AUDIT REPORT OF GREENBRIER PUBLIC SERVICE DISTRICT NO. 1 RONCEVERTE, WEST VIRGINIA FOR THE FISCAL YEAR ENDED JUNE 30, 2016

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1 AUDIT REPORT OF GREENBRIER PUBLIC SERVICE DISTRICT NO. 1 RONCEVERTE, WEST VIRGINIA FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Imre D. Pentek Certified Public Accountant P.O. Box 1390 Lewisburg, West Virginia

2 Table of Contents Board Officials 1 Independent Auditor's Report on Financial Statements 2-4 Basic Financial Statements: Statement of Net Position 5-6 Statement of Revenues, Expenses and Changes in Net Position 7 Statement of Cash Flows 8-9 Notes to the Financial Statements Required Supplementary Information: Schedule of Employer s Share of Net Pension Liability 48 Schedule of Employer Contributions 49 Supplementary Information: Schedule of Rate Covenant and Working Capital Reserve Compliance Statement of Operating Revenues 52 Statement of Operating Expenses Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Schedule of Findings and Responses 57

3 Board Officials Office Name Terms Chairman Dan Withrow 07/01/ /30/2017 Secretary James Bower 07/01/ /30/2019 (Appointed 06/23/2015) Treasurer John Preston 09/15/ /30/2021 1

4 To the Commissioners Greenbrier Public Service District No. 1 Ronceverte, West Virginia Report on the Financial Statements Imre D. Pentek Certified Public Accountant P.O. Box 1390 Lewisburg, West Virginia INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the business-type activities of the Greenbrier Public Service District No. 1 as of and for the years ended June 30, 2016 and June 30, 2015, and the related notes to the financial statements, which collectively comprise the Greenbrier Public Service District No. 1 s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 2

5 To the Commissioners Greenbrier Public Service District No. 1 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities of the Greenbrier Public Service District No. 1 at June 30, 2016 and June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the pension liability schedules on pages 48 through 49 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Management has omitted the management s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Greenbrier Public Service District No. 1 s basic financial statements. The individual fund financial statements and the schedule of rate covenant compliance are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The individual fund financial statements and the schedule of rate covenant compliance are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the individual fund financial statements and the schedule of rate covenant compliance are fairly stated in all material respects in relation to the financial statements as a whole. 3

6 To the Commissioners Greenbrier Public Service District No. 1 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2016, on our consideration of the Greenbrier Public Service District No. 1 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Greenbrier Public Service District No. 1 s internal control over financial reporting and compliance. Imre D. Pentek November 8,

7 Basic Financial Statements

8 Statement of Net Position For the Fiscal Year Ended June ASSETS CURRENT ASSETS Cash and cash equivalents $ 580,709 $ 660,414 Investments 36,312 35,085 Accounts receivable 27,376 25,277 Grants receivable 5,905 0 Prepaid expenses 12,493 8,623 Total Current Assets 662, ,399 NON-CURRENT ASSETS RESTRICTED ASSETS Municipal bond commission revenue accounts 309, ,167 Construction funds 142,882 26,962 Reserve funds 357, ,568 Depreciation funds 367, ,261 Customer deposit funds 43,525 45,244 Total Restricted Assets 1,221,446 1,055,202 CAPITAL ASSETS Property, plant and equipment 19,624,957 19,474,343 Construction in progress 445, ,007 Less accumulated depreciation (12,341,093) (11,933,765) Net capital assets 7,729,413 7,965,584 Total Non-Current Assets 8,950,859 9,020,787 Total Assets $ 9,613,654 $ 9,750,185 DEFERRED OUTFLOW OF RESOURCES Difference between pension contributions and proportionate share of contributions $ 13,759 $ 3,450 Difference between projected and actual earnings on pension plan investments 22,984 0 Difference between pension expected and 15,408 0 actual experience Contributions to PERS (pensions) 25,089 25,615 Total Deferred Outflow of Resources $ 77,240 $ 29,065 The auditor s report and the notes to the financial statements are an integral part of this statement. 5

9 Statement of Net Position (Continued) For the Fiscal Year Ended June LIABILITIES CURRENT LIABILITIES Accounts payable $ 71,388 $ 58,301 Compensated absences 28,884 28,436 Total Current Liabilities 100,273 86,737 CURRENT LIABILITIES PAYABLE FROM RESTRICTED ASSETS Current portion of long-term debt 384, ,849 Accrued interest 12,371 15,199 Customer deposits 42,637 44,187 Total Current Liabilities Payable From Restricted Assets 439, ,235 NON-CURRENT LIABILITIES Net OPEB obligation 204, ,760 Pension liability 75,334 42,430 Long-term debt: (Net of current portion) Loans payable - construction 223, ,054 Revenue bonds payable 1,228,355 1,544,445 Total Non-Current Liabilities 1,731,336 2,070,689 Total Liabilities $ 2,271,537 $ 2,577,661 DEFERRED INFLOW OF RESOURCES Difference between projected and actual earnings on pension plan investments $ 39,504 $ 44,885 Difference in pension assumptions 9,061 0 Difference between pension contributions and proportionate share of contributions 0 0 Total Deferred Inflow of Resources $ 48,565 $ 44,885 NET POSITION Invested in capital assets, net of related debt $ 5,893,019 $ 5,492,540 Restricted for capital projects 142,882 26,962 Restricted for debt service 642, ,140 Unrestricted 692,361 1,000,063 Total Net Position $ 7,370,793 $ 7,156,705 The auditor s report and the notes to the financial statements are an integral part of this statement. 6

10 Statement of Revenues, Expenses and Changes in Net Position For the Fiscal Year Ended June OPERATING REVENUES Charges for services $ 1,828,061 $ 1,782,112 Miscellaneous 2,242 1,845 Total Operating Revenues 1,830,303 1,783,957 OPERATING EXPENSES Personal services 256, ,240 Contractual services 692, ,147 Materials and supplies 22,553 18,138 Maintenance 51, ,244 Heat, light and power 74,766 64,252 Administrative and general 82,506 83,020 Depreciation 407, ,903 Total Operating Expenses 1,587,828 1,629,944 OPERATING INCOME (LOSS) 242, ,013 NON-OPERATING REVENUES (EXPENSES) Interest earned 2,572 1,916 Miscellaneous non-operating revenue 5,905 0 Interest expense (76,871) (88,649) Total Non-Operating Revenues (Expenses) (68,393) (86,732) Income (Loss) Before Contributions 174,082 67,281 CAPITAL CONTRIBUTIONS 40,006 3,900 Change in Net Position 214,088 71,181 NET POSITION - Beginning of Year 7,156,705 7,085,524 NET POSITION - END OF YEAR $ 7,370,793 $ 7,156,705 The auditor s report and the notes to the financial statements are an integral part of this statement. 7

11 Statement of Cash Flows For the Fiscal Year Ended June CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,828,204 $ 1,780,492 Cash paid to suppliers and employees (1,169,658) (1,225,831) Customer deposits received 14,578 18,300 Customer deposits returned (16,128) (18,282) Net Cash Provided (Used) By Operating Activities 656, ,679 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from issuance of capital debt - 40,487 Principal paid on capital debt (360,954) (342,524) Interest paid on capital debt (79,698) (91,226) Acquisition of capital assets (171,156) (56,690) Contributions in aid of construction 40,006 3,900 Net Cash Provided (Used) By Capital and Related Financing Activities (571,802) (446,053) CASH FLOWS FROM INVESTING ACTIVITIES Interest earned on cash and cash equivalents 2,572 1,916 Net Cash Provided (Used) By Investing Activities 2,572 1,916 Net Change in Cash and Cash Equivalents 87, ,542 CASH AND CASH EQUIVALENTS - Beginning of Year 1,750,701 1,640,159 CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,838,467 $ 1,750,701 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE BALANCE SHEET Cash and equivalents in current assets $ 617,021 $ 695,499 Restricted cash and equivalents 1,221,446 1,055,202 Total Cash and Cash Equivalents $ 1,838,467 $ 1,750,701 The auditor s report and the notes to the financial statements are an integral part of this statement. 8

12 Statement of Cash Flows (Continued) For the Fiscal Year Ended June RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ 242,474 $ 154,013 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 407, ,903 (Increase) decrease in accounts receivable (2,099) (3,465) (Increase) decrease in prepaid expenses (3,869) (830) (Increase) decrease in deferred outflows (48,175) (6,742) Increase (decrease) in accounts payable 13,087 1,273 Increase (decrease) in compensated absences payable 448 2,694 Increase (decrease) in customer deposits (1,550) 18 Increase (decrease) in OPEB liability 12,768 10,800 Increase (decrease) in pension liability 32,904 (57,870) Increase (decrease) in deferred inflows 3,680 44,885 Total Adjustments 414, ,666 Net Cash Provided (Used) By Operating Activities $ 656,996 $ 554,679 The auditor s report and the notes to the financial statements are an integral part of this statement. 9

13 Notes to the Financial Statements

14 Notes to the Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Greenbrier Public Service District No. 1 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. A summary of the significant accounting policies of the Greenbrier Public Service District No. 1 is presented below. Reporting Entity The government is a public service district created by the county and governed by three commissioners appointed by the county commission. As required by generally accepted accounting principles, these financial statements present the government and its component units, entities for which the government is considered to be financially accountable, as required by GASB Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. The accompanying financial statements present the government as required by accounting principles generally accepted in the United States. In determining whether to include a governmental department, agency, commission or organization as a component unit, the government must evaluate each entity as to whether they are legally separate and financially accountable based on the criteria set forth by the Governmental Accounting Standards Board (GASB). Legal separateness is evaluated on the basis of (1) its corporate name, (2) the right to sue and be sued and (3) the right to buy, sell or lease and mortgage property. Financial accountability is based on (1) the appointment of the governing authority and (2) the ability to impose will or (3) the providing of specific financial benefit or imposition of specific financial burden. Another factor to consider in this evaluation is whether an entity is fiscally dependent. Based upon the above criteria, the District does not have any component units. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The financial statements of the District are prepared in accordance with generally accepted accounting principles (GAAP). The District s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements and applicable Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless they conflict with GASB pronouncements. GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, incorporates the applicable guidance from those FASB and AICPA pronouncements into the state and local government accounting and financial reporting standards. The term measurement focus is used to denote what is being measured and reported in the District s operating statement. The District is accounted for on the flow of economic resources measurement focus. The fundamental objective of this focus is to measure whether the District is better or worse off economically as a result of events and transactions of the period. The term basis of accounting is used to determine when a transaction or event is recognized on the District s operating statement. The District uses the full accrual basis of accounting. Under this basis, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. 10

15 Operating income reported in proprietary fund financial statements includes revenues and expenses related to the primary, continuing operations of the fund. Principal operating revenues for the proprietary funds are charges to customers for sales or services. Principal operating expenses are the costs of providing goods or services and include administrative expenses and depreciation of capital assets. Other revenues and expenses are classified as non-operating in the financial statements. GASB Accounting Pronouncements On July 1, 2015, the District adopted the provisions of a number of Governmental Accounting Standards Board Statements, including the following: GASB Statement No. 72 GASB Statement No. 73 GASB Statement No. 76 Fair Value Measurement and Application Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments GASB Statement No. 34 Statement 34 established standards for external financial reporting for all state and local governmental entities which includes a statement of net position, a statement of activities and changes in net position and a statement of cash flows. GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, requires the classification of net position into three components: invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined as follows: Invested in capital assets, net of related debt - This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources attributable to the acquisition, construction, or improvement of the capital assets or related debt are also included. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net position component as the unspent proceeds. Restricted - This component of net position consists of restricted assets less liabilities and deferred inflows of resources related to those assts. Restricted assets are those with limited on their use that are externally imposed (by creditors such as through debt covenants, grantors, contributors, or laws or regulations of other governments) or that are imposed by the government s own constitutional provisions or enabling legislation. Unrestricted net position - This component of net position consists of net amount of assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of the net investment in capital assets or the restricted component of net position. 11

16 The adoption of Statement No. 34 had no effect on the basic financial statements except for the classification of net position in accordance with the Statement and the reflection of capital contributions as a change in net position. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first, then unrestricted resources as needed. Revenues - Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. Non-exchange transactions, in which the District receives value without directly giving value in return, include grants and donations. On an accrual basis, revenue from grants and donations is recognized in the fiscal year win which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the fiscal year when use is first permitted, matching requirements, in which the District must provide local resources to be used for a specific purpose, and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Revenues and Expenses Revenues and expenses are distinguished between operating and non-operating items. Operating revenues generally result from providing services in connection with the District s principal ongoing operations. The principal operating revenues of the District are fees for utility services. Operating expenses include the costs associated with the conveyance and treatment of wastewater, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses. Accounts Receivable Accounts receivable consist of amounts due from customers for sewerage utility services. Uncollectible accounts are charged directly to expense in the year they are determined to become uncollectible. The determination of uncollectibility is based on historical bad debt experience and an evaluation of the periodic aging of accounts. Cash and Equivalents Cash on hand and deposits with banking institutions either in checking or savings accounts are presented as cash in the accompanying financial statements. Cash and cash investments are available upon demand and are considered to be cash equivalents when preparing these financial statements. Investments are reported at fair value. Inventories Inventories of materials and supplies utilized in the District s operations are considered expended at the time of purchase; therefore, balances on hand at year end are not presented in the District s financial statements. 12

17 Prepaid Items Prepaid balances are for payments made by the Greenbrier Public Service District No. 1 in the current year to provide services occurring in the subsequent fiscal year. Capital Assets and Depreciation The District s property, plant, equipment, and infrastructure with useful lives of more than one year are stated at historical cost and comprehensively reported in the financial statements. Donated assets are stated at their estimated fair market value on the date donated. The District generally capitalizes assets with cost of $1,000 or more as purchase and construction outlays occur. Net interest costs during construction periods are capitalized for assets acquired by the issuance of long-term debt. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are as follows: Buildings Improvements, other than buildings Mobile equipment 5-10 Furniture, machinery, and equipment 5-40 Deferred Outflows / Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until that time. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, 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. Pensions For purposes of measuring the net pension liability and pension expense, information about the fiduciary net position of the West Virginia Public Employees Retirement System and additions to/deductions from the plan s fiduciary net position have been determined on the same basis as they are reported by the Public Employees Retirement System. 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. 13

18 Compensated Absences Compensated absences are those for which employees have a right to receive consideration for expected future absences. These absences should be accounted for in accordance with the provisions of GASB Statement No. 16, Accounting for Compensated Absences. Full-time, permanent employees are granted vacation benefits in varying amounts to specified maximums depending on tenure with the District. Generally, employees are entitled to all accrued vacation leave upon termination limited by the specified maximums. Compensated absences are reported as accrued in the proprietary financial statements. Customer Deposits The District is authorized by State statute to collect from all new applicants for service a deposit of $50 or two twelfths of the average annual usage of the applicant's specific customer class, whichever is greater, to secure the payment of wastewater service rates, fees and charges in the event they become delinquent. In any case where a deposit is forfeited to pay service rates, fees and charges which were delinquent and the user's service is disconnected or terminated, no reconnection or reinstatement of service may be made by the District until another deposit equal to $50 or a sum equal to two twelfths of the average usage for the applicant's specific customer class, whichever is greater, is remitted to the District. After twelve months of prompt payment history, the District returns the deposit to the customer or credits the customer's account with interest at a rate as the Public Service Commission may prescribe. However, when the customer is a tenant, the District is not required to return the deposit until the time the tenant discontinues service with the District. Whenever any rates, fees, rentals or charges for services or facilities furnished remain unpaid for a period of twenty days after the same become due and payable, the user of the services and facilities provided is delinquent and the user is liable at law until all rates, fees and charges are fully paid. The District may, under reasonable rules promulgated by the Public Service Commission, shut off and discontinue water services to a delinquent user of wastewater facilities ten days after the wastewater services become delinquent regardless of whether the District utilizes the security deposit to satisfy any delinquent payments. Long-Term Debt In the financial statements, outstanding debt is reported as liabilities. Bond issuance costs, bond discounts or premiums, and the difference between the reacquisition price and the net carrying value of refunded debt are capitalized and amortized over the terms of the respective bonds using a method that approximates the effective interest method or the straight line method. Comparative Data Comparative total data for the prior year has been presented in selected financial statements in order to provide an understanding of changes in the District s financial position and operations. However, comparative data has not been presented in each of the supplementary statements. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 14

19 NOTE 2. RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; employee health and life coverage; and natural disasters. The District participates in a risk management program administered by BrickStreet Mutual Insurance Company related to injuries to employees. The District has property and liability insurance and fidelity bond coverage. NOTE 3. FEDERAL INCOME TAX The Greenbrier Public Service District No. 1 is a governmental, non-stock community organization. The District has gained exemption from income taxation by qualifying as a governmental entity. NOTE 4. DEPOSITS AND INVESTMENTS Deposits Cash on hand and deposits with banking institutions either in checking or savings accounts are presented as cash in the accompanying financial statements. Deposits in each bank are insured by the Federal Deposit Insurance Corporation (FDIC) in the amount of $250,000 for interest bearing and non-interest bearing demand deposit accounts and in the amount of $250,000 for time and savings accounts (deposits not payable upon demand). Custodial Credit Risk Custodial credit risk is the risk that, in the event of a bank failure, the District s deposits may not be returned to it. The District s policy is that deposits not entirely covered by federal depository insurance are to be secured by adequate bond or other securities held by the banking institution in the District s name. Such deposits at June 30, 2016 were entirely covered by federal depository insurance or secured by adequate bond or other securities held by the banking institution in the District s name. The District s deposits are categorized to give an indication of the level of custodial credit risk assumed by the District at June 30, The difference between the bank balance and carrying value is due to outstanding checks and/or deposits in transit. The categories are described as follows: Category 1 - Uncollateralized. Category 2 - Collateralized with securities held by the pledging financial institution. Category 3 - Collateralized with securities held by the pledging financial institution s trust department or agent but not in the District s name. 15

20 Deposits, categorized by level of risk, are: Bank Category Category Category Carrying Balance Amount Working funds $ 78 $ - $ - $ - $ 78 Demand deposits, First Citizens Bank 617, , ,631 Total cash and equivalents $ 617,725 $ - $ 367,647 $ - $ 580,709 Investments State statutes authorized the government to invest in (1) the State Investment Pool or the Municipal Bond Commission; (2) direct obligations of the United States government pledged by its full faith and credit; (3) general and direct obligations of the state of West Virginia; (4) obligations of the federal national mortgage association; (5) indebtedness secured by first lien deed of trusts for property situated within this state if the payment is substantially insured or guaranteed by the federal government; (6) pooled mortgage trusts (subject to limitations); (7) indebtedness of any private corporation that is properly graded as in the top two or three highest rating grades; (8) mutual funds registered with the SEC which have fund assets over three hundred million dollars; (9) certificates of deposit at savings and loan associations and federally insured banks when secured by acceptable collateral; (10) savings accounts at savings and loan associations and banks, to the extent fully insured. Such deposits at June 30, 2016 were entirely covered by federal depository insurance or secured by adequate bond or other securities held by the banking institution in the District s name. Other Risks Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Concentration of credit risk is the risk of loss attributed to the magnitude of a government s investment in a single issuer. Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The District does not have formal policies to address these risks nor do they believe that they are exposed to these risks. The District s investments are categorized to give an indication of the level of custodial credit risk assumed by the District at June 30, The categories are described as follows: Category 1 - Uncollateralized. Category 2 - Collateralized with securities held by the pledging financial institution. Category 3 - Collateralized with securities held by the pledging financial institution s trust department or agent but not in the District s name. Deposits, categorized by level of risk, are: Bank Category Category Category Carrying Balance Amount Time and savings, City National Bank $ 36,312 $ - $ - $ - $ 36,312 Total investments $ 36,312 $ - $ - $ - $ 36,312 16

21 Restricted assets Certain assets are restricted for plant construction and for the servicing of long-term debt. As of June 30, 2016, $722,668 of the District s restricted bank balances of 1,221,446 were uninsured and uncollateralized. The District s restricted deposits are categorized to give an indication of the level of custodial credit risk assumed by the District at June 30, The categories are described as follows: Category 1 - Uncollateralized. Category 2 - Collateralized with securities held by the pledging financial institution. Category 3 - Collateralized with securities held by the pledging financial institution s trust department or agent but not in the District s name. Restricted assets, categorized by level of risk, are: Bank Category Category Category Carrying Balance Amount Demand deposits, First Citizens $ 166,400 $ - $ 166,400 $ - $ 166,400 Time and savings, City National 24, ,595 Demand deposits. City National 307,783-57, ,783 Municipal bond commission 722, , ,668 Total restricted assets $ 1,221,446 $ 722,668 $ 224,183 $ - $ 1,221,446 17

22 Prior year balances Prior year balances of Cash on hand and deposits with banking institutions either in checking or savings accounts, investments, and restricted assets were as follows, as of June 30, 2015: Deposits Bank Category Category Category Carrying Balance Amount Working funds $ 68 $ - $ - $ - $ 68 Demand deposits, First Citizens Bank 695, , ,346 Total cash and equivalents $ 695,135 $ - $ 445,067 $ - $ 660,414 Investments Bank Category Category Category Carrying Balance Amount Time and savings, City National Bank $ 35,085 $ - $ - $ - $ 35,085 Total investments $ 35,085 $ - $ - $ - $ 35,085 Restricted assets Bank Category Category Category Carrying Balance Amount Demand deposits, First Citizens $ 52,174 $ - $ 51,431 $ - $ 52,174 Time and savings, City National 24, ,595 Demand deposits. City National 261,263 11, ,263 Municipal bond commission 717, , ,170 Total restricted assets $ 1,055,202 $ 701,647 $ 51,431 $ - $ 1,055,202 18

23 NOTE 5. PROPERTY AND EQUIPMENT Capital asset activity for the fiscal year ending June 30, 2016, was as follows: Sewer Fund June 30, June 30, 2015 Additions Retirements 2016 Capital assets not being depreciated: Land and land rights $ 275,696 $ - $ - $ 275,696 Construction in progress 425,007 20, ,549 Total capital assets not being depreciated $ 700,703 $ 20,542 $ - $ 721,245 Capital assets being depreciated: Pumping system $ 3,100,523 $ - $ - $ 3,100,523 General structures 321,615 93, ,835 Service connections 21, ,936 Collecting mains 10,364,991 51,178-10,416,169 Transmission mains 3,153, ,153,545 Other collecting system 949, ,304 Electric pumping equipment 861, ,074 Miscellaneous pumping system 73, ,076 Office furniture and equipment 111,893 2, ,473 Transportation equipment 85, ,488 Tools and equipment 85,366 3,635-89,001 Communication equipment 22, ,127 Miscellaneous equipment 47, ,710 Total capital assets being depreciated $ 19,198,647 $ 150,613 $ - $ 19,349,260 19

24 Sewer Fund (Continued) June 30, June 30, 2015 Additions Retirements 2016 Less accumulated depreciation for: Pumping system $ 1,609,683 $ 77,154 $ - $ 1,686,837 General structures 76,505 8,585-85,090 Service connections 5, ,011 Collecting mains 6,476, ,959-6,688,606 Transmission mains 2,208,728 63,069-2,271,797 Other collecting system 595,717 20, ,286 Electric pumping equipment 566,344 18, ,406 Miscellaneous pumping system 66, ,072 Office furniture and equipment 108, ,187 Transportation equipment 69,576 3,471-73,047 Tools and equipment 80,928 2,636-83,564 Communication equipment 22, ,127 Miscellaneous equipment 46, ,063 Total accumulated depreciation $ 11,933,764 $ 407,329 $ - $ 12,341,093 Total capital assets being depreciated, net: $ 7,264,882 $ (256,716) $ - $ 7,008,166 Capital assets, net $ 7,965,585 $ (236,174) $ - $ 7,729,411 Depreciation was charged to governmental functions as follows: Sewer Fund $ 407,329 20

25 Capital asset activity for the prior fiscal year ending June 30, 2015, was as follows: Sewer Fund June 30, June 30, 2014 Additions Retirements 2015 Capital assets not being depreciated: Land and land rights $ 275,696 $ - $ - $ 275,696 Construction in progress 369,944 55, ,007 Total capital assets not being depreciated $ 645,641 $ 55,062 $ - $ 700,703 Capital assets being depreciated: Pumping system $ 3,100,523 $ - $ - $ 3,100,523 General structures 321, ,615 Service connections 21, ,936 Collecting mains 10,364, ,364,991 Transmission mains 3,153, ,153,545 Other collecting system 949, ,304 Electric pumping equipment 861, ,074 Miscellaneous pumping system 73, ,076 Office furniture and equipment 110,265 1, ,893 Transportation equipment 85, ,488 Tools and equipment 85, ,366 Communication equipment 22, ,127 Miscellaneous equipment 47, ,710 Total capital assets being depreciated $ 19,197,019 $ 1,628 $ - $ 19,198,647 21

26 Sewer Fund (Continued) June 30, June 30, 2014 Additions Retirements 2015 Less accumulated depreciation for: Pumping system $ 1,532,529 $ 77,154 $ - $ 1,609,683 General structures 65,889 10,616-76,505 Service connections 5, ,575 Collecting mains 6,265, ,153-6,476,647 Transmission mains 2,145,659 63,069-2,208,728 Other collecting system 575,148 20, ,717 Electric pumping equipment 548,115 18, ,344 Miscellaneous pumping system 66, ,692 Office furniture and equipment 107, ,260 Transportation equipment 66,105 3,471-69,576 Tools and equipment 77,071 3,857-80,928 Communication equipment 22, ,127 Miscellaneous equipment 46, ,982 Total accumulated depreciation $ 11,523,861 $ 409,903 $ - $ 11,933,764 Total capital assets being depreciated, net: $ 7,673,157 $ (408,275) $ - $ 7,264,882 Capital assets, net $ 8,318,798 $ (353,213) $ - $ 7,965,585 Depreciation was charged to governmental functions as follows: Sewer Fund $ 409,903 22

27 NOTE 6. CALCULATION OF NET POSITION GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position Governmental require the classification of net position into three components: invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined in Note 1 and are computed as follows: CALCULATION OF NET INVESTMENT IN CAPITAL ASSETS Sewer Fund Property and Equipment $ 19,624,957 Construction in Progress 445,549 Less: Accumulated Depreciation (12,341,093) Net Property and Equipment 7,729,413 Long-term debt Series 1983B 98,378 Series 2006A 1,185,000 Series 2013A 261,103 First Citizens loan 200,637 FNB Ronceverte loan 91,276 Total Long-Term Debt 1,836,394 Net Investment in Capital Assets $ 5,893,019 CALCULATION OF ASSETS RESTRICTED FOR CAPITAL PROJECTS Sewer Fund Project construction cash $ 142,882 Assets Restricted for Capital Projects $ 142,882 23

28 CALCULATION OF ASSETS RESTRICTED FOR DEBT SERVICE Sewer Fund MBC Revenue accounts $ 309,661 MBC Reserve accounts 332,870 Assets Restricted for Debt Service $ 642,531 UNRESTRICTED NET POSITION Sewer Fund Net position $ 7,370,793 Less: Net investment in capital assets 5,893,019 Assets restricted for capital projects 142,882 Assets restricted for debt service 642,531 Total restricted 6,678,432 Unrestricted net position $ 692,361 24

29 The following is the classification of net position at the prior year end, June 30, 2015: CALCULATION OF NET INVESTMENT IN CAPITAL ASSETS Sewer Fund Property and Equipment $ 19,198,646 Construction in Progress 425,007 Less: Accumulated Depreciation (11,933,764) Net Property and Equipment 7,689,889 Long-term debt Series 1983B 122,973 Series 2006A 1,450,000 Series 2013A 266,776 First Citizens loan 235,578 FNB Ronceverte loan 122,022 Total Long-Term Debt 2,197,349 Net Investment in Capital Assets $ 5,492,540 CALCULATION OF ASSETS RESTRICTED FOR CAPITAL PROJECTS Sewer Fund Project construction cash $ 26,962 Assets Restricted for Capital Projects $ 26,962 25

30 CALCULATION OF ASSETS RESTRICTED FOR DEBT SERVICE Sewer Fund MBC Revenue accounts $ 306,167 MBC Reserve accounts 330,973 Assets Restricted for Debt Service $ 637,140 UNRESTRICTED NET POSITION Sewer Fund Net position $ 7,156,705 Less: Net investment in capital assets 5,492,540 Assets restricted for capital projects 26,962 Assets restricted for debt service 637,140 Total restricted 6,156,642 Unrestricted net position $ 1,000,063 26

31 NOTE 7. CONTRIBUTIONS Contributions for the year ended June 30, 2016, were received from the following sources: Sewer Fund Tap fees $ 1, WV Division of Highways: State Fair Pedestrian Underpass - Sewer Line Relocation 38, Total Capital Contributions $ 40, Contributions for the prior year ended June 30, 2015, were received from the following sources: Tap fees $ 3, Total Capital Contributions $ 3, NOTE 8. PENSION PLAN Public Employees Retirement System Plan Description The Greenbrier Public Service District No. 1 contributes to the West Virginia Public Employees Retirement System (PERS) which is a multiple employer defined benefit cost sharing public employee retirement system covering substantially all employees of the State and its component units, as well as employees of participating non-state governmental entities who are not participants of another state or municipal retirement system. The PERS was established on July 1, 1961 and is administered by the West Virginia Consolidated Public Retirement Board. The cost to administer the plan is financed through the contributions and investment earnings of the plan. The West Virginia Consolidated Public Retirement Board issues a publicly available financial report that includes financial statements and the required supplementary information for the West Virginia Public Employees Retirement System. That report may be obtained on the West Virginia Consolidated Public Retirement Board website at The Board is managed by a Board of Trustees, which consists of, by virtue of their position, the Governor, State Auditor, State Treasurer, and Secretary of the Department of Administration, together with the following gubernatorial appointments that are subject to the advice and consent of the State Senate: four residents of the State who are not participants in the retirement plans, one State and one non-state employee participant in PERS, and one participant each from Teachers Retirement System (TRS), the State Police Death, Disability and Retirement System (SPDDRS), the State Police Retirement System (SPRS), the Deputy Sheriff Retirement System (DSRS), the Emergency Medical Services Retirement System (EMSRS), Municipal Police Officers and Firefighters Retirement System (MPFRS) and the Teachers Defined Contribution Retirement System (TDCRS). 27

32 The number of participating employers as of June 30, 2015 are as follows: 2015 West Virginia state agencies 152 Cities and towns 105 Counties 55 Special districts Employee membership data related to the West Virginia Public Employees Retirement System, as of July 1, 2015 was as follows: Pension Benefits Retirees and beneficiaries currently receiving benefits 25,679 Terminated employees entitled to but not yet receiving benefits 4,169 Terminated nonvested members 15,473 Active plan members: 36,122 Total 81,443 PERS provides retirement benefits as well as death and disability benefits. Qualification for normal retirement is age 60 with five years of service or at least age 55 with age and service equal to 80 or greater. The straight-life annuity retirement benefit is equivalent to 2% of average salary multiplied by years of service. Average salary is the average of the three consecutive highest annual earnings out of the last fifteen years of earnings. Terminated members with at least five years of contributory service who do not withdraw their accumulated contributions may elect to receive their retirement annuity beginning at age 62. Chapter 5, Article 10 of the West Virginia State Code assigns the authority to establish and amend the provisions of the plan to the State Legislature. In certain circumstances, this Article also permits members of TRS to transfer accumulated service credit and member contributions into PERS. Regular Retirement - A member who is currently working for a participating PERS agency may: o Retire with full benefits at age 55 if age plus contributing service equals 80 or more. o Retire with full benefits at age 60 if he or she has 5 or more years of contributing service. o Retire with reduced benefits at age 55 if he or she has 10 or more years of credited service. 28

33 Deferred Retirement - A member who is not currently working for a participating PERS agency and has not withdrawn his or her contributions may: o Retire at age 62 with full benefits if he or she has 5 or more years of credited service and was hired prior to July 1, o Retire at age 62 with full benefits if he or she has 5 or more years of contributory service and was hired on or after July 1, o Retire with full benefits at age 55 if age plus contributing service equals 80 or more. o Retire with reduced benefits at age 55 if he or she has between 20 and 25 years of service. o Retire with reduced benefits if less than 55 years of age and he or she has 30 or more years of credited service. Use of Unused Sick and Annual Leave at Retirement - Any member of PERS who works for an employer with a leave policy that allows for the conversion of unused annual and/or sick leave, may elect to use one of two options: Option 1: Members may elect to acquire additional credited service under PERS. A member may elect to use unused annual and/or sick leave towards an increase in retirement benefits. A retiree may receive one month of service credit for each ten days of unused annual and/or sick leave. However, such credited service shall not be used in meeting initial eligibility for retirement. Option 2: Members may elect to use such leave to purchase health insurance under the Public Employees Insurance Agency (PEIA). If an individual was enrolled in a PEIA insurance plan before July 1, 1988, and coverage has been continuous since that time, his or her unused annual and/or sick leave may be used to pay towards health insurance premiums. The retiree may purchase one month of single health coverage for every two days of unused annual and/or sick leave, or one month of family health coverage for every three days of unused annual and/or sick leave. If an individual was enrolled in a PEIA insurance plan between July 1, 1988 and June 30, 2001, the retiree may purchase one-half month of single health coverage for every two days of unused annual and/or sick leave, or one-half month of family health coverage for every three days of unused annual and/or sick leave. Members enrolled in a PEIA insurance plan on or after July 1, 2001 are not eligible to use unused annual and/or sick leave towards the purchase of health insurance. Unused leave cannot be used for both options. Members who retire from city, county, or other non-direct employers of the State should contact their employer regarding eligibility for PEIA insurance. If the member plans to separate from employment prior to eligibility for a retirement annuity (deferred retirement), they should refer to their employer s leave policy to determine if unused leave is cancelled at the time of separation from employment. 29