ANNUAL FINANCIAL REPORT OF THE CITY OF MOUNT VERNON, TEXAS

Transcription

1 ANNUAL FINANCIAL REPORT OF THE FOR FISCAL YEAR ENDED SEPTEMBER 30, 2016 City Administrator Tina Rose

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3 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2016 TABLE OF CONTENTS Page INTRODUCTORY SECTION City Officials iv FINANCIAL SECTION Independent Auditor's Report... 3 A. Management Discussion and Analysis 7 B. Basic Financial Statements Government-wide Financial Statements: Statement of Net Position Statement of Activities Governmental Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual - General Fund Proprietary Fund Financial Statements: Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to the Financial Statements 32 C. Required Supplementary Information: Schedule of Pension Trust - TMRS Funding Progress and Contributions Schedule of Contributions - TMRS 58 Schedule of Changes in Net Pension Liability and Related Ratios-TMRS 59 i

4 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2016 TABLE OF CONTENTS Page D. Supplementary Information Balance Sheet - Component Unit Economic Development Corporation. 63 Reconciliation of Governmental Fund Balance Sheet to the Statement of Net Position - Economic Development Corporation 64 Statement of Revenues, Expenditures, and Changes in Fund Balance-Economic Development Corporation.. 65 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities - Economic Development Corporation 66 Budgetary Comparison Schedule-Economic Development Corporation. 67 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.. 69 Schedule of Findings 71 ii

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7 City of Mount Vernon, Texas City Council For theyear Ended September 30, 2016 Margaret Sears Ralph Robertson Kenneth Shelton Jeff Briscoe Stephanie Hyman Russell Schneider Mayor Mayor Pro-Tem Council member Council member Council member Council member v

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9 FINANCIAL SECTION 1

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11 INDEPENDENT AUDITOR S REPORT Mayor and City Council City of Mount Vernon P.O. Box 597 Mount Vernon, Texas Members of the City Council: We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Mount Vernon, Texas ( City ) as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and 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 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 Park Street Commerce, Texas Office (903) Fax (903) Wesley Street Greenville, Texas Office (903) Fax (903) South Goliad Street Rockwall, Texas Office (972) Fax (972)

12 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 unit, each major fund, and the aggregate remaining fund information of the City of Mount Vernon, Texas, as of September 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof and respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis and the TMRS Funding Progress and Contributions and Schedule of Changes in Net Pension Liability on pages 7 17 and 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 s basic financial statements. The introductory section and supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it Park Street Commerce, Texas Office (903) Fax (903) Wesley Street Greenville, Texas Office (903) Fax (903) South Goliad Street Rockwall, Texas Office (972) Fax (972)

13 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 21, 2016, on our consideration of the City of Mount Vernon, 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 this 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 or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Mount Vernon, Texas internal control over financial reporting and compliance. Respectfully Submitted, CONWAY COMPANY CPAs, P.C. Greenville, Texas November 21, Park Street Commerce, Texas Office (903) Fax (903) Wesley Street Greenville, Texas Office (903) Fax (903) South Goliad Street Rockwall, Texas Office (972) Fax (972)

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15 As management of the City of Mount Vernon ("City"), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, We encourage readers to read the information presented here in conjunction with additional information that we have furnished in the City's financial statements, which follow this narrative. Financial Highlights MANAGEMENT DISCUSSION AND ANALYSIS SEPTEMBER 30, 2016 The assets of the City exceeded its liabilities at the close of the fiscal year by $11,134,853 (net position). Of this amount $7,764,415, or 70%, is net investment in capital assets. Net position restricted for specific purposes is $907,208, or 8%. The remaining amount of $2,463,230, or 22%, (unrestricted net position) may be used to meet the City's ongoing obligations to its citizens and creditors in accordance with fund designation and fiscal policies. The City's total net position increased by $362,441, or 3%, excluding prior period adjustments. The majority of this increase is attributable to an increase in total revenues of $117,915, or 3%. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $2,024,110, an increase of $4,422, or.3%, excluding prior period adjustment, in comparison with the prior year. Approximately 46% of this total amount, or $924,132, is available for spending at the City's discretion (unassigned fund balance). At the end of the current fiscal year, unassigned fund balance for the General Fund was $924,132, or 43%, of total general fund expenditures. The decrease in fund balance for the General Fund in the amount of ($41,342) is due to an increase in capital outlay. The City's total long-term debt decreased by ($132,856), or (3%), during the current fiscal year. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City of Mount Vernon's basic financial statements. The City's basic financial statements consist of three components; 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The report also contains other supplementary information in addition to the basic financial statements. 7

16 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Basic Financial Statements The first two statements (pages 21-23) in the basic financial statements are the Government-wide Financial Statements. They provide both short and long-term information about the City s financial status. The next statements (pages 24-31) are Fund Financial Statements. These statements focus on the activities of the individual parts of the City s government. These statements provide more detail than the government-wide statements. There are two parts to the Fund Financial Statements: 1) the governmental funds statements; and 2) the proprietary fund statements. The next section of the basic financial statements is the notes on pages The notes to the financial statements explain in detail some of the data contained in those statements. After the notes, required supplemental information is provided to show details about the City s pension plan on pages Government-wide Financial Statements The government-wide financial statements are designed to provide the reader with a broad overview of the City s finances, similar in format to a financial statement of a private-sector business. The government-wide statements provide short and long-term information about the City s financial status as a whole. The statement of net position presents information on all of the City s assets, deferred outflows, liabilities, and deferred inflows with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in these statements for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both the statement of net position and the statement of activities are prepared utilizing the accrual basis of accounting. The government-wide statements are divided into three categories: 1) governmental activities; 2) business-type activities; and 3) component unit. The governmental activities include most of the City s basic services such as public safety, parks and recreation, and general administration. Property and sales taxes and state and federal grant funds finance most of these activities. The business-type activities are those that the City charges customers to provide. These include the utility services offered by the City. The final category is the component unit. The government-wide financial statements are on pages of this report. Fund Financial Statements The fund financial statements provide a more detailed look at the City s most significant activities. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like all other governmental entities in Texas, uses fund accounting to ensure and reflect compliance (or non-compliance) with finance-related legal requirements, such as the General Statutes or the City s budget ordinance. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. 8

17 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Governmental Funds Governmental funds are used to account for those functions reported as governmental activities in the government-wide financial statements. Most of the City s basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the next year. Governmental funds are reported using an accounting method called modified accrual accounting which provides a short-term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her determine if there are more or less financial resources available to finance the City s programs. The relationship between government activities (reported in the Statement of Net position and the Statement of Activities) and governmental funds is described in a reconciliation that is a part of the fund financial statements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains fifteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Debt Service Fund, and the Permanent Fund. The Governmental Fund financial statements can be found on pages of this report. The City adopts an annual budget for its General Fund, as required by the General Statutes. The budget is a legally adopted document that incorporates input from the citizens of the City, the management of the City, and the decisions of the council about which services to provide and how to pay for them. It also authorizes the City to obtain funds from identified sources to finance these current period activities. The budgetary statement provided for the General Fund demonstrates how well the City complied with the budget ordinance and whether or not the City succeeded in providing the services as planned when the budget was adopted. The budgetary comparison schedule uses the modified accrual basis of accounting and is presented using the same format, language, and classifications as the legal budget document. The schedule shows four columns: 1) the original budget; 2) the final budget as amended by the council; 3) the actual resources, charges to appropriations, and ending balances in the General Fund; and 4) the difference or variance between the final budget and the actual resources and charges. Proprietary Funds The City has one type of proprietary fund which is the Water and Sewer Fund. 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. Proprietary Funds provide the same type of information as the government-wide financial statements, only in more detail. The basic proprietary fund financial statements can be found on pages of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements are on pages of this report. Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report includes certain required supplementary information concerning the City s progress in funding its obligation to provide pension benefits to its employees. 9

18 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 New Pronouncements The following statements for GASB were effective for the City in the fiscal year ending September 30, 2016: GASB Statement No. 72, Fair Value Measurement and Application addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes and, also, provides guidance for applying fair value to certain investments and disclosure related to all fair value measurements. The implementation of this Statement does not result in any changes to the City s financial statements. GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The implementation of this statement is included in the Required Supplementary Information as provided by TMRS. GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments is to address the hierarchy of generally accepted accounting principles (GAAP). This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP. This Statement supersedes Statement No. 55 and amends Statement No. 62. The implementation of this Statement does not result in any changes to the City s financial statements. The GASB has issued the following statements which will be effective in future years as described below: GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans other than Pension Plans, that replaces Statement No. 43 and amends Statement No. 57 will be implemented as required by GASB during the fiscal year September 30, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions, that replaces Statement No. 45 and amends Statement No. 57 and 74 will be implemented in fiscal year ending September 30, 2018 as required. GASB Statement No. 77, Tax Abatement Disclosures is to assist in assessing whether a government s currentyear revenues were sufficient to pay for current-year services, whether a government complied with finance-related legal and contractual obligations, where a government s financial resources come from and how it uses them, and a government s financial position and economic condition and how they have change over time. The City is in the process of evaluating the potential changes to the financial statements as a result of the implementation of this statement in fiscal year ending September 30,

19 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Governmental Net Position Business-Type Activities Activities Total Current and other assets $ 2,058,687 $ 1,699,381 $ 3,414,686 $ 4,669,919 $ 5,473,373 $ 6,369,300 Capital assets 2,105,504 1,864,524 7,778,646 6,935,780 9,884,150 8,800,304 Total assets 4,164,191 3,563,905 11,193,332 11,605,699 15,357,523 15,169,604 Deferred outflow of resources Deferred outflow-pension 356, , ,353 93, , ,633 Long-term liabilities 308, ,291 4,044,834 4,126,986 4,353,040 4,297,277 Current liabilities 32,874 72, , , , ,173 Total liabilities 341, ,862 4,185,395 4,288,588 4,526,475 4,531,450 Deferred inflow of resources Deferred inflow-pension 140, ,214 62,094 55, , ,311 Net position: Net investment in capital assets 2,105,504 1,864,524 5,658,911 5,797,373 7,764,415 7,661,897 Restricted 907, , , ,933 Unrestricted 1,026, ,508 1,436,285 1,558,138 2,463,230 2,235,646 Total net position $ 4,039,657 $ 3,404,965 $ 7,095,196 $ 7,355,511 $ 11,134,853 $ 10,760,476 As noted earlier, net position may serve over time as one useful indicator of a City's financial condition. The net position of the City exceeded liabilities by $11,134,853 as of September 30, The City's net position increased $362,441, or 4%, excluding prior period adjustments, for the fiscal year ended September 30, Net investment in capital assets: The largest portion of the City's net position, $7,764,415, or 70%, reflects the investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related debt still outstanding that was issued to acquire those items. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of outstanding related debt, the resources needed to repay that debt must be provided by other sources since the capital assets cannot be used to liquidate these liabilities. Restricted net position: The restricted net position of $907,208, or 8%, of total net position represents resources that are subject to external restrictions on their use, or by enabling legislation. Restricted net position is comprised of state and contractually imposed restrictions which are $563,053, or 62.07%, debt obligations, nonspendable endowment funds of $281,626, or 31.04%, $14,647, or 1.61%, restricted for court use, $47,196 or 5.2% for hotel use and $686, or 0.08% for the HOME program. Unrestricted net position: Unrestricted net position of $2,463,230, or 22%, is available to fund City programs to citizens and debt obligations to creditors. The majority of unrestricted net position resides in the Business-type activities. 11

20 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 The City of Mount Vernon's Changes in Net Position Governmental Business-type Activities Activities Totals REVENUE: Program Revenues Charges for Services $ 602,236 $ 592,752 $ 1,317,366 $ 1,269,479 $ 1,919,602 $ 1,862,231 Operating Grants and Contributions 20,170 11, ,170 11,574 Capital Grants and Contributions 97,070 70, , ,666 General Revenues: Property Taxes 711, , , ,094 Sales Taxes 494, , , ,970 Franchise Taxes 141, , , ,577 Hotel/Motel Tax 40,216 38, ,216 38,131 Investment Income 29,980 21,908 67,683 65,103 97,663 87,011 Miscellaneous 24,477 15, ,963 25,423 31,901 Total Revenues 2,161,075 2,078,610 1,385,995 1,350,545 3,547,070 3,429,155 EXPENSES: Program Expenses: General Government 477, , , ,153 Public Safety 582, , , ,988 Public Services and Operations 204, , , ,557 Public Works 340, , , ,193 Parks and Recreation 16,972 22, ,972 22,364 Sanitation 296, , , ,927 Water and Sewer - - 1,267,803 1,337,115 1,267,803 1,337,115 Total Expenses 1,916,826 1,816,182 1,267,803 1,337,115 3,184,629 3,153,297 Increase in Net Position before Transfers 244, , ,192 13, , ,858 Other Revenues and Financing Sources (uses) Transfers (22,734) 53,600 22,734 (53,600) - - Total Other Financing Sources (uses) (22,734) 53,600 22,734 (53,600) - - Increase in Net Position 221, , ,926 (40,170) 362, ,858 Net Position, October 1 3,404,965 3,152,225 7,355,511 7,424,448 10,760,476 10,576,673 Prior Period Adjustments 413,177 (63,288) (401,241) (28,767) 11,936 (92,055) Net Position, September 30 $ 4,039,657 $ 3,404,965 $ 7,095,196 $ 7,355,511 $ 11,134,853 $ 10,760,476 Governmental activities increase in net position, excluding prior period adjustments, is $221,515. This is due, in part, to a slight increase in revenues of $35,450, or 3%. Business-type activities increased net position, excluding prior period adjustments, by $140,926. This is due to a decrease in total expenses of ($69,312), or (5%), and a slight increase in total revenues of $35,450, or 3%. 12

21 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Governmental-type activities - Governmental-type activities increased the City's net position by $221,515, excluding prior period adjustments. A key element of this increase is as follows: Total revenues collected increased $82,465, or 3.8%. Expenses and Program Revenues - Governmental Activities (amounts expressed in thousands) FY2016 Expenses FY2015 Expenses FY2016 Revenue FY2015 Revenue General Government Public Safety Public Services Public Works Parks and Recreation Sanitation Revenues by Source - Governmental Activities Grants and Contributions 5% Miscellaneous 4% Property Taxes 33% Charges for Services 28% Sales Taxes 23% Franchise Taxes 7% 13

22 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Business-type Activities - Business-type activities increased the City's net position by $140,926, excluding prior period adjustments. Key elements of this increase are as follows: Total revenues increased $35,450, or 3%. Total expenditures decreased ($69,312), or (5%). Expenditures and Program Revenues - Business-type Activities (amounts expressed in thousands) Water and Sewer 1,400 1,200 1, FY2016 Expenses FY2016 Revenues FY2015 Expenses FY2015 Revenues Revenues by Source - Business-type Activities Assessment Fees 14% Other 7% Water Sales 42% Sewer Service 37% 14

23 MANAGEMENT AND DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Financial Analysis of the City's Funds As noted earlier, the City of Mount Vernon uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds - The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of usable resources. Such information is useful in assessing the City's financing requirements. Specifically, unassigned fund balance can be a useful measure of a government's net resources available for spending as they represent the portion of fund balance which has not been limited to use for a particular purpose by either an external party, the City itself, or a group or individual that has been granted authority to assign resources for a particular purpose for the City. At September 30, 2016, the governmental funds of the City reported a combined fund balance of $2,024,110, a 26% increase when compared to the prior year. The components of total fund balance are as follows: Nonspendable fund balance of $281,626, or 14%, of total fund balance is a permanent endowment for the City cemetery. Restricted fund balance of $624,418, or 31%, of total fund balance consists of the following: - requirements for debt obligations of $561,889, or 90.%; - restrictions for court use of $14,647, or 2.3%; - restrictions for hotel tax use of $47,196, or 7.6%; - restrictions for HOME program of $686, or 0.1%. Assigned fund balance of $193,934, or 10%, of total fund balance represents residual fund balance that has not been restricted, committed, or assigned. Unassigned fund balance of $924,132, or 45%, fund balance that is available for any purpose. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund was $924,132, compared to $738,168 at the end of the prior year. As a measure of the General Fund's liquidity, it may be useful to compare the unassigned fund balance to total fund expenditures. Unassigned fund balance represents 9% of total expenditures. It is the City's goal to achieve and maintain an unassigned fund balance in the General Fund equal to 16.67% of expenditures. At the end of the current fiscal year, the City is in excess of this threshhold by 37%. General Fund Budgetary Highlights: During the fiscal year, the City did not revise the budget. Generally, budget amendments fall into one of three categories: (1) amendments made to adjust the estimates that are used to prepare the original budget ordinance once exact information is available; 2) amendments made to recognize new funding amounts from external sources, such as Federal and State grants; and (3) increases in appropriations that become necessary to maintain services. Revenues were significantly more than the budgeted amounts and expenditures were more than budget mainly in the area of capital outlays. Proprietary Funds - The City's proprietary funds provide the same type of information found in the government-wide statements but in more detail. Unrestricted net position of the proprietary funds at the end of the fiscal year amounted to $1,436,

24 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Capital assets - The City's investment in capital assets for its governmental and business-type activities as of September 30, 2016, totals $9,884,150 (net of accumulated depreciation). This investment in capital assets includes buildings, roads and bridges, land, machinery and equipment. The total increase in the City's investment in capital assets for the current fiscal year was 12%. Major capital asset events during the current fiscal year included the following: Ongoing improvements to wastewater infrastructure Completion of sidewalk improvements project Capital Assets As of September 30, 2016 (net of accumulated depreciation) Governmental Business-type Activities Activities Total Land & Improvements $ 174,582 $ 174,582 $ 91,596 $ 91,596 $ 266,178 $ 266,178 Machinery & Equipment 153, , , , , ,791 Buildings & Improvements 26,243 37, ,243 37,452 Infrastructure 1,751,354 1,428,315 5,994,378 5,567,786 7,745,732 6,996,101 Construction in Progress - 20,666 1,202, ,116 1,202, ,782 Total $ 2,105,504 $ 1,864,524 $ 7,778,646 $ 6,935,780 $ 9,884,150 $ 8,800,304 More detailed information about the City's capital assets is presented in Note F to the financial statements Long-term Debt - As of September 30, 2016, the City had long-term debt outstanding of $3,927,144. This debt is secured by property taxes and/or net revenues of the Water/Sewer Fund. The debt decreased by ($132,856), or (3%). Outstanding Debt As of September 30, 2016 Governmental Business-type Activities Activities Total Certificates of Obligation $ - $ - $ 3,927,144 $ 4,060,000 $ 3,927,144 $ 4,060,000 Total $ - $ - $ 3,927,144 $ 4,060,000 $ 3,927,144 $ 4,060,000 More detailed information about the City's long-term liabilities is presented in Note G to the financial statements. 16

25 MANAGEMENT DISCUSSION AND ANALYSIS (continued) SEPTEMBER 30, 2016 Economic Factors and Next Year's Budgets and Rates The following known factors were considered in preparing the City's operating budget for FY : The revenue budget for all funds totals $3,613,620 which is a slight increase over the previous year. The adopted property tax rate for FY will remain at $ per $100 valuation. Property taxes are expected to increase $15,000, or 2.4%. Requests for Information 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 any questions about this report or need additional financial information, contact the City of Mount Vernon, P O Box 597, Mount Vernon, Texas

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27 BASIC FINANCIAL STATEMENTS 19

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29 STATEMENT OF NET POSITION SEPTEMBER 30, 2016 Primary Government Component Governmental Business-type Unit Activities Activities Total EDC ASSETS Cash and cash equivalents $ 972,616 $ 1,382,681 $ 2,355,297 $ 923,844 Receivables (net of allowance for uncollectible) 146, , ,393 35,787 Restricted assets: Cash and cash equivalents 939,308 1,923,375 2,862,683 - Capital assets, not being depreciated: Land & improvements 174,582 91, ,178 - Construction in progress - 1,202,094 1,202,094 - Capital assets, net of accumulated depreciation: Buildings and improvements 26,243-26,243 - Infrastructure 1,751,354 5,994,378 7,745,732 - Machinery & equipment 153, , ,903 - Total Assets 4,164,191 11,193,332 15,357, ,631 DEFERRED OUTFLOW OF RESOURCES Deferred outflow - pension 356, , ,146 26,984 LIABILITIES Accounts payable 27,680 16,912 44,592 1,250 Customer deposits - 115, ,966 - Accrued interest payable - 4,593 4,593 - Other liabilities 5,194 3,090 8,284 - Noncurrent Liabilities: Due within one year: Compensated absences 3, ,793 - Certificates of obligations - 110, ,000 - Due in more than one year: Compensated absences 38,571 8,243 46,814 - Net pension liability 266, , ,289 21,976 Certificates of obligations - 3,817,144 3,817,144 - Total Liabilities 341,080 4,185,395 4,526,475 23,226 DEFERRED INFLOW OF RESOURCES Deferred inflow - pension 140,247 62, ,341 9,306 NET POSITION Net investment in capital assets 2,105,504 5,658,911 7,764,415 - Restricted for: Debt 563, ,053 - Permanent Fund: Nonexpendable 281, ,626 - HOME program Court use 14,647-14,647 - Hotel tax use 47,196-47,196 - Unrestricted 1,026,945 1,436,285 2,463, ,083 Total Net Position $ 4,039,657 $ 7,095,196 $ 11,134,853 $ 954,083 The notes to the financial statements are an integral part of this financial statement. 21

30 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 Function/Program Activities Primary Government Governmental Activities: General Government 477,532 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ $ 28,330 $ 5,000 $ - Public Safety 582,040-15,170 - Public Services and Operations 204,108 87, Public Works 340,019 14,980-97,070 Parks and Recreation 16, Sanitation 296, , Total governmental activities 1,916, ,236 20,170 97,070 Business-type Activities: Water and Sewer 1,267,803 1,317, Total business-type activities 1,267,803 1,317, Total primary government 3,184,629 1,919,602 20,170 97,070 Component unit: Economic Development Corporation 158, Total component unit $ 158,550 $ - $ - $ - General revenues: Property taxes Sales taxes Franchise Taxes Hotel Taxes Investment income Miscellaneous Transfers Total general revenues & transfers Change in net position Net position - beginning Prior Period Adjustment Net position - ending The notes to the financial statements are an integral part of this financial statement. 22

31 Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business Component Activities Activities Total Unit $ (444,202) $ - $ (444,202) $ - (566,870) - (566,870) - (116,910) - (116,910) - (227,969) - (227,969) - (16,657) - (16,657) - 175, ,258 - (1,197,350) - (1,197,350) ,563 49, ,563 49,563 - (1,197,350) 49,563 (1,147,787) (158,550) $ - $ - $ - $ (158,550) $ 711,067 $ - $ 711,067 $ - 494, , , , ,284-40,216-40,216-29,980 67,683 97,663 14,134 24, ,423 - (22,734) 22, ,418,865 91,363 1,510, , , , ,441 92,872 3,404,965 7,355,511 10,760, , ,177 (401,241) 11,936 - $ 4,039,657 $ 7,095,196 $ 11,134,853 $ 954,083 The notes to the financial statements are an integral part of this financial statement. 23

32 BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30, 2016 Total General Debt Service Permanent Governmental Fund Fund Fund Funds ASSETS Cash and cash equivalents $ 972,616 $ - $ - $ 972,616 Receivables (net of allowances for uncollectible) 146, ,763 Cash - Restricted 95, , , ,308 Total Assets 1,215, , ,626 2,058,687 LIABILITIES Accounts payable 27, ,680 Other liabilities 5, ,194 Total Liabilities 32, ,874 DEFERRED INFLOW OF RESOURCES Unavailable revenue-property taxes 1, ,703 Total Deferred Inflow of Resources 1, ,703 FUND BALANCES Nonspendable: Endowment , ,626 Restricted for: Debt - 561, ,889 Court use 14, ,647 Hotel Tax Use 47, ,196 HOME program Assigned - streets 193, ,934 Unassigned 924, ,132 Total Fund Balances 1,180, , ,626 2,024,110 Total Liabilities, Deferred Inflow of Resources, and Fund Balances $ 1,215,064 $ 561,997 $ 281,626 $ 2,058,687 The notes to the financial statements are an integral part of this financial statement. 24

33 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2016 Total fund balances - governmental funds balance sheet $ 2,024,110 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. Accumulated depreciation has not been included in the governmental fund financial statements. Deferred inflow/outflow of resources for pension are not reported in the fund financial statements. Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements Accrued liabilities for compensated absences have not been reflected in the fund financial statements. Net pension liability is not due and payable in the current period and, therefore, is not reported in the fund financial statements. 4,246,374 (2,140,870) 216,546 1,703 (41,955) (266,251) Net position of governmental activities - statement of net position $ 4,039,657 The notes to the financial statements are an integral part of this financial statement. 25

34 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Total General Debt Service Permanent Governmental Fund Fund Fund Funds REVENUE Property Taxes $ 663,068 $ 66,594 $ - $ 729,662 Sales Tax Collected 494, ,575 Franchise Taxes 141, ,284 Licenses and Permits 16, ,358 Fines and Forfeitures 85, ,821 Hotel Tax 40, ,216 Charge for Services 500, ,058 Grant Revenue 101, ,152 Intergovernmental Revenues-state and federal 16, ,088 Investment Income 16,311 9,104-25,415 Miscellaneous 24, ,477 Total Revenues 2,099,408 75,698-2,175,106 EXPENDITURES Current: General Government 410, ,163 Public Safety 530, ,753 Public Services and Operations 211, ,267 Public Works 217, ,353 Parks and Recreation 14, ,652 Sanitation 296, ,155 Capital Outlay: General Government 93, ,896 Public Safety 36, ,732 Public Works 336, ,979 Total Expenditures 2,147, ,147,950 Excess (deficiency) of revenues over (under) expenditures (48,542) 75,698-27,156 Other Revenues and Financing Sources (uses) Transfers 7,200 (29,934) - (22,734) Total Other Financing Sources (uses) 7,200 (29,934.00) - (22,734) Net Change in Fund Balances (41,342) 45,764-4,422 Fund Balances, October 1 808, , ,626 1,606,511 Prior Period Adjustments 413, ,177 Fund Balances, September 30 $ 1,180,595 $ 561,889 $ 281,626 $ 2,024,110 The notes to the financial statements are an integral part of this financial statement. 26

35 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 Net change in fund balances - total governmental funds $ 4,422 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Depreciation expense on capital assets is reported in the government-wide statement of activities and changes in net position, but they do not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds. Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements Current year changes in pension expense do not require the use of current resources; therefore, are not reported as expenditures in governmental funds. Change in net position of governmental activities - statement of activities $ 467,607 (226,629) (18,595) (5,290) 221,515 The notes to the financial statements are an integral part of this financial statement. 27

36 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2016 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUE Property taxes $ 637,500 $ 637,500 $ 663,068 $ 25,568 Fines and forfeitures 80,210 80,210 85,821 5,611 Licenses and permits 19,950 19,950 16,358 (3,592) Sales taxes collected 450, , ,575 44,575 Franchise tax 140, , ,284 1,284 Hotel tax 35,000 35,000 40,216 5,216 Charge for services 438, , ,058 61,908 Grant revenues , ,152 Intergovernmental revenues-state and local 11,817 11,817 16,088 4,271 Investment income 8,900 8,900 16,311 7,411 Miscellaneous 12,350 12,350 24,477 12,127 Total Revenues 1,833,977 1,833,977 2,099, ,431 EXPENDITURES General government 433, , ,163 22,917 Public safety 524, , ,753 (6,703) Public services and operations 186, , ,267 (24,665) Public works 293, , ,353 76,597 Parks and recreation 20,445 20,445 14,652 5,793 Sanitation 292, , ,155 (3,968) Capital outlay: General government 128, ,000 93,896 34,104 Public safety 45,500 45,500 36,732 8,768 Public works 104, , ,979 (232,279) Total Expenditures 2,028,514 2,028,514 2,147,950 (119,436) Excess (deficiency) of revenues over (194,537) (194,537) (48,542) 145,995 (under) expenditures Other Revenues and Financing Sources (uses) Transfers 107, ,200 7,200 (100,000) Total Other Financing Sources (uses) 107, ,200 7,200 (100,000) Excess of revenues and other financing sources over (under) expenditures and other financing uses (87,337) (87,337) (41,342) 45,995 Fund Balances/Equity, October 1 808, , ,760 Prior Period Adjustment ,177 Fund Balances/Equity, September 30 $ 721,423 $ 721,423 $ 1,180,595 The notes to the financial statements are an integral part of this financial statement. 28

37 STATEMENT OF FUNDS NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2016 ASSETS Water/Sewer Fund Current Assets: Cash and cash equivalents $ 1,382,681 Receivables (net of allowances for uncollectible) 108,630 Restricted cash and cash equivalents 1,923,375 Total Current Assets 3,414,686 Noncurrent Assets: Capital Assets: Land 91,596 Machinery & equipment 586,303 Infrastructure 10,805,984 Construction in progress 1,202,094 Less: accumulated depreciation (4,907,331) Total Capital Assets (net of accumulated depreciation) 7,778,646 Total Noncurrent Assets 7,778,646 Total Assets 11,193,332 DEFERRED OUTFLOWS OF RESOURCES Deferred outflow - pension 149,353 LIABILITIES Current Liabilities: Accounts payable 16,912 Other liabilities 3,090 Payables from restricted funds: Customer deposits 115,966 Accrued interest payable 4,593 Compensated absences - current 409 Certificates of obligation - current 110,000 Total Current Liabilities 250,970 Noncurrent Liabilities: Compensated absences 8,243 Net pension liability 109,038 Certificates of obligation 3,817,144 Total Non-Current Liabilities 3,934,425 Total Liabilities 4,185,395 DEFERRED INFLOWS OF RESOURCES Deferred inflow - pension 62,094 NET POSITION Net investment in capital assets 5,658,911 Unrestricted 1,436,285 Total Net Position $ 7,095,196 The notes to the financial statements are an integral part of this financial statement. 29

38 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Water/Sewer Fund OPERATING REVENUES: Charges for services-water $ 587,802 Charges for services-sewer 513,295 Assessment fees 195,614 Miscellaneous income 21,601 Total Operating Revenues 1,318,312 OPERATING EXPENSES: Personnel costs 255,345 Supplies and materials 205,870 Maintenance and repair 187,866 Utility services 54,438 Water purchases 81,433 Depreciation 389,321 Total Operating Expenses 1,174,273 Operating Income (Loss) 144,039 NON-OPERATING REVENUES (EXPENSES): Interest expense (93,530) Investment income 67,683 Total Non-Operating Revenues (Expenses) (25,847) Income before capital contributions and transfers 118,192 Transfers 22,734 Change in Net Position 140,926 Net position - Beginning, October 1 7,355,511 Prior Period Adjustments (401,241) Net Position - Ending, September 30 $ 7,095,196 The notes to the financial statements are an integral part of this financial statement. 30

39 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Water/Sewer Fund Cash Flows from Operating Activities Cash received from customers $ 1,314,614 Cash received from other sources 21,601 Cash paid to employees (255,345) Cash paid to suppliers (553,974) Net cash provided by (used for) operating activities 526,896 Cash Flows from Noncapital Financing Activities Transfers to/from other funds 22,734 Change in net pension liability (399,396) Net Cash Provided by Non-capital Financing Activities (376,662) Cash Flows from Capital and Related Financing Activities Acquisition and construction of capital assets (1,232,185) Principal payments on debt obligations (132,856) Interest and fiscal charges on debt (93,530) Net cash provided by (used for) capital and related financing activities (1,458,571) Cash Flows from Investing Activities Interest Income 67,683 Net cash provided by (used for) investing activities 67,683 Net Increase (Decrease) in Cash and Cash Equivalents (1,240,654) Cash and Cash Equivalents at Beginning of Year 4,546,710 Cash and Cash Equivalents at End of Year $ 3,306,056 Reconciliation of operating income to net cash provided by (used for) operation activities Operating income (loss) $ 144,039 Adjustment to reconcile operating income to net provided by operating activities: Depreciation 389,321 Change in Assets and Liabilities Decrease (increase) in receivables 14,579 Increase (decrease) in accounts payable (13,198) Increase (decrease) in customer deposits 3,324 Increase (decrease) in accrued expenses (5,084) Increase (decrease) in other liabilities (6,085) Total Adjustments 382,857 Net cash provided by (used for) operating activities $ 526,896 The notes to the financial statements are an integral part of this financial statement. 31