Midland County, Michigan 2015

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1 Midland County, Michigan 2015 Comprehensive Annual Financial Report and Single Audit For the Year Ended December 31, 2015 This report was prepared by Midland County Finance Department

2 Table of Contents INTRODUCTORY SECTION Page Letter of Transmittal 1 GFOA Certificate of Achievement 6 Organizational Chart 7 List of Elected and Appointed Officials 8 FINANCIAL SECTION Independent Auditors Report 9 Management s Discussion and Analysis 13 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position 23 Statement of Activities 24 Fund Financial Statements: Balance Sheet Governmental Funds 26 Reconciliation of Fund Balances for Governmental Funds to Net Position of Governmental Activities 27 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 28 Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities 29 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund 30 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Senior Citizen Special Revenue Fund 31 Statement of Net Position Proprietary Funds 32 Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds 34 Statement of Cash Flows Proprietary Funds 36 Statement of Fiduciary Net Position - Fiduciary Funds 40 Statement of Changes in Fiduciary Net Position - Fiduciary Funds 41 Combining Statement of Net Position Discretely Presented Component Units 42 Combining Statement of Activities Discretely Presented Component Units 43 Notes to Financial Statements 46

3 Table of Contents Required Supplementary Information Act 345 Retirement System: Schedule of Changes in Net Pension Liability and Related Ratios 94 Schedule of Net Pension Liability 95 Schedule of Contributions 96 Schedule of Investment Returns 97 Employees' Retirement System: Schedule of Changes in Net Pension Liability and Related Ratios 98 Schedule of Net Pension Liability 99 Schedule of Contributions 100 Schedule of Investment Returns 101 Other Postemployment Benefits Plan - Retiree Health Care: Schedule of Funding Progress 102 Schedule of Employer Contributions 102 Combining and Individual Fund Financial Statements and Schedules Page Nonmajor Governmental Funds: Combining Balance Sheet 107 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 115 Schedules of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Nonmajor Special Revenue Funds 123 Nonmajor Enterprise Funds: Combining Statement of Net Position 159 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 163 Combining Statement of Cash Flows 167 Internal Service Funds: Combining Statement of Net Position 172 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 174 Combining Statement of Cash Flows 176

4 Table of Contents Fiduciary Funds: Combining Statement of Fiduciary Net Position - Private Purpose Trust Funds 180 Combining Statement of Changes in Fiduciary Net Position - Private Purpose Trust Funds 182 Combining Statement of Fiduciary Net Position Pension and Other Employee Benefit Trust Funds 184 Combining Statement of Changes in Fiduciary Net Position Pension and Other Employee Benefit Trust Funds 185 Combining Statement of Fiduciary Assets and Liabilities - Agency Funds 186 Combining Statement of Changes in Fiduciary Assets and Liabilities - Agency Funds 188 Component Unit: Drain Commission: Statement of Net Position and Governmental Fund Balance Sheet 190 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance 192 STATISTICAL SECTION (UNAUDITED) TABLE 1 Net Position by Component Changes in Net Position Governmental Activities Tax Revenue by Source Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Taxable Value and Estimated True Cash Value of Taxable Property Property Tax Rates Direct and Overlapping Governments Principal Property Taxpayers Property Tax Levies and Collections Ratio of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Legal Debt Margin Information Direct and Overlapping Governmental Activities Debt Demographic and Economic Statistics Principal Employers Full-Time Equivalent County Employees by Function Operating Indicators by Function Capital Asset Statistics by Function 224 Page

5 Table of Contents SINGLE AUDIT ACT COMPLIANCE Page Independent Auditors Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 227 Schedule of Expenditures of Federal Awards 228 Notes to Schedule of Expenditures of Federal Awards 230 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Governmental Auditing Standards 231 Independent Auditors' Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance 233 Schedule of Findings and Questioned Costs 235 Summary Schedule of Prior Audit Findings 238

6 June 28, 2016 To the Citizens of Midland County, Michigan: The Comprehensive Annual Financial Report of the County of Midland, Michigan, for the fiscal year ended December 31, 2015, is submitted herewith. This report was prepared by the Midland County Finance Department with assistance from the County s Independent Auditors. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the County. We believe the data, as presented, is accurate in all material respects; that it is presented in a manner designed to fairly set forth the financial position and results of operations of the County, as measured by the financial activity of its various funds; and that the disclosures necessary to enable the reader to gain the maximum understanding of the County s financial activity have been included. Management s discussion and analysis ( MD&A ) immediately follows the independent auditor s report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complement this letter of transmittal and should be read in conjunction with it. The County is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards (Uniform Guidance). Information related to this single audit, including the schedule of expenditures of federal awards, findings and recommendations, and auditors reports on internal control and compliance with applicable laws, regulations, contracts and grants, is included in the single audit section of this report. This report includes all funds of the County and its component units as defined in Government Accounting Standards Board Statement No. 61, The Financial Reporting Entity. The County has implemented GASB Statement No. 61, which sets forth criteria for including/excluding certain related entities in the County s basic financial statements. As a result, the Midland County Road Commission, the Office of the Midland County Drain Commissioner, and the Economic Development Corporation of the County of Midland ( EDCCM ) have been discretely presented as component units in the basic financial statements. The Midland Economic Development Council (EDCCM Loan Revolving Fund) is also a discrete component unit, but is not presented in the financial statements, as there was no activity for the year. Tori S. Meyer Suzanne V. Ault Kevin D. Beeson Denise L. Mason Finance Director Human Resources Director Facilities Manager Procurement & Contracts Administrator (989) (989) (989) (989)

7 Profile of the Government The management of Midland County is overseen by a district-elected Board of Commissioners. This board consists of seven members. Board of Commissioners are elected for two year terms and have the responsibility of making appropriations to all County functions and establishing policy for all County operations. The Board of Commissioners appoints an Administrator/Controller who has the overall responsibility to oversee the administrative duties of the County with the exception of Elected Officials Offices. The County provides many services to the County residents including, the administration of the Courts, Sheriff Road Patrol services in the unincorporated jurisdictions of the County, the constitutional offices of the County Clerk, Treasurer, Register of Deeds, Sheriff and Prosecutor and the statutory office of the Drain Commissioner. In addition, the County supports many other programs such as the Mosquito Control Program, Gypsy Moth Suppression, Health Services, Ambulance Services, County Transportation, County Infirmary and Services to older Citizens. The County also supports cultural and recreational services such as the MSU Extension, Parks and Recreation Services, and the Pere` Marquette Rail-Trail of Mid-Michigan. Local Economy Chemical giants, The Dow Chemical Co. and DuPont, are entering into a merger. The new company, called DowDuPont, will be headquartered in both Midland, Michigan and Wilmington, Delaware and is expected to be worth more than $120 billion. The combined company would serve as a vehicle for cutting some $3 billion in costs before splitting into three separate businesses 18 to 24 months after the merger closes. The merger is expected to close around fall of The three companies would focus on agriculture, material sciences and specialty products in nutrition and electronics. Executives emphasized that the combination and restructuring would avoid taxes, adding to the benefit of the shareholders. A new 5-story, 84,000 square-foot, mix-use building is being constructed in downtown Midland that will house restaurants, retail and residential condos. The developer is SSP Associates and the construction is expected to create 46 full-time jobs. Residential New housing in 2015 decreased 30% from the prior year with 80 new housing starts. New housing starts in 2014 were 114. Major initiatives The County is looking to construct a new public entrance to the courthouse as well as interior renovations which will address serious safety and functional issues through repurposing vacated space. The estimated cost for this construction is $5.7 million. The Courthouse, originally built in 1926, continues to be the most beautiful & historic functioning courthouse in the State of Michigan. Long-Term Financial Planning/Financial Policies Financial Management Management of the County is responsible for establishing and maintaining internal control designed to ensure that the assets of the County are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. 2

8 Budgeting Control The County maintains budgetary control with the objective to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the County Board of Commissioners. Activities of the General and Special Revenue Funds are included in the annual appropriation budget. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established by activity within these Funds. The County also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbered amounts lapse at year-end and are reappropriated as part of the following year s budget. As demonstrated by the statements and schedules included in the financial section of this report, the County continues to meet its responsibility for sound financial management. Single Audit As a recipient of federal and state awards, the County is responsible for ensuring that adequate internal control is in place to achieve compliance with applicable laws and regulations related to those programs. This internal control is subject to periodic evaluation by management and the independent auditors of the County. As part of the County s single audit, described earlier, tests are made to determine the adequacy of internal control, including that portion related to federal award programs, as well as to determine that the County has complied with applicable laws and regulations. The results of the County s single audit for the fiscal year ended December 31, 2015, disclosed no significant deficiencies and no material weaknesses or significant violations of applicable laws and regulations. Long-Term Financial Planning The budget serves as the foundation for the County s financial planning and control. As part of the budget process, management prepares an annual budget for the General Fund, where revenues, expenditures and fund balances are forecasted. The General Fund Budget for 2015 forecasted an overall increase in revenue with no increase in tax revenue. General Fund Budget expenditures in 2015 contained a slight increase with an expected increase in the General Fund Use of Surplus. As part of long-term financial planning, a Five-Year Forecast is prepared and updated annually. This forecast is presented to the Board of Commissioners and allows the governing body to look beyond the current budget year and discuss strategy. Management presents the current financial condition of the County to the Board of Commissioners Finance Committee on a quarterly basis. The reports include a comparison of the amended budget to the actual amounts and explanations for major variances. This process means that the budget remains current through the year and that actual expenditures are continually monitored. Lastly, the County s management trends key financial indictors to aid in long-term financial planning. These key financial indicators include, but are not limited to, tax revenue, revenue sharing, and healthcare costs. Financial Policies It is the Board of Commissioner s policy to maintain a sufficient fund balance in the County s General Fund. A portion of this fund balance shall be unassigned to provide available financial resources to be used exclusively for maintaining a stable tax and revenue structure and to provide for the orderly delivery of services to County residents; to maintain and improve the County s credit standing; and to provide financial resources that can be used to meet contingency and working capital requirements. The unassigned fund balance shall not be less than one-twelfth (8.33%) of the annual General Fund operating budget and a target total General Fund fund balance of 30% of the annual operating expenditures. 3

9 Policy also dictates that a General Fund Contingency Account be recommended in the Annual County Budget to be used in the event of unplanned expenditures. The Annual Budget Contingency Account shall not be less than one percent of the total annual General Fund Budget. It is the Board of Commissioner s policy that any authorized positions that are supported in whole or in part by a grant or other source of outside funding shall be reviewed for reduction or elimination when notified that sufficient outside funding will not be received. Further, the County maintains strong position control (a process that monitors head count and ensures that all hires are for board-approved positions only) and position budgeting system and adheres to the practice of budgeting for full employment. Salary and fringe benefits appropriations are tied to specific authorized positions in a position budgeting system. Should vacancies occur or if positions are filled at a level lower than authorized, the resulting favorable variance falls to fund balance. None of the other fiscal policies had a significant impact on the current period financial statements. Other information Independent Audit The Michigan Uniform Accounting and Budgeting Act requires an annual audit by independent certified public accountants. The accounting firm of Rehmann Robson was selected by the Midland County Board of Commissioners to perform the County s annual audit. In addition to meeting the requirements set forth in state statutes, the audit also was designed to meet the requirements of the federal Single Audit Act Amendments of 1996 and the Uniform Guidance. The auditor s report on the financial statements and combining and individual fund statements and schedules is included in the financial section of this report. The auditor s reports related specifically to the single audit are also included in this report in the Single Audit Section. Accounting Systems and Reports The County s accounting records for traditional governmental operations; i.e., General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds, are maintained on a modified accrual basis of accounting. As a result, the more significant revenues such as property taxes, intergovernmental revenues and investment earnings are recognized as earned and other revenues are generally recognized only when received. Expenditures are recorded when incurred and encumbrances placed when purchase orders are issued. Employees accumulated unused annual leave, sick pay and longevity pay are also recognized on the modified accrual basis. Budgetary control is maintained by an annual allotment system. Allotments, or appropriation, balances are encumbered by the simultaneous issuance and recording of purchase orders. Purchase orders that exceed allotted balances are not released until additional appropriations or appropriate budgetary adjustments are made available. Awards The Government Finance Officers Association of the United States and Canada ( GFOA ) awarded a Certificate of Achievement for Excellence in Financial Reporting to Midland County for its comprehensive annual financial report for the fiscal year ended December 31, In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. 4

10 A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements Appreciation is extended to the Finance Department and various employees throughout the County responsible for financial management and reporting. Their adherence to following the law, utilizing proper accounting methods and eliminating waste from processes has greatly improved the efficiency and accountability of the entire County. Respectfully submitted, Bridgette M. Gransden, CPA, CGFM Midland County Administrator/Controller 5

11 MIDLAND COUNTY, MICHIGAN GFOA Certificate of Achievement 6

12 7

13 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended December 31, 2015 BOARD OF COMMISSIONERS Mark Bone, Chairman James Geisler, Vice Chairman Eric Dorrien Alan Kloha Richard Keenan James Leigeb Scott Noesen Administrator/Controller Bridgette M. Gransden, CPA, CGFM Finance Director Tori S. Meyer Chief Accountant Laurie A. Tarkowski Independent Auditors Rehmann Robson 8

14 Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI Ph: Fx: rehmann.com INDEPENDENT AUDITORS' REPORT June 28, 2016 Board of Commissioners Midland County, Michigan Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Midland County, Michigan (the County ), as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the County s basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Independent Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Midland County Road Commission which represents 82 percent, 80 percent, and 93 percent of the assets and deferred outflows, net position, and revenues, respectively, of the discretely presented component units, and the Economic Development Corporation of the County of Midland ("EDCCM") which represents 4 percent and 6 percent of the assets and net position, respectively, and zero percent of the revenues of the discretely presented component units. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Midland County Road Commission and EDCCM, 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. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators 9

15 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the reports of other auditors, the financial statements referred to 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 Midland County, Michigan, as of December 31, 2015, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and the Senior Citizen special revenue fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Implementation of GASB Statement No. 68 As described in Note 18, the County implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions in the current year. Accordingly, beginning net position of governmental activities was restated. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis and schedules for the pension and other postemployment benefit plans, as noted 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 and other auditors 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. 10

16 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County s basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 28, 2016, on our consideration of Midland 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 the County's internal control over financial reporting and compliance. 11

17 MANAGEMENT'S DISCUSSION AND ANALYSIS 12

18 Management's Discussion and Analysis As management of Midland County, Michigan (the County ), 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 additional information that we have furnished in our letter of transmittal, which is identified in the table of contents. Financial Highlights The County implemented GASB Statement No. 68 in the current year. In addition to expanded disclosure requirements, the County is required to report its net pension liability on the statement of net position. This change has resulted in a negative unrestricted net position of governmental activities of $3,001,289. The assets and deferred outflows of resources of the County exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $25,890,787 (net position). Of this amount, $1,299,919 (unrestricted net position) may be used to meet the government s ongoing obligations to citizens and creditors. The government s total net position decreased by $1,333,136. As of the close of the current fiscal year, the County s governmental funds reported combined ending fund balances of $22,846,685, an increase of $754,056 (3.4%) in comparison with the prior year. The County had two new debt issuances during the year, totaling $3,820,000, including the Drain component unit. 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 contains other required supplementary information in addition to 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 information on all of the County s assets, deferred outflow of resources, liabilities, and deferred inflows of resources, with the residual balance 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 government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement 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 general government, legislative, judicial, public safety, public works, health and welfare, culture and recreation, and planning and development. The business-type activities of the County include the delinquent property tax collections, local unit water bonds, and inmate services. The government-wide financial statements include not only the County itself (known as the primary government), but also a legally separate Road Commission, Drain Commission, and a the Economic Development Corporation for which the County is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. The Midland County Building Authority, although 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. 13

19 Management's Discussion and Analysis 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 evaluating 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. Individual governmental fund information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenue, expenditures, and changes in fund balances for the General Fund, Senior Citizen Special Revenue Fund and Building Authority Debt Service Fund, each of which is considered to be a major fund. Data from the remaining 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 elsewhere in this report. The County adopts an annual appropriated budget for its General Fund and special revenue funds. Budgetary comparison statements or schedules have been provided for these funds to demonstrate compliance with this budget. Proprietary Funds. The County maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The County uses enterprise funds to account for the Larkin Township Water Bonds III Fund, Lee Township Water Bonds Fund, Edenville Township Water Bonds Fund, Hope Township Water Bonds Fund, and various other enterprise funds that are considered nonmajor. Internal service funds are used to accumulate and allocate costs internally among the County s various functions. The County uses internal service funds to account for its computer equipment maintenance and replacement, insurances, Day Activity Center maintenance, and mobile data terminal operations. Because these services predominately benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the enterprise fund major funds. Both the enterprise fund nonmajor funds and internal service funds are combined in separate single, aggregated presentations in the proprietary fund financial statements. Individual fund data for nonmajor enterprise funds and internal service funds are provided in the form of combining statements elsewhere in this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. 14

20 Management's Discussion and Analysis Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. This is limited to this management's discussion and analysis and the schedules for the pension and other postemployment benefit plans immediately following the notes to the financial statements. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Government-Wide Financial Analysis As previously stated, net position may serve over time as a useful indicator of a government s financial position. In the case of the County, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $25,890,787 at the close of the most recent fiscal year. Net Position Governmental Activities Business-type Activities Total Current and other assets $ 43,027,148 $ 41,224,803 $ 42,038,213 $ 28,573,466 $ 85,065,361 $ 69,798,269 Capital assets, net 39,633,293 40,629,202-16,142,115 39,633,293 56,771,317 Total assets 82,660,441 81,854,005 42,038,213 44,715, ,698, ,569,586 Total deferred outflows of resources 5,029, ,029,060 - Long-term liabilities 24,770,905 26,066,052 36,380,932 38,272,769 61,151,837 64,338,821 Other liabilities 30,722,326 16,205, , ,916 31,270,808 16,900,808 Total liabilities 55,493,231 42,271,944 36,929,414 38,967,685 92,422,645 81,239,629 Total deferred inflows of resources 10,976,776 10,606, , ,118 11,414,282 11,092,306 Net position: Net investment in capital assets 16,477,876 16,127, ,301 16,477,876 16,969,286 Restricted 7,742,907 7,612, , ,280 8,112,992 7,995,659 Unrestricted (3,001,289) 5,235,509 4,301,208 4,037,197 1,299,919 9,272,706 Total net position $ 21,219,494 $ 28,975,873 $ 4,671,293 $ 5,261,778 $ 25,890,787 $ 34,237,651 A substantial portion of the County s net position $16,477,876 (63.6%), reflects its net investment in capital assets (e.g. land, buildings, machinery and equipment). The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the County s net position of $8,112,992 (31.3%) represents resources that are subject to external restrictions on how they may be used. The County may use the remaining balance of unrestricted net position of $1,299,919 (5.1%) to meet its ongoing obligations to citizens and creditors. At the end of the current fiscal year, the County is able to report positive balances in two of the three categories of net position for the government as a whole and positive balances in all three categories of net position for businesstype activities. The County's total other liabilities balance increased by $14,370,000 (85%). This increase was mainly due to the implementation of GASB 68, which created a net pension liability for the County. 15

21 Management's Discussion and Analysis The following condensed financial information was derived from the government-wide statement of activities and reflects how the County's net position changed during the fiscal year: Change in Net Position Governmental Activities Business-type Activities Total Program revenues Charges for services $ 9,760,415 $ 9,995,606 $ 1,635,895 $ 1,738,539 $ 11,396,310 $ 11,734,145 Operating grants 10,047,310 9,734,911 1,316,802 1,383,166 11,364,112 11,118,077 Capital grants 9,342 70, , , , ,587 General revenues Property taxes 27,870,341 28,686, ,870,341 28,686,347 Grants and contributions not restricted to specific programs 3,980 3, ,980 3,625 Unrestricted investment earnings 434, ,574 53,861 39, , ,367 Miscellaneous 3,485 91, ,485 91,610 Total revenues 48,129,531 48,883,260 3,222,919 4,001,498 51,352,450 52,884,758 Expenses General government 10,562,406 10,267, ,562,406 10,267,499 Legislative 309, , , ,124 Judicial 6,776,797 5,890, ,776,797 5,890,447 Public safety 12,662,128 12,761, ,662,128 12,761,084 Public works 6,747 15, ,747 15,621 Health and welfare 16,589,701 17,497, ,589,701 17,497,785 Culture and recreation 884, , , ,814 Planning and development 774, , , ,652 Interest on debt 1,129,693 1,187, ,129,693 1,187,093 Delinquent property tax collection , , , ,971 Local unit water bonds - - 2,387,797 1,400,839 2,387,797 1,400,839 Inmate services , , , ,856 Total expenses 49,695,471 49,272,119 2,990,115 1,933,666 52,685,586 51,205,785 Change in net position, before transfers (1,565,940) (388,859) 232,804 2,067,832 (1,333,136) 1,678,973 Transfers 823, ,128 (823,289) (713,128) - - Change in net position (742,651) 324,269 (590,485) 1,354,704 (1,333,136) 1,678,973 Net position: Beginning of year 28,975,873 28,651,604 5,261,778 3,907,074 34,237,651 32,558,678 Restatement (7,013,728) (7,013,728) - End of year $ 21,219,494 $ 28,975,873 $ 4,671,293 $ 5,261,778 $ 25,890,787 $ 34,237,651 The County s net position decreased by $1,333,136 during the current fiscal year. There are two primary reasons for the decrease. One is a result of tax revenue in governmental activities being $816,006 lower than the previous year. The other reason is because overall spending had increased. The increase in spending is attributed to the local unit water bonds which is a business-type activity. These fluctuations are explained in more detail below. 16

22 Management's Discussion and Analysis Governmental Activities. Governmental activities decreased the County s net position by $742,651. Expenses in 2015 were $423,352 higher when compared to The bulk of this increase in expenses can be found in the judicial category and is largely attributable to pension costs. Some of this increase is offset by losses in health and welfare category as indigent care expenditures were drastically reduced as the Affordable Care Act was phased in. Meanwhile, revenues in 2015 were $753,729 lower than 2014, primarily as a result of a decrease in tax revenue by $816,006. This decrease can be attributed to legislation action that exempted personal property parcels with taxable values of $80,000 and less as well as legislation that exempts veterans whom are honorably discharged and 100% disabled from payment of their property taxes. $18,000,000 Expenses and Program Revenues - Governmental Activities $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Expenses Program Revenues Revenues by Source - Governmental Activities Other 1% Charges for services 20% Property taxes 58% Operating grants and contributions 21% 17

23 Management's Discussion and Analysis Business-type Activities. Business-type activities decreased the County s net position by $590,485. The key element for this decrease was the completion of the Hope Water project and transfer of the asset to the township upon completion of construction. The transfer of the asset is recognized as an expense and overall expenses were higher in 2015 as a result. $3,000,000 Expenses and Program Revenues - Business-type Activities $2,500,000 Expenses Program Revenues $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Delinquent tax collection Local unit water bonds Inmate services Revenues by Source - Business-type Activities Capital grants 7% Unrestricted investment earnings 1% Operating grants and contributions 41% Charges for services 51% 18

24 Management's Discussion and Analysis Financial Analysis of the County s 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 spending at the end of the fiscal year. As of the end of the current fiscal year, the County s governmental funds reported combined ending fund balances of $22,846,685, an increase of $754,056 in comparison with the prior year. The fund balance is classified as one of the following: A) Nonspendable funds in the amount of $729,339 (or 3.2%), which consists primarily of long-term advances and prepaids; B) Restricted for use per special revenue, capital project, and debt service fund restrictions in the amount of $5,820,299 (or 25.5%); C) committed for health and welfare, culture and recreation, public safety, and judicial funds per Board policy in the amount of $1,447,898 (or 6.3%); D) assigned for other specific uses in the County s general operations in the amount of $5,754,472 (or 25.2%) or E) unassigned ($9,094,677, or 39.8%) and available for spending at the County's discretion and needs. The General Fund is the chief operating fund of the County. At the end of the current fiscal year, nonspendable fund balance of the General Fund was $689,064, assigned fund balance of the General Fund was $1,610,930, and the unassigned fund balance of the General Fund was $9,094,677 or a total fund balance amounted to $11,394,671. The fund balance of the County s General Fund increased by $89,598 during the current fiscal year. This increase can be attributed to revenues in 2015 were $308,818 higher when compared to 2014 and largely in the intergovernmental and charges for services revenue lines, as a result of a $269,426 increase in State Revenue Sharing as well as overall revenue increases in the 75th District Court. Meanwhile, expenditures in 2015 were $674,703 higher than 2014, as a result of increased funding for health coverage which was an increase of more than $540,000. The General Fund budgeted for a decrease in fund balance of $1,346,021 and the actual increase in fund balance was $89,598. Significant changes in budgetary variances are as follows: Actual revenues exceeded the budget by $122,599. District Court revenues exceeded the budget by $361,262 and the Jail revenues exceeded their budget by $335,950 which helped to offset tax revenues, which came in $591,083 below budget. Expenditures had an overall positive effect as actual expenditures were $1,338,113 less than budget. Most of that cost savings was in the General Services Administration. Specifically, personnel costs came in below budget because the County budgets for full employment, but sometimes turnover can create vacancies in employment as does disability leaves. Budget savings in personnel costs totaled $482,730 across the entire general fund. The General Fund budgets 1% of overall expenditures as a contingency, which meant that $279,148 was also unspent. Also of note, Circuit Court was $97,763 below budget, largely with respect to Indigent Attorney Fees, Attorneys Fees for Appeals, and Jury Fees. The building authority s fund balance decreased by $299,849 during the fiscal year. This decrease was the result of applying some of the bond proceeds to the payment of the debt. Proprietary Funds. The County s proprietary fund financial statements provide the same type of information found in the government-wide financial statements, but in more detail. Net position of the Larkin Township Water Bonds III Fund at the end of the year amounted to $518, $366,457 for the Lee Township Water Bonds Fund, $1,047 for the Edenville Township Water Bonds Fund, and $950 for the Hope Township Water Bonds Fund. The Larkin Township Water Bonds III had a total decrease in net position of $2,750, while the Lee Township Water Bonds had an decrease of $4,642 and Edenville Township Water Bonds Fund experienced an increase in net position of $14. The Hope Township Water Bonds Fund had a total decrease in net position of $839,318. Other factors concerning the finances of these funds have already been addressed in the discussion of the County s business-type activities. 19

25 Management's Discussion and Analysis General Fund Budgetary Highlights During the year, there was an increase of $165,653 in appropriations between the original and final amended budget. Following are the main components of the change: In 2015 there were budget appropriation increases to law enforcement supplies at the jail in the amount of $35,920, most of which was for pharmaceutical supplies, and to general government for election supplies in the amount of $30,370. A change in payment processing to DHS resulted in an increase in the budget appropriation for other agencies in excess of $150,000. Capital Asset and Debt Administration Capital Assets. The County s capital assets for its governmental and business-type activities as of December 31, 2015 amounted to $39,633,293 and $0 respectively (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment, construction in progress and vehicles. The total decrease in the County s investment in capital assets for the current fiscal year was 30.2% (a 2.5% decrease for governmental activities and a 100% decrease for business-type activities). Major capital asset events during the current fiscal year included the following: Upon completion of construction of water supply projects, the assets become property of the townships. In 2014, Hope Township constructed a majority of its water project, placing underground lines to the residents of the township. In 2015, the Hope Township water project was completed and the asset was transferred to the Township. Capital Assets (Net of Depreciation) Governmental Activities Business-type Activities Total Land $ 2,267,213 $ 2,267,213 $ - $ - $ 2,267,213 $ 2,267,213 Construction in progress ,142,115-16,142,115 Land improvements 710, , , ,794 Buildings and improvements 34,781,013 35,669, ,781,013 35,669,399 Machinery and equipment 774, , , ,002 Vehicles 1,100,106 1,186, ,100,106 1,186,794 Total capital assets, net $ 39,633,293 $ 40,629,202 $ - $ 16,142,115 $ 39,633,293 $ 56,771,317 Additional information on the County s capital assets can be found in Note 6 of this report. Long-Term Debt. At the end of the current fiscal year, the County had total debt (less premiums and compensated absences) outstanding of $59,130,399. Of this amount, $53,211,399 (90%) comprises debt not backed by the full faith and credit of the government. The remainder of the County's debt represents deferred premiums and compensated absences. Governmental Activities Business-type Activities Total Long-term obligations, less premiums and compensated absences $ 22,820,000 $ 24,140,000 $ 36,310,399 $ 38,194,399 $ 59,130,399 $ 62,334,399 20

26 Management's Discussion and Analysis The County s total debt decreased by $3,204,000 (5.1%) during the current fiscal year. The net decrease was mainly attributable to scheduled principal payments offset by new obligations incurred during the current year. The County was upgraded to "AA" rating from Standard & Poor's on July 18, 2014 and maintained an "A2" rating from Moody's for its general obligation debt. The "AA" rating is given for bond issues that are backed with millage levies. State statutes limit the amount of general obligation debt a governmental entity may issue to 10% of its total state equalized valuation. The current debt limitation for the County is approximately $368,456,000, which is significantly higher than the County s outstanding general obligation debt. Additional information on the County long-term debt can be found in Note 9. Economic Factors and Next Year s Budget and Rates The annualized 2015 unemployment rate for the Midland micropolitan area was 4.70 percent, which is a decrease from a rate of 6.04 percent a year ago. This was lower than the State s annual 2015 average unemployment rate of 5.40 percent. Inflationary trends in the region compare favorably to national indices. The 2016 budget includes wage increases of 1% for all non represented, elected official positions, and four union groups, while three union groups saw wage increases of 2%. The 2016 general fund budget expenditures include an increase of $40,489. Savings in the funding of definedbenefit pension plans helped to offset increases in other fringe benefit costs. The County considered these factors in preparing the County s budget for the 2016 fiscal year. The personal property tax exemption phase-in and the refund of tax revenue loss in the form of the Essential Services Assessment monies. The refund will be new in Requests for Information This financial report is designed to provide a general overview of the County s finances for all those with an interest in the Midland County s finances. Questions concerning any of the information provided in this report, or requests for additional financial information, may be addressed to the Finance Director's office, County Administration Building, 200 W. Ellsworth, Midland, Michigan

27 BASIC FINANCIAL STATEMENTS 22

28 Statement of Net Position December 31, 2015 Primary Government Governmental Business-type Component Activities Activities Total Units Assets Cash and investment pool $ 27,823,579 $ 2,132,489 $ 29,956,068 $ 1,750,229 Receivables 15,049,171 39,903,625 54,952,796 6,595,117 Other assets 154,398 2, ,497 3,102,985 Capital assets not being depreciated 2,267,213-2,267,213 3,716,385 Capital assets being depreciated, net 37,366,080-37,366,080 39,673,882 Total assets 82,660,441 42,038, ,698,654 54,838,598 Deferred outflows of resources Deferred pension amounts 5,029,060-5,029,060 1,235,004 Liabilities Accounts payable and accrued liabilities 2,090, ,482 2,639, ,876 Unearned revenue 12,298-12,298 - Long-term liabilities: Due within one year 2,558,875 2,749,837 5,308, ,141 Due in more than one year 22,212,030 33,631,095 55,843,125 1,313,539 Net pension liability 12,698,340-12,698,340 8,604,954 Net other postemployment benefits obligation 15,920,973-15,920,973 1,194,038 Total liabilities 55,493,231 36,929,414 92,422,645 12,428,548 Deferred inflows of resources Taxes levied for a subsequent period 10,631,991-10,631,991 2,570,000 Deferred income on refunding - 437, ,506 - Deferred pension amounts 344, ,785 - Total deferred inflows of resources 10,976, ,506 11,414,282 2,570,000 Net position Net investment in capital assets 16,477,876-16,477,876 42,070,267 Restricted 7,742, ,085 8,112,992 5,684,069 Unrestricted (deficit) (3,001,289) 4,301,208 1,299,919 (6,679,282) Total net position $ 21,219,494 $ 4,671,293 $ 25,890,787 $ 41,075,054 The accompanying notes are an integral part of these basic financial statements. 23

29 Statement of Activities For the Year Ended December 31, 2015 Program Revenues Indirect Operating Capital Expenses Charges Grants and Grants and Net (Expense) Functions / Programs Expenses Allocation for Services Contributions Contributions Revenue Primary government Governmental activities: General government $ 11,006,398 $ (443,992) $ 1,046,605 $ 4,138,002 $ - $ (5,377,799) Legislative 309, (309,011) Judicial 6,652, ,558 2,053,052 2,074,798 - (2,648,947) Public safety 12,645,763 16,365 3,299, ,282 9,342 (8,703,832) Public works 6, (6,747) Health and welfare 16,286, ,069 3,043,250 3,164,436 - (10,382,015) Culture and recreation 884, ,486 1,774 - (565,617) Planning and development 774, ,018 - (754,743) Interest on debt 1,129, (1,129,693) Total governmental activities 49,695,471-9,760,415 10,047,310 9,342 (29,878,404) Business-type activities: Delinquent property tax collection 216,690-1,118, ,081 Local unit water bonds 2,387, ,316, ,361 (854,634) Inmate services 385, , ,496 Total business-type activities 2,990,115-1,635,895 1,316, , ,943 Total primary government $ 52,685,586 $ - $ 11,396,310 $ 11,364,112 $ 225,703 $ (29,699,461) Component units Road Commission $ 9,496,168 $ - $ 2,590,018 $ 7,071,339 $ 2,030,204 $ 2,195,393 Drain Commission 829, ,471 78,328 EDCCM 1,380,050-8, (1,372,050) Total component units $ 11,705,361 $ - $ 2,598,018 $ 7,071,339 $ 2,937,675 $ 901,671 continued 24

30 Statement of Activities For the Year Ended December 31, 2015 Primary Government Governmental Business-type Component Activities Activities Total Units Changes in net position Net (expense) revenue $ (29,878,404) $ 178,943 $ (29,699,461) $ 901,671 General revenues: Property taxes 27,870,341-27,870,341 1,286,708 Grants and contributions not restricted to specific programs 3,980-3, ,758 Unrestricted investment earnings 434,658 53, ,519 6,023 Miscellaneous 3,485-3,485 - Gain on sale of capital assets ,048 Transfers - internal activities 823,289 (823,289) - - Total general revenues and transfers 29,135,753 (769,428) 28,366,325 1,543,537 Change in net position (742,651) (590,485) (1,333,136) 2,445,208 Net position, beginning of year, as restated 21,962,145 5,261,778 27,223,923 38,629,846 Net position, end of year $ 21,219,494 $ 4,671,293 $ 25,890,787 $ 41,075,054 concluded The accompanying notes are an integral part of these basic financial statements. 25

31 Balance Sheet Governmental Funds December 31, 2015 Senior Citizen Building Nonmajor Total Special Revenue Authority Debt Governmental Governmental General Fund Service Fund Funds Funds Assets Cash and investment pool $ 10,741,738 $ 153,292 $ 16,801 $ 11,453,310 $ 22,365,141 Receivables: Accounts 308, , ,281 Loans ,029,906 2,029,906 Current taxes 731,280 2,777,323-7,491,554 11,000,157 Interest 9, ,808 14,684 Due from other governments 213, ,471 1,136,220 Due from other funds 93, ,105 Prepaids 43, ,275 84,250 Long-term advances to other funds 200, ,000 Long-term advances to component units 445, ,089 Total assets $ 12,787,471 $ 2,930,672 $ 16,801 $ 22,043,889 $ 37,778,833 Liabilities Accounts payable $ 420,902 $ 49,681 $ - $ 288,069 $ 758,652 Accrued wages 456, , ,422 Due to other funds ,105 93,105 Due to other governments ,866 13,866 Unearned revenue ,298 12,298 Long-term advances from other funds , ,000 Total liabilities 877,892 49, ,770 1,755,343 Deferred inflows of resources Unavailable revenue - property taxes 514, ,908 Unavailable revenue - loans receivable ,029,906 2,029,906 Taxes levied for a subsequent period - 2,880,991-7,751,000 10,631,991 Total deferred inflows of resources 514,908 2,880,991-9,780,906 13,176,805 Fund balances Nonspendable 689, , ,339 Restricted ,801 5,803,498 5,820,299 Committed ,447,898 1,447,898 Assigned 1,610, ,143,542 5,754,472 Unassigned 9,094, ,094,677 Total fund balances 11,394,671-16,801 11,435,213 22,846,685 Total liabilities, deferred inflows of resources and fund balances $ 12,787,471 $ 2,930,672 $ 16,801 $ 22,043,889 $ 37,778,833 The accompanying notes are an integral part of these basic financial statements. 26

32 Reconciliation Fund Balances for Governmental Funds to Net Position of Governmental Activities December 31, 2015 Fund balances - total governmental funds $ 22,846,685 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore are not reported in the fund statement. Capital assets not being depreciated 2,267,213 Capital assets being depreciated, net 37,366,080 The focus of governmental funds is on short-term financing. Accordingly, some assets will not be available to pay for current-period expenditures. Those assets (such as certain receivables) are offset by deferred inflows of resources in the governmental funds, and thus are not included in fund balance. Deferred property taxes receivable 514,908 Deferred loans receivable 2,029,906 Internal service funds are used by management to charge the costs of certain activities, such as insurances, to individual governmental funds. The assets and liabilities of the internal service funds are included in governmental activities. Net position of governmental activities accounted for in internal service funds 5,215,333 Certain liabilities, such as bonds payable, are not due and payable in the current period, and therefore are not reported in the funds. Compensated absences payable (1,615,488) Accrued interest payable (314,688) Bond premium (335,417) Bonds payable (22,820,000) Certain postemployment benefit-related amounts, such as the net pension liability and deferred amounts, are not due and payable in the current period or do not represent current financial resources, and therefore are not reported in the funds. Net pension liability (12,698,340) Net other postemployment benefit obligation (15,920,973) Deferred outflows related to the net pension liability 5,029,060 Deferred inflows related to the net pension liability (344,785) Net position of governmental activities $ 21,219,494 The accompanying notes are an integral part of these basic financial statements. 27

33 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2015 Senior Citizen Building Nonmajor Total Special Revenue Authority Debt Governmental Governmental General Fund Service Fund Funds Funds Revenues Taxes $ 17,366,461 $ 2,816,065 $ - $ 7,695,012 $ 27,877,538 Intergovernmental 3,659, ,500,565 10,160,181 Charges for services 6,036, ,203,295 8,239,493 Licenses and permits 180, , ,272 Rental 13, ,385 Interest earnings 51,132 2, ,329 79,510 Miscellaneous 749, ,981 1,518,146 Total revenues 28,056,362 2,818, ,427,049 48,302,525 Expenditures Current: General service administration 7,001, ,608 7,077,946 Legislative 310, ,242 Judicial 4,007, ,372,203 5,379,447 Law enforcement and corrections 9,533, ,412 9,732,349 Emergency services and public safety 263, ,063 Public works 1, ,916 Health and welfare 218, ,152,089 12,370,596 Culture and recreation 789, ,990 Planning and development 4, , ,430 Other agencies 980,728 2,818,963-4,738,075 8,537,766 Capital outlay ,231,168 1,231,168 Debt service: Principal - - 1,055, ,000 1,320,000 Interest charges , ,795 1,146,745 Total expenditures 23,111,037 2,818,963 1,972,950 20,428,708 48,331,658 Revenues over (under) expenditures 4,945,325 - (1,972,799) (3,001,659) (29,133) Other financing sources (uses) Transfers in 797,189-1,672,950 4,916,509 7,386,648 Transfers out (5,652,916) - - (950,543) (6,603,459) Total other financing sources (uses) (4,855,727) - 1,672,950 3,965, ,189 Net change in fund balances 89,598 - (299,849) 964, ,056 Fund balances, beginning of year 11,305, ,650 10,470,906 22,092,629 Fund balances, end of year $ 11,394,671 $ - $ 16,801 $ 11,435,213 $ 22,846,685 The accompanying notes are an integral part of these basic financial statements. 28

34 Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities For the Year Ended December 31, 2015 Net change in fund balances - total governmental funds $ 754,056 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Acquisition/construction of capital assets 759,000 Loss on disposal of capital assets (33,004) Depreciation expense (1,721,905) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds, but rather are deferred. Net change in deferred property taxes receivable (7,197) Net change in deferred loans receivable (73,741) Bond proceeds provide current financial resources to governmental funds in the period issued, but issuing bonds increases long-term liabilities in the statement of net position. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal payments on long-term liabilities 1,320,000 An internal service fund is used by management to charge the costs of certain services to individual governmental funds. The net increase (decrease) in net position of those funds is reported with governmental activities. Operating income from governmental activities in internal service funds 965,901 Interest income from governmental activities internal service funds 355,148 Transfers in from governmental funds 40,100 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Change in accrued interest payable 17,051 Amortization of bond premium 25,800 Change in accrual for compensated absences (50,653) Change in the net pension liability and related deferred amounts (1,000,336) Change in obligation for postemployment benefits (2,092,871) Change in net position of governmental activities $ (742,651) The accompanying notes are an integral part of these basic financial statements. 29

35 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ 17,957,544 $ 17,957,544 $ 17,366,461 $ (591,083) Intergovernmental 3,665,700 3,709,886 3,659,616 (50,270) Charges for services 5,401,315 5,405,215 6,036, ,983 Licenses and permits 204, , ,405 (24,295) Rental 14,760 14,760 13,385 (1,375) Interest earnings 43,135 43,135 51,132 7,997 Miscellaneous 605, , , ,642 Total revenues 27,892,759 27,933,763 28,056, ,599 Expenditures Current: General service administration 7,548,076 7,550,825 7,001,338 (549,487) Legislative 327, , ,242 (17,547) Judicial 4,314,678 4,294,880 4,007,244 (287,636) Law enforcement and corrections 9,863,640 9,890,353 9,533,937 (356,416) Emergency services and public safety 284, , ,063 (21,055) Public works 3,153 3,153 1,916 (1,237) Health and welfare 225, , ,507 (7,781) Culture and recreation 873, , ,990 (87,705) Planning and development 5,712 5,712 4,072 (1,640) Other agencies 824, , ,728 4,391 Interest expense 12,000 12,000 - (12,000) Total expenditures 24,283,497 24,449,150 23,111,037 (1,338,113) Revenues over expenditures 3,609,262 3,484,613 4,945,325 1,460,712 Other financing sources (uses) Transfers in 819, , ,189 (22,275) Transfers out (5,769,848) (5,650,098) (5,652,916) 2,818 Total other financing sources (uses) (4,950,384) (4,830,634) (4,855,727) 25,093 Net change in fund balance (1,341,122) (1,346,021) 89,598 1,435,619 Fund balance, beginning of year 11,305,073 11,305,073 11,305,073 - Fund balance, end of year $ 9,963,951 $ 9,959,052 $ 11,394,671 $ 1,435,619 The accompanying notes are an integral part of these basic financial statements. 30

36 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Senior Citizen Special Revenue Fund For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ 2,778,979 $ 2,824,979 $ 2,816,065 $ (8,914) Interest earnings 3,300 3,300 2,898 (402) Total revenues 2,782,279 2,828,279 2,818,963 (9,316) Expenditures Current Other agencies 2,782,279 2,828,279 2,818,963 (9,316) Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ - $ - $ - $ - The accompanying notes are an integral part of these basic financial statements. 31

37 Statement of Net Position Proprietary Funds December 31, 2015 Business-type Activities - Enterprise Funds Larkin Lee Edenville Hope Township Township Township Township Water Bonds III Water Bonds Water Bonds Water Bonds Assets Current assets: Cash and investment pool $ 518 $ 34 $ 610 $ 950 Receivables: Accounts Delinquent taxes and interest Interest Due from other governments 384, , , ,813 Prepaids Total current assets 385, , , ,763 Noncurrent assets: Due from other governments 3,620,000 11,607,423 7,485,437 6,960,000 Long-term advances to other funds Total noncurrent assets 3,620,000 11,607,423 7,485,437 6,960,000 Total assets 4,005,366 12,000,252 7,763,835 7,185,763 Liabilities Current liabilities: Accounts payable Accrued liabilities Interest payable 79, ,795 57,788 29,813 Due to other governments Bonds payable - current 305, , , ,000 Notes payable - current Total current liabilities 384, , , ,813 Noncurrent liabilities Bonds payable - net of current portion 3,620,000 11,241,000 7,485,000 6,960,000 Long-term advances from other funds Total noncurrent liabilities 3,620,000 11,241,000 7,485,000 6,960,000 Total liabilities 4,004,848 11,633,795 7,762,788 7,184,813 Deferred inflows of resources Deferred income on refunding Net position Restricted ,457 1, Unrestricted Total net position $ 518 $ 366,457 $ 1,047 $ 950 The accompanying notes are an integral part of these basic financial statements. 32

38 Business-type Activities - Enterprise Funds Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds $ 2,130,377 $ 2,132,489 $ 5,458, ,831 2,750,503 2,750,503-1,590 1,590 3,003 1,438,515 2,718,759-2,099 2,099 70,148 6,323,084 7,605,440 5,541,420 4,759,913 34,432,773-1,000,000 1,000,000-5,759,913 35,432,773-12,082,997 43,038,213 5,541,420 32,835 32,835 16, ,699 74, , , , ,837 1,910, , ,000-2,018,075 3,298, ,087 4,325,095 33,631,095-1,000,000 1,000,000-5,325,095 34,631,095-7,343,170 37,929, , , ,506-1, ,085-4,301,208 4,301,208 5,215,333 $ 4,302,321 $ 4,671,293 $ 5,215,333 33

39 Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds For the Year Ended December 31, 2015 Business-type Activities - Enterprise Funds Larkin Lee Edenville Hope Township Township Township Township Water Bonds III Water Bonds Water Bonds Water Bonds Operating revenues Interest earned on delinquent taxes $ - $ - $ - $ - Collection fees Rental income Billings to departments Miscellaneous Total operating revenues Operating expenses Compensation payments Consultant services General service administration Supplies Total operating expenses Operating income Nonoperating revenue (expenses) Interest income Reimbursements from local units 202, , , ,750 Interest expense on interfund advances Contributions to local units (1,055,699) Interest and paying agent fees (205,250) (483,079) (237,750) (183,750) Total nonoperating revenue (expense) (2,750) (4,642) 14 (1,055,679) Income (loss) before capital grants and transfers (2,750) (4,642) 14 (1,055,679) Capital grants and transfers Capital grants ,361 Transfers in Transfers out Total capital grants and transfers ,361 Change in net position (2,750) (4,642) 14 (839,318) Net position, beginning of year 3, ,099 1, ,268 Net position, end of year $ 518 $ 366,457 $ 1,047 $ 950 The accompanying notes are an integral part of these basic financial statements. 34

40 Business-type Activities - Enterprise Funds Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds $ 407,998 $ 407,998 $ - 671, , , , ,228,957 39,036 39, ,028 1,635,895 1,635,895 4,664, , , ,900 63,063 51,682 51,682 3,331, , , , ,210 3,699,084 1,056,685 1,056, ,901 53,770 53, , ,422 1,316,802 - (23,108) (23,108) - - (1,055,699) - (222,269) (1,332,098) - 22,815 (1,040,242) 355,148 1,079,500 16,443 1,321, ,361-2,347,728 2,347,728 40,100 (3,171,017) (3,171,017) - (823,289) (606,928) 40, ,211 (590,485) 1,361,149 4,046,110 5,261,778 3,854,184 $ 4,302,321 $ 4,671,293 $ 5,215,333 35

41 Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2015 Business-type Activities - Enterprise Funds Larkin Lee Edenville Hope Township Township Township Township Water Bonds III Water Bonds Water Bonds Water Bonds Cash flows from operating activities Cash received for services provided $ - $ - $ - $ - Cash received from other governmental units Cash payments to suppliers for goods and services Cash received from delinquent taxes, including interest Cash payments for delinquent tax rolls Cash payments for insurance claims Net cash provided by (used in) operating activities Cash flows from noncapital financing activities Proceeds from issuance of tax notes Principal paid on tax notes Interest paid on interfund advances Transfers in Transfers out Net cash provided by (used in) noncapital financing activities Cash flows from capital and related financing activities Principal paid on long-term debt (305,000) (235,000) (220,000) (195,000) Interest paid on long-term debt (205,250) (483,079) (237,750) (183,750) Capital grants ,361 Contributions from local units 507, , , ,438 Net cash provided by (used in) capital and related financing activities (2,773) (4,675) 1 49 Cash flows from investing activities Interest on investments Net increase (decrease) in cash and investment pool (2,750) (4,641) Cash and investment pool, beginning of year 3,268 4, Cash and investment pool, end of year $ 518 $ 34 $ 610 $

42 Business-type Activities - Enterprise Funds Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds $ - $ - $ 4,655, , ,994 - (515,703) (515,703) (206,637) 3,584,630 3,584,630 - (2,557,094) (2,557,094) (3,593,243) 1,036,827 1,036, ,274 3,500,000 3,500,000 - (3,502,000) (3,502,000) - (23,108) (23,108) - 2,347,728 2,347,728 40,100 (3,171,017) (3,171,017) - (848,397) (848,397) 40,100 (927,000) (1,882,000) - (222,269) (1,332,098) ,361-1,141,422 2,982,492 - (7,847) (15,245) - 53,251 53, , , ,527 1,249,458 1,896,543 1,905,962 4,208,980 $ 2,130,377 $ 2,132,489 $ 5,458,438 continued 37

43 Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2015 Business-type Activities - Enterprise Funds Larkin Lee Edenville Hope Township Township Township Township Water Bonds III Water Bonds Water Bonds Water Bonds Reconciliation of operating income (loss) to net cash provided by (used in) operating activities Operating income (loss) $ - $ - $ - $ - Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Changes in operating assets and liabilities that provided (used) cash: Accounts receivable Delinquent taxes receivable Prepaids Due from other governments Accounts payable Accrued liabilities Due to other governments Net cash provided by (used in) operating activities $ - $ - $ - $ - The accompanying notes are an integral part of these basic financial statements. 38

44 Business-type Activities - Enterprise Funds Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds $ 1,056,685 $ 1,056,685 $ 965, (9,831) 315, ,691 - (2,099) (2,099) 6,686 (353,148) (353,148) - 11,828 11,828 12, (119,905) 7,870 7,870 - $ 1,036,827 $ 1,036,827 $ 855,274 concluded 39

45 Statement of Fiduciary Net Position Fiduciary Funds December 31, 2015 Private- Pension & Other Purpose Employee Benefit Agency Trust Funds Trust Funds Funds Assets Cash and investment pool $ 1,043,941 $ 895,362 $ 1,883,375 Investments: Common stock 779,922 67,661,249 - International equities - 1,310,714 - Corporate bonds - 5,842,288 - American depositary receipts - 97,075 - Real estate investment trusts - 2,915,035 - Money market accounts - 6,413,103 - Alternatives - 12,694,318 - U.S. government securities - 3,612,128 - Total investments 779, ,545,910 - Other assets Receivables: Accounts ,452 - Interest , Prepaids - 190,736 - Total other assets , Total assets 1,824, ,683,360 $ 1,883,535 Liabilities Accounts payable 1,076 19,813 $ 734,429 Accrued liabilities - 157,780 - Deposits payable ,153 Interest payable Due to other governments ,514 Total liabilities 1, ,593 $ 1,883,535 Net position restricted for: Specific programs 1,823,609 - Retirement benefits - 101,505,767 Total net position $ 1,823,609 $ 101,505,767 The accompanying notes are an integral part of these basic financial statements. 40

46 Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended December 31, 2015 Pension & Other Private- Employee Purpose Benefit Trust Funds Trust Funds Additions Contributions: Employer $ - $ 3,649,154 Plan members - 520,554 Other 1,440,656 - Total contributions 1,440,656 4,169,708 Investment income: Interest 2, ,225 Dividends 25,452 1,140,445 Other revenue - 16,720 Net appreciation in fair value of investments 88, ,537 Total investment earnings 116,782 2,255,927 Investment expense - (319,189) Net investment income 116,782 1,936,738 Total additions 1,557,438 6,106,446 Deductions Administrative expense 17, ,056 Health and welfare 1,287,986 Benefits paid - 7,771,041 Participant refunds - 89,432 Total deductions 1,305,636 8,085,529 Change in net position 251,802 (1,979,083) Net position, beginning of year 1,571, ,484,850 Net position, end of year $ 1,823,609 $ 101,505,767 The accompanying notes are an integral part of these basic financial statements. 41

47 Combining Statement of Net Position Discretely Presented Component Units December 31, 2015 Road Drain Commission Commission EDCCM Totals Assets Cash and investment pool $ 543,838 $ 1,198,914 $ 7,477 $ 1,750,229 Receivables: Current taxes 2,570, ,570,000 Special assessments - 2,074,418-2,074,418 Interest Due from other governmental units 1,949, ,949,966 Inventory 759, ,876 Prepaids 76, ,668 Property inventory - - 2,266,441 2,266,441 Capital assets not being depreciated 3,716, ,716,385 Capital assets being depreciated, net 35,221,438 4,452,444-39,673,882 Total assets 44,838,136 7,726,544 2,273,918 54,838,598 Deferred outflows of resources Deferred pension amounts 1,235, ,235,004 Liabilities Accounts payable 193,983 48, ,616 Accrued liabilities 37, ,037 Due to others - - 4,990 4,990 Advance from primary government - 445, ,089 Advances from state 207, ,144 Long-term debt: Due within one year - 379, ,141 Due in more than one year 372, ,859-1,313,539 Net other postemployment benefits obligation 1,194, ,194,038 Net pension liability 8,604, ,604,954 Total liabilities 10,609,836 1,813,722 4,990 12,428,548 Deferred inflows of resources Taxes levied for a subsequent period 2,570, ,570,000 Net position Net investment in capital assets 38,937,823 3,132,444-42,070,267 Restricted 2,191,480 2,780, ,211 5,684,069 Unrestricted (deficit) (8,235,999) - 1,556,717 (6,679,282) Total net position $ 32,893,304 $ 5,912,822 $ 2,268,928 $ 41,075,054 The accompanying notes are an integral part of these basic financial statements. 42

48 Combining Statement of Activities Discretely Presented Component Units For the Year Ended December 31, 2015 Program Revenues Operating Capital Charges Grants and Grants and Net (Expense) Functions / Programs Expenses for Services Contributions Contributions Revenue Road Commission Governmental activities Public works $ 9,496,168 $ 2,590,018 $ 7,071,339 $ 2,030,204 $ 2,195,393 Drain Commission Governmental activities Public works 706, , ,299 Depreciation 86, (86,837) Interest on debt 36, (36,134) Total Drain Commission 829, ,471 78,328 EDCCM Governmental activities General government 1,380,050 8, (1,372,050) Total component units $ 11,705,361 $ 2,598,018 $ 7,071,339 $ 2,937,675 $ 901,671 continued 43

49 Combining Statement of Activities Discretely Presented Component Units For the Year Ended December 31, 2015 Component Units Road Drain Commission Commission EDCCM Total Changes in net position Net revenue (expense) $ 2,195,393 $ 78,328 $ (1,372,050) $ 901,671 General revenues Property taxes 1,286, ,286,708 Miscellaneous revenue - 147, ,758 Unrestricted investment earnings 1,314 4, ,023 Gain on sale of capital assets 103, ,048 Total general revenues 1,391, , ,543,537 Change in net position 3,586, ,791 (1,372,046) 2,445,208 Net position, beginning of year, as restated 29,306,841 5,682,031 3,640,974 38,629,846 Net position, end of year $ 32,893,304 $ 5,912,822 $ 2,268,928 $ 41,075,054 concluded The accompanying notes are an integral part of these basic financial statements. 44

50 NOTES TO FINANCIAL STATEMENTS 45

51 Notes To Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Midland County, Michigan (the County ) was organized in 1850 and covers an area of approximately 521 square miles, with the County seat located in the City of Midland. The County operates under an elected Board of Commissioners (seven members) and provides services to its 83,629 residents (per 2010 census) in many areas, including law enforcement, administration of justice, community enrichment and development, and human services. The financial statements of the County have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the County s accounting policies are described below. Reporting Entity As required by generally accepted accounting principles, these financial statements present the government and its component units, entities for which the County is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government s operations and as such, data from these units are combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize that they are legally separate from the government. Blended Component Unit The Midland County Building Authority (the Authority ) was incorporated under provisions of Michigan Public Act 31 of 1948 and is governed by a five member Board appointed by the Midland County Board of Commissioners. Although it is legally separate from the County, the Building Authority is reported as if it were part of the primary government because its sole purpose is to finance and construct the County s public buildings. As a result, the County has included in its financial statements a debt service fund, used for the accumulation of resources to pay off the debt. Also, the County has incorporated the bond issues and capital assets in the governmental activities. Discretely Presented Component Units The component unit columns in the financial statements include the financial data of the County s other component units. They are reported in a separate column to emphasize that they are legally separate from the County. The Midland County Road Commission is the agency through which the County carries on activities relative to roads and highways. The Midland County Board of Commissioners appoints three Road Commissioners for six-year terms and the County has the ability to impose its will on the Road Commission. Road service is conducted within the County and for the benefit of County residents. Motor Vehicle Highway funds and local property taxes are the primary revenue sources. 46

52 Notes To Financial Statements The Midland County Drain Commission is the Agency through which the County carries on the activities related to construction and maintenance of County drains. The Drain Commission is fiscally dependent on Midland County. Public Act 40 (The Drain Code) of 1956 established each drainage district as a separate legal entity with the power to contract, to sue and be sued, to hold, manage and dispose of real and personal property, etc. The Drain Commission may issue debt and levy special assessments without the prior approval of the County Board of Commissioners. The full faith and credit of the County may be given for the debt of the drainage districts. The Drain Commission deposits its receipts with the County Treasurer. The Economic Development Corporation of the County of Midland ( EDCCM ) was established in accordance with Act 338 of the Public Acts of 1984, by a resolution of the Midland County Board of Commissioners. The EDCCM was formed to assist in the attraction, expansion and retention of facilities which provide employment and which are most desirable and beneficial to the environment, economics and citizenry of Midland County. The EDCCM is not a lending institution, except as provided by the Community Development Block Grant Re-use Plan as approved by the Midland County Board of Commissioners. Its function is as an issuer of tax-exempt bonds, in accordance with Act 338 as amended. The Midland County Board of Commissioners appoints the Board of Directors and has the ability to significantly influence the operations of the EDCCM. Complete financial statements of the road commission and EDCCM discretely presented component units can be obtained from their respective administrative offices listed below or from the County Clerk s Office at the Courthouse. Administrative Offices Midland County Road Commission Midland County Economic Development Corporation 2334 N. Meridian Rd 300 Rodd Street Sanford, MI Midland, MI Related disclosures for the County s component units have been incorporated into the notes to the financial statements and are referenced to the above mentioned component units when applicable. Related Organizations The County s Board of Commissioners is also responsible for appointing members of the Boards of other organizations, but the County s accountability for these organizations does not extend beyond making the appointments. The County Board chairman or specific committees of the County Board appoints one Board member of the Council on Aging, one Board member of the Emergency Medical Services Board and two Board members (out of seven) of the Midland County Central Dispatch Authority. Joint Building Authority The County is a participant with the City of Midland in a joint City/County Building Authority (the Joint Authority ). The Joint Authority was created to provide for the acquisition and construction of certain public buildings, parking lots or structures, recreational facilities, stadiums and the necessary site or sites for the joint use of the City and County. 47

53 Notes To Financial Statements The Joint Authority is governed by a three-member Board composed of an appointee from both the City and County and a third who is mutually appointed. Complete financial statements for the Joint Authority can be obtained from the Joint Authority s administrative office located at 333 W. Ellsworth Street, Midland MI or at the County Clerk s Office. 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 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. 48

54 Notes To Financial Statements Governmental funds 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 90 days of the end of the current fiscal period, except taxes and E- 911 surcharge collections which must be collected within 60 days, health department revenue which must be collected within 120 days, and expenditure-driven grants which must be collected within one year. 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 within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The County reports the following major governmental funds: The General Fund is the government s primary operating fund. It accounts for all the financial resources of the general government, except those accounted for and reported in another fund. The Senior Citizen Special Revenue Fund accounts for funds raised by a special tax levy to maintain and expand services to older citizens in Midland County. The Building Authority Fund accounts for the accumulation of funds for the payment of interest and principal on the Building Authority Bonds for the County Services Building, Courthouse Reconstruction, Mosquito Abatement Building, and Jail Construction. The County reports the following major proprietary funds: The Larkin Township Water Bonds III Fund is used to account for the accumulation of funds for the payment of interest and principal on the Larkin Township III Water Bonds. The Lee Township Water Bonds Fund is used to account for the accumulation of funds for the payment of interest and principal on the Lee Township Water Bonds. The Edenville Township Water Bonds Fund is used to account for the accumulation of funds for the payment of interest and principal on the Edenville Township Water Bonds. The Hope Township Water Bonds Fund is used to account for the accumulation of funds for the payment of interest and principal on the Hope Township Water Bonds. 49

55 Notes To Financial Statements Additionally, the County reports the following fund types: Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Capital Projects Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Enterprise Funds account for those operations that are financed and operated in a manner similar to private business or where the County has decided that the determination of revenues earned, costs incurred and/or net income is necessary for management accountability. Internal Service Funds account for the equipment maintenance and replacement, insurance, day activity center maintenance, and mobile data terminal activity of the County provided to other departments and funds on a cost reimbursement basis. The Private Purpose Trust Funds account for trust arrangements for the juvenile care center, forfeiture control, department of human services, Pinecrest special donor, Bergstein donor trust, Midland charitable family trust, public guardian trust, and real estate transfer tax, which accumulate resources held in trust for those specific purposes. The Pension and Other Employee Benefit Trust Funds account for the activities of the County Employees Retirement System, Act 345 Retirement System, and the Retiree Healthcare Plan, which accumulate resources for pension and health benefit payments for qualified employees. Agency Funds are custodial in nature and do not present results of operations or have a measurement focus. These funds are used to account for assets that the government holds for others in an agency capacity (such as taxes collected for other governments). These include the county agency, flexible benefits, library penal fines, inmate, DHS child care, and DHS social welfare agency funds. 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. The General Fund provides certain central services to other funds of the County which are presented as program expenses in the funds receiving services. The related General Fund revenue has been netted against program expense in the government-wide statement of activities. 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. 50

56 Notes To Financial Statements Restricted net position are assets 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. Assets, deferred outflows of resources, liabilities, deferred inflows of resources, and equity Deposits and investments The County Treasurer maintains centralized management of most County cash resources, including cash resources of the following component units: the Midland County Drain Commission, the Midland County Road Commission and the EDCCM. Available cash is invested temporarily in certificates of deposits, money market accounts or other highly liquid investments. Each fund s share of the balance is reported in a separate cash account for the respective fund. The interest carried on the pooled funds is credited to the General Fund and is allocated to most funds based on average balances. Negative balances occasionally arise in some funds and represent implied interfund borrowings. For purposes of the statement of cash flows, the County considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Investments that do not have an established market are reported at estimated fair value. Receivables and payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either due to/from other funds (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as due to/from other funds. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. 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. Amounts received in advance of project costs being incurred are reported as unearned revenue. Certain receivables in governmental funds consist of rehabilitation and redevelopment loans that are generally not expected or scheduled to be collected in the subsequent year. 51

57 Notes To Financial Statements Inventory and prepaid items Inventory in the Road Commission component unit is stated at cost, as determined on the average unit cost method. Inventory items are charged to road construction and maintenance, equipment and repairs and operations as they are used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items, using the purchases method, in both the government-wide and fund financial statements. Capital assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined for financial statement purposes as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities, if any, is included as part of the capitalized value of the assets constructed. No such interest expense was incurred during the current fiscal year. In the Drain Commission component unit and the Road Commission component unit, infrastructure includes only those infrastructure assets acquired subsequent to January 1, Capital assets of the primary government as well as the component units are depreciated using the straight-line method over the following estimated useful lives: Years Land improvements 3-25 Buildings and improvements Public domain/system infrastructure 5-50 Machinery and equipment 3-10 Vehicles 6-15 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 represents a consumption of net position that applies to one or more future periods and so will not be recognized as an outflow of resources (expense/ expenditure) until then. The County reports deferred outflows of resources for change in expected and actual investment returns, assumptions, and differences between expected and actual experience seen in its pension plan. 52

58 Notes To Financial Statements Compensated absences County employees accumulate compensated leave time in varying amounts depending on length of service and other factors. A liability for these amounts is reported in governmental funds only if they matured, for example, as a result of employee resignations and retirements. Unearned revenue Unearned revenue consists of amounts received prior to the delivery of goods/service or expenditure on allowable costs. Long-term obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts 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 net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds report unavailable revenues, which arises only under a modified accrual basis of accounting, from two sources: property taxes and loans receivable. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. In addition, deferred inflows of resources are reported in the government-wide and governmental fund financial statements for property taxes levied during the year that were intended to finance future periods. Deferred income on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. In addition, the County reports deferred inflows of resources in its full-accrual statements related to the net pension liability. 53

59 Notes To Financial Statements Fund equity Governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted fund balance is reported when externally imposed constraints are placed on the use of resources by grantors, contributors, or laws or regulations of other governments. Committed fund balance is reported for amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the Board of Commissioners (the government s highest level of decision-making authority). A formal resolution of the Board of Commissioners is required to establish, modify, or rescind a fund balance commitment. The County reports assigned fund balance for amounts that are constrained by the government s intent to be used for specific purposes, but are neither restricted nor committed. The Board of Commissioners has delegated the authority to assign fund balance to the County Administrator/Controller or his/her designee. Unassigned fund balance is the residual classification for the General Fund. When the government incurs an expenditure for purposes for which various fund balance classifications can be used, it is the government s policy to use restricted fund balance first, then committed fund balance, assigned fund balance, and finally unassigned fund balance. The Board of Commissioners has adopted a minimum fund balance policy in which the assigned fund balance of the general fund of at least 8.33% (or the equivalent of one month) of the subsequent year's adopted budgeted expenditures and transfers out. If the fund balance of the general fund falls below the minimum range, the Administrator/Controller shall develop a restoration plan to achieve and maintain the minimum required amount. 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. Pensions For purposes of measuring the net pension asset, deferred outflows of resources and deferred inflows of resources related to pensions, as applicable, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the plan fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 54

60 Notes To Financial Statements Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. The County utilizes various investment instruments which are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements. 2. BUDGETARY INFORMATION The General Fund and Special Revenue Funds operate under formal budgetary control. A general appropriation budget is prepared in accordance with Michigan Public Act 2 of 1968, as amended, and the budgetary document is submitted annually by the County Administrator/Controller to the Finance Committee, which recommends formal adoption by the Midland County Board of Commissioners. Budgets presented in the financial statements are prepared on a modified accrual basis of accounting and encompass all amendments. Budgetary control is exercised at the activity level. The County Administrator/Controller is authorized to make budget transfers within these funds at the activity level. The Board of Commissioners is authorized to make and has made supplemental appropriation adjustments to the budget during the fiscal year as deemed necessary at the levels of budgetary control as noted above. These adjustments are reflected in the budget amounts in the financial statements. All encumbered appropriations lapse at the end of the fiscal year unless related commitments, contracts or purchase orders are outstanding at year-end. 55

61 Notes To Financial Statements 3. EXCESS OF EXPENDITURES OVER BUDGET The following funds had excess of expenditures over appropriations at the legal level of budgetary control: Appropriations Actual Budget Variance General Fund Other agencies $ 976,337 $ 980,728 $ 4,391 Transfers out 5,650,098 5,652,916 2,818 Act 511 Community Corrections Planning and development 162, ,358 3,437 Domestic Prepared Equipment Capital outlay - 1,329 1,329 Drug Court Law enforcement and corrections 95,000 95, Central Dispatch Other agencies 2,314,681 2,339,728 25,047 Swift and Sure Sanctions Probation Law enforcement and corrections Law Library Judicial 25,768 26,986 1,218 Housing MSHDA Transfers out Veterans Trust Health and welfare 25,000 25, ETC Transportation Other agencies 2,350,111 2,398,347 48,236 56

62 Notes To Financial Statements 4. DEPOSITS AND INVESTMENTS Statutory Authority 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. 4. 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. 7. External investment pools as authorized by Public Act 20 as amended through December 31, A reconciliation of cash, pooled investments and investments as shown in the basic financial statements to the County s deposits and investments is as follows: Primary Government Component Units Totals Statement of Net Position Cash and investment pool $ 29,956,068 $ 1,750,229 $ 31,706,297 Statement of Fiduciary Net Position Cash and investment pool 3,822,678-3,822,678 Investments 101,325, ,325,832 Total $ 135,104,578 $ 1,750,229 $ 136,854,807 57

63 Notes To Financial Statements Deposits and investments Bank deposits: Checking and savings accounts $ 8,096,315 Certificates of deposit due within one year 10,007,640 Investments: Act 345 retirement system 22,720,410 Employees' retirement system 54,127,724 Retiree health care fund 23,697,776 Other: U.S. government securities 3,350,000 Common stock 779,922 Commercial Paper 3,987,091 Municipal Bonds 300,000 MBIA class funds 6,386,910 Money market accounts 3,376,016 Total other 18,179,939 Cash on hand 25,003 Total $ 136,854,807 The County has adopted an official investment policy which is in accordance with investments permitted by Act 20 of the Michigan Public Acts of 1943 as amended, Act 196 PA 1997 (the Act). The Act generally allows the County to deposit funds in banks, savings and loan associations, and credit unions in the State of Michigan. The Act also provides for investment in U.S. government obligations; certificates of deposit of banks, savings and loans, and credit unions; commercial paper; repurchase agreements; bankers acceptances; and, with some restrictions, mutual funds. Pension Trust funds are also allowed to invest in corporate stocks and bonds. Pension Trust fund investments are subject to a number of restrictions as to type, quality and concentration of investments. All investments are reported at fair value. Investment risk is separately disclosed below for the County investments, the Act 345 Retirement System, The Employees Retirement System and the Retiree Health Care fund. 58

64 Notes To Financial Statements County's Investments Interest Rate Risk. State law limits the allowable investments and the maturities of some of the allowable investments. Midland County further limits the allowable investments and maturities of some allowable investments in its investment policy. The investment policy states that the County will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the County will not directly invest in securities maturing more than three years from the date of purchase. The County may collateralize its repurchase agreements using longer-dated investments not to exceed three years to maturity. Reserve funds may be invested in securities exceeding three years if the maturity of such investments are made to coincide as nearly as possible with the expected use of the funds. As of year end, maturities of the County's debt securities were as follows: Due in < 1 year Due in 1-5 years Totals U.S. government securities $ - $ 3,350,000 $ 3,350,000 Municipal bonds 300, ,000 $ 300,000 $ 3,350,000 $ 3,650,000 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 above. The County s investment policy does not have specific limits in excess of state law on investment credit risk. Credit risk ratings of the County's debt securities as of year end are summarized as follows: U.S. government securities Municipal bonds S&P AA+ $ 3,350,000 $ - S&P SP ,000 $ 3,350,000 $ 300,000 Custodial Credit Risk Deposits. Custodial credit risk is the risk that in the event of a bank failure, the County s deposits may not be returned. State law does not require and the County does not have a policy for deposit custodial credit risk. As of year-end, $21,439,728 of the County s bank balance of $21,950,411 was exposed to custodial credit risk because it was uninsured and uncollateralized. 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. State law does not require a policy for investment custodial credit risk. However, the County s investment policy states that no more than sixty percent of the County investment portfolio will be invested with a single financial institution. However, while uninsured and unregistered, the County s funds are not exposed to custodial credit risk since the securities are held in the counterparty s trust department in the County s name. 59

65 Notes To Financial Statements Concentration of Credit Risk. State law limits allowable investments but does not limit concentration of credit risk as identified above. The County s investment policy states that no more than sixty percent of the County investment portfolio, with the exception of U.S. Treasury securities and authorized pools, should be invested in a single security type. More than five percent of the County s investments are not invested in a single investment. All investments held at year-end are reported above. Midland County Act 345 Retirement System The System s investments are primarily held in a bank administered trust fund. Following is a summary of the System s investments at fair value, as determined by quoted market prices, as of December 31, 2015: U.S. government securities $ 1,666,219 Corporate bonds 2,509,449 Common stock 12,259,268 Real estate investment trust 395,517 Alternatives 5,758,812 Money market 131,145 Total investments $ 22,720,410 The Michigan Public Employees Retirement Systems Investment Act, Public Act 314 of 1965, as amended, authorizes the System to invest in domestic and foreign stocks, government securities, corporate securities, mortgages, real estate and various other investment instruments, subject to certain limitations. Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The System s investment policy emphasizes appropriate risk/return parameters and compliance with Public Act 314, and gives discretionary authority to its investment managers as opposed to establishing specific credit rating benchmarks. As of December 31, 2015, the System s investments in debt securities were rated by Moody s as follows: U.S. government securities Corporate bonds Rating: A $ - $ 501,929 AA - 175,802 AAA 1,666, ,583 B - 79,435 BB - 158,380 BBB - 1,028,320 $ 1,666,219 $ 2,509,449 60

66 Notes To Financial Statements United States treasury securities are explicitly guaranteed by the U.S. government and not considered to have credit risk. The System s investments in common stock, alternatives, real estate investment trust, and money market funds are not rated. Custodial Credit Risk. For investments, custodial credit risk is the risk that, in the event of the failure of the counterparty to a transaction, the System will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The System s investment policy requires that securities be held in trust by a third-party institution in the System s name or its nominee custodian s name or in bearer form. Although uninsured and unregistered, the System s investments are not exposed to custodial credit risk since the securities are held by the counterparty s trust department or agent in the System s name. Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of the System s investment in a single issuer. The System s investment policy requires that no manager will hold more than 5% of its portion of the total fund in any single company and no more than 5% may be held in any single common stock. At December 31, 2015 the System s investment portfolio was not concentrated. Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The System s investment policy does not discuss the maximum maturity for any single fixed income security or the weighted average portfolio maturity. As of December 31, 2015, maturities of the System s debt securities were as follows: Due in 1-5 years Due in 6-10 years Due in > 10 years Totals U.S. government securities $ 350,319 $ 294,873 $ 1,021,027 $ 1,666,219 Corporate bonds 1,465, , ,601 2,509,449 Total $ 1,815,586 $ 966,454 $ 1,393,628 $ 4,175,668 Midland County Employees' Retirement System The System s investments are primarily held in a bank administered trust fund. Following is a summary of the System s investments at fair value, as determined by quoted market prices, as of December 31, 2015: American depository receipts $ 97,075 Real estate investment trusts 1,357,328 Common stock 47,225,904 International equities 1,310,714 Money market 4,136,703 Total investments $ 54,127,724 The Michigan Public Employees Retirement Systems Investment Act, Public Act 314 of 1965, as amended, authorizes the System to invest in domestic and foreign stocks, government securities, corporate securities, mortgages, real estate and various other investment instruments, subject to certain limitations. 61

67 Notes To Financial Statements Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The System s investment policy emphasizes appropriate risk/return parameters and compliance with Public Act 314, and gives discretionary authority to its investment managers as opposed to establishing specific credit rating benchmarks. None of the investments above have credit ratings. Custodial Credit Risk. For investments, custodial credit risk is the risk that, in the event of the failure of the counterparty to a transaction, the System will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The System s investment policy requires that securities be held in trust by a third-party institution in the System s name or its nominee custodian s name or in bearer form. Although uninsured and unregistered, the System s investments are not exposed to custodial credit risk since the securities are held by the counterparty s trust department or agent in the System s name. Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of the System s investment in a single issuer. The System s investment policy requires that no manager will hold more than 5% of its portion of the total fund in any single company and no more than 5% may be held in any single common stock. At December 31, 2015 the System s investment portfolio was not concentrated. Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The System s investment policy does not discuss the maximum maturity for any single fixed income security or the weighted average portfolio maturity. Foreign Currency Risk. Foreign currency risk is the risk that significant fluctuations in exchange rates may adversely affect the fair value of an investment. The System has no policies relating to foreign currency risk. The System s exposure to foreign currency risk is summarized as follows: Investment/ Country Currency Fair Value (in U.S. Dollars) Ireland Euro $ 684,237 Switzerland Swiss franc 362,819 United Kingdom Euro 108,255 France Euro 155,403 Total $ 1,310,714 Retiree Health Care Fund Investments The Retiree Healthcare Fund investments are similarly governed by Public Act 314 of 1965 and follow the investment policies of the Employees Retirement System, although the Retiree Healthcare Fund is independent of the System. The Retiree Healthcare Fund s investments are held by an independent investment management company. 62

68 Notes To Financial Statements Following is a summary of the Retiree Healthcare Fund s investments at fair value, as determined by quoted market prices, as of December 31, 2015: U.S. government securities $ 1,945,909 Corporate bonds 3,332,839 Common stock 8,176,077 Real Estate Investment Trust 1,162,190 Alternatives 6,935,506 Money market 2,145,255 Total investments $ 23,697,776 Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Retiree Healthcare Fund s investment policy emphasizes appropriate risk/return parameters and compliance with Public Act 314, and gives discretionary authority to its investment managers as opposed to establishing specific credit rating benchmarks. As of year end, the Retiree Healthcare Fund s investments in debt securities were rated by Moody s as follows: U.S. government securities Corporate bonds Rating: A $ - $ 467,821 AA - 181,338 AAA 1,945, ,026 B - 118,187 BB - 300,032 BBB - 1,299,435 $ 1,945,909 $ 3,332,839 United States treasury securities are explicitly guaranteed by the U.S. government and not considered to have credit risk. The Retiree Healthcare Fund s investments in common stock, real estate investment trust, alternatives, and money market funds are not rated. Custodial Credit Risk. For investments, custodial credit risk is the risk that, in the event of the failure of the counterparty to a transaction, the Retiree Healthcare Fund will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Retiree Healthcare Fund s investment policy requires that securities be held in trust by a third-party institution in the Retiree Healthcare Fund s name or its nominee custodian s name or in bearer form. Although uninsured and unregistered, the Retiree Healthcare Fund s investments are not exposed to custodial credit risk since the securities are held by the counterparty s trust department or agent in the Retiree Healthcare Fund s name. Short-term investments in money market funds and open-end mutual funds are not exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book form. Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of the Retiree Healthcare Fund s investment in a single issuer. The Retiree Healthcare Fund s investment policy requires that no manager will hold more than 5% of its portion of the total fund in any single company and no more than 5% may be held in any single common stock. At year end, the Retiree Healthcare Fund s investment portfolio was not concentrated. 63

69 Notes To Financial Statements Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Retiree Healthcare Fund s investment policy does not discuss the maximum maturity for any single fixed income security or the weighted average portfolio maturity. As of year end, maturities of the Retiree Healthcare Fund s debt securities were as follows: Due in 1-5 years Due in 6-10 years Due in >10 years Totals U.S. government securities $ 115,753 $ 492,841 $ 1,337,315 $ 1,945,909 Corporate bonds 1,868, , ,524 3,332,839 Total $ 1,984,172 $ 1,422,737 $ 1,871,839 $ 5,278, RECEIVABLES Receivables are comprised of the following at year-end: Governmental Activities Business-type Activities Component Units Accounts $ 420,112 $ - $ - Loans 2,029, Taxes and special assessments 11,000,157 2,750,503 4,644,418 Interest 17,687 1, Intergovernmental 1,581,309 37,151,532 1,949,966 $ 15,049,171 $ 39,903,625 $ 6,595,117 Governmental funds report deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Resources intended to provide financing for a subsequent period are also reported as deferred inflows of resources in both governmental and proprietary fund types. In the governmental activities, $2,029,906 of the loans receivable and $1,109,270 of the taxes and special assessments receivable is considered noncurrent and not expected to be collected within one year. In the business-type activities, $34,432,773 of the intergovernmental receivables is considered noncurrent and not expected to be collected within one year. 64

70 Notes To Financial Statements 6. CAPITAL ASSETS Primary government Capital asset activity for the primary government for the year ended December 31, 2015, was as follows: Beginning Balance Additions Disposals Transfers Ending Balance Governmental Activities Capital assets, not being depreciated: Land $ 2,267,213 $ - $ - $ - $ 2,267,213 Capital assets, being depreciated: Land improvements 2,189, ,189,682 Buildings and improvements 48,902,580 94, ,997,540 Machinery and equipment 3,128, ,395 (178,136) - 3,199,237 Motor vehicles 3,301, ,645 (439,729) - 3,277,897 57,523, ,000 (617,865) - 57,664,356 Less accumulated depreciation for: Land improvements (1,431,888) (47,131) - - (1,479,019) Buildings and improvements (13,233,181) (983,346) - - (14,216,527) Machinery and equipment (2,380,976) (221,537) 177,574 - (2,424,939) Motor vehicles (2,115,187) (469,891) 407,287 - (2,177,791) (19,161,232) (1,721,905) 584,861 - (20,298,276) Total capital assets being depreciated, net 38,361,989 (962,905) (33,004) - 37,366,080 Governmental activities capital assets, net $ 40,629,202 $ (962,905) $ (33,004) $ - $ 39,633,293 Business-type Activities Capital assets, not being depreciated: Construction in progress $ 16,142,115 $ 216,361 $ (16,358,476) $ - $ - 65

71 Notes To Financial Statements Business-type activities construction in progress is related to water projects administered by the County on behalf of the local units. Upon completion of the projects, construction in progress is reversed and a receivable from the local unit is established equal to the debt outstanding. During the construction project, construction in progress is equal to the debt and grant proceeds expended. During the year, projects for Hope and Edenville townships were completed and assets totaling $8,335,729 and $8,022,747 were transferred, respectively. Depreciation expense was charged to functions/programs of the primary government as follows: Depreciation of governmental activities by function Judicial $ 78,880 General government 442,455 Public safety 644,946 Public works 4,831 Health and welfare 443,640 Cultural and recreation 106,394 Planning and development 759 $ 1,721,905 66

72 Notes To Financial Statements Discretely presented component units Capital assets activity for the Road Commission component unit for the year ended December 31, 2015, was as follows: Beginning Balance Additions Disposals Ending Balance Component Unit - Road Commission Capital assets, not being depreciated: Land and improvements $ 3,707,685 $ - $ - $ 3,707,685 Land / right-of-way 8, ,700 3,716, ,716,385 Capital assets, being depreciated: Buildings 2,822,006 26,661-2,848,667 Road equipment 6,951, ,776 (604,829) 7,197,891 Shop equipment 112,191 10,720 (257) 122,654 Office equipment 85,949 15,624 (5,535) 96,038 Engineer equipment 73,235 55,366 (19,590) 109,011 Infrastructure - bridges 7,007,833 1,741,379-8,749,212 Infrastructure - roads 35,841,936 4,016,474 (101,437) 39,756,973 Infrastructure - traffic lights 67, ,447 52,962,541 6,717,000 (731,648) 58,947,893 Less accumulated depreciation for: Buildings (1,196,448) (59,265) - (1,255,713) Road equipment (5,673,146) (587,011) 599,418 (5,660,739) Shop equipment (111,152) (1,278) 257 (112,173) Office equipment (75,470) (4,579) 5,535 (74,514) Engineer equipment (70,118) (6,916) 19,590 (57,444) Infrastructure - bridges (969,781) (158,656) - (1,128,437) Infrastructure - roads (13,500,810) (1,977,057) 101,437 (15,376,430) Infrastructure - traffic lights (56,486) (4,519) - (61,005) (21,653,411) (2,799,281) 726,237 (23,726,455) Total capital assets being depreciated, net 31,309,130 3,917,719 (5,411) 35,221,438 Road Commission capital assets, net $ 35,025,515 $ 3,917,719 $ (5,411) $ 38,937,823 67

73 Notes To Financial Statements Capital assets activity for the Drain Commission component unit for the year ended December 31, 2015, was as follows: Beginning Balance Additions Disposals Ending Balance Component Unit - Drain Commission Capital assets, being depreciated: Infrastructure $ 4,790,353 $ 429,969 $ - $ 5,220,322 Less accumulated depreciation for: Infrastructure (681,041) (86,837) - (767,878) Total capital assets being depreciated, net $ 4,109,312 $ 343,132 $ - $ 4,452, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities are comprised of the following at year-end: Governmental Activities Business-type Activities Component Units Accounts $ 775,040 $ 32,835 $ 242,616 Accrued liabilities 987,121-37,037 Interest payable 314, ,284 - Intergovernmental 13, , ,223 $ 2,090,715 $ 548,482 $ 936,876 68

74 Notes To Financial Statements 8. INTERFUND BALANCES AND TRANSFERS The composition of interfund balances as of year end, was as follows: Due to and from primary government funds Due from Other Funds Due to Other Funds General fund $ 93,105 $ - Nonmajor governmental funds - 93,105 $ 93,105 $ 93,105 The above balances generally resulted from a time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. Advances to and from primary government funds Advance from Other Funds Advance to Other Funds General Fund $ - $ 200,000 Nonmajor governmental funds 200,000 - Nonmajor enterprise funds 1,000,000 1,000,000 $ 1,200,000 $ 1,200,000 Long-term advances from the General Fund to other funds are commonly made without specific repayment terms to finance new activities during their initial operations. A nonspendable fund balance is maintained in the General Fund for these advances as shown on the balance sheet-governmental funds. Advances are made by the General Fund based upon the cash needs of the funds receiving the advance. Advances between the Tax Repayment Funds and the Delinquent Tax Revolving Fund exist to maintain adequate reserves in the Tax Repayment Funds until delinquent taxes are collected. 69

75 Notes To Financial Statements For the year ended December 31, 2015, interfund transfers consisted of the following: Transfers Out General Fund Transfers in (Continued) Building Authority Nonmajor Governmental Funds Nonmajor Enterprise Funds General Fund $ - $ 1,672,950 $ 3,979,966 $ - Nonmajor governmental funds 14, ,543 - Nonmajor enterprise funds 783, ,347,728 $ 797,189 $ 1,672,950 $ 4,916,509 $ 2,347,728 Transfers in (Concluded) Transfers Out Internal Service Funds Totals General Fund $ - $ 5,652,916 Nonmajor governmental funds - 950,543 Nonmajor enterprise funds 40,100 3,171,017 $ 40,100 $ 9,774,476 Transfers are used to: (1) move revenues from the fund that is required to collect them to the fund that is required or allowed to expend them; (2) move receipts restricted to or allowed for debt service from the funds collecting the receipts to the debt service fund as debt service payments become due; and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. 70

76 Notes To Financial Statements 9. LONG-TERM DEBT The County has issued general obligation bonds to provide funds for the acquisition and construction of major capital assets. The original amount of general obligation bonds issued for the governmental activities is $30,985,000. The original amount of general obligation bonds issued for business-type activities is $43,970,000. The Drain Commission component unit has notes and bonds for drain construction. The original amount of these notes and bonds is $4,140,000. Governmental Activities Beginning Balance Additions Deductions Ending Balance Due Within One Year Building Authority Bonds of $24,485,000, due in annual installments of $875,000 to $1,700,000 through 2028 at interest rates of 3.25 to 5.25%, payable semi-annually $ 18,795,000 $ - $ (1,055,000) $ 17,740,000 $ 1,090,000 Capital Improvement Bonds of $6,500,000, due in annual installments of $215,000 to $475,000 through 2029, interest at 3.25 to 4.75%, payable semi-annually 5,345,000 - (265,000) 5,080, ,000 Net bond premium 361,217 - (25,800) 335,417 25,800 Total governmental activities bonds 24,501,217 - (1,345,800) 23,155,417 1,390,800 Compensated absences 1,564,835 1,380,217 (1,329,564) 1,615,488 1,168,075 Total governmental activities $ 26,066,052 $ 1,380,217 $ (2,675,364) $ 24,770,905 $ 2,558,875 For the governmental activities, net pension liability, net other postemployment obligation, and compensated absences are generally liquidated by the general fund and certain special revenue funds. 71

77 Notes To Financial Statements Beginning Balance Additions Deductions Ending Balance Due Within One Year Business-type Activities 2015 Delinquent Property Tax Advance Note of $3,500,000, due in fiscal 2016, interest rates of LIBOR plus 70 basis points. $ - $ 3,500,000 $ (2,661,000) $ 839,000 $ 839, Delinquent Property Tax Advance Note of $3,000,000, repaid during ,000 - (841,000) - - Water Supply Bond issuances and refundings totaling $53,100,000, due in varying annual installments of $10,000 to $467,000 through 2052, interest at 1.75 to 7.0% payable semi-annually. 37,353,399 - (1,882,000) 35,471,399 1,903,000 Net bond premium 78,370 - (7,837) 70,533 7,837 Total business-type activities $ 38,272,769 $ 3,500,000 $ (5,391,837) $ 36,380,932 $ 2,749,837 72

78 Notes To Financial Statements Beginning Balance Additions Deductions Ending Balance Due Within One Year Discretely-Presented Component units Drain Commission Kent Drain Bond of $320,000, due in annual installments of $29,000 to $35,000 plus interest at 2.280% through June 15, 2025 $ - $ 320,000 $ - $ 320,000 $ 29,141 Ashby Drain Bond of $985,000, due in annual installments of $45,000 to $50,000 plus interest at 4.0 to 4.875% through September 1, ,000 - (50,000) 300,000 50,000 Abbott & Ware Drain Bonds of $750,000, due in annual installments of $75,000 plus interest of % through June 1, ,000 - (75,000) 75,000 75,000 Little Salt Intercounty Drain Bonds of $1,590,000, due in annual installments of $150,000 to $175,000 plus interest at 3.9 to 4.6% through June 1, ,000 - (175,000) 175, ,000 Brewer Drain Bonds of $495,000, due in annual installments of $45,000 to $50,000, plus interest at 0.85 to 2.85% through June 1, ,000 - (45,000) 450,000 50,000 Total drain commission component unit $ 1,345,000 $ 320,000 $ (345,000) $ 1,320,000 $ 379,141 Road Commission Compensated absences $ 315,046 $ 57,634 $ - $ 372,680 $ - 73

79 Notes To Financial Statements Annual debt service requirements to maturity for long-term debt, excluding compensated absences and bond premium, are as follows: Governmental Activities Business-type Activities Year Ended December 31, Principal Interest Principal Interest 2016 $ 1,365,000 $ 1,084,720 $ 2,742,000 $ 1,108, ,420,000 1,030,808 1,887,000 1,044, ,465, ,608 1,554, , ,515, ,120 1,564, , ,585, ,970 1,221, , ,805,000 2,869,853 6,009,000 3,756, ,665, ,468 4,827,000 2,800, ,086,000 2,160, ,530,000 1,567, ,365, , ,145, , ,000 14,250 $ 22,820,000 $ 8,319,547 $ 36,310,399 $ 16,493,459 Discretely-presented Component Unit Year Ended December 31, Principal Interest 2016 $ 379,141 $ 33, ,481 25, ,153 21, ,841 17, ,544 13, ,840 23,454 $ 1,320,000 $ 135,058 County debt is limited to 10% of state equalized value of property in the County, or approximately $368,456, RISK MANAGEMENT The County is exposed to various risks of loss related to claims, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Other than workers compensation, risk of loss is primarily handled through the purchase of commercial insurance policies. Settlements have not exceeded insurance coverage in any of the past three years. 74

80 Notes To Financial Statements The County maintains a self-insurance fund for workers compensation. The fund is reported as an Internal Service Fund and other fund types share the expense based on payroll dollars. An independent company administers the program, and provides claims review, safety inspections and processing. A workers compensation reinsurance policy indemnifies the County up to $1,000,000 for each loss in excess of the first $300,000 and up to $5,000,000 in the aggregate. Settled claims have not exceeded insurance coverage in any of the past three years. The claims liability of $36,842 in the Workers Compensation Fund at December 31, 2015, is based on the requirements of Governmental Accounting Standards Board Statement Number 10, which requires that a liability for claims be reported if it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The claims liability is estimated by management based on historical experience. No annuity contracts have been purchased for the claims liability. The Road Commission is a member of the Michigan County Road Commission Self-Insurance Pool ( Pool ). The insurance coverage includes, but is not limited to, general liability, auto, property insurance, stop loss protection, errors and omissions, truck line liability and an umbrella policy. The amount the Road Commission pays annually is determined by the Administrator of the Pool and is based on miles of roads, population and prior claim history of the Road Commission. In addition to premiums paid, the Road Commission is responsible for the first $1,000 of legal expense incurred per occasion. All other risk is transferred to the Pool. The self-insurance program for health insurance is accounted for in the Healthcare Fund (internal service fund) and the Retiree Healthcare Fund (other employee benefit trust fund). An independent administrator ( Blue Cross ) is hired to process the daily claims. The County has a stop loss of $30,000. There were no reductions of insurance coverage from the prior year. The County is also responsible for paying administrative charges and for actual prescription claims. The revenues for this Fund s operation are reimbursements from various funds and employee payroll withholdings. The liability at the end of the year is based on claims already incurred and reported and on estimates of incurred but not reported claims as provided by Blue Cross. No annuity contracts have been purchased to satisfy claim liabilities. Settled claims have not exceeded insurance coverage in any of the past three years. Changes in the balances of claim liabilities are as follows: Workers' Compensation Health Estimated liability, January 1, 2014 $ 2,427 $ 589,743 Estimated claims incurred 37,037 4,922,733 Claim payments (36,829) (4,838,292) Estimated liability, December 31, , ,184 Estimated claims incurred 107,390 4,953,955 Claim payments (73,183) (5,285,139) Estimated liability, December 31, 2015 $ 36,842 $ 343,000 75

81 Notes To Financial Statements 11. CONTINGENT LIABILITIES Grant Programs The County is the recipient of several Federal and State Grant programs. The expenditures for each program are subject to audit for technical compliance by an appropriate agency. In the event such audit procedures indicate that the County is not in compliance, the Federal or State government could require repayment of funds to the grantor(s). In the opinion of the County s management, such repayments, if any, are not likely to be material. Other There are various legal actions which the County believes either will be favorably resolved or that it is too early to estimate any possible loss upon the outcome of such cases. 12. PENSION PLANS Midland County Plan Description. The County maintains two separate single employer defined benefit pension plans, the Midland County Act 345 Retirement System for Sheriff s Department personnel, Road Patrol, Command, and MSEA-Corrections and Court Security; and the Midland County Employees Retirement System for substantially all other full-time employees. The single employer pension plans are maintained as Pension Trust Funds in the financial statements. The Plans do not issue stand-alone financial statements and are not included in the financial report of any other entity. The Plans provide retirement, disability, and death benefits to plan members and beneficiaries. Cost-ofliving adjustments are provided to members and beneficiaries at the discretion of the County. The County's Board of Commissioners has the authority to establish and amend benefit provisions. Basis of Accounting. The financial statements of the Midland County Act 345 Retirement System and the Midland County Employees Retirement System are prepared on the accrual basis of accounting. Plan member contributions are recognized in the period they are due. The County s contributions to the Systems are recognized when due and they have made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the Systems. Method Used to Value Investments. The plans' investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Investments for which market quotations are not readily available are valued at their fair values as determined by the custodian under the direction of the County's Board of Commissioners, with the assistance of a valuation service. 76

82 Notes To Financial Statements Administrative Expenses. The Systems are administered by Midland County. Administrative expenses, such as trustee and actuarial fees, are paid by the Systems. Fees for investment counseling are paid by the Systems. Employees Covered by Benefit Terms - Act 345 Retirement System. membership consisted of the following: At December 31, 2015, plan Retired plan members and beneficiaries receiving benefits 50 Inactive plan members entitled to but not yet receiving benefits 2 Active plan members 42 Total membership 94 Employees Covered by Benefit Terms - Midland County Employees' Retirement System. At December 31, 2015, plan membership consisted of the following: Retired plan members and beneficiaries receiving benefits 196 Inactive plan members entitled to but not yet receiving benefits 22 Active plan members 108 Total membership 326 Benefits Provided - Act 345 Retirement System. This plan is available to Sheriff's department personnel, Road Patrol, Command, and MSEA-Corrections and Court Security. Participants who retire at age 50 with 25 years of service or age 60 regardless of service are entitled straight life pension of 2.7% (Sheriff, Road Patrol and Command) or 2.6% (MSEA - Corrections and Court Security) of 3-year average final compensation (AFC), times service (maximum of 80% AFC). Benefits Provided - Midland County Employees' Retirement System. This plan was available to County employees hired into the General, Teamsters, Steelworkers (Probate Court), and District Court groups before January 1, 2007, AFSCME group before January 1, 2008, and Steelworkers-Pinecrest group before October 21, Participants who retire with a sum of age and service equal to 85 years (minimum 25 years of service), age 60 with 10 or more years of service, or age 65 with 8 or more years of service are entitled to regular retirement of total service multiplied by 2.25% of final average compensation, which is calculated as the highest 5 consecutive years out of the last 10, with some lump sums included. The maximum County financed portion is 75% of the final average compensation. There is an early retirement option for those participants of age 55 with 10 or more years of service. This option entitles the retiree to regular retirement benefits reduced to the actuarial equivalent of the benefit payable at age 60. Contributions. The contribution requirements of plan members and the County are established and may be amended by the County's Board of Commissioners. The Board establishes rates based on an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance any unfunded accrued liability. Plan members are required to contribute 7% (Sheriff, Road Patrol, and Command) or 6.27% (MSEA) of annual covered salary for Act 345 Retirement System participants, and 3% of annual covered salary for the Employees Retirement System participants. 77

83 Notes To Financial Statements Investment Policy. The Plans' policies in regard to the allocation of invested assets are established and may be amended by the County's Board of Commissioners. The investment policies have been formulated based on consideration of a wide range of policies and describe the prudent investment process that the Board deems appropriate. The Plans' asset allocation policies are shown in the tables below. Rate of Return. For the year ended December 31, 2015, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 3.97% and 2.03% for the Act 345 Retirement System and the Employees' Retirement System, respectively. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimates of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. This is then modified through a Monte- Carlo simulation process, by which a (downward) risk adjustment is applied to the baseline expected return. Best estimates of arithmetic real rates of return for each plan as of December 31, 2015, and the final investment return assumption, are summarized in the following tables: Act 345 Retirement System Asset Class Target Allocation Long-term Expected Real Rate of Return Expected Money- Weighted Rate of Return U.S. Equities 40.00% 5.24% 2.10% Non-U.S. Equities 15.00% 5.36% 0.80% Global Fixed Income 20.00% 1.32% 0.26% Alternative Investments 15.00% 3.89% 0.58% Commercial Real Estate 10.00% 4.01% 0.40% Cash 0.00% 0.07% 0.00% 100.0% 4.14% Inflation 2.75% Risk Adjustments 0.11% Investment rate of return 7.00% 78

84 Notes To Financial Statements Midland County Retirees' System Asset Class Target Allocation Long-term Expected Real Rate of Return Expected Money- Weighted Rate of Return U.S. Equities 45.0% 5.24% 2.36% Non-U.S. Equities 15.0% 5.39% 0.81% Global Fixed Income 20.0% 1.29% 0.26% Alternative Investments 10.0% 3.89% 0.39% Commercial Real Estate 10.0% 4.28% 0.43% Cash 0.0% 0.07% 0.00% 100.0% 4.25% Inflation 2.75% Risk Adjustments 0.50% Investment rate of return 7.50% Discount Rate. The discount rate used to measure the total pension liability was 7.00% for the Act 345 Retirement System and 7.50% for the Midland County Employees' Retirement System. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that City contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Concentrations. At December 31, 2015, there were no individual investments with a value that represented 5% or more of either System's net position. 79

85 Notes To Financial Statements Changes in the Net Pension Liability. The components of the change in the net pension liability are summarized as follows: Act 345 Retirement System Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (a) - (b) Balances at December 31, 2014 $ 28,062,180 $ 22,743,682 $ 5,318,498 Changes for the year: Service cost 577, ,768 Interest 1,927,958-1,927,958 Differences between expected and actual experience (423,948) - (423,948) Changes in assumptions 637, ,619 Employer contributions - 946,928 (946,928) Employee contributions - 171,249 (171,249) Net investment income - 698,059 (698,059) Benefit payments, including refunds of employee contributions (1,617,614) (1,617,614) - Administrative expense - (72,055) 72,055 Net changes 1,101, , ,216 Balances at December 31, 2015 $ 29,163,963 $ 22,870,249 $ 6,293,714 Plan fiduciary net position as a percentage of the total pension liability 78.42% 80

86 Notes To Financial Statements Midland County Retirees' System Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (a) - (b) Balances at December 31, 2014 $ 58,121,694 $ 56,426,464 $ 1,695,230 Changes for the year: Service cost 718, ,485 Interest 4,241,131-4,241,131 Differences between expected and actual experience 425, ,800 Changes in assumptions 1,065,309-1,065,309 Employer contributions - 981,940 (981,940) Employee contributions - 183,251 (183,251) Net investment income - 647,449 (647,449) Benefit payments, including refunds of employee contributions (3,864,991) (3,864,991) - Administrative expense - (71,311) 71,311 Other Net changes 2,585,734 (2,123,662) 4,709,396 Balances at December 31, 2015 $ 60,707,428 $ 54,302,802 $ 6,404,626 Plan fiduciary net position as a percentage of the total pension liability 89.45% Actuarial Assumptions. The total pension liability was determined by an annual actuarial valuation as of December 31, 2014 (rolled forward to December 31, 2015), using the following actuarial assumptions, applied to all periods included in the measurement: Act 345 Retirement System Actuarial cost method Entry-age normal Amortization method Level dollar, closed Remaining amortization period 15 years Asset valuation method 5-year smoothed market Price inflation 2.75% Salary increases 3.50%-6.50%, including inflation Investment rate of return 7.00% (net of administrative and investment expenses) Retirement age Age-based table of rates that are specific to the type of eligibility condition Mortality 1994 group annuity mortality table 81

87 Notes To Financial Statements Midland County Retirees' System Actuarial cost method Entry-age normal Amortization method Level dollar, closed Remaining amortization period 20 years Asset valuation method Market value of assets with 4-year smoothing of gains and losses Price inflation 2.75% Salary increases 3.00%-7.40%, including inflation Investment rate of return 7.50% (net of investment expenses) Retirement age Age-based table of rates that are specific to the type of eligibility condition Mortality The 1971 group annuity mortality table with ages set back 3 years The actuarial assumptions used in the December 31, 2014 valuations were based on the results of actuarial experience studies that were conducted for the 5-year period ending December 31, 2006 for the Act 345 Retirement System and prior to fiscal year 2000 for the Midland County Retirees' System. The next assumption review is scheduled for Sensitivity of the Net Pension Liability to Changes in the Discount Rate - Act 345 Retirement System. The following presents the System's net pension liability of the County, calculated using the discount rate of 7.0%, as well as what the County's net pension liability would be if it were calculated using a discount rate that is 1% lower (6.0%) or higher (8.0%) than the current rate: One Percent Current One Percent Decrease Discount Rate Increase (6.0%) (7.0%) (8.0%) Total pension liability $ 10,126,128 $ 6,293,714 $ 3,112,843 Sensitivity of the Net Pension Liability to Changes in the Discount Rate - Midland County Retirees' System. The following presents the System's net pension liability of the County, calculated using the discount rate of 7.5%, as well as what the County's net pension liability would be if it were calculated using a discount rate that is 1% lower (6.5%) or higher (8.5%) than the current rate: One Percent Current One Percent Decrease Discount Rate Increase (6.5%) (7.5%) (8.5%) Total pension liability $ 13,185,882 $ 6,404,626 $ 660,766 Pension Plan Fiduciary Net Position. Detailed information about the pension plans' fiduciary net positions is provided in Note 14. For the year ended December 31, 2015 the County s annual pension cost of $946,928 and $981,940 for the Act 345 System and the Employees Retirement System, respectively, met the annual required contributions as determined as part of the December 31, 2013, actuarial valuation using individual entry age actuarial cost method. 82

88 Notes To Financial Statements Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended December 31, 2015, the County recognized pension expense of $1,049,173 for the ACT 345 System and $1,880,031 for the Employees' Retirement System. At December 31, 2015, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows (Inflows) of Resources Act 345 Retirement System Difference between expected and actual experience $ - $ 344,785 $ (344,785) Changes in assumptions 518, ,558 Net difference between project and actual earnings on pension plan investments 699, ,197 Total Act 345 Retirement System 1,217, , ,970 Midland County Retirees' System Difference between expected and actual experience 289, ,396 Changes in assumptions 724, ,039 Net difference between project and actual earnings on pension plan investments 2,797,870-2,797,870 Total Midland County Retirees' System 3,811,305-3,811,305 Total deferred outflows of resources and deferred inflows of resources related to pensions $ 5,029,060 $ 344,785 $ 4,684,275 Pension-related deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows: Year Ended December 31, Act 345 Retirement System Midland County Retirees' System Total 2016 $ 214,697 $ 1,177,142 $ 1,391, ,697 1,177,142 1,391, , , , , , , ,182-14,182 Total $ 872,970 $ 3,811,305 $ 4,684,275 The General Fund and certain special revenue funds have typically been used to liquidate the net pension liability in governmental funds. 83

89 Notes To Financial Statements Midland County Road Commission The Road Commission participates in an agent multiple-employer defined benefit pension plan administered by the Municipal Employees' Retirement System of Michigan (MERS) that covers all full-time employees of the Road Commission. MERS was established as a State-wide public employee pension plan by the Michigan Legislature under PA135 of 1945 and is administered by a nine-member Retirement Board. MERS issues a publicly available financial report which includes the financial statements and required supplemental information of this defined benefit plan. This report can be obtained at or in writing to MERS at 1134 Municipal Way, Lansing, Michigan Further information regarding the Road Commission's participation in the Plan is presented in a separately issued Road Commission report. 13. OTHER POSTEMPLOYMENT BENEFITS Primary Government The County also sponsors a retiree healthcare plan (the Plan ). The plan is a single employer defined benefit public retiree healthcare plan established effective May 5, The purpose of the plan is to provide medical and healthcare benefits for the welfare of certain retirees of the County and the spouses and dependents of such retirees who are participants in the Midland County Retirement System (excluding employees of Midland-Gladwin Community Mental Health Services) and ACT 345 Retirement System who elect to participate in the Plan. Benefits under the plan are provided pursuant to a group contract issued by Blue Cross Blue Shield of Michigan. The Plan is maintained as a Pension and Other Employee Benefit Trust Fund in the Midland County financial statements. The County Board of Commissioners has the authority to establish and amend benefit provisions. The Plan does not issue stand-alone financial statements and is not included in the financial report of any other entity. The Plan is a contributory defined benefit plan which covers substantially all employees of Midland County as defined above. At December 31, 2013, the date of the latest actuarial valuation, participants in the plan consisted of: Retirees and beneficiaries receiving benefits Active plan members Total 344 Most members contribute amounts ranging from 1% to 1.5% of their annual compensation to the Plan. If an employee leaves covered employment, accumulated employee contributions plus related investment earnings are refunded to the employee or designated beneficiary. Upon retirement, no further member contributions are required. The employer s contributions are advance-funded on an actuarially determined basis. Although the County has contractual obligations to provide these other postemployment benefits ( OPEB s) to certain of the employee groups outlined above, advance funding of the OPEBs are at the discretion of the County. 84

90 Notes To Financial Statements Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedules of funding progress, presented as required supplementary information following the notes to financial statements, present multiyear trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The benefit obligation represents the actuarial present value of those estimated future benefits that are attributed to employee service rendered to December 31. Postretirement benefits include future benefits expected to be paid to or for (1) currently retired or terminated employees and dependents (as defined by the Plan) and (2) active employees and their beneficiaries and dependents after retirement from service. Prior to an active employee s full eligibility date, the postretirement benefit obligation is the portion of the expected postretirement benefit obligation that is attributed to that employee s service rendered to the valuation date. The actuarial present value of the expected postretirement benefit obligation is determined by an actuary and is the amount that results from applying actuarial assumptions to historical insurance premium-cost data to estimate future annual premium costs per participant and to adjust such estimates for the time value of money (through discounts for interest) and the probability of payment (by means of decrements such as those for death, disability, withdrawal, or retirement) between the valuation date and the expected date of payment. The Plan s unfunded accrued liability was determined as part of an actuarial valuation of the Plan as of December 31, Significant actuarial assumptions used in determining the Plan s unfunded accrued liability included (a) a rate of return on the investment of present and future assets of 6.0% per year compounded annually, (b) projected salary increases of 4.5% per year compounded annually, attributable to inflation, (c) additional projected salary increases ranging from 5.5% to 8.9% per year, depending on age, attributable to seniority/merit, and (d) healthcare cost increases of 8.5% in 2015 and scaling down by 0.5% every other year until it is 4.5% for 2023 and beyond. The UAAL is being amortized on a level dollar method on a closed basis. The remaining amortization period at December 31, 2013, was 30 years. Marketable securities are stated at aggregate fair value. Securities which are traded on a national securities exchange are valued at the last reported sales price on the last business day of the System s year. Investments traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the last reported bid price. 85

91 Notes To Financial Statements Annual OPEB cost and net OPEB obligation. The County s annual OPEB cost and net OPEB obligation for the current year were as follows: Annual required contribution $ 3,959,083 Interest on net OPEB obligation 829,686 Adjustment to annual required contribution (975,612) Net OPEB cost (expense) 3,813,157 Contributions made (1,720,286) Increase in net OPEB obligation 2,092,871 Net OPEB obligation, beginning of year 13,828,102 Net OPEB obligation, end of year $ 15,920,973 The County s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for 2015 and the two preceding years were as follows: Year Ended Three-Year Trend Information Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 2013 $ 3,796, % $ 11,427, ,918, % 13,828, ,813, % 15,920,973 The schedules of employer contributions included as required supplementary information present trend information about the amounts contributed to the plan by employers in comparison to the ARC, an amount that is actuarially determined in accordance with GASB Statement 43. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost for each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. Funded Status and Funding Progress. As of December 31, 2013, the most recent actuarial valuation date, the Plan was 37.5 percent funded. The actuarial accrued liability for benefits was $56,434,810, and the actuarial value of assets was $21,145,002, resulting in an unfunded actuarial accrued liability (UAAL) of $35,289,808. The covered payroll (annual payroll of active employees covered by the Plan) was $9,751,849, and the ratio of the UAAL to the covered payroll was percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The General Fund and certain special revenue funds have typically been used to liquidate the net other postemployment benefit obligation in governmental funds. 86

92 Notes To Financial Statements Midland County Road Commission The Road Commission administers a single employer defined benefit public healthcare plan. The plan provides healthcare and life insurance benefits to all full-time employees upon retirement, in accordance with labor contracts. The benefits are provided under the collective bargaining agreement for union employees and by resolution of the Board of County Road Commissioners for nonunion employees. At yearend there were 19 retirees eligible for benefits under the plan. The Road Commission includes retirees and their spouses in its insured healthcare plan, with no contribution required by any of the participants for previous employees who retired on or after June 28, The Road Commission also includes pre- Medicare retirees and their spouses in its insured healthcare plan with no contribution required by any of the participants for previous employees who retired prior to June 28, 1999, in accordance with union contracts. Further information regarding the Plan is presented in a separately issued Road Commission report. 14. FINANCIAL STATEMENTS FOR INDIVIDUAL PENSION AND OTHER POSTEMPLOYMENT BENEFIT FUNDS Plan Net Position Retiree Health Care Employees' Retirement Act 345 Retirement Total Assets Cash and investment pool $ 725,233 $ 156,974 $ 13,155 $ 895,362 Investments Common stock 8,176,077 47,225,904 12,259,268 67,661,249 International equities - 1,310,714-1,310,714 Corporate bonds 3,332,839-2,509,449 5,842,288 American depository receipts - 97,075-97,075 Real estate investment trusts 1,162,190 1,357, ,517 2,915,035 Money market funds 2,145,255 4,136, ,145 6,413,103 Alternatives 6,935,506-5,758,812 12,694,318 U.S. government obligations 1,945,909-1,666,219 3,612,128 Total investments 23,697,776 54,127,724 22,720, ,545,910 Other assets Receivables: Accounts 7,585 7,223 5,644 20,452 Interest , ,900 Prepaids 59, , ,736 Total other assets 67,487 37, , ,088 Total assets 24,490,496 54,322,615 22,870, ,683,360 Liabilities Accounts payable - 19,813-19,813 Accrued liabilities 157, ,780 Total liabilities 157,780 19, ,593 Net position restricted for retirement benefits $ 24,332,716 $ 54,302,802 $ 22,870,249 $ 101,505,767 87

93 Notes To Financial Statements Retiree Health Care Changes in Plan Net Position Employees' Retirement Act 345 Retirement Total Additions Contributions: Employer $ 1,720,286 $ 981,940 $ 946,928 $ 3,649,154 Plan members 166, , , ,554 Total contributions 1,886,340 1,165,191 1,118,177 4,169,708 Investment income Interest 211,468 1, , ,225 Dividends 215, , ,499 1,140,445 Other revenue - 16,720-16,720 Net appreciation in fair value of investments 197, , , ,537 Total investment income 623, , ,440 2,255,927 Investment expense (32,285) (222,523) (64,381) (319,189) Net investment income 591, , ,059 1,936,738 Total additions 2,477,570 1,812,640 1,816,236 6,106,446 Deductions Benefits paid 2,361,124 3,839,210 1,570,707 7,771,041 Participant refunds 16,744 25,781 46,907 89,432 Administrative expenses 81,690 71,311 72, ,056 Total deductions 2,459,558 3,936,302 1,689,669 8,085,529 Change in net position 18,012 (2,123,662) 126,567 (1,979,083) Net position, beginning of year 24,314,704 56,426,464 22,743, ,484,850 Net position, end of year $ 24,332,716 $ 54,302,802 $ 22,870,249 $ 101,505, PROPERTY TAXES County General Fund property taxes are levied on July 1 of each year (the lien date) and are due in full by September 14, though they do not become delinquent until March 1 of the following year. For levies other than the General Fund, the lien date is December 1. 88

94 Notes To Financial Statements Assessed values are established annually by the County Equalization Department and are equalized by the State of Michigan at 50% of current market value. Total real and personal property for the December 1, 2014 levy was assessed (taxable value) at $3,645,175,541. Total real and personal property for the July 1, 2015 levy was assessed (taxable value) at $3,684,561,852. Midland County s operating tax rate for the 2015 levy was mills, with an additional 0.55 mills for ambulance service, 0.42 mills for mosquito abatement, mills for service to senior citizens, 0.60 mills for 9-1-1, 0.25 mills for public transportation, 0.37 mills for the infirmary, and 1.00 mill for the Road Commission. Taxes are due and receivable on the levy date and are collected through and become delinquent on March 1st of the following year. Taxes are reported as revenue and used for operations in the year subsequent to the levy date, with the exception of the July levy which is recognized in the year of the levy. By resolution of the Board of Commissioners, the County Treasurer purchases at face value the real property taxes receivable returned delinquent each March 1. Subsequent collections of these receivables were used to liquidate the amounts due the General Fund and various other funds and governmental agencies for purchase of the receivables and to provide funds for current operations. 89

95 Notes To Financial Statements 16. FUND BALANCES - GOVERNMENTAL FUNDS In accordance with GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, the County classifies fund balances based primarily on the extent to which it is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Detailed information on fund balances of governmental funds is as follows: Nonmajor Total Building Governmental Governmental General Authority Funds Funds Nonspendable: Prepaids $ 43,975 $ - $ 40,275 $ 84,250 Long-term advances to other funds 200, ,000 Long-term advances to component units 445, ,089 Total nonspendable 689,064-40, ,339 Restricted for: Children's services , ,265 Register of deeds automation , ,063 Grant programs , ,814 Veterans' services - - 9,120 9,120 Pest abatement and suppression - - 1,812,800 1,812,800 Infirmary facility , ,683 Building Authority - 16,801-16,801 Public safety ,719 14,719 Domestic prepared equipment Health services , ,015 Capital projects - - 2,607,269 2,607,269 Concealed pistol licensing administration ,981 16,981 Total restricted - 16,801 5,803,498 5,820,299 Committed for: Children's services , ,998 Grant programs ,159 22,159 Drug court and enforcement - - 5,621 5,621 Public safety training , ,120 Total committed - - 1,447,898 1,447,898 Assigned for: Health services , ,300 Subsequent year's budget 1,610, ,610,930 Capital projects - - 3,254,242 3,254,242 Total assigned 1,610,930-4,143,542 5,754,472 Unassigned 9,094, ,094,677 Total fund balances, governmental funds $ 11,394,671 $ 16,801 $ 11,435,213 $ 22,846,685 90

96 Notes To Financial Statements 17. NET POSITION Restricted Net Position The composition of the County's restricted net position as of December 31, 2015, was as follows: Governmental Business-type Component Activities Activities Units Restricted for: Children's services 178, Register of deeds automation 109, Grant programs 2,363, Veterans' services 9, Pest abatement and suppression 1,814, Infirmary facility 474, Public safety 14, Domestic prepared equipment Health services 247, Capital projects 2,513, Debt service - 370,085 - Concealed pistol licensing administration 16, Primary roads - - 2,114,144 Local roads ,336 Drain projects - - 2,780,378 Conveyance to Eagle East Development, LLC ,078 Redevelopment ,133 7,742, ,085 5,684,069 Net Investment in Capital Assets The composition of net investment in capital assets as of December 31, 2015, was as follows: Governmental Activities Component Units Capital assets: Capital assets not being depreciated $ 2,267,213 $ 3,716,385 Capital assets being depreciated, net 37,366,080 39,673,882 39,633,293 43,390,267 Related liabilities: Bonds and notes payable 23,155,417 1,320,000 Net investment in capital assets $ 16,477,876 $ 42,070,267 91

97 Notes To Financial Statements 18. RESTATEMENT The County adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, in the current year. As a result of this change, beginning net position of governmental activities was decreased by $7,013,

98 REQUIRED SUPPLEMENTARY INFORMATION 93

99 Required Supplementary Information Act 345 Retirement System Schedule of Changes in Net Pension Liability and Related Ratios Fiscal Year Ended December 31, Total pension liability Service cost $ 577,768 $ 585,097 Interest 1,927,958 1,868,003 Differences between expected and actual experience (423,948) - Changes in assumptions 637,619 - Benefit payments, including refunds of of member contributions (1,617,614) (1,568,258) Net change in total pension liability 1,101, ,842 Total pension liability, beginning of year 28,062,180 27,177,338 Total pension liability, end of year 29,163,963 28,062,180 Plan fiduciary net position Employer contributions 946, ,068 Employee contributions 171, ,159 Net investment income 698, ,240 Benefit payments, including refunds of member contributions of member contributions (1,617,614) (1,568,259) Administrative expenses (72,055) (91,875) Other - 451,394 Net change in fiduciary net position 126, ,727 Fiduciary net position, beginning of year 22,743,682 21,838,955 Fiduciary net position, end of year 22,870,249 22,743,682 Net pension liability $ 6,293,714 $ 5,318,498 Fiduciary net position as a percentage of total pension liability 78.42% 81.05% Covered employee payroll $ 2,796,832 $ 2,890,980 Net pension liability as a percentage of covered employee payroll % % Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 94

100 Required Supplementary Information Act 345 Retirement System Schedule of the Net Pension Liability (b/a) Plan Net ((a-b)/c) (a) Position as a UAAL Fiscal Year Total (b) (a-b) % of Total (c) as a % of Ended Pension Plan Net Net Pension Pension Covered Covered December 31, Liability Position Liability Liability Payroll Payroll 2014 $ 28,062,180 $ 22,743,682 $ 5,318, % $ 2,890, % ,163,963 22,870,249 6,293, % 2,796, % Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 95

101 Required Supplementary Information Act 345 Retirement System Schedule of Contributions Actual Contribution Fiscal Year Actuarially Contribution as Percentage Ended Determined Actual Deficiency Covered of Covered December 31, Contribution Contribution (Excess) Payroll Payroll 2014 $ 984,068 $ 984,068 $ - $ 2,890, % , ,928 (5) 2,796, % Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. Notes to Schedule of Contributions Valuation date Actuarially determined contribution amounts are calculated as of December 31 each year, which is 12 months prior to beginning of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry-age normal Amortization method Level dollar, closed Remaining amortization period 16 years Asset valuation method 5-year smoothed market Price inflation 2.75% Salary increases 4.50%-7.50%, including inflation Investment rate of return 7.0% (net of administrative and investment expenses) Retirement age Age-based table of rates that are specific to the type of eligibility condition Mortality 1994 group annuity mortality table Other information Changes to price inflation, salary increase rates and mortality tables as the result of an assumption study were adopted by the Retirement Board for use in the annual valuations of the Retirement System beginning with the December 31, 2015 actuarial valuation. 96

102 Required Supplementary Information Act 345 Retirement System Schedule of Investment Returns Fiscal Year Ending Annual December 31, Return * % % * Annual money-weighted rate of return, net of investment expenses Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 97

103 Required Supplementary Information Employees' Retirement System Schedule of Changes in Net Pension Liability and Related Ratios Fiscal Year Ended December 31, Total pension liability Service cost $ 718,485 $ 830,069 Interest 4,241,131 4,148,409 Differences between expected and actual experience 425,800 - Changes in assumptions 1,065,309 - Benefit payments, including refunds of member contributions of member contributions (3,864,991) (3,507,742) Net change in total pension liability 2,585,734 1,470,736 Total pension liability, beginning of year 58,121,694 56,650,958 Total pension liability, end of year 60,707,428 58,121,694 Plan fiduciary net position Employer contributions 981,940 1,148,418 Employee contributions 183, ,244 Net investment income 647,449 3,768,749 Benefit payments, including refunds of member contributions of member contributions (3,864,991) (3,507,742) Administrative expenses (71,311) (319,600) Other - 3,257 Net change in fiduciary net position (2,123,662) 1,298,326 Fiduciary net position, beginning of year 56,426,464 55,128,138 Fiduciary net position, end of year 54,302,802 56,426,464 Net pension liability $ 6,404,626 $ 1,695,230 Fiduciary net position as a percentage of total pension liability 89.45% 97.08% Covered employee payroll $ 7,031,593 $ 7,143,454 Net pension liability as a percentage of covered employee payroll 91.08% 23.73% Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 98

104 Required Supplementary Information Employees' Retirement System Schedule of the Net Pension Liability (b/a) Plan Net ((a-b)/c) (a) Position as a UAAL Fiscal Year Total (b) (a-b) % of Total (c) as a % of Ended Pension Plan Net Net Pension Pension Covered Covered December 31, Liability Position Liability Liability Payroll Payroll 2014 $ 58,121,692 $ 56,426,464 $ 1,695, % $ 7,143, % ,707,428 54,302,802 6,404, % 7,031, % Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 99

105 Required Supplementary Information Employees' Retirement System Schedule of Contributions Actual Contribution Fiscal Year Actuarially Contribution as Percentage Ended Determined Actual Deficiency Covered of Covered December 31, Contribution Contribution (Excess) Payroll Payroll 2014 $ 1,148,418 $ 1,148,418 $ - $ 7,143, % , ,940 (63) 7,031, % Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. Notes to Schedule of Contributions Valuation date Actuarially determined contribution amounts are calculated as of December 31 each year, which is 12 months prior to beginning of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry-age normal Amortization method Level dollar, closed Remaining amortization period 21 years Asset valuation method Market value of assets with 4-year smoothing of gains and losses Price inflation 2.75% Salary increases 4.5%-8.9%, including inflation Investment rate of return 7.50% Retirement age Age-based table of rates that are specific to the type of eligibility condition Mortality The 1971 group annuity mortality table with ages set back 3 years Other information Changes to price inflation, salary increase rates and mortality tables as the result of an assumption study were adopted by the Retirement Board for use in the annual valuations of the Retirement System beginning with the December 31, 2015 actuarial valuation. 100

106 Required Supplementary Information Employees' Retirement System Schedule of Investment Returns Fiscal Year Ending Annual December 31, Return * % % * Annual money-weighted rate of return, net of investment expenses Note: GASB 67 was implemented in fiscal year This schedule is being built prospectively. Ultimately, 10 years of data will be presented. 101

107 Required Supplementary Information Other Postemployment Benefits Plan - Retiree Health Care Schedule of Funding Progress (amounts in thousands) Actuarial Accrued UAAL as a Actuarial Actuarial Liability Unfunded Percentage Valuation Value Of (AAL) Entry AAL Funded Covered Of Covered Date Assets Age (UAAL) Ratio Payroll Payroll December 31, (a) (b) (b - a) (a / b) (c) ((b-a) / c) 2009 $ 18,536 $ 51,403 $ 32, % $ 11, % ,492 53,084 33, % 10, % ,145 56,435 35, % 9, % Schedule of Employer Contributions Annual Year Ended Required Percentage December 31, Contribution Contributed 2013 $ 3,947, % ,100, % ,959, % 102

108 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES 103

109 Nonmajor Governmental Funds Special Revenue Funds Emergency Medical Services - Established to record the operations of the ambulance service, funded by a tax levy. Friend of the Court - Authorized by Section 253 of Public Act 297 of 1982 to account for the activities of the Friend of the Court. Funded through County appropriations, State and Federal funds and service fees. Health Department - To account for the Federal and State revenues, service fees and General Fund appropriations for providing health services to citizens of the County. Mosquito Abatement - Established to account for funds raised by a special tax levy to operate the Mosquito Department. Gypsy Moth Suppression - Established to account for funds raised by a special tax levy to operate the Gypsy Moth Department. MDNR Trust Grant - Established to account for a trust fund grant from the Michigan Department of Natural Resources, private contributions and capital project funds for the construction of a trailhead alongside the Pere Marquette Rail Trail and the replacement of a 2-mile stretch of the trail. Act 511 Community Corrections - Authorized by Public Act 511 to account for the activities of the Midland County Comprehensive Community Corrections Plan. Funded through State grants. Register of Deeds Automation - To account for funding for upgrading the Register of Deeds operations. Domestic Prepared Equipment - equipment. To account for funds received for emergency preparedness Drug Court To account for funds received for the Drug Court. Drug Law Enforcement To account for funds received for the Drug Law Enforcement Program. Concealed Pistol Licensing MCL Chapter 28, Act 372 of 1927, Section establishes that each County shall establish a fund for the deposit of fees collected for concealed pistol licensing. Funds may be used for administering this act Central Dispatch - To account for funds used for the operation of the 911 Central Dispatch System. Funded by a tax levy. Swift and Sure Sanctions Probation - To account for funds related to this intensive probation supervision program that targets high-risk felony offenders with a history of probation violations or failures as governed by MCL 771A.1 et seq. Sheriff s Training - To account for funds received in association with Michigan Public Act 302 of 1982 which created the Michigan Justice Training Fund. Funded by State grants. Corrections Training - To account for funds received in association with training. Law Library - Authorized by Section of the Compiled Laws of 1979 to account for the operations of the law library. 104

110 Nonmajor Governmental Funds Special Revenue Funds (Continued) Housing Revolving Administration - To account for funds designated to provide financial assistance to low and moderate income homeowners in meeting the minimum requirements of the 1978 basic housing code. Housing Revolving - MSHDA - To account for funds designated to provide financial assistance to low and moderate income homeowners. Funded by grants through the Michigan Department of Commerce from Housing MSHDA To account for funds designated to provide home repair and ownership assistance to low and moderate income homeowners. Housing MSHDA To account for funds designated to provide home repair and ownership assistance to low and moderate income homeowners. Housing MSHDA To account for funds designated to provide home repair and ownership assistance to low and moderate income homeowners. Housing MSHDA To account for funds designated to provide home repair and ownership assistance to low and moderate income homeowners. Housing MSHDA To account for funds designated to provide home repair and ownership assistance to low and moderate income homeowners. Baby Court To account for grant funds used for a program aimed at making changes for abused and neglected children from ages 0-3. Department of Human Services - Authorized by Michigan Public Act 280 of 1939, as amended, to account for the operation of the County Department of Human Services. Infirmary - Authorized by the Department of Treasury and the Michigan Department of Social Services as a sub-fund of the Social Welfare Fund to record the operations of Pine Crest, the County Medical Care Facility. Probate Court Child Care - Authorized by Michigan Public Act 87 of 1978 to account for funds designated for the foster care of children. Funded mainly by County appropriations and State grants. Soldiers Relief - Authorized by Section of the Michigan Compiled Laws of 1979 to account for revenue designated for the care of indigent veterans. Veterans Trust - Authorized by Section of the Michigan Compiled Laws of 1979 to account for revenue used to aid veterans. Child Care Welfare - To account for funds designated for the foster care of children by the Department of Social Services. Funded through State grants and General Fund appropriations. Juvenile Care Center - To account for the operations of the County s Juvenile Care facility. Child Care SED Waiver To account for the activities that serves youths with mental illness or serious emotional impairment who qualify for services using Medicaid testing but would not otherwise be financially eligible for Medicaid-funded services. ETC Transportation To account for funds raised by a special tax levy for County-wide public transportation. 105

111 Nonmajor Governmental Funds Special Revenue Funds (Concluded) Midland Kids First To account for funds designated to provide mentoring services to children. Funded through State and Local grants. Capital Projects Funds General Capital Improvements - Created to accumulate funds for large capital items in need of repair or replacement. Capital Purchase To account for purchases of capital assets for the General Fund. Jail Construction To account for funds accumulated for the construction of a new jail facility. Courthouse & Fourth Floor Renovation To account for funds accumulated for the renovation of the courthouse and the fourth floor of the County building. Courthouse Preservation - To account for funds accumulated for the preservation of the outside of the Midland County Courthouse. Infirmary Improvement To account for funds accumulated for the construction of an addition to the facility. Juvenile Care Building Repair - To account for funds used to construct a new juvenile care center. To be funded via a special voted millage. Emergency Warning Equipment - emergency warning equipment. To account for funds accumulated for the purchase of Radio Equipment Maintenance To account for funds accumulated for maintenance of the radio system in the Sheriff Department. Parks Improvement - To account for funds used to improve various County parks. 106

112 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2015 Special Revenue Funds Emergency Medical Friend of Health Mosquito Gypsy Moth Services the Court Department Abatement Suppression Assets Cash and investment pool $ 102,473 $ 416,179 $ 912,068 $ 624,343 $ 1,247,311 Receivables: Accounts Loans Current taxes 1,883, ,437,245 - Interest Due from other governments - 100, , Prepaids - 2, ,242 - Total assets $ 1,986,380 $ 518,598 $ 1,238,764 $ 2,063,273 $ 1,248,256 Liabilities Accounts payable $ 37,380 $ 3,219 $ 14,986 $ 1,724 $ - Accrued wages - 26,855 60,466 8,763 - Due to other funds Due to other governments , Unearned revenue , Long-term advances from other funds Total liabilities 37,380 30, ,616 10,487 - Deferred inflows of resources Unavailable revenue - loans receivable Taxes levied for a subsequent period 1,949, ,487,000 - Total deferred inflows of resources 1,949, ,487,000 - Fund balances Nonspendable - 2, ,242 - Restricted , ,544 1,248,256 Committed - 486, Assigned , Total fund balances - 488,524 1,137, ,786 1,248,256 Total liabilities, deferred inflows of resources and fund balances $ 1,986,380 $ 518,598 $ 1,238,764 $ 2,063,273 $ 1,248,

113 Special Revenue Funds Act 511 Register Domestic Drug Concealed MDNR Trust Community of Deeds Prepared Drug Law Pistol Grant Corrections Automation Equipment Court Enforcement Licensing $ - $ 15,913 $ 108,497 $ 769 $ - $ 5,617 $ 16, , ,271 33, , , $ 69,271 $ 49,415 $ 110,258 $ 769 $ 48,494 $ 5,621 $ 16,981 $ - $ 12,173 $ 515 $ - $ 11,668 $ - $ - - 2, , , ,112 14, , , , ,981 22,159 35, , ,159 35, , ,621 16,981 $ 69,271 $ 49,415 $ 110,258 $ 769 $ 48,494 $ 5,621 $ 16,981 continued 108

114 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2015 Special Revenue Funds Swift and Sure Central Sanctions Sheriff's Corrections Law Dispatch Probation Training Training Library Assets Cash and investment pool $ 105,421 $ - $ 14,719 $ 10,475 $ 2,299 Receivables: Accounts Loans Current taxes 2,048, Interest Due from other governments Prepaids Total assets $ 2,154,334 $ 535 $ 14,719 $ 10,475 $ 2,299 Liabilities Accounts payable $ 34,334 $ 185 $ - $ 3 $ 2,299 Accrued wages Due to other funds Due to other governments Unearned revenue Long-term advances from other funds Total liabilities 34, ,299 Deferred inflows of resources Unavailable revenue - loans receivable Taxes levied for a subsequent period 2,120, Total deferred inflows of resources 2,120, Fund balances Nonspendable Restricted , Committed ,472 - Assigned Total fund balances ,719 10,472 - Total liabilities, deferred inflows of resources and fund balances $ 2,154,334 $ 535 $ 14,719 $ 10,475 $ 2,

115 Special Revenue Funds Housing Housing Housing Housing Housing Housing Housing Revolving Revolving MSHDA MSHDA MSHDA MSHDA MSHDA Admin. MSHDA $ 96,179 $ 229,078 $ - $ - $ - $ - $ 8, ,499 1,635, , $ 278,751 $ 1,864,955 $ - $ - $ - $ - $ 220,052 $ 38 $ - $ - $ - $ - $ - $ ,499 1,635, , ,499 1,635, , , , , , , ,347 $ 278,751 $ 1,864,955 $ - $ - $ - $ - $ 220,052 continued 110

116 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2015 Special Revenue Funds Department Probate Baby of Human Court Soldiers Court Services Infirmary Child Care Relief Assets Cash and investment pool $ - $ 24,028 $ 554,125 $ 692,501 $ 6,526 Receivables: Accounts ,902 1,599 - Loans Current taxes - - 1,266, Interest Due from other governments 17,635-3,671 75,113 - Prepaids - 34, Total assets $ 17,635 $ 58,228 $ 1,841,374 $ 769,213 $ 6,526 Liabilities Accounts payable $ 8,818 $ - $ 9,311 $ 59,069 $ - Accrued wages , Due to other funds 8, Due to other governments Unearned revenue Long-term advances from other funds Total liabilities 17,635-56,586 59,069 - Deferred inflows of resources Unavailable revenue - loans receivable Taxes levied for a subsequent period - - 1,310, Total deferred inflows of resources - - 1,310, Fund balances Nonspendable - 34, Restricted ,683-6,526 Committed - 24, ,144 - Assigned Total fund balances - 58, , ,144 6,526 Total liabilities, deferred inflows of resources and fund balances $ 17,635 $ 58,228 $ 1,841,374 $ 769,213 $ 6,

117 Special Revenue Funds Juvenile Child Midland Veterans Child Care Care Care ETC Kids Trust Welfare Center SED Waiver Transportation First $ 2,592 $ 166,978 $ 133,305 $ 2,358 $ 42,928 $ 2, , , , , , $ 2,594 $ 166,978 $ 453,753 $ 2,358 $ 898,337 $ 13,512 $ - $ - $ 24,757 $ - $ 13,337 $ 4, , , ,777-13,337 4, , , , ,978-2,358-8, , , , ,976 2,358-8,929 $ 2,594 $ 166,978 $ 453,753 $ 2,358 $ 898,337 $ 13,512 continued 112

118 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2015 Capital Project Funds General Courthouse & Capital Capital Jail Fourth Floor Courthouse Improvements Purchase Construction Renovation Preservation Assets Cash and investment pool $ 1,211,458 $ 1,803,366 $ 581,259 $ 471,630 $ 287,968 Receivables: Accounts Loans Current taxes Interest Due from other governments Prepaids Total assets $ 1,212,376 $ 1,803,366 $ 581,699 $ 471,795 $ 288,170 Liabilities Accounts payable $ 34,794 $ 14,834 $ - $ - $ 42 Accrued wages Due to other funds Due to other governments Unearned revenue Long-term advances from other funds Total liabilities 34,794 14, Deferred inflows of resources Unavailable revenue - loans receivable Taxes levied for a subsequent period Total deferred inflows of resources Fund balances Nonspendable Restricted , ,795 - Committed Assigned 1,177,582 1,788, ,128 Total fund balances 1,177,582 1,788, , , ,128 Total liabilities, deferred inflows of resources and fund balances $ 1,212,376 $ 1,803,366 $ 581,699 $ 471,795 $ 288,

119 Capital Project Funds Juvenile Care Emergency Radio Nonmajor Infirmary Building Warning Equipment Parks Governmental Improvement Repair Equipment Maintenance Improvement Funds $ 1,518,658 $ 11,479 $ 10,350 $ - $ 12,803 $ 11,453, , ,029, ,491, , , ,275 $ 1,519,135 $ 11,479 $ 10,358 $ - $ 12,803 $ 22,043,889 $ - $ - $ - $ - $ - $ 288, , , , , , , ,029, ,751, ,780, ,275 1,519,135 11,479 10,358-12,803 5,803, ,447, ,143,542 1,519,135 11,479 10,358-12,803 11,435,213 $ 1,519,135 $ 11,479 $ 10,358 $ - $ 12,803 $ 22,043,889 concluded 114

120 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended December 31, 2015 Special Revenue Funds Emergency Medical Friend of Health Mosquito Gypsy Moth Services the Court Department Abatement Suppression Revenues Taxes $ 1,929,367 $ - $ - $ 1,473,270 $ (3,078) Intergovernmental revenue - 759,484 1,692, Charges for services - 22, , Licenses and permits , Interest earnings 2, ,177 4,531 Miscellaneous , Total revenues 1,931, ,761 2,616,365 1,476,447 1,453 Expenditures Current: General service administration Judicial - 1,246, Law enforcement and corrections Health and welfare 1,931,547-2,855,638 1,444, ,159 Planning and development Other agencies Capital outlay ,016 - Debt service: Principal Interest charges Total expenditures 1,931,547 1,246,914 2,855,638 1,501, ,159 Revenue over (under) expenditures - (465,153) (239,273) (24,717) (232,706) Other financing sources (uses) Transfers in - 572, , Transfers out Total other financing sources (uses) - 572, , Net change in fund balances - 107, ,348 (24,717) (232,706) Fund balances, beginning of year - 380, , ,503 1,480,962 Fund balances, end of year $ - $ 488,524 $ 1,137,148 $ 565,786 $ 1,248,

121 Special Revenue Funds Act 511 Register Domestic Drug Concealed MDNR Trust Community of Deeds Prepared Drug Law Pistol Grant Corrections Automation Equipment Court Enforcement Licensing $ - $ - $ - $ - $ - $ - $ - 267, ,008-1,329 92, , , , , , ,468 74,759 1,329 94,315 6,532 16, , ,568 1, , ,592-3,377 1, , ,358 79,985 1,329 95,568 1,397 - (173,180) (29,890) (5,226) - (1,253) 5,135 16,981 49,139 24, (14,000) - 49,139 24, (14,000) - (124,041) (5,531) (5,226) - (1,253) (8,865) 16, ,200 40, , ,253 14,486 - $ 22,159 $ 35,189 $ 109,743 $ 769 $ - $ 5,621 $ 16,981 continued 116

122 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended December 31, 2015 Special Revenue Funds Swift and Sure Central Sanctions Sheriff's Corrections Law Dispatch Probation Training Training Library Revenue Taxes $ 2,120,700 $ - $ - $ - $ - Intergovernmental revenue 235, , Charges for services ,952 6,500 Licenses and permits Interest earnings Miscellaneous Total revenue 2,356, ,580 27,952 6,500 Expenditures Current: General service administration Judicial ,986 Law enforcement and corrections 16, ,610 30,133 - Health and welfare Planning and development Other agencies 2,339, Capital outlay Debt service: Principal Interest charges Total expenditures 2,356, ,610 30,133 26,986 Revenue over (under) expenditures - - 2,970 (2,181) (20,486) Other financing sources (uses) Transfers in ,486 Transfers out Total other financing sources (uses) ,486 Net change in fund balances - - 2,970 (2,181) - Fund balances, beginning of year ,749 12,653 - Fund balances, end of year $ - $ - $ 14,719 $ 10,472 $ - 117

123 Special Revenue Funds Housing Housing Housing Housing Housing Housing Housing Revolving Revolving MSHDA MSHDA MSHDA MSHDA MSHDA Admin. MSHDA $ - $ - $ - $ - $ - $ - $ , ,127 66, ,622 14,509 67, , ,093 12, , ,093 12, ,330 (23,584) 54, ,347 40, , (69,701) (37,258) (552) (44,098) - 40, ,609 (69,701) (37,258) (552) (44,098) - 16, ,877 (69,701) (37,258) (552) (44,098) 8,347 79,394 23,376 69,701 37, ,098 - $ 96,214 $ 229,253 $ - $ - $ - $ - $ 8,347 continued 118

124 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended December 31, 2015 Special Revenue Funds Department Probate Baby of Human Court Soldiers Court Services Infirmary Child Care Relief Revenue Taxes $ - $ - $ 1,297,849 $ - $ - Intergovernmental revenue 52, , ,357 - Charges for services ,586 30,076 - Licenses and permits Interest earnings - - 2, Miscellaneous ,872 54,801 - Total revenue 52, ,259, ,234 - Expenditures Current: General service administration Judicial Law enforcement and corrections Health and welfare 105,814 17,282 1,700, ,899 - Planning and development Other agencies Capital outlay , Debt service: Principal Interest charges Total expenditures 105,814 17,282 1,721, ,899 - Revenue over (under) expenditures (52,907) (17,214) 538,341 (273,665) - Other financing sources (uses) Transfers in 52,907 48, , Transfers out - - (493,795) - - Total other financing sources (uses) 52,907 48,441 (493,795) 306, Net change in fund balances - 31,227 44,546 33, Fund balances, beginning of year - 27, , ,076 6,326 Fund balances, end of year $ - $ 58,228 $ 474,788 $ 710,144 $ 6,

125 Special Revenue Funds Juvenile Child Midland Veterans Child Care Care Care ETC Kids Trust Welfare Center SED Waiver Transportation First $ - $ - $ - $ - $ 876,904 $ - 25, ,353 1,334,438 4,224 1,520,531 35, , , ,949 25, ,353 1,794,285 4,229 2,398,347 65, , ,490 3,011,487 4,224-73, ,398, , ,490 3,011,487 4,224 2,398,347 73,454 (224) (29,137) (1,217,202) 5 - (7,528) - 44,750 1,356, , ,750 1,356, ,500 (224) 15, , (28) 2, ,365 14,766 2,353-8,957 $ 2,594 $ 166,978 $ 153,976 $ 2,358 $ - $ 8,929 continued 120

126 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended December 31, 2015 Capital Project Funds General Courthouse & Capital Capital Jail Fourth Floor Courthouse Improvements Purchase Construction Renovation Preservation Revenue Taxes $ - $ - $ - $ - $ - Intergovernmental revenue Charges for services ,200 Licenses and permits Interest earnings 3,578-2, ,148 Miscellaneous 32,956 16, ,000 - Total revenue 36,534 16,913 2, , ,348 Expenditures Current: General service administration Judicial ,024 Law enforcement and corrections , Health and welfare ,132 - Planning and development Other agencies Capital outlay 7, , Debt service: Principal Interest charges Total expenditures 7, ,097 34,548 52,132 85,024 Revenue over (under) expenditures 29,317 (671,184) (32,502) 348,408 30,324 Other financing sources (uses) Transfers in 110, , ,000 Transfers out (100,000) (7,000) - - (135,000) Total other financing sources (uses) 10, , (128,000) Net change in fund balances 39,317 85,691 (32,502) 348,408 (97,676) Fund balances, beginning of year 1,138,265 1,702, , , ,804 Fund balances, end of year $ 1,177,582 $ 1,788,532 $ 581,699 $ 471,795 $ 288,

127 Capital Project Funds Juvenile Care Emergency Radio Nonmajor Infirmary Building Warning Equipment Parks Governmental Improvement Repair Equipment Maintenance Improvement Funds $ - $ - $ - $ - $ - $ 7,695, ,500, ,203, ,867 2, , , ,981 2,695-16, ,427, ,608-13, ,372, , ,412 12, ,152, , ,738, ,231, , , , , ,749 13,279 15, ,428,708 (504,054) (13,279) (3,001,659) 493, ,600-4,916, (49,139) (950,543) 493, ,600 (49,139) 3,965,966 (10,259) (13,279) 790 1,600 (49,139) 964,307 1,529,394 24,758 9,568 (1,600) 61,942 10,470,906 $ 1,519,135 $ 11,479 $ 10,358 $ - $ 12,803 $ 11,435,213 concluded 122

128 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Emergency Medical Services For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ 1,949,000 $ 1,949,000 $ 1,929,367 $ (19,633) Interest earnings 2,500 2,500 2,180 (320) Total revenues 1,951,500 1,951,500 1,931,547 (19,953) Expenditures Current: Health and welfare 1,951,500 1,951,500 1,931,547 (19,953) Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ - $ - $ - $ - 123

129 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Friend of the Court For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 673,800 $ 673,800 $ 759,484 $ 85,684 Charges for services 75,530 75,530 22,277 (53,253) Total revenues 749, , ,761 32,431 Expenditures Current: Judicial 1,322,008 1,323,243 1,246,914 (76,329) Revenues under expenditures (572,678) (573,913) (465,153) 108,760 Other financing sources Transfers in 572, , ,678 - Net change in fund balance - (1,235) 107, ,760 Fund balance, beginning of year 380, , ,999 - Fund balance, end of year $ 380,999 $ 379,764 $ 488,524 $ 108,

130 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Health Department For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 1,088,673 $ 1,093,825 $ 1,692,874 $ 599,049 Charges for services 941, , ,933 (347,833) Licenses and permits 220, , ,911 (3,089) Miscellaneous revenue 222, , ,647 (109,439) Total revenues 2,472,525 2,477,677 2,616, ,688 Expenditures Current: Health and welfare 3,337,146 3,342,298 2,855,638 (486,660) Revenues under expenditures (864,621) (864,621) (239,273) 625,348 Other financing sources Transfers in 864, , ,621 - Net change in fund balance , ,348 Fund balance, beginning of year 511, , ,800 - Fund balance, end of year $ 511,800 $ 511,800 $ 1,137,148 $ 625,

131 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Mosquito Abatement For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ 1,539,556 $ 1,487,556 $ 1,473,270 $ (14,286) Interest earnings 3,400 3,400 3,177 (223) Total revenues 1,542,956 1,490,956 1,476,447 (14,509) Expenditures Current: Health and welfare 1,553,751 1,524,987 1,444,148 (80,839) Capital outlay 50,000 57,020 57,016 (4) Total expenditures 1,603,751 1,582,007 1,501,164 (80,843) Net change in fund balance (60,795) (91,051) (24,717) 66,334 Fund balance, beginning of year 590, , ,503 - Fund balance, end of year $ 529,708 $ 499,452 $ 565,786 $ 66,

132 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Gypsy Moth Suppression For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ - $ - $ (3,078) $ (3,078) Interest earnings 2,300 2,300 4,531 2,231 Total revenues 2,300 2,300 1,453 (847) Expenditures Current: Health and welfare 379, , ,159 (145,257) Net change in fund balance (377,116) (377,116) (232,706) 144,410 Fund balance, beginning of year 1,480,962 1,480,962 1,480,962 - Fund balance, end of year $ 1,103,846 $ 1,103,846 $ 1,248,256 $ 144,

133 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds MDNR Trust Grant For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 300,000 $ 300,000 $ 267,412 $ (32,588) Miscellaneous revenue 166, ,661 - (166,661) Total revenues 466, , ,412 (199,249) Expenditures Capital outlay 515, , ,592 (75,208) Revenues under expenditures (49,139) (49,139) (173,180) (124,041) Other financing sources Transfers in 49,139 49,139 49,139 - Net change in fund balance - - (124,041) (124,041) Fund balance, beginning of year 146, , ,200 - Fund balance, end of year $ 146,200 $ 146,200 $ 22,159 $ (124,041) 128

134 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Act 511 Community Corrections For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 138,262 $ 138,262 $ 136,008 $ (2,254) Interest earnings Miscellaneous revenue Total revenues 138, , ,468 (2,094) Expenditures Current: Planning and development 162, , ,358 3,437 Revenues under expenditures (24,359) (24,359) (29,890) (5,531) Other financing sources Transfers in 24,359 24,359 24,359 - Net change in fund balance - - (5,531) (5,531) Fund balance, beginning of year 40,720 40,720 40,720 - Fund balance, end of year $ 40,720 $ 40,720 $ 35,189 $ (5,531) 129

135 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Register of Deeds Automation For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Charges for services $ 91,000 $ 91,000 $ 74,420 $ (16,580) Interest earnings (261) Total revenues 91,600 91,600 74,759 (16,841) Expenditures Current: General service administration 79,940 79,940 76,608 (3,332) Capital outlay 10,000 10,000 3,377 (6,623) Total expenditures 89,940 89,940 79,985 (9,955) Net change in fund balance 1,660 1,660 (5,226) (6,886) Fund balance, beginning of year 114, , ,969 - Fund balance, end of year $ 116,629 $ 116,629 $ 109,743 $ (6,886) 130

136 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Domestic Prepared Equipment For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ - $ - $ 1,329 $ 1,329 Expenditures Capital outlay - - 1,329 1,329 Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ 769 $ 769 $ 769 $ - 131

137 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Drug Court For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 90,000 $ 90,000 $ 92,998 $ 2,998 Miscellaneous revenue 5,000 5,000 1,317 (3,683) Total revenues 95,000 95,000 94,315 (685) Expenditures Current: Law enforcement and corrections 95,000 95,000 95, Net change in fund balance - - (1,253) (1,253) Fund balance, beginning of year 1,253 1,253 1,253 - Fund balance, end of year $ 1,253 $ 1,253 $ - $ (1,253) 132

138 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Drug Law Enforcement For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Charges for services $ 2,000 $ 2,000 $ 6,516 $ 4,516 Interest earnings Total Revenues 2,000 2,000 6,532 4,532 Expenditures Current: Law enforcement and corrections - 2,200 1,397 (803) Revenues over (under) expenditures 2,000 (200) 5,135 5,335 Other financing uses Transfers out (14,000) (14,000) (14,000) - Net change in fund balance (12,000) (14,200) (8,865) 5,335 Fund balance, beginning of year 14,486 14,486 14,486 - Fund balance, end of year $ 2,486 $ 286 $ 5,621 $ 5,

139 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Concealed Pistol Licensing For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Licenses and permits $ - $ - $ 16,956 $ 16,956 Interest earnings Total revenues ,981 16,981 Net change in fund balance ,981 16,981 Fund balance, beginning of year Fund balance, end of year $ - $ - $ 16,981 $ 16,

140 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Central Dispatch For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ 2,103,332 $ 2,103,332 $ 2,120,700 $ 17,368 Intergovernmental revenue 228, , ,393 6,893 Total revenues 2,331,832 2,331,832 2,356,093 24,261 Expenditures Current: Law enforcement and corrections 17,151 17,151 16,365 (786) Other agencies 2,314,681 2,314,681 2,339,728 25,047 Total expenditures 2,331,832 2,331,832 2,356,093 24,261 Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ - $ - $ - $ - 135

141 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Swift and Sure Sanctions Probation For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ - $ - $ 535 $ 535 Expenditures Current: Law enforcement and corrections Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ - $ - $ - $ - 136

142 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Sheriff's Training For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 8,421 $ 8,421 $ 7,580 $ (841) Expenditures Current: Law enforcement and corrections 8,421 8,421 4,610 (3,811) Net change in fund balance - - 2,970 2,970 Fund balance, beginning of year 11,749 11,749 11,749 - Fund balance, end of year $ 11,749 $ 11,749 $ 14,719 $ 2,

143 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Corrections Training For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Charges for services $ 23,868 $ 26,500 $ 27,952 $ 1,452 Expenditures Current: Law enforcement and corrections 23,868 33,100 30,133 (2,967) Net change in fund balance - (6,600) (2,181) 4,419 Fund balance, beginning of year 12,653 12,653 12,653 - Fund balance, end of year $ 12,653 $ 6,053 $ 10,472 $ 4,

144 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Law Library For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Charges for services $ 6,500 $ 6,500 $ 6,500 $ - Expenditures Current: Judicial 25,768 25,768 26,986 1,218 Revenues under expenditures (19,268) (19,268) (20,486) (1,218) Other financing sources Transfers in 19,268 19,268 20,486 1,218 Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ - $ - $ - $ - 139

145 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Housing Revolving Administration For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Interest earnings $ 100 $ 100 $ 382 $ 282 Miscellaneous revenue 3,900 3,900 14,127 10,227 Total revenues 4,000 4,000 14,509 10,509 Expenditures Current: Health and welfare 44,404 44,404 38,093 (6,311) Revenues over (under) expenditures (40,404) (40,404) (23,584) 16,820 Other financing sources Transfers in 40,404 40,404 40,404 - Net change in fund balance ,820 16,820 Fund balance, beginning of year 79,394 79,394 79,394 - Fund balance, end of year $ 79,394 $ 79,394 $ 96,214 $ 16,

146 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Housing Revolving MSHDA For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Interest earnings $ - $ - $ 608 $ 608 Miscellaneous revenue 35, ,415 65,515 Total revenues 35, ,023 66,123 Expenditures Current: Health and welfare 35, ,400 12,755 (141,645) Revenue over (under) expenditures - (153,500) 54, ,768 Other financing sources (uses) Transfers in - 153, ,609 (1,891) Net change in fund balance , ,877 Fund balance, beginning of year 23,376 23,376 23,376 - Fund balance, end of year $ 23,376 $ 23,376 $ 229,253 $ 205,

147 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Housing MSHDA For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Other financing uses Transfers out $ - $ (70,000) $ (69,701) $ (299) Fund balance, beginning of year 70,000 70,000 69, Fund balance, end of year $ 70,000 $ - $ - $ - 142

148 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Housing MSHDA For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Other financing uses Transfers out $ - $ (37,300) $ (37,258) $ (42) Fund balance, beginning of year 37,300 37,300 37, Fund balance, end of year $ 37,300 $ - $ - $ - 143

149 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Housing MSHDA For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Other financing uses Transfers out $ - $ - $ (552) $ 552 Fund balance, beginning of year Fund balance, end of year $ 552 $ 552 $ - $

150 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Housing MSHDA For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Other financing uses Transfers out $ - $ (44,100) $ (44,098) $ (2) Fund balance, beginning of year 44,100 44,100 44,098 2 Fund balance, end of year $ 44,100 $ - $ - $ - 145

151 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Housing MSHDA 2014 For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ - $ 25,000 $ 19,018 $ (5,982) Interest earnings Miscellaneous revenue - - 1,622 1,622 Total revenues - 25,000 20,677 (4,323) Expenditures Capital outlay - 25,000 12,330 (12,670) Net change in fund balance - - 8,347 8,347 Fund balance, beginning of year Fund balance, end of year $ - $ - $ 8,347 $ 8,

152 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Baby Court For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 52,907 $ 52,907 $ 52,907 $ - Expenditures Current: Health and welfare 105, , ,814 - Revenues under expenditures (52,907) (52,907) (52,907) - Other financing sources Transfers in 52,907 52,907 52,907 - Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ - $ - $ - $ - 147

153 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Department of Human Services For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 331,464 $ 331,464 $ 68 $ (331,396) Expenditures Current: Health and welfare 379, ,905 17,282 (362,623) Revenues under expenditures (48,441) (48,441) (17,214) 31,227 Other financing sources Transfers in 48,441 48,441 48,441 - Net change in fund balance ,227 31,227 Fund balance, beginning of year 27,001 27,001 27,001 - Fund balance, end of year $ 27,001 $ 27,001 $ 58,228 $ 31,

154 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Infirmary For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ 1,353,410 $ 1,353,410 $ 1,297,849 $ (55,561) Intergovernmental revenue 343, ,450 69,683 (273,767) Charges for services 632, , , ,486 Interest earnings 3,200 3,200 2,945 (255) Miscellaneous revenue ,872 18,372 Total revenues 2,332,560 2,384,660 2,259,935 (124,725) Expenditures Current: Health and welfare 1,974,303 2,043,960 1,700,384 (343,576) Capital outlay 13,500 32,350 21,210 (11,140) Total expenditures 1,987,803 2,076,310 1,721,594 (354,716) Revenues over expenditures 344, , , ,991 Other financing uses Transfers out (493,795) (493,795) (493,795) - Net change in fund balance (149,038) (185,445) 44, ,991 Fund balance, beginning of year 430, , ,242 - Fund balance, end of year $ 281,204 $ 244,797 $ 474,788 $ 229,

155 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Probate Court Child Care For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 227,033 $ 217,034 $ 130,357 $ (86,677) Charges for services 25,000 34,999 30,076 (4,923) Miscellaneous revenue 80,899 80,899 54,801 (26,098) Total revenues 332, , ,234 (117,698) Expenditures Current: Health and welfare 639, , ,899 (150,766) Revenues under expenditures (306,733) (306,733) (273,665) 33,068 Other financing sources Transfers in 306, , ,733 - Net change in fund balance ,068 33,068 Fund balance, beginning of year 677, , ,076 - Fund balance, end of year $ 677,076 $ 677,076 $ 710,144 $ 33,

156 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Soldiers Relief For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Expenditures Current: Health and welfare $ 200 $ 200 $ - $ (200) Other financing sources Transfers in Net change in fund balance Fund balance, beginning of year 6,326 6,326 6,326 - Fund balance, end of year $ 6,326 $ 6,326 $ 6,526 $

157 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Veterans Trust For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 20,000 $ 25,000 $ 25,396 $ 396 Interest earnings Total revenues 20,000 25,000 25, Expenditures Current: Health and welfare 20,000 25,000 25, Net change in fund balance - - (224) (224) Fund balance, beginning of year 2,818 2,818 2,818 - Fund balance, end of year $ 2,818 $ 2,818 $ 2,594 $ (224) 152

158 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Child Care Welfare For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 179,000 $ 179,000 $ 114,353 $ (64,647) Expenditures Current: Health and welfare 358, , ,490 (80,260) Revenues under expenditures (179,000) (44,750) (29,137) 15,613 Other financing sources Transfers in 179,000 44,750 44,750 - Net change in fund balance ,613 15,613 Fund balance, beginning of year 151, , ,365 - Fund balance, end of year $ 151,365 $ 151,365 $ 166,978 $ 15,

159 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Juvenile Care Center For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 1,505,543 $ 1,505,543 $ 1,334,438 $ (171,105) Charges for services 380, , ,835 76,671 Miscellaneous revenue - - 3,012 3,012 Total revenues 1,885,707 1,885,707 1,794,285 (91,422) Expenditures Current: Health and welfare 3,242,119 3,242,119 3,011,487 (230,632) Revenues under expenditures (1,356,412) (1,356,412) (1,217,202) 139,210 Other financing sources Transfers in 1,356,412 1,356,412 1,356,412 - Net change in fund balance , ,210 Fund balance, beginning of year 14,766 14,766 14,766 - Fund balance, end of year $ 14,766 $ 14,766 $ 153,976 $ 139,

160 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Child Care SED Waiver For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 195,565 $ 195,565 $ 4,224 $ (191,341) Interest earnings Total revenues 195, ,565 4,229 (191,336) Expenditures Current: Health and welfare 195, ,565 4,224 (191,341) Net change in fund balance Fund balance, beginning of year 2,353 2,353 2,353 - Fund balance, end of year $ 2,353 $ 2,353 $ 2,358 $ 5 155

161 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds ETC Transportation For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Taxes $ 888,911 $ 888,911 $ 876,904 $ (12,007) Intergovernmental revenue 1,460,000 1,460,000 1,520,531 60,531 Interest earnings 1,200 1, (288) Total revenues 2,350,111 2,350,111 2,398,347 48,236 Expenditures Current: Other agencies 2,350,111 2,350,111 2,398,347 48,236 Net change in fund balance Fund balance, beginning of year Fund balance, end of year $ - $ - $ - $ - 156

162 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Nonmajor Special Revenue Funds Midland Kids First For the Year Ended December 31, 2015 Actual Over Original Final (Under) Final Budget Budget Actual Budget Revenues Intergovernmental revenue $ 52,500 $ 52,500 $ 35,977 $ (16,523) Miscellaneous revenue 45,000 45,000 29,949 (15,051) Total revenues 97,500 97,500 65,926 (31,574) Expenditures Current: Health and welfare 105, ,000 73,454 (31,546) Revenue over (under) expenditures (7,500) (7,500) (7,528) (28) Other financing sources Transfers in 7,500 7,500 7,500 - Net change in fund balance - - (28) (28) Fund balance, beginning of year 8,957 8,957 8,957 - Fund balance, end of year $ 8,957 $ 8,957 $ 8,929 $ (28) 157

163 Nonmajor Enterprise Funds Delinquent Tax Revolving Fund - To account for advances by the County to other local operating units and County funds for delinquent property taxes. Advances are repaid from collections of delinquent taxes, including interest and collection fees. Treasurer's Foreclosure Fund - A fund established by PA 123 of 1999 for use by the County Treasurer for foreclosure operations. 2012, 2013, 2014, 2015, 2016 and 2017 Forfeiture/Foreclosure - To account for various fees and related costs related to the new delinquent tax reversion process and 2014 Tax Repayment To account for delinquent taxes, funded by the collection of taxes and interest. PA To account for the requirements of Public Act 105. Delinquent Personal Property Tax Administration To account for delinquent personal property tax per Public Act 206 of 1893, Section Larkin Township Water Bonds To account for the accumulation of funds for the payment of interest and principal on the Larkin Township Water Bonds. Jerome Township Water Bonds - To account for the accumulation of funds for the payment of interest and principal on the Jerome Township Water Bonds. Larkin Township Water Bonds II To account for the accumulation of funds for the payment of interest and principal on the Larkin Township Water Bonds II. M-30 Water Project - To account for the accumulation of funds for the construction of the M-30 water project and payment of interest and principal on the M-30 Water Project Bonds. Homer Township #8 Water Bonds - To account for the accumulation of funds for the construction of the Homer Township #8 water project and payment of interest and principal on the Homer Township #8 Water Bonds. Refunded Homer Twp. Bonds - To account for the accumulation of funds for the construction of the Homer Township water projects and payment of interest and principal on the Homer Township refunding bonds. Water District #1 - To account for the accumulation of funds for the construction of the Water District #1 and payment of interest and principal on the Water District #1 Bonds. Jail Commissary This fund is used to account for the operations of jail inmate concessions. 158

164 Combining Statement of Net Position Nonmajor Enterprise Funds December 31, 2015 Delinquent Treasurer's Tax Foreclosure Forfeiture/ Forfeiture/ Forfeiture/ Revolving Fund Foreclosure Foreclosure Foreclosure Assets Current assets Cash and investment pool $ 424,311 $ 299,490 $ - $ 96,962 $ 320,610 Receivables: Delinquent taxes and interest 600, Interest Due from other governments 408, Prepaids - 2, Total current assets 1,433, ,864-97, ,852 Noncurrent assets Due from other governments Advances to other funds 1,000, Total noncurrent assets 1,000, Total assets 2,433, ,864-97, ,852 Liabilities Current liabilities Accounts payable Interest payable Due to other governments Bonds payable - current Notes payable - current Total current liabilities Noncurrent liabilities Bonds payable - net of current portion Long-term advances from other funds Total noncurrent liabilities Total liabilities Deferred inflow of resources Deferred income on refunding Net position Restricted for debt service Unrestricted 2,433, ,864-97, ,852 Total net position $ 2,433,901 $ 301,864 $ - $ 97,035 $ 320,

165 Delinquent Personal Larkin Forfeiture/ Forfeiture/ Forfeiture/ Tax Tax Property Tax Township Foreclosure Foreclosure Foreclosure Repayment Repayment PA 105 Administration Water Bonds $ 115,993 $ 28,144 $ 8,736 $ - $ 210,004 $ 124,067 $ 2,851 $ ,150, , ,181 28,158 8,742-2,360, ,120 2,851 20, ,181 28,158 8,742-2,360, ,120 2,851 20, , , , , ,363-20, ,000, ,000, ,839, ,363-20, ,133 28,028 8, ,291 7,757 2,851 - $ 116,133 $ 28,028 $ 8,742 $ - $ 521,291 $ 7,757 $ 2,851 $ 1 continued 160

166 Combining Statement of Net Position Nonmajor Enterprise Funds December 31, 2015 Jerome Larkin Homer Refunded Township Township M-30 Township #8 Homer Twp. Water Bonds Water Bonds II Water Project Water Bonds Water Bonds Assets Current assets Cash and investment pool $ 6 $ 14 $ 2 $ - $ 3,770 Receivables: Delinquent taxes and interest Interest Due from other governments 98, ,529 24,039 23, ,212 Prepaids Total current assets 98, ,543 24,041 23, ,982 Noncurrent assets Due from other governments 100, , , ,000 2,086,975 Advances to other funds Total noncurrent assets 100, , , ,000 2,086,975 Total assets 198,987 1,319, , ,813 2,587,957 Liabilities Current liabilities Accounts payable Interest payable 3,981 24,529 4,039 3,813 19,375 Due to other governments Bonds payable - current 95, ,000 20,000 20, ,837 Notes payable - current Total current liabilities 98, ,529 24,039 23, ,212 Noncurrent liabilities Bonds payable - net of current portion 100, , , ,000 1,652,696 Long-term advances from other funds Total noncurrent liabilities 100, , , ,000 1,652,696 Total liabilities 198,981 1,319, , ,813 2,149,908 Deferred inflow of resources Deferred income on refunding ,506 Net position Restricted for debt service Unrestricted Total net position $ 6 $ 14 $ 2 $ - $

167 Water Jail District #1 Commissary Total $ 8 $ 495,408 $ 2,130, ,750, ,590 30,865-1,438, ,099 30, ,408 6,323,084 1,212,938-4,759, ,000,000 1,212,938-5,759,913 1,243, ,408 12,082,997-32,654 32,835 17,865-74, ,363 13, , ,000 30,865 32,654 2,018,075 1,212,399-4,325, ,000,000 1,212,399-5,325,095 1,243,264 32,654 7,343, , , ,754 4,301,208 $ 547 $ 462,754 $ 4,302,321 concluded 162

168 Combining Statement of Revenues, Expenses and Changes in Fund Net Position Nonmajor Enterprise Funds For the Year Ended December 31, 2015 Delinquent Treasurer's Tax Foreclosure Forfeiture/ Forfeiture/ Forfeiture/ Revolving Fund Foreclosure Foreclosure Foreclosure Operating revenues Interest earned on delinquent taxes $ - $ - $ - $ - $ - Collection fees 179, ,231 Rental income Miscellaneous 39, Total operating revenues 218, ,231 Operating expenses Consultant services General service administration 51, Supplies Total operating expenses 51, Operating income (loss) 167,609 (343) - (206) 5,201 Nonoperating revenue (expense) Interest income 13,031 1, ,000 Reimbursement from local units Interest expense on interfund advances Interest expense on long-term debt Total nonoperating revenue (expense) 13,031 1, ,000 Income (loss) before transfers 180, ,201 Transfers Transfers in 550, , Transfers out (482,009) (113,242) (104,971) (195,287) - Total transfers 68,225 41,029 (104,971) (195,287) - Change in net position 248,865 41,839 (104,902) (194,871) 6,201 Net position, beginning of year 2,185, , , , ,651 Net position, end of year $ 2,433,901 $ 301,864 $ - $ 97,035 $ 320,

169 Delinquent Personal Larkin Forfeiture/ Forfeiture/ Forfeiture/ Tax Tax Property Tax Township Foreclosure Foreclosure Foreclosure Repayment Repayment PA 105 Administration Water Bonds $ - $ - $ - $ - $ 407,998 $ - $ - $ - 158, ,781 8,733 58, , , ,781 8,733 58, , , , , , , , ,592 19,722 8,733 58, ,407 (3) ,550 33,055 1, (7,442) (15,666) (2,363) (6,840) (14,116) 33,055 1,974 (1,422) 130,217 19,755 8,742 51, ,291 33,052 2,851 (1,422) (49,300) - - (550,234) - (32,751) - - (49,300) - - (550,234) - (32,751) ,917 19,755 8,742 (498,474) 521, ,851 (1,422) 35,216 8, ,474-7,456-1,423 $ 116,133 $ 28,028 $ 8,742 $ - $ 521,291 $ 7,757 $ 2,851 $ 1 continued 164

170 Combining Statement of Revenues, Expenses and Changes in Fund Net Position Nonmajor Enterprise Funds For the Year Ended December 31, 2015 Jerome Larkin Homer Refunded Township Township M-30 Township #8 Homer Twp. Water Bonds Water Bonds II Water Project Water Bonds Water Bonds Operating revenues Interest earned on delinquent taxes $ - $ - $ - $ - $ - Collection fees Rental income Miscellaneous Total operating revenues Operating expenses Consultant services General service administration Supplies Total operating expenses Operating income (loss) Nonoperating revenue (expense) Interest income Reimbursement from local units 12,576 69,543 10,764 9,963 56,500 Interest expense on interfund advances Interest expense on long-term debt (14,228) (74,503) (10,766) (10,273) (56,000) Total nonoperating revenue (expense) (1,645) (4,943) - (309) 515 Income (loss) before transfers (1,645) (4,943) - (309) 515 Transfers Transfers in Transfers out Total transfers Change in net position (1,645) (4,943) - (309) 515 Net position, beginning of year 1,651 4, Net position, end of year $ 6 $ 14 $ 2 $ - $

171 Water Jail District #1 Commissary Total $ - $ - $ 407, , , , , ,124 1,635, , , , , , , ,496 1,056, ,770 54, , (23,108) (54,136) - (222,269) 4-22, ,496 1,079,500 1,643,223-2,347,728 (1,643,223) - (3,171,017) - - (823,289) 4 131, , ,258 4,046,110 $ 547 $ 462,754 $ 4,302,321 concluded 166

172 Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2015 Delinquent Treasurer's Tax Foreclosure Forfeiture/ Forfeiture/ Forfeiture/ Revolving Fund Foreclosure Foreclosure Foreclosure Cash flows from operating activities Net cash received from (paid to) other governmental units $ - $ - $ - $ - $ - Cash payments to suppliers for goods and services (220) (30) Cash received from delinquent taxes, including interest 87, ,231 Cash payments for delinquent tax rolls (404,173) (2,756) Net cash provided by (used in) operating activities (316,871) (2,442) - (206) 5,201 Cash flows from noncapital financing activities Proceeds from issuance of tax notes Principal paid on tax notes Issuances (repayments) of interfund advances 500, Interest paid on interfund advances Transfers in 550, , Transfers out (482,009) (113,242) (104,971) (195,287) - Net cash provided by (used in) noncapital financing activities 568,225 41,029 (104,971) (195,287) - Cash flows from capital and related financing activities Principal paid on long-term debt Interest paid on long-term debt Contributions from local units Net cash provided by (used in) capital and related financing activities Cash flows from investing activities Interest on investments 12,642 1, ,051 Net increase (decrease) in cash and investment pool 263,996 39,657 (104,842) (194,780) 6,252 Cash and investment pool, beginning of year 160, , , , ,358 Cash and investment pool, end of year $ 424,311 $ 299,490 $ - $ 96,962 $ 320,610 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $ 167,609 $ (343) $ - $ (206) $ 5,201 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Changes in operating assets and liabilities that provided (used) cash: Delinquent taxes and interest receivable (131,335) Prepaids - (2,099) Due from other governments (353,148) Accounts payable Due to other governments Net cash provided by (used in) by operating activities $ (316,871) $ (2,442) $ - $ (206) $ 5,

173 Delinquent Personal Larkin Forfeiture/ Forfeiture/ Forfeiture/ Tax Tax Property Tax Township Foreclosure Foreclosure Foreclosure Repayment Repayment PA 105 Administration Water Bonds $ - $ - $ - $ - $ - $ 7,870 $ - $ - (29,589) (102,929) - - (10,050) (3) , ,781 8,733 2,655, , (2,150,165) ,541 19,852 8,733 2,655,791 (1,614,758) 7, ,500, (841,000) (2,661,000) (1,500,000) 1,000, (7,442) (15,666) (49,300) - - (550,234) - (32,751) - - (49,300) - - (2,898,676) 1,823,334 (32,751) (20,000) (2,363) , (1,423) ,428 33,023 1, ,692 19,875 8,736 (242,188) 210,004 8,139 2,851 (1,422) 36,301 8, , ,928-1,423 $ 115,993 $ 28,144 $ 8,736 $ - $ 210,004 $ 124,067 $ 2,851 $ 1 $ 129,592 $ 19,722 $ 8,733 $ 58,600 $ 535,407 $ (3) $ 877 $ ,597,191 (2,150,165) (1,051) , $ 128,541 $ 19,852 $ 8,733 $ 2,655,791 $ (1,614,758) $ 7,867 $ 877 $ - continued 168

174 Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2015 Jerome Larkin Homer Refunded Township Township M-30 Township Homer Twp. Water Bonds Water Bonds II Water Project #8 Water Bonds Water Bonds Cash flows from operating activities Net cash received from (paid to) other governmental units $ - $ - $ - $ - $ - Cash payments to suppliers for goods and services Cash received from delinquent taxes, including interest Cash payments for delinquent tax rolls Net cash provided by (used in) operating activities Cash flows from noncapital financing activities Proceeds from issuance of tax notes Principal paid on tax notes Issuances / (repayments) of interfund advances Interest paid on interfund advances Transfers in Transfers out Net cash provided by (used in) noncapital financing activities Cash flows from capital and related financing activities Principal paid on long-term debt (90,000) (290,000) (20,000) (20,000) (475,000) Interest paid on long-term debt (14,228) (74,503) (10,766) (10,273) (56,000) Contributions from local units 102, ,543 30,764 29, ,500 Net cash provided by (used in) capital and related financing activities (1,652) (4,960) (2) (310) 500 Cash flows from investing activities Interest on investments Net increase (decrease) in cash and investment pool (1,645) (4,943) - (309) 515 Cash and investment pool, beginning of year 1,651 4, ,255 Cash and investment pool, end of year $ 6 $ 14 $ 2 $ - $ 3,770 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $ - $ - $ - $ - $ - Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Changes in operating assets and liabilities that provided (used) cash: Delinquent taxes and interest receivable Prepaids Due from other governments Accounts payable Due to other governments Net cash provided (used) by operating activities $ - $ - $ - $ - $ - 169

175 Water Jail District #1 Commissary Total $ - $ 517,124 $ 524,994 - (372,882) (515,703) - - 3,584, (2,557,094) - 144,242 1,036, ,500, (3,502,000) (23,108) 1,643,223-2,347,728 (1,643,223) - (3,171,017) - - (848,397) (12,000) - (927,000) (54,136) - (222,269) 66,136-1,141, (7,847) 4-53, , , ,166 1,896,543 $ 8 $ 495,408 $ 2,130,377 $ - $ 131,496 $ 1,056, , (2,099) - - (353,148) - 12,746 11, ,870 $ - $ 144,242 $ 1,036,827 concluded 170

176 Internal Service Funds Equipment Maintenance & Replacement - To account for funds accumulated for the maintenance and replacement of computer equipment. Employee Disability Insurance - To account for funds accumulated for the payment of both long and short-term disability for covered employees. Workers Compensation - To account for funds used in the self-insurance of Workers Compensation. Funded by receipts from other funds for their proportional expense. Healthcare - To account for funds used in the self-insurance of healthcare for County employees. Funded by receipts from other funds for their proportional expense. InsuranceDeductible- To account for funds accumulated for the payment of the deductible on insurance claims; deductibles were increased for lower premium payments. Day Activity Center Maintenance - To account for funds used in the maintenance and improvement of the Day Activity Center which is owned by Midland County and leased to the Midland-Gladwin Mental Health Services Board. Funded by payments from the lessee. Mobile Data Terminal - To account for funds used in the purchase of Mobile Data Terminal equipment and the collection of user fees for its use. 171

177 Combining Statement of Net Position Internal Service Funds December 31, 2015 Equipment Employee Maintenance Disability Workers & Replacement Insurance Compensation Healthcare Assets Current assets: Cash and investment pool $ 114,116 $ 147,425 $ 663,143 $ 2,466,113 Receivables: Accounts ,831 Interest ,848 Prepaids ,148 Total current assets 114, , ,658 2,547,940 Noncurrent assets: Equipment 177, Accumulated depreciation (177,168) Total noncurrent assets Total assets 114, , ,658 2,547,940 Liabilities Current liabilities: Accounts payable 10, ,077 Accrued liabilities - 7,862 36, ,220 Total liabilities 10,311 7,862 36, ,297 Net position Unrestricted $ 103,894 $ 139,681 $ 626,816 $ 2,356,

178 Day Activity Mobile Insurance Center Data Deductible Maintenance Terminal Total $ 2,051,789 $ 15,852 $ - $ 5,458, , , ,148 2,052,210 15,864-5,541, , , (37,440) (214,608) ,052,210 15,864-5,541, ,388 79, ,699 79, ,087 $ 1,972,435 $ 15,864 $ - $ 5,215,

179 Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds For the Year Ended December 31, 2015 Equipment Employee Maintenance Disability Workers & Replacement Insurance Compensation Healthcare Operating revenue Billings to departments $ 152,500 $ 220,269 $ 296,812 $ 3,559,376 Miscellaneous ,672 Total operating revenue 152, , ,812 3,926,048 Operating expenses Compensation payments - 191, ,798 - Consultant services - 3,568 59,495 - General service administration 148, ,077,776 Total operating expenses 148, , ,293 3,077,776 Operating income (loss) 4,034 25, , ,272 Nonoperating revenue Interest income ,200 8,937 Income before transfers 4,317 26, , ,209 Other financing sources Transfers in Change in net position 4,317 26, , ,209 Net position, beginning of year 99, , ,097 1,499,434 Net position, end of year $ 103,894 $ 139,681 $ 626,816 $ 2,356,

180 Day Activity Mobile Insurance Center Data Deductible Maintenance Terminal Total $ - $ - $ - $ 4,228,957 69, ,028 69, ,664, , , , ,331, , ,699,084 (35,554) , , , , ,321,049 40, , , ,361,149 1,624,765 15,809-3,854,184 $ 1,972,435 $ 15,864 $ - $ 5,215,

181 Combining Statement of Cash Flows Internal Service Funds For the Year Ended December 31, 2015 Equipment Employee Maintenance Disability Workers & Replacement Insurance Compensation Healthcare Cash flows from operating activities Cash received for services provided $ 152,500 $ 220,269 $ 296,812 $ 3,916,217 Cash payments to suppliers for goods and services (138,155) Cash payments for insurance claims - (192,856) (139,086) (3,261,301) Net cash provided by operating activities 14,345 27, , ,916 Cash flows from noncapital financing activities Transfers in Cash flows from investing activities Interest on investments ,981 8,288 Net increase in cash and investment pool 14,609 27, , ,204 Cash and investment pool, beginning of year 99, , ,436 1,802,909 Cash and investment pool, end of year $ 114,116 $ 147,425 $ 663,143 $ 2,466,113 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities Operating income (loss) $ 4,034 $ 25,630 $ 123,519 $ 848,272 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Change in operating assets and liabilities that provided (used) cash: Accounts receivable (9,831) Prepaids ,686 Accounts payable 10, ,112 Accrued liabilities - 1,783 34,207 (192,323) Net cash provided by operating activities $ 14,345 $ 27,413 $ 157,726 $ 654,

182 Day Activity Mobile Insurance Center Data Deductible Maintenance Terminal Total $ 69,356 $ - $ - $ 4,655,154 (68,482) - - (206,637) (3,593,243) ,274 40, , , , , ,249,458 1,667,821 15,800-4,208,980 $ 2,051,789 $ 15,852 $ - $ 5,458,438 $ (35,554) $ - $ - $ 965, (9,831) , ,423 36, (119,905) $ 874 $ - $ - $ 855,

183 Fiduciary Funds Fiduciary Funds are funds set up to account for assets held by the County, in a fiduciary capacity, for individuals, organizations, other units of government or other funds. These funds are grouped into three categories: Private-Purpose Trust Funds To account for assets held in trusts under which the principal and income benefit individuals, private organizations and other governments. Pension and Other Employee Benefit Trust Funds - To account for resources required to be held in trust for the members and beneficiaries of retirement programs or other employee benefit programs. Agency Funds - To account for resources received and held by the County, in a custodial capacity, for individuals, organizations and other governments. Private Purpose Trust Funds Juvenile Care Center - To account for money received from the Volunteers for Youth of Midland, Inc., for future benefits of Juvenile Care Center. Forfeiture Control - To account for money received from various forfeitures. Department of Human Services - To account for all transactions concerning donor money which is received by the Midland County Family Independence Agency office. Pinecrest Special Donor - requested by the Donor. To account for money received and used for specialty projects as Bergstein Donor Trust - To account for money received for projects as requested by the Donor. Midland Charitable Family Trust - requested by the Donor. To account for money received and used for projects as Public Guardian Trust - To account for money received from private individuals for specific purposes which are related to Probate Court matters. Real Estate Transfer Tax - To account for money from real estate taxes collected by the County. Pension and Other Employee Benefit Trust Funds RetireeHealthCare- To account for the operation of the Retiree Health Care System. Premium payments for retiree health insurance are paid from this fund. Funded through employee contributions, County contributions and earnings on the accumulated funds. Employees' Retirement - To account for the operation of the Midland County Employees Retirement System. Funded through employee contributions, County contributions and earnings on the accumulated funds. Act 345 Retirement - Established under the provisions of Michigan Public Act 345 of 1937, to account for the operation of the retirement system for members of the Sheriff Department. Funded by employee contributions, County contributions and earnings on accumulated funds. 178

184 Fiduciary Funds Agency Funds County Agency - To account for money which is held by the County in a capacity of trustee, custodian, or agent for individuals, governmental entities and non-public organizations. Flexible Benefit Fund - benefit/cafeteria plan. To account for deposits from employees to be used for flexible Library Penal Fines Fund - To account for money which is received from the courts for funds they impose for State Law violations. Required by Michigan Public Act 286 of Inmate Trust Fund - To account for deposits from County jail inmates. DHS Child Care - To account for money received for from other Counties within the State's region where Midland County is designated as the centralized unit for DHS Child Care. DHS Social Welfare - To account for money received for from other Counties within the State's region where Midland County is designated as the centralized unit for DHS Social Welfare. 179

185 Combining Statement of Fiduciary Net Position Private Purpose Trust Funds December 31, 2015 Juvenile Department Pinecrest Bergstein Midland Care Forfeiture of Human Special Donor Charitable Center Control Services Donor Trust Family Trust Assets Cash and investment pool $ 149,264 $ 1,950 $ 410,656 $ 124,162 $ - $ 578 Investments - common stock , Receivables: Accounts Interest receivable Total assets 149,377 1,950 1,190, , Liabilities Accounts payable Net position restricted for specific programs $ 149,048 $ 1,950 $ 1,190,889 $ 123,812 $ 1 $

186 Public Real Estate Guardian Transfer Trust Tax Total $ 357,331 $ - $ 1,043, , ,331-1,824, ,076 $ 357,331 $ - $ 1,823,

187 Combining Statement of Changes in Fiduciary Net Position Private Purpose Trust Funds For the Year Ended December 31, 2015 Juvenile Department Pinecrest Bergstein Midland Care Forfeiture of Human Special Donor Charitable Center Control Services Donor Trust Family Trust Additions Contributions $ - $ - $ - $ 15,943 $ 10,305 $ - Investment income: Interest income 529-1, Dividends , Net appreciation in fair value of investments , Total additions ,783 16,401 10,315 2 Deductions Administrative expenses 3, ,225 - Health and welfare , Total deductions 3, ,262 14,225 - Change in net position (2,862) - 115, (3,910) 2 Net position, beginning of year 151,910 1,950 1,075, ,673 3, Net position, end of year $ 149,048 $ 1,950 $ 1,190,889 $ 123,812 $ 1 $

188 Public Real Estate Guardian Transfer Trust Tax Total $ 1,414,408 $ - $ 1,440, , , ,931 1,414,408-1,557, ,650 1,271,724-1,287,986 1,271, ,305, ,684 (34) 251, , ,571,807 $ 357,331 $ - $ 1,823,

189 Combining Statement of Fiduciary Net Position Pension and Other Employee Benefit Trust Funds December 31, 2015 Assets Retiree Health Employees' Act 345 Care Retirement Retirement Total Cash and investment pool $ 725,233 $ 156,974 $ 13,155 $ 895,362 Investments Common stock 8,176,077 47,225,904 12,259,268 67,661,249 International equities - 1,310,714-1,310,714 Corporate bonds 3,332,839-2,509,449 5,842,288 American depository receipts - 97,075-97,075 Real estate investment trusts 1,162,190 1,357, ,517 2,915,035 Money market accounts 2,145,255 4,136, ,145 6,413,103 Alternatives 6,935,506-5,758,812 12,694,318 U.S. government securities 1,945,909-1,666,219 3,612,128 Total investments 23,697,776 54,127,724 22,720, ,545,910 Other assets Receivables: Accounts 7,585 7,223 5,644 20,452 Interest , ,900 Prepaids 59, , ,736 Total other assets 67,487 37, , ,088 Total assets 24,490,496 54,322,615 22,870, ,683,360 Liabilities Accounts payable - 19,813-19,813 Accrued liabilities 157, ,780 Total liabilities 157,780 19, ,593 Net position, restricted for retirement benefits $ 24,332,716 $ 54,302,802 $ 22,870,249 $ 101,505,

190 Combining Statement of Changes in Fiduciary Net Position Pension and Other Employee Benefit Trust Funds For the Year Ended December 31, 2015 Retiree Health Employees' Act 345 Care Retirement Retirement Total Additions Contributions Employer $ 1,720,286 $ 981,940 $ 946,928 $ 3,649,154 Plan members 166, , , ,554 Total contributions 1,886,340 1,165,191 1,118,177 4,169,708 Investment income Interest 211,468 1, , ,225 Dividends 215, , ,499 1,140,445 Other revenue - 16,720-16,720 Net appreciation in fair value of investments 197, , , ,537 Total investment earnings 623, , ,440 2,255,927 Less investment expense (32,285) (222,523) (64,381) (319,189) Net investment income 591, , ,059 1,936,738 Total additions 2,477,570 1,812,640 1,816,236 6,106,446 Deductions Benefits paid 2,361,124 3,839,210 1,570,707 7,771,041 Participant refunds 16,744 25,781 46,907 89,432 Administrative expenses 81,690 71,311 72, ,056 Total deductions 2,459,558 3,936,302 1,689,669 8,085,529 Change in net position 18,012 (2,123,662) 126,567 (1,979,083) Net position, beginning of year 24,314,704 56,426,464 22,743, ,484,850 Net position, end of year $ 24,332,716 $ 54,302,802 $ 22,870,249 $ 101,505,

191 Combining Statement of Fiduciary Assets and Liabilities Agency Funds December 31, 2015 Library County Flexible Penal Inmate Agency Benefit Fines Trust Assets Cash and investment pool $ 1,767,283 $ 44,741 $ 15,543 $ 55,808 Interest receivable Total assets $ 1,767,283 $ 44,741 $ 15,703 $ 55,808 Liabilities Accounts payable $ 734,429 $ - $ - $ - Deposits payable 534,604 44,741-55,808 Interest payable Due to other governments 498,250-15,264 - Total liabilities $ 1,767,283 $ 44,741 $ 15,703 $ 55,

192 DHS Social Welfare Total $ - $ 1,883, $ - $ 1,883,535 $ - $ 734, , ,514 $ - $ 1,883,

193 Combining Statement of Changes in Fiduciary Assets and Liabilities Agency Funds For the Year Ended December 31, 2015 County Agency Balance January 1, 2015 Additions Deductions Balance December 31, 2015 Assets Cash and investment pool $ 1,164,110 $ 68,516,166 $ 67,912,993 $ 1,767,283 Liabilities Accounts payable $ 257,356 $ 38,914,970 $ 38,437,897 $ 734,429 Deposits payable 404,554 1,478,648 1,348, ,604 Due to other governments 502,200 91,555,828 91,559, ,250 Total liabilities $ 1,164,110 $ 131,949,446 $ 131,346,273 $ 1,767,283 Flexible Benefit Assets Cash and investment pool $ 47,457 $ 200,814 $ 203,530 $ 44,741 Liabilities Deposits payable $ 47,457 $ 200,814 $ 203,530 $ 44,741 Library Penal Fines Assets Cash and investment pool $ 137,639 $ 1,596,256 $ 1,718,352 $ 15,543 Interest receivable Total assets $ 137,709 $ 1,596,416 $ 1,718,422 $ 15,703 Liabilities Accounts payable $ - $ 361,537 $ 361,537 $ - Interest payable Due to other governments 137, , ,623 15,264 Total liabilities $ 137,709 $ 879,695 $ 1,001,701 $ 15,703 Inmate Trust Assets Cash and investment pool $ 298,937 $ - $ 243,129 $ 55,808 Liabilities Deposits payable $ 298,937 $ - $ 243,129 $ 55,808 DHS Social Welfare Assets Cash and investment pool $ 134,857 $ 891 $ 135,748 $ - Liabilities Accounts payable $ 16,166 $ 119,582 $ 135,748 $ - Due to other governments 118, ,691 - Total liabilities $ 134,857 $ 119,582 $ 254,439 $ - continued 188

194 Combining Statement of Changes in Fiduciary Assets and Liabilities Agency Funds For the Year Ended December 31, 2015 Balance January 1, 2015 Additions Deductions Balance December 31, 2015 Total All Agency Funds Assets Cash and investment pool $ 1,783,000 $ 70,314,127 $ 70,213,752 $ 1,883,375 Interest receivable Total assets 1,783,070 70,314,287 70,213,822 1,883,535 Liabilities Accounts payable $ 273,522 $ 39,396,089 $ 38,935,182 $ 734,429 Deposits payable 750,948 1,679,462 1,795, ,153 Interest payable Due to other governments 758,421 92,073,185 92,318, ,514 Total liabilities $ 1,783,070 $ 133,149,537 $ 133,049,072 $ 1,883,535 concluded 189

195 Statement of Net Position and Governmental Fund Balance Sheet Drain Commission Component Unit December 31, 2015 Revolving Brewer Kiesel Revolving Drain Drain Drain Drain Drain Operating Debt Debt Assets Cash and investment pool $ 939,057 $ 34,208 $ 5,262 $ 10,524 $ - Receivables: Special assessments 1,703, ,277 - Interest Due from other funds - 371,150 46, Prepaids Capital assets being depreciated, net Total assets $ 2,643,014 $ 405,358 $ 51,721 $ 64,801 $ - Liabilities Accounts payable $ 39,222 $ 7,900 $ - $ - $ - Due to other funds 417, Advance from primary government - 397,458 47, Long-term debt: Due within one year Due in more than one year Total liabilities 456, ,358 47, Deferred inflows of resources Unavailable revenue - Special assessments 1,317, Fund balances Nonspendable Restricted 868,567-4,090 64,801 - Total fund balances 868,567-4,090 64,801 - Total liabilities, deferred inflows of resources and fund balances $ 2,643,014 $ 405,358 $ 51,721 $ 64,801 $ - Net Position Net investment in capital assets Restricted Total net position 190

196 Little Abbott & Ashby Sanford Total Salt Ware Drain Lake Balance Statement Debt Debt Debt Improvement Sheet Adjustments of Net Position $ 76,555 $ 16,657 $ 72,350 $ 44,301 $ 1,198,914 $ - $ 1,198,914 71,250 78,067 52, ,422 2,074,418-2,074, ,605 (417,605) ,452,444 4,452,444 $ 147,805 $ 94,724 $ 124,491 $ 159,791 $ 3,691,705 4,034,839 7,726,544 $ - $ - $ - $ 3,750 $ 50,872 (2,239) 48, ,605 (417,605) , , , , , , , , ,156 1,813, ,317,620 (1,317,620) (35) - 147,805 94, , ,006 1,460,484 (1,460,484) - 147,805 94, , ,041 1,460,519 (1,460,519) - $ 147,805 $ 94,724 $ 124,491 $ 159,791 $ 3,691,705 3,132,444 3,132,444 2,780,378 2,780,378 $ 5,912,822 $ 5,912,

197 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance Drain Commission Component Unit For the Year Ended December 31, 2015 Revolving Brewer Kiesel Revolving Drain Drain Drain Drain Drain Operating Debt Debt Revenue Special assessments $ 695,717 $ - $ - $ - $ - Interest earnings 4, Miscellaneous revenue 37, Total revenue 737, Expenditures/expenses Current operations: Public works 1,028, Depreciation Debt service: Payment of debt principal ,000 - Interest charges ,594 - Total expenditures/expenses 1,028, ,594 - Revenues over (under) expenditures/expenses (291,164) - 22 (54,568) - Other financing sources (uses) Issuance of long-term debt 320, Transfers in ,372 - Transfers out (245,446) Total other financing sources (uses) 74, ,372 - Change in fund balance/net position (216,610) - 22 (1,196) - Fund balance/net position, beginning of year 1,085,177-4,068 65,997 - Fund balance/net position, end of year $ 868,567 $ - $ 4,090 $ 64,801 $ - 192

198 Little Abbott & Ashby Sanford Salt Ware Drain Lake Statement Debt Debt Debt Improvement Total Adjustments of Activities $ - $ - $ - $ 109,475 $ 805, ,279 $ 907, ,705-4, , , , , , , ,279 1,059, ,924 1,136,141 (429,969) 706, ,837 86, ,000 75,000 50, ,000 (345,000) - 12,101 5,025 15,738-42,458 (6,324) 36, ,101 80,025 65, ,924 1,523,599 (694,456) 829,143 (76,438) (79,991) (65,624) 1,819 (565,944) 796, , ,000 (320,000) - 67,875 66,790 57, ,446 (245,446) (245,446) 245,446-67,875 66,790 57, ,000 (320,000) - (8,563) (13,201) (8,215) 1,819 (245,944) 476, , , , , ,222 1,706,463 3,975,568 5,682,031 $ 147,805 $ 94,724 $ 124,491 $ 156,041 $ 1,460,519 $ 4,452,303 $ 5,912,

199 STATISTICAL SECTION 194

200 Statistical Section Table of Contents This part of the County s Comprehensive Annual Financial Report presents detailed information to assist the user in understanding what the financial statements, note disclosures and required supplementary information say about the overall economic condition of Midland County. Financial Trends Tables 1-4 Revenue Capacity Tables 5-8 Debt Capacity Tables 9-14 Demographic and Economic Information Tables Page These schedules contain trend information to help the reader understand and evaluate how the County s financial condition, performance and well-being have changed over time. 196 These schedules contain information to help the reader assess the County s ability to generate its most significant local revenue source, the property tax. 205 These schedules present information to help the reader assess the affordability of the County s current levels of outstanding debt and its ability to issue additional debt in the future. 212 These schedules present various demographic and economic indicators to help the reader understand the environment within which the County operates and how they affect the County s financial activities. 219 Operating Information Tables These schedules contain information about the County s operations and resources to help the reader understand how the information in the County s financial report relates to the services the County provides and the activities it performs. 222 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Report for the relevant year. 195

201 Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Governmental activities Net investment in capital assets $ 16,263,177 $ 17,300,317 $ 17,205,728 $ 9,975,629 $ 13,434,713 Restricted 3,649,802 3,236,915 21,557,644 11,263,208 7,065,655 Unrestricted 45,640,350 21,625,971 2,049,155 15,780,321 10,195,845 Total governmental activities net position 65,553,329 42,163,203 40,812,527 37,019,158 30,696,213 Business-type activities Net investment in capital assets Restricted Unrestricted 3,450,874 3,563,602 1,950,829 3,761,731 4,278,333 Total business-type activities net position 3,450,874 3,563,602 1,950,829 3,761,731 4,278,333 Primary government Net investment in capital assets 16,263,177 17,300,317 17,205,728 9,975,629 13,434,713 Restricted 3,649,802 3,236,915 21,557,644 11,263,208 7,065,655 Unrestricted 49,091,224 25,189,573 3,999,984 19,542,052 14,474,178 Total primary government activities net position $ 69,004,203 $ 45,726,805 $ 42,763,356 $ 40,780,889 $ 34,974,546 Note: GASB Statement No.'s 63 and 65 were implemented for fiscal year ended December 31, Information on this schedule is reported prospectively for the year of implementation. Midland County, Michigan has chosen not to make the necessary calculations to retroactively report the information for the eight fiscal years ended December 31, 2006 through Note: GASB Statement No. 68 was implemented for the year ended December 31, This resulted in presentation of the County's net pension liability on the statement of net position. Prior years were not restated. 196

202 Table 1 Unaudited $ 13,342,892 $ 13,408,436 $ 15,035,072 $ 16,127,985 $ 16,477,876 7,004,755 7,104,017 6,266,528 5,508,732 7,742,907 9,395,702 7,262,037 7,350,004 7,339,156 (3,001,289) 29,743,349 27,774,490 28,651,604 28,975,873 21,219,494 1,904,968 1,181 1, , , ,085 3,044,183 3,463,894 3,905,800 4,037,197 4,301,208 4,949,151 3,465,075 3,907,074 5,261,778 4,671,293 15,247,860 13,409,617 15,036,346 16,969,286 16,477,876 7,004,755 7,104,017 6,266,528 5,892,012 8,112,992 12,439,885 10,725,931 11,255,804 11,376,353 1,299,919 $ 34,692,500 $ 31,239,565 $ 32,558,678 $ 34,237,651 $ 25,890,

203 Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Expenses Governmental activities: General government $ 12,655,110 $ 33,921,164 $ 8,973,519 $ 10,028,301 $ 10,752,373 Legislative 187, , , , ,327 Judicial 6,045,807 7,152,321 7,713,534 6,485,900 6,702,515 Public safety 8,028,374 9,298,163 10,291,081 10,667,693 11,316,483 Public works 83, ,811 (24,989) 84,357 85,777 Health and welfare 14,810,248 15,358,161 17,312,199 14,711,734 16,262,221 Culture and recreation 1,630, ,130 1,095,622 1,282, ,406 Planning and development 566, , , , ,745 Interest on debt 50,540 36, ,556 1,171,834 1,355,783 Total governmental activities expenses 44,058,725 67,561,094 46,803,381 45,003,457 48,347,630 Business-type activities: Delinquent property tax collection 153, , , , ,755 Local unit water bonds 1,636, , , ,896 1,443,400 Inmate services 57,847 47,319 68,962 83, ,699 Total business-type activities expenses 1,848, ,303 1,212, ,572 1,794,854 Total primary government expenses 45,907,423 68,538,397 48,015,972 45,813,029 50,142,484 Program Revenues Governmental activities: Charges for services: General government 1,100,893 1,023,546 1,041,619 1,031,404 1,072,098 Judicial 1,835,820 1,787,298 1,824,633 1,696,829 1,716,386 Public safety 690, , , ,955 1,207,912 Health and welfare 2,290,908 2,546,823 2,560,861 2,504,138 2,088,466 Culture and recreation 99, , , , ,120 Planning and development 2,704 21,905 27,514 (76,540) 130,037 Operating grants and contributions 7,578,580 7,781,635 9,127,679 7,395,674 7,773,583 Capital grants and contributions 530, , , , ,887 Total governmental activities program revenues 14,129,709 14,830,079 15,825,115 13,632,628 14,426,

204 Table 2 Unaudited $ 9,484,648 $ 10,732,028 $ 9,836,275 $ 10,267,499 $ 10,562, , , , , ,011 6,576,905 6,574,769 5,872,461 5,890,447 6,776,797 11,014,855 11,383,682 11,723,068 12,761,084 12,662,128 62,373 15,690 22,519 15,621 6,747 15,685,378 16,088,832 17,635,552 17,497,785 16,589, , , , , , , , , , ,111 1,379,321 1,312,547 1,226,786 1,187,093 1,129,693 45,584,216 47,526,443 47,763,093 49,272,119 49,695, , , , , ,690 1,870,236 3,183,993 1,465,025 1,400,839 2,387, , , , , ,628 2,245,506 3,830,772 2,032,660 1,933,666 2,990,115 47,829,722 51,357,215 49,795,753 51,205,785 52,685, ,466 1,091,672 1,234, ,418 1,046,605 2,009,825 2,098,569 3,181,717 1,829,095 2,053,052 1,992,393 2,628,598 3,364,496 3,489,437 3,299,672 2,209,026 2,548,998 2,465,672 3,186,484 3,043, , , , , , ,117 96,225 35, , ,604,715 7,982,094 9,251,052 9,734,911 10,047,310 27,589 26,831 50,300 70,587 9,342 15,495,803 16,772,496 19,840,771 19,801,104 19,817,067 continued 199

205 Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Business-type activities: Charges for services: Delinquent property tax collection $ 701,561 $ 825,424 $ 996,624 $ 951,203 $ 1,083,492 Local unit water bonds ,886 Inmate services 72,782 70,109 75,131 14, ,466 Operating grants and contributions ,619,073 Capital grants and contributions 1,306, , ,694 2,203,169 - Total business-type activities program revenues 2,081,026 1,433,448 1,796,449 3,168,554 2,928,917 Total primary government program revenues 16,210,735 16,263,527 17,621,564 16,801,182 17,355,406 Net (expense)/revenue Governmental activities (29,929,016) (52,731,015) (30,978,266) (31,370,829) (33,921,141) Business-type activities 232, , ,858 2,358,982 1,134,063 Total primary government net expense (29,696,688) (52,274,870) (30,394,408) (29,011,847) (32,787,078) General Revenues Governmental activities: Property taxes 30,306,817 26,064,855 26,047,550 25,955,569 26,654,938 Unrestricted grants and contributions 19, ,241 15, ,242 96,192 Unrestricted investment earnings 2,342,034 2,690,843 1,191, , ,775 Other revenue , Transfers - internal activities 259, ,734 2,361, , ,305 Total governmental activities 32,928,175 29,569,963 29,627,590 27,264,710 27,598,210 Business-type activities: Unrestricted investment earnings 95, , ,131 46,200 21,844 Transfers - internal activities (259,575) (556,734) (2,361,762) (594,280) (639,305) Total business-type activities (163,734) (343,417) (2,196,631) (548,080) (617,461) Total primary government 32,764,441 29,226,546 27,430,959 26,716,630 26,980,749 Change in Net Position Governmental activities 2,999,159 (23,161,052) (1,350,676) (4,106,119) (6,322,931) Business-type activities 68, ,728 (1,612,773) 1,810, ,602 Total primary government $ 3,067,753 $ (23,048,324) $ (2,963,449) $ (2,295,217) $ (5,806,329) 200

206 Table 2 Unaudited $ 704,429 $ 788,765 $ 1,321,745 $ 1,290,353 $ 1,118, , , , , ,124 2,254,497 1,311,202 1,436,956 1,383,166 1,316, , ,361 3,194,992 2,445,353 3,170,774 3,961,705 3,169,058 18,690,795 19,217,849 23,011,545 23,762,809 22,986,125 (30,088,413) (30,753,947) (27,922,322) (29,471,015) (29,878,404) 949,486 (1,385,419) 1,138,114 2,028, ,943 (29,138,927) (32,139,366) (26,784,208) (27,442,976) (29,699,461) 27,731,894 27,580,674 27,565,966 28,686,347 27,870, ,932 60,499 52,556 3,625 3, , , , , , , ,610 3, , , , , ,289 29,135,550 28,662,610 28,799,436 29,795,284 29,135, , ,760 43,757 39,793 53,861 (663,172) (680,417) (739,871) (713,128) (823,289) (278,668) (98,657) (696,114) (673,335) (769,428) 28,856,882 28,563,953 28,103,322 29,121,949 28,366,325 (952,863) (2,091,337) 877, ,269 (742,651) 670,818 (1,484,076) 442,000 1,354,704 (590,485) $ (282,045) $ (3,575,413) $ 1,319,114 $ 1,678,973 $ (1,333,136) concluded 201

207 Table 3 Unaudited Governmental Activities Tax Revenue By Source Last Ten Fiscal Years (accrual basis of accounting) Fiscal Property Year Tax 2006 $ 30,306, ,064, ,047, ,955, ,654, ,731, ,580, ,565, ,686, ,870,

208 Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) General fund Reserved $ 934,732 $ 906,156 $ 842,556 $ 769,212 $ 653,290 Unreserved 5,955,897 3,346,062 3,270,135 4,107,194 4,396,640 Nonspendable Committed Assigned Unassigned Total general fund 6,890,629 4,252,218 4,112,691 4,876,406 5,049,930 All other governmental funds Reserved 109, ,065 19,937,007 3,898,430 2,468,626 Unreserved Special revenue funds 37,764,846 15,473,354 12,799,696 17,042,316 12,579,299 Nonspendable Restricted Committed Assigned Unassigned (deficit) Total all other governmental funds 37,874,694 16,096,419 32,736,703 20,940,746 15,047,925 Total governmental funds $ 44,765,323 $ 20,348,637 $ 36,849,394 $ 25,817,152 $ 20,097,855 The County implemented GASB 54 in

209 Table 4 Unaudited $ - $ - $ - $ - $ , , , , , ,786 2,184,390 2,228, ,195,443 5,879,622 8,144,632 1,341,122 1,610, ,257,066 9,094,677 7,079,535 8,766,229 11,036,657 11,305,073 11,394, ,083 47,702 40,275 10,347,355 8,250,891 6,266,528 5,840,472 5,820,299 82, , ,993 1,181,203 1,447,898 2,548,347 3,022,916 3,118,143 3,734,228 4,143, (16,049) - 12,978,216 11,483,147 9,796,747 10,787,556 11,452,014 $ 20,057,751 $ 20,249,376 $ 20,833,404 $ 22,092,629 $ 22,846,

210 Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Revenues Taxes $ 30,306,815 $ 25,986,133 $ 26,066,589 $ 26,121,852 $ 26,762,824 Intergovernmental revenue 7,377,062 8,329,046 9,208,742 7,413,517 7,819,223 Charges for services 4,744,655 4,707,615 4,722,058 4,532,349 5,221,034 Licenses and permits 306, , , , ,358 Rental revenue 81,485 75,757 81,207 76,844 70,641 Investment income 2,104,051 2,473,115 1,052, , ,269 Miscellaneous revenue 2,029,560 2,024,088 1,994,566 1,980,532 1,402,879 Total revenues 46,950,545 43,912,929 43,471,168 40,961,571 41,804,228 Expenditures Current: General service administration 11,292,552 32,663,546 7,475,905 5,975,445 6,362,681 Legislative 188, , , , ,996 Judicial 6,207,483 6,061,714 6,421,237 5,491,232 5,266,361 Law enforcement and corrections 7,046,558 7,148,329 14,106,229 21,696,405 8,150,042 Public safety and emergency services 401, , , , ,693 Public works 19,105 19,079 20,849 20,238 29,378 Health and welfare 12,308,219 12,557,376 14,549,511 14,554,516 15,841,345 Culture and recreation 839, , , , ,242 Planning and development 490, , , , ,983 Other agencies 6,161,829 6,493,387 7,275,176 6,858,499 7,720,727 Capital outlay 1,030,505 1,209,587 1,500,141 1,171, ,348 Debt service: Principal 527, , , ,826 1,217,428 Interest 51,496 38, ,237 1,127,999 1,363,606 Total expenditures 46,566,022 68,657,565 54,345,201 59,471,012 48,162,830 Revenues over (under) expenditures 384,523 (24,744,636) (10,874,033) (18,509,441) (6,358,602) Other financing sources (uses) Bond proceeds ,001,017 6,449,056 - Sale of capital assets , Transfers in 9,362,499 13,335,731 16,394,434 24,721,944 9,377,356 Transfers (out) (9,058,628) (12,778,997) (14,032,672) (23,693,791) (8,738,051) Total other financing sources (uses) 304, ,024 27,374,790 7,477, ,305 Net change in fund balances $ 689,249 $ (24,187,612) $ 16,500,757 $ (11,032,232) $ (5,719,297) Debt service as a percentage of noncapital expenditures 1.27% 0.84% 1.98% 3.58% 5.43% 205

211 Table 5 Unaudited $ 27,693,427 $ 27,045,898 $ 27,615,488 $ 28,795,849 $ 27,877,538 7,521,328 7,777,936 9,259,973 9,298,716 10,160,181 6,289,191 7,267,971 8,912,361 8,722,283 8,239, , , , , ,272 19,407 7,601 10,115 15,225 13, ,521 92,710 76,003 65,247 79,510 1,540,704 2,000,391 1,780,611 1,783,222 1,518,146 43,614,087 44,606,295 48,074,053 49,082,260 48,302,525 6,430,679 6,396,140 6,604,227 6,896,300 7,077, , , , , ,242 5,529,687 5,205,918 5,445,571 5,333,879 5,379,447 8,060,015 8,356,309 8,623,707 9,465,917 9,732, , , , , ,063 2,566 2,332 2,859 2,431 1,916 12,730,884 12,735,578 14,707,091 13,482,391 12,370, , , , , , , , , , ,430 7,623,031 8,075,368 8,238,852 8,260,318 8,537, , , ,780 1,118,601 1,231,168 1,254,030 1,287,379 1,332,332 1,270,000 1,320,000 1,324,308 1,283,261 1,239,338 1,193,120 1,146,745 44,698,373 45,241,440 48,229,896 48,536,163 48,331,658 (1,084,286) (635,145) (155,843) 546,097 (29,133) , ,285,306 9,908,743 7,231,946 7,220,936 7,386,648 (7,624,427) (9,228,326) (6,492,075) (6,507,808) (6,603,459) 1,044, , , , ,189 $ (40,104) $ 45,272 $ 584,028 $ 1,259,225 $ 754, % 5.82% 5.62% 5.23% 5.19% 206

212 Taxable Value and Estimated True Cash Value of Taxable Property Last Ten Fiscal Years Fiscal Year Total Ended Real Property Personal Taxable December 31, Residential Commercial Industrial Other Property Value 2006 $ 1,871,003,835 $ 304,131,147 $ 914,814,516 $ 75,838,447 $ 451,252,750 $ 3,617,040, ,947,737, ,306, ,627,630 78,639, ,467,350 3,686,778, ,968,856, ,310, ,586,568 80,608, ,799,150 3,294,161, ,008,069, ,799, ,606,165 84,561, ,977,680 3,402,014, ,958,643, ,957, ,688,541 85,765, ,100,055 3,534,155, ,974,508, ,203, ,807,971 86,688, ,151,854 3,610,360, ,999,773, ,017, ,235,330 86,304, ,841,848 3,473,172, ,022,343, ,310, ,720,835 88,134, ,139,656 3,627,649, ,041,966, ,688, ,688,215 89,160, ,671,192 3,645,175, ,056,205, ,411, ,266,079 90,478, ,199,778 3,684,561,852 Source: Midland County Equalization Department Note: Property in the county is reassessed annually. The tax rates are applied to taxable value to generate revenue. True cash values are estimated at twice the State Equalized Values. Tax rates are per $1,000 of assessed value. 207

213 Table 6 Unaudited Taxable Total Value as a Direct True Cash Percentage of Tax Rate Value True Cash Value $ 8,222,453, % ,251,955, % ,295,877, % ,344,727, % ,565,628, % ,660,104, % ,356,429, % ,632,569, % ,674,204, % ,794,159, % 208

214 Property Tax Rates - Direct and Overlapping Governments Last Ten Fiscal Years Midland County Total Fiscal Operating Special County SET Year (1) (2) Millage Millage Millage Schools Source: Midland County Equalization Department (1) Rates reduced to comply with the Headlee Amendment. (2) This is the year in which the tax is levied refers to the 2007 tax collection, 2007 refers to the 2008 tax collection, and so on. 209

215 Table 7 Unaudited Overlapping Rates Intermediate Delta Schools College Townships Cities

216 Table 8 Unaudited Principal Property Taxpayers December 31, 2015 and Eight Years Ago * Taxable Percentage of Taxable Percentage of Assessed Total Taxable Assessed Total Taxable Taxpayer Value Rank Assessed Value Value Rank Assessed Value Dow Chemical Company $ 408,816, % $ 353,459, % Midland Cogeneration Venture 216,767, % 674,352, % Dow Corning 138,523, % 122,043, % Consumers Energy 73,479, % 51,349, % Trinseo LLC 33,216, % Mich Electric Transmission Co, LLC 24,508, % 11,339, % Midland Downtown Partners, LLC 20,378, % Midland Mall LLC 18,147, % 15,612, % Cabot Corporation 11,621, % Midland County Club 10,659, % Meijer Inc 7,857, % Quebecor World, Inc. 10,255, % IBM Credit LLC 7,424, % Wells Fargo Bank N.A. 6,851, % Totals $ 956,118, % $ 1,260,544, % * 2006 data was not available so 2007 data is reported Source: Midland County Equalization Department 211

217 Table 9 Unaudited Property Tax Levies and Collections Last Ten Fiscal Years Collected within the Fiscal Year of the Levy Total Collections to Date Fiscal Year Total Tax Delinquent Ended Levy for Percentage Taxes Percentage December 31, Fiscal Year Amount of Levy Collected (1) Amount (2) of Levy (3) 2006 $ 145,380,392 $ 140,280, % $ 5,099,989 $ 145,380, % ,419, ,145, % 5,273, ,419, % ,992, ,488, % 5,498, ,987, % ,393, ,113, % 14,279, ,392, % ,937, ,246, % 5,691, ,937, % ,373, ,371, % 6,002, ,373, % ,828, ,315, % 5,512, ,827, % ,909, ,031, % 4,862, ,893, % ,183, ,760, % 5,577, ,337, % ,051, ,900, % 714, ,614, % Source: Midland County Treasurer (1) Includes all delinquent tax years March 31- March 31 and excludes personal tax collections. (2) Amount of total collections to date includes collections for all entities within the County with tax levies. (3) Total collections, including delinquent taxes, are shown as a percent of total tax levy for the fiscal year. 212

218 Table 10 Unaudited Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Business- Type Activities Fiscal Year General Delinquent Total Percentage Ended Obligation Capital Property Tax Primary of Personal Per December 31, Bonds Leases Bonds Advance Notes Government Income (1) Capita (1) 2006 $ 920,000 $ 645,346 $ 16,385,000 $ - $ 17,950, % , ,471 16,065,000-17,099, % ,485, ,995 20,983,000-45,944, % ,110, ,169 33,978,000-64,479, % ,985, ,741 35,939,000-65,222, % ,830, ,711 41,185,000-69,214, % ,640, ,332 37,648,000-64,390, % ,797,017-39,773,490-65,570, % ,501,217-38,272,769-62,773, % ,155,417-35,541,932 $ 839,000 59,536,349 (2) (2) Note: Details regarding the County's outstanding debt can be found in the notes to the financial statements. (1) See Statistical Table Number 13 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year. (2) Information not available at this time. 213

219 Table 11 Unaudited Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Percentage of Less: Amounts Estimated General Available for Actual Taxable Fiscal Obligation Repayment of Value of Per Year Bonds Principal Total Property (1) Capita (2) 2005 $ 1,365,000 $ 30,711 $ 1,334, % ,000 31, , % ,000 32, , % ,485,000 19,695,805 4,789, % ,110,000 2,947,608 27,162, % ,985,000 1,967,700 27,017, % ,830,000 1,213,757 26,616, % ,640, ,564 25,727, % ,797, ,035 25,180, % ,501, ,650 24,184, % ,155,417-23,155,417 (3) (3) Note: Details regarding the County's outstanding debt can be found in the notes to the financial statements. (1) See Statistical Table Number 6 for property value data. (2) See Statistical Table Number 13 for population data. (3) Information not available at this time. 214

220 Legal Debt Margin Information Last Ten Fiscal Years Fiscal Years Legal debt limit $ 361,704,070 $ 368,677,849 $ 329,416,162 $ 340,201,468 $ 353,415,543 Total net debt applicable to limit 17,552,075 17,099,471 27,914,101 60,151,540 60,953,759 Legal debt margin $ 344,151,995 $ 351,578,378 $ 312,287,367 $ 280,049,928 $ 292,461,784 Total net debt applicable to the limit as a percentage of debt limit 4.85% 4.64% 8.47% 17.68% 17.25% Note: Under state finance law Midland County's outstanding general obligation debt should not exceed 10 percent of total assessed property value. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general obligation bonds. (1) Includes primary government 215

221 Table 12 Unaudited Fiscal Years $ 361,036,070 $ 347,317,242 $ 362,764,934 $ 364,516,004 $ 368,456,185 67,142,643 60,580,111 63,486,328 60,913,073 58,327,264 $ 293,893,427 $ 286,737,131 $ 299,278,606 $ 303,602,931 $ 310,128, % 17.44% 17.50% 16.71% 15.83% Legal Debt Margin Calculation for Fiscal Year 2015 Taxable Value $ 3,684,561,852 Debt limit (10% of taxable value of property in County) 368,456,185 Debt applicable to limit: (1) 58,697,349 Less: Assets in Debt Service funds available for payment of principal 370,085 Total amount of debt applicable to debt limit 58,327,264 Legal debt margin $ 310,128,

222 Table 13 Unaudited Direct and Overlapping Governmental Activities Debt As of December 31, 2015 Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable Debt Overlapping Debt: City of Midland $ 27,860, % $ 27,804,280 Edenville Township 115, % 115,615 Homer Township 2,334, % 2,334,250 Hope Township 7,264, % 7,264,525 Jerome Township 250, % 250,842 Larkin Township 5,240, % 5,240,000 Lincoln Township 1, % 1,620 Midland Township 423, % 423,330 Mills Township 2,064, % 2,064,000 Breckenridge School District 6,050, % 1,293,490 Bullock Creek School District 11,145, % 11,145,000 Coleman School District 7,005, % 6,155,994 Freeman School District 5,495, % 2,748 Hemlock School District 15,320, % 559,180 Meridian School District 20,095, % 20,095,000 Merrill School District 17,825, % 4,220,974 Shepherd School District 31,182, % 1,531,064 St Louis School District 20,063, % 2,716,646 Gratiot-Isabella Intermediate School District 995, % $ 38,407 Saginaw Intermediate School District 1,635, % 17,168 Total Overlapping Debt 93,274,133 Direct Debt: County of Midland 23,155, % 23,155,417 Total Direct and Overlapping Debt $ 116,429,550 Sources: Debt outstanding and estimated share of overlapping debt provided by Municipal Advisory Council of Michigan. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the County. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Midland County. This process recognizes that, when considering the government's ability to issue and repay long term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. 217

223 Table 14 Unaudited Demographic and Economic Statistics Last Ten Fiscal Years Fiscal Personal Per Capita School Unemployment Year Population (1) Income (2) Personal Income Enrollment (3) Rate (4) ,792 $ 3,279,082,000 $ 39,134 14, % ,017 3,324,519,000 40,046 14, % ,605 3,466,961,000 41,970 14, % ,548 3,454,868,000 41,853 13, % ,634 3,514,447,000 42,022 13, % ,063 3,652,161,000 43,446 13, % ,822 3,807,452,000 45,423 13, % ,919 3,879,407,532 46,228 12, % ,629 3,859,561,979 46,151 12, % ,632 (5) (5) 12, % Data Sources: (1) Population Division, U.S. Census Bureau - Population is an estimate as of July 1, of fiscal year with the exception of 2000 which reflects the actual census, and Fedstats.gov (2) Bureau of Economic Analysis, U.S. Department of Commerce (3) Local school districts (4) Michigan Department of Labor and Economic Growth - Unemployment rate information is a yearly average not seasonally adjusted. (5) Information not available at this time. 218

224 Table 15 Unaudited Principal Employers 2015 and Percentage of Percentage of Total County Total County Employer Employees (1) Rank Employment Employees (1) Rank Employment Dow Chemical Company 5, % 5, % MidMichigan Health 2, % 3, % Dow Corning Corporation 1, % 1, % Chemical Bank and Trust Company % % Northwood University % City of Midland % % Greater Midland Community Centers % Midland County % % Three Rivers Corporation % Meijer, Inc % % Midland Public Schools 1, % Quebecor World Pendell, Inc % IBM % Totals 11, % 14, % Source: Midland Tomorrow (formerly the Midland Economic Development Corporation) (1) Employee counts are approximate. 219

225 Full-time Equivalent County Employees by Function Last Ten Fiscal Years Full-time Equivalent Employees as of December 31, Function General service administration Legislative Judicial Law enforcement and correction Public safety and emergency services Health and Welfare Culture and recreation Planning and development Total Source: Midland County Finance Department 220

226 Table 16 Unaudited Full-time Equivalent Employees as of December 31,

227 Operating Indicators by Function Last Ten Fiscal Years Fiscal Year Function Judicial Circuit court total caseload 2,093 2,026 1,872 1,889 1,817 District court total caseload 20,483 18,250 18,268 17,361 15,807 Probate court total caseload Law enforcement and corrections Number of incarcerated offenders 3,759 3,822 3,602 2,958 3,701 Public safety and emergency services Animal Control Complaints 5,169 4,976 5,094 4,894 2,525 Animal adoptions Health and welfare Health Department Immunizations administered 6,795 5,742 7,258 5,865 7,506 House numbering House numbers issued Housing Mortgages granted Recreation and culture Annual vehicle park passes Daily vehicle park passes 11,796 12,939 18,557 22,717 29,996 Annual boat passes Daily boat passes 3,059 3,245 2,948 3,094 2,866 Daily bus passes (new in 2009) Frequent Visitor passes (new in 2009) Annual Permit Passes (boat & vehicle, new in 2011) Annual Senior Permit (new in 2012) Source: Midland County Finance Department Note: Indicators are not available for the general government, legislative functions, planning and development. 222

228 Table 17 Unaudited Fiscal Year ,285 1,197 1,026 1,210 1,210 13,910 15,933 14,964 13,966 20, ,090 3,694 4,218 3,836 3,129 1,232 1,174 1,204 1,930 1, ,646 7,139 7,135 5,749 3, n/a n/a n/a n/a n/a 29,123 23,457 18,373 17,962 19,393 n/a n/a n/a n/a n/a 2,650 n/a n/a n/a n/a

229 Capital Asset Statistics by Function Last Ten Fiscal Years Function Fiscal Year Judicial Juvenile Detention Law enforcement and corrections Sheriff 1 Health and welfare Health Department Beds Recreation and culture Parks and recreation Parks County Fairgrounds Buildings Sources: Midland County Finance Department Note: No capital asset indicators are available for the general government, legislative, or planning and development functions. Not all historical information is available, this table will continue to be populated as more information becomes available. 224

230 Table 18 Unaudited Fiscal Year

231 SINGLE AUDIT ACT COMPLIANCE 226

232 Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI Ph: Fx: rehmann.com Independent Auditors Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance Board of Commissioners Midland County, Michigan June 28, 2016 We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Midland County, Michigan (the "County") as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the County s basic financial statements. We issued our report thereon dated June 28, 2016, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators 227

233 Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2015 CFDA Passed Pass-through / Total Federal Federal Agency / Cluster / Program Title Number Through Grantor Number Subawards Expenditures U.S. Department of Agriculture Child Nutrition Cluster School Breakfast Program MDE 09/ $ - $ 14,285 National School Lunch Program MDE 09/ & 09/ ,660 Total Child Nutrition Cluster - 36,945 Water and Waste Disposal Systems for Rural Communities Direct N/A - 216,361 Total U.S. Department of Agriculture - 253,306 U.S. Department of Justice Justice Assistance Grant (JAG) Program Cluster Edward Byrne Memorial JAG Program MSP MSP # ,086 Edward Byrne Memorial JAG Program MSP JAG BAYANET ,812 Edward Byrne Memorial JAG Program MSP 2015-MU-BX ,025 Total U.S. Department of Justice - 28,923 U.S. Department of Transportation Federal Transit Capital Investment Grants MDOT N/A 144, ,096 Small Bus Program - Section FY14 Operating MDOT N/A 473, ,696 Total U.S. Department of Transportation 617, ,792 U.S. Environmental Protection Agency State Grants to Reimburse Operators of Small Water Systems for Training & Certification Costs MDEQ N/A U.S. Department of Health and Human Services FDA Tobacco Retailer Inspections MDHHS N/A - 14,250 Public Health Emergency Preparedness MDHHS N/A - 130,835 Public Health Emergency Preparedness - Ebola Virus Disease Phase II MDHHS N/A - 2, ,009 Project Grants & Cooperative Agreements for TB Control Programs MDHHS N/A Family Planning Services MDHHS N/A - 28,910 continued 228

234 Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2015 CFDA Passed Pass-through / Total Federal Federal Agency / Cluster / Program Title Number Through Grantor Number Subawards Expenditures U.S. Department of Health and Human Services (concluded) Federally Funded Vaccines MDHHS N/A $ - $ 92,452 Immunization IAP MDHHS N/A - 42,326 Immunization Fixed Fees MDHHS N/A - 2, ,028 Immunization IAP MDHHS N/A - 4,864 Child Support Enforcement - Incentive MDHHS N/A - 92,708 Title IV-D Reimbursement - Friend of the Court MDHHS CSFOC ,261 Title IV-D Reimbursement - Prosecutor MDHHS CSPA , ,929 CSHCS Medicaid Outreach MDHHS N/A - 38,674 Medicaid Outreach MDHHS N/A - 41,463 CSHCS Outreach & Advocacy MDHHS N/A - 20, ,137 Child Health-MCH MDHHS N/A - 8,555 Family Planning Services MDHHS N/A - 13,878 Other-MCH-Varied MDHHS N/A - 15,000 Family Planning-Women-MCH MDHHS N/A Family Planning-Adolescents-MCH MDHHS N/A Children's Special Health Care Services- MCH MDHHS N/A - 6,491 Enabling Services Children-MCH MDHHS N/A - 6,000 Enabling Services Women-MCH MDHHS N/A - 1,250 Public Health Functions & Infrastructure-MCH MDHHS N/A - 1,250-53,519 Total U.S. Department of Health and Human Services - 1,314,746 U.S. Department of Homeland Security Boating Safety Financial Assistance MDNR N/A - 5,200 Disaster Grants - Public Assistance MSP ,524 Emergency Management Performance Grants MSP EMW-2015-EP S01-40,489 Emergency Management Performance Grants MSP EMW-2014-EP ,612-43,101 Homeland Security Grant Program ALCONA EMW-2013-SS ,329 Total U.S. Department of Homeland Security - 51,154 Total Expenditures of Federal Awards $ 617,792 $ 2,266,782 See notes to schedule of expenditures of federal awards. concluded 229

235 Notes to Schedule of Expenditures of Federal Awards 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule ) includes the federal grant activity of Midland County, Michigan (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 Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of the County, it is not intended to and does not present the financial position, changes in net position or cash flows of the County. The County s reporting entity is defined in Note 1 of the County s Comprehensive Annual Financial Report. The County s financial statements include the operations of the Midland County Road Commission and the Economic Development Corporation of the County of Midland ("EDCCM") discretely-presented component units, which received federal awards that are not included in the Schedule for the year ended December 31, 2015, as these entities were separately audited. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the modified accrual basis of accounting, which is described in Note 1 to the County's financial statements. Such expenditures are recognized following the cost principles contained in Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available. For purposes of charging indirect costs to federal awards, the County has not elected to use the 10 percent de minimis cost rate as permitted by of the Uniform Guidance. 3. PASS-THROUGH AGENCIES The County receives certain federal grants as subawards from non-federal entities. Pass-through entities, where applicable, have been identified in the Schedule with an abbreviation, defined as follows: Pass-through Agency Abbreviation ALCONA MDE MDEQ MDHHS MDNR MDOT MSP Pass-through Agency Name Alcona County, Michigan Michigan Department of Education Michigan Department of Environmental Quality Michigan Department of Health and Human Services Michigan Department of Natural Resources Michigan Department of Transportation Michigan State Police 230

236 Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI Ph: Fx: rehmann.com Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards June 28, 2016 Board of Commissioners Midland County, 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 Midland County, Michigan (the "County"), as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the County s basic financial statements, and have issued our report thereon dated June 28, Our report includes a reference to other auditors who audited the financial statements of the Midland County Road Commission and the Economic Development Corporation of the County of Midland, as described in our report on the County s financial statements. This report does not include the results of the other auditors testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the County s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County s internal control. Accordingly, we do not express an opinion on the effectiveness of the County s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators 231

237 A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item to be a material weakness. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Compliance and Other Matters As part of obtaining reasonable assurance about whether the County s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Midland County s Response to Findings The County s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The County s responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 232

238 Independent Auditors Report on Compliance for Each Major Federal Program and Internal Control over Compliance Required by the Uniform Guidance Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI Ph: Fx: rehmann.com Board of Commissioners Midland County, Michigan June 28, 2016 Report on Compliance for Each Major Federal Program We have audited the compliance of Midland County, Michigan (the "County") with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the County s major federal programs for the year ended December 31, The County s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. The County s basic financial statements include the operations of the Midland County Road Commission and Economic Development Corporation of the County of Midland ("EDCCM") discretely presented component units. The Midland County Road Commission received $89,320 in federal awards, which is not included in the schedule of expenditures of federal awards for the year ended December 31, Our audit, described below, did not include the operations of the Midland County Road Commission or EDCCM because they arranged for a separate audit in accordance with the Uniform Guidance. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Independent Auditors Responsibility Our responsibility is to express an opinion on compliance for each of the County s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the County s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators 233

239 We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the County s compliance. Opinion on Each Major Federal Program In our opinion, the County complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, Report on Internal Control Over Compliance Management of the County is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe that a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. 234

240 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2015 SECTION I - SUMMARY OF AUDITORS RESULTS Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified? X yes no yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified? yes X no yes X none reported Any audit findings disclosed that are required to be reported in accordance with 2 CFR (a)? yes X no Identification of major programs and type of auditors' report issued on compliance for each major program: CFDA Number Name of Federal Program or Cluster Type of Report Water and Waste Disposal Systems for Rural Communities Child Support Enforcement Unmodified Unmodified Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee? yes X no 235

241 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2015 SECTION II FINANCIAL STATEMENT FINDING Audit Adjustments (Repeat) Finding Type. Material Weakness in Internal Control over Financial Reporting. Criteria. Management is responsible for maintaining its accounting records in accordance with generally accepted accounting principles (GAAP). Condition. During our audit, we identified and proposed certain adjustments to fund balance and special assessments receivable in the Drain Commission component unit (which were approved and posted by management) to adjust the County's general ledger to the appropriate balances. Cause. This condition was the result of dependence on external auditors, who by definition cannot be a part of the County's internal control, to make adjustments to the general ledger and reconcile certain balance sheet accounts to their underlying detail. Effect. As a result of this condition, the County's accounting records were initially misstated by amounts material to the financial statements. Recommendation. We recommend that the County refrain from posting entries directly to fund balance, unless moving amounts between fund balance classifications within the same fund and reconcile balance sheet accounts prior to the start of the audit process. View of Responsible Officials. Management agrees with the adjustments proposed by its auditors, and they have been posted in the County's records. 236

242 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2015 SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. 237

243 Summary Schedule of Prior Audit Findings For the Year Ended December 31, 2015 Finding Material Audit Adjustments Material audit adjustments were required to properly state the County's financial statements. A similar finding is reported for the current year as finding

244 Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI Ph: Fx: rehmann.com INDEPENDENT AUDITORS COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE June 28, 2016 Board of Commissioners Midland County, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Midland County, Michigan (the County ) as of and for the year ended December 31, 2015, and have issued our report thereon dated June 28, We did not audit the financial statements of the Midland County Road Commission or the Economic Development Corporation of the County of Midland ( EDCCM ) discretely presented component units. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion on the financial statements and this report, insofar as they relate to the Midland County Road Commission and EDCCM, are based solely on the report of other auditors. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated February 1, 2016, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the County solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. We have provided our findings regarding internal control over financial reporting and compliance noted during our audit in a separate letter to you dated June 28, In addition, we noted certain other matters which are included in Attachment A to this letter. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter and in our meeting about planning matters on April 11, Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators

245 Board of Commissioners Midland County, Michigan June 28, 2016 Page 2 Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm has complied with all relevant ethical requirements regarding independence. Qualitative Aspects of the County s Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the County is included in Note 1 to the financial statements. As described in Note 18 to the financial statements, the County changed accounting policies related to accounting for pension plans by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 68, Accounting and Financial Reporting for Pensions. The cumulative effect of the accounting change as of the beginning of the year is reported in the Statement of Activities. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management s current judgments. The most sensitive accounting estimates affecting the financial statements were: Management s estimate of the useful lives of depreciable capital assets is based on the length of time it is believed that those assets will provide some economic benefit in the future. Management s estimate of the accrued compensated absences is based on current hourly rates and policies regarding payment of sick and vacation banks. Management s estimate of the insurance claims incurred but not reported is based on information provided by the entity s third party administrators and subsequent claims activity. The assumptions used in the actuarial valuations of the pension and other postemployment benefits plans are based on historical trends and industry standards. We evaluated the key factors and assumptions used to develop these estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.

246 Board of Commissioners Midland County, Michigan June 28, 2016 Page 3 Significant Difficulties Encountered During the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. The material misstatement detected as a result of audit procedures and corrected by management is described in the Schedule of Findings and Questioned Costs issued in connection with the Single Audit. The schedule of adjustments passed is included with management s written representations in Attachment C to this letter, and summarizes uncorrected financial statement misstatements whose effects in the current and prior periods, as determined by management, are immaterial, both individually and in the aggregate, to the financial statements taken as a whole and each applicable opinion unit. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the County s financial statements or the auditors report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management, which are included in Attachment C to this letter. Management s Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the County, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the County s auditors.

247 Board of Commissioners Midland County, Michigan June 28, 2016 Page 4 Other Information in Documents Containing Audited Financial Statements Our responsibility for the supplementary information accompanying the financial statements, as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and to report on whether the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole. We made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Upcoming Changes in Accounting Standards Generally accepted accounting principles (GAAP) are continually changing in order to promote the usability and enhance the applicability of information included in external financial reporting. While it would not be practical to include an in-depth discussion of every upcoming change in professional standards, Attachment B to this letter contains a brief overview of recent pronouncements of the Governmental Accounting Standards Board (GASB) and their related effective dates. Management is responsible for reviewing these standards, determining their applicability, and implementing them in future accounting periods. This information is intended solely for the use of the governing body and management of the Midland County and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours,

248 Attachment A - Comments and Recommendations For the December 31, 2015 Audit During our audit, we became aware of certain other matters that are opportunities for strengthening internal control and/or improving operating efficiency. This memorandum summarizes our comments and recommendations regarding those matters. Our consideration of the County's internal control over financial reporting is described in our report, dated June 28, 2016, issued in accordance with Government Auditing Standards. This memorandum does not affect that report or our report dated June 28, 2016, on the financial statements of the Midland County. Other Matters Timely Reconciliations (Repeat) Reconciliations of several agency fund accounts were not completed as of year end. The County was in the process of reconciling these accounts prior to the completion of the audit. We recommend that timely reconciliations are completed on a monthly basis to ensure proper balances are recorded. A-1

249 Attachment B Upcoming Changes in Accounting Standards / Regulations For the December 31, 2015 Audit The following pronouncements of the Governmental Accounting Standards Board (GASB) have been released recently and may be applicable to the County in the near future. We encourage management to review the following information and determine which standard(s) may be applicable to the County. For the complete text of these and other GASB standards, visit and click on the Standards & Guidance tab. If you have questions regarding the applicability, timing, or implementation approach for any of these standards, please contact your audit team. GASB 72 Fair Value Measurement and Application Effective 06/15/2016 (your FY 2016) This standard defines "fair value" as the price that would be received to sell an asset in an orderly transaction between market participants (an "exit price"). Fair value measurement is currently applied principally to investments, which GASB 72 does not change. However, it does introduce specific methods for measuring fair value when a market price is not readily available, and establishes a 3-level hierarchy of fair value that is disclosed in the footnotes, based on the presence or absence of observable market inputs. GASB 73 Pensions and Related Assets Not Within the Scope of GASB 68 Effective 06/15/2016 (your FY 2016) This standard addresses accounting and financial reporting for pensions that were not covered by GASB Statement No. 68, because the plan assets are not held in trust. Essentially, it applies the same treatment as GASB 68, but reflects the total pension liability and plan assets separately, rather than a net pension liability. We do not expect this standard to have any significant effect on the County. GASB 74 Postemployment Benefit Plans Other than Pension Plans Effective 06/15/2017 (your FY 2017) This standard requires the calculation of a net other postemployment benefit (OPEB) liability based on an actuarial valuation of retiree healthcare and similar benefits administered by an OPEB trust. It mirrors the new accounting and financial reporting requirements of GASB 67 for pension plans. GASB 75 Postemployment Benefits Other than Pensions Effective 06/15/2018 (your FY 2018) This standard builds on the requirements of GASB 74 by requiring employers that provide other postemployment benefits (OPEB) to recognize a net OPEB liability on their statements of net position. It mirrors the new accounting and financial reporting requirements of GASB 68 for pension benefits. GASB 76 The Hierarchy of GAAP for State and Local Governments Effective 06/15/2016 (your FY 2016) This standard clarifies the source of "generally accepted accounting principles" (GAAP) for governments. Authoritative sources of GAAP now include (1) GASB pronouncements, (2) GASB implementation guides, and (3) AICPA literature specifically cleared by the GASB. This standard does not change existing GAAP. B-1

250 Attachment B Upcoming Changes in Accounting Standards / Regulations For the December 31, 2015 Audit GASB 77 Tax Abatement Disclosures Effective 12/15/2016 (your FY 2016) This standard requires governments to disclose certain information about tax abatement agreements made to foster economic development or otherwise benefit the government or its citizens. Required disclosures include a brief description of the arrangement, the gross dollar amount of taxes abated in the current period, and any additional commitments made by the government as part of the agreement. GASB 78 Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans Effective 12/15/2016 (your FY 2016) This standard is an amendment to GASB 68, and provides guidance to governments that participate in nongovernmental cost-sharing pension plans. We do not expect this standard to have any significant effect on the County. GASB 79 Certain External Investment Pools and Pool Participants Effective 06/15/2016 (your FY 2016) This standard essentially extends the guidance previously available to governments investing in 2a7-like external investment pools to carry investments at amortized cost, as an approximation of fair value. The SEC amended Rule 2a7 in 2014, so the GASB replicated its prior provisions in this statement. We do not expect this standard to have any significant effect on the County. GASB 80 Blending Requirements for Certain Component Units Effective 06/15/2017 (your FY 2017) This standard is an amendment to GASB 14, The Financial Reporting Entity, and requires blending component units incorporated as not-for-profit corporations in which the government is the sole corporate member. We do not expect this standard to have any significant effect on the County. GASB 81 Irrevocable Split-Interest Agreements Effective 12/15/2017 (your FY 2017) This standard addresses the accounting for split-interest agreements for which the government serves as the intermediary and/or the beneficiary. It requires governments to record assets, liabilities, and deferred inflows of resources at the inception of the agreement when serving as intermediary, or when the government controls the present service capacity of a beneficial interest. We do not expect this standard to have any significant effect on the County. GASB 82 Pension Issues Effective 06/15/2017 (your FY 2017) This standard is an amendment to GASB 67/68 to clarify several issues related to pensions. We do not expect this standard to have any significant effect on the County. B-2

251 Attachment C Management Representations For the December 31, 2015 Audit The following pages contain the written representations that we requested from management. C-1

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