GOGEBIC COUNTY ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2013

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1 GOGEBIC COUNTY ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2013

2 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS 4 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position 15 Statement of Activities 16 Fund Financial Statements Governmental Funds Balance Sheet 17 Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position 18 Statement of Revenues, Expenditures, and Changes in Fund Balance 19 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balance with the Statement of Activities 20 Proprietary Funds Statement of Net Position 21 Statement of Revenues, Expenses and Changes in Net Position 22 Statement of Cash Flows 23 Fiduciary Funds Statement of Net Position 25 Statement of Changes in Fiduciary Net Position 26 Component Units Combining Statement of Net Position 27 Combining Statement of Activities 28 Notes to the Financial Statements 29 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual General Fund 62 Schedule of Funding Progress - Gogebic County Employees Retirement System 64 Schedule of Funding Progress - Retiree Healthcare Plan 65 Page

3 TABLE OF CONTENTS Page OTHER SUPPLEMENTARY INFORMATION Nonmajor Governmental Funds Combining Balance Sheet 67 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 70 Nonmajor Enterprise Funds Combining Statement of Net Position 73 Combining Statement of Revenues, Expenses and Changes in Net Position 74 Combining Statement of Cash Flows 75 Internal Service Funds Combining Statement of Net Position 77 Combining Statement of Revenues, Expenses and Changes in Net Position 78 Combining Statement of Cash Flows 79 Fiduciary Funds Combining Statement of Net Position 80 SINGLE AUDIT ACT COMPLIANCE Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 81 Independent Auditor's Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A Schedule of Expenditures of Federal Awards 85 Notes to the Schedule of Expenditures of Federal Awards 86 Schedule of Findings & Questioned Costs 88

4 To the Board of Commissioners Gogebic County, Michigan Report on the Financial Statements INDEPENDENT AUDITOR S REPORT We have audited the accompanying 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 Gogebic County, Michigan, as of and for the year ended December 31, 2013, 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. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Gogebic County Road Commission, the Community Mental Health Authority, or the Western U.P. Manpower Consortium, which represent 99.4 percent, 99.6 percent, and 99.8 percent, respectively, of the assets, net position, and revenues of the discretely presented component units. We also did not audit the Gogebic County Transit, which represents 16 percent, 5 percent, and 4 percent, respectively, of the assets, net position, and revenues of the business-type activities. 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 Gogebic County Road Commission, the Community Mental Health Authority, the Western U.P. Manpower Consortium, and the Gogebic County Transit 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. 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 - 1 -

5 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 Gogebic County 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 above 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 Gogebic County, Michigan, as of December 31, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, the schedules of funding progress and employer contributions for the pension and other postemployment benefits plan, and budgetary comparison information as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or 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 Gogebic County, Michigan s basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional - 2 -

6 analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards 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 nonmajor fund financial statements and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 26, 2014, on our consideration of Gogebic County, Michigan s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Gogebic County, Michigan s internal control over financial reporting and compliance. Gabridge & Company, PLC Grand Rapids, Michigan June 26,

7 Management s Discussion and Analysis As management of Gogebic County, Michigan (the County or government ), we offer readers of the County s financial statements this narrative overview and analysis of the financial activities of the County for the fiscal year ended December 31, We encourage readers to consider the information presented here in conjunction with the County s financial statements, which can be found on pages of this report. Financial Highlights The assets of Gogebic County exceeded its liabilities at December 31, 2013 by $21,829,399. Of this amount, $12,266,953 is unrestricted and may be used to meet the County s ongoing obligations to citizens and creditors. At the close of the current fiscal year, the County s governmental funds reported combined fund balances of $1,097,947, a decrease of $85,302 in comparison with the prior year. Approximately 26% of this amount ($283,259) is available for spending at the government s discretion (unassigned fund balance). At December 31, 2013, unassigned fund balance for the General Fund was $283,259, or 4.7% of the general fund s annualized expenditures. Total long-term debt of the county decreased by $30,000 from the prior year. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the County s basic financial statements. The County s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the County s finances, in a manner similar to a private-sector business. The statement of net position presents financial information on all of the County s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the County s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows

8 Thus, revenues and expenses are reported for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include legislative, judicial, general government, public safety, public works, and recreation and culture. The business-type activities of the County include a medical care facility, airport operating, airport capital improvement, forestry and parks commission, fair board, and a transit authority. The government-wide financial statements include not only the County itself (known as the primary government), but also a legally separate economic development corporation, brownfield redevelopment authority, community mental health authority, county road commission, and a manpower consortium. Financial information for these component units is reported separately from the financial information presented for the primary government itself. The combining component unit statements can be found on pages The transit authority and economic development commission, 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 as blended component units. The government-wide financial statements can be found on pages of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in assessing a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for 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

9 The County maintains 21 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund. Data from the other 20 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 in the combining and individual fund statements and schedules section of this report. The County adopts an annual appropriated budget for its general fund and all special revenue funds. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with their budget. The basic governmental fund financial statements can be found on pages of this report. 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 enterprises funds to account for its medical care facility and for its delinquent revolving taxes. Internal service funds are an accounting device used to accumulate and allocate costs internally among the County s various functions. Internal service funds are used to account for monies advanced by the County to pay the County and other local taxing units for their delinquent real property taxes. Because the County s internal service funds primarily serve governmental functions, they are included within the governmental activities of 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 medical care facility and airport capital improvement, both of which are considered to be major funds of the County. Conversely, all five internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds are provided in the form of combining statements in the combining and individual fund statements and schedules section of this report. The basic proprietary fund financial statements can be found on pages of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside of the government. Fiduciary funds are not reported in the government-wide financial statements because the resources of those funds are not available to support the County s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The County maintains three different types of fiduciary funds. The pension and benefit trust fund is used to report resources held in trust for retirees and beneficiaries. The Private-purpose trust fund is used to report resources held in trust for scholarships for high school graduates that attend college. The Agency fund reports resources held by the County in a custodial capacity for individuals, private organizations and other governments. The fiduciary fund financial statements can be found on page of this report

10 Notes to the Financial Statements. The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information concerning the County s progress in funding its obligation to provide pension and OPEB benefits to its employees, in addition to demonstrating the County s compliance with its annual budget. Required supplementary information can be found on pages of this report. This report also presents other supplementary information which includes the nonmajor fund combining and individual statements. The combining statements are presented immediately following the required supplementary information on pensions and OPEB. Combining and individual fund statements and schedules can be found on pages of this report

11 Government-wide Financial Statements As noted earlier, net position over time, may serve as a useful indicator of a government s financial position. In the case of the County, assets exceeded liabilities and deferred inflows by $21,829,399, at the close of the most recent fiscal year. Gogebic County Statement of Net Position for Fiscal Years Ended December 31, 2013 and December 31, 2012 Governmental Business-type Total Primary Activities Activities Government ASSETS Current Assets Cash $ 5,115,403 $ 4,678,724 $ 2,888,879 $ 1,824,641 $ 8,004,282 $ 6,503,365 Investments , , , ,003 Taxes Receivable 2,105,398 2,152, , ,448 2,303,006 2,354,095 Accounts Receivable - - 1,340,229 1,376,474 1,340,229 1,376,474 Due from State 6,061 3,150 26,045 25,504 32,106 28,654 Federal Government 31,321 31, ,321 31,602 Notes Receivable 2,472 38, ,472 38,411 Other Receivables 275, ,236 31,291 48, , ,440 Inventories , ,267 76, ,267 Prepaid Expenses 36,367-85,527 27, ,894 27,874 Total Current Assets 7,572,882 7,237,770 4,844,944 3,804,415 12,417,826 11,042,185 Noncurrent Assets Reserved Cash - - 2,006,987 1,809,986 2,006,987 1,809,986 Capital Assets, Net 2,399,964 2,305,035 7,505,566 6,989,129 9,905,530 9,294,164 Total Assets 9,972,846 9,542,805 14,357,497 12,603,530 24,330,343 22,146,335 LIABILITIES Current Liabilities Accounts Payable 69,121 47, , , , ,965 Salaries, Wages, and Related Liabilities 84,902 55, , , , ,514 Due State of Michigan - - 6,698-6,698 - Interest Payable 10,918 11,343 10,918 11,343 Current Portion of Long-term Liabilities 30,000 30, ,000 30,000 Total Current Liabilities 194, , , , , ,822 Noncurrent Liabilities Compensated Absences 194, , , , , ,022 Note Payable 665, , , ,000 Other Post-employment Benefits Payable 56,906 39, ,906 39,871 Total Liabilities 1,110,898 1,074, , ,981 1,874,589 1,829,715 DEFERRED INFLOWS Property Taxes Levied for a Subs. Period 248, , , ,298 Unearned Revenue 2,472 38, , , , ,539 Total Deferred Inflows 250, , , , , ,837 NET POSITION Net Investment in Capital Assets 1,704,964 1,571,013 7,505,566 5,906,358 9,210,530 7,477,371 Restricted 349, ,489 2,273 2, , ,409 Unrestricted 6,556,476 6,242,860 5,710,477 5,547,143 12,266,953 11,790,003 Total Net Position $ 8,611,083 $ 8,016,362 $ 13,218,316 $ 11,456,421 $ 21,829,399 $ 19,472,783 A significant portion of the County s net position ($9,210,530, or 42% of total net position) reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, vehicles, and infrastructure), less any related outstanding debt that was used to acquire those assets. The - 8 -

12 County uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are not available for future spending. Although the County s investment in capital assets is reported net of related debt, it should be noted that the resources used 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%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of $12,266,953 is unrestricted and may be used to meet the government s ongoing obligations to its citizens and creditors. At the end of the current fiscal year, the County is able to report positive balances in all reported categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The County s overall net position increased $2,346,606 from the prior fiscal year. The reasons for this overall decrease are discussed in the following sections for governmental activities and business-type activities. Governmental Activities. During the current fiscal year, net position for governmental activities increased $594,721 from the prior fiscal year for an ending balance of $8,611,083. Interest expense is negative in the current year due to unrealized holding losses in the current year. The following chart summarizes the revenue sources for the governmental activities of the County for the most recent fiscal year end: - 9 -

13 The following chart summarizes the expenses for the governmental activities of the County for the most recent fiscal year end: Business-type Activities. For the County s business-type activities, the results for the current fiscal year resulted in an ending balance of $13,208,066. The total increase in net position for business-type activities was $1,751,885, or 15%, from the prior fiscal year. The increase in net position can largely be attributed to a capital grant in the airport capital improvement fund of $861,829. The remaining increase of $890,056 is consistent with the previous years increase

14 The following details the changes in net position for both the governmental and business-type activities in a comparative format for the two most recently completed fiscal years: Gogebic County Change in Net Position for Fiscal Years Ended December 31, 2013 and December 31, 2012 Governmental Business-type Total Activities Activities Government Revenue Program Revenues Charges for Services $ 1,884,576 $ 1,746,474 $ 11,777,687 $ 11,447,285 $ 13,662,263 $ 13,193,759 Operating Grants & Contributions 1,524,943 1,671, , ,202 2,142,283 2,151,640 Capital Grants & Contributions 213,164 82, , ,712 1,164, ,673 Total Program Revenues 3,622,683 3,500,873 13,346,360 12,326,199 16,969,043 15,827,072 General Revenues Taxes 3,821,557 3,988, ,821,557 3,988,257 State Grants 261, , , ,522 Other 102, , , ,609 Interest (45,626) 57,986 21,630 6,015 (23,996) 64,001 Transfers (10,010) (34,536) 10,010 34, Total General Revenues and Transfers 4,129,511 4,436,838 31,640 40,551 4,161,151 4,477,389 Total Revenues 7,752,194 7,937,711 13,367,990 12,366,750 21,120,184 20,304,461 Expenses Legislative 55,794 71, ,794 71,507 Judicial 945, , , ,343 General Government 1,427,992 1,566, ,427,992 1,566,754 Public Safety 1,916,113 1,706, ,916,113 1,706,326 Health and Welfare 1,023, ,296 9,593,352 9,468,029 10,617,276 10,453,325 Recreation and Culture 116,416 94, , , , ,336 Other Functions 1,531,927 1,636,148 1,499,732 1,545,545 3,031,659 3,181,693 Community and Economic Development 106,700 90, ,700 90,236 Interest on Long-term Debt 32,965 45, ,965 45,971 Total Expenses 7,157,473 7,058,667 11,616,105 11,535,824 18,773,578 18,594,491 Change in Net Position 594, ,044 1,751, ,926 2,346,606 1,709,970 Net Position at the Beginning of Period 8,016,362 7,137,318 11,456,181 10,625,255 19,472,543 17,762,573 Net Position at the End of Period $ 8,611,083 $ 8,016,362 $ 13,208,066 $ 11,456,181 $ 21,819,149 $ 19,472,543 Financial Analysis of Governmental Funds As noted earlier, the 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 discretionary use as they represent the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the County itself, or a group or individual that has been delegated authority to assign resources for use for particular purposes by the County Commissioners

15 At December 31, 2013, the County s governmental funds reported combined fund balances of $1,097,947, a decrease of $85,302 in comparison with the prior year. Approximately 26% of this amount ($283,259) constitutes unassigned fund balance, which is available for spending at the government s discretion. The remainder of the fund balance is either nonspendable, restricted, or assigned to indicate that it is 1) nonspendable prepayments ($36,367), 2) restricted for particular purposes ($349,643), or 3) assigned for particular purposes ($428,678). 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 $283,259, while total fund balance increased to $669,269. As a measure of the general fund s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total general fund expenditures. Unassigned fund balance represents approximately 4.7 percent of total general fund expenditures, while total fund balance represents approximately 11.1 percent of that same amount. The fund balance of the County s general fund increased by $81,138 during the current fiscal year. The increase in the general fund balance was due a slight increase in revenues and slight decrease in expenditures in comparison with the previous year. Proprietary Funds. The County s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the proprietary funds at the end of the year was $5,710,477. The total increase in net position for proprietary funds was $1,751,885. General Fund Budgetary Highlights Original budget compared to final budget. During the year, the County revised its original budget several times to account for the changing environment of funding sources, generally in the federal grant area. A schedule showing the County s general fund original budget, final budget and the actual results are included as required supplementary information in the financial section of the audit report. Final budget compared to actual results. During the current fiscal year the County had the following significant budget variances between the final budgeted amounts compared to actual results: Final Budget Actual Variance District Court $ 228,184 $ 246,185 $ (18,001) Probate Court 311, ,205 (1,181) Indigent Attorney Contract 146, ,308 (61,308) Data Processing 97, ,076 (14,837) Employees' Health Insurance 901, ,144 (8,574) Other - 69,810 (69,810) Optical Reimbursements 20,000 26,630 (6,630)

16 Capital Assets The County s investment in capital assets for its governmental and business-type activities as of December 31, 2013, amounts to $9,905,530 (net of accumulated depreciation). This investment in capital assets includes land, buildings, machinery, equipment, and vehicles. The total increase in capital assets for the current fiscal year was approximately 6.5%. Additional information on the County s capital assets can be found in Note 9 on pages of this report. Long-term Debt The County had $695,000 of long-term debt at December 31, This amount is comprised of the 2009 capital improvement bonds. State statutes limit the amount of general obligation debt a governmental entity may issue to 10 percent of its total assessed valuation. The County is well under its statutory debt limit as of December 31, Additional information on the County s long-term debt can be found in Note 10 on pages of this report. Future Considerations The following factors were considered in preparing the County s budget for the 2014 fiscal year: The decline in property values and the rise in foreclosures over the past several years have had a dramatic effect on the property tax levy and the revenue generated by it. For the 2014 fiscal year, a conservative approach has continued and tax revenue increases have not been budgeted for the County s general fund. The condition of the state and federal economies will likely continue to result in additional decreases in state and federal funding. The actual magnitude of the decreases will depend on the economy within the State of Michigan and continued budgetary cuts at the federal level. It is likely these decreases will come through changes in grants and long standing funding relationships. Revenue Sharing for the County is projected to be $270,917 for fiscal year Effective with the 2013 fiscal year, the State implemented new requirements for Revenue Sharing. The County is scheduled to receive $216,734 as part of the County Revenue Sharing Payment. However, the remaining portion of funds ($54,183) is subject to the new County Incentive Program (CIP). The CIP portion of Revenue Sharing requires the County to submit the following three elements in order to qualify for funding: 1) Accounting & Transparency ($18,061); 2) Consolidation of Services ($18,061); and 3) Unfunded Accrued Liability Plan ($18,061)

17 Interest earnings remain at an all-time low. On the expenditure side, increases are expected in health insurance premiums, as well as pension and other employee benefit costs. Contacting the County 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 financial information should be addressed to: County office at Gogebic County 200 N. Moore Street Bessemer, MI (906)

18 Statement of Net Position December 31, 2013 Governmental Activities Primary Government Business-type Activities Total Component Units ASSETS Current Assets Cash $ 5,115,403 $ 2,888,879 $ 8,004,282 $ 3,099,584 Investments , , ,814 Taxes Receivable 2,105, ,608 2,303, Accounts Receivable -- 1,340,229 1,340, ,539 Due from State 6,061 26,045 32, ,645 Federal Government 31, , Notes Receivable 2, ,472 18,600 Other Receivables 275,860 31, , Inventories -- 76,148 76, ,938 Prepaid Expenses 36,367 85, ,894 60,554 Total Current Assets 7,572,882 4,844,944 12,417,826 4,789,674 Noncurrent Assets Reserved Cash -- 2,006,987 2,006, ,316 Capital Assets, Net 2,399,964 7,505,566 9,905,530 19,161,551 Notes Receivable - Long-term (Net) ,557 Total Assets 9,972,846 14,357,497 24,330,343 24,208,098 DEFERRED OUTFLOWS OF RESOURCES Unamortized Capital Lease ,292 Total Deferred Outflows of Resources ,292 LIABILITIES Current Liabilities Accounts Payable 69, , , ,468 Salaries, Wages, and Related Liabilities 84, , , ,668 Due State of Michigan -- 6,698 6, Interest Payable 10, ,918 8,556 Current Portion of Long-term Liabilities 30, , ,048 Total Current Liabilities 194, , ,101 1,448,740 Noncurrent Liabilities Compensated Absences 194, , , ,411 Capital Lease Payable ,000 Note Payable 665, , ,012 Other Post-employment Benefits Payable 56, , ,386 Total Liabilities 1,110, ,691 1,874,592 2,669,549 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue 2, , , ,113 Property Taxes Levied for a Subsequent Period 248, , Total Deferred Inflows of Resources 250, , , ,113 NET POSITION Net Investment in Capital Assets 1,704,964 7,505,566 9,210,530 18,652,258 Restricted for: Unemployment Claims -- 2,273 2,273 1,905 Maintenance of Effort 339, , Animal Control 10, , Unrestricted 6,556,476 5,710,477 12,266,953 2,191,565 Total Net Position $ 8,611,083 $ 13,218,316 $ 21,829,399 $ 20,845,728 The Notes to the Financial Statements are an integral part of these Financial Statements

19 Statement of Activities For the Year Ended December 31, 2013 Functions/Programs Primary Government Governmental Activities: Expenses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Net (Expense) Revenue Primary Government Business-type Activities Legislative $ 55,794 $ -- $ -- $ -- $ (55,794) $ -- $ (55,794) $ -- Judicial 945, , , (379,808) -- (379,808) -- General Government 1,427, , , , , Public Safety 1,916, ,633 99,882 61,721 (1,158,877) -- (1,158,877) -- Health and Welfare 1,023, , , (664,730) -- (664,730) -- Recreation and Culture 116,416 98,328 20, , , , Other Functions 1,531,927 30,646 98, (1,402,874) -- (1,402,874) -- Community and Economic Development 106,700 9,374 97, (13) -- (13) -- Interest on Long-term Debt 32, (32,965) -- (32,965) -- Total Governmental Activities 7,157,473 1,884,576 1,524, ,164 (3,534,790) -- (3,534,790) -- Business-type Activities: Medical Care Facility 9,593,352 10,536,838 17, , , Airport Capital Improvment 214,398 10,661 70, , , , Forestry and Parks Commission 356, , , , Fair Board 166, , (27,412) (27,412) -- Airport Operating 685, ,391 55,194 23, (157,411) (157,411) -- Gogebic County Transit 599,818 49, ,037 65, (10,536) (10,536) -- Total Business-type Activities 11,616,105 11,777, , , ,730,255 1,730, Total Primary Government $ 18,773,578 $ 13,662,263 $ 2,142,283 $ 1,164,497 $ (3,534,790) $ 1,730,255 $ (1,804,535) -- Component Units Total Component Units $ 16,654,191 $ 11,843,909 $ 3,451,483 $ 1,594, ,723 Total Component Units $ 16,654,191 $ 11,843,909 $ 3,451,483 $ 1,594, ,723 General Purpose Revenues and Transfers: Revenues Taxes 3,821, ,821, State Grants 261, , Other Revenues 102, , Interest (45,626) 21,630 (23,996) 12,260 Gain (Loss) on Asset Disposal ,516 Transfers (10,010) 10, Total General Revenues and Transfers 4,129,511 31,640 4,161, ,776 Change in Net Position 594,721 1,761,895 2,356, ,499 Net Position at Beginning of Period 7,596,111 11,456,421 19,052,532 20,319,229 Prior Period Adjustment (See Note 16) 420, , Net Position at Beginning of Period - Restated 8,016,362 11,456,421 19,472,783 20,319,229 Net Position at End of Period $ 8,611,083 $ 13,218,316 $ 21,829,399 $ 20,845,728 Total Component Units The Notes to the Financial Statements are an integral part of these Financial Statements

20 Balance Sheet Governmental Funds December 31, 2013 Other Governmental Funds Total Governmental Funds General ASSETS Cash $ 423,335 $ 387,019 $ 810,354 Taxes Receivable 706, ,335 Due from State -- 6,061 6,061 Federal Government -- 31,321 31,321 Notes Receivable -- 2,472 2,472 Other Receivables 243,145 32, ,860 Prepaid Expenditures 36, ,367 Total Assets $ 1,409,182 $ 459,588 $ 1,868,770 LIABILITIES Accounts Payable $ 50,620 $ 6,831 $ 57,451 Salaries, Wages, and Related Liabilities 80,995 3,907 84,902 Due to Other Funds -- 17,700 17,700 Total Liabilities 131,615 28, ,053 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue 359,908 2, ,380 Property Taxes Levied for a Subsequent Period 248, ,390 Total Liabilities and Deferred Inflows of Resources 739,913 30, ,823 FUND BALANCE Nonspendable 36, ,367 Restricted 349, ,643 Assigned , ,678 Unassigned 283, ,259 Total Fund Balance 669, ,678 1,097,947 Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 1,409,182 $ 459,588 $ 1,868,770 The Notes to the Financial Statements are an integral part of these Financial Statements

21 Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position December 31, 2013 Total Fund Balance - Governmental Funds $ 1,097,947 Net position of internal service funds that are treated as proprietary in the fund level statements are treated as governmental in the entity-wide statements. 5,710,142 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. This amount represents capital assets of $6,070,993 less accumulated depreciation of $3,671,029. 2,399,964 Certain liabilities are not due and payable in the current period and are not reported in the funds. Those liabilities consist of: Bonds Payable $695,000. (695,000) Other post employment benefits are not due and payable in the current period and, therefore, are not reported in the funds. (56,906) Unavailable revenues are not available to to pay current period expenditures and, therefore, are deferred inflows of resources in the funds. 359,908 Compensated absences are not due and payable in the current period and, therefore, are not reported in the funds. (194,054) In the statement of activities, interest is accrued on outstanding bonds, whereas in governmental funds, the interest expenditure is reported when due. (10,918) Total Net Position - Governmental Funds $ 8,611,083 The Notes to the Financial Statements are an integral part of these Financial Statements

22 Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds For the Year Ended December 31, 2013 Other Governmental Funds Total Governmental Funds General Revenues Taxes $ 3,795,725 $ -- $ 3,795,725 Licenses and Permits 6, ,033 Federal Grants 677, , ,246 State Grants 925, ,423 1,105,153 Contributions from Local Units 43, ,607 Charges for Services 625, ,716 1,145,166 Fines and Forfeitures 17, ,337 Interest and Rents 32, ,465 Other Revenues 99,828 35, ,341 Interest (45,626) -- (45,626) Total Revenues 6,178, ,228 7,150,447 Expenditures Legislative 55, ,794 Judicial 918,981 26, ,642 General Government 1,210, ,210,976 Public Safety 1,615, ,826 1,916,113 Health and Welfare 492, ,706 1,023,924 Community and Economic Development , ,700 Recreation and Culture , ,416 Other Functions 1,531, ,531,927 Capital Outlay 93, , ,050 Debt Service - Principal 30, ,000 Debt Service - Interest 33, ,390 Total Expenditures 5,982,058 1,285,874 7,267,932 Excess of Revenues Over (Under) Expenditures 196,161 (313,646) (117,485) Other Financing Sources (Uses) Transfers from Other Funds 199, , ,847 Transfers to Other Funds (314,890) (1,774) (316,664) Net Other Financing Sources (Uses) (115,023) 147,206 32,183 Net Change in Fund Balance 81,138 (166,440) (85,302) Fund Balance at Beginning of Period 490, ,118 1,085,731 Prior Period Adjustment (See Note 16) 97, ,518 Fund Balance at Beginning of Period - Restated 588, ,118 1,183,249 Fund Balance at End of Period $ 669,269 $ 428,678 $ 1,097,947 The Notes to the Financial Statements are an integral part of these Financial Statements

23 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance with Statement of Activities For the Year Ended December 31, 2013 Total Net Change in Fund Balances - Governmental Funds $ (85,302) Changes in net position of internal service funds that are treated as enterprise fund changes in net position in the fund level statements are treated as governmental fund changes in net position in the entity-wide statements. 543,732 Compensated absences not payable from current year resources are not reported as expenditures of the current year in the funds. In the statement of activities, those cost represent expenses of the current year. 2,140 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This amount represents capital outlay expenditures of $297,050 less depreciation expense of $200,948 and net disposals of $1, ,929 In the statement of activities, an expense is recorded for other post-employment benefits (OPEB) to adjust the net OPEB obligation to the actuarial determined amount less any contributions to fund the obligation. This is the difference between the prior year and the current year net OPEB obligation. (17,035) Long-term debt payments are reported as financing uses in the governmental funds and thus contribute to the change in fund balance. However, long-term debt payments reduce longterm liabilities on the statement of net position. This represents the amount of long-term debt principal payments made during the year. 30,000 Revenues in the statement of activities that do not provide current financial resources are reported as deferred inflows of resources. 25,832 Changes to accrued interest are not shown in the fund financial statements. The net effect of the current year decrease is to increase net position. 425 Changes in Net Position - Governmental Funds $ 594,721 The Notes to the Financial Statements are an integral part of these Financial Statements

24 Statement of Net Position Proprietary Funds December 31, 2013 Medical Care Facility Business-type Activities - Enterprise Funds Airport Capital Improvment Other Enterprise Funds Total Enterprise Funds Governmental Activities Internal Service Funds ASSETS Current Assets Cash $ 2,387,262 $ 134,585 $ 367,032 $ 2,888,879 $ 4,305,049 Investments , , Taxes Receivable 197, ,608 1,399,063 Accounts Receivable 1,338, ,217 1,340, Due from State ,045 26, Other Receivables ,219 31, Inventories 50, ,375 76, Prepaid Expenses 80, ,596 85, Due from Other Funds ,700 Total Current Assets 4,054, , ,182 4,844,944 5,721,812 Noncurrent Assets Reserved Cash 2,006, ,006, Capital Assets, Net 1,444,742 3,547,343 2,513,481 7,505, Total Assets 7,505,906 3,681,928 3,169,663 14,357,497 5,721,812 LIABILITIES Current Liabilities Accounts Payable 122, , ,970 11,670 Salaries, Wages, and Related Liabilities 145, , , Due State of Michigan ,698 6, Total Current Liabilities 268, , ,160 11,670 Noncurrent Liabilities Compensated Absences 410, , , Total Liabilities 678, , ,691 11,670 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue 363, , , Total Deferred Inflows of Resources 363, , , NET POSITION Net Investment in Capital Assets 1,444,742 3,547,343 2,513,481 7,505, Restricted for: Unemployment Claims ,273 2, Unrestricted 5,018, , ,945 5,710,477 5,710,142 Total Net Position $ 6,463,689 $ 3,681,928 $ 3,072,699 $ 13,218,316 $ 5,710,142 The Notes to the Financial Statements are an integral part of these Financial Statements

25 Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended December 31, 2013 Medical Care Facility Business-type Activities - Enterprise Funds Airport Capital Improvment Other Enterprise Funds Total Enterprise Funds Governmental Activities Internal Service Funds Operating Revenues Sales and Charges for Services $ 10,186,764 $ 10,661 $ 940,120 $ 11,137,545 $ -- Other Operating Revenues 178, , , Federal Grants ,829 29, , State Grants -- 7,588 1,250 8, Contributions from Local Units -- 14,250 47,919 62, Fines and Forfeitures ,858 Interest and Rents ,893 52, Other Revenues ,289 11, ,884 Total Operating Revenues 10,365, ,328 1,308,902 12,568, ,742 Operating Expenses Salaries, Fees, and Fringe Benefits 6,464, ,318 7,410, Services. Materials, and Other Operating Expenses 2,916,915 4, ,828 3,590, Depreciation Provisions 211, , , , Administration Expense ,889 Total Operating Expenses 9,593, ,398 1,808,355 11,567,105 74,889 Operating Income (Loss) 772, ,930 (499,453) 1,001, ,853 Non-Operating Revenues (Expenses) Property Taxes 188, , , Federal Grants ,368 82, State Grants , , Interest ,630 21,630 9,072 Net Non-Operating Revenues (Expenses) 188, , ,199 9,072 Income Before Contributions and Transfers 960, ,930 (3,786) 1,685, ,925 Capital Contributions ,984 65, Transfers from Other Funds -- 14, , ,010 3,865,423 Transfers to Other Funds (160,000) (160,000) (3,907,616) Change In Net Position 960, ,180 57,958 1,761, ,732 Net Position at Beginning of Period 5,502,932 2,938,748 3,014,741 11,456,421 5,166,410 Net Position at End of Period $ 6,463,689 $ 3,681,928 $ 3,072,699 $ 13,218,316 $ 5,710,142 The Notes to the Financial Statements are an integral part of these Financial Statements

26 Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2013 Business-type Activities Enterprise Funds Governmental Other Activities Medical Care Airport Capital Enterprise Total Enterprise Internal Service Facility Improvement Funds Funds Funds Cash Flows from Operating Activities Cash Received from Customers $ 10,224,570 $ 10,661 $ 1,168,542 $ 11,403,773 $ - Cash Received from Local Units - 14,250 47,919 62,169 - Property Tax Collections ,977 94,977 1,257,899 Other Revenues 178, ,417-1,048, ,884 Cash Payments to Employees for Services and Fringe Benefits (6,440,314) (1,071,697) (7,512,011) - Cash Payments to Suppliers for Goods and Services (2,970,555) (4,534) (541,815) (3,516,904) (78,603) Total Cash Flows from Operating Activities 992, ,794 (302,074) 1,580,234 1,366,180 Cash Flows from Non-capital Financing Activities Property Tax Collections 188, , ,702 - Grant Contributions , ,435 - Transfers in from Other Funds - 14,250 (4,240) 10,010 (1,127,045) Total Cash Flows from Non-capital Financing Activities 188,532 14, , ,147 (1,127,045) Cash Flows from Capital and Related Financing Activities Capital Contributions ,984 65,984 - Purchases of Capital Assets (68,525) (910,829) (94,145) (1,073,499) - Total Cash Flows from Capital and Related Financing Activities (68,525) (910,829) (28,161) (1,007,515) - Cash Flows from Investing Activities Interest Earned ,373 22,373 9,072 Total Cash Flows from Investing Activities ,373 22,373 9,072 Net Increase (Decrease) in Cash and Equivalents 1,112,521 (6,785) 155,503 1,261, ,207 Cash and Equivalents - Beginning of Year 3,281, , ,529 3,634,627 4,056,842 Cash and Equivalents - End of Year $ 4,394,249 $ 134,585 $ 367,032 $ 4,895,866 $ 4,305,049 The Notes to the Financial Statements are an integral part of these Financial Statements

27 Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2013 Business-type Activities Enterprise Funds Governmental Other Activities Medical Care Airport Capital Enterprise Total Enterprise Internal Service Facility Improvement Funds Funds Funds Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating Income $ 772,225 $ 728,930 $ (499,453) $ 1,001,702 $ 576,853 Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities Depreciation Expense 211, , , ,612 - Changes in Assets & Liabilities Receivables (Net) 37,806-2,536 40, ,041 Inventory ,017 26,119 - Prepaid Expenses (55,284) - (2,369) (57,653) - Accounts Payable 1,542 - (13,212) (11,670) (3,714) Accrued Payroll & Related Liabilities 24,584 - (9,802) 14,782 - Net Cash Provided by Operating Activities $ 992,514 $ 889,794 $ (302,074) $ 1,580,234 $ 1,366,180 The Notes to the Financial Statements are an integral part of these Financial Statements

28 Statement of Fiduciary Net Position Fiduciary Funds December 31, 2013 Pension and Benefit Trust Private Purpose Trust Pension Trust Fund Private Purpose Trust VEBA Agency Funds ASSETS Cash $ -- $ 150,528 $ 333,930 $ 54,728 Investments 44,927, ,807 2,633, Temporary Investments 274, ,045 Total Assets 45,202, ,335 2,967, ,773 LIABILITIES Accounts Payable ,767 Salaries, Wages, and Related Liabilities Due State of Michigan ,992 Undistributed Receipts ,014 Total Liabilities ,773 NET POSITION Held in Trust $ 45,201,134 $ 822,335 $ 2,967,441 $ -- The Notes to the Financial Statements are an integral part of these Financial Statements

29 Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended December 31, 2013 Pension Trust Fund Private Purpose Trust VEBA Additions Contributions Contributions from Other Funds $ 1,997,592 $ -- $ -- Employee Contributions 306, Total Contributions 2,304, Investment Income Net Change in Fair Value of Investments 5,536, Interest, Dividends, and Other Investment Gains 146, , ,508 Total Investment Income 5,682, , ,508 Total Additions 7,986, , ,508 Deductions Retirement Benefits 2,888, , Administration Expense 526, Scholarships Awarded ,830 Total Deductions 3,415, , ,830 Change in Net Position 4,571,933 36, ,678 Net Position at Beginning of Period 40,629, ,392 2,731,763 Net Position at End of Period $ 45,201,134 $ 822,335 $ 2,967,441 The Notes to the Financial Statements are an integral part of these Financial Statements

30 Combining Statement of Net Position Component Units December 31, 2013 Economic Development Corporation Brownfield Redevelopment Authority Community Mental Health Authority County Road Commission Western U.P. Manpower Consortium Total Component Units ASSETS Current Assets Cash $ 64,555 $ 14,639 $ 795,654 $ 2,222,961 $ 1,775 $ 3,099,584 Investments , ,814 Accounts Receivable ,876 94, ,539 Due from State , , , ,645 Notes Receivable 3,600 15, ,600 Inventories , ,938 Prepaid Expenditures ,905 35,903 22,746 60,554 Total Current Assets 68,155 29, ,267 3,548, ,302 4,789,674 Noncurrent Assets Reserved Cash , ,316 Capital Assets, Net ,044,497 17,108,677 8,377 19,161,551 Notes Receivable - Long-term (Net) 6,790 32, ,557 Total Assets 74,945 62,406 3,116,080 20,656, ,679 24,208,098 DEFERRED OUTFLOWS OF RESOURCES Unamortized Capital Lease , ,292 Total Deferred Outflows of Resources , ,292 LIABILITIES Current Liabilities Accounts Payable ,968 38,994 80, ,468 Salaries, Wages, and Related Liabilities ,258 49,440 2, ,668 Interest Payable , ,556 Current Portion of Long-term Liabilities -- 15, , ,048 Total Current Liabilities -- 15,000 1,261,830 88,434 83,476 1,448,740 Noncurrent Liabilities Compensated Absences , ,409 3, ,411 Capital Lease Payable , ,000 Note Payable -- 32, , ,012 Other Post-employment Benefits Payable ,542 59, ,386 Total Liabilities -- 47,767 1,798, , ,580 2,669,549 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue , , ,113 Total Deferred Inflows of Resources , , ,113 NET POSITION Net Investment in Capital Assets ,535,204 17,108,677 8,377 18,652,258 Unemployment Claims , ,905 Unrestricted 74,945 14,639 (203,554) 2,368,639 (63,104) 2,191,565 Total Net Position $ 74,945 $ 14,639 $ 1,333,555 $ 19,477,316 $ (54,727) $ 20,845,728 The Notes to the Financial Statements are an integral part of these Financial Statements

31 Combining Statement of Activities Component Units For the Year Ended December 31, 2013 Economic Development Corporation Brownfield Redevelopment Authority Community Mental Health Authority County Road Commission Western U.P. Manpower Consortium Total Component Units Expenses Public Works $ -- $ -- $ -- $ 7,560,513 $ -- $ 7,560,513 Health and Welfare ,641, ,367,750 9,009,666 Community and Economic Development -- 23, ,087 Bad Debt Expense 38, ,704 Interest , ,221 Total Expenses 38,704 23,087 6,664,137 7,560,513 2,367,750 16,654,191 Program Revenues Charges for services ,527,858 6,316, ,843,909 Operating grants and contributions -- 25,326 1,082, ,343,740 3,451,483 Capital grants and contributions ,594, ,594,522 Total Program Revenues -- 25,326 6,610,275 7,910,573 2,343,740 16,889,914 Net Program Revenues (Expenses) (38,704) 2,239 (53,862) 350,060 (24,010) 235,723 General Revenue Interest 1, ,742 4, ,260 Gain (Loss) on Asset Disposal (1,795) 280, ,516 Total General Revenues 1, , , ,776 Change in Net Position (37,611) 2,239 (48,915) 634,796 (24,010) 526,499 Net Position at Beginning of Period 112,556 12,400 1,382,470 18,842,520 (30,717) 20,319,229 Net Position at End of Period $ 74,945 $ 14,639 $ 1,333,555 $ 19,477,316 $ (54,727) $ 20,845,728 The Notes to the Financial Statements are an integral part of these Financial Statements

32 Notes to the Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Gogebic County operates under an elected Board of Commissioners. The financial statements of the County have been prepared in conformity with generally accepted accounting principles as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial-reporting principles. The more significant of the County s accounting policies are described below. Financial Reporting Entity The financial statements of the reporting entity include those of Gogebic County (the primary government) and its component units as required by generally accepted accounting principles. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. The component units discussed below are included in the County s reporting entity as discretely presented component units because of the significance of their operational or financial relationships with the County. These component units are reported in a separate column to emphasize that they are legally separate from the County. A combining statement of net position and statement of activities for these discretely presented component units are included as part of the basic financial statements. Gogebic County Road Commission (the Commission ) - the Commission is responsible for the maintenance and construction of the County road system. The Commission s operations are financed primarily from the state distribution of gas and weight taxes, federal financial assistance, and contributions from other local governments within the County. The members of the governing Board of Road Commissioners are appointed by the County Board. The Road Commission is fiscally dependent on the County because the County must approve taxes levied and approve bonded debt. The Commission has a December 31 year end. The component unit is audited separately from the County and complete financial statements may be obtained from the Road Commission s administrative office. Accordingly, the County has elected to omit substantially all note disclosures related to the Commission in these financial statements. The Commission s administrative office contact information is as follows: Gogebic County Road Commission Courthouse Annex 200 N. Moore Street Bessemer, MI Community Mental Health Authority (the Authority ) - The Gogebic County Community Mental Health Authority (the Authority) was organized by Gogebic County to provide mental

33 Notes to the Financial Statements health services to Gogebic County residents under the Michigan Mental Health Code (P.A. 290 of 1995). The Authority operates under the direct of an administrative board consisting of twelve members appointed by the Gogebic County Board of Commissioners. The financial statements and related notes reflect the operations of the Authority for the fiscal year ended September 30, The component unit is audited separately from the County and complete financial statements may be obtained from the Authority s administrative office. Accordingly, the County has elected to omit substantially all note disclosures related to the Authority in these financial statements. The Authority s administrative office contact information is as follows: Community Mental Health Authority 103 West US 2 Wakefield, Michigan Western Upper Peninsula Manpower Consortium - Western Upper Peninsula Manpower Consortium (the Consortium) was originally created under Michigan Public Act 8 of 1967 to administer the Federal Comprehensive Employee Training Act of 1973, had also administered the Jobs Training Partnership Act of 1982 and now administers the Workforce Investment Act of The Consortium operates under an appointed Administrative Board with two members from each of the six counties comprising the Consortium. The Consortium covers a service delivery area of the Michigan counties of Baraga, Gogebic, Houghton, Iron, Keweenaw and Ontonagon with the main office in the City of Ironwood, Michigan, and field offices in the cities of Houghton and Crystal Falls, Michigan. The members of the governing board of the Consortium are appointed by member counties. The Gogebic County Treasurer is the depository for all monetary transactions involving the Consortium. Employees of the Consortium are considered to be Gogebic County employees and are members of the Gogebic County Employees Retirement System. Gogebic County provides no financial assistance to the Consortium. The financial statements of the Consortium are presented on its fiscal year of July 1, 2012 to June 30, The Consortium is audited separately from the County and complete financial statements may be obtained from the Consortium s administrative office. Accordingly, the County has elected to omit substantially all note disclosures related to the Consortium in these financial statements. The Consortium s administrative office contact information is as follows: Western Upper Peninsula Manpower Consortium 2950 College Avenue Escanaba, MI Economic Development Corporation - The majority of the members of the governing board are appointed by the County Board of Commissioners. The Economic Development Corporation (EDC) is a legally separate nonprofit corporation established pursuant to the provisions of Michigan Public Act 338 of 1974, as amended. The County Board has the ability to modify or approve the budget of the EDC. The EDC may not issue debt without County Board approval. Separate financial statements for the EDC are not prepared and are not available

34 Notes to the Financial Statements Gogebic County Brownfield Redevelopment Authority - Brownfield Redevelopment Authority (the Authority) was created by the County under the provisions of State of Michigan Public Act 381 of 1996, as amended. The purpose of the Authority is to promote the revitalization of environmentally distressed areas and/or functionally obsolete properties within the boundaries of the County. The Authority Board members are from the general public. The Authority is a legally separate entity. Separate financial statements for the Authority are not prepared and are not available. Blended Component Units The component units discussed below are included in the County s reporting entity as blended component units because the County believes its financial statements would be misleading if the data were not included. Economic Development Commission - The Economic Development Commission was established pursuant to Michigan Public Act 46 of 1966 and is governed by a board appointed by the County Board. The Economic Development Commission is reported as a special revenue fund of the County because its sole purpose is to finance economic development projects within the County. Gogebic County Transit - Gogebic County Transit is a separate legal entity and is administered by an elected board. The Transit Board may not issue debt. The Transit taxes are levied under the taxing authority of the Gogebic County Board, as approved by the Gogebic County electors, and are included as a part of the County s total tax levy and are reported in the Gogebic County Transit Fund. The Gogebic County Transit is reported as a nonmajor enterprise fund. The financial statements of the Transit are presented using their fiscal year ended September 30, The component unit is audited separately from the County and complete financial statements may be obtained from the Facility s administrative office. Accordingly, the County has elected to omit substantially all note disclosures related to the Facility in these financial statements. The Facility s administrative office contact information is as follows: Gogebic County Transit 235 E. McLeod Avenue Ironwood, MI

35 Notes to the Financial Statements The financial statements of certain other governmental organizations, as set forth below, are not included in the financial statements of the County in accordance with generally accepted accounting principles. Gogebic County is a member of the Western Upper Peninsula District Health Department, and all of the financial transactions thereof are recorded in the records of another county and are therefore not included in the financial statements of Gogebic County. The Health Department provides limited health services to the residents of Houghton, Ontonagon, Gogebic, Baraga and Keweenaw counties. Each of the counties is required to contribute financial resources on an annual basis sufficient to eliminate any operating deficits and to provide for retirement of longterm debt. Gogebic County is responsible for approximately 21% of such annual contributions. Gogebic County s 2013 appropriation to the Health Department was $128,726. Accordingly, the County has elected to omit substantially all note disclosures related to the health department in these financial statements. The health departments administrative office contact information is as follows: Western Upper Peninsula Health Department 540 Depot Street Houghton, MI The financial statements of the Community Development Block Grant Fund are included in the financial statements of the County as a special revenue fund. The County passes federal block grant monies to Gogebic-Ontonagon Community Action Agency (the Agency), a sub recipient of the grant monies and a separate governmental entity. The Agency administers various governmental programs for the low income and elderly population in a two-county region in the western upper peninsula of Michigan. The Agency s activities are funded primarily by federal and state grants awarded to it by the Michigan Family Independence Agency, Upper Peninsula Commission for Area Progress (UPCAP), U.S. Department of Agriculture, and U.S. Department of Health and Human Services. The financial statements of Gogebic-Ontonagon Community Action Agency are not included in the financial statements of the County. Accordingly, the County has elected to omit substantially all note disclosures related to the community action agency in these financial statements. The community action agency administrative office contact information is as follows: Gogebic-Ontonagon Community Action Agency 100 S. Mill Street Bessemer, Michigan 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 nonfiduciary 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

36 Notes to the Financial Statements 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. 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 government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period or within one year for expenditure-driven grants. 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, intergovernmental revenue, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and as such have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due

37 Notes to the Financial Statements 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 major governmental funds of the County are: General Fund - the general operating fund of the County. This fund is used to account for all financial resources except those required to be accounted for in another fund. The major enterprise funds of the County are: Medical Care Facility - used to account for the financial transactions of the Gogebic Medical Care Facility. Airport Capital Improvement Fund - used to account for the financial transactions of the Gogebic-Iron County Airport Additionally, the County reports the following fund types: Special Revenue Funds - Special revenue funds are used by the County to account for the proceeds of specific revenue sources (other than major capital projects) requiring separate accounting because of legal or regulatory provisions or administrative action. Debt Service Funds - Debt service funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. Enterprise Funds - Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the costs (expenses including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges, or for activities where periodic measurement of net income is appropriate for capital maintenance, public policies, management control or other purposes. Internal Service Funds - Internal service funds are used to account for monies advanced by the County to pay the County and other local taxing units for their delinquent real property taxes. Fiduciary Funds - are used to account for assets held in a trustee capacity or as an agent for others. 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

38 Notes to the Financial Statements 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 government s internal service funds 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. Restricted position represents amounts that are subject to restrictions beyond the government s control. The restrictions may be externally imposed or imposed by law. When both restricted and unrestricted resources are available for use, it is the government s policy to use restricted resources first, then unrestricted resources as they are needed. Budgetary Basis of Accounting Formal budgetary accounting is employed as a management control for all funds of the County; however, legal budgets are adopted only for the general and special revenue funds. For each fund for which a formal budget is adopted, the same basis of accounting is used to reflect actual revenues and expenditures recognized on the basis of generally accepted accounting principles. The County follows these procedures in establishing budgetary data shown in the financial statements: Prior to January 1, the County Administrator submits to the County Board of Commissioners a proposed operating budget for the year commencing January 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are held to obtain taxpayers comments. Prior to January 1, the budget is legally enacted by the County Board of Commissioners by passage of the General Appropriations Act. The budget expires on December 31 of the budget year. Any revisions to the budgeted amounts must be approved by the County Board of Commissioners. Budgets for governmental fund types are adopted on a basis consistent with generally accepted accounting principles at the activity level for the general fund and at the functional level for the special revenue funds. Budgeted amounts are as originally adopted plus amendments made on or before December 31 by the County Board of Commissioners

39 Notes to the Financial Statements Assets, Liabilities, Deferred Inflows / Outflows of Resources, and Equity Deposits and Investments - The government s cash and cash equivalents include amounts in demand deposit accounts, certificates of deposit and short term investments with original maturities of three months or less from the date of acquisition. Investments are stated at fair value. State statutes authorize the County to invest in: Bonds, securities, other obligations and repurchase agreements of the United States, or an agency or instrumentality of the United States. Certificates of deposit, savings accounts, deposit accounts or depository receipts of a qualified financial institution. Commercial paper rated at the time of purchase within the two highest classifications established by not less than two standard rating services and that matures not more than 270 days after the date of purchase. Bankers acceptances of United States banks. Obligations of the State of Michigan and its political subdivisions, that, at the time of purchase are rated as investment grade by at least one standard rating service. Mutual funds registered under the Investment Company Act of 1940 with the authority to purchase only investment vehicles that are legal for direct investment by a public corporation. External investment pools as authorized by Public Act 20 as amended through December 31, Investments - Investments are stated at fair market value in accordance with GASB Statement No. 31. Investments are exposed to various risks, such as significant external events, interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the fair value of investments will occur in the near term and that such changes could materially affect the amounts reported in the statement of net position. Receivables and Payables - Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year and all other outstanding balances between funds are referred to as due to/from other funds (i.e., the current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances

40 Notes to the Financial Statements All trade and property tax receivables are shown net of an allowance for uncollectibles, as applicable. All amounts deemed to be uncollectible are charged against the allowance for doubtful accounts in the period that determination is made. Amounts due from other governments include amounts due from grantors for specific programs and capital projects. Program grants and capital grants for capital assets are recorded as receivables and revenues at the time reimbursable project costs are incurred. Revenues received in advance of project costs being incurred are reported as unearned revenues. Prepaid Items - Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. Inventories - Inventories of the Medical Care Facility and the Airport Operating Fund are stated at the lower of cost or market; cost is determined by the first-in, first-out method. Inventories of the County Road Commission (a component unit) are stated at cost as determined by the moving-average method. Payments for supplies for other funds are recorded as expenditures or expenses at the time of purchase. Capital Assets and Depreciation - Capital assets, including land and improvements, buildings, furniture and fixtures, equipment, vehicles and infrastructure assets (roads, bridges, sidewalks and similar items) are reported in the government-wide financial statements. Capital assets are defined by the County as assets with an acquisition cost of generally more than $5,000 or betterments totaling $20,000 with an estimated useful life in excess of two years. Assets meeting this criteria are recorded at historical cost or estimated historical costs if the amount is not known. Any donated capital assets are recorded at estimated fair market value at the date of donation. The costs of capital assets are charged to expense using an annual allocation of depreciation expense. Taking the depreciable cost of an asset and dividing that cost by its estimated useful life calculates the annual expense. The expense is recorded on the governmentwide statement of activities and included as a direct expense of an identifiable function if the assets sole purpose can be identified as being for the function

41 Notes to the Financial Statements The capital assets are depreciated using the straight-line method over the following useful lives (land excluded as not depreciable): Land Improvements Buildings Furniture, Fixtures and other Equipments Vehicles Roads Other Infrastructure 20 years years 5-20 years 5-10 years 5-30 years years 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 a future period(s) and, as such, will not be recognized as an outflow of resources (expense/expenditure) until then. The County reports deferred outflows of resources in the government-wide statements for unamortized capital lease (for the discretely presented component units). Capital leases received is reported as other financing uses. For governmentwide financial statement purposes the amount of the capital lease is deferred and amortized over the life of the lease using straight line amortization. Compensated Absences (Vacation, Personal, and Sick Leave) - Eligible employees are permitted to accumulate earned but unused vacation pay benefits in varying amounts based on length of service and certain other established criteria. Sick pay and vacation pay is accrued when incurred in the government-wide, proprietary, and fiduciary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and 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 straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed when incurred. 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. 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

42 Notes to the Financial Statements statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds report unavailable revenues and property taxes levied for subsequent period. Unavailable revenues arise under a modified accrual basis of accounting, from property taxes receivable that are collected beyond the allowed 60 days for revenue recognition within the fund financial statements 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. Property taxes levied for subsequent period represents property taxes that are levied to finance the following period s budget and is deferred and recognized as an inflow of resources will not be recognized as an inflow of resources (revenue) until that time. Property Tax Revenues, Taxes Receivable, and Deferred Inflows of Resources - County operating property taxes are levied as of July 1 on property values assessed as of December 31 of the prior year. The billings are due on or before September 15, at which time the bill becomes delinquent and penalties and interest may be assessed by the County. Property tax revenue is recognized in the year for which taxes have been levied and become available. The County levy date is July 1, and accordingly, the total levy is recognized as revenue. Property taxes collected outside of 60 days of year end are reported as unavailable revenues ($359,808) in the fund financial statements. All other County property taxes are assessed as of December 31 and the related property taxes become a lien on December 1 of the following year. These taxes are due on February 14 of the ensuing year with the final collection date of February 28 before they are added to the delinquent rolls. The County records property taxes receivable and deferred inflows of resources ($248,390) on December 1; the property taxes are then recognized as revenue on January 1 of the following year, when monies are available for use to finance County operations. The County purchases delinquent real property taxes of the County and all local units annually. Interfund Transactions - During the course of normal operations, the County has numerous transactions between funds and component units, including expenditures and transfers of resources to provide services, construct assets, and service debt. The accompanying financial statements generally reflect such transactions as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial statements. Internal service funds are used to record charges for services to all County departments and funds as transfers or operating revenue. All County funds record these payments to the internal service funds as transfers or operating expenditures/expenses. Estimates - The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts

43 Notes to the Financial Statements Granting of Credit - The general fund grants credit to the State of Michigan and various local units of government in the western upper peninsula of Michigan. Community Mental Health Authority (a component unit) and the Medical Care Facility record patient service revenue at established rates. Each has an agreement with third-party payors, which provide for reimbursement of patient service revenue at amounts different from established rates. The primary third-party payers are Medicare and Medicaid. Accounts receivable from patients include amounts due from Medicare and Medicaid. The airport operating fund grants credit to various customers for storage facility space and fuel. Gogebic County Transit grants credit to several local community governmental agencies. Gogebic County Forestry Commission grants credit to several timber purchasers. The County Road Commission (a component unit) grants credit to various customers for various types of services performed. Included among its customers are several local units of government. The community development block grant fund, economic development corporation (a component unit) and brownfield redevelopment authority (a component unit) grant credit in the form of notes receivable to individuals and local corporations. Net Position Flow Assumption - Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Fund Balance Flow Assumptions - Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the government s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Fund Balance Policies - Fund balance of governmental funds is reported in various categories based on the nature of any limitations requiring the use of resources for specific purposes. The government itself can establish limitations on the use of resources through either a commitment (committed fund balance) or an assignment (assigned fund balance)

44 Notes to the Financial Statements The committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the government s highest level of decisionmaking authority. The Board of Commissioners is the highest level of decision-making authority for the government that can, by adoption of a resolution or majority vote prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the resolution or majority vote remains in place until a similar action is taken (the adoption of another resolution or majority vote) to remove or revise the limitation. Amounts in the assigned fund balance classification are intended to be used by the government for specific purposes but do not meet the criteria to be classified as committed. The Board of Commissioners has authorized the County Administrator to assign fund balance. The Board of Commissioners may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. Subsequent Events Subsequent events have been evaluated through June 26, 2014, the date the financial statements were available to be issued. Management is not aware of any subsequent events that would have a significant impact on the financial condition of the County. NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Public Act 275 of 1980 Disclosure There were no accumulated fund-balance/retained deficits in any County funds as of December 31, The following component units had an unrestricted net position deficit balance at December 31, 2013: Community Mental Health Authority $ (203,554) Western U.P. Manpower Consortium (63,104) $ (266,658)

45 Notes to the Financial Statements Public Act 621 of 1978 Disclosure Public Act 621 of 1978 provides that a local unit shall not incur expenditures in excess of the amounts appropriated. During the year ended December 31, 2013, the County had incurred expenditures in budgetary funds which were in excess of the amounts budgeted as follows: Final Budget Actual Variance District Court $ 228,184 $ 246,185 $ (18,001) Probate Court 311, ,205 (1,181) Indigent Attorney Contract 146, ,308 (61,308) Data Processing 97, ,076 (14,837) Employees' Health Insurance 901, ,144 (8,574) Other - 69,810 (69,810) Optical Reimbursements 20,000 26,630 (6,630) NOTE 3 PROPERTY TAXES The County operating property tax is levied on July 1 and all other County property taxes are levied on December 1 on the taxable value of property located in Gogebic County as of the preceding December 31. 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 percent of the current estimated market value. The taxable value of real and personal property for 2013, for which revenue was recognized in the general fund, was $506,685,288. The millage for the fiscal year ended December 31, 2013 was as follows: Mills General Operations Gogebic County Transit Animal Control Medical Care Facility - Building & Site Medical Care Facility - Maintenance of Effort Senior Programs Total

46 Notes to the Financial Statements NOTE 4 DEPOSITS & INVESTMENTS The County maintains pooled and individual fund demand deposits, certificates of deposit and short-term investment accounts for the primary government and certain discretely presented component units. Certain imprest demand deposit accounts are also maintained by discretely presented component units. Following is a reconciliation of deposit and investment balances as of December 31, 2013: Primary Government Component Units Totals Statement of Net Position Cash & Cash Equivalents $ 8,004,282 $ 3,099,584 $ 11,103,866 Restricted Cash & Cash Equivalents 2,006, ,316 2,224,303 Investments 199, , ,031 Statement of Fiduciary Net Position Cash & Cash Equivalents 1,207,098-1,207,098 Investments 48,482,538-48,482,538 Total Deposits and Investments 59,900,122 3,519,714 63,419,836 Less Component Units Separately Audited Road Commission - (2,425,775) (2,425,775) Community Mental Health Authority - (1,012,970) (1,012,970) Western U.P. Manpower Consortium - (1,775) (1,775) Gogebic County Transit (275,019) - (275,019) Total Component Units Separately Audited (275,019) (3,440,520) Deposits and Investments Managed by the County Treasurer $ 59,350,084 $ 79,194 $ 59,704,297 Deposits and Investments Cash & Cash Equivalents $ 8,122,317 Certificates of Deposit 3,099,142 Investments 48,482,538 Cash on hand 300 Total $ 59,704,297 Custodial Credit Risk - Deposits. Custodial credit risk is the risk that, in the event of a bank failure, the County s deposits might not be returned. State law does not require and the County does not have a policy for deposit custodial credit risk. Due to the dollar amounts of cash deposits and the limits of FDIC insurance, the County believes it is impractical to insure all bank deposits. As a result, the County evaluates each financial institution with which it deposits County funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level are used as depositories

47 Notes to the Financial Statements The carrying amounts of the County s deposits with financial institutions were as follows: Bank Balance Carrying Amount Amount Insured by the FDIC $ 3,185,491 $ 3,520,749 Amount Uncollateralized and Uninsured 6,663,960 6,663,960 Amount of Unknown Coverage 1,707,566 1,707,566 $ 11,557,017 $ 11,221,759 Custodial Credit Risk Investments. For an investment, 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. In order to minimize this risk, County policy limits the types of investments and pre-qualifies financial institutions. As of December 31, 2013, none of the County s investments were exposed to risk since the securities are held in the County s name by the counterparty. Following is a summary of the County s investments as of December 31, 2013: Real Estate Trust 904,758 Mutual Funds 47,328,247 Temporary Investments - Cash 249,533 $ 48,482,538 Credit Risk. State law limits investments to specific government securities, certificates of deposits and bank accounts with qualified financial institutions, commercial paper with specific maximum maturities and ratings when purchased, bankers acceptances of specific financial institutions, qualified mutual funds and qualified external investment pools as identified in the list of authorized investments in the summary of significant accounting policies. The County s investment policy does not have specific limits in excess of state law on investment credit risk. The County s investments in mutual funds are not rated. Interest Rate Risk. Interest rate risk is the risk that the market rate of securities in the portfolio will fall due to changes in market interest rates. State law limits the allowable investments and the maturities of some of the allowable investments as identified in the summary of significant accounting policies. The County s investment policy does not have specific limits in excess of state law on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates

48 Notes to the Financial Statements Maturity dates for investments and certificates of deposit held at year-end are summarized as follows: Certificates of Deposit Investments No Maturity $ - $ 48,482,538 Due within one year 1,650,294 - Due in 1-5 Years 1,255,983 - Due in 6-10 Years 192,865 - Total $ 3,099,142 $ 48,482,538 Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of the County s investment in a single issuer. State law limits allowable investments but does not limit concentration of credit risk as identified in the list of authorized investments in the summary of significant accounting policies. The County s investment policy does not limit investments in a single financial institution of a single security type (with the exception of U.S. treasuries and agencies and authorized pools) to a % of the total investment portfolio. All investments held at year end are reported above. NOTE 5 - RISK MANAGEMENT General County Operations Gogebic County is exposed to various risks of loss related to property loss, torts, errors and omissions, employee injuries, as well as medical benefits provided to employees. The County has purchased commercial insurance for medical benefits claims and participates as a member in the Michigan Municipal Risk Management Authority (the Pool) for claims relating to general liability, excess liability, auto liability, truckline liability, errors and omissions, physical damage (equipment, buildings and contents) and workers compensation. The Pool operates as a public entity risk-sharing pool providing property and liability coverage to participating members for local units in Michigan. Member premiums are used to purchase excess insurance coverage and to pay member claims in excess of deductible amounts. The County is sharing risk with the other members of the Pool and has a self-insurance retention, excess of deductibles, of up to $75,000. The deductible is $1,000 per occurrence for auto, property and crime losses. The Pool provides, after the self-insurance retention, reinsurance up to $10,000,000 of occurrence-based casualty coverage and property coverage for each incident by internally assuming risks and reinsuring risks through commercial companies

49 Notes to the Financial Statements NOTE 6 - RECEIVABLES INFORMATION Allowances for Uncollectibles Allowances for uncollectable accounts total $10,000 in its enterprise funds. Notes Receivable Following is a summary of monies the County has loaned to local corporations and to individuals to be used for additions and improvements to industrial facilities and housing: Primary Government Community Development Block Grant Fund Various interest rate loans to individuals, due in varying monthly installments, including interest $ 2,472 Component Units Economic Development Corporation 6.5% Loan to a local corporation, due in monthly installments of $300, including interest 10,390 Brownfield Redevelopment Authority 5.5% Loan to a local corporation, due in monthly installments of $15,000, including interest 47,767 Total Component Units 58,157 Total $ 60,629 The County is accounting for the notes receivable in its community development block grant, economic development corporation, and brownfield redevelopment authority funds. Principal and interest collected on the block grant loans to individuals are restricted for future block grant housing improvements. Principal and interest collected on the economic development loans to local corporations are restricted for economic development purposes. The Economic Development Corporation has adopted an economic development plan, which allows for spending of the monies. The Brownfield Redevelopment Authority will use collections on this note to pay on a loan it owns to City of Ironwood Economic Development Fund

50 Notes to the Financial Statements NOTE 7 - INTERFUND RECEIVABLES AND PAYABLES The County had the following interfund balances at the end of the year: Receivable Fund Payable Fund Amount 100% Tax Collection Child Care Fund $ % Tax Collection Friend of the Court 17,600 NOTE 8 - INTERFUND TRANSFERS Transfers of cash between the various County funds are budgeted and reported separately from revenues and expenditures as operating transfers in (out). Transfers and payments within the reporting entity are substantially for the purposes of subsidizing operating functions, funding capital projects and asset acquisitions, or maintaining debt service on a routine basis. Resources are accumulated in a fund to support and simplify the administration of various projects or programs. A summary of net interfund transfers for the year ended December 31, 2013, follows: Transfer In Transfer Out Amount General 100% Tax Collection $ 38,093 General Nonmajor Enterprise Funds 160,000 General Nonmajor Governmental Funds 1,774 Airport Capital Improvement General 14,250 Nonmajor Enterprise Funds General 155,760 Nonmajor Governmental Funds General 144,880 Nonmajor Governmental Funds Internal Service Funds 4,

51 Notes to the Financial Statements NOTE 9 - FIXED ASSETS Changes in governmental activities capital assets are summarized below: Governmental Activities December 31, 2012 Additions Reductions Decemeber 31, 2013 Capital assets not being depreciated: Land $ 25,000 $ - $ - $ 25,000 Subtotal - Nondepreciable capital assets 25, ,000 Capital assets being depreciated: Vehicles 505,303 54,092 8, ,185 Equipment 1,098,678 39,393-1,138,071 Improvements 152, , ,960 Buildings 3,505, ,505,124 Furniture and Fixtures 495, ,653 Total capital assets, being depreciated 5,757, ,050 8,210 6,045,993 Less accumulated depreciation: Vehicles 357,817 37,961 7, ,741 Equipment 785, , ,224 Improvements 59,282 10,161-69,443 Buildings 1,786,816 44,139-1,830,955 Furniture and Fixtures 487,697 4, ,665 3,477, ,948 7,037 3,671,029 Total capital assets being depreciated - Net 2,280,035 96,102 1,173 2,374,964 Total capital assets - Net 2,305,035 $ 96,102 $ 1,173 $ 2,399,964 Changes in business-type activities capital assets are summarized below: Medical Care Facility Decemeber 31, 2012 Additions Reductions Decemeber 31, 2013 Capital assets being depreciated Land Improvements $ 339,761 $ - $ - $ 339,761 Buildings 3,580,755 58,789-3,639,544 Equipment and Vehicles 1,136,414 9,736-1,146,150 Total capital assets, being depreciated 5,056,930 68,525-5,125,455 Less accumulated depreciation 3,469, ,539-3,680,713 Total capital assets - Net $ 1,587,756 $ (143,014) $ - $ 1,444,

52 Notes to the Financial Statements Airport - Capital Improvement Decemeber 31, 2012 Additions Reductions Decemeber 31, 2013 Capital assets being depreciated Buildings and Fencing $ 2,973,449 $ 910,829 $ - $ 3,884,278 Equipment and Vehicles 797, ,993 Total capital assets, being depreciated 3,771, ,829-4,682,271 Less accumulated depreciation 974, ,864-1,134,928 Total capital assets - Net $ 2,797,378 $ 749,965 $ - $ 3,547,343 Decemeber 31, 2012 Additions Reductions Decemeber 31, 2013 Fair Board Capital assets not being depreciated Land $ 100 $ - $ - $ 100 Capital assets being depreciated Land Improvements 3, ,133 Buildings 782, ,026 Equipment and Vehicles 23, ,967 Total capital assets, being depreciated 809, ,126 Less accumulated depreciation 248,450 20, ,152 Total capital assets being depreciated - Net 560,676 (20,702) - 539,974 Total capital assets - Net $ 560,776 $ (20,702) $ - $ 540,074 Decemeber 31, 2012 Additions Reductions Decemeber 31, 2013 Forestry and Parks Commission Capital assets not being depreciated Land $ 184,263 $ - $ - $ 184,263 Capital assets being depreciated Land Improvements 187, ,597 Buildings 215, ,735 Equipment and Vehicles 202,199 30, ,792 Total capital assets, being depreciated 580,523 30, ,124 Less accumulated depreciation 267,799 37, ,279 Total capital assets being depreciated - Net 312,724 (6,887) - 330,845 Total capital assets - Net $ 521,995 $ (6,887) $ - $ 515,

53 Notes to the Financial Statements Decemeber 31, 2012 Additions Reductions Decemeber 31, 2013 Airport - Operating Capital assets not being depreciated Land $ 370,000 $ - $ - $ 370,000 Capital assets being depreciated Land Improvements 6,386, ,386,769 Buildings 732, ,036 Equipment and Vehicles 772,060 6, ,960 Total capital assets, being depreciated 7,890,865 6,900-7,897,765 Less accumulated depreciation 7,209,649 45,537-7,255,186 Total capital assets being depreciated - Net 681,216 (38,637) - 642,579 Total capital assets - Net $ 1,051,216 $ (38,637) $ - $ 1,012,579 September 30, 2012 Additions Reductions September 30, 2013 Gogebic County Transit Capital assets not being depreciated Land $ 37,557 $ - $ - $ 37,557 Subtotal - Nondepreciable capital assets 37, ,557 Capital assets being depreciated Buildings 700, ,481 Equipment and Vehicles 693,263 66, , ,787 Total capital assets, being depreciated 1,393,744 66, ,678 1,338,268 Less accumulated depreciation 961,293 90, , ,105 Total capital assets being depreciated - Net 432,451 (24,288) - 408,163 Total capital assets - Net $ 470,008 $ (24,288) $ - $ 445,

54 Notes to the Financial Statements December 31, 2012 Additions Reductions December 31, 2013 Business-type Activities - Total Capital assets not being depreciated Land $ 591,920 $ - $ - $ 591,920 Capital assets being depreciated Land Improvements 6,917, ,917,260 Buildings 8,984, ,618-9,954,100 Equipment and Vehicles 3,625, , ,678 3,617,649 Total capital assets, being depreciated 19,527,638 1,083, ,678 20,489,009 Less accumulated depreciation 13,130, , ,678 13,575,363 Total capital assets being depreciated - Net 6,397, ,437-6,913,646 Total business-type capital assets - Net 6,989,129 $ 516,437 $ - $ 7,505,566 Depreciation expense for the year was allocated as follows: Governmental Activities General Government $ 200,948 Total Governmental Activities $ 200,948 Business-type Activities Medical Care Facility $ 211,539 Airport - Operating 45,537 Airport - Capital Improvement 160,864 Forestry and Parks Commission 37,480 Fair Board 20,702 Gogebic County Transit 90,490 Total Business-type Activites $ 566,612 NOTE 10 - LONG-TERM DEBT There are a number of limitations and restrictions contained in the various debt instruments. The County is in compliance with all significant limitations and restrictions. The following is a summary of bond transactions of the County for the year ended December 31, 2013 December 31, 2012 Additions Reductions December 31, 2013 Due Within One Year Primary Government Capital Improvement Bonds, Series 2009 $ 725,000 $ - $ 30,000 $ 695,000 $ 30,000 Component Units Note Payable to Economic Development Corporation 62,767-15,000 47,767 15,

55 Notes to the Financial Statements Total interest expense for the year was $32,965 for the primary government Capital Improvement Bonds The 2009 Capital Improvement Bonds were issued June 1, 2009 to finance the jail renovation project. The bonds were for $805,000. The 2009 Series bonds have principal payments due each March 1 and interest is due each March 1 and September 1. Interest rates vary from 4.00% to 5.10%. These bonds are in denominations of $5,000. Principal and interest are collateralized by and payable from general fund revenues of Gogebic County. Bonds maturing in years 2009 to 2016 are not subject to redemption prior to maturity. The jail renovation was completed by December 31, 2010 at a cost of approximately $860,000. A summary of the annual principal and interest requirements to maturity follows: 2009 Capital Improvement Principal Interest Total 2014 $ 30,000 $ 32,115 $ 62, ,000 30,840 60, ,000 29,459 64, ,000 27,971 62, ,000 13,614 48, ,000 55, , ,000 27, , ,000 1,530 61,530 Total $ 695,000 $ 218,665 $ 913,665 The notes payable to EDC is due from the Brownfield Redevelopment Authority to the City of Ironwood Economic Development Commission. Property tax rebates, due to a local corporation, will be received by this Authority; which will use these proceeds to pay the loan due to the City of Ironwood. NOTE 11 - ACCUMULATED ABSENCES General County Operations Sick leave is earned in varying amounts depending upon union or nonunion employee status, is generally limited to 1 or 1-1/4 day for each completed monthly period of service and may generally be accumulated in unlimited amounts. General County employees receive cash payment upon retirement of one-half of accumulated sick days at $50 per day with an 80-day maximum payout. Certain appointed officials receive cash payment of one-half of accumulated sick days at current salary rates. The sick leave liability

56 Notes to the Financial Statements recorded in the financial statements represents only that amount that would be payable should an employee retire. Vacation pay is not paid upon termination of employment. No liability for unused vacation pay is reported in the County s financial statements. Under contracts negotiated with employees, individual employees have a vested right to receive payments for unused sick, personal and vacation leave. The dollar amount of these vested rights as of December 31, 2013, was $651,585 for the primary government. NOTE 12 - RETIREMENT SYSTEM Gogebic County administers the Gogebic County Employees Retirement System. The plan s assets may be used only for the payment of benefits to the members of that plan, in accordance with the terms of the plan. Summary of Significant Accounting Policies Basis of Accounting - Gogebic County s retirement financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions to each plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. Method Used to Value Investments - Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Mortgages are valued on the basis of future principal and interest payments, and are discounted at prevailing interest rates for similar instruments. Investments that do not have an established market are reported at estimated fair value. Plan Description and Contribution Information Membership of the plan consisted of the following at December 31, 2011, the date of the latest actuarial valuation: Retirees and beneficiaries receiving benefits 224 Terminated plan members entitled to but not yet receiving benefits 33 Active members 326 Members in deferred retirement option plan

57 Notes to the Financial Statements Plan Description Gogebic County Employees Retirement System is a single-employer defined benefit pension plan that covers the employees of Gogebic County, including all departments and agencies. Retirement System provides retirement, disability and death benefits to plan members and their beneficiaries. County ordinance assigns the authority to establish and amend the benefit provisions of the plan to the Board of Commissioners. Member Contributions General (hired prior to January 1, 1994, or hired after December 31, 1993, with five or more years of service), Medical Care Facility - AFSCME, Road Commission (with eight or more years of service), elected and appointed officials (hired prior to March 31, or after April 1, 1993, with five or more years of service) and WPPA (hired prior to July 1, 2004): none. Community Mental Health: Residential and non-residential pays 6.2% of annual compensation. General (hired between January 1, and July 1, 2004, and having less than five years of service or hired after July 1, 2004,) Elected and appointed officials (hired after January 1, 1994 and having less than five years of service or hired after January 1, 2005), Airport (hired between January 1, 1994 and July 1, 2004, with less than 5 years of service or hired after July 1, 2004), Cooks, Manpower, and Road Commission (with less than eight years of service), WPPA (hired after July 1, 2004) and Medical Care Facility (non-afscme): 3% of the first $4,200 of annual compensation plus 5% of annual compensation in excess of $4,200. Effective August 1, 2001, Airport employees contribute an additional 1.0% and General employees contribute an additional 1.0%. Regular Retirement Eligibility Elected and Appointed Officials WPAA (Wisconsin Professional Police Association, Airport Group Manpower, Medical Care Facility (SEIU Local 79) Community Mental Health Others Sum of age and years of service equal 80 with a minimum age of 55, or age of 60 with 8 years of service Age of 55 with 25 years of service, or age of 60 with 8 years of service Sum of age and years of service equal to 70, or age 60 with 7 years of service Sum of age and years of service equal to 70, any age with 20 years of service, or age 60 with 8 years of service Age 55 with 30 years of service or age 60 with 8 years of service

58 Notes to the Financial Statements Annual Amount Medical Care Facility, AFSCME, RN, Local 79, Cooks, Road Commission, Administrator and Staff, and Manpower Elected and Appointed Officials General County & Airport Others Total credited service multiplied by 2.0% of final average compensation (FAC) Total credited service multiplied by 2.5% of final average compensation (FAC) Total credited service multiplied by 2.25% of final average compensation (FAC) Total credited service multiplied by 1.6% of final average compensation (FAC) Maximum County-financed portion is 75% of final average compensation. Type of final average compensation - Generally, highest 5 consecutive years out of last 10 years of credited service, with the following exceptions: General County members, WPPA, Community Mental Health, Airport and Medical Care Facility administrative staff use the highest 3 consecutive years out of the last 10 years. Road Commission members with 30 or more years of service use highest 3 consecutive years out of the last 5 years. Deferred Retirement (vested benefit) Eligibility - Eight years of service; 10 years of service for WPPA members hired after July 1, Benefit begins when member would have attained normal retirement age based on service at time of termination. Annual Amount - Same as regular retirement but based upon service and final average compensation at time of termination. The plan also provides benefits for both duty and non-duty disability and death

59 Notes to the Financial Statements The information presented in the required supplementary schedules was determined as part of the actuarial valuations as of December 31, Additional information as of the latest actuarial valuation follows: Valuation Date December, Actuarial Cost Method Amortization method for unfunded actuarial accrued liabilities Remaining amortization period Amortization method for temporary funding credits Remaining amortization period Asset valuation method Individual entry age Level percent open Mental Healh - 15 years Other - 27 years Level percent open 15 years 5 year smoothed market method Actuarial assumptions: Investment rate of return 7.50% Projected salary increases, including wage inflation at 4.5% 4.5% - 9.0% Cost of living adjustments None Funded Status and funding Progress Actuarial Accrued (Overfunded) UAL as a Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) Total (c ) ((b-a)/c) 12/31/2011 $ 37,221,098 $ 53,037,304 $ 15,816,206 70% $ 11,255, %

60 Notes to the Financial Statements Three Year Trend Information Fiscal Annual Percentage Net Year Pension of APC Pension Ending Cost Contributed Obligation 12/31/2011 1,852, % - 12/31/2012 1,668, % - 12/31/2013 1,818, % - NOTE 13 - POST-EMPLOYMENT HEALTH BENEFITS Governmental activities have other post employment benefits liability of $56,906, see below for further detail. As part of the pension benefits described in Note 12, the County provides post-employment health care benefits in accordance with a resolution adopted by the County Commission, to all members of the Gogebic County Deputy Sheriffs Association employed by the County, the Elected and Appointed Officials of the County and the Forestry Commission who retire from the County, up to age 65, under the following terms. Elected County Officials and Forestry Commission: sum of age and years of service equal to 80 with minimum age of 55, or age 60 with 8 years of service; County Deputy Sheriffs Association members: age 55 with 25 years of service, or at age 60 with 8 years of service. The County contributions are financed on an actuarially determined basis through annual contributions to the Voluntary Employees Beneficiary Association (VEBA) Fund. The same significant actuarial assumptions, accounting policies and methods used to value investments are used to determine the County s contributions as explained in Note 12. Eligible membership consisted of the following at December 31, 2011, the date of the latest actuarial valuation: Retirees and beneficiaries receiving benefits 10 Active members The County is required to provide periodic contributions to the plans at actuarially determined rates. Plan members hired after January 1, 2005, pay 1% of their salary as contributions to the plan. Employees Covered by Retirement System Plan Description The County pays health insurance benefits of retirees receiving a retiree benefit allowance from the County Retirement System under a single-employer plan. Retirees are eligible for the benefit if they are age 55 with 30 years of service or age 60 with 8 years of

61 Notes to the Financial Statements service. Spouses of employees are eligible to receive benefits upon reaching age 55. Surviving spouses of employees are eligible for the health care benefit until the spouse becomes Medicare eligible under the following circumstances; Duty death - spouse entitled to deferred coverage at age 55 if employee accrued 8 years of service; Non-duty death - spouse entitled to deferred coverage at age 55 if employee eligible for normal retirement; Duty disability - employee with 8 years of service shall immediately receive two-person health coverage fully paid by the System until the employee is eligible for Medicare or Medicaid; until the retiree is eligible for Medicare benefits. At December 31, 2013, the County has 10 employees who are receiving this benefit. Funding Policy The payments are recorded as current expenditures when paid on a pay-asyou-go basis. The County has no obligation to make contributions in advance of when the premiums are due. Effective for new hires after January 1, 2010, no retiree health insurance coverage will be provided to these employees. For the year ended December 31, 2009, the County was required to adopt Governmental Accounting Standards Board Statement No. 45 (GASB No. 45) Accounting and Financial Reporting by Employers for Post-employment Benefits Other Than Pensions. In accordance with GASB No. 45, the County is required to record on the financial statements the annual Other Post-employment Benefit (OPEB) cost. Annual OPEB cost and Net OPEB obligation. The County s annual OPEB cost is calculated based on the annual required contribution (ARC) of the employer, an amount determined by an actuarial study. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. In the year of implementation of GASB No. 45, the Net OPEB obligation is set at zero at the beginning of the year. The County s computed ARC and funding as of December 31, 2013 is as follows: For the Year Ended December 31, 2013 Annual Required Contirbution $ 172,108 Interest on prior year's net OPEB obligation 3,190 Annual OPEB cost 175,298 Amounts contributed: Payments of current premiums 158,262 Advance funding - Increase in net OPEB obligation 17,036 OPEB obligation, Beginning of Year 39,871 OPEB obligation, End of Year $ 56,

62 Notes to the Financial Statements The annual OPEB costs, the percentage contributed to the plan, and the net OPEB obligation for the year ended December 31, 2013 is as follows: Fiscal Year Ended December 31, Primary Government Annual OPEB Cost (Expense) $ 181,220 $ 189,122 $ 175,298 Percentage of OPEB Cost Contributed 101% 98% 90% Net OPEB Obligation $ 36,918 $ 39,871 $ 56,907 Funded Status and funding Progress Actuarial Accrued (Overfunded) UAL as a Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) Total (c ) ((b-a)/c) 12/31/2011 $ 624,738 $ 2,175,262 $ 1,550,524 29% $ 3,302,944 47% Actuarial valuations of an ongoing plan involve estimates of the value of the reported amounts and assumptions about the probability of the occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funding status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of the sharing of 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

63 Notes to the Financial Statements In the December 31, 2011 actuarial valuation, the individual entry-age actuarial cost method was used. The actuarial assumptions included: Actuarial Cost Method Individual entry age Amortization Method Level percent open Remaining Amortization period Mental Health - 15 Years, All Other 27 Years Asset Valuation Method Market Value Investment Return 7.50% Projected Salary Increases 4.5% - 9.0% Healthcare Cost Trend Rate 9.0% in 2103, grading to 4.5% in 2022 The Gogebic Medical Care Facility considered the need to estimate the liability for the postemployment benefits. No retired employees from this facility has ever participated in the plan, nor are any expected to participate due to the high cost of the retiree required contribution. No liability has been recorded by Gogebic Medical Care Facility for this reason. NOTE 14 - DEFERRED COMPENSATION PLANS The County offers its employees a choice of several deferred compensation plans created in accordance with Internal Revenue Code Section 457. Because the County does not have an established trust agreement with the Plan trustees, does not provide investment advice and does not administer the Plan, the County has not established a fiduciary relationship with the Plan. Therefore, the Plan assets are not included in the financial statements of the County. NOTE 15 - PRIVATE-PURPOSE TRUST FUND On December 26, 2008 the County received monies from the Trusts of former County residents who passed away on December 28, The Trusts stated the funds would pass to their children but, unfortunately, the entire family perished in the same accident. The Trust was then required to distribute the funds to the County with specific orders as to how the monies were to be used. The County is responsible for using the income to provide scholarships to high school students throughout Gogebic County for 35 years, after which the principal may also be used for scholarships. The County received the balance of the monies from the Trusts early in 2009 and has begun the process of awarding scholarships as required by the terms of the Trusts

64 Notes to the Financial Statements NOTE 16 PRIOR PERIOD ADJUSTMENT Three restatements were made to beginning fund equity at January 1, 2013, as follows: The net position of the governmental activities was increased by $431,594 to properly account for delinquent county operating taxes receivable. The net position of the governmental activities was decreased by $11,343 to properly account for accrued interest on long-term debt. The fund balance of general fund was increased by $97,518 to account for county operating taxes receivable of $431,594 and unavailable revenues of $334,

65 REQUIRED SUPPLEMENTARY INFORMATION

66 Schedule of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual General Fund For the Year Ended December 31, 2013 Variance Positve Budgeted Amounts (Negative) Original Final Actual Final to Actual Revenues Taxes $ 3,808,291 $ 3,808,291 $ 3,795,725 $ (12,566) Licenses and Permits 5,800 5,800 6, Federal Grants 556, , ,670 32,920 State Grants 874, , ,730 (4,895) Contributions from Local Units 38,000 38,000 43,607 5,607 Charges for Services 612, , ,450 (15,215) Fines and Forfeitures 19,600 19,600 17,337 (2,263) Interest Earned 45,000 45,000 (45,626) (90,626) Rentals and Leases 33,765 33,765 32,465 (1,300) Other Revenues 85, ,013 99,828 (18,185) Total Revenues 6,079,971 6,284,508 6,178,219 (106,289) Other Financing Sources Transfers from other funds 160, , ,867 39,867 Total Revenues and Other Financing Sources 6,239,971 6,444,508 6,378,086 (66,422) Expenditures Legislative 62,471 62,471 55,794 6,677 Judicial Drug & Alcohol Court -- 8,915 2,659 6,256 Circuit Court 137, , , District Court 231, , ,185 (18,001) Probate Court 310, , ,205 (1,181) Indigent Attorney Contract 146, , ,308 (61,308) Jury Commission 2,472 2,472 1, Total Judicial 826, , ,981 (73,363) General Government Administration 87,454 87,454 87,543 (89) Elections (138) Clerk/Register of Deeds 221, , ,816 9,335 Equalization 130, , ,893 23,503 Prosecuting Attorney 221, , ,190 (19) Survey and Remonumentation 58,486 58,486 56,511 1,975 Treasurer 119, , ,568 15,179 Data Processing 97,239 97, ,076 (14,837) Building and Grounds 201, , ,245 12,606 Cooperative Extension 86,017 86,017 42,085 43,932 Drain Commissioner Other ,810 (69,810) Audit 6,700 6,700 7,000 (300) Total General Government 1,230,313 1,232,313 1,210,976 21,

67 Schedule of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual General Fund For the Year Ended December 31, 2013 Variance Positive Budgeted Amounts (Negative) Original Final Actual Final to Actual Expenditures Public Safety Sheriff Department 1,140,706 1,188,506 1,188,592 (86) Sheriff Department - Bessemer/Wakefield Cities 173, , ,382 11,444 Sheriff Department - Road Patrol 53,948 53,948 42,399 11,549 Marine Law Enforcement 12,423 16,423 16,422 1 ORV Law Enforcement 8,636 17,636 17, Snowmobile Enforcement 24,430 24,430 14,027 10,403 Emergency Services 27,191 74,998 65,108 9,890 Animal Control 101, , ,051 2,389 Total Public Safety 1,542,431 1,662,950 1,615,287 45,920 Health & Welfare District Health 246, , , Veterans Affairs 23,322 23,322 23, Medical Care Facility Maintenance of Effort 304, , , ,514 Medical Examiners 15,500 15,500 10,410 5,090 Mine Inspector 2,342 2, ,342 Soldiers and Sailors Relief 6,420 6,420 6, Soil Conservation 3,000 3,000 3, Western U.P. Substance Abuse 23,042 23,042 23,547 (505) Western U.P. Planning and Regional Development 8,041 8,041 8, U.P.C.A.P Cigarette Tax Human Services Coordinating Board 7,000 7,000 7, Total Health & Welfare 640, , , ,843 Other Functions Employees' Health Insurance 863, , ,144 (8,574) Insurance, Bonds, and Fringes 78,000 78,000 69,640 8,360 Unemployment Compensation ,482 (982) Workers' Compensation 53,200 53,200 30,197 23,003 Employees' Retirement 480, , ,493 7,507 Prescription Co-pay 3,000 3,000 2, Optical Reimbursements 20,000 20,000 26,630 (6,630) Tax Reimbursements 11,600 11,600 3,956 7,644 Duplicating and Office Supplies 20,000 20,000 15,049 4,951 Total Other Functions 1,530,120 1,567,870 1,531,927 35,943 Capital Outlay 32,500 55,325 93,485 (38,160) Debt Service 63,390 63,390 63, Total Expenditures 5,925,461 6,129,998 5,982, ,940 Other Financing Uses Transfers to other funds 314, , ,890 (380) Total Expenditures and Other Financing Uses 6,239,971 6,444,508 6,296, ,560 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses ,138 81,138 Net Change in Fund Balance ,138 81,138 Fund Balance at Beginning of Period 588, , , Fund Balance at End of Period $ 588,131 $ 588,131 $ 669,269 $ 81,

68 , Michigan Required Supplementary Information Gogebic County Employees Retirement System - Single Employer Defined Benefit Plan Schedule of Funding Progress (Unaudited) Actuarial Accrued (Overfunded) UAL as a Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) Total (c ) ((b-a)/c) 12/31/2009 $ 33,923,701 $ 49,531,000 $ 15,607,299 68% $ 11,394, % 12/31/ ,158,631 51,085,200 $ 14,926,569 71% 11,190, % 12/31/ ,221,098 53,037,304 $ 15,816,206 70% 11,255, % Fiscal Annual Percentage Year Pension of APC Ending Cost Contributed 12/31/2011 1,852, % 12/31/2012 1,668, % 12/31/2013 1,818, %

69 Required Supplementary Information Retiree Healthcare Plan Schedule of Funding Progress (Unaudited) Actuarial Accrued (Overfunded) UAAL as a Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) Total ( c ) ((b-a)/c) 12/31/2008 $ 307,007 $ 2,262,365 $ 1,955,358 14% $ 3,160,710 62% 12/31/ ,738 2,175,262 1,550,524 29% 3,302,944 47% Fiscal Year Ending Annual Pension Cost Percentage of APC Contributed Net Pension Obligation 12/31/2011 $ 181, % $ 36,918 12/31/ ,122 98% 39,871 12/31/ ,298 90% 56,

70 OTHER SUPPLEMENTARY INFORMATION

71 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2013 Register of Deeds Automation Fund Victims Advocacy Fund Special Revenue Drunk Driving Impact Panel Drug Forfeiture Fund Drug Enforcement Fund Law Library Fund 911 Service Fund ASSETS Cash $ 182,156 $ -- $ 143,115 $ 203 $ 771 $ -- $ 462 Due from State Federal Government Notes Receivable Other Receivables , Total Assets $ 182,156 $ -- $ 175,830 $ 203 $ 771 $ -- $ 462 LIABILITIES Accounts Payable $ 750 $ -- $ 1,429 $ -- $ -- $ -- $ 462 Salaries, Wages, and Related Liabilities Due to Other Funds Total Liabilities , DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Liabilities and Deferred Inflows of Resources , FUND BALANCE Assigned 181, , Total Fund Balance 181, , Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 182,156 $ -- $ 175,830 $ 203 $ 771 $ -- $

72 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2013 Community Development Block Grant Fund Crime Victims' Rights Fund Economic Development Commission Special Revenue Jail Improvment Bond Revenue Sharing Reserve Fund Michigan Justice Training Fund Correction Officers Training Fund ASSETS Cash $ 1,413 $ 7,238 $ -- $ -- $ -- $ 2,157 $ 10,256 Due from State Federal Government Notes Receivable 2, Other Receivables Total Assets $ 3,885 $ 7,238 $ -- $ -- $ -- $ 2,157 $ 10,256 LIABILITIES Accounts Payable $ -- $ -- $ -- $ -- $ -- $ -- $ -- Salaries, Wages, and Related Liabilities Due to Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue 2, Total Liabilities and Deferred Inflows of Resources 2, FUND BALANCE Assigned 1,413 7, ,157 10,256 Total Fund Balance 1,413 7, ,157 10,256 Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 3,885 $ 7,238 $ -- $ -- $ -- $ 2,157 $ 10,

73 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2013 Veterans' Trust Fund Special Revenue County Parks Fund Friend of the Court Land Bank Authority Fund Debt Service Total Nonmajor Governmental Funds Child Care Fund Debt Service ASSETS Cash $ 896 $ 3,017 $ 15,472 $ 676 $ 18,628 $ 559 $ 387,019 Due from State 6, ,061 Federal Government , ,321 Notes Receivable ,472 Other Receivables ,715 Total Assets $ 6,957 $ 3,017 $ 15,472 $ 31,997 $ 18,628 $ 559 $ 459,588 LIABILITIES Accounts Payable $ 1,041 $ -- $ 255 $ 2,894 $ -- $ -- $ 6,831 Salaries, Wages, and Related Liabilities , ,907 Due to Other Funds , ,700 Total Liabilities 1, , ,438 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue ,472 Total Liabilities and Deferred Inflows of Resources 1, , ,910 FUND BALANCE Assigned 5,088 3,017 15,217 8,786 18, ,678 Total Fund Balance 5,088 3,017 15,217 8,786 18, ,678 Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 6,957 $ 3,017 $ 15,472 $ 31,997 $ 18,628 $ 559 $ 459,

74 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2013 Register of Deeds Automation Fund Victims Advocacy Fund Special Revenue Drunk Driving Impact Panel Drug Forfeiture Fund Drug Enforcement Fund Law Library Fund 911 Service Fund Revenues Federal Grants $ -- $ -- $ -- $ -- $ -- $ -- $ -- State Grants Charges for Services 22, , Other Revenues , ,500 Total Revenues 22, , , ,500 Expenditures Judicial 11, ,795 Public Safety , ,670 6, Health and Welfare Community and Economic Development Recreation and Culture Capital Outlay Total Expenditures 11, , ,670 6,929 13,795 Excess of Revenues Over (Under) Expenditures 10,209 (960) 40, (6,929) (11,295) Other Financing Sources (Uses) Transfers from Other Funds ,480 Transfers to Other Funds Net Other Financing Sources (Uses) ,480 Net Change in Fund Balance 10,209 (960) 40, (6,929) 185 Fund Balance at Beginning of Period 171, , ,929 (185) Fund Balance at End of Period $ 181,406 $ -- $ 173,939 $ 203 $ 771 $ -- $

75 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2013 Community Development Block Grant Fund Crime Victims' Rights Fund Economic Development Commission Special Revenue Jail Improvment Bond Revenue Sharing Reserve Fund Michigan Justice Training Fund Correction Officers Training Fund Revenues Federal Grants $ 60,346 $ -- $ -- $ -- $ -- $ -- $ -- State Grants -- 7, Charges for Services Other Revenues 9, ,801 5,292 Total Revenues 69,720 7, ,801 5,292 Expenditures Judicial Public Safety -- 6, , ,658 1,917 Health and Welfare Community and Economic Development 69, , Recreation and Culture Capital Outlay Total Expenditures 69,790 6,727 36,910 8, ,658 1,917 Excess of Revenues Over (Under) Expenditures (70) 1,253 (36,802) (8,761) -- 1,143 3,375 Other Financing Sources (Uses) Transfers from Other Funds Transfers to Other Funds (1,774) Net Other Financing Sources (Uses) (1,774) Net Change in Fund Balance (70) 1,253 (36,802) (8,761) (1,774) 1,143 3,375 Fund Balance at Beginning of Period 1,483 5,985 36,802 8,761 1,774 1,014 6,881 Fund Balance at End of Period $ 1,413 $ 7,238 $ -- $ -- $ -- $ 2,157 $ 10,

76 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2013 Veterans' Trust Fund Special Revenue County Parks Fund Friend of the Court Land Bank Authority Fund Debt Service Total Nonmajor Governmental Funds Child Care Fund Debt Service Revenues Federal Grants $ -- $ -- $ -- $ 177,230 $ -- $ -- $ 237,576 State Grants , ,423 Charges for Services 70, ,328 15, ,716 Other Revenues -- 4, , ,513 Total Revenues 70,517 4, , ,821 9, ,228 Expenditures Judicial ,661 Public Safety ,826 Health and Welfare 271,985 2, ,397 6, ,706 Community and Economic Development ,700 Recreation and Culture , ,416 Capital Outlay , ,565 Total Expenditures 271,985 2, , ,397 6, ,285,874 Excess of Revenues Over (Under) Expenditures (201,468) 1,972 (50,210) (57,576) 2, (313,646) Other Financing Sources (Uses) Transfers from Other Funds 100, , ,980 Transfers to Other Funds (1,774) Net Other Financing Sources (Uses) 100, , ,206 Net Change in Fund Balance (101,468) 1,972 (50,210) (20,076) 2, (166,440) Fund Balance at Beginning of Period 106,556 1,045 65,427 28,862 16, ,118 Fund Balance at End of Period $ 5,088 $ 3,017 $ 15,217 $ 8,786 $ 18,628 $ 559 $ 428,

77 Combining Statement of Net Position Nonmajor Enterprise Funds December 31, 2013 Forestry and Parks Commission Enterprise Airport Operating Gogebic County Transit Total Enterprise Funds Fair Board ASSETS Current Assets Cash $ 186,004 $ 23,128 $ 82,098 $ 75,802 $ 367,032 Investments , ,217 Taxes Receivable Accounts Receivable ,217 2,217 Due from State ,045 26,045 Other Receivables , ,219 Inventories , ,375 Prepaid Expenditures ,596 4,596 Total Current Assets 186,004 23, , , ,182 Noncurrent Assets Capital Assets, Net 515, ,074 1,012, ,720 2,513,481 Total Assets 701, ,202 1,151, ,078 3,169,663 LIABILITIES Current Liabilities Accounts Payable 1, ,960 8,972 18,461 Salaries, Wages, and Related Liabilities 5, , ,850 Due State of Michigan ,698 6,698 Total Current Liabilities 6, ,294 16,536 38,009 Noncurrent Liabilities Compensated Absences ,514 33,416 46,930 Total Liabilities 6, ,808 49,952 84,939 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue , ,025 Total Deferred Inflows of Resources , ,025 NET POSITION Net Investment in Capital Assets 515, ,074 1,012, ,720 2,513,481 Restricted for: Unemployment Claims ,273 2,273 Unrestricted 179,197 22,756 98, , ,945 Total Net Position $ 694,305 $ 562,830 $ 1,111,438 $ 704,126 $ 3,072,

78 Combining Statement of Revenues, Expenses, and Changes in Net Position Nonmajor Enterprise Funds For the Year Ended December 31, 2013 Forestry and Parks Commission Enterprise Airport Operating Gogebic County Transit Total Enterprise Funds Fair Board Operating Revenues Sales and Charges for Services $ 570,019 $ 109,613 $ 211,227 $ 49,261 $ 940,120 Other Operating Revenues , ,886 Federal Grants , ,545 State Grants , ,250 Contributions from Local Units , ,919 Interest and Rents 20,600 20,015 12, ,893 Other Revenues 1,379 9, ,289 Total Operating Revenues 591, , ,105 49,261 1,308,902 Operating Expenses Salaries, Fees, and Fringe Benefits 233,872 31, , , ,318 Expenses 84, , , , ,828 Depreciation Provisions 37,480 20,702 45,537 90, ,209 Total Operating Expenses 356, , , ,818 1,808,355 Operating Income (Loss) 235,927 (27,412) (157,411) (550,557) (499,453) Non-Operating Revenues (Expenses) Property Taxes , ,659 Federal Grants ,368 82,368 State Grants , ,010 Interest 21, ,630 Net Non-Operating Revenues (Expenses) 21, , ,667 Transfers 257,557 (27,412) (157,411) (76,520) (3,786) Capital Contributions ,984 65,984 Transfers from Other Funds -- 9, , ,760 Transfers to Other Funds (160,000) (160,000) Change In Net Position 97,557 (18,412) (10,651) (10,536) 57,958 Net Position at Beginning of Period 596, ,242 1,122, ,662 3,014,741 Net Position at End of Period $ 694,305 $ 562,830 $ 1,111,438 $ 704,126 $ 3,072,

79 Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2013 Enterprise Forestry and Parks Airport Gogebic County Total Enterprise Comission Fair Board Operating Transit Funds Cash Flows from Operating Activities Cash Received from Customers $ 570,019 $ 109,613 $ 439,972 $ 48,938 $ 1,168,542 Cash Received from Local Units ,919-47,919 Other Revenues 21,979 29,925 43,073-94,977 Cash Payments to Employees for Services and Fringe Benefits (244,446) (31,152) (279,993) (516,106) (1,071,697) Cash Payments to Suppliers for Goods and Services (83,190) (116,411) (342,214) - (541,815) Total Cash Flows from Operating Activities 264,362 (8,025) (91,243) (467,168) (302,074) Cash Flows from Non-capital Financing Activities Property Tax Collections , ,170 Grant Contributions , ,435 Transfers in from Other Funds (160,000) 9, ,760 - (4,240) Total Cash Flows from Non-capital Financing Activities (160,000) 9, , , ,365 Cash Flows from Capital and Related Financing Activities Capital Contributions 65,984 65,984 Purchases of Capital Assets (30,593) - (6,900) (56,652) (94,145) Total Cash Flows from Capital and Related Financing Activities (30,593) - (6,900) 9,332 (28,161) Cash Flows from Investing Activities Interest Earned 21, ,373 Total Cash Flows from Investing Activities 21, ,373 - Net Increase (Decrease) in Cash and Equivalents 95, ,617 10, ,503 Cash and Equivalents - Beginning of Year 90,605 22,153 33,481 65, ,529 Cash and Equivalents - End of Year $ 186,004 $ 23,128 $ 82,098 $ 75,802 $ 367,

80 Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2013 Enterprise Forestry and Parks Airport Gogebic County Total Enterprise Comission Fair Board Operating Transit Funds Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating Income $ 235,927 $ (27,412) $ (157,411) $ (550,557) $ (499,453) Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities Depreciation Expense 37,480 20,702 45,537 90, ,209 Changes in Assets & Liabilities Receivables (Net) - - 2,859 (323) 2,536 Inventory ,017-23,648 Prepaid Expenses (2,369) Accounts Payable 1,529 (1,385) (10,168) (3,188) (13,212) Accrued Payroll & Related Liabilities (10,574) 70 1,923 (1,221) (9,802) Net Cash Provided by Operating Activities $ 264,362 $ (8,025) $ (91,243) $ (467,168) $ (302,074)

81 Combining Statement of Net Position Internal Service Funds December 31, 2013 Tax Foreclosure Fund Internal Service 100% Tax Collection 2010 Tax Levy 2011 Tax Levy Total Internal Service Funds 2012 Tax Levy ASSETS Current Assets Cash $ 393,984 $ 663,176 $ -- $ 2,219,041 $ 1,028,848 $ 4,305,049 Taxes Receivable -- 31, ,614 1,067,152 1,399,063 Due from Other Funds -- 17, ,700 Total Current Assets 393, , ,519,655 2,096,000 5,721,812 Total Assets 393, , ,519,655 2,096,000 5,721,812 LIABILITIES Current Liabilities Accounts Payable -- 11, ,670 Total Current Liabilities -- 11, ,670 Total Liabilities -- 11, ,670 NET POSITION Unrestricted 393, , ,519,295 2,096,000 5,710,142 Total Net Position $ 393,984 $ 700,863 $ -- $ 2,519,295 $ 2,096,000 $ 5,710,

82 Combining Statement of Revenues, Expenses, and Changes in Net Position Internal Service Funds For the Year Ended December 31, 2013 Tax Foreclosure Fund Internal Service 100% Tax Collection 2010 Tax Levy 2011 Tax Levy Total Internal Service Funds 2012 Tax Levy Operating Revenues Fines and Forfeitures $ 206,039 $ 80,161 $ -- $ 133,830 $ 44,828 $ 464,858 Other Revenues -- 98, ,847 41, ,884 Total Operating Revenues 206, , ,677 85, ,742 Operating Expenses Administration Expense 70, , ,889 Total Operating Expenses 70, , ,889 Operating Income (Loss) 135, , ,427 84, ,853 Non-Operating Revenues (Expenses) Interest 287 3, , ,072 Net Non-Operating Revenues (Expenses) 287 3, , ,072 Transfers 135, , ,046 85, ,925 Transfers from Other Funds -- 1,854, ,010,749 3,865,423 Transfers to Other Funds -- (2,052,942) (1,854,674) (3,907,616) Change In Net Position 135,674 (16,314) (1,854,674) 183,046 2,096, ,732 Net Position at Beginning of Period 258, ,177 1,854,674 2,336, ,166,410 Net Position at End of Period $ 393,984 $ 700,863 $ -- $ 2,519,295 $ 2,096,000 $ 5,710,

83 Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2013 Internal Service Tax Foreclosure 100% Tax Total Internal Fund Collection 2010 Tax Levy 2011 Tax Levy 2012 Tax Levy Service Funds Cash Flows from Operating Activities Property Tax Collections $ 206,039 $ 61,428 $ - $ 945,604 $ 44,828 $ 1,257,899 Other Revenues - 98,022-47,847 41, ,884 Cash Payments to Suppliers for Goods and Services (74,596) (130) - (2,890) (987) (78,603) Total Cash Flows from Operating Activities 131, , ,561 84,856 1,366,180 Cash Flows from Non-capital Financing Activities Transfers in from Other Funds - (215,968) (1,854,674) - 943,597 (1,127,045) Total Cash Flows from Non-capital Financing Activities - (215,968) (1,854,674) - 943,597 (1,127,045) Cash Flows from Investing Activities Interest Earned 287 3,771-4, ,072 Total Cash Flows from Investing Activities 287 3,771-4, ,072 Net Increase (Decrease) in Cash and Equivalents 131,730 (52,877) (1,854,674) 995,180 1,028, ,207 Cash and Equivalents - Beginning of Year 262, ,053 1,854,674 1,223,861-4,056,842 Cash and Equivalents - End of Year $ 393,984 $ 663,176 $ - $ 2,219,041 $ 1,028,848 $ 4,305,049 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating Income $ 135,387 $ 178,183 $ - $ 178,427 $ 84,856 $ 576,853 Adjustments to Reconcile Operating Income to Net Cash Changes in Assets & Liabilities Receivables (Net) - (18,733) - 811, ,041 Accounts Payable (3,944) (130) (3,714) Net Cash Provided by Operating Activities $ 131,443 $ 159,320 $ - $ 990,561 $ 84,856 $ 1,366,

84 Statement of Fiduciary Net Position Fiduciary Funds December 31, 2013 Agency Library Penal Fine Fund Total Agency Funds Trust and Agency Michigan Works Payroll ASSETS Cash $ -- $ -- $ 54,728 $ -- $ 54,728 Investments Temporary Investments 643, ,045 Total Assets 643, , ,773 LIABILITIES Accounts Payable 1, ,767 Salaries, Wages, and Related Liabilities Due State of Michigan 3, ,992 Undistributed Receipts 637, , ,014 Total Liabilities 643, , ,773 NET POSITION Held in Trust $ -- $ -- $ -- $ -- $

85 SINGLE AUDIT ACT COMPLIANCE

86 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards To the Board of Commissioners County of Gogebic, Michigan 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 County of Gogebic, Michigan, as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the County of Gogebic, Michigan s basic financial statements, and have issued our report thereon dated June 26, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the County of Gogebic, Michigan 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 of Gogebic, Michigan s internal control. Accordingly, we do not express an opinion on the effectiveness of the County of Gogebic, Michigan s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the County of Gogebic, Michigan 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

87 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. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Gabridge & Company, PLC Grand Rapids, MI June 26,

88 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 To the Board of Commissioners Gogebic County, Michigan Report on Compliance for Each Major Federal Program We have audited the County of Gogebic, Michigan s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the County of Gogebic, Michigan s major federal programs for the year ended December 31, The County of Gogebic, Michigan s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the County of Gogebic, Michigan 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 of Gogebic, Michigan s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the County of Gogebic, Michigan s compliance. Opinion on Each Major Federal Program In our opinion, the County of Gogebic, Michigan, 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 December 31,

89 Report on Internal Control Over Compliance Management of the County of Gogebic, Michigan, 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 of Gogebic, Michigan 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 OMB Circular A-133, 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 of Gogebic, Michigan 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 than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over 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. 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 OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Gabridge & Company, PLC Grand Rapids, MI June 26,

90 Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2013 CFDA Federal Federal Agency / Pass-Through Grantor / Program Title Number Expenditures Primary Government U.S. Department of Housing and Urban Development Passed through State of Michigan Department of Housing Development: Community Development Block Grant - MSC HOA $ 60,346 U.S. Department of Transportation Passed through State of Michigan Department of Transportation Hazardous Materials Emergency Planning Grant ,000 Michigan Air Service Program ,025 Federal Emergency Management Authority Disaster Relief ,837 U.S. Department of Homeland Security Transportation Security Administration Law Enforcement Officer HSTS0213HSLR ,520 Passed through the Michigan Department of State Police: 2013 Emergency Management Performance , Operation Stonegarden SJ ,252 * Passed through Michigan Homeland Security 2010 Homeland Security Grant Program ,400 * 2011 Homeland Security Grant Program ,100 * 2012 Homeland Security Grant Program ,310 * Total U.S. Department of Homeland Security 135,098 U.S. Department of Health and Human Services Passed through Michigan Department of Human Services Child Support Enforcement Cluster (Title IV - D) Title IV-D - Prosecuting Attorney - CSPA ,065 Title IV-D - Friend of the Court CSFOC ,988 Title IV-D - Incentive Payments CSFOC ,242 Total U.S. Department of Health and Human Services 216,295 Other Federal Assistance Direct Program - Department of Interior - payment in lieu of taxes ,396 Department of Justice Grants ,800 Passed through State of Michigan - Department of Natural Resources 2013 Marine Safety Program ,994 Total Other Federal Assistance 512,190 TOTAL PPRIMARY GOVERNMENT EXPENDITURES OF FEDERAL AWARDS $ 944,791 * These awards comprise the homeland security grant cluster

91 Notes to the Schedule of Expenditures of Federal Awards NOTE 1 BASIS OF PRESENTATION The Schedule of Expenditures of Federal Awards (the Schedule ) includes the federal grant activity of the County under programs of the federal government for the year ended December 31, The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of State, Local Governments, and Non-Profit Organizations. 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. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, wherein certain types of expenditures are not allowable or are limited as to reimbursement. NOTE 3 SUBRECIPIENTS Of the federal expenditures presented in the schedule, Gogebic County, Michigan, provided federal awards to one subrecipient (Gogebic-Ontonagon Community Action Agency) as follows: Program Title Federal CFDA Number Amount Provided Community Development Block Grant $ 67,720 NOTE 4 GRANTS ADMINISTERED BY OTHERS Federal revenue recorded on the statement in the amount of $861,829 is not included in the Schedule because the grant was administered by the State of Michigan Department of Transportation. Accordingly, the State of Michigan Department of Transportation included these federal revenues on their single audit report

92 Notes to the Schedule of Expenditures of Federal Awards NOTE 5 RECONCILIATION TO FINANCIAL STATEMENTS A reconciliation of the amounts presented in the Schedule to the amounts presented in the financial statements is as follows: Federal revenue reported in the financial statements Governmental Funds $ 915,246 Proprietary Funds - Operating 891,374 Proprietary Funds - Non-operating 82,368 Total 1,888,988 Subtract Federal revenue audited by other auditors (82,368) Federal revenue audited at MDOT (Note 4) (861,829) Total expenditures of federal awards $ 944,

93 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2013 SECTION I - SUMMARY OF AUDITORS RESULTS Financial Statements Type of auditors' report issued Unmodified Internal controls over financial reporting Material weaknesses identified? No Significant deficiencies identified not considered to be material weaknesses? No Noncompliance material to financial statements noted? No Federal Awards Internal control over major programs Material weaknesses identified? None reported Significant deficiencies identified not considered to be material weaknesses? None reported Type of auditors' report issued on compliance for major programs Any audit findings disclosed that are required to be reported in accordance with Circular A-133, section 510(a)? Identification of Major Programs CFDA Number(s) Unmodified No Name of Federal Program or Cluster Payment in Lieu of Taxes Dollar threshold used to distingquish between Type A and B programs? $300,000 Auditee qualified as a low-risk auditee? Yes

94 June 26, 2014 To the Board of Commissioners County of Gogebic, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Gogebic for the year ended December 31, Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards (and, if applicable, Government Auditing Standards and OMB Circular A-133), as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 8, Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the County of Gogebic are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the fiscal year ended December 31, We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the County of Gogebic s financial statements was: 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 and the related pay rates as of December 31, Management s assumptions used to calculate the actuarial report and the net present value of post employment benefits, including health and pension benefits

MISSAUKEE COUNTY, MICHIGAN ANNUAL FINANCIAL REPORT YEAR ENDED SEPTEMBER 30, 2016

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