliance and Other Matters As part of obtaining reasonable assura nce about whether the City of Odessa, Missouri's financial statements are free from material misstatement, we performed tests of its complia nce with certa in provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of 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 one instance of noncompliance or other matters that is required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and responses as item City of Odessa, Missouri's Response to Findings The City of Odessa, Missouri's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The City of Odessa, Missouri's responses were not subjected to the auditing procedures applied in the audit of the financial statements, and accord ingly, we express no opinion on them. 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 entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Overland Park, Kansas September 5,

74 DANA F. COLE & COMPANYLLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT ON COM PLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Mayor and Members of the Board of Aldermen City of Odessa, Missouri Report on Complia ce for Each Major Federal Program We have audited City of Odessa, Missouri'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 Odessa, Missouri's major federal programs for the eighteen month period ended March 31, The City of Odessa, Missouri's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of fi ndings and questioned costs. Management's Responsibility Management is responsible for complia nce with the federal statutes, regulations, and the terms and conditions of its federal awa rds applicable to its federa l programs. Auditors ' Responsibility Our responsibility is to express an opinion on compliance for each of City of Odessa, Missouri's major federal programs based on our audit of the types of complia nce requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America ; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR} 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 noncomplia nce with the types of complia nce 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 Odessa, Missouri'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 Odessa, Missouri's compliance. Opinion on Each Major Federal Program In our opinion, the City of Odessa, Missouri, compl ied, in all material respects, with the types of complia nce requirements referred to above that could have a direct and material effect on each of its major federal programs for the eighteen month period ended March 31,

75 Other Matters The resu lts of our auditing procedures disclosed no instances of noncompliance which are required to be reported in accordance with the Uniform Guidance. Our opinion on each major federal program is not modified with respect to these matters. Report on Internal Control Over Compliance Management of City of Odessa, Missouri, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of complia nce, we considered the City of Odessa, Missouri's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumsta nces for the purpose of expressing an opinion on compliance for each major federa l 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 complia nce. Accordingly, we do not express an opinion on the effectiveness of the City of Odessa, Missouri's internal control over complia nce. A deficiency in internal control over compliance exists when the design or operation of a control over compl iance does not allow management or employees, in the normal course of performing their assigned fu nctions, 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 combi nation of deficiencies, in internal control over complia nce, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federa l 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 compl iance 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 compl iance was for the limited purpose described in the first paragraph of th is section and was not designed to identify all deficiencies in internal control over complia nce 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 suita ble for any other purpose. Overland Park, Kansas September 5,

76 SCHEDULE OF FINDI NGS AND QUESTIONED COSTS EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 SECTION I. SUMMARY OF AUDITORS' RESULTS Financial Statements Type of auditors' report issued: Unmodified Internal control over fi nancial reporting: Material weakness identified: Significant deficiencies identified that are not considered to be material weaknesses: Noncompliance matter to the financial statements disclosed: _Yes -X_No Yes _None reported Yes _No Federal Awards Internal control over major programs: Material weakness identified: Significant deficiencies identified that are not considered to be material weaknesses: Type of auditors' report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with 2 CFR Section (a): _Yes -X_No _Yes _X _None reported Unmodified _Yes _X_No Identification of major programs: Ca pitalization Gra nts for Clean Water State Revolving Funds Program Dollar threshold used to distinguish between type A and type B programs: Auditee qualified as a low-risk auditee: $750,000 _Yes _X_No 71

77 SCHEDULE OF FINDINGS AND QUESTIONED COSTS EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 SECTION II. FINANCIAL STATEMENT FINDINGS SEGREGATION OF DUTIES Criteria The City has a lack of segregation of duties related to certa in financial transactions. Condition and Context The concept of segregation of duties is such that the authorization and recording of transactions, and access to the related assets is not the responsibility of the same individual. The City has a limited number of employees to fully segregate duties. Potential Effect A lack of segregation of duties increases the risk of loss or errors in recording transactions, safeguarding assets, and financial statement reporting. Recommendation Although the small size of the City's accounting and other staff limits the full extent of segregation of duties, we believe certa in additional procedures and reviews could be implemented to reduce the effect of incompatible duties. Views of Responsible Officials The City concurs with the recommendations that the City of Odessa, Missouri, would be best served by segregating fiscal duties as outlined above. At the current time, the additional staff required to implement the recommendation is not practical in order to allow us to fully implement the recommendation. The City's Board of Aldermen and management will remain actively involved in the financial affairs of the City to provide oversight and independent review fu nctions. 72

78 SCHEDULE OF FINDINGS AND QUESTIONED COSTS EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 SECTION II. FINANCIAL STATEMENT FINDINGS (Continued) RELIANCE UPON THE AUDITOR Criteria As described in our engagement letter, management is responsible for esta blishing and maintaining internal controls, including monitoring, and for the fa ir presentation of financial statements, in conformity with accounting principles generally accepted in the United States of America. Condition and Context Management should possess the ability to record necessary adjustments and to prepare financial statements and related note disclosures in accordance with accounting principles generally accepted in the United States of America without the assista nce from the auditors. During our audit, the auditors prepared a draft of the financial statements and note disclosures from a trial balance containing necessary adjustments to properly present the City's financial records. Change in personnel within the City determined the need for the auditors to draft the year-end financial statements, including the note disclosures and supplementary information. Potential Effect The potential exists that a material misstatement of the financial statements could occur and not be prevented or detected by the City's internal control. Recommendation We recommend that the City review and approve the proposed auditor adjusting entries, the adequacy of the financial statement disclosures and apply ana lytical procedu res and other procedures determined necessary in reviewing the draft of the financial statements. Views of Responsible Officials The City relies on the auditors to propose adjustments necessary to prepare the financial statements including the related note disclosures. The City reviews such fi nancial statements and related disclosures and approves all adjustments. 73

79 SCHEDULE OF FINDINGS AND QUESTIONED COSTS EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 SECTION II. FINANCIAL STATEMENT FINDINGS (Continued) BUDGETARY CONTROLS Criteria As reported in the Notes to Required Supplementary Information, the City's actual expenditures exceeded budgeted expenditures in the Pa rk and Debt Service funds for the eighteen month period ending March 31, Over expenditures were approved by the board prior to payment but the budget was not amended to include them prior to the end of the audit period. Condition and Context In Section , RSMo, the statutes detail that no disbursement of public monies should be made unless it is authorized within the budget. Section , RSMo, allows for budget increases if the governing body adopts a resolution detailing the facts and circumstances for the budget amendment. The City did not adequately monitor actual disbursements compared to budgeted disbursements to ensure they do not exceed budgeted appropriations in accordance with RSMo's. Nor did they prepare a necessary budget amendment prior to the end of the eighteen month audit period. Potential Effect The potential effect is the City will be noncompliant with state statutes and overspending could allow for a fund to result in a deficit balance. Recommendation We recommend that the City implement procedu res to adequately monitor budget to actual expenditures to ensure disbursements do not exceed budgeted funds. We also recommend that the City's procedures incorporate steps to prepare and approve budget amendments in accordance with state statutes. Views of Responsible Officials The budgetary overage results from a lack of City specific knowledge and turnover within City Management within the 18 month audit period. We have implemented proced ures to ensure actual expenditures are within budgeted appropriations in the future. 74

80 SCHEDULE OF FINDINGS AND QUESTIONED COSTS EIGHTEEN MONTH PERIOD ENDED MARCH 31, 2018 SECTION Ill. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None reported. 75

81 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS EIGHTEEN MONTH PERIOD ENDED MARCH 31, SEGREGATION OF DUTIES The City has a limited number of personnel involved in the accounting function, th us limiting its internal control procedures in relation to certain financial transactions. This is a continued finding as noted in item RELIANCE UPON THE AUDITOR Management should possess the ability to prepare fi nancial statements in accordance with accounting pri nciples genera lly accepted in the United States of America without assistance from the auditors. The preparation of financial statements under this basis of accounting would require that management possess the ability to properly record and classify transactions in a general ledger and prepare the financial statements and related disclosures without assista nce from the aud itors. This is a continued finding as noted in item

82 City IJ.l. "_.r ;v1/ V/. Otiessa :Missouri P.O. Box S. Second Odessa, MO Phone: (816) Fax. (816) cityofodessamo com CORRECTIVE ACTION PLAN September 5, 2018 The City of Odessa, Missouri, respectively submits the following corrective action plan for the eighteen month period endee:t March 31, 2018, for the findings identified by Dana F. Cole & Cqrnpany, LLP, Overland Park, Kansas. FINANCIAL STATEMENT FINDINGS SEGREGATION OF DUTIES Recommendation: Although the small size of the City's accounting and other staff limits the full extended of segregation of duties, we believe certain additiona procedures and reviews could be implemented to reduce the effect of incompatible duties. Action Ta ken: As the additional staff required to fully implementthe auditor's recommendation is not practical at the current time, the City's Board of Alderman and management will remain actively involved in the financial affa irs of the City to provide oversight and independent review functions RELIANCE UPON THE AUDITOR Recommendation: We recommend that the City review and approve the proposed auditor adjusting entries, the adequacy of the financial statement disclosures, and apply analytical procedures and other procedures determined necessary in reviewing the draft of the financial statements. Action Ta ken: City Management will work with the auditors as a part of financial statement preparation. The City also will continue to review the financial statements and related disclosures as well as approving all adjustments proposed BUDGETARY CONTROLS Recommendation: We recommend the City implement procedures to adequately monitor budget to actual expenditures to ensure disbursements do not exceed budgeted funds. We also recommend that the City's procedures. incorporate steps to prepare and approve budget amendments in accordance with state statutes. Action Taken: The City has implemented procedures to ensure actual expenditures are within budgeted appropriations in the future. If there are any questions regarding this plan, please contact Dawn Jennings at Re ectively, I " {fa; '; /-\"'e,0 Dawn Jennings-""' City Finance Director 77