CITY OF GROESBECK, TEXAS ANNUAL FINANCIAL REPORT

Transcription

1 CITY OF GROESBECK, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2017

2 Introductory Section

3 City of Groesbeck Annual Financial Report For the Year Ended September 30, 2017 Table of Contents FINANCIAL SECTION Independent Auditor s Report 1-2 Management s Discussion and Analysis 3-9 Page Exhibit Basic Financial Statements Government-wide Financial Statements: Statement of Net Position 10 A-1 Statement of Activities 11 A-2 Fund Financial Statements: Balance Sheet Governmental Funds 12 A-3 Reconciliation of the Governmental funds Balance Sheet to the Statement of Net Position 13 A-4 Statement of Revenues, Expenditures, and changes in Fund Balances Governmental Funds 14 A-5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 15 A-6 Statement of Net Position Proprietary Funds 16 A-7 Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds 17 A-8 Statement of Cash Flows Proprietary Funds 18 A-9 Statement of Fiduciary Net Position Fiduciary Funds 19 A-10 Notes to the Financial Statements Required Supplementary Information: Budgetary Comparison Schedule: General Fund 46 B-1 Schedule of Changes in Net Pension Liability and Related Ratios 47 Schedule of Contributions 48 OTHER SUPPLEMENTARY INFORMATION SECTION Independent Auditors Report on Internal Control Over Financial Reporting an on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 50

4 Financial Section

5 Donald L Allman, CPA, PC 205 East University Ave., Ste. 165 Georgetown, Texas dallman@donallmancpa.com CERTIFIED PUBLIC ACCOUNTANT Mayor and City Council City of Groesbeck, Texas Report on the Financial Statements INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Groesbeck, Texas as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the City of Groesbeck, Texas basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements, referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Groesbeck, Texas as of September 30, 2017, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1 MEMBER TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS & AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 205 East University, Ste. 165, GEORGETOWN, TEXAS FAX: WEBSITE

6 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 on pages 3-9, and 46-48, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 13, 2018 on our consideration of the City of Groesbeck, Texas internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Groesbeck, Texas internal control over financial reporting and compliance. Respectfully submitted, Georgetown, Texas March 13, 2018 Donald L. Allman, CPA, PC MEMBER TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS & AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 205 East University, Ste. 165, GEORGETOWN, TEXAS FAX: WEBSITE 2

7 Management s Discussion and Analysis City of Groesbeck, Texas MANAGEMENT S DISCUSSION AND ANALYSIS This section of the city of Groesbeck s annual financial report presents our discussion and analysis of the City s financial performance during the year ended September 30, Please read it in conjunction with the City s financial statements, which follow this section. FINANCIAL HIGHLIGHTS The City s total combined net position on financial statement exhibit A-1 was $8,756,212 at September 30, During the year, the City s proprietary fund reported net income of $577,890 before transfers. The general fund reported a governmental fund balance this year on financial statement exhibit A-3 of $609,105. The general fund began the current year with a fund balance in the amount of $601,397. A majority of the increase in fund balance was attributable to increased income in sales taxes. The City s general fund in government wide financial statements reported a net loss of $(12,712) before transfers. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three management s discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the City: The first two statements are government-wide financial statements that provide both long-term and short-term information about the City s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the government, reporting the City s operations in more detail than the government-wide statements. The governmental funds statements tell how general government services were financed in the short term as well as what remains for future spending. Fiduciary fund statements provide the information about the financial relationships in which the City acts solely as a trustee or agent for the benefit of others, to which the resources in question belong. Business-type activities fund statements provide information about the for-profit activities and services. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. 3

8 Government-wide Statements The government-wide statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the government s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the City s net position and how they have changed. Net position the difference between the City s assets and deferred outflows of resources less liabilities and deferred inflows of resources is one way to measure the city s financial health or position. Over time, increases or decreases in the City s net position is an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City, one needs to consider additional nonfinancial factors such as changes in the City s tax base. The government-wide financial statements of the City include the Governmental Activities and Business-type Activities. Most of the City s basic services are included as Governmental Activities, such as general government, public safety, public services, and sanitation. Property taxes, sales taxes, charges for services and grants finance most of these activities. The City s enterprise revenues are reflected as Business-type Activities. Fund Financial Statements The fund financial statements provide more detailed information about the City s most significant funds not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and by bond covenants. The City council establishes other funds to control and manage money for particular purposes or to show that it is properly using certain taxes and grants. The City has the following kinds of funds: Governmental funds Most of the City s basic services are included in governmental funds, which focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at yearend that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that 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. Because this information does not encompass the additional long-term focus of the government-wide statements, we provide additional information at the bottom of the governmental funds statement, or on the subsequent page, that explain the relationship (or differences) between them. Proprietary funds The City charges customers for the services it provides, whether to outside customers or to other units within the city. 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 funds (a component of proprietary funds) are identical to the business type activities that are reported in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. Fiduciary funds The City is the trustee, or fiduciary, for certain funds. It is also responsible for other assets that because of a trust arrangement can be used only for the trust beneficiaries. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the City s fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes in fiduciary net position. We exclude these activities for the city s government-wide financial statements because the City cannot use these assets to finance its operations. 4

9 FINANCIAL ANALYSIS OF THE CITY AS A WHOLE Net position. The City s combined net position was 8.7 million at September 30, (See Table A-1). Table A-1 City of Groesbeck's Net Position (In million dollars) Total Percentage Change Sept Sept Current assets: Cash and cash equivalents $ 1.3 $ Investments Due from other governments Other receivables Inventories - supplies and materials Total current assets Noncurrent assets: Land, furniture and equipment Less accumulated depreciation (11.0) (9.9) 11 Other assets Total noncurrent assets (3) Total Assets Deferred outflows of resources

10 Table A-1 City of Groesbeck's Net Position (In million dollars) Total Percentage Change Sept Sept Current liabilities: Account payable and accrued liabilities $ 0.1 $ 0.2 (50) Short-term debt Consumer deposits Total current liabilities (33) Long-term liabilities: Net Pension Liability Noncurrent liabilities due in one year Noncurrent liabilities due more than 1 yea (7) Total long term Liabilities (6) Deferred inflows of resources Net Position: Net Investment in Capital Assets Restricted Unrestricted Total Net Position $ 8.7 $ 8.2 $ 6 As of September 30, 2017, the City has $709,325 in restricted net position that represents requirements for debt service. The $1,591,167 of unrestricted net position represents resources to be available to fund the programs of the City next year. Changes in net position The City s total revenues were $5,025,307. A significant portion, 38 percent, of the City s revenue comes from taxes, while 62 percent relates to charges for services. The total cost of all programs and services was $4,380,882, with 62 percent of these costs being for governmental activities. 6

11 Program Revenues: September 2017 September 2016 Total Percentage Change Sept Sept Charges for Services $ 2.9 $ 3.1 (6) Operating Grants and Contribution Capital Grants and Contributions Grant Revenues Taxes Investment Earnings Other Total Revenues General Government (13) Public Safety Highways and Streets Sanitation Culture and Recreation Economic Development Assistance Water and Sewer (11) Other (33) Total Expenses (6) Excess Before Other Resources Table A-2 Changes in City of Groesbeck's Net Position (In million dollars) Uses and Transfers Prior Period Adjustment Transfers In (Out) Increase in Net Position Table A-3 presents the cost of each of the City s largest functions as well as each function s net cost (total cost less fees generated by the activities and intergovernmental aid). The net cost reflects what was funded by state revenues as well as local tax dollars. The cost of all governmental activities this year was million. However, the amount that our taxpayers paid for these activities through property taxes was only $915 thousand. Some of the cost was paid by those who directly benefited from the programs $915 thousand Table A-3 Net Cost of Selected City Functions Total Cost of Services (In million dollars) % Change Net Cost of Services September 2017 September 2016 % Change General Government $ 0.7 $ $ 0.4 $ Public Safety Highways and Streets

12 FINANCIAL ANALYSIS OF THE CITY S FUNDS General Fund Budgetary Highlights Total revenues actually received were $601,949 more than budgeted, and total expenses were $501,121 less than budgeted. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of fiscal year 2017, the City had invested $23,998,012 in a broad range of capital assets, including land, equipment, buildings, infrastructure and vehicles (See Table A-4). This amount represents a net increase (including additions and depreciation) of $298,916 or 1% over last year. Table A-4 City's Capital Assets (In millions of dollars) September September Total Percentage Change Sept Sept Land $ 1.0 $ Infrastructure Buildings and improvements Water and sewer system Equipment Leased assets Totals at historical cost Total accumulated depreciation (10.6) (9.9) 7 Net capital assets $ 13.4 $ 13.8 (3) More detailed information about the City s capital assets is presented in the notes to the financial statements. Long Term Debt At year-end the City had $7.3 million in bonds, leases and notes outstanding as shown in Table A-5. More detailed information about the City s debt is presented in the notes to the financial statements. -8-

13 Table A-5 City's Long Term Debt (In millions of dollars) September 2017 September 2016 Total Percentage Change Sept Sept Leases payable $ - $ - - Bonds payable (4) Notes payable Net Pension Liability Less deferred amount On refundings - - Totals bonds & notes payable $ 7.6 $ 7.8 (3) Economic Factors and Next Year s budgets and Rates The City s budgetary general fund balance is not expected to change appreciably by the close of fiscal year 201. Contacting the City s Financial Management This financial report is to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City s finances and to demonstrate the City s accountability for the money it receives. If you have questions about this report or need additional information, contact the City of Groesbeck s Business Services Department at P.O. Box 227, Groesbeck, Texas or phone number

14 Basic Financial Statements

15 CITY OF GROESBECK, TEXAS STATEMENT OF NET POSITION September 30, 2017 EXHIBIT A-1 Governmental Business-type ASSETS Activities Activities Total Cash and Cash Equivalents $ 10,774 $ 569,227 $ 580,001 Investments 223, , ,635 Receivables (net of allowances for uncollectibles) 366, , ,351 Internal Balances Receivable from Fiduciary Inventory 3,283 51,902 55,185 Bond Issuance Costs, net - 170, ,666 Restricted assets: - Cash 181, , ,325 Investments Land 941,278 59,421 1,000,699 Building & Equipment, net 4,022,031 8,418,039 12,440,070 Total Assets 5,748,552 10,557,380 16,305,932 Deferred Outflows of Resources 79,498 48, ,013 LIABILITIES Accounts Payable and Other Current Liabilities 34,424 54,430 88,854 Short-Term Debt Consumer Deposits - 156, ,402 Unearned revenue-property taxes - - Accrued Liabilities Notes Payable - Current 56,604-56,604 Leases Payable - Current 10,201-10,201 Bonds Payable - Current 76, , ,000 Noncurrent Liabilities Net Pension Liability 162, , ,383 Notes Payables - Noncurrent 100, ,882 Leases Payables - Noncurrent 10,652-10,652 Bonds Payable - Noncurrent 1,191,000 5,200,000 6,391,000 Total Liabilities 1,642,353 5,964,625 7,606,978 Deferred Inflows of Resources Deferred Inflows of Resources 43,466 27,289 70,755 Net Investment in Capital Assets 3,517,970 2,825,460 6,343,430 Restricted For: - Debt Service 181, , ,325 Construction Other Economic Development Corporation 112, ,290 Unrestricted 330,286 1,260,881 1,591,167 Total Net Position $ 4,142,231 $ 4,613,981 $ 8,756,212 The accompanying notes are an integral part of this statement

16 CITY OF GROESBECK, TEXAS EXHIBIT A-2 STATEMENT OF ACTIVITIES September 30, 2017 Operating Charges for Grants and Governmental Business-type Functions / Programs Expenses Services Contributions Activities Activities Total Governmental Activities Program Revenues General Government $ 721,063 $ 201,666 $ - $ (519,397) $ - $ (519,397) Public Safety 684,399 42,339 13,936 (628,124) - (628,124) Highway and Streets 309, (309,358) - (309,358) Sanitation 435, , , ,844 Culture and Recreation 331,230 22,585 2,757 (305,888) - (305,888) Economic Development Assistance 193,308 - (193,308) - (193,308) Debt Service - Interest 118, (39,700) (79,247) (118,947) Total Governmental Activities 2,793, ,842 16,693 (1,944,178) (79,247) (2,023,425) - - Business-type Activities: - - Water and Sewer 1,587,169 2,090, , , ,283 Total Business-type Activities 1,587,169 2,090, , , ,283 Total Primary Government $ 4,380,882 $ 2,923,387 $ 164,600 $ (1,944,178) $ 572,036 $ (1,372,142) General Revenues: Property Taxes $ 915,221 $ - $ 915,221 Sales Taxes 773, ,225 Franchise Taxes 168, ,679 Taxes, Hotel - Motel 63,580-63,580 Intergovernmental 8,000-8,000 Investment Earnings 2,761 5,854 8,615 Transfers 80,445 (80,445) - Total General Revenues 2,011,911 (74,591) 1,937,320 Change in Net Position 67, , ,178 Net Position - Beginning 4,074,498 4,116,536 8,191,034 Prior Period Adjustment Net Position Ending -11- Net (Expense) Revenue & Changes in Net Position $ 4,142,231 $ 4,613,981 $ 8,756,212 -

17 CITY OF GROESBECK, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2017 EXHIBIT A-3 ASSETS AND OTHER DEBITS Economic Other Total General Development Governmental Governmental Fund Fund Funds Funds Assets: Cash and Cash Equivalents $ (81,913) $ 112,290 $ 135,082 $ 165,459 Investments - 96, , ,046 Receivables (net of allowance for uncollectibles) 277,763 88, ,455 Due from Other Funds Inventory 3,283 3,283 Restricted Assets: Cash Investments Total Assets and Other Debits $ 199,133 $ 297,818 $ 261,292 $ 758,243 LIABILITIES AND FUND BALANCES: Liabilities: Accounts Payable $ 34,424 $ - $ - $ 34,424 Due to Other Funds Accrued Liabilities Unearned Revenue 114, ,714 Short-Term Debt Total Liabilities 149, ,138 Fund Balances: Nonspendable 3, ,283 Restricted Committed - 297, ,818 Assigned , ,292 Unassigned 46, ,712 Total Fund Balance 49, , , ,105 Total Liabilities and Fund Balance $ 199,133 $ 297,818 $ 261,292 $ 758,243 The accompanying notes are an integral part of this statement. -12-

18 CITY OF GROESBECK, TEXAS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION September 30, 2017 EXHIBIT A-4 Total fund balances - governmental funds balance sheet $ 609,105 Amounts reported for governmental activities in the statement of net position are different because: Deferred Outflows of resources are not recorded in governmental funds 79,498 Deferred Inflows of resources are not recorded in governmental funds (43,466) Capital assets used in governmental activities are not reported in the funds. 4,963,309 Property taxes receivable unavailable to pay 27,000 for current period expenditures are deferred in the funds. 114,714 Net Pension Liability is not recorded in governmental funds (162,590) Payables for capital leases which are not due in the current period are not reported in the funds (20,853) Payables for notes payable which are not due in the current period are not reported in the funds (157,486) Payables for bonds payable which are not due in the current period are not reported in the funds. (1,267,000) Net position of governmental activities - statement of net position $ 4,142,231 The accompanying notes are an integral part of this statement. -13-

19 CITY OF GROESBECK, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS September 30, 2017 EXHIBIT A-5 Economic Other Total General Development Governmental Governmental Fund Fund Funds Funds Revenue: General Property Taxes $ 949,695 $ - $ - $ 949,695 General Sales and Use Taxes 422, , ,056 Street Maintenance Sales Tax ,585 87,585 Civic Center Sales Tax ,585 87,585 Franchise Taxes 168, ,679 Taxes, Hotel - Motel ,580 63,580 Intergovernmental 8, ,000 Charges for Services 753,098 17,135 62, ,842 Fines Investment Earnings 86 1,382 1,293 2,761 Contributions and Donations 2,757-13,936 16,693 Total Revenues 2,305, , ,588 2,815,476 Expenditures: General Government 508, , ,979 Public Safety 626,386-42, ,544 Highways and Streets 161, , ,109 Sanitation 435, ,408 Culture and Recreation 300, ,641 Economic Development and Assistance - 193, ,219 Debt Service 134,011-72, ,959 Capital Outlay 112, ,909 Total Expenditures 2,279, , ,791 2,807,768 Excess (Deficiency) of Revenues Over (Under) Expenditures 25, (18,203) 7,708 Other Financing Sources (Uses): Operating Transfer In/(Out) (37,270) (904) 38,174 - Grants Bond Proceeds Total Other Financing Sources (Uses) (37,270) (904) 38,174 - Fund Balances - Beginning 61, , , ,397 - Fund Balances - Ending $ 49,995 $ 297,818 $ 261,292 $ 609,105 The accompanying notes are an integral part of this statement. -14-

20 EXHIBIT A-6 CITY OF GROESBECK, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES September 30, 2017 Net Change in fund balances - total governmental funds $ 7,708 Amounts reported for governmental activities in the statement of activities ("SOA") are different because: Capital outlays are not reported as expenses in the SOA. 112,909 The depreciation of capital assets used in governmental activities is not reported in the funds. (187,109) Certain property tax revenues are deferred in the funds. This is the change in these amounts this year. 36,407 Repayment of capital lease principal is an expenditure in the funds but is not an expense in the SOA. 9,768 Repayment of loan principal is an expenditure in the funds but is not an expense in the SOA. 149,560 Net Pension expense is not included in governmental funds (33,663) Changes in deferred outflows and deferred inflows are not included in Govt. funds (27,847) Change in net position of governmental activities - statement of activities $ 67,733 The accompanying notes are an integral part of this statement. -15-

21 ASSETS: Current Assets: CITY OF GROESBECK, TEXAS EXHIBIT A-7 STATEMENT OF NET POSITION PROPRIETARY FUNDS September 30, 2017 Enterprise Fund Utility Fund Cash and Cash Equivalents $ 569,227 Investments 507,589 Receivables (net of allowances for uncollectibles) 252,896 Due from other funds - Inventories 51,902 Total Current Assets 1,381,614 Noncurrent Assets: Restricted Cash, Cash Equivalents and Investments - Cash and Cash Equivalents 527,640 Investments - Bond Issuance Costs 170,666 Land 59,421 Property, Plant and Equipment - Net 8,418,039 Total Noncurrent Assets 9,175,766 Total Assets 10,557,380 Deferred Outflows of Resources 48,515 LIABILITIES: Current Liabilities: Accounts payable 54,430 Due to other funds - Accrued liabilities - Capital Leases Payable from Restricted Assets - - Current Liabilities Payable from Restricted Assets - Consumer deposits 156,402 Revenue bonds payable 452,000 Net Pension Liability 101,793 Noncurrent Liabilities Payable from Restricted Assets - Revenue Bonds Payable 5,200,000 Total Liabilities 5,964,625 Deferred Inflows of Resources 27,289 NET POSITION: Net Investment in Capital Assets 2,825,460 Restricted for: Debt Service 527,640 Construction - Other - Retrained Earnings 1,260,881 Total Net Position $ 4,613,981 The accompanying notes are an integral part of this statement. -16-

22 CITY OF GROESBECK, TEXAS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS September 30, 2017 Enterprise Fund Utility Fund OPERATING REVENUES: Water 1,356,905 Sewer 664,914 Miscellaneous 111,050 Total Operating Revenues 2,132,869 EXHIBIT A-8 OPERATING EXPENSES: Administration expenses 402,326 Water operations 332,184 Sewer operations 225,343 Repairs, maintenance & supplies expense 167,672 Total Pension expense 21,073 Depreciation & Amortization 480,895 Total Operating Expenses 1,629,493 Operating Income 503,376 NON-OPERATING REVENUES (EXPENSES): Interest Revenue 5,854 Grants 147,907 Donations and Contributions - Interest Expense & Fees (79,247) Total Non-operating Revenues (Expenses) 74,514 Income before Transfers 577,890 Operating Transfers Out (80,445) Change in Net Position 497,445 Total Net Position - Beginning 4,116,536 - Total Net Position - Ending $ 4,613,981 The accompanying notes are an integral part of this statement. -17-

23 Cash Flows from Operating Activities: CITY OF GROESBECK, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS September 30, 2017 Enterprise Fund Utility Fund Cash Received from Customers $ 2,089,888 Cash Payments to Employees for Services (407,413) Cash Payments to Other Suppliers for Goods & Services (685,362) Net cash provided by operating activities 997,113 Cash Flows from Non-capital Financing Activities: Operating Transfers To Other Funds (80,445) Net cash used for non-capital financing activities (80,445) Cash Flows from Capital and Related Financing Activities: Proceeds from Issuance of Long-term Debt - Grant Proceeds 147,907 Donations and Contributions - Principal and Interest Paid (523,247) Acquisition or Construction of Capital Assets (186,007) Cash Transfers to Restricted Cash for Debt Service (198,965) Net cash used for capital & related financing activities (760,312) Cash Flows from Investing Activities: (Increase)/Decrease in Investments (129,663) Interest and Dividends on Investments 5,854 Net cash used for investment activities (123,809) Net Decrease in Cash and Cash Equivalents 32,547 EXHIBIT A-9 Cash and Cash Equivalents at Beginning of Year 536,680 Cash and Cash Equivalents at End of Year $ 569,227 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Loss $ 503,376 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 480,895 Bond amortization 14,144 Change in Assets and Liabilities: Decrease (Increase) in Receivables (42,981) Decrease (Increase) in Interfund Receivables - Decrease (Increase) in Inventory - Increase (Decrease) in Accounts Payable 17,824 Increase (Decrease) in Accrued Liabilities (19,054) Increase (Decrease) in Consumer Deposits 21,836 Total Pension expense is not a cash expense 21,073 Total Adjustments 493,737 Net Cash Provided by Operating Activities $ 997,113 The accompanying notes are an integral part of this statement. -18-

24 CITY OF GROESBECK, TEXAS STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS September 30, 2017 EXHIBIT A-10 Agency Fund Payroll Clearing Fund ASSETS: Cash and Cash Equivalents $ - Total Assets - DEFERRED OUTFLOWS OF RESOURCES - LIABILITIES: Accounts Payable - Due to Other Funds - Total Liabilities - DEFERRED INFLOWS OF RESOURCES - NET POSITION Fund Balance $ - The accompanying notes are an integral part of this statement. -19-

25 CITY OF GROESBECK, TEXAS NOTES TO THE FINANCIAL STATEMENTS For the Year Ended September 30, Summary of Significant Accounting Policies The financial statements of City of Groesbeck (the City) have been prepared in conformity with accounting principles applicable to governmental units which are generally accepted in the United States of America. The Governmental Accounting Standards Board (GASB) is the accepted standards setting body for establishing governmental accounting and financial reporting principles. Reporting Entity The City s basic financial statements include the accounts of all its operations. The city evaluated whether any other entity should be included in these financial statements. The criteria for including organizations as component units within the City s reporting entity, as set forth in GASB Statement No. 14, The Financial Reporting Entity, include whether: the organization is legally separate (can sue and be sued in its name) the City holds the corporate powers of the organization the City appoints a voting majority of the organization s board the City is able to impose its will on the organization the organization has the potential to impose a financial benefit/burden on the City there is fiscal dependency by the organization on the City the exclusion of the organization would result in misleading or incomplete financial statements The City also evaluated each legally separate, tax-exempt organization whose resources are used principally to provide support to the City to determine if its omission from the reporting entity would result in financial statements which are misleading or incomplete. GASB Statement No. 14 requires inclusion of such an organization as a component unit when: (1) The economic resources received or held by the organization are entirely or almost entirely for the direct benefit of the City, its component units or its constituents; and (2) The City or its component units is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the organization; and (3) such economic resources are significant to the City. Based on these criteria, the City has no component units. Additionally, the City is not a component unit of any other reporting entity as defined by the GASB Statement. Basis of Presentation, Basis of Accounting Basis of Presentation Government-wide Statements The statement of net position and the statement of activities include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. -20-

26 CITY OF GROESBECK, TEXAS NOTES TO THE FINANCIAL STATEMENTS For the Year Ended September 30, Summary of Significant Accounting Policies Basis of Presentation, Basis of Accounting Basis of Presentation The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of the City and for each function of the City s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly indentifiable to a particular function. The City does not allocate indirect expenses in the statement of activities. Program revenues include (a) fees, fines, and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the City s funds, with separate statements presented for each fund category. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as non-major funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. The City reports the following major governmental funds: General Fund This is the city s primary operating fund. It accounts for all financial resources of the City except those required to be accounted for in another fund. Economic Development Fund The fund accounts for the receipt of dedicated sales tax proceeds and the approved expenditures associated with area economic development. The City reports the following major enterprise funds: Utility Fund This fund is used to account for operations that are financed and operated in a manner similar to private business enterprises, where the costs (expenses, including depreciation) of providing water and sewer services to the general public on a continuing basis are financed through user charges. In addition, the City reports the following fund types: Fiduciary funds are reported in the fiduciary fund statements. However, because their assets are held in a trustee or agent capacity and are therefore not available to support city programs, these funds are not included in the government-wide statements. Agency Funds (a fiduciary fund) are used to report activity funds and other resources held in a purely custodial capacity (assets equal liabilities). Agency funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. -21-

27 CITY OF GROESBECK, TEXAS NOTES TO THE FINANCIAL STATEMENTS For the Year Ended September 30, Summary of Significant Accounting Policies Basis of Presentation, Basis of Accounting Measurement Focus, Basis of Accounting Government-wide, Proprietary, and Fiduciary Fund Financial Statements These financial statements are reported using the economic resources measurement focus. The government-wide and proprietary fund financial statements are reported using the accrual-basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisified. Governmental fund Financial Statements Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The city does not consider revenues collected after its year-end to be available in the current period. Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues received from the State are recognized under the susceptible-to-accrual concept. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. When the City incurs an expenditure or expense for which both restricted and unrestricted resources may be used, it is the City s policy to use restricted resources first, then unrestricted resources. Financial Statement Amounts Cash and Cash Equivalents For purposes of the statement of cash flows, highly liquid investments are considered to be cash equivalents if they have a maturity of three months or less when purchased. Property Taxes Property taxes are levied by October 1 on the assessed value listed as of the prior January 1 for all real and business personal property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. Property tax revenues are considered available when they become due or past due and receivable within the current period. -22-

28 CITY OF GROESBECK, TEXAS NOTES TO THE FINANCIAL STATEMENTS For the Year Ended September 30, Summary of Significant Accounting Policies Financial Statement Amounts Property Taxes Allowances for uncollectible tax receivables within the General and Debt Service Funds are based upon historical experience in collecting property taxes. Uncollectible personal property taxes are periodically reviewed and written off, but the City is prohibited from writing off real property taxes without specific statutory authority from the Texas Legislature. Inventories The City records purchases of supplies as expenditures during the year. Year-end adjustments reflect the purchase method of accounting for inventory. Inventories are recorded at cost on a first-in, first-out basis. Capital Assets Purchased or constructed capital assets, including infrastructure assets, are reported at cost or estimated historical cost. Donated fixed assets are recorded at their estimated fair value at the date of the donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. A capitalization threshold of $5,000 is used. Capital assets are being depreciated using the straight-line method over the following estimated useful lives: Estimated Asset Class Useful Lives Land - Infrastructure 40 Buildings & Improvements Water & Sewer Systems Equipment & Furniture 3-10 Receivable and Payable Balances The City believes that sufficient detail of receivable and payable balances is provided in the financial statements to avoid the obscuring of significant components by aggregation. Therefore, no disclosure is provided which disaggregates those balances. There are no significant receivables which are not scheduled for collection within one year of year end. Pensions: For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources, and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from the City s Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the 23

29 CITY OF GROESBECK, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2017 employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Information regarding the City s Total Pension Liability is obtained from TMRS through a report prepared for the City by the TMRS consulting actuary, Gabriel Roeder Smith & Company, in compliance with Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. Deferred Outflows/Inflows of Resources: 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 (expense/expenditure) until then. The City has the following items that qualify for reporting in this category. Deferred charges on refunding A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Pension contributions after measurement date These contributions are deferred and recognized in the following fiscal year. Difference in projected and actual earnings on pension assets This difference is deferred and amortized over a closed five year period. Difference in expected and actual pension experience This difference is deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statements element, deferred inflows or 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 City has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, this item is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: property taxes and municipal court fines. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. -24-

30 1. Summary of Significant Accounting Policies 2. Financial Statement Amounts Interfund Activity CITY OF GROESBECK, TEXAS NOTES TO THE FINANCIAL STATEMENTS For the Year Ended September 30, 2017 Interfund activity results from loans, services provided, reimbursements or transfers between funds. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures or expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related costs as a reimbursement. All other interfund transactions are treated as transfers. Transfers In and Transfers Out are netted and presented as a single Transfers line on the government-wide statement of activities. Similarly, interfund receivables and payables are netted and presented as a single internal Balances line of the government-wide statement of net assets. Fund Equity The city implemented GASB Statement No. 54 during the year ending September 30, GASB Statement No. 54 requires analysis and presentation of fund balance in five categories. The new fund balance categories are: Non-spendable Includes items that are not in a spendable form because they are either legally or contractually required to be maintained intact. Restricted Includes items that are restricted by external creditors, grantors, or contributors, or restricted by legal constitutional provisions. Committed Includes items committed by the City Council, by resolution of the Council. Commitments may be modified or rescinded by similar resolution. Assigned Includes items assigned by specific uses, authorized by the City Manager and/or finance director. Unassigned This is the residual classification used for those balances not assigned to another category in the General Fund. Deficit fund balance in other governmental funds are also presented as unassigned. When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, then unrestricted resources as they are needed. The order of spending available resources is as follows: restricted, committed, assigned, and unassigned. The following detail of fund balances by classification is shown for governmental funds. Economic Other Total General Development Governmental Governmental Fund Fund Funds Funds Fund Balances: Nonspendable: Inventory $ 3,283 $ - $ - $ 3,283 Restricted for: Debt Service Committed to: Economic development - 297, ,818 Hotel Motel 87,267 87,267 Street improvements - - (6,622) (6,622) Convention Center , ,791 Assigned to: Public safety ,856 27,856 Culture and recreation Unassigned 46, ,712 $ 49,995 $ 297,818 $ 261,292 $ 609,