Eaton County, Michigan. Year Ended September 30, Financial Statements and Single Audit Act Compliance

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1 Eaton County, Michigan Year Ended September 30, 2016 Financial Statements and Single Audit Act Compliance

2 Table of Contents Introductory Section 1 Letter of Transmittal 3 Organizational Chart 5 Principal Officials 6 Financial Section 7 Independent Auditors Report 9 Management s Discussion and Analysis 13 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position 26 Statement of Activities 27 Fund Financial Statements: Balance Sheet Governmental Funds 30 Reconciliation of Fund Balances of Governmental Funds to Net Position of Governmental Activities 31 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 32 Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities 33 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual: General Fund 34 Child Care Special Revenue Fund 35 Statement of Net Position Proprietary Funds 36 Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds 37 Statement of Cash Flows Proprietary Funds 38 Statement of Fiduciary Net Position - Fiduciary Funds 40 Statement of Changes in Fiduciary Net Position - Fiduciary Funds 41 Combining Statement of Net Position Discretely Presented Component Units 42 Combining Statement of Activities Discretely Presented Component Units 43 Notes to Financial Statements 45 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - County: Schedule of Changes in the County's Net Pension Liability and Related Ratios 94 Schedule of the Net Pension Liability 95 Schedule of Contributions 96 MERS Agent Multiple-Employer Defined Benefit Pension Plan - Health and Rehabilitation Services Facility: Schedule of Changes in the Facility's Net Pension Liability and Related Ratios 97 Schedule of the Net Pension Liability 98 Schedule of Contributions 99 Page

3 Table of Contents Required Supplementary Information (concluded) MERS Agent Multiple-Employer Defined Benefit Pension Plan - District Health: Schedule of Changes in the District's Net Pension Liability and Related Ratios 100 Schedule of the Net Pension Liability 101 Schedule of Contributions 102 Postemployment Healthcare Plan - Retiree Health: Schedule of Funding Progress 103 Schedule of Employer Contributions 103 Combining and Individual Fund Financial Statements and Schedules General Fund: Detailed Schedule of Revenues and Other Financing Sources - Budget and Actual 106 Detailed Schedule of Expenditures and Other Financing Uses - Budget and Actual 109 Nonmajor Governmental Funds: Combining Balance Sheet 112 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 118 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds 124 Nonmajor Enterprise Funds: Combining Statement of Net Position 137 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 138 Combining Statement of Cash Flows 139 Internal Service Funds: Combining Statement of Net Position 140 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 142 Combining Statement of Cash Flows 144 Agency Funds: Combining Statement of Fiduciary Assets and Liabilities 146 Page

4 Table of Contents Combining and Individual Fund Financial Statements and Schedules (concluded) Discretely Presented Component Units: Board of Public Works: Statement of Net Position and Governmental Funds Balance Sheet 148 Reconciliation of Fund Balances of Governmental Funds to Net Position of Governmental Activities 151 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance 152 Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities 155 Drainage Districts: Statement of Net Position and Governmental Funds Balance Sheet 156 Reconciliation of Fund Balances of Governmental Funds to Net Position of Governmental Activities 159 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance 160 Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities 163 District Health Department: Statement of Net Position and Governmental Funds Balance Sheet 164 Reconciliation of Fund Balances of Governmental Funds to Net Position of Governmental Activities 165 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance 166 Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities 167 Page

5 Table of Contents Page Single Audit Act Compliance 169 Independent Auditors Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 171 Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Independent Auditors 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 Independent Auditors Report on Compliance for Each Major Federal Program and on Internal Control over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings 184 Corrective Action Plan 185

6 INTRODUCTORY SECTION 1

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8 EATON COUNTY CONTROLLER/PERSONNEL March 6, Independence Blvd Charlotte, MI (517) (517) Fax John F. Fuentes CPA Controller/ Administrator Connie L. Sobie Deputy Controller/ Administrator Melissa Howell Accountant To the Members of the Board of Commissioners: The Annual Financial Report of Eaton County, Michigan for the fiscal year ended September 30, 2016, is hereby submitted. Responsibility for both the accuracy of the presented information and the completeness and fairness of the presentation, including all disclosures, rests with the County. We believe the enclosed information is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups of the County. These financial statements have been prepared in accordance with generally accepted accounting principles for local governments as prescribed by the Governmental Accounting Standards Board (GASB). All disclosures necessary to enable the reader to gain an understanding of the County s financial activities have been included. Format The report is presented in two sections: Introductory and Financial. The Introductory section includes this transmittal, an organizational chart, and a list of principal officials. The Financial section includes the independent auditor s report, management s discussion and analysis, the basic financial statements, required supplementary information, and the combining and individual fund financial statements and schedules. Reporting Entity The financial reporting entity includes all the funds of the County as well as all of its component units. Component units are legally separate entities for which the primary government is financially accountable. Blended Component Units although legally separate entities, they are, in substance, part of the primary governments operations and are included as part of the primary government. The following organizations are reported within the combining and individual fund financial statements: Eaton County Department of Human Services Eaton County Health and Rehabilitation Services Facility Eaton County Building Authority Discretely Presented Component Units are legally separate from the primary government and are reported in separate columns in the combined financial statements to differentiate their financial position and results of operations from those of the primary government. The following are reported as discretely presented component units: Eaton County Road Commission Eaton County Board of Public Works Eaton County Drainage Districts 3

9 Joint Ventures are legal entities that result from a contractual arrangement, or interlocal agreement, which is owned, operated, or governed by two or more participants. The following is reported as a discretely presented component unit: Barry/Eaton District Health Department The following Related Organization did not meet the financial accountability criteria and has been excluded from the County s financial statements: Eaton County Transportation Authority Financial Reporting and Auditing The County is required to undergo an annual single audit in conformity with the provisions of the Uniform Guidance. Information pertaining to this single audit, including the auditors reports on the internal control structure and compliance with laws and regulations, the schedule of federal awards and a schedule of findings and questioned costs, is presented in this report. Independent Audit The State of Michigan requires that an annual audit of the financial records and transactions of all departments of the County be performed by an independent certified public accountant. In addition, the audit is designed to meet the requirements set forth in the Uniform Guidance. The auditors report on the financial statements is included in the financial section of the report. The auditor s reports relating specifically to the single audit are presented in this report as well. Respectfully submitted, John Fuentes Controller 4

10 Organizational Chart 5

11 PRINCIPAL OFFICIALS For the Year Ended September 30, 2016 Board of Commissioners Michael Hosey District 1 Blake Mulder - Chairman District 2 Terrance Augustine District 3 Howard T. Spence District 4 Jim Osieczonek District 5 Jane Whitacre District 6 Glenn Freeman III District 7 Joseph C. Brehler District 8 Wally Miars District 9 Roger A. Eakin - Vice-Chairman District 10 Wayne Ridge District 11 Brian Lautzenheiser District 12 Kent C. Austin District 13 Jeremy Whittum District 14 Barbara Rogers District 15 Tom Reich County Sheriff Diana Bosworth County Clerk/Register of Deeds Robert A. Robinson County Treasurer Douglas R. Lloyd Prosecuting Attorney Richard Wagner Drain Commissioner John Fuentes, CPA Controller/Administrator Connie Sobie Deputy Controller/Administrator Administration 6

12 FINANCIAL SECTION 7

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14 Rehmann Robson 2330 East Paris Ave. SE Grand Rapids, MI Ph: Fx: rehmann.com INDEPENDENT AUDITORS' REPORT March 6, 2017 The Board of Commissioners Eaton County, Michigan Charlotte, Michigan Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Eaton County, Michigan (the County ), as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the County 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. Independent Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Eaton County Health and Rehabilitation Services Enterprise Fund, which is a major fund and therefore a separate opinion unit that represents 59 percent, 45 percent, and 91 percent, respectively, of the assets, net position, and revenues of the business-type activities. We also did not audit the financial statements of the Eaton County Road Commission, a component unit of the County that represents 45 percent, 54 percent and 70 percent, respectively, of the assets, net position, and revenues of the total discretely presented component units. Those statements were audited by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included for the Eaton County Health and Rehabilitation Services and the Eaton County Road Commission, is based solely on the reports of the other auditors. 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. The financial statements of the Eaton County Health and Rehabilitation Services were not audited in accordance with Government Auditing Standards. 9

15 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, based on our audit and the reports of other auditors, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Eaton County, Michigan, as of September 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the general fund and each major special revenue fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that management s discussion and analysis and the schedules for the pension and other postemployment benefits plans listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or 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 County s basic financial statements. The combining and individual fund financial statements and schedules and the introductory section are presented for purposes of additional analysis and are not a required part of the basic financial statements. 10

16 The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 6, 2017, on our consideration of Eaton County, Michigan s internal control over financial reporting and 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County's internal control over financial reporting and compliance. 11

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18 MANAGEMENT'S DISCUSSION AND ANALYSIS 13

19 Management's Discussion and Analysis As management of Eaton County, Michigan we offer the readers of the County s financial statements this narrative overview and analysis of the financial activities of the County for the fiscal year ended September 30, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in the accompanying basic financial statements. Financial Highlights The County s total net position decreased by $9,812,804 during 2016, which consisted of a decrease of $9,844,269 for governmental activities and an increase of $31,465 for business-type activities. As of the close of the current fiscal year, the County s governmental funds (this includes the general, special revenue, debt service, capital projects and permanent funds) reported combined ending fund balances of $9,329,080, a decrease of $1,190,580 in comparison with the prior year. Of the fund balance amount, $5,575,167 is available for spending at the government s discretion (unassigned fund balance). The general fund had a decrease in fund balance of $783,924 for 2016, as a result of decreased property tax revenues and intergovernmental funding, and an overall increase in expenditures. At the end of the year, unassigned fund balance for the general fund was $5,575,167 or approximately 17.5 percent of total general fund expenditures. Total fund balance for the general fund was $5,818,010. The County s total bonded debt, which excludes delinquent tax notes, decreased by $270,000 during the current fiscal year as a result of annual principal repayments of obligations. The County also refunded debt of $8,505,000 for the purpose of interest savings and economic gain. Using this Annual Report This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Activities provide information about the activities of the County as a whole (government-wide financial statements) and present a longer-term view of the County s finances. Fund financial statements tell how these services were financed in the short-term as well as what remains for future spending. Fund financial statements also report the County s operations in more detail than the government-wide statements by providing information about the County s most significant funds. The remaining statements provide financial information about activities for which the County acts solely as a trustee or agent for the benefit of those outside of the government. The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Reporting the County as a Whole The Statement of Net Position and the Statement of Activities. One of the most important questions asked about the County s finances is, Is the County as a whole better off or worse off as a result of this year s activities? The Statement of Net Position and the Statement of Activities report information about the County as a whole and about its activities in a way that helps answer this question. These statements include all assets, deferred outflows of resources, liabilities and deferred inflows of resources, using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. 14

20 Management's Discussion and Analysis These two statements report the County s net position and changes in them. One can think of the County s net position as one way to measure the County s financial health. Over time, increases or decreases in the County s net position are one indicator of whether its financial health is improving or deteriorating. During 2016, the net position of the County decreased by $9,812,804. The most significant factor for this decrease is the pension related expenses for governmental activities in the amount of $8,885,789. The Statement of Net Position and the Statement of Activities, present information about the following: Governmental activities. All of the County s basic services are considered to be governmental activities, including legislative, judicial, general government, public safety, public works, health and social services, parks, recreation and culture, and other activities. Property taxes, intergovernmental revenue and charges for services finance most of these activities. Business-type activities. Other functions of the County that are intended to recover all or a significant portion of their costs through user fees and charges are considered to be business-type activities. These include delinquent tax collections, the jail commissary, foreclosing government unit and the Eaton County Health and Rehabilitation Services Facility. Component units. The County includes four legally separate entities in its financial statements: the Eaton County Road Commission, Board of Public Works, the Eaton County Drainage Districts, and the Barry/Eaton District Health Department. Although legally separate, these component units are important because the County is financially accountable for them. Financial statements for these component units are reported separately from the financial information presented for the primary government itself. The Eaton County Building Authority, although also legally separate, functions for all practical purposes as a department of the County, and therefore has been included as an integral part of the primary government. Reporting the County's Most Significant Funds Fund Financial Statements. The fund financial statements provide detailed information about the most significant funds not the County as a whole. Some funds are required to be established by State law or bond covenants. However, the County establishes many other funds to help control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants and other money. The County s two primary kinds of funds governmental and proprietary use different accounting approaches. Governmental funds. Most of the County s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the County s general governmental operations and the basic services it provides. Governmental fund information helps one determine whether there are more or fewer financial resources that can be spent in the near future to finance the County s programs. Because the focus of the 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 the 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 County maintains numerous 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 and child care funds, each of which is considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements as identified in the table of contents. 15

21 Management's Discussion and Analysis Proprietary funds. The County maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The County uses enterprise funds to account for delinquent tax operations, county health and rehabilitation operations, the operation of a jail commissary, and the operation of a foreclosing governmental unit. Internal service funds are an accounting device used to accumulate and allocate costs internally among the County s various functions. The County uses internal service funds to account for self-insurance and fringe benefit programs. Because these services predominantly benefit governmental rather than business-type functions, they have been included within the governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the delinquent tax operation and county health and rehabilitation, both of which are considered to be major funds of the County. All internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. Reporting the County's Fiduciary Responsibilities The County is the trustee, or fiduciary, for certain amounts on behalf of others. Fiduciary funds are used to account for the resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County s own programs. The County s fiduciary activities are reported in a separate Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. The accounting used for fiduciary funds is much like that used for proprietary funds. The County is responsible for ensuring that the assets reported in these funds are used for their intended purposes. Additional Information Notes to Financial Statements. The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. This is limited to this management's discussion and analysis and the schedules for the MERS pension and other postemployment benefits plans immediately following the notes to the financial statements. The combining and individual fund financial statements and schedules are presented immediately following the required supplementary information. Financial Analysis of the County as a Whole The government-wide financial analysis focuses on the net position and changes in net position of the County s governmental and business-type activities. As noted earlier, net position may serve over time as a useful indicator of a government s financial position. As the following table demonstrates, the net position of the County was in a deficit primarily a result of the net pension liability at September 30,

22 Management's Discussion and Analysis Net Position Governmental Activities Business-type Activities Total Assets Current and other assets $ 16,783,591 $ 18,965,300 $ 18,822,334 $ 19,008,764 $ 35,605,925 $ 37,974,064 Capital assets, net 28,414,347 30,090,181 15,040,022 15,621,636 43,454,369 45,711,817 Total assets 45,197,938 49,055,481 33,862,356 34,630,400 79,060,294 83,685,881 Deferred outflows 16,787,463 3,206,343 1,448, ,518 18,235,476 3,659,861 Liabilities Long-term liabilities 14,894,279 15,731,077 9,158,756 9,955,184 24,053,035 25,686,261 Other liabilities 86,106,564 65,701,920 3,701,553 2,760,871 89,808,117 68,462,791 Total liabilities 101,000,843 81,432,997 12,860,309 12,716, ,861,152 94,149,052 Deferred inflows ,732-50,732 - Net position Net investment in capital assets 16,490,554 16,732,394 7,762,894 7,556,929 24,253,448 24,289,323 Restricted 2,990,440 3,369, ,990,440 3,369,709 Unrestricted (deficit) (58,496,436) (49,273,276) 14,636,434 14,810,934 (43,860,002) (34,462,342) Total net position $ (39,015,442) $ (29,171,173) $ 22,399,328 $ 22,367,863 $ (16,616,114) $ (6,803,310) A portion of the County s net position, $24,253,448 is its investment in capital assets (i.e., land, buildings, vehicles, equipment and infrastructure), net of any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the County s net position, $2,990,440, represents resources that are subject to external restrictions on how they may be used. Governmental activities. Governmental activities decreased the County s net position by $9,844,269. The cost of all governmental activities this year was $52,451,825 compared to $49,809,463 from the prior year. Key elements of the decrease in net position, in addition to those matters discussed previously, is as follows: Property tax revenue increased by $159,132. County's share of self insurance premiums increased by $668,674. Grants and contributions not restricted to specific programs decreased by $637,289 primarily as a result of a local tax abatement litigation settlement in the amount of $486,757, received during the prior fiscal year. Judicial and general government expenses increased by $1,271,471 and $978,133, respectively, as a result of increases in the recognition of Other Post Employment Benefit (OPEB) expenses of $759,730 and $1,221,929, respectively. 17

23 Management's Discussion and Analysis Change in Net Position Governmental Activities Business-type Activities Total Revenues Program revenues: Charges for services $ 5,158,896 $ 5,062,418 $ 19,358,476 $ 19,503,786 $ 24,517,372 $ 24,566,204 Operating grants 9,815,698 10,136,891 14,514 9,572 9,830,212 10,146,463 General revenues: Property taxes 24,573,108 24,413, , ,922 24,990,697 24,847,898 Grants and contributions not restricted to 2,621,176 3,258, ,621,176 3,258,465 specific programs Unrestricted investment earnings 88, , , ,426 Total revenues 42,257,556 43,128,176 19,790,579 19,947,280 62,048,135 63,075,456 Expenses Legislative 329, , , ,761 Judicial 7,098,389 5,826, ,098,389 5,826,918 General government 10,771,914 9,793, ,771,914 9,793,781 Public safety 24,260,826 24,129, ,260,826 24,129,640 Public works 390, , , ,623 Health and social services 7,722,010 7,725, ,722,010 7,725,695 Parks, recreation, and cultural 641, , , ,126 Other 771, , , ,726 Interest on long-term debt 466, , , ,193 Health and Rehabilitation Services ,088,026 17,833,051 19,088,026 17,833,051 Jail commissary ,241 31,628 46,241 31,628 Delinquent tax collections , , , ,578 Foreclosing government unit ,485 76, ,485 76,284 Total expenses 52,451,825 49,809,463 19,409,114 18,076,541 71,860,939 67,886,004 Change in net position, before transfers (10,194,269) (6,681,287) 381,465 1,870,739 (9,812,804) (4,810,548) Transfers 350, ,600 (350,000) (465,600) - - Change in net position (9,844,269) (6,215,687) 31,465 1,405,139 (9,812,804) (4,810,548) Net position, beginning of year (29,171,173) 22,526,884 22,367,863 21,258,105 (6,803,310) 43,784,989 Restatement for the implementation of GASB 68 - (45,482,370) - (295,381) - (45,777,751) Net position, end of year $ (39,015,442) $ (29,171,173) $ 22,399,328 $ 22,367,863 $ (16,616,114) $ (6,803,310) 18

24 Management's Discussion and Analysis Business-type activities. Business-type activities increased the County s net position by $31,465 for the current year. Key elements of the current year increase are as follows: The County Health and Rehabilitation Services Facility reported a decrease in net position of $994,119. The County, as the foreclosing governmental unit, reported an increase in operating revenues as a result of property sales of $660,163. The delinquent tax revolving fund, transferred $500,000 to the general fund for operations. Financial Analysis of the County's Funds As noted earlier, Eaton County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the County s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the County s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the County s governmental funds reported combined ending fund balances of $9,329,080, a decrease of $1,190,580 in comparison with the prior year. Of the fund balance amount, $5,575,167 constitutes unassigned fund balance, which is available for spending at the government s discretion. The general fund is the chief operating fund of the County. At the end of the current fiscal year, unassigned fund balance of the general fund was $5,575,167, while total fund balance was $5,818,010. As a measure of the general fund s liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. Unassigned fund balance represents 17.5 percent of the total general fund expenditures. The fund balance of the County s general fund decreased by $783,924 during the current fiscal year. A decrease in property taxes of $21,268, intergovernmental funding of $370,581 and overall increase of expenditures of $418,922 contributed to the current year decrease in fund balance. The child care fund has a fund balance of $67,661, an increase of $14,399 for the year. Proprietary funds. The County s proprietary funds provide the same type of information in the government-wide financial statements, but in more detail. Unrestricted net position of the health and rehabilitation services facility and delinquent tax revolving enterprise funds at the end of the year amounted to $2,407,645 and, $11,127,218, respectively. The health and rehabilitation services fund had a decrease in net position for the year of $994,119 while the delinquent tax revolving fund had an increase of $255,554. Other factors concerning the finances of the enterprise funds have already been addressed in the discussion of the County s business-type activities. General Fund Budgetary Highlights Revenues in the general fund increased by $11,595 from the original budget to the final budget based on an increase in insurance proceeds received to replace a County vehicle. Expenditures in the general fund increased by $278,404 from the original to the final budget related to Public Improvement projects and computer fund projects/equipment expenditures (combined with the general fund for financial reporting purposes). 19

25 Management's Discussion and Analysis Capital Asset and Debt Administration Capital assets. The County s investment in capital assets for its governmental and business-type activities as of September 30, 2016 amounted to $43,454,369 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, and vehicles and equipment. The net decrease in the County s investment in governmental activities capital assets for the current fiscal year was $1,675,834. The County s business-type activities capital assets decreased by $581,614. This was due to annual depreciation exceeding current year additions. Capital Assets (Net of Depreciation) Governmental Activities Business-type Activities Total Land and land improvements $ 102,628 $ 102,628 $ - $ - $ 102,628 $ 102,628 Buildings and improvements 22,436,001 23,455,660 14,250,359 14,567,264 36,686,360 38,022,924 Vehicles and equipment 5,874,974 5,970, ,663 1,032,142 6,660,637 7,002,388 Construction in progress ,647 4,000 22,230 4, ,877 Total capital assets, net $ 28,414,347 $ 30,090,181 $ 15,040,022 $ 15,621,636 $ 43,454,369 $ 45,711,817 Long-Term Debt. At the end of the current fiscal year, the County had total bonded debt outstanding of $18,439,251; this entire amount comprises debt backed by the full faith and credit of the County. Long-term Debt Governmental Activities Business-type Activities Total General obligation bonds $ 11,140,000 $ 11,410,000 $ 7,299,251 $ 8,062,646 $ 18,439,251 $ 19,472,646 Installment contracts 1,301,575 1,942, ,301,575 1,942,279 Issuance premiums - 5, ,508 Lease payable - - 7,752 36,986 7,752 36,986 Delinquent tax notes - - 1,604,000 1,634,500 1,604,000 1,634,500 Compensated absences 2,452,704 2,373, , ,052 2,700,457 2,594,342 Total long-term debt $ 14,894,279 $ 15,731,077 $ 9,158,756 $ 9,955,184 $ 24,053,035 $ 25,686,261 The County s total general obligation debt decreased by $1,033,395 (5.3 percent) during the current fiscal year. The County has an AA- rating for general obligation bonds from Standard & Poor s. State statutes limit the amount of general obligation debt a governmental entity may issue to 10 percent of its total assessed valuation (i.e., State Equalized Value). The current debt limitation for the County is $396,818,259 which is significantly in excess of the County s outstanding general obligation debt. 20

26 Management's Discussion and Analysis Economic Factors and Next Year s Budget and Rates The following factors were considered in preparing the County s budget for the 2017 fiscal year: The County Property Tax Revenue increased by $208,000. Charges for services for the Register of Deeds increased by $75,000 due to statutory changes in document filing fees. The County increased its total expenditure budget by $955,485. Of this amount the following increases are highlighted: Total personnel costs increased by approximately $970,000 due to increases in salary and fringe benefit costs. A decrease in the Capital Outlay of $52,200, primarily to decreases in equipment and vehicle replacement costs. Contacting the County's Controller/Administrator This financial report is designed to provide a general overview of the County s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to Eaton County Controller/Administrator, 1045 Independence Boulevard, Charlotte, Michigan

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28 BASIC FINANCIAL STATEMENTS 23

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30 GOVERNMENT-WIDE FINANCIAL STATEMENTS 25

31 Statement of Net Position September 30, 2016 Primary Government Governmental Business-type Component Activities Activities Totals Units Assets Cash and cash equivalents $ 3,515,321 $ 11,296,384 $ 14,811,705 $ 15,620,718 Investments 1,021,467-1,021,467 - Receivables, net 11,343,886 7,292,427 18,636,313 30,792,919 Internal balances 413 (413) - - Other assets 902, ,936 1,136, ,115 Net other postemployment benefit asset ,515,143 Capital assets not being depreciated 103,372 4, ,372 24,915,509 Capital assets being depreciated, net 28,310,975 15,036,022 43,346, ,478,198 Total assets 45,197,938 33,862,356 79,060, ,052,602 Deferred outflows of resources Deferred charge on refunding 517,782 29, , ,873 Deferred pension amounts 16,269,681 1,418,138 17,687,819 2,719,364 Total deferred outflows of resources 16,787,463 1,448,013 18,235,476 3,113,237 Liabilities Accounts payable and accrued liabilities 3,538,588 1,057,267 4,595,855 1,615,545 Interest payable 41,982 82, , ,347 Unearned revenue ,386 Long-term liabilities: Due within one year 2,001,077 2,657,900 4,658,977 4,135,432 Due in more than one year 12,893,202 6,500,856 19,394,058 29,519,352 Net pension liability 68,892,709 1,956,522 70,849,231 6,750,730 Net other postemployment benefit obligation 13,633, ,854 14,238,139 - Total liabilities 101,000,843 12,860, ,861,152 42,410,792 Deferred inflows of resources Deferred pension amounts - 50,732 50,732 - Net position Net investment in capital assets 16,490,554 7,762,894 24,253, ,754,192 Restricted for: Judicial 302, ,890 - Public safety 2,080,410-2,080,410 - Health and social services 154, ,680 - Debt service 38,631-38,631 - Endowments 68,250-68,250 - Other state mandated 345, ,579 - Immunizations ,756 Local roads millage ,869 Drainage districts ,149,927 Unrestricted (deficit) (58,496,436) 14,636,434 (43,860,002) 5,636,303 Total net position $ (39,015,442) $ 22,399,328 $ (16,616,114) $ 163,755,047 The accompanying notes are an integral part of these financial statements. 26

32 Statement of Activities For the Year Ended September 30, 2016 Program Revenues Operating Capital Net Charges for Grants and Grants and (Expense) Functions/Programs Expenses Services Contributions Contributions Revenues Primary government Governmental activities: Legislative $ 329,164 $ - $ - $ - $ (329,164) Judicial 7,098,389 2,259, ,444 - (3,981,711) General government 10,771,914 1,215,118 1,829,863 - (7,726,933) Public safety 24,260,826 1,190,518 4,458,237 - (18,612,071) Public works 390, (390,352) Health and social services 7,722, ,166 2,670,154 - (4,724,690) Parks, recreation and culture 641, , (474,168) Other 771, (771,927) Interest on long-term debt 466, (466,215) Total governmental activities 52,451,825 5,158,896 9,815,698 - (37,477,231) Business-type activities: Health and rehabilitation services 19,088,026 17,526, (1,561,708) Jail commissary 46,241 63, ,947 Delinquent tax collections 151, ,859 10, ,211 Foreclosing government unit 123, ,111 3, ,426 Total business-type activities 19,409,114 19,358,476 14,514 - (36,124) Total primary government $ 71,860,939 $ 24,517,372 $ 9,830,212 $ - $ (37,513,355) Component units Road Commission $ 11,188,794 $ 365,036 $ 9,580,172 $ 2,045,129 $ 801,543 Board of Public Works 183, ,849 - (9,885) Drainage Districts 5,077,205 63,406 1, ,419 (4,797,914) District Health Department 7,047,178 1,488,409 4,844,195 - (714,574) Total component units $ 23,496,911 $ 1,916,851 $ 14,599,682 $ 2,259,548 $ (4,720,830) continued 27

33 Statement of Activities For the Year Ended September 30, 2016 Primary Government Governmental Business-type Component Activities Activities Totals Units Change in net position Net (expense) revenues $ (37,477,231) $ (36,124) $ (37,513,355) $ (4,720,830) General revenues: Property taxes 24,573, ,589 24,990,697 3,964,993 Grants and contributions not restricted to specific programs 2,621,176-2,621,176 - Unrestricted investment earnings 88,678-88,678 26,203 Other ,996 Transfers - internal activities 350,000 (350,000) - - Total general revenues and transfers 27,632,962 67,589 27,700,551 3,997,192 Change in net position (9,844,269) 31,465 (9,812,804) (723,638) Net position, beginning of year (29,171,173) 22,367,863 (6,803,310) 164,478,685 Net position, end of year $ (39,015,442) $ 22,399,328 $ (16,616,114) $ 163,755,047 concluded The accompanying notes are an integral part of these financial statements. 28

34 FUND FINANCIAL STATEMENTS 29

35 Balance Sheet Governmental Funds September 30, 2016 Child Nonmajor Total General Care Governmental Governmental Fund Fund Funds Funds Assets Cash and cash equivalents $ - $ - $ 3,535,228 $ 3,535,228 Investments 1,021, ,021,467 Receivables: Property taxes 8,130,292-3,751 8,134,043 Accounts, net 331,004 50,365 11, ,515 Due from other governments 622,251 1,921, ,953 2,757,328 Prepaids 182,843-18, ,164 Advances to component unit 60, ,000 Total assets $ 10,347,857 $ 1,971,489 $ 3,782,399 $ 16,101,745 Liabilities Negative equity in pooled cash $ 3,162,687 $ 1,558,470 $ 64,516 $ 4,785,673 Accounts payable 660, , ,108 1,052,420 Accrued liabilities 574,298 69, , ,402 Due to other governmental units - 19,748-19,748 Due to other funds 132,048 10,765 22, ,422 Total liabilities 4,529,847 1,903, ,990 6,772,665 Fund balances Nonspendable 242,843-18, ,164 Restricted - - 3,014,101 3,014,101 Committed - 67, , ,648 Unassigned 5,575, ,575,167 Total fund balances 5,818,010 67,661 3,443,409 9,329,080 Total liabilities and fund balances $ 10,347,857 $ 1,971,489 $ 3,782,399 $ 16,101,745 The accompanying notes are an integral part of these financial statements. 30

36 Reconciliation Fund Balances of Governmental Funds to Net Position of Governmental Activities September 30, 2016 Total fund balances for governmental funds $ 9,329,080 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. Capital assets not being depreciated 103,372 Capital assets being depreciated, net 28,310,975 Certain liabilities, such as bonds payable, are not due and payable in the current period, and therefore are not reported in the funds. Bonds and installment contracts payable (12,441,575) Deferred charge on refunding 517,782 Interest payable (41,982) Net other postemployment benefit obligation (13,633,285) Compensated absences (2,452,704) Internal service funds are used by management to charge costs of certain activities, such as insurance, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Position. 3,915,923 Certain pension-related amounts, such as the net pension liability and deferred amounts, are not due and payable in the current period or do not represent current financial resources, and therefore are not reported in the funds. Net pension liability (68,892,709) Deferred outflows related to the net pension liability 16,269,681 Net position of governmental activities $ (39,015,442) The accompanying notes are an integral part of these financial statements. 31

37 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2016 Child Nonmajor Total General Care Governmental Governmental Fund Fund Funds Funds Revenues Property taxes $ 17,881,716 $ - $ 6,691,392 $ 24,573,108 Licenses and permits 216, , ,282 Intergovernmental: Federal/State 5,094,825 2,441,980 1,123,436 8,660,241 Local 3,294,308-1,215 3,295,523 Charges for services 3,295, ,182 3,864,368 Fines and forfeitures 327,966-7, ,896 Interest and rents 275,061-18, ,931 Other 179, , , ,827 Total revenues 30,565,014 2,633,002 8,998,160 42,196,176 Expenditures Current: Legislative 296, ,516 Judicial 5,447, ,700 5,552,307 General government 7,991, ,633 8,164,839 Public safety 13,718,039-5,377,223 19,095,262 Public works 390, ,352 Health and social services 1,805,508 4,948, ,699 7,139,050 Parks, recreation and culture 522, ,007 Other 271, ,739 Capital outlay 973,135-19, ,652 Debt service: Principal 336,179-1,044,525 1,380,704 Interest and fiscal charges 27, , ,140 Total expenditures 31,779,991 4,948,843 7,548,734 44,277,568 Revenues over (under) expenditures (1,214,977) (2,315,841) 1,449,426 (2,081,392) Other financing sources (uses) Transfers in 1,910,093 2,330,240 1,306,816 5,547,149 Transfers out (1,488,493) - (3,108,656) (4,597,149) Proceeds from sale of capital assets 9, ,453 Issuance of long-term refunding debt - - 8,975,000 8,975,000 Payment to refunding bond escrow agent - - (9,043,641) (9,043,641) Total other financing sources (uses) 431,053 2,330,240 (1,870,481) 890,812 Net change in fund balances (783,924) 14,399 (421,055) (1,190,580) Fund balances, beginning of year 6,601,934 53,262 3,864,464 10,519,660 Fund balances, end of year $ 5,818,010 $ 67,661 $ 3,443,409 $ 9,329,080 The accompanying notes are an integral part of these financial statements. 32

38 Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities For the Year Ended September 30, 2016 Net change in fund balance - total governmental funds $ (1,190,580) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlay as expenditures. However, in the Statement of Activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. Purchase of capital assets 772,123 Depreciation expense (2,433,922) Proceeds from sale of capital assets (9,453) Loss on disposal of capital assets (4,582) Bond proceeds provide current financial resources to the governmental funds in the period issued, but issuing bonds increases long-term liabilities in the Statement of Net Position. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. Repayment of debt principal 1,380,704 Issuance of long-term refunding debt (8,975,000) Payment to refunding bond escrow agent 9,043,641 Some expenses reported in the Statement of Activities do not require the use current financial resources and therefore are not reported as fund expenditures. Change in accrued compensated absences (79,414) Amortization of premium on long-term debt 459 Amortization of deferred charge on refunding (15,810) Change in the net pension liability and related deferred amounts (4,633,783) Change in the net other postemployment benefit obligation (3,060,959) Change in accrued interest payable 21,276 Internal service funds are used by management to charge costs of certain activities, such as insurance, to individual funds. The net change in net position of the internal service funds is reported with governmental activities in the Statement of Activities. (658,969) Change in net position of governmental activities $ (9,844,269) The accompanying notes are an integral part of these financial statements. 33

39 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended September 30, 2016 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Property taxes $ 18,245,895 $ 18,245,895 $ 17,881,716 $ (364,179) Licenses and permits 196, , ,522 57,822 Intergovernmental: Federal/State 5,465,450 5,465,450 5,094,825 (370,625) Local 3,220,951 3,252,951 3,294,308 41,357 Charges for services 3,128,330 3,127,830 3,295, ,356 Fines and forfeitures 333, , ,966 (5,234) Interest and rents 278, , ,061 (3,630) Other 156, , ,430 5,185 Total revenues 31,025,367 31,036,962 30,565,014 (471,948) Expenditures Current: Legislative 299, , ,516 (6,435) Judicial 5,783,520 5,847,990 5,447,607 (400,383) General government 8,425,415 8,425,258 7,991,206 (434,052) Public safety 14,195,071 14,189,232 13,718,039 (471,193) Public works 423, , ,352 (33,155) Health and social services 1,852,662 1,852,662 1,805,508 (47,154) Parks, recreation and culture 536, , ,007 (51,995) Other 562, , ,739 (275,148) Capital outlay 938,050 1,116, ,135 (143,448) Debt service: Principal 320, , ,179 (1) Interest and fiscal charges 26,499 27,703 27,703 - Total expenditures 33,364,548 33,642,955 31,779,991 (1,862,964) Revenues over (under) expenditures (2,339,181) (2,605,993) (1,214,977) 1,391,016 Other financing sources (uses) Transfers in 1,850,082 1,904,993 1,910,093 5,100 Transfers out (1,224,268) (1,507,841) (1,488,493) (19,348) Proceeds from sale of capital assets 10,500 10,500 9,453 (1,047) Total other financing sources (uses) 636, , ,053 23,401 Net change in fund balance (1,702,867) (2,198,341) (783,924) 1,414,417 Fund balance, beginning of year 6,601,934 6,601,934 6,601,934 - Fund balance, end of year $ 4,899,067 $ 4,403,593 $ 5,818,010 $ 1,414,417 The accompanying notes are an integral part of these financial statements. 34

40 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Child Care Special Revenue Fund For the Year Ended September 30, 2016 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental: Federal/State $ 2,693,507 $ 2,693,507 $ 2,441,980 $ (251,527) Other 205, , ,022 (14,078) Total revenues 2,898,607 2,898,607 2,633,002 (265,605) Expenditures Health and social services 5,045,559 5,229,133 4,948,843 (280,290) Revenues under expenditures (2,146,952) (2,330,526) (2,315,841) 14,685 Other financing sources Transfers in 2,146,952 2,130,526 2,330, ,714 Net change in fund balance - (200,000) 14, ,399 Fund balance, beginning of year 53,262 53,262 53,262 - Fund balance, end of year $ 53,262 $ (146,738) $ 67,661 $ 214,399 The accompanying notes are an integral part of these financial statements. 35

41 Statement of Net Position Proprietary Funds September 30, 2016 Governmental Business-type Activities - Enterprise Funds Activities - Health and Nonmajor Rehabilitation Delinquent Tax Enterprise Internal Services Facility Revolving Funds Total Service Funds Assets Current assets: Cash and cash equivalents $ 3,037,059 $ 7,810,263 $ 449,062 $ 11,296,384 $ 4,765,766 Receivables: Property taxes - 4,179, ,788 4,817,372 - Accounts, net 1,721, ,915 9,825 2,475,055 - Due from other funds ,944 Inventories 66,161-19,238 85,399 - Prepaid items 148, , ,340 Total current assets 4,973,072 12,733,762 1,115,913 18,822,747 5,633,050 Noncurrent assets: Construction in progress 4, ,000 - Buildings 18,831, ,831,174 - Equipment 2,543, ,543,003 - Accumulated depreciation (6,338,155) - - (6,338,155) - Total noncurrent assets 15,040, ,040,022 - Total assets 20,013,094 12,733,762 1,115,913 33,862,769 5,633,050 Deferred outflows of resources Deferred charge on refunding 29, ,875 - Deferred pension amounts 1,418, ,418,138 - Total deferred outflows of resources 1,448, ,448,013 - Liabilities Current liabilities: Accounts payable 248,296 2,544 11, ,968 45,319 Accrued liabilities 792,498-1, ,490 1,671,699 Due to other funds Due to other governments Interest payable 82, ,910 - Current portion of: Accrued compensated absences 247, ,753 - Lease payable 7, ,752 - Bonds and notes payable 798,395 1,604,000-2,402,395 - Total current liabilities 2,177,604 1,606,544 14,342 3,798,490 1,717,127 Noncurrent liabilities: Long-term debt, net of current portion: Bonds and notes payable 6,500, ,500,856 - Net pension liability 1,956, ,956,522 - Net other postemployment benefit obligation 604, ,854 - Total noncurrent liabilities 9,062, ,062,232 - Total liabilities 11,239,836 1,606,544 14,342 12,860,722 1,717,127 Deferred inflows of resources Deferred pension amounts 50, ,732 - Net position Net investment in capital assets 7,762, ,762,894 - Unrestricted 2,407,645 11,127,218 1,101,571 14,636,434 3,915,923 Total net position $ 10,170,539 $ 11,127,218 $ 1,101,571 $ 22,399,328 $ 3,915,923 The accompanying notes are an integral part of these financial statements. 36

42 Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds For the Year Ended September 30, 2016 Governmental Business-type Activities - Enterprise Funds Activities - Health and Nonmajor Rehabilitation Delinquent Tax Enterprise Internal Services Facility Revolving Funds Total Service Funds Operating revenues Charges for services $ 17,526,318 $ - $ - $ 17,526,318 $ 12,117,289 Interest on taxes - 674, ,684 - Sales , ,351 - Administrative fees/penalties - 215, , ,123 - Other revenues ,903 Total operating revenues 17,526, , ,269 19,358,476 12,196,192 Operating expenses Personal services and benefits 13,936,305-70,070 14,006,375 2,810,845 Operating supplies 1,687,438 38,856-1,726,294 - Contractual services 434,783 25,351 99, , ,268 Insurance and claims ,095,321 Tax tribunal refunds - 29,843-29,843 - Depreciation 656, ,550 - Other expenses 2,090,807 28,326-2,119,133 - Total operating expenses 18,805, , ,726 19,097,985 12,313,434 Operating income (loss) (1,279,565) 767, , ,491 (117,242) Nonoperating revenues (expenses) Interest income - 10,714 3,800 14,514 58,273 Interest expense (282,143) (28,986) - (311,129) - Property tax revenue 417, ,589 - Total nonoperating revenues (expenses) 135,446 (18,272) 3, ,974 58,273 Income (loss) before transfers (1,144,119) 749, , ,465 (58,969) Transfers Transfers in 150, ,071-1,061, ,000 Transfers out - (1,404,758) (6,313) (1,411,071) (700,000) Total transfers 150,000 (493,687) (6,313) (350,000) (600,000) Change in net position (994,119) 255, ,030 31,465 (658,969) Net position, beginning of year 11,164,658 10,871, ,541 22,367,863 4,574,892 Net position, end of year $ 10,170,539 $ 11,127,218 $ 1,101,571 $ 22,399,328 $ 3,915,923 The accompanying notes are an integral part of these financial statements. 37

43 Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2016 Governmental Business-type Activities - Enterprise Funds Activities - Health and Nonmajor Rehabilitation Delinquent Tax Enterprise Internal Services Facility Revolving Funds Total Service Funds Cash flows from operating activities Cash received from customers $ 16,203,339 $ 7,425,532 $ 407,149 $ 24,036,020 $ - Cash received from interfund services ,156,581 Delinquent taxes purchased - (5,589,474) - (5,589,474) - Cash paid to/for employees (18,205,613) - (69,601) (18,275,214) (4,976,326) Cash paid to suppliers - (120,308) (107,861) (228,169) (7,632,481) Other receipts 1,586, ,586,906 - Net cash provided by (used in) operating activities (415,368) 1,715, ,687 1,530,069 (452,226) Cash flows from noncapital financing activities Transfers in 150, ,071-1,061, ,000 Transfers out - (1,404,758) (6,313) (1,411,071) (700,000) Tax notes issued - 3,000,000-3,000,000 - Tax notes redeemed - (3,030,500) - (3,030,500) - Property tax receipts 417, ,589 - Interest paid on tax notes / advances - (28,986) - (28,986) - Net cash provided by (used in) noncapital financing activities 567,589 (553,173) (6,313) 8,103 (600,000) Cash flows from capital and related financing activities Interest paid on long-term debt (288,262) - - (288,262) - Principal paid on long-term debt (792,629) - - (792,629) - Purchases of capital assets (74,936) - - (74,936) - Net cash used in capital and related financing activities (1,155,827) - - (1,155,827) - Cash flows from investing activities Interest received - 10,714 3,800 14,514 58,273 Net change in cash and cash equivalents (1,003,606) 1,173, , ,859 (993,953) Cash and cash equivalents, beginning of year 4,040,665 6,636, ,888 10,899,525 5,759,719 Cash and cash equivalents, end of year $ 3,037,059 $ 7,810,263 $ 449,062 $ 11,296,384 $ 4,765,766 continued 38

44 Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2016 Governmental Business-type Activities - Enterprise Funds Activities - Health and Nonmajor Rehabilitation Delinquent Tax Enterprise Internal Services Facility Revolving Funds Total Service Funds Reconciliation of operating income (loss) to net cash provided by (used in) operating activities Operating income (loss) $ (1,279,565) $ 767,513 $ 772,543 $ 260,491 $ (117,242) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 656, ,550 - Amortization 5, ,050 - Provision for bad debt 111, ,047 - Change in operating assets and liabilities that provided (used) cash: Taxes receivable - 1,712,727 (614,515) 1,098,212 - Accounts receivable 152,880 (742,101) 79,395 (509,826) - Due from other funds (39,719) Due from other governments - 5,386-5,386 - Inventories 15,288 - (2,448) 12,840 - Prepaid items (134,442) - - (134,442) (18,048) Accounts payable (317,016) 2,544 (6,248) (320,720) 20,360 Accrued liabilities 105, ,486 (297,686) Net pension liability 1,218, ,218,636 - Deferred outflows and inflows of resources - pension amounts (948,813) - - (948,813) - Due to other funds Due to other governments - (30,319) 419 (29,900) - Net cash provided by (used in) operating activities $ (415,368) $ 1,715,750 $ 229,687 $ 1,530,069 $ (452,226) concluded The accompanying notes are an integral part of these financial statements. 39

45 Statement of Fiduciary Net Position Fiduciary Funds September 30, 2016 Retiree Healthcare Agency Trust Funds Assets Cash and cash equivalents $ - $ 5,442,415 Investments: Money market funds 98,883 - Common stocks 2,651,779 - Exchange traded 494,949 - Corporate bonds 73,525 - U.S. agencies 141,261 - Sovereign securities 6,434 - Mutual funds 587,999 - Due from other governments - 97,097 Total assets 4,054,830 $ 5,539,512 Liabilities Undistributed receipts - $ 5,539,512 Net position restricted for Other postemployment benefits $ 4,054,830 The accompanying notes are an integral part of these financial statements. 40

46 Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended September 30, 2016 Retiree Healthcare Trust Additions Investment income: Net appreciation in fair value of investments $ 274,376 Change in net position 274,376 Net position restricted for other postemployment benefits Beginning of year 3,780,454 End of year $ 4,054,830 The accompanying notes are an integral part of these financial statements. 41

47 Combining Statement of Net Position Discretely Presented Component Units September 30, 2016 Road Board of Drainage District Commission Public Works Districts Health Total Assets Cash and cash equivalents $ 5,016,301 $ - $ 8,821,094 $ 1,783,323 $ 15,620,718 Receivables: Accounts, net 16, , ,742 Special assessments 28,887-22,895,569-22,924,456 Due from other governmental units: Federal/State 1,408, ,408,803 Local 74, ,468 Leases receivable - 6,172, ,172,450 Inventories 424,500-16, ,627 Prepaid items 192,591 47,503-49, ,488 Net other postemployment benefits asset 2,515, ,515,143 Capital assets not being depreciated 24,416, ,860-24,915,509 Capital assets being depreciated, net 56,584,804-71,798,572 94, ,478,198 Total assets 90,679,006 6,219, ,030,222 2,123, ,052,602 Deferred outflows of resources Deferred charge on refunding 25,000 84, , ,873 Deferred pension amounts ,719,364 2,719,364 Total deferred outflows of resources 25,000 84, ,851 2,719,364 3,113,237 Liabilities Accounts payable 908, , ,750 1,244,302 Accrued liabilities 155, , ,243 Interest payable 2, , ,347 Unearned revenue - 47,503-41,883 89,386 Advances from primary government ,000-60,000 Long-term debt: Due within one year 533, ,935 2,941,494 37,314 4,135,432 Due in more than one year 768,202 5,549,515 22,992, ,763 29,519,352 Net pension liability ,750,730 6,750,730 Total liabilities 2,368,792 6,219,953 26,517,229 7,304,818 42,410,792 Net position Net investment in capital assets 80,011,453-46,647,917 94, ,754,192 Restricted for immunizations , ,756 Restricted for local roads millage 2, ,869 Restricted for drainage districts ,149,927-31,149,927 Unrestricted (deficit) 8,320,892 84,022 - (2,768,611) 5,636,303 Total net position $ 88,335,214 $ 84,022 $ 77,797,844 $ (2,462,033) $ 163,755,047 The accompanying notes are an integral part of these financial statements. 42

48 Combining Statement of Activities Discretely Presented Component Units For the Year Ended September 30, 2016 Road Board of Drainage District Commission Public Works Districts Health Total Expenses Public works $ - $ 183,734 $ 5,077,205 $ - $ 5,260,939 Health and social services ,047,178 7,047,178 Highways and streets 11,188, ,188,794 Total expenses 11,188, ,734 5,077,205 7,047,178 23,496,911 Program revenues Charges for services 365,036-63,406 1,488,409 1,916,851 Operating grants and contributions 9,580, ,849 1,466 4,844,195 14,599,682 Capital grants and contributions 2,045, ,419-2,259,548 Total program revenues 11,990, , ,291 6,332,604 18,776,081 Net program revenues (expenses) 801,543 (9,885) (4,797,914) (714,574) (4,720,830) General revenues Property taxes 3,964, ,964,993 Unrestricted investment earnings 16,582-9,621-26,203 Other 5, ,996 Total general revenues 3,987,571-9,621-3,997,192 Change in net position 4,789,114 (9,885) (4,788,293) (714,574) (723,638) Net position, beginning of year 83,546,100 93,907 82,586,137 (1,747,459) 164,478,685 Net position, end of year $ 88,335,214 $ 84,022 $ 77,797,844 $ (2,462,033) $ 163,755,047 The accompanying notes are an integral part of these financial statements. 43

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50 NOTES TO FINANCIAL STATEMENTS 45

51 Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Eaton County, Michigan (the County or government ) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing U.S. governmental accounting and financial reporting principles. The more significant of the County s accounting policies are described below. Reporting Entity As required by generally accepted accounting principles, these financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government s operations and so data from these units are combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the government. Blended Component Unit Eaton County Department of Human Services is governed by a three-member board, which consists of two members appointed by the County Board of Commissioners and one State-appointed member. The Board is responsible for establishing policies and overseeing the local administration of the Department of Human Services and the State of Michigan Social Welfare program. State law requires local activities to be blended with the local primary government even though the employees of the Eaton County Department of Human Services are employees of the State of Michigan and substantially all of the programs are financed through the State. In accordance with State law, the Department of Human Services has been included as a special revenue fund. Eaton County Building Authority is governed by a three-member Board appointed by the County Board of Commissioners. Although it is legally separate from the County, the Eaton County Building Authority is reported as if it were part of the primary government because its sole purpose is to finance and construct the County s public buildings. Discretely Presented Component Units Eaton County Road Commission is governed by a three-member Board of Road Commissioners that is appointed by the County Board of Commissioners. The Road Commission maintains local, state and federal trunklines in Eaton County with financing primarily from the distribution of gas and weight taxes, federal financial assistance, and contributions from other local governments. The County must authorize all longterm debt issuances of the Road Commission, excluding capital lease purchase agreements. Complete financial statements for the Road Commission may be obtained by contacting the Eaton County Road Commission at 1112 Reynolds Road, Charlotte, Michigan

52 Notes to Financial Statements Eaton County Board of Public Works (BPW) is governed by a seven-member Board that consists of six County Board of Commissioners appointees and the Eaton County Drain Commissioner. The BPW Board oversees the operations of the BPW, while establishing policy and administering various public works construction projects and debt service funds under Act 185 of the Public Acts of The BPW is financially accountable to the County because all general obligation debt issuances require County authorization and are backed by the full faith and credit of the County. The BPW does not issue separate financial statements. Eaton County Drainage Districts are governed by the Eaton County Drain Commissioner, who is responsible for planning, developing and maintaining surface water drainage systems, while maintaining a file for the financing, construction and maintenance of each County drain. The Drain Commissioner has authority to spend up to $2,500 per mile on drain maintenance and borrow up to $150,000 from any source to provide for drain maintenance without Board of Commissioners approval and without going through the Michigan Municipal Finance Division. The Drain Commissioner has authority to levy special assessments on properties benefitting from maintenance. The Drainage Districts are financially accountable to the County because bond issuances greater than $150,000 require County authorization and are backed by the full faith and credit of the County. Separate financial statements are not issued for the Drainage Districts. Joint Ventures A joint venture is a legal entity or other organization that results from a contractual arrangement, or interlocal agreement, which is owned, operated or governed by two or more participants. The entity is subject to joint control with financial interest and responsibility by its participants. Barry/Eaton County District Health Department (DHD) is a joint venture between Barry and Eaton counties. The DHD was established to provide public health services with a current funding formula of 65 and 35 percent from Eaton and Barry counties, respectively. Due to the treasury function resting with the Eaton County Treasurer, the DHD is presented as a discretely presented component unit of Eaton County. The DHD does not issue separate financial statements. Related Organization A related organization is a legal entity for which the government appoints a voting majority of the governing body, but for which it is not financially accountable. Eaton County Transportation Authority is governed by a three-member board comprised of one Board of Commissioner member and two at-large appointees made by the Board. The Transportation Authority is a legally separate entity established to provide public transportation services to citizens within the County. The County levies and collects a millage for the Transportation Authority, but it does not hold title to the Authority s assets, nor does it have rights or obligations to surpluses or deficits of the Transportation Authority. Accordingly, it is not reported as a component unit of the County. Jointly Governed Organizations A jointly governed organization is a regional government or other multi-governmental arrangement that is governed by representatives that create the organization, but that is not a joint venture because the participants do not retain an ongoing financial interest or responsibility. 47

53 Notes to Financial Statements Tri-County Community Mental Health Board is governed by a 12 member board appointed by the Boards of Commissioners of Ingham, Eaton and Clinton counties for which it services. Operating revenues are derived from fees for services and from federal, state and local sources; Eaton County appropriated $394,327 to the Tri-County Community Mental Health Board for the year ended September 30, Tri-County Regional Planning Commission is governed by the political jurisdictions it serves including the cities of Lansing and East Lansing; Delta and Meridian townships; the Michigan Department of Transportation; and the counties, road commissions and transit authorities of Ingham, Eaton and Clinton counties. The Planning Commission adopts a proposed budget during February and submits the budget, thereby requesting a contribution from each governmental unit. Eaton County contributed $106,533 for the year ended September 30, Tri-County Office on Aging is governed by a 13 member board appointed by the Board of Commissioners from the three counties it services Ingham, Eaton and Clinton. The Office on Aging provides services to older residents of the three counties and receives its operating revenues from fees for services and from federal, state and local sources, of which Eaton County appropriated $62,238 for the year ended September 30, CEI-Community Mental Health is governed by 12 members from three counties, of which Eaton County appoints two members. The County s financial responsibility is to pass through to the Commission a portion of the convention and tourism revenues it receives and, if needed, such additional funds based on the ratio of board membership. The County contributed $228,198 for the year ended September 30, Lansing Tri-County Employment and Training Consortium is governed by a 11 member board, of which the County appoints two members. The County has no financial responsibility other than potential liability from appropriated use of funds as the Consortium s revenue is derived from federal and state grants. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. 48

54 Notes to Financial Statements Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Agency funds, a type of fiduciary fund, are unlike all other types of funds, reporting only assets and liabilities. Therefore, agency funds cannot be said to have a measurement focus. They do, however, use the accrual basis of accounting to recognize receivables and payables. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the County considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, except for expenditure-driven grants, which must be collected within one year, and property taxes. Property taxes for the County are levied and payable within the current fiscal year are fully recognized inasmuch as any uncollected taxes are settled with the Delinquent Tax Revolving Fund not later than March 1 of the following fiscal year. While this schedule exceeds the normal availability period for property taxes of sixty days, management believes that fully recognizing property taxes in the year they are intended to finance better reflects the matching concept of generally accepted accounting principles. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, state shared revenues, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The County reports the following major governmental funds: The general fund is the government s primary operating fund. It accounts for all the financial resources of the general government, except those accounted for and reported in another fund. The child care fund accounts for the operations of the County's community-based programming and placement costs for youth and funding received from the State of Michigan for these services. The County reports the following major proprietary funds: The health and rehabilitation services facility fund accounts for the operation of the County s longterm adult care facility. The delinquent tax revolving fund accounts for the annual purchase of delinquent real property taxes from each of the local taxing units within the county, and the ultimate collection from the property owners of the delinquent taxes with penalty and interest. 49

55 Notes to Financial Statements Additionally, the County reports the following fund types: Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Debt service funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Capital projects funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Permanent funds are used to account for resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the County s programs. Enterprise funds account for those operations that are financed and operated in a manner similar to private business or where the County has decided that the determination of revenues earned, costs incurred and/or net income is necessary for management accountability. Internal service funds account for the insurance activity of the County provided to other departments and funds on a cost reimbursement basis. Retireehealthcaretrustfund accounts for the accumulated resources for retirement health benefit payments to qualified employees. Agency funds are custodial in nature and do not present results of operations or have a measurement focus. Agency funds are accounted for using the modified accrual basis of accounting. These funds are used to account for assets that the government holds for others in an agency capacity. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments in lieu of taxes and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the enterprise funds and of the County s internal service fund are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 50

56 Notes to Financial Statements Assets, Liabilities, Deferred Outflows of Resources, Deferred Inflows of Resources and Equity Deposits and Investments The County pools cash resources of various funds in order to facilitate the management of cash; however, cash applicable to a particular fund is readily identifiable. Sufficient cash is retained in the pooled cash accounts to meet current operating requirements and excess cash is invested in various interest bearing securities and disclosed as part of the County s investments. Cash equivalents consist of temporary investments in certificates of deposit, with maturities from date of purchase of 90 days or less, investment trust funds, and mutual funds. The investment trust funds have the general characteristics of demand deposit accounts. Investments are stated at fair value and primarily consist of money market funds, municipal bonds, U.S. securities, and mutual funds with original maturities of greater than 90 days. State statutes authorize the County to deposit in the accounts of federally insured banks, credit unions and savings and loan associations and to invest in obligations of the U.S. Treasury, certain commercial paper, repurchase agreements, bankers acceptances, and mutual funds composed of otherwise legal investments. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as either due to/from other funds (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non-current portion of interfund loans). Any residual balances outstanding between governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Advances between funds are offset by nonspendable fund balance in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources. Receivables consist of accounts receivable related to charges for services and amounts due from governmental units for various financial assistance programs and State shared revenues. The County has established allowances for doubtful accounts to estimate uncollectible accounts receivable in the general, child care, health and rehabilitation services facility funds and district health department component unit. The County utilizes the direct write-off method for all other funds as past experience indicates the writeoff of accounts receivable for these funds are immaterial and do not warrant the use of allowance accounts. Inventories The cost of inventory items in the primary government for all funds is recorded as an expenditure at the time of purchase. Inventories of the health and rehabilitation services facility and jail commissary funds consist of medical supplies and miscellaneous hygiene and consumer products, respectively, which are stated at the lower of cost determined by the first-in, first-out (FIFO) method or market. The cost of inventory items in the Road Commission is recorded as an expenditure when they are used (i.e., consumption method). Inventories of the Road Commission consist of road materials and equipment parts, which are stated at the lower of average cost or market. 51

57 Notes to Financial Statements Prepaids Certain payments to vendors (particularly for insurance coverage) reflect costs that are applicable to a future period and are recorded as prepaid items. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g. roads, bridges, drains and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with initial, individual costs of $5,000 or more ($200,000 for infrastructure) and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated acquisition cost at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities, if any, is included as part of the capitalized value of the assets constructed. No such interest expense was incurred during the current fiscal year. Capital assets of the primary government and Drainage Districts component unit are depreciated using the straight-line method over the following estimated useful lives: Years Building and improvements 5-40 Equipment 3-10 Vehicles 2-5 Infrastructure - drains 40 Capital assets of the Road Commission component unit are depreciated as follows: Years Buildings 40 Equipment 5-8 Roads 5-30 Bridges Other infrastructure

58 Notes to Financial Statements Deferred Outflows 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 one or more future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The County reports deferred outflows of resources for the charge on advance bond refunding reported in the government-wide statement of net position, which results from the difference in the carrying value of refunded debt and its reacquisition price. In addition, the County reports deferred outflows of resources for changes in expected and actual investment returns, assumptions, and benefits provided in its pension plan. A portion of these costs also represent contributions to the plan subsequent to the plan measurement date. Compensated Absences Eligible employees are permitted to accumulate earned but unused vacation benefits in varying amounts based on length of service and certain other established criteria. Amounts not expected to be liquidated with expendable available financial resources are accrued when incurred in the government-wide and proprietary fund financial statements. A liability is reported in governmental funds only if these amounts have matured, for example, as a result of employee resignations or retirements. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the plan fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 53

59 Notes to Financial Statements Deferred Inflows of Resources In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to future periods and so will not be recognized as an inflow of resources until that time. The governmental funds report unavailable revenues, which arise only under the modified accrual basis of accounting. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The County also reports deferred outflows of resources for changes in expected and actual investment returns, assumptions, and benefits provided in its pension plan. Fund Equity Governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted fund balance is reported when externally imposed constraints are placed on the use of resources by grantors, contributors, or laws or regulations of other governments. Committed fund balance is reported for amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government s highest level of decision-making authority, the County Commissioners. A formal resolution of the County Commissioners is required to establish, modify, or rescind a fund balance commitment. The County Commissioners can also give authority to management to assign fund balance but has not yet done so; assigned fund balances are neither restricted nor committed. Unassigned fund balance is the residual classification for the general fund. When the government incurs expenditures for purposes for which various fund balances classifications can be used, it is the government s policy to use restricted fund balance first, then committed, assigned and finally unassigned fund balance. 2. BUDGETARY INFORMATION Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the general and special revenue funds. All annual appropriations lapse at year-end. The legal level of budgetary control is at the activity level for the general fund and the functional level for the special revenue funds; for control purposes, all budgets are maintained at the activity and account level. Budgetary transfers between funds, amendments to total fund, department or activity budgets, or increases to salary or capital outlay accounts in excess of $2,500 require Board approval. The Board made several supplemental budgetary appropriations throughout the year that were not considered material. Prior to May 1 of each year, the County departments working in conjunction with the Controller s Office prepare and submit their proposed budgets, including expenditures and estimated revenues, for the fiscal year commencing the following October 1. Following a public hearing to obtain taxpayer comments, the budgets are legally enacted prior to September 30 through passage of a budget resolution. 54

60 Notes to Financial Statements 3. EXCESS OF EXPENDITURES OVER APPROPRIATIONS State statutes provide that a local unit shall not incur expenditures in excess of the amount appropriated. During the year ended September 30, 2016, the County incurred a expenditures in excess of the amounts appropriated as follows: Total Amount of Budget Appropriations Expenditures Variance General fund: Health and social services: Convention & tourism $ 219,688 $ 228,198 $ 8,510 Drug Law Forfeiture: Transfers out - 3,106 3,106 Drug County III - Circuit Court: Transfers out - 2,847 2,847 Domestic Preparedness: Public safety 122, , Drug Forfeiture Prosecutor: Transfers out - 16,849 16,849 OHSP Traffic Enforcement: Transfers out - 5,190 5,190 Veterans Trust: Transfers out - 2,000 2,000 Juvenile Millage: Transfers out 1,206,963 1,209,145 2,182 Juvenile Court: Judicial Youth facility: Public safety - 7,014 7,014 Sheriff Donations: Public safety - 3,900 3,900 55

61 Notes to Financial Statements 4. DEPOSITS AND INVESTMENTS Summary of Deposit and Investment Balances Following is a reconciliation of deposit and investment balances as of September 30, 2016: Primary Component Government Units Totals Financial statements Statement of net position: Cash and cash equivalents $ 14,811,705 $ 15,620,718 $ 30,432,423 Investments 1,021,467-1,021,467 Statement of fiduciary net position: Cash and cash equivalents 5,442,415-5,442,415 Investments 4,054,830-4,054,830 Total $ 25,330,417 $ 15,620,718 $ 40,951,135 Deposits and investments Bank deposits (checking and savings accounts) $ 22,723,355 Investments in securities, mutual funds and similar vehicles: Treasurer s pool 12,278,475 Retiree healthcare trust fund 4,054,830 Cash on deposit with third party 1,887,885 Cash on hand 6,590 Total $ 40,951,135 County's Cash and Investment Pool Custodial Credit Risk - Deposits. For deposits, custodial credit risk is the risk that, in the event of a bank failure, the County s deposits may not be returned to the government. As of September 30, 2016, $23,443,146 of the County s total bank balance of $24,202,572 (total book balance was $22,723,355) was exposed to custodial credit risk as it was uninsured and uncollateralized. The County s investment policy requires that only those banks or savings and loan institutions that are members of the FDIC or FSLIC will be considered for depository purposes, but recognizes that it is impractical to insure all bank deposits due to the limitations of depository insurance. As a result, the County evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level are used as depositories. 56

62 Notes to Financial Statements Custodial Credit Risk - Investments. Following is a summary of the County's pooled investments as of September 30, 2016: Money market funds $ 11,272,606 Municipal bonds 502,707 U.S. agencies 503,162 Total $ 12,278,475 For investments, custodial credit risk is the risk that, in the event of the failure of the counterparty, the County will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The County s investment policy requires that investment securities shall be kept in the County Treasurer s office in a fireproof vault, although certificates of deposit may be held in safekeeping by the financial institution. As of September 30, 2016, investments in the Treasurer s pool totaling $11,272,606 were in money market accounts, which are not subject to custodial credit risk since the securities are held in the County s name by the counterparty. Credit Risk. The County s investments in money market accounts are not rated and comply with the County s policy regarding the types of investments it may hold. As of September 30, 2016, the County's pooled investments in municipal bonds and U.S. agencies were rated as follows: Not rated $ 11,272,606 S & P AA- 502,707 S & P AA+ 503,162 Total $ 12,278,475 Interest Rate Risk. As of September 30, 2016, maturities of the County's fixed income securities were as follows: Investment Maturities (Fair value by years) Fair No Due in less Due in 1-5 Due in 6 Value maturity than 1 year years or more years Money market funds $ 11,272,606 $ 11,272,606 $ - $ - $ - Municipal bonds 502, ,707 - U.S. agencies 503, ,162 - Total $ 12,278,475 $ 11,272,606 $ - $ 1,005,869 $ - 57

63 Notes to Financial Statements Retirees Healthcare Trust Fund Investments The retiree healthcare trust fund (the "Fund") investments are maintained separately from the County s cash and investment pool, and are subject to separate investment policies and state statutes. Accordingly, the required disclosures for the Fund s investments are presented separately. The Public Employee Retirement System Investment Act, Public Act 314 of 1965, as amended, authorizes the fund to invest in stocks, government and corporate securities, mortgages, real estate, and various other investment instruments, subject to certain limitations. The County Treasurer has the responsibility and authority to oversee the investment portfolio. A professional investment manager is contracted to assist in managing the Fund s assets. The Fund s investments are held in an administered trust account. Following is a summary of the Fund s investments as of September 30, 2016: Money market funds $ 98,883 Common stocks 2,651,779 Exchange traded 494,949 Corporate bonds 73,525 U.S. agencies 141,261 Sovereign securities 6,434 Mutual funds 587,999 Total $ 4,054,830 Credit Risk. As of September 30, 2016, the Fund s investments were rated as follows: Moody AAA $ 92,965 Moody A3 6,434 S&P A 3,189 S&P A- 20,152 S&P AA- 5,407 S&P BBB+ 36,410 S&P BBB 8,367 Not Rated 3,881,906 Total $ 4,054,830 The County s policy is to comply with Public Act 314 as referenced above; such statute does not provide specific guidelines regarding credit risk. Custodial Credit Risk. The County does not have a policy regarding custodial credit risk for the Fund s investments. However, while uninsured and unregistered, the Fund s investments are not exposed to custodial credit risk since the securities are held by the counterparty s trust department in the County s name. 58

64 Notes to Financial Statements Concentration of Credit Risk. At September 30, 2016, the Fund investment portfolio holdings were not concentrated (i.e., no more than 5% of the portfolio in issues of any one entity other than the federal government). The County s policy is to comply with Public Act 314 as referenced above. Interest Rate Risk. As of September 30, 2016, maturities of the Fund s investments were as follows: Investment Maturities (Fair value by years) Fair No Due in less Due in 1-5 Due in 6 Value maturity than 1 year years or more years Money market funds $ 98,883 $ 98,883 $ - $ - $ - Common stocks 2,651,779 2,651, Exchange traded 494, , Corporate bonds 73, ,682 47,843 U.S. agencies 141, , ,619 Sovereign securities 6, ,434 - Mutual funds 587, , Total $ 4,054,830 $ 3,833,610 $ - $ 71,758 $ 149,462 Fair Value. The County categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. These levels are determined by the County's investment manager, and are determined at the fund level based on a review of the investment's class, structure, and what kind of securities are held in the funds. The investment manager will request the information from the fund manager, if necessary. The County had the following recurring fair value measurements as of September 30, 2016: Level 1 Level 2 Level 3 Total Money market funds $ 11,257,009 $ 114,480 $ - $ 11,371,489 Municipal bonds - 502, ,707 U.S. agencies - 644, ,423 Common stocks - 2,651,779-2,651,779 Exchange traded - 494, ,949 Corporate bonds - 73,525-73,525 Sovereign securities - 6,434-6,434 Mutual funds - 587, ,999 Total $ 11,257,009 $ 5,076,296 $ - $ 16,333,305 59

65 Notes to Financial Statements 5. RECEIVABLES Receivables as of September 30, 2016 are summarized as follows: Governmental Activities Business-type Activities Component Units Amount Not Expected To Be Collected Within One Year Property taxes $ 8,565,725 $ 4,817,372 $ - $ - Accounts receivable 392,515 2,475, ,006 - Special assessments ,924,456 19,523,413 Leases receivable - - 6,172,450 5,549,515 Due from other governments 2,757,328-1,483,271 - Advances to component unit 60, ,000 Less allowance for doubtful accounts (431,682) - (19,264) - $ 11,343,886 $ 7,292,427 $ 30,792,919 $ 25,132,928 Leases receivable in the Public Works component unit represents amounts receivable from other local governments for the water and sewer systems constructed for those governments using bonds issued by the County. The receivable is equal to the outstanding bond principal plus accrued interest as of September 30, The current portion of the receivable is equal to the current portion of the related debt plus accrued interest. 6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund receivables and payables at September 30, 2016 is as follows: Due from Other Funds Due to Other Funds General fund $ - $ 132,048 Child care fund - 10,765 Nonmajor governmental funds - 22,609 Nonmajor enterprise funds Internal service funds 165, $ 165,944 $ 165,944 The due from (to) other funds resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. 60

66 Notes to Financial Statements For the year ended September 30, 2016, interfund transfers consisted of the following: Transfers In Transfers Out General fund $ 1,910,093 $ 1,488,493 Child care fund 2,330,240 - Nonmajor governmental funds 1,306,816 3,108,656 Health and rehabilitation services fund 150,000 - Delinquent tax revolving fund 911,071 1,404,758 Nonmajor enterprise funds - 6,313 Internal service funds 100, ,000 $ 6,708,220 $ 6,708,220 Transfers are used to: (1) move revenues from the fund that is required to collect them to the fund that is required or allowed to expend them; (2) move receipts restricted to or allowed for debt service from the funds collecting the receipts to the debt service fund as debt service payments become due; and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. 7. CAPITAL ASSETS Capital assets activity for the year ended September 30, 2016 was as follows: Beginning Ending Balance Additions Disposals Transfers Balance Governmental activities Capital assets not being depreciated: Land $ 102,628 $ - $ - $ - $ 102,628 Construction in progress 561, (561,647) , (561,647) 103,372 Capital assets being depreciated: Buildings & improvements 44,239, ,757-8,854 44,349,765 Vehicles & equipment 19,388, ,622 (201,989) 552,793 20,409,067 63,627, ,379 (201,989) 561,647 64,758,832 Less accumulated depreciation for: Buildings & improvements (20,783,494) (1,130,270) - - (21,913,764) Vehicles & equipment (13,418,395) (1,303,652) 187,954 - (14,534,093) (34,201,889) (2,433,922) 187,954 - (36,447,857) Total capital assets being depreciated, net 29,425,906 (1,662,543) (14,035) 561,647 28,310,975 Governmental activities capital assets, net $ 30,090,181 $ (1,661,799) $ (14,035) $ - $ 28,414,347 61

67 Notes to Financial Statements Beginning Ending Balance Additions Disposals Transfers Balance Business-type activities Capital assets not being depreciated: Construction in progress $ 22,230 $ - $ - $ (18,230) $ 4,000 Capital assets being depreciated: Buildings & improvements 18,788,282 42, ,831,174 Vehicles & equipment 2,492,729 32,044-18,230 2,543,003 21,281,011 74,936-18,230 21,374,177 Less accumulated depreciation for: Buildings & improvements (4,104,268) (476,547) - - (4,580,815) Vehicles & equipment (1,577,337) (180,003) - - (1,757,340) (5,681,605) (656,550) - - (6,338,155) Total capital assets being depreciated, net 15,599,406 (581,614) - 18,230 15,036,022 Business-type activities capital assets, net $ 15,621,636 $ (581,614) $ - $ - $ 15,040,022 Depreciation expense was charged to functions/programs of the primary government as follows: Depreciation of governmental activities by function General government $ 639,532 Public safety 1,396,670 Health and welfare 50,300 Cultural and recreation 260,848 Judicial 86,572 Total governmental activities $ 2,433,922 Depreciation expense in business-type activities is allocated entirely to the health and rehabilitation services facility. 62

68 Notes to Financial Statements Beginning Ending Balance Additions Disposals Transfers Balance Component unit - Road Commission Capital assets not being depreciated: Land $ 243,002 $ - $ - $ - $ 243,002 Land improvements 788, ,636 Right of ways 23,385, ,385,011 24,416, ,416,649 Capital assets being depreciated: Buildings & improvements 6,530,005 3, ,533,022 Equipment 7,535, ,162 (231,756) - 7,827,683 Infrastructure 99,818,876 7,776,449 (2,508,349) - 105,086,976 Depletable assets 50, , ,934,717 8,303,628 (2,740,105) - 119,498,240 Less accumulated depreciation for: Buildings & improvements (2,139,171) (130,894) - - (2,270,065) Equipment (6,538,912) (346,971) 231,744 - (6,654,139) Infrastructure (51,651,155) (4,795,867) 2,508,349 - (53,938,673) Depletable assets (50,559) (50,559) (60,379,797) (5,273,732) 2,740,093 - (62,913,436) Total capital assets being depreciated, net 53,554,920 3,029,896 (12) - 56,584,804 Road Commission capital assets, net $ 77,971,569 $ 3,029,896 $ (12) $ - $ 81,001,453 Component unit - Drainage District Capital assets not being depreciated: Construction in progress $ - $ 812,891 $ - $ (314,031) $ 498,860 Capital assets being depreciated: Infrastructure 104,471, , ,785,714 Less accumulated depreciation for: Infrastructure (30,380,455) (2,606,687) - - (32,987,142) Total capital assets being depreciated, net 74,091,228 (2,606,687) - 314,031 71,798,572 Drainage District capital assets, net $ 74,091,228 $ (1,793,796) $ - $ - $ 72,297,432 63

69 Notes to Financial Statements Beginning Ending Balance Additions Disposals Transfers Balance Component Unit - District Health Capital assets being depreciated: Equipment $ 309,446 $ 52,122 $ - $ - $ 361,568 Less accumulated depreciation for: Equipment (229,999) (36,747) - - (266,746) District Health capital assets, net $ 79,447 $ 15,375 $ - $ - $ 94, PAYABLES Accounts payable and accrued liabilities as of September 30, 2016 are summarized as follows: Governmental Business-type Components Activities Activities Units Accounts payable $ 1,097,739 $ 261,968 $ 1,244,302 Accrued liabilities 2,421, , ,243 Due to other governments 19, Advances from primary government , LONG-TERM DEBT $ 3,538,588 $ 1,057,267 $ 1,615,545 General obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the County. These bonds are typically issued as year serial bonds with varying amounts of principal maturing each year. General obligation bonds currently outstanding are as follows: Purpose Amount of Amount Interest Rates Maturity Date Original Issue Outstanding Governmental activities 2007 Jail Expansion 4.25%-5.00% 2028 $ 15,000,000 $ 1,490, Dental Clinic 4.00%-4.50% , , Building Authority Refunding Bond 2.282% ,975,000 8,975,000 $ 11,140,000 Business-type activities 2008 Health and Rehabilitation Services 4.55% 2027 $ 5,700,000 $ 3,980, Health and Rehabilitation Services 2.00%-3.00% ,545,000 3,319,251 $ 7,299,251 Component Unit - Road Commission 2013 Transportation Refunding 1.210% 2018 $ 2,595,000 $ 1,015,000 64

70 Notes to Financial Statements Purpose Amount of Amount Interest Rates Maturity Date Original Issue Outstanding Component Unit - Public Works Grand Ledge Water/Sewer Refunding 2.00%-2.375% 2025 $ 4,960,000 $ 4,555,000 Brookfield Water 1.625% ,860,000 1,550,000 6,105,000 Total component units $ 7,120,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending September 30, Governmental Activities Business-type Activities Component Units Principal Interest Principal Interest Principal Interest 2017 $ 875,000 $ 296,611 $ 798,395 $ 270,565 $ 1,120,000 $ 119, , , , ,098 1,135, , , , , , ,000 95, , , , , ,000 83, , , , , ,000 71, ,265, ,644 2,567, ,518 2,925, , ,200,000 33, ,000 20, $ 11,140,000 $ 1,736,945 $ 7,299,251 $ 1,500,072 $ 7,120,000 $ 635,678 By statute, the government s legal debt limit is restricted to 10% of the equalized value of property in the County. At September 30, 2016, the County s legal debt limit was $396,818,259. Refunded Debt During fiscal year 2016, the County issued $8,975,000 of refunding bonds to advance refund $8,505,000 of the 2007 Building Authority Bonds to provide resources to purchase U.S. government securities that were placed in an irrevocable trust to generate resources for all future debt service payments. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the statement of net position. The bonds are to be called on September 1, Accordingly, $8,505,000 of defeased debt remains outstanding at year-end. The refunding resulted in a savings of $1,142,941 and an economic gain of $1,007,

71 Notes to Financial Statements Installment obligations. The government has entered into long-term installment payment agreements for the upgrade of its communication systems, information technology infrastructure, jail security system and vehicles. Installment obligations currently outstanding are as follows: Purpose Amount of Amount Interest Rates Maturity Date Original Issue Outstanding Governmental activities 2014 Communications System 0% 07/01/2017 $ 740,375 $ 246, Information Technology Infrastructure 2.65% 07/25/2018 2,160, , Jail Security System 3.32% 01/01/ , , Vehicles 4.50% 10/01/ ,933 46,255 $ 1,301,575 Annual debt service requirements to maturity for installment obligations are as follows: Year Ending Governmental Activities September 30, Principal Interest 2017 $ 650,284 $ 31, ,025 19, ,887 7, ,904 4, ,121 2, , $ 1,301,575 $ 66,161 The governmental activities original purchase costs of the assets was $3,532,795 with accumulated depreciation of $458,676 at September 30, The Eaton County Health and Rehabilitation Services Facility entered into lease agreements during fiscal years 2009 and 2013 for certain equipment. The original amount of the obligations were $175,000 and $81,938, respectively. Installment obligations outstanding at year-end amounted to $7,752 with interest ranging from 7.5 to 9.5 percent. Annual debt service requirements to maturity for these installment obligations are as follows: Year Ending Business-type Activities September 30, Principal Interest 2017 $ 7,752 $ 123 Drain bonds and notes. The Drain Commissioner is authorized under state statutes to issue special assessment bonds and drain notes for the construction or maintenance of drainage districts. Such bonds and notes are repaid from special assessments levied upon the benefiting property owners. At September 30, 2016, drain bonds and notes totaling $25,432,099 were outstanding. Drain bonds and notes carry interest at rates ranging from 1.96 percent to 8.0 percent. 66

72 Notes to Financial Statements Annual debt service requirements to maturity for drain bonds and notes are as follows: Year Ending Drainage Districts September 30, Principal Interest 2017 $ 2,883,540 $ 886, ,710, , ,648, , ,555, , ,470, , ,955,000 1,396, ,010, , ,000 16,700 $ 25,432,099 $ 5,172,100 Delinquent tax notes. The government issues general obligation limited tax notes to finance the purchase of delinquent real property taxes receivable from each taxing district in the County. These notes are reported in the proprietary funds (i.e., delinquent tax revolving enterprise fund) as they are expected to be repaid from proprietary fund revenues. Each series of delinquent tax notes are subject to variable interest rates which are determined on a weekly basis by the County s remarketing agent using established criteria and legal limitations. Principal and interest payments are predicated upon actual collections of delinquent property taxes, which are subject to collection over a period not to exceed two years. Delinquent tax notes totaling $1,604,000 from the 2016 Series were outstanding at September 30, 2016, which is expected to be paid in the year ending September 30, The delinquent tax note carries an interest rate of 1.49 percent. Changes in long-term debt. Long-term debt activity for the year ended September 30, 2016 was as follows: Beginning Ending Due Within Balance Additions Deductions Balance One Year Primary Government Governmental activities General obligation bonds $ 11,410,000 $ 8,975,000 $ (9,245,000) $ 11,140,000 $ 875,000 Deferred amounts for: Issuance premiums 5,508 - (5,508) - - Installment contracts 1,942,279 - (640,704) 1,301, ,284 Compensated absences 2,373,290 2,167,909 (2,088,495) 2,452, ,793 $ 15,731,077 $ 11,142,909 $ (11,979,707) $ 14,894,279 $ 2,001,077 Business-type activities General obligation bonds $ 8,062,646 $ - $ (763,395) $ 7,299,251 $ 798,395 Lease payable 36,986 - (29,234) 7,752 7,752 Delinquent tax notes 1,634,500 3,000,000 (3,030,500) 1,604,000 1,604,000 Compensated absences 221, ,578 (199,877) 247, ,753 $ 9,955,184 $ 3,226,578 $ (4,023,006) $ 9,158,756 $ 2,657,900 67

73 Notes to Financial Statements Beginning Ending Due Within Balance Additions Deductions Balance One Year Component Units Road Commission Transportation bonds $ 1,530,000 $ - $ (515,000) $ 1,015,000 $ 505,000 Compensated absences 304, ,037 (196,166) 286,891 28,689 $ 1,834,020 $ 179,037 $ (711,166) $ 1,301,891 $ 533,689 Board of Public Works General obligation bonds $ 6,700,000 $ - $ (595,000) $ 6,105,000 $ 615,000 Deferred amounts for: Issuance premiums 75,385 - (7,935) 67,450 7,935 $ 6,775,385 $ - $ (602,935) $ 6,172,450 $ 622,935 Drainage Districts Drain bonds and notes $ 27,720,642 $ 720,000 $ (3,008,543) $ 25,432,099 $ 2,883,540 Deferred amounts for: Issuance premiums 560,221 - (57,954) 502,267 57,954 $ 28,280,863 $ 720,000 $ (3,066,497) $ 25,934,366 $ 2,941,494 District Health Compensated absences $ 284,834 $ 291,955 $ (330,712) $ 246,077 $ 37,314 For the governmental activities, compensated absences are generally liquidated by the general fund. The County issued $2,595,000 of Michigan Transportation Fund Refunding Bonds, Series 2013 on March 8, 2013 pursuant to the provisions of Act 51, Public Acts of Michigan of 1951, as amended for the purpose of refunding bonds that were used for the constructing, improving, maintaining and repairing certain Road Commission buildings. While the bonds are a general obligation of the County, the Road Commission is responsible for servicing the debt. Bond payments are made directly from the Road Commission s portion of the County s pooled cash. Accordingly, the related long-term debt is only recorded by the Road Commission, and is not included in the financial statements of the primary government. 10. RISK MANAGEMENT / SELF-INSURANCE PROGRAMS The government manages its risk exposures and provides certain employee benefits through a combination of self-insurance programs, risk management pools and commercial insurance and excess coverage policies. All funds and component units of the County participate in these programs except for the Road Commission (see below) and Health and Rehabilitation Services Facility (which carries commercial insurance for workers compensation, general and automobile liability, motor vehicle physical damage and property damage). For risks that are commercially insured, settlements have not exceeded insurance coverage in any of the past three years. Following is a summary of the self-insurance programs and risk management pool participation. 68

74 Notes to Financial Statements Workers compensation. The County maintains a self-insurance program for workers compensation coverage, which is accounted for in the workers compensation internal service fund. The program is administered by a third-party administrator who provides claims review and processing services. Premiums are paid into the internal service fund by all other funds based on payrolls and job classifications and are available to pay claims, claim reserves, excess coverage and administrative costs. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $275,000 subject to an annual aggregate limit of $5 million. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of pay outs and other economic and social factors. Changes in the balances of estimated liabilities during the past two years are as follows: Workers compensation Estimated liability, October 1 $ 88,363 $ 76,642 Estimated claims incurred, including changes in estimates 136,946 37,425 Claim payments (30,399) (25,704) Estimated liability, September 30 $ 194,910 $ 88,363 Health insurance. The County maintains a self-insurance program for employee health insurance with Blue Cross Blue Shield (BCBS), which is accounted for in the Health Insurance internal service fund. The program is administered by BCBS. Premiums are paid into the internal service fund by all other funds based on a fixed rate established each year; monies are then advanced to BCBS by the internal service fund to pay claims and administrative costs. Changes in the balances of estimated liabilities during the past two years are as follows: Health insurance Estimated liability, October 1 $ 920,563 $ 844,732 Estimated claims incurred, including changes in estimates 4,427,206 3,968,647 Claim payments (4,352,973) (4,352,973) Estimated liability, September 30 $ 994,796 $ 920,563 Liability insurance. The County participates in the Michigan Municipal Risk Management Authority (MMRMA) for general and automobile liability, motor vehicle physical damage and property damage coverages. The MMRMA provides risk management, underwriting, reinsurance and claim review and processing services for all member governments pursuant to its charter. Under most circumstances, the County s maximum loss retention per occurrence is $75,000 for general and automobile liability, $15,000 for motor vehicle physical damage, and $10,000 for property coverage. 69

75 Notes to Financial Statements The County makes annual contributions to MMRMA based on actuarial studies using historical data and insurance industry statistics. These contributions are paid from an internal service fund (i.e., the liability insurance fund) using premiums paid into it by other funds of the County. Such contributions as received by MMRMA are allocated between its general and member retention funds. Economic resources in MMRMA s general fund are expended for reinsurance coverage, claim payments and certain general and administrative costs, whereas resources in the member retention fund are used for loss payments and defense costs up to the members self-insured retention limits along with certain other member specific costs. Accordingly, the County records an asset for its portion of the unexpended member retention fund. At September 30, 2016, the balance of the County s member retention fund was $1,868, General liability Estimated liability, October 1 $ 753,030 $ 249,086 Estimated claims incurred, including changes in estimates (410,322) 695,247 Claim payments (74,362) (191,303) Estimated liability, September 30 $ 268,346 $ 753,030 Unemployment. The County is self-insured for unemployment benefits, as accounted for in the unemployment internal service fund. The reserve for unemployment benefits is determined by management based on prior experience. Benefits are expensed when paid, as follows: Unemployment compensation Estimated liability, October 1 $ - $ - Estimated claims incurred, including changes in estimates 27,789 22,201 Claim payments (27,789) (22,201) Estimated liability, September 30 $ - $ - Life and disability insurance. The County maintains a self-insurance program for life and disability coverage. The program is accounted for in the life and disability internal service fund and administered by a third-party administrator who provides claims review and processing services. Premiums for the selfinsured program are paid into the internal service fund by all other funds based on actual or illustrated rates. These premiums are available to pay claims and administrative costs. 70

76 Notes to Financial Statements Changes in the balances of estimated liabilities during the past two years are as follows: Life and disability Estimated liability, October 1 $ 2,290 $ 2,948 Estimated claims incurred, including changes in estimates 87, ,790 Claim payments (87,407) (116,448) Estimated liability, September 30 $ 2,140 $ 2,290 Dental insurance. The County has a self-insured program for dental coverage. The plan is accounted for in the dental insurance internal service fund. The program is administered by a third-party administrator who provides claims review and processing services. Premiums for the self-insured program are paid into the internal service fund by all other funds based on actual or illustrated rates. These premiums are available to pay claims and administrative costs. Changes in the balances of claims liabilities during the past two years are as follows: Dental Estimated liability, October 1 $ 12,175 $ 12,552 Estimated claims incurred, including changes in estimates 198, ,011 Claim payments (201,520) (223,388) Estimated liability, September 30 $ 9,262 $ 12,175 Road Commission. The Road Commission is exposed to various risks of loss related to property loss, torts, errors and omissions, employee injuries (workers compensation), as well as medical benefits provided to employees. The Road Commission has purchased commercial insurance for medical benefit claims and participates in the Michigan County Road Commission self-insurance pool for workers compensation and property liability. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years. The Michigan County Road Commission self-insurance pool program operates as a common risk-sharing management program for local units government in Michigan; member premiums are used to purchase commercial excess insurance coverage and to pay member claims in excess of deductible amounts. 71

77 Notes to Financial Statements 11. CONTINGENT LIABILITIES Amounts received or receivable from grantor agencies are subject to audit and potential adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the County expects such amounts, if any, to be immaterial. The County is a defendant and counter-plaintiff in a lawsuit with the Municipal Employees Retirement System (MERS) over disputed contributions necessary to fund certain defined benefit pension programs. The outcome of this lawsuit is not presently known. The County could be subject to significantly higher contributions in the future to fund these programs, depending on the resolution of this matter. 12. PROPERTY TAXES County property taxes are levied on July 1 of each year (the lien date) and are due in full by March 1 of the year following the levy, at which time uncollected taxes became delinquent. Property taxes are levied on the assessed taxable value of the property as established by local units, accepted by the County and equalized under state statute at approximately 50% of the current estimated market value. The taxable value of real and personal property recognized in the general fund for the 2016 levy was $3,346,894,233. The general operating tax rate for the 2015 levy was mills, with an additional.7000,.9500,.3500 and.1250 mills assessed for jail debt, central dispatch, juvenile services and health and rehabilitation services facility, respectively. These additional levies were based on a 2016 taxable value of $3,340,681,235. Delinquent taxes receivable represent unpaid personal property taxes in the general and special revenue funds and unpaid real property taxes in the delinquent tax revolving funds. By agreement with the various taxing authorities, the County purchases at face value the real property taxes returned delinquent each March 1 and records a corresponding delinquent taxes receivable. These receivables are pledged to a bank for the payment of the notes payable and subsequent collection on the receivable. 13. POSTEMPLOYMENT HEALTH CARE BENEFITS The County provides certain health care benefits for employees retiring during or after Substantially all employees hired prior to January 1, 2006 are eligible for benefits if they reach the age of 55 with at least 25 years of credited service while working for the County, retire due to duty disability as determined by MERS, or meet other criteria as discussed in the personnel manual. The County pays the entire cost of health insurance premiums for the retiree and a portion for his/her spouse as prescribed in the personnel manual. The activity of this program is accounted for in the retirees health insurance internal service fund. 72

78 Notes to Financial Statements Effective January 1, 2001, new employees spouses are no longer eligible for coverage under the plan. Any employees hired after January 1, 2006, are not eligible for County paid retiree health insurance as previously described. Employees are required to contribute 1% of their salary into a Health Care Savings Plan through Michigan Employees Retirement System. The County will contribute an amount equal to 2% of the employee s salary into their Health Care Savings Plan. An employee may also contribute over and above the mandatory 1%, up to 10%, and the County will match the additional contribution by the employee over the 2% and up to 4%. Any money contributed by the employee will remain in the employee's account to use for allowable health related activities upon their retirement or termination of employment. The Health Care Saving Plan has a vesting policy as described in the personnel policy. In fiscal 2006, the County established a retiree healthcare trust with the Michigan Municipal Employees Retirement System (MERS) to which it transferred monies from the internal service fund in order to earn a greater return on investment. At September 30, 2016, the fair value of the trust assets was $6,729,918; because these assets are in trust with a third party trustee, they are not reported in the accompanying financial statements. The County did not make any contributions to the trust during fiscal year 2016 and did not pay any benefits from trust assets; instead, all such activity was processed through the aforementioned internal service fund. In fiscal 2015, the County established a retiree healthcare trust administered by the County to which it transferred monies from the internal service fund in order to earn a greater return on investment. At September 30, 2016, the fair value of the trust assets was $4,054,830; because these assets are administered by the County, the County has established a trust fund accounting for the activity in the accompanying financial statements. Plan Description. The County s Retiree Health Plan (the Plan ) is a single-employer defined benefit healthcare plan administered by the Retiree Health Care Board (the Board ). The Plan was established and may be amended by the County Board of Commissioners, subject to applicable collective bargaining agreements. Eligible retirees are those individuals who meet the requirements to receive MERS retirement benefits. Basis of Accounting. The Plan s financial statements are prepared using the accrual basis of accounting. Plan contributions are recognized in the period in which the contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contribution. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Method Used to Value Investments. Plan investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Investments that do not have an established market are reported at estimated fair values. Funding Policy. The contribution requirements of plan members and the County are established and may be amended by the County Board of Commissioners, subject to applicable labor contracts. Plan members are not required to contribute to the plan. The County may contribute the annual required contribution (ARC), which is an amount actuarially determined in accordance with the parameters of GASB Statement 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. For the year ended September 30, 2016, the County contributed $1,789,071, on a pay-asyou-go basis. 73

79 Notes to Financial Statements Annual OPEB Cost and Net OPEB Obligation. For the year ended September 30, 2016, the components of the County s annual OPEB (other postemployment benefit) cost for the year, the amount actually contributed to the Plan, and changes in the County s net OPEB obligation to the Plan were as follows: Annual required contribution $ 5,050,201 Interest on net OPEB obligation 634,339 Adjustment to annual required contribution (834,510) Annual OPEB cost 4,850,030 Contributions made (1,789,071) Increase in net OPEB obligation 3,060,959 Net OPEB obligation, beginning of year 10,572,326 Net OPEB obligation, end of year $ 13,633,285 The County s annual OPEB costs, the percentage of annual OPEB costs contributed to the Plan, and the net OPEB obligation as of September 30, 2016, and the preceding two years, were as follows: Three-Year Trend Information Percentage of Annual OPEB Annual OPEB Cost Net OPEB Year Ended Cost Contributed Obligation 2014 $ 5,029, % $ 11,143, ,960, % 10,572, ,850, % 13,633,285 Funded Status and Funding Progress. The funded status of the Plan as of December 31, 2014, the date of the latest actuarial valuation, was as follows: Actuarial accrued liabilities (AAL) $ 60,401,374 Actuarial value of plan assets 10,083,711 Unfunded actuarial accrued liability (UAAL) $ 50,317,663 Funded ratio 16.7% Covered payroll (active plan members) $ 16,241,437 UAAL as a percentage of covered payroll 309.8% 74

80 Notes to Financial Statements Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Significant methods and assumptions were as follows: Actuarial valuation date December 31, 2014 Actuarial cost method Entry age Amortization method Level dollar amount Remaining amortization period 23 years Asset valuation method Market value of assets Actuarial assumptions: Investment rate of return 6.0% Projected salary increases 4.0% Healthcare inflation rate 9.0% initially; 4.0% ultimately Health and Rehabilitation Services Facility The Health and Rehabilitation Services Facility participates in a defined benefit plan that provides postemployment medical benefits to certain retirees and their spouses. Employees who retire as a director with at least 25 years of service may become eligible for benefits. The postemployment benefit is expected to be paid by the facility. The facility made contributions of $21,003 to the Plan for the year ended September 30, Basis of Accounting. The Plan s financial statements are prepared using the accrual basis of accounting. Plan contributions are recognized in the period in which the contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contribution. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. 75

81 Notes to Financial Statements Funding Policy. The facility has no obligation to make contributions in advance of when premiums are due for payment as this may be funded on a pay-as-you-go basis. The Health and Rehabilitation Services Facility s annual other postemployment benefits (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer. The Facility has elected to calculate the ARC and related liabilities using the alternative measurement permitted by GASB 45 for employers in plans with fewer than one hundred total plan members. The ARC represents a level of funding that, if paid on an on-going basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. Annual OPEB Cost and Net OPEB Obligation. For the year ended September 30, 2016, the components of the Health and Rehabilitation Services Facility s annual OPEB (other postemployment benefit) cost for the year, the amount actually contributed to the Plan, and the Facility s net OPEB obligation to the Plan were as follows: Annual OPEB cost $ 129,629 Interest on net OPEB obligation 20,984 Adjustment to annual required contribution (25,649) Annual OPEB cost 124,964 Contributions made (21,003) Increase in net OPEB obligation 103,961 Net OPEB obligation, beginning of year 500,893 Net OPEB obligation, end of year $ 604,854 Funded Status and Funding Progress. The funded status of the Plan as of September 30, 2016, was as follows: Actuarial accrued liabilities (AAL) and unfunded actuarial accrued liability (UAAL) $ 1,348,200 Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial Methods and Assumptions. Detailed data for the actuarial methods and assumptions used are reported in the separately issued audit report for the Eaton County Health and Rehabilitation Services Facility. 76

82 Notes to Financial Statements Road Commission The Road Commission has established a retiree health care fund (a fiduciary fund) with the intent of prefunding postemployment health care benefits to eligible retirees and their families. Annual employer contributions to fund the Plan are currently on a pay-as-you-go basis with the intent of building the fund for purposes of paying future benefits. The Road Commission made contributions of $786,686 to the Plan for the year ended September 30, Annual OPEB Cost and Net OPEB Asset. The Road Commission s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC). The Road Commission has elected to calculate the ARC and related information using the alternative measurement method permitted by GASB Statement No. 45 for employers in plans with fewer than one hundred total plan members. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the Road Commission s annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the Road Commission s net OPEB asset: Annual required contribution $ 133,264 Interest on net OPEB (asset) (129,199) Adjustment to annual required contribution 113,180 Annual OPEB cost 117,245 Contributions made 786,686 Increase in net OPEB asset 669,441 Net OPEB asset, beginning of year 1,845,702 Net OPEB asset, end of year $ 2,515,143 The County's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB asset for 2016 and the previous two years, was as follows: Three-Year Trend Information Percentage of Annual OPEB Annual OPEB Cost Net OPEB Year Ended Cost Contributed Asset 2014 $ 234, % $ 1,477, , % 1,845, , % 2,515,143 77

83 Notes to Financial Statements Funded Status and Funding Progress. The funded status of the Plan as of September 30, 2015, the date of the latest actuarial valuation, was as follows: Actuarial accrued liabilities (AAL) $ 3,815,444 Actuarial value of plan assets 3,014,487 Unfunded actuarial accrued liability (UAAL) $ 800,957 Funded ratio 79.0% Covered payroll (active plan members) $ 1,839,347 UAAL as a percentage of covered payroll 43.5% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial Methods and Assumptions. The annual required contribution was determined as part of the September 30, 2015 actuarial valuation using a simplified version of the entry age cost method. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at September 30, 2015, was 24 years. 14. PENSION PLANS County General Information About the Plan Plan Description. The County's defined benefit pension plan provides certain retirement, disability and death benefits to plan members and beneficiaries. The County participates in the Municipal Employees Retirement System (MERS) of Michigan. MERS is an agent multiple-employer, statewide public employee pension plan established by the Michigan Legislature under Public Act 135 of 1945 and administered by a nine member Retirement Board. MERS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained accessing the MERS website at Benefits Provided. Pension benefits vary by division/bargaining unit and are calculated as final average compensation (based on a 3 or 5 year period) and multipliers ranging from 1.7% to 3.2%. Participants are considered to be fully vested in the plan after 10 years. Normal retirement age is 60 with early retirement at age 50 with 25 years of service, age 55 with 15 years of service, or age 55 with 25 years of service, depending on division/bargaining unit. 78

84 Notes to Financial Statements Employees Covered by Benefit Terms. At the December 31, 2015 valuation date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 271 Inactive employees entitled to but not yet receiving benefits 62 Active employees 361 Total membership 694 Contributions. The County is required to contribute amounts at least equal to the actuarially determined rate, as established by the MERS Retirement Board. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. In addition, the employer may establish contribution rates to be paid by its covered employees. Employer and employee contribution rates, by division/bargaining unit, were as follows for the year ended September 30, 2016: Division/Bargaining Unit Employer Contribution Employee Contribution 01 - NonUnion 02 - Sheriff Superv Admin Staff 11 - General Maint 12 - NonSupervisors 13 - Dispatch Superv Gen Youth Services 16 - Animal Control 20 - Sheriff Non-Superv 11.22% 7.30% 66.70% 16.50% 34.21% 9.00% 11.24% 5.94% 17.15% 13.46% 38.33% 15.20% 5.66% 1.00% 23.46% 8.22% 22.29% 13.70% Net Pension Liability. The County's net pension liability was measured as of December 31, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50% Salary increases 3.75% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation Although no specific price inflation assumptions are needed for the valuation, the 2.5% long-term wage inflation assumption would be consistent with a price inflation of 3%-4%. Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. 79

85 Notes to Financial Statements The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of The main assumption and method changes in the most recent actuarial valuation included an adjustment to the mortality table to reflect longer lifetimes, the assumed annual rate of return, net of all expenses, was lowered from 8.0% to 7.75%, and the asset smoothing was changed from 10 to 5 years. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-term Expected Real Rate of Return Expected Money- Weighted Rate of Return Global equity 57.5% 5.02% 2.89% Global fixed income 20.0% 2.18% 0.44% Real assets 12.5% 4.23% 0.51% Diversifying strategies 10.0% 6.56% 0.66% 100.0% Inflation 3.25% Administrative expenses netted above 0.50% Investment rate of return 8.25% Discount Rate. The discount rate used to measure the total pension liability is 8.25% for The projection of cash flows used to determine the discount rate assumes that employer and employee contributions will be made at the rates agreed upon for employees and the actuarially determined rates for employers. Based on these assumptions, the pension plan s fiduciary net position was projected to be available to pay all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 80

86 Notes to Financial Statements Changes in Net Pension Liability The components of the change in the net pension liability are summarized as follows: Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (a) - (b) Balances at December 31, 2014 $ 133,008,900 $ 81,813,312 $ 51,195,588 Changes for the year: Service cost 2,994,010-2,994,010 Interest 10,779,046-10,779,046 Differences between expected and actual experience 2,594,548-2,594,548 Changes in assumptions 6,193,688-6,193,688 Employer contributions - 4,232,444 (4,232,444) Employee contributions - 2,009,187 (2,009,187) Net investment income (loss) - (1,200,470) 1,200,470 Benefit payments, including refunds of employee contributions (7,701,609) (7,701,609) - Administrative expense - (176,990) 176,990 Net changes 14,859,683 (2,837,438) 17,697,121 Balances at December 31, 2015 $ 147,868,583 $ 78,975,874 $ 68,892,709 The employer contributions for 2015 include $1,414,007 contributed by MERS, ostensibly under the terms of a Settlement Agreement entered into between the County, MERS, and three of the bargaining units representing County employees in MERS actions regarding the manner, it has allegedly met its obligations, under this Settlement Agreement is the subject of a currently pending litigation (see Note 11) between MERS, the County, and these bargaining units. Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the net pension liability of the County, calculated using the discount rate of 8.25%, as well as what the County's net pension liability would be if it were calculated using a discount rate that is 1% lower (7.25%) or 1% higher (9.25%) than the current rate: 1% Decrease (7.25%) Current Discount Rate (8.25%) 1% Increase (9.25%) County's net pension liability $ 87,295,775 $ 68,892,709 $ 53,636,245 Pension Plan Fiduciary Net Position. Detailed information about the pension plan s fiduciary net position is available in the separately issued Plan financial statements. 81

87 Notes to Financial Statements Pension Expense and Deferred Outflows of Resources Related to Pensions For the year ended September 30, 2016, the County recognized pension expense of $8,885,789. The County reported deferred outflows of resources related to pensions from the following sources: Deferred Outflows of Resources Difference between expected and actual experience $ 2,075,638 Changes in assumptions 4,954,950 Net difference between projected and actual earnings on pension plan investments 7,184,572 14,215,160 Contributions subsequent to the measurement date 2,054,521 Total $ 16,269,681 The amount reported as deferred outflows of resources resulting from contributions subsequent to the measurement date will be recognized as a reduction in the net pension liability for the year ending September 30, Other amounts reported as deferred outflows of resources related to the pension will be recognized in pension expense as follows: Year Ended September 30, Amount 2017 $ 3,627, ,627, ,627, ,334,154 Total $ 14,215,160 Payable to the Pension Plan. At September 30, 2016, the County reported a payable of $357,160 for the outstanding amount of contributions to the pension plan required for the year ended September 30, Section 457 Plan The County also offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan is available to all full-time County employees, who may elect to defer a portion of their salary until future years. The deferred compensation is not available to participants until termination, retirement, death, or unforeseeable emergency. The Plan has created a trust for the exclusive benefit of the Plan s participants under the rules provided in Internal Revenue Code Section 401(f). The County did not contribute to the plan during The County employees made contributions of $252,860 to the plan for the year ended September 30,

88 Notes to Financial Statements Health and Rehabilitation Services Facility General Information About the Plan Plan Description. The Health and Rehabilitation Services Facility (Facility) defined benefit pension plan provides certain retirement, disability and death benefits to plan members and beneficiaries. The Facility participates in the Municipal Employees Retirement System (MERS) of Michigan. MERS is an agent multipleemployer, statewide public employee pension plan established by the Michigan Legislature under Public Act 135 of 1945 and administered by a nine member Retirement Board. MERS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained accessing the MERS website at Benefits Provided. Pension benefits vary by division/bargaining unit and are calculated as final average compensation (based on a 3 or 5 year period) and multipliers ranging from 1.7% to 2.5%. Participants are considered to be fully vested in the plan after 6 or 10 years, depending on division/bargaining unit. Normal retirement age is 60 with early retirement at age 50 with 25 years of service or age 55 with 25 years of service, depending on division/bargaining unit. Employees Covered by Benefit Terms. At the December 31, 2015 valuation date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 48 Inactive employees entitled to but not yet receiving benefits 9 Active employees 221 Total membership 278 Contributions. The Facility is required to contribute amounts at least equal to the actuarially determined rate, as established by the MERS Retirement Board. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. In addition, the employer may establish contribution rates to be paid by its covered employees. For the year ended September 30, 2016, the average active employee contribution rate was 3.0 percent of annual pay and the Facility's average contribution rate was approximately 4.1 percent of annual payroll. Net Pension Liability. The Facility's net pension liability was measured as of December 31, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50% Salary increases 3.75% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation 83

89 Notes to Financial Statements Although no specific price inflation assumptions are needed for the valuation, the 2.5% long-term wage inflation assumption would be consistent with a price inflation of 3%-4%. Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of The main assumption and method changes in the most recent actuarial valuation included an adjustment to the mortality table to reflect longer lifetimes, the assumed annual rate of return, net of all expenses, was lowered from 8.0% to 7.75%, and the asset smoothing was changed from 10 to 5 years. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-term Expected Real Rate of Return Expected Money- Weighted Rate of Return Global equity 57.5% 5.02% 2.89% Global fixed income 20.0% 2.18% 0.44% Real assets 12.5% 4.23% 0.51% Diversifying strategies 10.0% 6.56% 0.66% 100.0% Inflation 3.25% Administrative expenses netted above 0.50% Investment rate of return 8.25% Discount Rate. The discount rate used to measure the total pension liability is 8.25% for The projection of cash flows used to determine the discount rate assumes that employer and employee contributions will be made at the rates agreed upon for employees and the actuarially determined rates for employers. Based on these assumptions, the pension plan s fiduciary net position was projected to be available to pay all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 84

90 Notes to Financial Statements Changes in Net Pension Liability The components of the change in the net pension liability are summarized as follows: Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (a) - (b) Balances at December 31, 2014 $ 9,087,438 $ 8,349,552 $ 737,886 Changes for the year: Service cost 589, ,206 Interest 754, ,946 Differences between expected and actual experience (63,415) - (63,415) Changes in assumptions 431, ,055 Employer contributions - 396,548 (396,548) Employee contributions - 245,016 (245,016) Net investment income (loss) - (129,789) 129,789 Benefit payments, including refunds of employee contributions (462,355) (462,355) - Administrative expense - (18,619) 18,619 Net changes 1,249,437 30,801 1,218,636 Balances at December 31, 2015 $ 10,336,875 $ 8,380,353 $ 1,956,522 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the net pension liability of the Facility, calculated using the discount rate of 8.25%, as well as what the Facility's net pension liability would be if it were calculated using a discount rate that is 1% lower (7.25%) or 1% higher (9.25%) than the current rate: 1% Decrease (7.25%) Current Discount Rate (8.25%) 1% Increase (9.25%) Facility's net pension liability $ 3,401,806 $ 1,956,522 $ 772,103 Pension Plan Fiduciary Net Position. Detailed information about the pension plan s fiduciary net position is available in the separately issued Plan financial statements. 85

91 Notes to Financial Statements Pension Expense and Deferred Outflows of Resources Related to Pensions For the year ended September 30, 2016, the Facility recognized pension expense of $690,705. The Facility reported deferred outflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows (Inflows) of Resources Difference between expected and actual experience $ - $ 50,732 $ (50,732) Changes in assumptions 344, ,844 Net difference between projected and actual earnings on pension plan investments 749, ,702 1,094,546 50,732 1,043,814 Contributions subsequent to the measurement date 323, ,592 Total $ 1,418,138 $ 50,732 $ 1,367,406 The amount reported as deferred outflows of resources resulting from contributions subsequent to the measurement date will be recognized as a reduction in the net pension liability for the year ending September 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the pension will be recognized in pension expense as follows: Year Ended September 30, Amount 2017 $ 268, , , ,578 Total $ 1,043,814 Payable to the Pension Plan. At September 30, 2016, the Facility reported a payable of $33,485 for the outstanding amount of contributions to the pension plan required for the year ended September 30,

92 Notes to Financial Statements District Health Department General Information About the Plan Plan Description. The District Health Department (Department) defined benefit pension plan provides certain retirement, disability and death benefits to plan members and beneficiaries. The Department participates in the Municipal Employees Retirement System (MERS) of Michigan. MERS is an agent multipleemployer, statewide public employee pension plan established by the Michigan Legislature under Public Act 135 of 1945 and administered by a nine member Retirement Board. MERS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained accessing the MERS website at Benefits Provided. Pension benefits vary by division/bargaining unit and are calculated as final average compensation (based on a 3 or 5 year period) and multipliers at 2.5%. Participants are considered to be fully vested in the plan after 6 years. Normal retirement age is 60 with early retirement at age 50 with 25 years of service or age 55 with 15 years of service, depending on division/bargaining unit. Employees Covered by Benefit Terms. At the December 31, 2015 valuation date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 86 Inactive employees entitled to but not yet receiving benefits 40 Active employees 61 Total membership 187 Contributions. The Department is required to contribute amounts at least equal to the actuarially determined rate, as established by the MERS Retirement Board. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. In addition, the employer may establish contribution rates to be paid by its covered employees. Employer and employee contribution amounts or rates, by division/bargaining unit, were as follows for the year ended September 30, 2016: Division/Bargaining Unit Employer Contribution Employee Contribution 01 - PERA Unit II 10 - Non Un Mgmt 11 - PERA 12.44% 8.97% 23.92% 2.00% 12.44% 6.88% Net Pension Liability. The Department's net pension liability was measured as of December 31, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. 87

93 Notes to Financial Statements Actuarial Assumptions. The total pension liability in the December 31, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50% Salary increases 3.75% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation Although no specific price inflation assumptions are needed for the valuation, the 2.5% long-term wage inflation assumption would be consistent with a price inflation of 3%-4%. Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of The main assumption and method changes in the most recent actuarial valuation included an adjustment to the mortality table to reflect longer lifetimes, the assumed annual rate of return, net of all expenses, was lowered from 8.0% to 7.75%, and the asset smoothing was changed from 10 to 5 years. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-term Expected Real Rate of Return Expected Money- Weighted Rate of Return Global equity 57.5% 5.02% 2.89% Global fixed income 20.0% 2.18% 0.44% Real assets 12.5% 4.23% 0.51% Diversifying strategies 10.0% 6.56% 0.66% 100.0% Inflation 3.25% Administrative expenses netted above 0.50% Investment rate of return 8.25% 88

94 Notes to Financial Statements Discount Rate. The discount rate used to measure the total pension liability is 8.25% for The projection of cash flows used to determine the discount rate assumes that employer and employee contributions will be made at the rates agreed upon for employees and the actuarially determined rates for employers. Based on these assumptions, the pension plan s fiduciary net position was projected to be available to pay all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in Net Pension Liability The components of the change in the net pension liability are summarized as follows: Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (a) - (b) Balances at December 31, 2014 $ 18,134,817 $ 13,840,126 $ 4,294,691 Changes for the year: Service cost 345, ,262 Interest 1,462,130-1,462,130 Changes in benefits (69,189) - (69,189) Differences between expected and actual experience 284, ,641 Changes in assumptions 945, ,293 Employer contributions - 561,235 (561,235) Employee contributions - 187,030 (187,030) Net investment income (loss) - (206,101) 206,101 Benefit payments, including refunds of employee contributions (1,169,315) (1,169,315) - Administrative expense - (30,066) 30,066 Net changes 1,798,822 (657,217) 2,456,039 Balances at December 31, 2015 $ 19,933,639 $ 13,182,909 $ 6,750,730 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the net pension liability of the Department, calculated using the discount rate of 8.25%, as well as what the Department's net pension liability would be if it were calculated using a discount rate that is 1% lower (7.25%) or 1% higher (9.25%) than the current rate: 1% Decrease (7.25%) Current Discount Rate (8.25%) 1% Increase (9.25%) Department's net pension liability $ 8,916,576 $ 6,750,730 $ 4,916,300 Pension Plan Fiduciary Net Position. Detailed information about the pension plan s fiduciary net position is available in the separately issued Plan financial statements. 89

95 Notes to Financial Statements Pension Expense and Deferred Outflows of Resources Related to Pensions For the year ended September 30, 2016, the Department recognized pension expense of $1,185,662. The Department reported deferred outflows of resources related to pensions from the following sources: Deferred Outflows of Resources Difference between expected and actual experience $ 189,761 Changes in assumptions 630,195 Net difference between projected and actual earnings on pension plan investments 1,218,802 2,038,758 Contributions subsequent to the measurement date 680,606 Total $ 2,719,364 The amount reported as deferred outflows of resources resulting from contributions subsequent to the measurement date will be recognized as a reduction in the net pension liability for the year ending September 30, Other amounts reported as deferred outflows of resources related to the pension will be recognized in pension expense as follows: Year Ended September 30, Amount 2017 $ 727, , , ,859 Total $ 2,038,758 Payable to the Pension Plan. At September 30, 2016, the Department reported a payable of $69,895 for the outstanding amount of contributions to the pension plan required for the year ended September 30, DEFINED CONTRIBUTION PENSION PLAN - ROAD COMMISSION The Road Commission provides pension benefits for substantially all of its regular full-time employees through a defined contribution pension plan. The Road Commission is the plan administrator; however, the daily plan administration and operation is provided through the American Funds Group. The Road Commission contributes an amount equal to 12% of each employee s compensation during the plan year, after completion of one year of service. Members do not contribute any annual compensation to this plan. The Road Commission s contributions to the plan for the year ended September 30, 2016 were $213,

96 Notes to Financial Statements 16. NET INVESTMENT IN CAPITAL ASSETS The composition of net investment in capital assets as of September 30, 2016, was as follows: Governmental Activities Business-type Activities Component Units Capital assets: Capital assets not being depreciated $ 103,372 $ 4,000 $ 24,915,509 Capital assets being depreciated, net 28,310,975 15,036, ,478,198 28,414,347 15,040, ,393,707 Related debt: Capital related bonds (11,140,000) (7,299,251) (32,552,099) Bonds payable related to capital lease receivables - - 6,105,000 Installment contracts (1,301,575) - - Leases payable - (7,752) - Deferred loss on refunding 517,782 29, ,873 Deferred loss on refunding from bonds payable related to capital lease receivables - - (84,022) Unamortized premium on bonds - - (502,267) (11,923,793) (7,277,128) (26,639,515) Total net investment in capital assets $ 16,490,554 $ 7,762,894 $ 126,754,192 91

97 Notes to Financial Statements 17. COMPONENTS OF FUND BALANCES Detailed information on fund balances of governmental funds as of September 30, 2016 is as follows: Child Nonmajor General Care Governmental Fund Fund Funds Total Nonspendable: Prepaids $ 182,843 $ - $ 18,321 $ 201,164 Advances to component units 60, ,000 Total nonspendable 242,843-18, ,164 Restricted for: Central dispatch - - 1,508,154 1,508,154 Judicial - - 1,024 1,024 Debt service ,613 80,613 Permanent trusts ,250 68,250 CDBG housing , ,714 Remonumentation - - 6,068 6,068 ROD technology , ,821 Veterans trust - - 1,966 1,966 Public safety , ,836 Officer training , ,706 Judicial , ,214 Animal control - - 4,735 4,735 Total restricted - - 3,014,101 3,014,101 Committed for: Public safety - - 7,988 7,988 Child care - 67,661-67,661 Solid waste , ,139 General government ,644 22,644 Health and social services , ,145 LEAD drug testing - - 1,889 1,889 Sheriff road crew - - 8,165 8,165 Concealed pistol licenses ,017 31,017 Total committed - 67, , ,648 Unassigned 5,575, ,575,167 Total fund balances $ 5,818,010 $ 67,661 $ 3,443,409 $ 9,329,080 92

98 REQUIRED SUPPLEMENTARY INFORMATION 93

99 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - County Schedule of Changes in the County's Net Pension Liability and Related Ratios Year Ended September Total pension liability Service cost $ 2,994,010 $ 2,744,783 Interest 10,779,046 10,297,354 Differences between expected and actual experience 2,594,548 - Changes of assumptions 6,193,688 - Benefit payments, including refunds of employee contributions (7,701,609) (6,954,516) Net change in total pension liability 14,859,683 6,087,621 Total pension liability, beginning of year 133,008, ,921,279 Total pension liability, end of year 147,868, ,008,900 Plan fiduciary net position Employer contributions 4,232,444 2,295,134 Employee contributions 2,009,187 1,900,799 Net investment income (loss) (1,200,470) 4,994,651 Benefit payments, including refunds of employee contributions (7,701,609) (6,954,516) Administrative expense (176,990) (183,040) Net change in plan fiduciary net position (2,837,438) 2,053,028 Plan fiduciary net position, beginning of year 81,813,312 79,760,284 Plan fiduciary net position, end of year 78,975,874 81,813,312 County's net pension liability $ 68,892,709 $ 51,195,588 Plan fiduciary net position as a percentage of total pension liability 53.4% 61.5% Covered payroll $ 18,536,741 $ 16,927,042 County's net pension liability as a percentage of covered payroll 371.7% 302.4% The amounts presented for each fiscal year were determined as of December 31 of the preceding year. Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 94

100 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - County Schedule of the Net Pension Liability Fiscal Year Ended September 30, Total Pension Liability Plan Net Position Net Pension Liability Plan Net Position as Percentage of Total Pension Liability Covered Payroll 2016 $ 147,868,583 $ 78,975,874 $ 68,892, % $ 18,536, ,008,900 81,813,312 51,195, % 16,927,042 The amounts presented for each fiscal year were determined as of December 31 of the preceding year. Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 95

101 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - County Schedule of Contributions Fiscal Year Ended September 30, Actuarially Determined Contribution Contributions in Relation to the Actuarially Determined Contribution Contribution Deficiency (Excess) Covered Payroll Contributions as Percentage of Covered Payroll 2016 $ 4,252,006 $ 4,252,006 $ - $ 18,574, % ,649,596 2,649,596-17,943, % The employer contributions for the fiscal year ended September 30, 2016 include $1,414,007 contributed by MERS, ostensibly under the terms of a Settlement Agreement entered into between the County, MERS, and three (3) of the bargaining units representing County employees in MERS actions regarding the manner it has allegedly met its obligations under this Settlement Agreement is the subject of a currently pending litigation (See Note 11) between MERS, the County, and these bargaining units. Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. Notes to Schedule of Contributions Valuation Date Actuarially determined contribution rates are calculated as of the December 31 that is 21 months prior to the beginning of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry-age normal Amortization method Level percent of payroll, open Remaining amortization period years, depending on division/bargaining unit Asset valuation method 10-year smooth market Inflation 2.50% Salary increases 3.75% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation Retirement age Mortality Age-based table of rates that are specific to the type of eligibility condition. The Normal Retirement rates were first used for the December 31, 2015 actuarial valuations. The Early Retirement rates were first used for the December 31, 2015 actuarial valuations. Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. 96

102 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - Health and Rehabilitation Services Facility Schedule of Changes in the Facility's Net Pension Liability and Related Ratios Year Ended September Total pension liability Service cost $ 589,206 $ 555,375 Interest 754, ,617 Differences between expected and actual experience (63,415) - Changes of assumptions 431,055 - Benefit payments, including refunds of employee contributions (462,355) (398,998) Net change in total pension liability 1,249, ,994 Total pension liability, beginning of year 9,087,438 8,244,444 Total pension liability, end of year 10,336,875 9,087,438 Plan fiduciary net position Employer contributions 396, ,907 Employee contributions 245, ,066 Net investment income (loss) (129,789) 491,649 Benefit payments, including refunds of employee contributions (462,355) (398,998) Administrative expense (18,619) (18,165) Net change in plan fiduciary net position 30, ,459 Plan fiduciary net position, beginning of year 8,349,552 7,677,093 Plan fiduciary net position, end of year 8,380,353 8,349,552 Facility's net pension liability $ 1,956,522 $ 737,886 Plan fiduciary net position as a percentage of total pension liability 81.1% 91.9% Covered payroll $ 8,198,547 $ 7,719,600 Facility's net pension liability as a percentage of covered payroll 23.9% 9.6% The amounts presented for each fiscal year were determined as of December 31 of the preceding year. Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 97

103 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - Health and Rehabilitation Services Facility Schedule of the Net Pension Liability Fiscal Year Ended September 30, Total Pension Liability Plan Net Position Net Pension Liability Plan Net Position as Percentage of Total Pension Liability Covered Payroll 2016 $ 10,336,875 $ 8,380,353 $ 1,956, % $ 8,198, ,087,438 8,349, , % 7,719,600 The amounts presented for each fiscal year were determined as of December 31 of the preceding year. Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 98

104 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - Health and Rehabilitation Services Facility Schedule of Contributions Fiscal Year Ended September 30, Actuarially Determined Contribution Contributions in Relation to the Actuarially Determined Contribution Contribution Deficiency (Excess) Covered Payroll Contributions as Percentage of Covered Payroll 2016 $ 420,882 $ 420,882 $ - $ 8,747, % , ,195-8,161, % Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. Notes to Schedule of Contributions Valuation Date Actuarially determined contribution rates are calculated as of the December 31 that is 21 months prior to the beginning of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry-age normal Amortization method Level percent of payroll, open Remaining amortization period 25 years Asset valuation method 10-year smooth market Inflation 2.50% Salary increases 3.75% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation Retirement age Mortality Age-based table of rates that are specific to the type of eligibility condition. The Normal Retirement rates were first used for the December 31, 2015 actuarial valuations. The Early Retirement rates were first used for the December 31, 2015 actuarial valuations. Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. 99

105 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - District Health Schedule of Changes in the District's Net Pension Liability and Related Ratios Year Ended September Total pension liability Service cost $ 345,262 $ 352,453 Interest 1,462,130 1,408,014 Changes in benefit terms (69,189) - Differences between expected and actual experience 284,641 - Changes of assumptions 945,293 - Benefit payments, including refunds of employee contributions (1,169,315) (1,032,516) Net change in total pension liability 1,798, ,951 Total pension liability, beginning of year 18,134,817 17,406,866 Total pension liability, end of year 19,933,639 18,134,817 Plan fiduciary net position Employer contributions 561,235 1,092,352 Employee contributions 187, ,161 Net investment income (loss) (206,101) 807,772 Benefit payments, including refunds of employee contributions (1,169,315) (1,032,516) Administrative expense (30,066) (29,793) Net change in plan fiduciary net position (657,217) 1,012,976 Plan fiduciary net position, beginning of year 13,840,126 12,827,150 Plan fiduciary net position, end of year 13,182,909 13,840,126 District's net pension liability $ 6,750,730 $ 4,294,691 Plan fiduciary net position as a percentage of total pension liability 66.1% 76.3% Covered payroll $ 2,700,051 $ 2,769,717 District's net pension liability as a percentage of covered payroll 250.0% 155.1% The amounts presented for each fiscal year were determined as of December 31 of the preceding year. Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 100

106 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - District Health Schedule of the Net Pension Liability Fiscal Year Ended September 30, Total Pension Liability Plan Net Position Net Pension Liability Plan Net Position as Percentage of Total Pension Liability Covered Payroll 2016 $ 19,933,639 $ 13,182,909 $ 6,750, % $ 2,700, ,134,817 13,840,126 4,294, % 2,769,717 The amounts presented for each fiscal year were determined as of December 31 of the preceding year. Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 101

107 Required Supplementary Information MERS Agent Multiple-Employer Defined Benefit Pension Plan - District Health Schedule of Contributions Fiscal Year Ended September 30, Actuarially Determined Contribution Contributions in Relation to the Actuarially Determined Contribution Contribution Deficiency (Excess) Covered Payroll Contributions as Percentage of Covered Payroll 2016 $ 429,325 $ 429,325 $ - $ 2,891, % , , ,924 2,882, % Note: GASB 68 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. Notes to Schedule of Contributions Valuation Date Actuarially determined contribution rates are calculated as of the December 31 that is 21 months prior to the beginning of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry-age normal Amortization method Level percent of payroll, open Remaining amortization period 23 years Asset valuation method 10-year smooth market Inflation 2.50% Salary increases 3.75% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation Retirement age Mortality Age-based table of rates that are specific to the type of eligibility condition. The Normal Retirement rates were first used for the December 31, 2015 actuarial valuations. The Early Retirement rates were first used for the December 31, 2015 actuarial valuations. Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. 102

108 Required Supplementary Information Postemployment Healthcare Plan - Retiree Health Schedule of Funding Progress Actuarial Accrued UAAL as a Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) - AAL Funded Covered of Covered Valuation Date Assets Entry Age (UAAL) Ratio Payroll Payroll December 31 (a) (b) (b-a) (a / b) (c) ((b-a) / c) 2011 $ 6,923,689 $ 53,761,648 $ 46,837, % $ 17,631, % ,589,895 58,409,824 50,819, % 17,600, % ,083,711 60,401,374 50,317, % 16,241, % Schedule of Employer Contributions Annual Year Ended Required Percentage September 30, Contribution Contributed 2014 $ 5,159, % ,153, % ,050, % 103

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110 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES 105

111 Detailed Schedule of Revenues and Other Financing Sources Budget and Actual - General Fund For the Year Ended September 30, 2016 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes: Real and personal property taxes $ 17,488,004 $ 17,488,004 $ 17,122,972 $ (365,032) Industrial facilities tax 357, , ,083 (101,808) Payments in lieu 45,000 45,000 11,237 (33,763) Delinquent taxes 20,000 20,000 12,773 (7,227) Trailer park taxes 10,000 10,000 9,644 (356) Real estate transfer tax 260, , , ,865 Interest and penalties 65,000 65,000 56,142 (8,858) Total taxes 18,245,895 18,245,895 17,881,716 (364,179) Licenses and permits: Dog licenses 98,000 98,000 92,786 (5,214) Pistol permits 39,000 1, (550) Marriage licenses 14,200 14,200 14, Soil erosion 45,000 45, ,001 63,001 Total licenses and permits 196, , ,522 57,822 Intergovernmental - federal/state: ADC Incentive 150, , ,949 11,949 Cooperative reimbursement - Friend of the Court 1,119,794 1,119, ,370 (263,424) Probate Judge's salary 152, , ,166 (2,990) Judicial salary standardization 188, , ,673 (13,709) Sheriff road patrol program 101, , ,370 - Marine safety program 5,000 5,000 2,500 (2,500) Drug case incentive (27) Victims Rights Act 120, , ,800 2,800 Parole violation grant 230, , ,927 (121,073) Diverted felon program 145, , ,020 (3,980) Assistant juvenile officer grant 52,776 52,776 52,776 - Convention and tourism 439, , ,394 21,018 Cigarette tax 7,000 7,000 - (7,000) Liquor license fees 25,000 25,000 33,151 8,151 State income tax 2,216,196 2,216,196 2,216,201 5 State aid-case flow assistance 25,900 25,900 27,043 1,143 State court equity funding 430, , ,880 (120) Title IV-E 23,000 23,000 21,315 (1,685) Vertical drug 7,500 7,500 11,144 3,644 Miscellaneous 26,500 26,500 23,673 (2,827) Total intergovernmental - federal/state 5,465,450 5,465,450 5,094,825 (370,625) continued 106

112 Detailed Schedule of Revenues and Other Financing Sources Budget and Actual - General Fund For the Year Ended September 30, 2016 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues (cont.) Intergovernmental - local: Township - planning $ 143,921 $ 175,921 $ 178,941 $ 3,020 Township - Sheriff 3,037,030 3,037,030 3,062,831 25,801 Prosecuting attorney services 40,000 40,000 52,536 12,536 Total intergovernmental - local 3,220,951 3,252,951 3,294,308 41,357 Charges for services: Court: District Court costs 982, ,000 1,063,265 81,265 Circuit Court probation 47,050 47,050 97,189 50,139 Court filing fees 35,000 35,000 38,938 3,938 Bond costs 1,000 1, (280) Jury demand 5,000 5,000 4,135 (865) Writ of garnishment 94,000 94, ,360 12,360 Attorney fee reimbursement 17,700 17,700 50,556 32,856 SOS reinstatement fee 32,000 32,000 35,840 3,840 Probation oversight 190, , ,682 5,682 Alcohol assessment 28,000 28,000 36,593 8,593 Friend of the Court service fees 142, , ,681 55,376 Probate Court services 36,000 36,000 39,585 3,585 Juvenile Court services 3,900 3,900 5,887 1,987 Prosecuting attorney services 1,600 1,600 8,203 6,603 Juvenile Court attorney fees 27,000 27,000 21,412 (5,588) Crime victim assessment Inmate medical 5,000 5,000 1,793 (3,207) General government: County Clerk services 94,200 94,200 96,817 2,617 County Treasurer services 11,000 11,000 20,380 9,380 Register of Deed services 330, , ,969 (2,031) Drain Commission services 140, ,100 88,052 (52,048) Child care collection fees 44,000 44,000 31,558 (12,442) Property description services 20,600 20,600 24,669 4,069 Food stamp fraud 3,000 3,000 1,230 (1,770) Community corrections services Sheriff Department: Sheriff services 137, , ,047 (32,953) Economic crimes unit 465, , ,659 (64,441) OUIL/Impaired 14,000 14,000 12,381 (1,619) False alarms 4,000 4,000 7,105 3,105 Abandoned vehicles 5,500 5, (4,580) Inmate medical 5,000 5,000 2,186 (2,814) Sentenced inmate boarding 40,000 40,000 46,130 6,130 Boarding of dogs and cats 5,000 5,000 5, Medical Examiner - cremation fees 34,000 34,000 14,560 (19,440) Parks and recreation 97,125 97,125 93,311 (3,814) continued 107

113 Detailed Schedule of Revenues and Other Financing Sources Budget and Actual - General Fund For the Year Ended September 30, 2016 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues (cont.) Charges for services - concluded: Planning aerial photos $ - $ - $ 4,398 $ 4,398 Computer ,549 73,549 Miscellaneous 31,000 30,500 34,635 4,135 Total charges for services 3,128,330 3,127,830 3,295, ,356 Fines and forfeitures: Ordinance fines and costs 306, , ,490 (20,710) Handicap parking 1,000 1, (678) Bond forfeitures 16,500 16,500 31,410 14,910 Dog fines 2,000 2,000 3,994 1,994 Law library 6,500 6,500 6,500 - Miscellaneous 1,000 1, (750) Total fines and forfeitures 333, , ,966 (5,234) Interest and rents: Interest on investments ,535 11,035 Rental fees 278, , ,526 (14,665) Total interest and rents 278, , ,061 (3,630) Other: Reimbursements and refunds 102, ,995 87,791 (32,204) Restitution 2,500 2,500 23,614 21,114 Miscellaneous 51,750 51,750 68,025 16,275 Total other 156, , ,430 5,185 Total revenues 31,025,367 31,036,962 30,565,014 (471,948) Other financing sources Transfers in 1,850,082 1,904,993 1,910,093 5,100 Proceeds from sale of capital assets 10,500 10,500 9,453 (1,047) Total other financing sources 1,860,582 1,915,493 1,919,546 4,053 Total revenues and other financing sources $ 32,885,949 $ 32,952,455 $ 32,484,560 $ (467,895) concluded 108

114 Detailed Schedule of Expenditures and Other Financing Uses Budget and Actual - General Fund For the Year Ended September 30, 2016 Actual Over Original Final (Under) Final Budget Budget Actual Budget Expenditures Legislative: Board of Commissioners $ 299,951 $ 302,951 $ 296,516 $ (6,435) Judicial: Circuit Court 1,237,461 1,325,212 1,150,197 (175,015) District Court 1,607,940 1,595,008 1,529,995 (65,013) Friend of the Court 1,426,636 1,420,636 1,367,259 (53,377) County Guardian 63,050 63,050 60,000 (3,050) Probate Court 554, , ,258 (28,754) Juvenile Division 876, , ,820 (67,029) Probation 10,723 10,723 6,097 (4,626) Law library 6,500 6,500 2,981 (3,519) Total judicial 5,783,520 5,847,990 5,447,607 (400,383) General government: Elections 87,350 84,804 76,676 (8,128) County Clerk 641, , ,118 (8,590) Plat Board (323) Controller 936, , ,988 (87,555) Information Systems 917, , ,676 (43,073) Equalization 622, , ,701 (11,629) Prosecuting Attorney 1,710,422 1,710,415 1,694,043 (16,372) Economic Crimes Unit 416, , ,378 (106,820) Register of Deeds 249, , ,111 (7,437) Treasurer 459, , ,378 (17,725) Cooperative Extension 144, , ,402 (664) Building and Grounds 1,672,929 1,673,079 1,604,525 (68,554) Drain Commissioner 546, , ,710 (57,182) Eaton Conservation District 20,500 20,500 20,500 - Total general government 8,425,415 8,425,258 7,991,206 (434,052) Public safety: Sheriff Department 5,117,957 5,116,447 5,084,784 (31,663) Sheriff - Corrections 4,353,706 4,350,428 4,179,513 (170,915) Sheriff - Delta office 3,755,754 3,743,082 3,606,729 (136,353) Tri-County Metro 50,000 50,000 1,047 (48,953) Sheriff Road Patrol 188, , ,843 (11,528) Marine Safety 12,495 12, (11,522) Community Development 229, , ,154 (16,271) Tri-County Planning 106, , ,533 - Animal Control 279, , ,077 (43,621) Vertical Drug 100, , ,386 (367) Total public safety 14,195,071 14,189,232 13,718,039 (471,193) continued 109

115 Detailed Schedule of Expenditures and Other Financing Uses Budget and Actual - General Fund For the Year Ended September 30, 2016 Actual Over Original Final (Under) Final Budget Budget Actual Budget Expenditures (cont.) Public works: Drains at Large $ 423,507 $ 423,507 $ 390,352 $ (33,155) Health and social services: Convention & Tourism 219, , ,198 8,510 Medical Examiner 177, , ,276 (12,924) Community Mental Health 394, , ,327 - Health Plan Corporation 650, Tri-County Aging 62,978 62,978 62,238 (740) Veterans 115, ,169 92,222 (22,947) Landfill 35,000 35,000 30,858 (4,142) Child Care - DHS 2,500 2,500 - (2,500) Soldiers and Sailors 30,000 30,000 17,589 (12,411) District Health - Appropriation 165, , ,800 - Total health and social services 1,852,662 1,852,662 1,805,508 (47,154) Parks, recreation and culture: Courthouse Square Association 15,000 15,000 15,000 - Parks and recreation 518, , ,918 (50,494) Parks special projects 1,500 1,500 - (1,500) Historical commission 1,500 2,090 2,089 (1) Total parks, recreation and culture 536, , ,007 (51,995) Other: Computer 116, , ,703 (894) Insurance, bonds & contingency 446, , ,036 (274,254) Total other 562, , ,739 (275,148) Capital outlay: General 487, , ,947 (43,744) Computer 450, , ,188 (99,704) Total capital outlay 938,050 1,116, ,135 (143,448) Debt service: Principal 320, , ,179 (1) Interest 26,499 27,703 27,703 - Total debt service 347, , ,882 (1) Total expenditures 33,364,548 33,642,955 31,779,991 (1,862,964) Other financing uses Transfers out 1,224,268 1,507,841 1,488,493 (19,348) Total expenditures and other financing uses $ 34,588,816 $ 35,150,796 $ 33,268,484 $ (1,882,312) concluded 110

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117 Combining Balance Sheet Nonmajor Governmental Funds September 30, 2016 Special Revenue Funds Sheriff Solid Central Swift CDBG Road Waste Dispatch and Sure Housing Crew Ordinance Fund Sanctions Grant Assets Cash and cash equivalents $ 10,969 $ 226,926 $ 1,529,304 $ - $ 152,737 Receivables: Property taxes - - 1, Accounts receivable, net - 11, Due from other governmental units ,756 22,197 - Prepaid items Total assets $ 10,969 $ 238,072 $ 1,606,841 $ 22,197 $ 152,737 Liabilities Negative equity in pooled cash $ - $ - $ - $ 18,365 $ - Accounts payable ,340 32,563 2, Accrued liabilities 2,097 3,185 53, Due to other funds , Total liabilities 2,804 21,933 98,687 21, Fund balances Nonspendable Restricted - - 1,508,154 1, ,714 Committed 8, , Total fund balances 8, ,139 1,508,154 1, ,714 Total liabilities and fund balances $ 10,969 $ 238,072 $ 1,606,841 $ 22,197 $ 152,

118 Combining Balance Sheet Nonmajor Governmental Funds September 30, 2016 Special Revenue Funds Construction Remonu- Register Criminal Code mentation of Deeds Property Drug Law S.T.O.P. Drug Court III - Enforcement Grant Technology Forfeiture Forfeiture Grant Circuit Court $ 496,717 $ 22,838 $ 118,696 $ 7,892 $ - $ 3,378 $ 12, , $ 496,717 $ 22,838 $ 118,696 $ 7,892 $ - $ 3,378 $ 29,533 $ - $ - $ - $ - $ - $ - $ - 1,749 16, ,448 8, ,976 1,636 1, ,945 16, ,378 5, ,772 6, , , , ,772 6, ,821 7, ,228 $ 496,717 $ 22,838 $ 118,696 $ 7,892 $ - $ 3,378 $ 29,533 continued 113

119 Combining Balance Sheet Nonmajor Governmental Funds September 30, 2016 Special Revenue Funds Property Bureau of Drug Community Domestic Forfeiture Justice Forfeiture Corrections Preparedness Prosecutor LLEBG Prosecutor Assets Cash and cash equivalents $ 1,274 $ 35,954 $ 22,644 $ - $ - Receivables: Property taxes Accounts receivable, net Due from other governmental units 7,681 34,367-8,801 - Prepaid items Total assets $ 8,955 $ 70,966 $ 22,644 $ 8,801 $ - Liabilities Negative equity in pooled cash $ - $ - $ - $ 8,801 $ - Accounts payable 3,715 18, Accrued liabilities Due to other funds Total liabilities 4,485 18,429-8,801 - Fund balances Nonspendable Restricted 4,470 51, Committed , Total fund balances 4,470 52,537 22, Total liabilities and fund balances $ 8,955 $ 70,966 $ 22,644 $ 8,801 $ - 114

120 Combining Balance Sheet Nonmajor Governmental Funds September 30, 2016 Special Revenue Funds Local Michigan Concealed OHSP Department Home Tax Corrections Justice Pistol Traffic of Human Veterans Exemption Officer Training Licenses Enforcement Services Trust Audit Training $ 20,601 $ 31,480 $ - $ 100,378 $ - $ 36,802 $ 217, ,572-3, $ 20,601 $ 31,480 $ 21,572 $ 100,378 $ 3,970 $ 36,802 $ 217,751 $ - $ - $ 17,096 $ - $ 504 $ - $ ,487 1,044 1,500 12, , ,476 1,044 2,004 12, , , ,955-31, ,334-23,811-19,751 31, ,334 1,966 23, ,955 $ 20,601 $ 31,480 $ 21,572 $ 100,378 $ 3,970 $ 36,802 $ 217,751 continued 115

121 Combining Balance Sheet Nonmajor Governmental Funds September 30, 2016 Special Revenue Funds LEAD Veterans' Drug Juvenile Jail Court Juvenile Testing Millage Millage II Grant Court Assets Cash and cash equivalents $ 1,889 $ 227,554 $ 83,369 $ - $ 10,170 Receivables: Property taxes , Accounts receivable, net Due from other governmental units - - 2,358 20,040 - Prepaid items , Total assets $ 1,889 $ 228,210 $ 104,717 $ 20,040 $ 10,170 Liabilities Negative equity in pooled cash $ - $ - $ - $ 19,750 $ - Accounts payable - 26, Accrued liabilities , Due to other funds - - 6, Total liabilities - 26,710 37,675 20, Fund balances Nonspendable , Restricted - 201,500 49,366-10,120 Committed 1, Total fund balances 1, ,500 67,042-10,120 Total liabilities and fund balances $ 1,889 $ 228,210 $ 104,717 $ 20,040 $ 10,

122 Combining Balance Sheet Nonmajor Governmental Funds September 30, 2016 Special Revenue Funds Debt Service Funds Permanent Trust Fund Animal Building Lincoln Youth Sheriff Control Authority Dental Brick Facility Donations Donations Jail Clinic Trust Total $ 3,403 $ 6,582 $ 4,735 $ 31,179 $ 49,434 $ 68,250 $ 3,535, , , , ,321 $ 3,403 $ 6,582 $ 4,735 $ 31,179 $ 49,434 $ 68,250 $ 3,782,399 $ - $ - $ - $ - $ - $ - $ 64, , , , , ,321 3,120 6,582 4,735 31,179 49,434 68,250 3,014, ,987 3,120 6,582 4,735 31,179 49,434 68,250 3,443,409 $ 3,403 $ 6,582 $ 4,735 $ 31,179 $ 49,434 $ 68,250 $ 3,782,399 concluded 117

123 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2016 Special Revenue Funds Sheriff Solid Central Swift CDBG Road Waste Dispatch and Sure Housing Crew Ordinance Fund Sanctions Grant Revenues Property taxes $ - $ - $ 3,178,559 $ - $ - Licenses and permits Intergovernmental: Federal/state ,905 87, ,430 Local Charges for services 45, , Fines and forfeitures Interest and rents Other - 11, Total revenues 45, ,570 3,508,464 87, ,612 Expenditures Current: Judicial General government Public safety 90,958-3,138,753 86,953 - Health and social services - 297, ,908 Capital outlay Debt service: Principal , Interest and fiscal charges Total expenditures 90, ,774 3,385,545 86,953 64,908 Revenues over (under) expenditures (45,466) 25, ,919 1,024 37,704 Other financing sources (uses) Transfers in 34, Transfers out - (2,356) (526,433) - - Issuance of long-term refunding debt Payment to refunding bond escrow agent Total other financing sources (uses) 34,721 (2,356) (526,433) - - Net change in fund balances (10,745) 23,440 (403,514) 1,024 37,704 Fund balances, beginning of year 18, ,699 1,911, ,010 Fund balances, end of year $ 8,165 $ 216,139 $ 1,508,154 $ 1,024 $ 152,

124 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2016 Special Revenue Funds Construction Remonu- Register Criminal Code mentation of Deeds Property Drug Law S.T.O.P. Drug Court III - Enforcement Grant Technology Forfeiture Forfeiture Grant Circuit Court $ - $ - $ - $ - $ - $ - $ - 407, , ,700 75,665 1, ,292 17,185 88, , , ,821 92,414 88,574 4,050-50, , ,297-91,746 81, , , , ,241 91,746 81, , ,297 90, ,445 3,918 - (31,177) 2, ,106-31,177 - (4,379) - (65,916) - (3,106) - (2,847) (4,379) - (65,916) 3,106 (3,106) 31,177 (2,847) 86, (58,471) 7,024 (3,106) ,571 5, , ,106-24,228 $ 484,772 $ 6,068 $ 117,821 $ 7,892 $ - $ - $ 24,228 continued 119

125 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2016 Special Revenue Funds Property Bureau of Drug Community Domestic Forfeiture Justice Forfeiture Corrections Preparedness Prosecutor LLEBG Prosecutor Revenues Property taxes $ - $ - $ - $ - $ - Licenses and permits Intergovernmental: Federal/state 117, ,105-19,517 - Local Charges for services Fines and forfeitures - - 3, Interest and rents Other Total revenues 117, ,105 3,880 19,517 - Expenditures Current: Judicial General government Public safety 117, , ,517 - Health and social services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures 117, , ,517 - Revenues over (under) expenditures - - 3, Other financing sources (uses) Transfers in , Transfers out (16,849) Issuance of long-term refunding debt Payment to refunded bond escrow agent Total other financing sources (uses) ,849 - (16,849) Net change in fund balances ,260 - (16,849) Fund balances, beginning of year 4,470 52,537 2,384-16,849 Fund balances, end of year $ 4,470 $ 52,537 $ 22,644 $ - $ - 120

126 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2016 Special Revenue Funds Local Michigan Concealed OHSP Department Home Tax Corrections Justice Pistol Traffic of Human Veterans Exemption Officer Training Licenses Enforcement Services Trust Audit Training $ - $ - $ - $ - $ - $ - $ , ,351-62,775-18, , , , ,351 62,686 91,168-18,350 18,199 27, ,778 3,240 85, , ,907 15, ,778 3,240 85,882 6,907 15, ,370 2,573 59,446 5,286 (6,907) 3,240 17,441 24, , (42,000) (5,190) - (2,000) (3,063) (42,000) (5,190) 14,000 (2,000) (3,063) - 2,573 17, ,093 1,240 14,378 24,235 17,178 13,571-92, , ,720 $ 19,751 $ 31,017 $ 96 $ 99,334 $ 1,966 $ 23,811 $ 216,955 continued 121

127 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2016 Special Revenue Funds LEAD Veterans' Drug Juvenile Jail Court Juvenile Testing Millage Millage II Grant Court Revenues Property taxes $ - $ 1,170,747 $ 2,342,086 $ - $ - Licenses and permits Intergovernmental: Federal/state - - 2,358 43,433 - Local Charges for services Fines and forfeitures Interest and rents Other - - 2, Total revenues 50 1,170,747 2,346,680 43, Expenditures Current: Judicial General government Public safety - 184,387 1,058,090 43,433 - Health and social services Capital outlay Debt service: Principal , Interest and fiscal charges - - 7, Total expenditures - 184,387 1,123,792 43, Revenues over (under) expenditures ,360 1,222, Other financing sources (uses) Transfers in Transfers out - (1,209,145) (1,206,963) - - Issuance of long-term refunding debt Payment to refunded bond escrow agent Total other financing sources (uses) - (1,209,145) (1,206,963) - - Net change in fund balances 50 (222,785) 15, Fund balances, beginning of year 1, ,285 51,117-9,880 Fund balances, end of year $ 1,889 $ 201,500 $ 67,042 $ - $ 10,

128 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2016 Special Revenue Funds Debt Service Funds Permanent Trust Fund Animal Building Lincoln Youth Sheriff Control Authority Dental Brick Facility Donations Donations Jail Clinic Trust Total $ - $ - $ - $ - $ - $ - $ 6,691, , ,123, , , , ,870 6,343 7,370 1,454-70,320 16, ,375 6,343 7,370 1,454-70,320 16,800 8,998, , ,633 7,014 3, ,377, , , ,000 40,000-1,044, ,143 29, ,437 7,014 3,900-1,107,143 69,325-7,548,734 (671) 3,470 1,454 (1,107,143) ,800 1,449, ,206, ,306, (18,409) (3,108,656) ,975, ,975, (9,043,641) - - (9,043,641) ,138,322 - (18,409) (1,870,481) (671) 3,470 1,454 31, (1,609) (421,055) 3,791 3,112 3,281-48,439 69,859 3,864,464 $ 3,120 $ 6,582 $ 4,735 $ 31,179 $ 49,434 $ 68,250 $ 3,443,409 concluded 123

129 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Sheriff Road Crew Solid Waste Ordinance Actual Over Actual Over Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Revenues Property taxes $ - $ - $ - $ - $ - $ - Licenses and permits Intergovernmental: Federal/state Local Charges for services 59,500 45,492 (14,008) 253, ,424 58,990 Fines and forfeitures Interest and rent Other ,000 11,146 (854) Total revenues 59,500 45,492 (14,008) 265, ,570 58,136 Expenditures Current: Judicial General government Public safety 94,221 90,958 (3,263) Health and social services , ,774 (26,836) Capital outlay Debt service: - Principal Interest and fiscal charges Total expenditures 94,221 90,958 (3,263) 324, ,774 (26,836) Revenues over (under) expenditures (34,721) (45,466) (10,745) (59,176) 25,796 84,972 Other financing sources (uses) Transfers in 34,721 34, Transfers out (2,356) (2,356) - Total other financing sources (uses) 34,721 34,721 - (2,356) (2,356) - Net change in fund balances - (10,745) (10,745) (61,532) 23,440 84,972 Fund balances, beginning of year 18,910 18, , ,699 - Fund balances, end of year $ 18,910 $ 8,165 $ (10,745) $ 131,167 $ 216,139 $ 84,

130 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Central Dispatch Swift and Sure Sanctions CDBG Housing Grant Actual Over Actual Over Actual Over Final (Under) Final Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Budget Actual Budget $ 3,213,411 $ 3,178,559 $ (34,852) $ - $ - $ - $ - $ - $ , ,905 (50,095) 125,000 87,977 (37,023) 170, ,430 (67,570) (218) ,593,411 3,508,464 (84,947) 125,000 87,977 (37,023) 170, ,612 (67,788) ,782,759 3,138,753 (644,006) 125,000 86,953 (38,047) ,400 64,908 (105,492) , , ,029,551 3,385,545 (644,006) 125,000 86,953 (38,047) 170,400 64,908 (105,492) (436,140) 122, ,059-1,024 1,024-37,704 37, (526,433) (526,433) (526,433) (526,433) (962,573) (403,514) 559,059-1,024 1,024-37,704 37,704 1,911,668 1,911, , ,010 - $ 949,095 $ 1,508,154 $ 559,059 $ - $ 1,024 $ 1,024 $ 115,010 $ 152,714 $ 37,704 continued 125

131 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Construction Code Enforcement Remonumentation Grant Actual Over Actual Over Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Revenues Property taxes $ - $ - $ - $ - $ - $ - Licenses and permits 290, , , Intergovernmental: Federal/state ,200 75, Local - 1,215 1, Charges for services 4,800 18,292 13,492 17,000 17, Fines and forfeitures Interest and rent Other Total revenues 294, , ,021 92,200 92, Expenditures Current: Judicial General government ,200 91,746 (454) Public safety 329, ,724 (12,574) Health and social services Capital outlay 26,500 19,517 (6,983) Debt service: Principal Interest and fiscal charges Total expenditures 355, ,241 (19,557) 92,200 91,746 (454) Revenues over (under) expenditures (60,998) 90, , Other financing sources (uses) Transfers in Transfers out (4,379) (4,379) Total other financing sources (uses) (4,379) (4,379) Net change in fund balances (65,377) 86, , Fund balances, beginning of year 398, ,571-5,400 5,400 - Fund balances, end of year $ 333,194 $ 484,772 $ 151,578 $ 5,400 $ 6,068 $

132 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Register of Deeds Technology Criminal Property Forfeiture Drug Law Forfeiture Actual Over Actual Over Actual Over Final (Under) Final Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Budget Actual Budget $ - $ - $ - $ - $ - $ - $ - $ - $ ,000 88,080 (1,920) ,000 4,050 (6,950) ,020 88,574 (1,446) 11,000 4,050 (6,950) ,882 81,129 (67,753) , (10,868) ,882 81,129 (67,753) 11, (10,868) (58,862) 7,445 66,307-3,918 3, ,106 3, (65,916) (65,916) (3,106) 3,106 (65,916) (65,916) - - 3,106 3,106 - (3,106) 3,106 (124,778) (58,471) 66,307-7,024 7,024 - (3,106) (3,106) 176, , ,106 3,106 - $ 51,514 $ 117,821 $ 66,307 $ 868 $ 7,892 $ 7,024 $ 3,106 $ - $ (3,106) continued 127

133 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 S.T.O.P. Grant Drug Court III - Circuit Court Actual Over Actual Over Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Revenues Property taxes $ - $ - $ - $ - $ - $ - Licenses and permits Intergovernmental: Federal/state 55,354 50,700 (4,654) 85,000 75,665 (9,335) Local Charges for services ,510 31,479 (8,031) Fines and forfeitures Interest and rent Other Total revenues 55,354 50,700 (4,654) 124, ,144 (17,366) Expenditures Current: Judicial , ,297 (20,213) General government Public safety 100,879 81,877 (19,002) Health and social services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures 100,879 81,877 (19,002) 124, ,297 (20,213) Revenues over (under) expenditures (45,525) (31,177) 14,348-2,847 2,847 Other financing sources (uses) Transfers in 45,525 31,177 (14,348) Transfers out (2,847) 2,847 Total other financing sources (uses) 45,525 31,177 (14,348) - (2,847) 2,847 Net change in fund balances Fund balances, beginning of year ,228 24,228 - Fund balances, end of year $ - $ - $ - $ 24,228 $ 24,228 $ - 128

134 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Community Corrections Domestic Preparedness Property Forfeiture Prosecutor Actual Over Actual Over Actual Over Final (Under) Final Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Budget Actual Budget $ - $ - $ - $ - $ - $ - $ - $ - $ , ,641 (60,564) 122, , ,000 3, , ,641 (60,564) 122, , ,000 3, , ,641 (60,564) 122, , , (7,531) , ,641 (60,564) 122, , , (7,531) (5,000) 3,411 8, ,849 16, ,849 16, (5,000) 20,260 25,260 4,470 4,470-52,537 52,537-2,384 2,384 - $ 4,470 $ 4,470 $ - $ 52,537 $ 52,537 $ - $ (2,616) $ 22,644 $ 25,260 continued 129

135 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Bureau of Justice LLEBG Drug Forfeiture Prosecutor Actual Over Actual Over Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Revenues Property taxes $ - $ - $ - $ - $ - $ - Licenses and permits Intergovernmental: Federal/state 23,000 19,517 (3,483) Local Charges for services Fines and forfeitures Interest and rent Other Total revenues 23,000 19,517 (3,483) Expenditures Current: Judicial General government Public safety 23,000 19,517 (3,483) Health and social services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures 23,000 19,517 (3,483) Revenues over (under) expenditures Other financing sources (uses) Transfers in Transfers out (16,849) 16,849 Total other financing sources (uses) (16,849) 16,849 Net change in fund balances (16,849) (16,849) Fund balances, beginning of year ,849 16,849 - Fund balances, end of year $ - $ - $ - $ 16,849 $ - $ (16,849) 130

136 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Michigan Justice Training Concealed Pistol Licenses OHSP Traffic Enforcement Actual Over Actual Over Actual Over Final (Under) Final Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Budget Actual Budget $ - $ - $ - $ - $ - $ - $ - $ - $ ,000 62,686 10, ,000 14,351 (649) ,388 62,775 (39,613) ,014 28,393 5, ,000 14,351 (649) 52,000 62,686 10, ,402 91,168 (34,234) ,000 11,778 (3,222) 10,000 3,240 (6,760) 125,402 85,882 (39,520) ,000 11,778 (3,222) 10,000 3,240 (6,760) 125,402 85,882 (39,520) - 2,573 2,573 42,000 59,446 17,446-5,286 5, (42,000) (42,000) - - (5,190) 5, (42,000) (42,000) - - (5,190) 5,190-2,573 2,573-17,446 17, ,178 17,178-13,571 13, $ 17,178 $ 19,751 $ 2,573 $ 13,571 $ 31,017 $ 17,446 $ - $ 96 $ 96 continued 131

137 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Department of Human Services Veterans Trust Actual Over Actual Over Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Revenues Property taxes $ - $ - $ - $ - $ - $ - Licenses and permits Intergovernmental: Federal/state ,000 18,350 (31,650) Local Charges for services Fines and forfeitures Interest and rent Other Total revenues ,000 18,350 (31,650) Expenditures Current: Judicial General government Public safety Health and social services 25,000 6,907 (18,093) 50,000 15,110 (34,890) Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures 25,000 6,907 (18,093) 50,000 15,110 (34,890) Revenues over (under) expenditures (25,000) (6,907) 18,093-3,240 3,240 Other financing sources (uses) Transfers in 14,000 14, Transfers out (2,000) 2,000 Total other financing sources (uses) 14,000 14, (2,000) 2,000 Net change in fund balances (11,000) 7,093 18,093-1,240 1,240 Fund balances, beginning of year 92,241 92, Fund balances, end of year $ 81,241 $ 99,334 $ 18,093 $ 726 $ 1,966 $ 1,

138 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Home Tax Exemption Audit Local Corrections Officer Training LEAD Drug Testing Actual Over Actual Over Actual Over Final (Under) Final Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Budget Actual Budget $ - $ - $ - $ - $ - $ - $ - $ - $ ,000 27,605 (7,395) ,000 18,199 14, ,000 18,199 14,199 35,000 27,605 (7,395) , (242) ,000 3,370 (31,630) , (242) 35,000 3,370 (31,630) ,000 17,441 14,441-24,235 24, (8,000) (3,063) (4,937) (8,000) (3,063) (4,937) (5,000) 14,378 19,378-24,235 24, ,433 9, , ,720-1,839 1,839 - $ 4,433 $ 23,811 $ 19,378 $ 192,720 $ 216,955 $ 24,235 $ 1,839 $ 1,889 $ 50 continued 133

139 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Juvenile Millage Jail Millage II Actual Over Actual Over Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Revenues Property taxes $ 2,368,776 $ 1,170,747 $ (1,198,029) $ 2,368,776 $ 2,342,086 $ (26,690) Licenses and permits Intergovernmental: Federal/state 2,000 - (2,000) 2,000 2, Local Charges for services Fines and forfeitures Interest and rent Other ,236 2,236 Total revenues 2,370,776 1,170,747 (1,200,029) 2,370,776 2,346,680 (24,096) Expenditures Current: Judicial General government Public safety 1,064, ,387 (879,685) 1,064,072 1,058,090 (5,982) Health and social services Capital outlay Debt service: Principal 13,445 - (13,445) 57,757 57,733 (24) Interest and fiscal charges ,445 7,969 (5,476) Total expenditures 1,077, ,387 (893,130) 1,135,274 1,123,792 (11,482) Revenues over (under) expenditures 1,293, ,360 (306,899) 1,235,502 1,222,888 (12,614) Other financing sources (uses) Transfers in Transfers out (1,206,963) (1,209,145) 2,182 (1,206,963) (1,206,963) - Total other financing sources (uses) (1,206,963) (1,209,145) 2,182 (1,206,963) (1,206,963) - Net change in fund balances 86,296 (222,785) (309,081) 28,539 15,925 (12,614) Fund balances, beginning of year 424, ,285-51,117 51,117 - Fund balances, end of year $ 510,581 $ 201,500 $ (309,081) $ 79,656 $ 67,042 $ (12,614) 134

140 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Veterans' Court Grant Juvenile Court Youth Facility Actual Over Actual Over Actual Over Final (Under) Final Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Budget Actual Budget $ - $ - $ - $ - $ - $ - $ - $ - $ ,754 43,433 (8,321) ,343 6,343 51,754 43,433 (8,321) ,343 6, ,754 43,433 (8,321) ,014 7, ,754 43,433 (8,321) ,014 7, (671) (671) (671) (671) ,880 9,880-3,791 3,791 - $ - $ - $ - $ 9,880 $ 10,120 $ 240 $ 3,791 $ 3,120 $ (671) continued 135

141 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds For the Year Ended September 30, 2016 Sheriff Donations Animal Control Donations Actual Over Actual Over Final (Under) Final Final (Under) Final Budget Actual Budget Budget Actual Budget Revenues Property taxes $ - $ - $ - $ - $ - $ - Licenses and permits Intergovernmental: Federal/state Local Charges for services Fines and forfeitures Interest and rent Other - 7,370 7,370-1,454 1,454 Total revenues - 7,370 7,370-1,454 1,454 Expenditures Current: Judicial General government Public safety - 3,900 3, Health and social services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures - 3,900 3, Revenues over (under) expenditures - 3,470 3,470-1,454 1,454 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances - 3,470 3,470-1,454 1,454 Fund balances, beginning of year 3,112 3,112-3,281 3,281 - Fund balances, end of year $ 3,112 $ 6,582 $ 3,470 $ 3,281 $ 4,735 $ 1,454 concluded 136

142 Combining Statement of Net Position Nonmajor Enterprise Funds September 30, 2016 Business-type Activities - Enterprise Funds Foreclosing Jail Government Commissary Unit Total Assets Current assets: Cash and cash equivalents $ 221,805 $ 227,257 $ 449,062 Taxes receivable - 637, ,788 Accounts receivable 9,825-9,825 Inventories 19,238-19,238 Total assets 250, ,045 1,115,913 Liabilities Current liabilities: Accounts payable - 11,128 11,128 Accrued liabilities 756 1,236 1,992 Due to other funds Due to other governments Total liabilities 1,667 12,675 14,342 Net position Unrestricted $ 249,201 $ 852,370 $ 1,101,

143 Combining Statement of Revenues, Expenses and Changes in Fund Net Position Nonmajor Enterprise Funds For the Year Ended September 30, 2016 Business-type Activities - Enterprise Funds Foreclosing Jail Government Commissary Unit Total Operating revenues Sales $ 63,188 $ 660,163 $ 723,351 Administrative fees/penalties - 218, ,918 Total operating revenues 63, , ,269 Operating expenses Personal services and benefits 25,030 45,040 70,070 Contractual services 21,211 78,445 99,656 Total operating expenses 46, , ,726 Operating income 16, , ,543 Nonoperating revenues Interest income - 3,800 3,800 Income before transfers 16, , ,343 Transfers out - (6,313) (6,313) Change in net position 16, , ,030 Net position, beginning of year 232,254 99, ,541 Net position, end of year $ 249,201 $ 852,370 $ 1,101,

144 Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended September 30, 2016 Business-type Activities - Enterprise Funds Foreclosing Jail Government Commissary Unit Total Cash flows from operating activities Cash received from customers $ 63,748 $ 343,401 $ 407,149 Cash paid to/for employees (24,859) (44,742) (69,601) Cash paid to suppliers (23,268) (84,593) (107,861) Net cash provided by operating activities 15, , ,687 Cash flows from noncapital financing activities Transfers out - (6,313) (6,313) Cash flows from investing activities Interest received - 3,800 3,800 Net change in cash and cash equivalents 15, , ,174 Cash and cash equivalents, beginning of year 206,184 15, ,888 Cash and cash equivalents, end of year $ 221,805 $ 227,257 $ 449,062 Reconciliation of operating income to net cash provided by operating activities Operating income $ 16,947 $ 755,596 $ 772,543 Adjustments to reconcile operating income to net cash provided by operating activities: Change in operating assets and liabilities that provided (used) cash: Taxes receivable - (614,515) (614,515) Accounts receivable ,835 79,395 Inventories (2,448) - (2,448) Accounts payable - (6,248) (6,248) Accrued liabilities Due to other funds (28) Due to other governments Net cash provided by operating activities $ 15,621 $ 214,066 $ 229,

145 Combining Statement of Net Position Internal Service Funds September 30, 2016 Retirees Health Workers' Health Liability Insurance Compensation Insurance Insurance Assets Current assets: Cash and cash equivalents $ 299,038 $ 764,435 $ 1,354,703 $ 1,767,576 Due from other funds 55,852 1, Prepaid items - 17, ,980 - Total assets 354, ,315 2,038,683 1,767,576 Liabilities Current liabilities: Accounts payable - 34, Accrued liabilities - 194, , ,346 Due to other funds Total liabilities - 229, , ,351 Net position Unrestricted $ 354,890 $ 553,747 $ 1,043,093 $ 1,499,

146 Combining Statement of Net Position Internal Service Funds September 30, 2016 Life and Retirement Dental Unemployment Disability Stabilization Insurance Total $ 212,980 $ 3,464 $ 241,762 $ 121,808 $ 4,765, , , , , ,679 6, , ,808 5,633, ,262 45,319-2, ,507-1,671, , ,854 9,262 1,717,127 $ 213,317 $ 3,889 $ 135,216 $ 112,546 $ 3,915,

147 Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds For the Year Ended September 30, 2016 Retirees Health Workers' Health Liability Insurance Compensation Insurance Insurance Operating revenues Charges for services $ 1,629,199 $ 68,141 $ 6,199,285 $ 1,142,684 Other revenues 77,688 1, Total operating revenues 1,706,887 69,356 6,199,285 1,142,684 Operating expenses Personal services and benefits Contractual services - 16,625 2,500 21,446 Insurance and claims 1,789, ,565 6,541, ,078 Total operating expenses 1,789, ,190 6,543, ,524 Operating income (loss) (82,459) (324,834) (344,628) 849,160 Nonoperating revenues Interest income ,212 Income (loss) before transfers (82,319) (323,913) (344,628) 906,372 Transfers Transfers in Transfers out - - (600,000) (100,000) Total transfers - - (600,000) (100,000) Change in net position (82,319) (323,913) (944,628) 806,372 Net position, beginning of year 437, ,660 1,987, ,853 Net position, end of year $ 354,890 $ 553,747 $ 1,043,093 $ 1,499,

148 Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds For the Year Ended September 30, 2016 Life and Retirement Dental Unemployment Disability Stabilization Insurance Total $ 18,984 $ 73,213 $ 2,874,145 $ 111,638 $ 12,117, ,903 18,984 73,213 2,874, ,638 12,196, ,810,570-2,810, , , ,268 27,788 87, ,095,321 27,788 87,406 2,975, ,520 12,313,434 (8,804) (14,193) (101,602) (89,882) (117,242) ,273 (8,804) (14,193) (101,602) (89,882) (58,969) , , (700,000) ,000 - (600,000) (8,804) (14,193) (1,602) (89,882) (658,969) 222,121 18, , ,428 4,574,892 $ 213,317 $ 3,889 $ 135,216 $ 112,546 $ 3,915,

149 Combining Statement of Cash Flows Internal Service Funds For the Year Ended September 30, 2016 Retirees Health Workers' Health Liability Insurance Compensation Insurance Insurance Cash flows from operating activities Cash received from interfund services $ 1,691,888 $ 70,231 $ 6,199,394 $ 1,142,684 Cash paid to/for employees (1,789,346) (270,102) - - Cash paid to suppliers - - (6,484,668) (778,203) Net cash provided by (used in) operating activities (97,458) (199,871) (285,274) 364,481 Cash flows from noncapital financing activities Transfers in Transfers out - - (600,000) (100,000) Net cash provided by (used in) noncapital financing activities - - (600,000) (100,000) Cash flows from investing activities Interest received ,212 Net change in cash and cash equivalents (97,318) (198,950) (885,274) 321,693 Cash and cash equivalents, beginning of year 396, ,385 2,239,977 1,445,883 Cash and cash equivalents, end of year $ 299,038 $ 764,435 $ 1,354,703 $ 1,767,576 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities Operating income (loss) $ (82,459) $ (324,834) $ (344,628) $ 849,160 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Change in operating assets and liabilities that provided (used) cash: Due from other funds (14,999) Prepaid items - (2,375) (15,673) - Accounts payable - 21, Accrued liabilities - 104,589 74,233 (484,684) Due to other funds Net cash provided by (used in) operating activities $ (97,458) $ (199,871) $ (285,274) $ 364,

150 Combining Statement of Cash Flows Internal Service Funds For the Year Ended September 30, 2016 Life and Retirement Dental Unemployment Disability Stabilization Insurance Total $ 19,413 $ 72,776 $ 2,848,557 $ 111,638 $ 12,156,581 (27,425) (87,556) (2,801,897) - (4,976,326) - - (165,177) (204,433) (7,632,481) (8,012) (14,780) (118,517) (92,795) (452,226) , , (700,000) ,000 - (600,000) ,273 (8,012) (14,780) (18,517) (92,795) (993,953) 220,992 18, , ,603 5,759,719 $ 212,980 $ 3,464 $ 241,762 $ 121,808 $ 4,765,766 $ (8,804) $ (14,193) $ (101,602) $ (89,882) $ (117,242) 430 (437) (25,588) - (39,719) (18,048) (2,913) 20,360 - (150) 8,326 - (297,686) $ (8,012) $ (14,780) $ (118,517) $ (92,795) $ (452,226) 145

151 Combining Statement of Fiduciary Assets and Liabilities Agency Funds September 30, 2016 Inmate Trust and District Trust Agency Library Court Bond Account Assets Cash and cash equivalents $ 5,182,571 $ 100,030 $ 134,226 $ 18,386 Due from other governments 97, Total assets $ 5,279,668 $ 100,030 $ 134,226 $ 18,386 Liabilities Undistributed receipts $ 5,279,668 $ 100,030 $ 134,226 $ 18,

152 Combining Statement of Fiduciary Assets and Liabilities Agency Funds September 30, 2016 Property Forfeiture Trust Total $ 7,202 $ 5,442,415-97,097 $ 7,202 $ 5,539,512 $ 7,202 $ 5,539,

153 Statement of Net Position and Governmental Funds Balance Sheet Board of Public Works Component Unit September 30, 2016 Debt Service Funds Grand Brookfield Ledge Water Water/Sewer System Systems Total Assets Prepaid items $ 47,503 $ - $ 47,503 Leases receivable 6,172,450-6,172,450 Total assets 6,219,953-6,219,953 Deferred outflows of resources Deferred charge on refunding Total assets and deferred outflows of resources $ 6,219,953 $ - $ 6,219,953 Liabilities Unearned revenue $ 47,503 $ - $ 47,503 Long-term debt: Due within one year Due in more than one year Total liabilities 47,503-47,503 Deferred inflows of resources Unavailable revenue - leases receivable 6,172,450-6,172,450 Fund balances Unassigned Total liabilities, deferred inflows of resources and fund balances $ 6,219,953 $ - $ 6,219,953 Net position - unrestricted 148

154 Statement of Net Position and Governmental Funds Balance Sheet Board of Public Works Component Unit September 30, 2016 GASB 34 Adjustments Statement of Net Position $ - $ 47,503-6,172,450-6,219,953 84,022 84,022 84,022 6,303,975-47, , ,935 5,549,515 5,549,515 6,172,450 6,219,953 (6,172,450) $ 84,022 $ 84,

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156 Reconciliation Fund Balances of Governmental Funds to Net Position of Governmental Activities Board of Public Works Component Unit September 30, 2016 Total fund balances for governmental funds $ - Amounts reported for governmental activities in the Statement of Net Position are different because: The focus of governmental funds is on short-term financing. Accordingly, some assets will not be available to pay for current period expenditures. Those assets (such as certain receivables) are offset by deferred inflows in the governmental funds, and thus are not included in fund balance. Leases receivable 6,172,450 Certain liabilities, such as bonds payable, are not due and payable in the current period, and therefore are not reported in the funds. Bonds payable (6,105,000) Unamortized bond premium (67,450) Unamortized deferred loss on refunding 84,022 Net position of governmental activities $ 84,

157 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance Board of Public Works Component Unit For the Year Ended September 30, 2016 Debt Service Funds Grand Brookfield Ledge Water Water/Sewer System Systems Total Revenues Intergovernmental - local $ 610,459 $ 166,325 $ 776,784 Expenditures / expenses Debt service: Principal 455, , ,000 Interest and fiscal charges 155,459 26, ,784 Total expenditures/expenses 610, , ,784 Net changes in fund balances Change in net position Fund balances / net position, beginning of year Fund balances / net position, end of year $ - $ - $ - 152

158 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance Board of Public Works Component Unit For the Year Ended September 30, 2016 GASB 34 Adjustments Statement of Net Position $ (602,935) $ 173,849 (595,000) - 1, ,734 (593,050) 183, (9,885) (9,885) 93,907 93,907 $ 84,022 $ 84,

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160 Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities Board of Public Works Component Unit For the Year Ended September 30, 2016 Net change in fund balance - total governmental funds $ - Amounts reported for governmental activities in the Statement of Activities are different because: Amounts received from local governments for the payment of bond principal is recorded in the funds as revenue, but eliminated for the Statement of Activities. Collections attributable to bond principal and accrued interest (602,935) Bond proceeds provide current financial resources to governmental funds in the period issued, but issuing bonds increases long-term liabilities in the Statement of Net Position. Repayment of bond principal is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. Repayment of debt principal 595,000 Certain expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the funds. Amortization of bond premium 7,935 Amortization of deferred loss on refunding (9,885) Change in net position of governmental activities $ (9,885) 155

161 Statement of Net Position and Governmental Funds Balance Sheet Drainage Districts Component Unit September 30, 2016 Debt Service Fund Capital Projects Funds Regular Regular Drain Narrow Lake Lacey Lake Drain Drain Revolving Level Level Assets Cash and cash equivalents $ 1,083,488 $ 7,725,592 $ 664 $ 10,999 $ 351 Special assessments receivable 22,895, Due from other funds 6,139 34,000 50, Inventories , Capital assets not being depreciated Capital assets being depreciated, net Total assets 23,985,196 7,759,592 67,191 10, Deferred outflows of resources Deferred charge on refunding Total assets and deferred outflows of resources $ 23,985,196 $ 7,759,592 $ 67,191 $ 10,999 $ 351 Liabilities Accounts payable $ - $ 217,372 $ 7,191 $ - $ - Interest payable Due to other funds 37,115 53, Advances from primary government , Long-term debt: Due within one year Due in more than one year Total liabilities 37, ,796 67, Deferred inflows of resources Unavailable revenue - special assessments 22,895, Fund balances Restricted 1,052,512 7,488,796-10, Total liabilities, deferred inflows of resources and fund balances $ 23,985,196 $ 7,759,592 $ 67,191 $ 10,999 $ 351 Net position Net investment in capital assets Restricted Total net position 156

162 Statement of Net Position and Governmental Funds Balance Sheet Drainage Districts Component Unit September 30, 2016 GASB 34 Statement Total Adjustments of Net Position $ 8,821,094 $ - $ 8,821,094 22,895,569-22,895,569 90,539 (90,539) - 16,127-16, , ,860-71,798,572 71,798,572 31,823,329 72,206, ,030, , ,851 $ 31,823,329 72,491, ,315,073 $ 224, , , ,300 90,539 (90,539) - 60,000-60,000-2,941,494 2,941,494-22,992,872 22,992, ,102 26,142,127 26,517,229 22,895,569 (22,895,569) - 8,552,658 (8,552,658) - $ 31,823,329 46,647,917 46,647,917 31,149,927 31,149,927 $ 77,797,844 $ 77,797,

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164 Reconciliation Fund Balances of Governmental Funds to Net Position of Governmental Activities Drainage Districts Component Unit September 30, 2016 Total fund balances for governmental funds $ 8,552,658 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. Capital assets not being depreciated 498,860 Capital assets being depreciated, net 71,798,572 Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current expenditures. Those assets (i.e. receivables) are offset by deferred inflows of resources in the governmental funds and, therefore, not included in fund balance. Deferred special assessments 22,895,569 Certain liabilities, such as bonds payable, are not due and payable in the current period, and therefore are not reported in the funds. Long-term debt (25,432,099) Unamortized premiums (502,267) Unamortized deferred loss on refunding 284,851 Interest payable (298,300) Net position of governmental activities $ 77,797,

165 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance Drainage Districts Component Unit For the Year Ended September 30, 2016 Debt Service Fund Capital Projects Funds Regular Regular Drain Narrow Lake Lacey Lake Drain Drain Revolving Level Level Revenues Charges for services $ - $ 63,406 $ - $ - $ - Special assessments 4,054, , Interest revenue 9, Miscellaneous 150 1, Total revenues 4,063, , Expenditures / expenses Public works Capital outlay - construction and maintenance - 2,369, Debt service: Principal 3,008, Interest and fiscal charges 959, Total expenditures / expenses 3,967,599 2,369, Revenues over (under) expenditures/expenses 96,206 (1,438,107) Other financing sources (uses) Issuance of long-term debt 35, , Net changes in fund balances 131,600 (753,501) Change in net position Fund balances / net position, beginning of year 920,912 8,242,297-10, Fund balances / net position, end of year $ 1,052,512 $ 7,488,796 $ - $ 10,999 $

166 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance Drainage Districts Component Unit For the Year Ended September 30, 2016 GASB 34 Statement Total Adjustments of Net Position $ 63,406 $ - $ 63,406 4,920,620 (4,706,201) 214,419 9,621-9,621 1,466-1,466 4,995,113 (4,706,201) 288,912-2,606,687 2,606,687 2,369,415 (812,891) 1,556,524 3,008,543 (3,008,543) - 959,056 (45,062) 913,994 6,337,014 (1,259,809) 5,077,205 (1,341,901) (3,446,392) (4,788,293) 720,000 (720,000) - (621,901) (4,166,392) - - (4,166,392) (4,788,293) 9,174,559 73,411,578 82,586,137 $ 8,552,658 $ 65,078,794 $ 77,797,

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168 Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities Drainage Districts Component Unit For the Year Ended September 30, 2016 Net change in fund balance - total governmental funds $ (621,901) Amounts reported for governmental activities in the Statement of Activities are different because: Revenues in the Statement of Activities that do not provide current resources are not reported as revenues in the funds, but rather are deferred to subsequent fiscal years. Change in deferred special assessments (4,706,201) Governmental funds report capital outlay as expenditures. However, in the Statement of Activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. Purchases of capital assets 812,891 Depreciation expense (2,606,687) Bond proceeds provide current financial resources to the governmental funds in the period issued, but issuing bonds increases long-term liabilities in the Statement of Net Position. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. Issuance of long-term debt (720,000) Principal payments on long-term debt 3,008,543 Certain expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the funds. Change in accrual for interest payable on long-term debt 19,976 Amortization of bond premium 57,954 Amortization of deferred loss on refunding (32,868) Change in net position of governmental activities $ (4,788,293) 163

169 Statement of Net Position and Governmental Funds Balance Sheet District Health Department Component Unit September 30, 2016 General GASB 34 Statement Fund Adjustments of Activities Assets Cash and cash equivalents $ 1,783,323 $ - $ 1,783,323 Accounts receivable, net 195, ,882 Prepaid items 49,394-49,394 Capital assets being depreciated, net - 94,822 94,822 Total assets 2,028,599 94,822 2,123,421 Deferred outflows of resources Deferred pension amounts - 2,719,364 2,719,364 Total assets and deferred outflows of resources $ 2,028,599 2,814,186 4,842,785 Liabilities Accounts payable $ 110, ,750 Accrued liabilities 155, ,378 Unearned revenue 41,883-41,883 Long-term debt: Due within one year - 37,314 37,314 Due in more than one year - 208, ,763 Net pension liability - 6,750,730 6,750,730 Total liabilities 308,011 6,996,807 7,304,818 Fund balance Nonspendable for prepaids 49,394 (49,394) - Restricted for immunizations 211,756 (211,756) - Unassigned 1,459,438 (1,459,438) - Total fund balance 1,720,588 (1,720,588) - Total liabilities and fund balance $ 2,028,599 Net position Net investment in capital assets 94,822 94,822 Restricted for immunizations 211, ,756 Unrestricted deficit (2,768,611) (2,768,611) Total net position $ (2,462,033) $ (2,462,033) 164

170 Reconciliation Fund Balances of Governmental Funds to Net Position of Governmental Activities District Health Department Component Unit September 30, 2016 Total fund balances for governmental funds $ 1,720,588 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. Capital assets being depreciated, net 94,822 Accrued vacation and sick time earned by eligible employees is not payable in the current period and therefore is not reported in the funds. However, these amounts are included in the Statement of Net Position. (246,077) Certain pension-related amounts, such as the net pension liability and deferred amounts, are not due and payable in the current period or do not represent current financial resources, and therefore are not reported in the funds. Net pension liability (6,750,730) Deferred outflows related to the net pension liability 2,719,364 Net position of governmental activities $ (2,462,033) 165

171 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance District Health Department Component Unit For the Year Ended September 30, 2016 General GASB 34 Statement Fund Adjustments of Activities Revenues Licenses and permits $ 208,530 $ - $ 208,530 Intergovernmental: Federal/State 3,074,098-3,074,098 Local 1,770,097-1,770,097 Charges for services 1,089,116-1,089,116 Miscellaneous 190, ,763 Total revenues 6,332,604-6,332,604 Expenditures / expenses Health and social services 6,717, ,085 7,047,178 Net change in fund balance (384,489) 384,489 - Change in net position - (714,574) (714,574) Fund balance / net position, beginning of year 2,105,077 (3,852,536) (1,747,459) Fund balance / net position, end of year $ 1,720,588 $ (4,182,621) $ (2,462,033) 166

172 Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities District Health Department Component Unit For the Year Ended September 30, 2016 Net change in fund balance - total governmental funds $ (384,489) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlay as expenditures. However, in the Statement of Activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. Purchases of capital assets 52,122 Depreciation expense (36,747) Certain expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the funds. Change in accrual for accrued compensated absences 38,757 Change in the net pension liability and related deferred amounts (384,217) Change in net position of governmental activities $ (714,574) 167

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174 SINGLE AUDIT ACT COMPLIANCE 169

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176 Rehmann Robson 2330 East Paris Ave. SE Grand Rapids, MI Ph: Fx: rehmann.com INDEPENDENT AUDITORS REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE March 6, 2017 To the Board of Commissioners Eaton County, Michigan Charlotte, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Eaton County, Michigan (the "County") as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the County s basic financial statements. We issued our report thereon dated March 6, 2017, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditure of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. 171

177 Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2016 CFDA Passed Pass-through / Total Federal Federal Agency / Cluster / Program Title Number Through Grantor Number Subawards Expenditures U.S. Department of Agriculture Child Nutrition Cluster: School Breakfast Program MDE $ - $ 18,462 National School Lunch Program MDE ,663 Special Snack Program MDE ,859-36,522 Total Child Nutrition Cluster - 54,984 Women, Infants and Children MDHHS IW ,164 Women, Infants and Children Breastfeeding MDHHS IW ,206 Women, Infants and Children Breastfeeding MDHHS W , ,783 Total U.S. Department of Agriculture - 564,767 U.S. Department of Justice Federal Surplus Property Transfer Program (non-cash assistance) Direct n/a - 3,107 State Criminal Alien Assistance Program Direct 2016-AP-BX ,358 Violence Against Women - S.T.O.P. Grant BHF n/a - 50,700 Drug Court - Priority SCAO SCAO ,665 Drug Court - Sobriety SCAO SCAO ,699 Edward Byrne Memorial Justice Assistance - Vertical Drug COL B - 11, ,508 Total U.S. Department of Justice - 183,673 U.S. Department of Transportation Alcohol Impaired Driving Countermeasures Grant MSP SCAO ,283 Strategic Traffic Enforcement Program MSP PT ,517 Total U.S. Department of Transportation - 27,800 U.S. Environmental Protection Agency State Drinking Water Revolving Loan Fund Program: Operator Certification MDEQ FS Source Water Assessment MDEQ FS Revised Total Coliform Rule MDEQ FS ,992-5,767 continued

178 Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2016 CFDA Passed Pass-through / Total Federal Federal Agency / Cluster / Program Title Number Through Grantor Number Subawards Expenditures U.S. Department of Health and Human Services Public Health Emergency Preparedness MDHHS NU90TP $ - $ 149,834 Tuberculosis Control Program MDHHS 15U52PS Immunization and Vaccine Program MDHHS H23 CCH ,377 Vaccines (non-cash assistance) MDHHS n/a - 299, ,990 PPHF Capacity Building Assistance to Strengthen Public Health Immunization MDHHS H23 IP ,239 Child Support Enforcement: Incentive Payments MDHHS n/a - 161,949 Friend of the Court MDHHS CSFOC ,659 Prosecuting Attorney MDHHS CSPA , ,783 Access and Visitation Programs SCAO n/a - 1,935 Prevention and Public Health Funds: BCCCP Coordination MDHHS NU58DP ,250 CCC Community Implementation Project MDHHS NU58DP ,000-33,250 Preventive Health and Health Services Block Grant MDHHS 2B01OT ,935 Medical Assistance Program: CSHC Medicaid Outreach MDHHS 05 U05M15ADM - 30,180 CSHC Outreach and Advocacy MDHHS 05 U05M15ADM - 40,000 Medicaid Outreach MDHHS 05 U05M15ADM - 129, ,200 Comprehensive Breast and Cervical Cancer Early Detection Programs: BCCCP Coordination MDHHS NU58DP ,250 CCC Community Implementation Project MDHHS NU58DP ,000-12,250 Outpatient/Intensive Outpatient MSHN n/a - 172,335 Women's Services MSHN n/a - 58, ,458 Maternal and Child Health Services Block Grant MDHHS B1MIMCHS - 70,324 Total U.S. Department of Health and Human Services - 1,998,298 continued

179 Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2016 CFDA Passed Pass-through / Total Federal Federal Agency / Cluster / Program Title Number Through Grantor Number Subawards Expenditures U.S. Department of Homeland Security Emergency Management Preparedness Grant MSP EMC-2016-EP-00001S01 $ - $ 39,518 Homeland Security Grant Program COL n/a 10, ,715 Total U.S. Department of Homeland Security 10, ,233 Total Expenditures of Federal Awards $ 10,000 $ 2,942,538 concluded See accompanying notes to the schedule of expenditures of federal awards. 174

180 Notes to Schedule of Expenditures of Federal Awards 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule ) includes the federal grant activity of Eaton County, Michigan (the County ) under programs of the federal government for the year ended September 30, The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the County, it is not intended to and does not present the financial position, changes in net position or cash flows of the County. The County's reporting entity is defined in Note 1 of the financial statements. The County's financial statement includes the operations of the Eaton County Road Commission discretely-presented component unit, which received federal awards that are not included in the Schedule for the year ended September 30, 2016 as this entity was separately audited. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the modified accrual basis of accounting, which is described in Note 1 to the County's financial statements. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Passthrough entity identifying numbers are presented where available. For purposes of charging indirect costs to federal awards, the County has not elected to use the 10 percent de minimis cost rate as permitted by of the Uniform Guidance. 3. PASS-THROUGH AGENCIES The County receives certain federal grant as subawards from non-federal entities. Pass-through entities, where applicable, have been identified in the Schedule with an abbreviation, defined as follows: Pass-through Agency Abbreviation BHF COL MDE MDEQ MDHHS MSP MSHN SCAO Pass-through Agency Name Bronson Health Foundation/Sexual Assault Services City of Lansing Michigan Department of Education Michigan Department of Environmental Quality Michigan Department of Health and Human Services Michigan State Police Mid State Health Network State Court Administrative Office 175

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182 Rehmann Robson 2330 East Paris Ave. SE Grand Rapids, MI Ph: Fx: rehmann.com INDEPENDENT AUDITORS 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 To the Board of Commissioners Eaton County, Michigan Charlotte, Michigan March 6, 2017 We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Eaton County, Michigan (the "County"), as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the County s basic financial statements, and have issued our report thereon dated March 6, Our report includes a reference to other auditors who audited the financial statements of the Eaton County Health and Rehabilitation Services Facility enterprise fund and the Eaton County Road Commission discretely presented component unit, as described in our report on the County s financial statements. This report does not include the results of the other auditors testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. The financial statements of the Eaton County Health and Rehabilitation Services were not audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the County s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County s internal control. Accordingly, we do not express an opinion on the effectiveness of the County s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness. 177

183 A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item to be a material weakness. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Compliance and Other Matters As part of obtaining reasonable assurance about whether the County s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Eaton County's Response to Finding The County s response to the finding is identified in our audit is described in the accompanying schedule of findings and questioned costs. The County s response is not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 178

184 Rehmann Robson 2330 East Paris Ave. SE Grand Rapids, MI Ph: Fx: rehmann.com INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Commissioners Eaton County, Michigan Charlotte, Michigan March 6, 2017 Report on Compliance for Each Major Federal Program We have audited the compliance of Eaton County, Michigan (the "County") with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the County s major federal programs for the year ended September 30, The County s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. The County's basic financial statements include the operations of the Eaton County Road Commission, which received federal awards which are not included in the schedule. Our audit, described below, did not include the operations of the Eaton County Road Commission because that entity engaged other auditors to perform their financial statement audit and did not meet the threshold for a single audit in accordance with the Uniform Guidance. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Independent Auditors Responsibility Our responsibility is to express an opinion on compliance for each of the County s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the County s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. 179

185 We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the County s compliance. Opinion on Each Major Federal Program In our opinion, the County complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30, Report on Internal Control Over Compliance Management of the County is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe that a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. 180

186 Schedule of Findings and Questioned Costs For the Year Ended September 30, 2016 SECTION I - SUMMARY OF AUDITORS RESULTS Financial Statements Type of auditors report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted? X yes no yes X none reported yes X no Federal Awards Internal control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditors report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with 2CFR (a)? yes X no yes X none reported Unmodified yes X no Identification of major programs: CFDA Number Name of Federal Program or Cluster Special Supplemental Nutrition Program for Women, Infants, and Children Child Support Enforcement Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee? yes X no 181

187 Schedule of Findings and Questioned Costs For the Year Ended September 30, 2016 SECTION II FINANCIAL STATEMENT FINDINGS Material Audit Adjustments Finding Type. Material Weakness in Internal Control over Financial Reporting. Criteria. Management is responsible for maintaining its accounting records in accordance with generally accepted accounting principles (GAAP). Condition. During our audit, we identified and proposed material adjustments (which were approved and posted by management) to adjust the County s general ledger to the appropriate balances. These adjustments related to current and delinquent tax receivables and revenue, forfeited property revenue, and special assessment receivables and revenue. Cause. This condition was the result of an oversight in calculating the correct sales proceeds, interest and administrative fees receivable related to property tax revenue. In addition, this condition was the result of an oversight in recording delinquent taxes receivable and adjusting special assessments receivable for assessment prepayments. Effect. As a result of this condition, the County s accounting records were initially misstated by amounts material to the financial statements. Recommendation. Management has already taken appropriate corrective action by reviewing and approving the proposed audit adjustments. We recommend that management reconcile all tax revenue and receivables and special assessment receivables to the general ledger at the end of the fiscal year to the appropriate support. View of Responsible Officials. Management agrees with the adjustments proposed by its auditors, and they have been posted in the County's records. 182

188 Schedule of Findings and Questioned Costs For the Year Ended September 30, 2016 SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None reported. 183

189 Summary Schedule of Prior Audit Findings For the Year Ended September 30, Material Audit Adjustments During the audit, there were identified and proposed material adjustments (which were approved and posted by management) to adjust the County s general ledger to the appropriate balances. These adjustments related to current and delinquent property tax revenue and receivables, bank reconciling items and the establishment of a retiree healthcare trust fund. This finding has been repeated as as it relates to current and delinquent property tax revenue and receivables Capital Assets Certain balances in construction in progress for drain projects were completed but not transferred into service in a prior year. As a result, these assets did not have related depreciation expense recognized for several years. In addition, management determined that $506,296 of construction in progress did not meet the requirements for capitalization and had to be written off. This finding has been corrected during the current year Internal Controls over Grant Reporting The County filed the required quarterly reports for its grants on a timely basis. However, the reports were not subject to independent review and approval. This finding has been corrected during the current year. 184

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191 Rehmann Robson 2330 East Paris Ave. SE Grand Rapids, MI Ph: Fx: rehmann.com INDEPENDENT AUDITORS COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE March 6, 2017 Board of Commissioners of Eaton County, Michigan Charlotte, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Eaton County, Michigan (the County ) as of and for the year ended September 30, 2016, and have issued our report thereon dated March 6, We did not audit the financial statements of the Eaton County Health and Rehabilitation Services enterprise fund or the Eaton County Road Commission discretely presented component unit. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion on the financial statements and this report, insofar as they relate the Eaton County Health and Rehabilitation Services enterprise fund and the Eaton County Road Commission discretely presented component unit, are based solely on the reports of other auditors. Professional standards require that we provide you with the following information related to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated January 5, 2017, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, as part of our audit, we considered the internal control of the County solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. We have provided our findings regarding internal control over financial reporting and compliance noted during our audit in a separate letter to you dated March 6, In addition, we noted certain other matters which are included in Attachment A to this letter.

192 Page 2 Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter and in our meeting about planning matters on January 13, Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm has complied with all relevant ethical requirements regarding independence. Qualitative Aspects of the County s Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the County is included in Note 1 to the financial statements. There have been no initial selections of accounting policies and no changes in significant accounting policies or their application during the year. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management s current judgments. The most sensitive accounting estimates affecting the financial statements were: Management s estimate of the useful lives of depreciable capital assets is based on the length of time it is believed that those assets will provide some economic benefit in the future. Management s estimate of the accrued compensated absences is based on current hourly rates and policies regarding payment of sick and vacation banks. Management s estimate of the allowance for uncollectible receivable balances is based on past experience and future expectation for collection of various account balances. Management s estimate of the insurance claims incurred but not reported is based on information provided by the entity s third party administrators and subsequent claims activity. The assumptions used in the actuarial valuation of the other postemployment benefits plan are based on historical trends and industry standards.

193 We evaluated the key factors and assumptions used to develop these estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. In addition, the financial statements include a net pension liability and other pension-related amounts, which are dependent on estimates made by the plan. These estimates are based on historical trends and industry standards, but are not within the control of management. Significant Difficulties Encountered During the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. The material misstatements detected as a result of audit procedures and corrected by management are described in the Schedule of Findings and Questioned Costs issued in connection with the Single Audit. The schedule of adjustments passed is included with management s written representations in Attachment C to this letter, and summarizes uncorrected financial statement misstatements whose effects in the current and prior periods, as determined by management, are immaterial, both individually and in the aggregate, to the financial statements taken as a whole and each applicable opinion unit. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the County s financial statements or the auditors report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management, which are included in Attachment C to this letter. Management s Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Page 3

194 Page 4 Other Significant Matters, Findings, or Issues In the normal course of our professional association with the County, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the County s auditors. Other Information in Documents Containing Audited Financial Statements Our responsibility for the supplementary information accompanying the financial statements, as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and to report on whether the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole. We made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Upcoming Changes in Accounting Standards Generally accepted accounting principles (GAAP) are continually changing in order to promote the usability and enhance the applicability of information included in external financial reporting. While it would not be practical to include an in-depth discussion of every upcoming change in professional standards, Attachment B to this letter contains a brief overview of recent pronouncements of the Governmental Accounting Standards Board (GASB) and their related effective dates. Management is responsible for reviewing these standards, determining their applicability, and implementing them in future accounting periods. This information is intended solely for the use of the governing body and management of Eaton County, Michigan and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours,

195 Attachment A - Comments and Recommendations For the September 30, 2016 Audit During our audit, we became aware of certain other matters that are opportunities for strengthening internal control and/or improving operating efficiency. This memorandum summarizes our comments and recommendations regarding those matters. Our consideration of the County's internal control over financial reporting is described in our report, dated March 6, 2017, issued in accordance with Government Auditing Standards. This memorandum does not affect that report or our report dated March 6, 2017, on the financial statements of the County. Other Matters Compliance with the Uniform Budgeting Manual The State of Michigan Department of Treasury, through its Uniform Budgeting Manual, requires that the total estimated expenditures, including an accrued deficit, in the budget shall not exceed the total estimated revenues, including an available unappropriated surplus and the proceeds from bonds or other obligations issued under the fiscal stabilization act or the balance of the principal of these bonds or other obligations. The County budgeted for an ending fund balance deficit for the Child Care and Property Forfeiture Prosecutor special revenue funds, which is not permissible under State statutes. A1

196 Attachment B Upcoming Changes in Accounting Standards / Regulations For the September 30, 2016 Audit The following pronouncements of the Governmental Accounting Standards Board (GASB) have been released recently and may be applicable to the County in the near future. We encourage management to review the following information and determine which standard(s) may be applicable to the County. For the complete text of these and other GASB standards, visit and click on the Standards & Guidance tab. If you have questions regarding the applicability, timing, or implementation approach for any of these standards, please contact your audit team. GASB 74 Postemployment Benefit Plans Other than Pension Plans Effective 06/15/2017 (your FY 2017) This standard requires the calculation of a net other postemployment benefit (OPEB) liability based on an actuarial valuation of retiree healthcare and similar benefits administered by an OPEB trust. It mirrors the new accounting and financial reporting requirements of GASB 67 for pension plans. GASB 75 Postemployment Benefits Other than Pensions Effective 06/15/2018 (your FY 2018) This standard builds on the requirements of GASB 74 by requiring employers that provide other postemployment benefits (OPEB) to recognize a net OPEB liability on their statements of net position. It mirrors the new accounting and financial reporting requirements of GASB 68 for pension benefits. GASB 77 Tax Abatement Disclosures Effective 12/15/2016 (your FY 2017) This standard requires governments to disclose certain information about tax abatement agreements made to foster economic development or otherwise benefit the government or its citizens. Required disclosures include a brief description of the arrangement, the gross dollar amount of taxes abated in the current period, and any additional commitments made by the government as part of the agreement. GASB 78 Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans Effective 12/15/2016 (your FY 2017) This standard is an amendment to GASB 68, and provides guidance to governments that participate in nongovernmental cost-sharing pension plans. We do not expect this standard to have any significant effect on the County. GASB 80 Blending Requirements for Certain Component Units Effective 06/15/2017 (your FY 2017) This standard is an amendment to GASB 14, The Financial Reporting Entity, and requires blending component units incorporated as not-for-profit corporations in which the government is the sole corporate member. We do not expect this standard to have any significant effect on the County. B1

197 Attachment B Upcoming Changes in Accounting Standards / Regulations For the September 30, 2016 Audit GASB 81 Irrevocable Split-Interest Agreements Effective 12/15/2017 (your FY 2018) This standard addresses the accounting for split-interest agreements for which the government serves as the intermediary and/or the beneficiary. It requires governments to record assets, liabilities, and deferred inflows of resources at the inception of the agreement when serving as intermediary, or when the government controls the present service capacity of a beneficial interest. We do not expect this standard to have any significant effect on the County. GASB 82 Pension Issues Effective 06/15/2017 (your FY 2017) This standard is an amendment to GASB 67/68 to clarify several issues related to pensions. We do not expect this standard to have any significant effect on the County. GASB 83 Certain Asset Retirement Obligations Effective 06/15/2019 (your FY 2019) This standard addresses accounting and financial reporting for certain asset retirement obligations--legally enforceable liabilities associated with the retirement of a tangible capital asset. We do not expect this standard to have any significant effect on the County. GASB 84 Fiduciary Activities Effective 12/15/2019 (your FY 2020) This standard establishes new criteria for determining how to report fiduciary activities in governmental financial statements. The focus is on whether the government is controlling the assets, and who the beneficiaries are. Under this revised standard, certain activities previously reported in agency funds may be reclassified in future periods. Due to the number of specific factors to consider, we will continue to assess the degree to which this standard may impact the County. B2

198 Attachment C Management Representations For the September 30, 2016 Audit The following pages contain the written representations that we requested from management. C1

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