We encountered no difficulties in dealing with management in performing and completing our audit.

Transcription

1 January 23, 2017 To the Honorable Mayor and Members of the City Council City of Shavano Park, Texas We have audited the financial statements of the City of Shavano Park, Texas for the year ended September 30, Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information to you in our engagement letter dated September 30, Professional standards also require that we communicate to you the following information related to our audit. Qualitative Aspects of Accounting Practices Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of Shavano Park, Texas are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements include the net pension liability, accumulated depreciation, depreciation expense, and the related estimated useful lives of capital assets and the allowances for doubtful accounts. We evaluated the key factors and assumptions used to develop these estimates in determining they are reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements Saint James Place, Suite 100, Houston, Texas Main Fax NW Loop 410, Suite 725, San Antonio, Texas Main Fax 1

2 Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated January 23, Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the City s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Issues and Comments We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Compliance with Public Funds Investment Act The Public Funds Investment Act (the Act) requires that we include, as part of our audit, procedures to determine if the City complied with the provisions of the Act. We found, as a result of our review, that the City, was in compliance with the requirements of the Act for the fiscal year ended September 30, Comments and Recommendations Regarding Internal Controls and Operations Adjustments and Write-offs During our audit of the billing and collection process over court, permits, and EMS, we noted employees who have the ability to collect payments also have the ability to adjust or write-off accounts within the system. The combination of these duties by one employee reduces the City s control over processing and receiving cash receipts. We recommend the City implement oversight procedures over adjustments and write-offs to account balances in the billing systems. The process should include obtaining a listing of accounts adjusted or written off for the period under review that is obtained independent of the employee making the adjustments. Adjustments and write-offs should be verified by proper authorization. This information is intended solely for the use of the City Council and management of the City of Shavano Park, Texas and is not intended to be and should not be used by anyone other than these specified parties. Certified Public Accountants San Antonio, Texas 2

3 ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016

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5 ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2016 C O N T E N T S PAGE NUMBER INDEPENDENT AUDITOR S REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS 5 GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET POSITION 6 STATEMENT OF ACTIVITIES 7 FUND FINANCIAL STATEMENTS BALANCE SHEET GOVERNMENTAL FUNDS 8 RECONCILIATION OF BALANCE SHEET GOVERNMENTAL FUNDS TO STATEMENT OF NET POSITION 9 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 10 RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIES 11 STATEMENT OF NET POSITION WATER FUND 12 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION WATER FUND 13 STATEMENT OF CASH FLOWS WATER FUND 14 STATEMENT OF NET POSITION FIDUCIARY FUNDS 15 NOTES TO FINANCIAL STATEMENTS 16 REQUIRED SUPPLEMENTARY INFORMATION STATEMENT OF REVENUES AND EXPENDITURES BUDGET AND ACTUAL GENERAL FUND MAJOR GOVERNMENTAL FUNDS 38 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS 40 SCHEDULE OF CONTRIBUTIONS 41 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION 42 OTHER SUPPLEMENTARY INFORMATION COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS 45 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS 47 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES CAPITAL REPLACEMENT FUND GOVERNMENTAL FUNDS 49

6 ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2016 C O N T E N T S PAGE NUMBER OTHER SUPPLEMENTARY INFORMATION (CONTINUED) STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES PEG FUND NONMAJOR GOVERNMENTAL FUNDS 50 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OAK WILT FUND NONMAJOR GOVERNMENTAL FUNDS 51 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES STREET MAINTENANCE FUND NONMAJOR GOVERNMENTAL FUNDS 52 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES CHILD SAFETY FUND NONMAJOR GOVERNMENTAL FUNDS 53 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES COURT RESTRICTED FUND NONMAJOR GOVERNMENTAL FUNDS 54 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES LEOSE FUND NONMAJOR GOVERNMENTAL FUNDS 55 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES POLICE FORFEITURE FUND NONMAJOR GOVERNMENTAL FUNDS 56 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES CRIME CONTROL DISTRICT NONMAJOR GOVERNMENTAL FUNDS 57 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES DEBT SERVICE FUND NONMAJOR GOVERNMENTAL FUNDS 58 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES WATER FUND NONMAJOR GOVERNMENTAL FUNDS 59

7 Independent Auditor s Report The Honorable Mayor and Members of the City Council City of Shavano Park, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Shavano Park, Texas, as of and for the year ended September 30, 2016, and 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 fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements Saint James Place, Suite 100, Houston, Texas Main Fax NW Loop 410, Suite 725, San Antonio, Texas Main Fax 1

8 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Shavano Park, Texas, as of September 30, 2016 and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information, and schedule of changes in net pension liability and related ratios, and schedule of contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Shavano Park, Texas s basic financial statements. The combining nonmajor fund financial statements is presented for purposes of additional analysis and is not a required part of the basic financial statements. 2

9 The combining nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Certified Public Accountants San Antonio, Texas January 23,

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11 City of Shavano Park, Texas Management s Discussion and Analysis (MD & A) Fiscal Year Ended September 30, 2016 Management s discussion and analysis of the City of Shavano Park s financial performance provides an overview of the City s financial activities for the year ended September 30, USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The statement of net position and the statement of activities (on pages 6 and 7) provide information about the activities of the City as a whole and present a longer-term view of the City s finances. Fund financial statements start on page 8. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City s operations in more detail than the governmentwide statements by providing information about the City s most significant funds. REPORTING THE CITY AS A WHOLE The Statement of Net Position and the Statement of Activities Management s analysis of the City as a whole begins on page 5A. One of the most important questions asked about the City s finances is, Is the City as a whole better off or worse off as a result of the year s activities? The statement of net position and the statement of activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City s net position and changes in them. You can think of the City s net position the difference between assets and liabilities as one way to measure the City s financial health, or financial position. Over time, increases or decreases in the City s net position are one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the City s property tax base and the condition of the City s roads, to assess the overall health of the City. In the statement of net position and the statement of activities, we divide the City into two kinds of activities: Governmental Activities Most of the City s basic services are reported here, including the police, fire, general administration, court, public works and development services. Ad valorem and sales taxes, franchise fees, fines, and building permit fees finance most of these activities. Business-Type Activities The City charges a fee to customers to cover all of the cost of certain services it provides. The City s water system is reported here. 5

12 REPORTING THE CITY S MOST SIGNIFICANT FUNDS Fund Financial Statements Our analysis of the City s major funds begins on page 5B. The fund financial statements begin on page 8 and provide detailed information about the most significant funds not the City as a whole. Some funds are required to be established by state law and by bond covenants. However, the City Council may establish other funds to help it control and manage money for particular purposes (like the capital replacement fund). The City s three kinds of funds governmental, proprietary, and fiduciary use different accounting approaches. Governmental Funds Most of the City s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City s programs. We describe the relationship (or differences) between governmental activities (reported in the statement of net position and the statement of activities) and governmental funds in a reconciliation at the bottom of the fund financial statements. Proprietary Funds When the City charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net position and the statement of activities. In fact, the City s enterprise fund is the same as the businesstype activities we report in the government-wide statements but provide more detail and additional information, such as cash flows. Fiduciary Funds The City accounts for certain assets held as an agent for individuals. Fiduciary funds are accounted for in the same manner as proprietary funds. (The remainder of this page is intentionally left blank) 5A

13 NET POSITION For the year ended September 30, 2016, the total and net position changed as follows: GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES TOTAL ASSETS Current and Other Assets $ 7,771,524 $ 7,002,208 $ 1,460,396 $ 1,646,862 $ 9,231,920 $ 8,649,070 Capital Assets 4,784,148 5,019,582 4,692,224 4,695,172 9,476,372 9,714,754 Total Assets 12,555,672 12,021,790 6,152,620 6,342,034 18,708,292 18,363,824 DEFERRED OUTFLOWS 638, ,469 64,682 39, , ,672 LIABILITIES Current Liabilities 467, , , , , ,613 Long-Term Liabilities 2,572,547 2,371,116 2,442,774 2,504,724 5,015,321 4,875,840 Total Liabilities 3,040,013 2,772,063 2,621,126 2,642,390 5,661,139 5,414,453 DEFERRED INFLOWS 30,615 13,023 1, ,545 13,566 NET POSITION Net Investment in Capital Assets 3,143,512 3,239,909 2,217,860 2,134,845 5,361,372 5,374,754 Restricted 1,452,551 1,150, ,452,551 1,150,330 Unrestricted 5,527,430 5,224,934 1,376,386 1,603,459 6,903,816 6,828,393 TOTAL NET POSITION $ 10,123,493 $ 9,615,173 $ 3,594,246 $ 3,738,304 $ 13,717,739 $ 13,353,477 The net position of the City s governmental activities increased by $508,320 during the fiscal year. The net position for the business-type activities decreased by $144,058. Governmental Activities To aid in the understanding of the statement of activities, some additional explanation is given. Of particular interest is the format that is significantly different than a typical statement of revenues, expenses, and changes in fund balance. You will notice that expenses are listed in the first column with revenues from that particular program reported to the right. The result is a net (expense)/revenue. The reason for this kind of format is to highlight the relative financial burden of each of the functions of the City s taxpayers. It also identifies how much each function draws from the general revenues or if it is self-financing through fees and grants. Some of the individual line item revenues reported for each function are: Development Services Court Police Fire Building permits, development fees, occupational licenses, and plumbing/electric inspections. Court costs allocation from fines. Fines and arrest fees. Grants are classified as operating grants. EMS fees. Grants are classified as operating grants. All other governmental revenues are reported as general. It is important to note that all taxes are classified as general revenue even if restricted for a specific purpose. Expenses for governmental activities (as presented on page 7) increased by $168,844 to $4,427,392 in 2016 from The City s general revenues decreased by $77,920 primarily due to a decrease in charges for services. The City s net revenue for 2016 was $508,320 compared to $755,084 in B

14 Business-Type Activities Water revenues (as presented on page 7) decreased by less than 1% (or $8,003) to $841,804. Total operating expenses of the water department increased by 13% (or $112,537) to $972,747. Net income decreased by $113,839 to ($144,058) in 2016 due to increase in expenditures. CHANGES IN NET POSITION The City s government funds total assets (as presented on page 8) increased by 14% (or $533,882) in The City s government funds balances increased by 9% (or $671,747). The following schedule presents comparative summary of the statement of activities for the fiscal year ended September 30, 2016 and GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES TOTAL REVENUES Program Revenues Charges for Services $ 915,627 $ 1,126,025 $ 841,804 $ 849,807 $ 1,757,431 $ 1,975,832 Operating Grants & Contributions 25,367 30, ,367 30,426 General Revenues Taxes 3,487,895 3,361, ,487,895 3,361,998 Franchise Fees 452, , , ,127 Investment Earnings 10,875 4,718 8,935 2,234 19,810 6,952 Other 21,108 24, ,108 24,292 Total Revenues 4,913,666 4,991, , ,041 5,764,405 5,843,627 EXPENSES City Council 28,949 30, ,949 30,380 Administration 901, , , ,612 Municipal Court 69,416 69, ,416 69,022 Police 1,373,180 1,263, ,373,180 1,263,146 Fire 1,455,848 1,371, ,455,848 1,371,566 Public Works 419, , , ,232 Development Services 99, , , ,925 Interest on Long-Term Debt 79,085 82, ,085 82,669 Water , , , ,210 Total Expenses 4,427,396 4,258, , ,210 5,400,143 5,118,762 Increase in Net Position before Transfers 486, ,034 (122,008) (8,169) 364, ,865 TRANSFERS 22,050 22,050 (22,050) (22,050) - - Change in Net Position 508, ,084 (144,058) (30,219) 364, ,865 NET POSITION AT BEGINNING OF YEAR 9,615,173 9,219,606 3,738,304 3,783,503 13,353,477 13,003,109 RESTATEMENT OF NET POSITION AT BEGINNING OF YEAR - (359,517) - (14,980) - (374,497) NET POSITION - BEGINNING, AS RESTATED 9,615,173 8,860,089 3,738,304 3,768,523 13,353,477 12,628,612 NET POSITION - ENDING $ 10,123,493 $ 9,615,173 $ 3,594,246 $ 3,738,304 $ 13,717,739 $ 13,353,477 5C

15 BUDGETARY HIGHLIGHTS Budgetary comparisons for the general fund is included on pages 38 and 39 of this annual financial report. General fund actual revenues exceeded the budget by 4% (or $158,612). Budget exceeded total expenditures by 3% (or $133,843). Capital Assets CAPITAL ASSET AND DEBT ADMINISTRATION At the end of September 30, 2016, the City had $9,779,353 invested in capital assets including police and fire equipment, buildings, and vehicles (see table below). This represents a net decrease of 4% (or $391,233) from last year. See Note 6 on page for additional analysis of the City s capital assets net of depreciation. GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITES TOTALS Land $ 111,687 $ 111,687 $ 30,146 $ 30,146 $ 141,833 $ 141,833 Building and Improvements 2,529,871 2,609,122 89,079 91,363 2,618,950 2,700,485 Water System and Improvements - - 4,186,543 4,167,053 4,186,543 4,167,053 Street Improvements 1,365,043 1,434, ,448,518 1,434,320 Vehicles and Equipment 777, ,453 83, ,629 1,080, ,082 Water Rights , , , ,981 TOTALS $ 4,784,148 $ 5,019,582 $ 4,692,224 $ 4,695,172 $ 9,779,353 $ 9,714,754 Debt At September 30, 2016, the City had $4,115,000 in outstanding bonds compared to $4,340,000 last year. That is a decrease of 6% (or $298,908) as shown in the following table: GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITES TOTALS Bonds $ 1,640,636 $ 1,779,673 $ 2,474,364 $ 2,560,327 $ 4,115,000 $ 4,340,000 Other obligations of the City include accrued compensated absences. See Note 5 on page 30 for additional analysis of City s debt. 5D

16 ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES General Fund revenues for the fiscal year 2017 are budgeted at $5,003,281, a 10.30% increase over 2016 actual amounts. The increase is largely related to a $ 297,900 increase in Transfers In, from the Capital Replacement Fund for various equipment and engineer fees drainage study. Additionally, increases in the ad valorem tax revenues and several minor increases account for the remainder of the increase. The City s largest single source of revenue in the General Fund continues to be ad valorem taxes. The tax rate was maintained at $ This rate consists of a maintenance and operations (M&O) tax rate of $ and interest and sinking (debt service) tax rate of $ T he property tax revenue projections for M&O tax levy increased by $205,506. While the City has a finite supply of undeveloped property, over the past two years a significant amount of the remaining property was platted from which additional development is expected to continue for the next few years before slowing down. This new development will positively affect the revenue streams in the near future. The General Fund expenditures for fiscal 2017 are budgeted at $5,003,281 a 15.71% decrease over 2016 actual. The operational expenditures are budgeted with an increase that is largely accounted for in employee compensation increases. The actual decrease in the 2017 total budgeted expenditures over the 2016 actually spent is accounted for primarily by the $1,643,749 transferred from unassigned general fund balance to Capital Improvement / Replacement Fund (allocated to Fire, Police, Public Works, and Drainage). The City s current fund policy is to achieve and maintain an unassigned General Fund balance equal to 25% to 50% of budgeted expenditures. Any amount in excess of 50% is considered for reservation to fund future capital projects and equipment, and/or to reduce future tax levies. The fiscal year 2017 budget transfers $214,387 to the Capital Replacement Fund. At year end, the unassigned fund balance is $2,438,048, which is below the 50% Fund Balance % of the 2017 Budget ($2,501,641) at 48.7%. For 2017, water revenues are budgeted at $934,678, a 9.86% increase from 2016 actual revenues. Water operating expenditures are budgeted at $1,363,926, a 36.82% increase from 2016 actual (excluding depreciation). The increase in expenditures includes a drawdown from unrestricted funds of $300,000 for SCADA replacement, over $70,000 for additional capital expenditures, and additional funds to be set aside for future reserves. The Water Fund net position unrestricted total is estimated to be $1,032,490 with anticipated draws for CONTACTING THE CITY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the City s finances and to show the City s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City Manager at 900 Saddletree Court, Shavano Park, Texas E

17 STATEMENT OF NET POSITION SEPTEMBER 30, 2016 ASSETS GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL CURRENT ASSETS Cash and Investments $ 7,474,172 $ 1,332,657 $ 8,806,829 Accounts Receivable 298,471 87, ,188 Internal Balances (1,119) 1,119 - Inventory - 34,700 34,700 Prepaid Expenses - 4,203 4,203 Total Current Assets 7,771,524 1,460,396 9,231,920 Capital Assets 9,451,591 7,877,543 17,329,134 Accumulated Depreciation (4,667,443) (3,185,319) (7,852,762) Net Capital Assets 4,784,148 4,692,224 9,476,372 TOTAL ASSETS 12,555,672 6,152,620 18,708,292 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflow - TMRS Pension 540,857 39, ,299 Deferred Charge on Refunded Bonds 97,592 25, ,832 TOTAL DEFERRED OUTFLOWS 638,449 64, ,131 LIABILITIES CURRENT LIABILITIES Accounts Payable 213,922 53, ,453 Accrued Wages Payable 105,681 6, ,309 Customer Deposits - 17,750 17,750 Accrued Interest Payable 8,826 14,480 23,306 Current Portion of Bonds Payable 139,037 85, ,000 Total Current Liabilities 467, , ,818 Compensated Absences Payable 155,859 5, ,055 Net Pension Liability 915,089 49, ,266 Bonds Payable 1,501,599 2,388,401 3,890,000 TOTAL LIABILITIES 3,040,013 2,621,126 5,661,139 DEFERRED INFLOWS OF RESOURCES Deferred Inflow - TMRS Pension 30,615 1,930 32,545 NET POSITION Net Investment in Capital Assets 3,143,512 2,217,860 5,361,372 Restricted for: PEG Funds 88,911-88,911 Street Maintenance 192, ,180 Child Safety 4,939-4,939 Court 53,236-53,236 LEOSE 2,814-2,814 Police Forfeiture 6,226-6,226 Debt Service 304, ,075 Crime Control 800, ,170 Unrestricted 5,527,430 1,376,386 6,903,816 TOTAL NET POSITION $ 10,123,493 $ 3,594,246 $ 13,717,739 (The Accompanying Notes are an Integral Part of these Financial Statements) 6

18 STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2016 PROGRAM REVENUE NET (EXPENSE) REVENUE CHARGES FOR OPERATING CAPITAL GOVERNMENTAL BUSINESS-TYPE PROGRAM ACTIVITIES EXPENSES SERVICES GRANTS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL Governmental Activities City Council $ 28,949 $ - $ - $ - $ (28,949) $ - $ (28,949) Administration 901,822 57,330 12,458 - (832,034) - (832,034) Municipal Court 69, , , ,717 Police 1,373,180 8,198 2,680 - (1,362,302) - (1,362,302) Fire 1,455,848 97,810 10,229 - (1,347,809) - (1,347,809) Public Works 419, (419,425) - (419,425) Development Services 99, , , ,485 Interest 79, (79,085) - (79,085) Total Governmental Activities 4,427, ,627 25,367 - (3,486,402) - (3,486,402) Business-Type Activities Water 972, , (130,943) (130,943) TOTAL GOVERNMENT $ 5,400,143 $ 1,757,431 $ 25,367 $ - (3,486,402) (130,943) (3,617,345) General Revenues Taxes 3,487,895-3,487,895 Franchise Fees 452, ,794 Interest 10,875 8,935 19,810 Other 21,108-21,108 Transfers 22,050 (22,050) - Total General Revenue and Transfers 3,994,722 (13,115) 3,981,607 Change in Net Position 508,320 (144,058) 364,262 NET POSITION AT BEGINNING OF YEAR 9,615,173 3,738,304 13,353,477 NET POSITION AT END OF YEAR $ 10,123,493 $ 3,594,246 $ 13,717,739 (The Accompanying Notes are an Integral Part of these Financial Statements) 7

19 BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2016 CAPITAL OTHER GENERAL REPLACEMENT FUNDS TOTAL ASSETS Cash and Investments $ 2,973,625 $ 3,335,814 $ 1,164,733 $ 7,474,172 Receivables: Delinquent Ad Valorem Taxes 17,965-1,886 19,851 Warrant Receivable (net) 164, ,105 EMS Receivable (net) 6,020-6,020 Other Receivable 73,100-35, ,495 Due from Other Funds , ,142 TOTAL ASSETS $ 3,235,431 $ 3,335,814 $ 1,513,540 $ 8,084,785 LIABILITIES Accounts Payable $ 187,661 $ - $ 1,855 $ 189,516 Accrued Wages Payable 105, ,681 Other Payables 24, ,406 Due to Other Funds 291,545 21, ,261 Total Liabilities 609,293 21,100 2, ,864 DEFERRED INFLOWS OF RESOURCES Deferred Revenue - Property Taxes 17,965-1,886 19,851 Deferred Revenue - Warrants 164, ,105 Deferred Revenue - EMS 6, ,020 Total Deferred Inflows of Resources 188,090-1, ,976 FUND BALANCES Restricted - PEG Funds ,911 88,911 Restricted - Street Maintenance 192, ,180 Restricted - Child Safety Fund - - 4,939 4,939 Restricted - Court ,236 53,236 Restricted - LEOSE - - 2,814 2,814 Restricted - Police Forfeiture - - 6,226 6,226 Restricted - Debt Service , ,075 Restricted - Crime Control District , ,170 Committed - Oak Wilt ,632 56,632 Committed - Capital Replacement - 3,314,714-3,314,714 Unassigned 2,438, ,438,048 Total Fund Balances 2,438,048 3,314,714 1,509,183 7,261,945 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 3,235,431 $ 3,335,814 $ 1,513,540 $ 8,084,785 (The Accompanying Notes are an Integral Part of these Financial Statements) 8

20 RECONCILIATION OF BALANCE SHEET GOVERNMENTAL FUNDS TO STATEMENT OF NET POSITION SEPTEMBER 30, 2016 TOTAL FUND BALANCES - GOVERNMENTAL FUNDS $ 7,261,945 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds; net of accumulated depreciation of $4,667,443. 4,784,148 Delinquent ad valorem taxes are not available to pay for current period expenditures and, therefore, are deferred in the funds. 19,851 Warrant receivables are not available to pay for current period expenditures and, therefore, are deferred in the funds. 164,105 EMS receivables are not available to pay for current period expenditures and, therefore, are 6,020 deferred in the funds. Accrued interest payable on bonds payable does not require current financial resources and, therefore, is not reported in the funds. (8,826) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds: Net Pension Liability (915,089) Deferred Outflow of Resources - Pension Related 540,857 Deferred Inflow of Resources - Pension Related (30,615) Compensated Absences (155,859) Unamortized Charge on Refunded Bonds 97,592 Bonds Payable (1,640,636) TOTAL NET POSITION - GOVERNMENTAL ACTIVITIES $ 10,123,493 (The Accompanying Notes are an Integral Part of these Financial Statements) 9

21 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2016 CAPITAL OTHER GENERAL REPLACEMENT FUNDS TOTAL REVENUES Taxes - Ad Valorem $ 2,645,218 $ - $ 237,688 $ 2,882,906 Taxes - Sales 388, , ,609 Taxes - Beverage 18, ,535 Franchise Fees 437,409-15, ,794 Building Permits and Fees 523,446-17, ,156 Fines and Forfeits 202,393-8, ,132 EMS Fees 68, ,606 Other 91,454-5,512 96,966 Interest 10, ,875 Total Revenues 4,386, ,028 4,867,579 EXPENDITURES City Council 28, ,949 General Administration 753, ,250 Municipal Court 67, ,435 Police 1,222,107-13,141 1,235,248 Fire 1,292,595-1,519 1,294,114 Public Works 394, ,926 Development Services 99, ,671 Capital Outlay 151, ,613 Principal Retirement , ,037 Interest and Fees ,677 68,677 Total Expenditures 4,010, ,374 4,232,920 Excess of Revenues Over Expenditures 375, , ,659 OTHER FINANCING SOURCES (USES) Gain on Sale of Assets 15, ,038 Transfers from Other Funds 87,505 1,905,486 20,000 2,012,991 Transers from Capital Replacement Fund 25, , ,882 Transfers from Water Fund 22, ,050 Transfers to Other Funds (1,925,486) (173,882) (87,505) (2,186,873) Total Other Financing Sources (Uses) (1,775,793) 1,731,604 81,277 37,088 Net Changes in Fund Balance (1,400,001) 1,731, , ,747 FUND BALANCES - BEGINNING 3,838,049 1,582,897 1,169,252 6,590,198 FUND BALANCES - ENDING $ 2,438,048 $ 3,314,714 $ 1,509,183 $ 7,261,945 (The Accompanying Notes are an Integral Part of these Financial Statements) 10

22 RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIES SEPTEMBER 30, 2016 Net Change in Fund Balance - Governmental Funds $ 671,747 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the government-wide statement of activities, the cost of these assets is allocated over their estimated useful lives as depreciation expense. This is the amount of capital assets recorded in the current period. 151,613 Depreciation expense on capital assets is reported in the governmentwide statement of activities, but they do not require the use of current financial resources. Therefore, depreciation expense is not reported as an expenditure in governmental funds. (387,047) The repayment of long-term debt (bonds and capital lease obligations) consumes the current financial resources of governmental funds. Neither of these transactions, however, has any effect on net position. The net effect of these differences in the treatment of long-term debt is as follows: Bond Principal Payments 139,037 Defeasement Charge (10,408) The change in the liability for compensated absences does not consume a current financial resource and is therefore not reported as an expenditure in the governmental funds. (11,684) The change in the liability for net pension liability does not consume a current financial resource and is therefore not reported as an expenditure in the governmental funds. (75,987) The change in delinquent ad-valorem taxes for the year does not create a current financial resource and therefore is deferred in the governmental funds. 1,845 The change in warrant fees for the year does not create a current financial resource and therefore is deferred in the governmental funds. 29,204 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 508,320 (The Accompanying Notes are an Integral Part of these Financial Statements) 11

23 STATEMENT OF NET POSITION WATER FUND SEPTEMBER 30, 2016 ASSETS Cash and Investments $ 1,332,657 Receivable from Water Customers 87,717 Inventory 34,700 Prepaid Expenses 4,203 Due from Other Funds 1,119 Capital Assets 7,877,543 Accumulated Depreciation (3,185,319) Total Assets 6,152,620 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflow - TMRS Pension 39,442 Deferred Charge on Refunded Bonds 25,240 Total Deferred Outflows of Resources 64,682 TOTAL ASSETS AND DEFERRED OUTFLOWS $ 6,217,302 LIABILITIES Accounts Payable and Accrued Expenses $ 53,531 Accrued Wages Payable 6,628 Water Customer Deposits 17,750 Compensated Absences Payable 5,196 Accrued Interest Payable 14,480 Net Pension Liability 49,177 Bonds Payable 2,474,364 Total Liabilities 2,621,126 DEFERRED INFLOWS OF RESOURCES Deferred Inflow - TMRS Pension 1,930 NET POSITION Net Investment in Capital Assets 2,217,860 Unrestricted 996,265 Unrestricted - Designated for Capital Replacement 380,121 Total Net Position 3,594,246 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 6,217,302 (The Accompanying Notes are an Integral Part of these Financial Statements) 12

24 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION WATER FUND YEAR ENDED SEPTEMBER 30, 2016 REVENUE Water Service $ 784,442 Other Revenue 57,362 Total Revenue 841,804 OPERATING EXPENSES Personnel 229,852 Supplies 14,456 Other Services and Charges 106,799 Water Lease 47,969 Repair and Maintenance 261,068 Debt Service 117,397 Depreciation 195,206 Total Operating Expenses 972,747 Net Operating Income (130,943) NONOPERATING REVENUES Proceeds from Insurance 2,390 Interest Income and Other 6,545 Income Before Transfers (122,008) TRANSFERS OUT (22,050) Change in Net Position (144,058) NET POSITION - BEGINNING 3,738,304 TOTAL NET POSITION - ENDING $ 3,594,246 (The Accompanying Notes are an Integral Part of these Financial Statements) 13

25 STATEMENT OF CASH FLOWS WATER FUND YEAR ENDED SEPTEMBER 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Change in Net Position $ (144,058) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 195,206 Change in Operating Assets and Liabilities: Decrease in Accounts Receivable 74,231 Decrease in Due To/From Other Funds (40,079) Decrease in Customer Deposits (2,000) Increase in Inventory (7,379) Increase in Prepaid Expenses (3,603) Increase in Accounts Payable and Accrued Expenses 41,952 Increase in Net Pension Liability (2,037) Net Cash Provided by Operating Activities 112,233 CASH FLOWS FROM INVESTING ACTIVITIES Capital Asset Additions (192,258) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of Debt (83,270) Net Increase in Cash (163,295) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,495,952 CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,332,657 NONCASH ACTIVITY: Change in Actuarially Determined Net Pension Liability $ 20,400 (The Accompanying Notes are an Integral Part of these Financial Statements) 14

26 STATEMENT OF NET POSITION FIDUCIARY FUNDS YEAR ENDED SEPTEMBER 30, 2016 PET DOCUMENTATION AND RESCUE FUND Cash $ 2,293 Liability Due to Others $ 2,293 (The Accompanying Notes are an Integral Part of these Financial Statements) 15

27 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Shavano Park, Texas (the City) complies with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASB) pronouncements. In the government-wide financial statements and the fund financial statements for the proprietary funds, Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, have been applied unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The accounting and reporting framework and the more significant accounting policies are discussed in subsequent subsections of this note. A. Reporting Entity The financial statements include all the governmental, proprietary, and fiduciary funds of the City. There are no component units applicable to the City. Therefore, the primary government (City of Shavano Park, Texas) is the same as the reporting entity. The City is not a component unit of any other entity. B. Government-wide Financial Statements The statement of net position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and businesstype activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. C. Fund Financial Statements The government uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Funds are classified into three categories: governmental, proprietary, and fiduciary. Each category, in turn, is divided into separate fund types. Governmental funds are used to account for all or most of a government s general activities, including the collection and disbursement of earmarked monies (special revenue funds), the acquisition or construction of capital assets (capital projects funds) and the servicing of long-term debt (debt service funds). The general fund is used to account for all activities of the general government not accounted for in another fund. Proprietary funds are used to account for activities similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies primarily within the government (internal service funds). 16

28 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Fund Financial Statements (Continued) Fiduciary funds are used to account for assets held by the City as an agent for individuals and/or other funds. D. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for by using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Governmental fund type operating statements present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. All proprietary and fiduciary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and liabilities associated with the operation of these funds are included on the balance sheet. Proprietary fundtype operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in total net position. In the government-wide statement of net position and the statement of activities, both governmental and business-like activities are presented using the economic resources measurement focus and using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. The modified accrual basis of accounting is used by all governmental fund types. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. A 60 day availability period is used for revenue recognition for governmental fund revenues. Expenditures are recorded when the related fund liability is incurred. Principal and interest on long-term debt is recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Those revenues susceptible to accrual are property taxes, franchise fees, special assessments, interest revenue and charges for services. Licenses, fines and permits are not susceptible to accrual because generally, they are not measurable until received in cash. 17

29 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Basis of Accounting (Continued) The accrual basis of accounting is utilized by proprietary fund types. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expenditure) until then. The City s deferred outflows of resources are unamortized loss on refund bonds, the City s contributions to the defined-benefit pension fund after the measurement date of the plan, changes in the actuarial investment experience, and actuarial assumptions. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds report deferred revenues from property taxes, warrants, and EMS receivables, and the difference between actual experience and actuarial assumptions from the defined-benefit pension plan. The amount is deferred and recognized as an inflow of resources in the period that the amounts become available. E. Cash and Investments Cash and investments include amounts in demand deposits, savings accounts, and TexSTAR and TexPool investment accounts. F. Short-Term Interfund Receivables/Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as due from other funds or due to other funds on the balance sheet. Short-term interfund loans are classified as interfund receivables/payables. Interfund receivables and payables between funds within governmental activities are eliminated in the statement of net position. G. Receivables In the government-wide statements, receivables consist of all revenues earned at year end and not yet received. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Major receivable balances for the governmental activities include ad valorem taxes, warrants, franchise fees, and other fees. Business-type activities report water earnings as their major receivables. 18