DEPARTMENT OF TREASURY Nick A. Khouri, State Treasurer

STATE OF MICHIGAN Rick Snyder, Governor DEPARTMENT OF TREASURY Nick A. Khouri, State Treasurer Report on Financial Statements VILLAGE OF CHESANING COUNTY OF SAGINAW February 2016 (Revised) Local Government Financial Services Division Bureau of Local Government Services

VILLAGE OF CHESANING VILLAGE COUNCIL (January 18, 2017) Joseph Sedlar, Jr. President Matthew Hoover President Pro-Tem Trent Vondrasek Council Member Michael Navarre Council Member Keith Wenzel Council Member Michael Cicalo Council Member Phil Larner Council Member Tina Powell Clerk Kenneth Valentine Treasurer Troy Feltman Administrator VILLAGE POPULATION--2010 2,394 TAXABLE VALUATION--2015 $135,257,200

4425 (Rev. 04-15) RICK SNYDER GOVERNOR STATE OF MICHIGAN DEPARTMENT OF TREASURY LANSING NICK A. KHOURI STATE TREASURER January 18, 2017 Village Council Village of Chesaning 1100 West Broad Street Chesaning, Michigan 48616 Independent Auditor's Report Dear Council Members: Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund and the aggregate remaining fund information of the Village of Chesaning, Saginaw County, Michigan, as of and for the fiscal year ended February 29, 2016, and the related notes to the financial statements, which collectively comprise the Village of Chesaning s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 P.O. BOX 30728 LANSING, MICHIGAN 48909-8228 www.michigan.gov/treasury 517-373-3227

Village of Chesaning (Saginaw County) Page 2 January 18, 2017 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, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund and the aggregate remaining fund information of the Village of Chesaning, Saginaw County, Michigan, as of February 29, 2016, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparisons for the general fund and major special revenue funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 1 through 7, the budgetary comparison information in Exhibits J, K, L and M, pension trend data, and the schedule of funding progress other postemployment benefits 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. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Village of Chesaning s basic financial statements. The accompanying supplementary and related information presented as Exhibits N through O are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative

Village of Chesaning (Saginaw County) Page 3 January 18, 2017 Requirements, Cost Principles, and Audit Requirements for Federal Award, and is also not a required part of the basic financial statements. The information presented in Exhibits N through O and the schedule of expenditures of Federal awards 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. 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 statement 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 Exhibits listed above are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 18, 2017, on our consideration of the Village of Chesaning s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Village of Chesaning s internal control over financial reporting and compliance. Sincerely, Cary Jay Vaughn, CPA, CGFM Audit Manager Local Government Financial Services Division

VILLAGE OF CHESANING TABLE OF CONTENTS MANAGEMENT S DISCUSSION AND ANALYSIS...1 BASIC FINANCIAL STATEMENTS EXHIBIT A--Government-Wide Statement of Net Position...8 EXHIBIT B--Government-Wide Statement of Activities...9 EXHIBIT C--Balance Sheet--Governmental Funds and Reconciliation to Statement of Net Position...10 EXHIBIT D--Statement of Revenues, Expenditures and Changes in Fund Balances--Governmental Funds and Reconciliation to Statement of Activities...11 EXHIBIT E--Statement of Net Position--Proprietary Funds...12 EXHIBIT F--Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds...13 EXHIBIT G--Statement of Cash Flows--Proprietary Funds...14 EXHIBIT H--Statement of Net Position--Component Unit...15 EXHIBIT I--Statement of Activities--Component Unit...16 NOTES TO FINANCIAL STATEMENTS...17 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE 1--Schedule of Changes in the Net Pension Liability and Related Ratios...49 SCHEDULE 2--Schedule of Pension Contributions...50 SCHEDULE 3--Schedule of Funding Progress-- Other Postemployment Benefits....51 EXHIBIT J--Budgetary Comparison Schedule--General Fund...52 EXHIBIT K--Budgetary Comparison Schedule--Major Street Major Special Revenue Fund...53 Page i

VILLAGE OF CHESANING TABLE OF CONTENTS (CONTINUED) Page EXHIBIT L--Budgetary Comparison Schedule--Municipal Street Major Special Revenue Fund...54 EXHIBIT M- Budgetary Comparison Schedule Local Street Major Special Revenue Fund.55 SUPPLEMENTARY INFORMATION AND SCHEDULES EXHIBIT N--Schedule of Revenues and Other Financing Sources By Source--Budget and Actual--General Fund...56 EXHIBIT O--Schedule of Expenditures and Other Financing Uses By Activity--Budget and Actual--General Fund...57 SCHEDULE S1 Expenditures of Federal Awards...58 Notes to Schedule of Expenditures of Federal Awards...59 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards...60 Report on Compliance with Requirements Applicable to Each Major Federal Program and on Internal Control Over Compliance Required By the Uniform Guidance...62 SCHEDULE S2 Schedule of Findings and Questioned Costs...65 Report to Those Charged With Governance...70 ii

VILLAGE OF CHESANING--SAGINAW COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS Our discussion and analysis of the Village of Chesaning s (Village) financial performance provides an overview of the Village s financial activities for the fiscal year ended February 29, 2016. USING THIS ANNUAL REPORT This annual report consists of three parts: management s discussion and analysis (this section), the basic financial statements, and required supplementary information. This report also contains supplementary information in addition to the basic financial statements. The basic financial statements include a series of financial statements. The Statement of Net Position and the Statement of Activities in Exhibits A and B provide information about the activities of the Village as a whole and present a longer-term view of the Village s finances. Fund financial statements start with Exhibit C. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Village s operations in more detail than the government-wide statements by providing information about the Village s most significant funds. The remaining statements provide financial information about activities for which the Village acts solely as a trustee or agent for the benefit of those outside of the government. Reporting the Village as a Whole The Statement of Net Position and the Statement of Activities One of the most important questions asked about the Village s finances is, Is the Village as a whole better or worse off as a result of the year s activities? The Statement of Net Position and the Statement of Activities report information about the Village as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Village s net assets and changes in them. You can think of the Village s net assets the difference between assets and liabilities as one way to measure the Village s financial health, or financial position. Over time, increases or decreases in the Village s net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the Village s property tax base and the condition of the Village s infrastructure, to assess the overall health of the Village. In the Statement of Net Position and the Statement of Activities we divide the Village into two kinds of activities: Governmental activities Most of the Village s basic services are reported here, including the police, public works, parks department, and general administration. Property taxes, franchise fees, and State grants finance most of these activities. 1

VILLAGE OF CHESANING--SAGINAW COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS Business-type activities The Village charges a fee to customers to help cover all or most of the cost of certain services it provides. The Village s water and sewer system are reported here. The Village also includes within the financial statements the Downtown Development Authority as a component unit, which is a separate legal entity. Although legally separate, the Village is financially accountable for the Downtown Development Authority. Report the Village s Major Fund Fund Financial Statements Our analysis of the Village s major funds begins with Exhibits C and D with additional information provided in Note A of the Notes to the Financial Statements. Some funds are required to be established by State law such as Major Street and Local Street while others are established by the Village Council to help it control and manage money for particular reasons such as the Municipal Street. The Village s two kinds of funds, governmental and proprietary, use different accounting approaches. Governmental funds Most of the Village s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Village s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Village s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in reconciliation at the bottom of the fund financial statements of Exhibit C and D. Proprietary funds When the Village charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the Village s enterprise funds (a component of proprietary funds) are the same as the business-type activities we report in the government-wide statements but provide more detail and additional information, such as cash flow, for proprietary funds. Additional Required Supplementary Information (RSI) Following the basic financial statements is additional Required Supplementary Information that further explains and supports the information in the financial statements. The Required Supplementary Information includes budgetary comparison schedules and schedules of funding progress for pensions and other post-employment benefits. 2

VILLAGE OF CHESANING--SAGINAW COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS Other Supplementary Information These exhibits provide the balance sheet and income statement for the individual funds that are combined into the non-major governmental column in Exhibits C and D. Exhibits N and O provide more detailed information on the General fund and its budget. The Village as a Whole The Village s combined net position decreased from $3,433,149 to $3,379,145 or $54,004 for the year ended February 29, 2016. During the fiscal year, the Village of Chesaning implemented GASB Statement Number 68, which required the restatement of beginning net position in the amount of $1,871,173 for the recording of net pension liability in the amount of $2,389,905 as in Note N for governmental type activities. Our analysis focuses on the net position (Table 1) and changes in net position (Table 2) of the Village s governmental and business-type activities. Table 1 Net Position of Governmental and Business Type Activities Total Governmental Activities Business-Type Activities Primary Government 2015 2016 2015 2016 2015 2016 Current and Other Assets $ 985,616 $ 2,704,673 $ 649,408 $ 651,544 $ 1,635,024 $ 3,356,217 Noncurrent Assets 1,229,838 1,183,569 5,252,835 6,004,415 6,482,673 7,187,984 Total Assets 2,215,454 3,888,242 5,902,243 6,655,959 8,117,697 10,544,201 Deferred Outflows of Resources 28,767 * 231,048 - - 28,767 231,048 Current Liabilities 192,061 65,049 71,362 44,095 263,423 109,144 Noncurrent Liabilities 2,570,892 * 4,671,960 1,879,000 2,615,000 4,449,892 7,286,960 Total Liabilities 2,762,953 4,737,009 1,950,362 2,659,095 4,713,315 7,396,104 Net Position Net Investment in Capital Assets 1,229,838 1,153,918 3,008,647 2,959,016 4,238,485 4,112,934 Restricted 219,489 628,815 365,188 430,399 584,677 1,059,214 Unrestricted (1,968,059) * (2,400,452) 578,046 607,449 (1,390,013) (1,793,003) Total Net Position $ (518,732) $ (617,719) $ 3,951,881 $ 3,996,864 $ 3,433,149 $ 3,379,145 * Amounts have been restated for the implementation of GASB Statement Number 68. Net position of the Village s governmental activities decreased by $2,488,892 (from $1,871,173 in fiscal year 2015 compared to $(617,719) in fiscal year 2016). This decrease is due to the incorporation of the net pension liability in the Village. Net position of the Village s businesstype activities increased by $44,983 (from $3,951,881 in fiscal year 2015 compared to $3,996,864 in fiscal year 2016). 3

VILLAGE OF CHESANING--SAGINAW COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS Table 2 Changes in Net Position Governmental and Business-Type Activities Total Governmental Activities Business-Type Activities Primary Government 2015 2016 2015 2016 2015 2016 Program Revenue Charges for Services $ 177,441 $ 305,588 $ 1,019,899 $ 1,024,342 $ 1,197,340 $ 1,329,930 Operating Grants and Contributions 222,060 260,127 3,728-225,788 260,127 Capital Grants and Contributions 218,370 - - - 218,370 - General Revenue Property Taxes 740,770 1,023,822 - - 740,770 1,023,822 State-Shared Revenues 222,449 218,396 - - 222,449 218,396 Unrestricted Investment Loss - - (2,879) (37,458) (2,879) (37,458) Rents 33,330 47,529 - - 33,330 47,529 Other 21,275 131,935 - - 21,275 131,935 Total Revenues 1,635,695 1,987,397 1,020,748 986,884 2,656,443 2,974,281 Program Expenses General Government 394,677 426,011 - - 394,677 426,011 Public Safety 205,067 201,874 - - 205,067 201,874 Public Works 1,477,061 1,239,314 - - 1,477,061 1,239,314 Community and Economic Development 25,998 29,054 - - 25,998 29,054 Recreation and Cultural 41,759 90,585 - - 41,759 90,585 Other 42,166 98,959 - - 42,166 98,959 Interest Expense - 587 - - - 587 Sewer/Water - - 1,011,785 941,901 1,011,785 941,901 Total Expenses 2,186,728 2,086,384 1,011,785 941,901 3,198,513 3,028,285 Transfers In (Out) (14,000) - 14,000 - - - Change in Net Position (565,033) (98,987) 22,963 44,983 (542,070) (54,004) Ending Net Postion 1,871,173 (617,719) 3,951,881 3,996,864 5,823,054 3,379,145 Restatement of Net Position for Pension Liability ( Note N) (2,389,905) (2,389,905) Restated Net Postion $ (518,732) $ (617,719) $ 3,951,881 $ 3,996,864 $ 3,433,149 $ 3,379,145 4

VILLAGE OF CHESANING--SAGINAW COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS Governmental Activities Total revenues for the Village s governmental activities increased by $351,702 or 20% from $1,635,695 in fiscal year 2015 to $1,987,397 in 2016. Total governmental activities expenses decreased by $114,344 or 5.2% from $2,200,728 to $2,086,384. The revenue increase is partially due to increases in charges for services, operating grants and contributions as well as an increase in property tax revenue. Business-Type Activities Total revenues for the Village s business-type activities decreased by $47,864 or 4.6%, from $1,034,748 in fiscal year 2015 to $986,884 in fiscal year 2016. Total expenses decreased by $69,884 or 6.9% from $1,011,785 to $941,901 from fiscal year 2015 to 2016. Total revenue decreased as the Village s unrestricted investment losses increased from fiscal year 2015 to 2016, however, charges for services increased. The decrease in the expenses is due to differences in sewer and water project s cost. THE VILLAGE S FUNDS As the Village completed the year, its governmental funds (as presented in the balance sheet on Exhibit C) reported a fund balance of $2,268,366 which is $1,842,536 more than last year s $425,830. The primary reasons for the governmental funds increase is bond proceeds in the Municipal Street Fund that will be spent on street projects in the upcoming fiscal year. Total revenues for the Village s governmental activities increased by $2,411,513 or 147% from $1,635,695 in fiscal year 2015 to $4,047,208 (including bond proceeds) in fiscal year 2016 as shown on Exhibit D. Total governmental activities expenditures (including transfers) increased by only $3,944 from $2,200,728 to $2,204,672. The revenue increase is partially due to operating grants and contributions, as well as increases in property tax revenue and charges for services. GENERAL FUND BUDGETARY HIGHLIGHT Over the course of the year, the Village s budget was monitored monthly to continuously evaluate the financial position of the Village. 5

VILLAGE OF CHESANING--SAGINAW COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets As of February 29, 2016, the Village had $6,757,585 invested in a broad range of capital assets, including land, buildings, vehicles, equipment, street and sidewalk infrastructure, and water and sewer infrastructure. This amount represents a net increase (including additions and deductions) of $640,099. Table 3 Capital Assets at Year-End Total Governmental Activities Business-Type Activities Primary Government 2015 2016 2015 2016 2015 2016 Land $ 4,000 $ 4,000 $ 91,135 $ 91,135 $ 95,135 $ 95,135 Buildings and Improvements 126,996 145,436 - - 126,996 145,436 Equipment 496,643 536,187 - - 496,643 536,187 Vehicles 467,725 467,725 - - 467,725 467,725 Infrastructure 1,445,058 1,445,058 - - 1,445,058 1,445,058 Sewer System - - 6,329,206 6,441,362 6,329,206 6,441,362 Water System - - 2,203,297 2,978,495 2,203,297 2,978,495 Total Capital Assets 2,540,422 2,598,406 8,623,638 9,510,992 11,164,060 12,109,398 Total Accumulated Depreciation (1,310,584) (1,414,837) (3,735,991) (3,936,976) (5,046,575) (5,351,813) Total Net Capital Assets $ 1,229,838 $ 1,183,569 $ 4,887,647 $ 5,574,016 $ 6,117,485 $ 6,757,585 This year s major capital asset additions included the following: Equipment $ 39,544 Building and Building Improvements 18,440 Water System Improvements 775,198 Sewer System Improvements 112,155 Total Additions $ 945,337 The Village s fiscal-year 2017 capital budget calls for continued improvement to the Village s water system. More detailed information about the Village s capital assets is presented in Note G to the financial statements. 6

VILLAGE OF CHESANING--SAGINAW COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS Debt At year-end, the Village had $4,456,656 in bonds and notes payable, in addition to vested employee benefits payable (compensated absences) versus $1,909,916 in the prior year, an increase of $2,546,740, as shown in Table 4. The increase is due to Sewer and Water Bonds in the Business-Type Activities. In the Governmental Activities, the increase is due to new debt for an equipment note as well as Municipal Street Bonds related to street projects in the upcoming fiscal year. Table 4 Outstanding Debt at Year-End Governmental Business-Type Total Activities Activities Primary Government 2015 2016 2015 2016 2015 2016 Bonds Payable $ - $ 1,785,000 $ 1,879,000 $ 2,615,000 $ 1,879,000 $ 4,400,000 Notes Payable - 29,651 - - - 29,651 Compensated Absences 11,341 10,644 19,575 16,361 30,916 27,005 Total Outstanding Debt $ 14,056 $ 1,825,295 $ 1,898,575 $ 2,631,361 $ 1,909,916 $ 4,456,656 More detailed information about the Village s liabilities is presented in Note H to the financial statements. ECONOMIC FACTORS AND NEXT YEAR S BUDGET The Village s fiscal year 2017 budget has been designed to continue to address the Village s infrastructure. More water, sewer and street projects are planned for the upcoming fiscal year and additional funds will be set aside as the Village also continues reserving funds to replace older equipment. CONTACTING THE VILLAGE S FINANCIAL MANAGEMENT This financial report is intended to provide our citizens, taxpayers, customers and investors with a general overview of the Village s finances and to show accountability for the money it receives. If you have questions about this report or need additional information, we welcome you to contact the Village's office at: 1100 West Broad Street, Chesaning, Michigan 48616 (Phone Number 989-845-3800). 7

VILLAGE OF CHESANING--SAGINAW COUNTY GOVERNMENT-WIDE STATEMENT OF NET POSITION February 29, 2016 EXHIBIT A Governmental Business-Type Component ASSETS Activities Activities Total Units Current Assets Cash and Cash Equivalents $ 2,362,364 $ 195,727 $ 2,558,091 $ 79,826 Investments 232,758 423,642 656,400 - Receivables ` Taxes--Delinquent 33,918-33,918 - Accounts 5,412 32,175 37,587 - Due From State 70,221-70,221 - Total Current Assets 2,704,673 651,544 3,356,217 79,826 Noncurrent Assets Restricted Cash - 430,399 430,399 - Capital Assets--Non-depreciating 4,000 91,135 95,135 - Capital Assets--Depreciating 1,179,569 5,482,881 6,662,450 295,485 Total Assets 3,888,242 6,655,959 10,544,201 375,311 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows of Resources-Pension Related 231,048-231,048 - Total Deferred Outflows of Resources 231,048-231,048 - LIABILITIES AND NET POSITION Current Liabilities Accounts Payable 35,364 25,149 60,513 - Accrued Liabilities 19,041 2,585 21,626 8,638 Vested Employee Benefits 10,644 16,361 27,005 - Total Current Liabilities 65,049 44,095 109,144 8,638 Long-Term Liabilities Lease Payable--Due Within One Year 12,653-12,653 - Lease Payable--Due in More Than One Year 16,998-16,998 - Bonds Payable--Due Within One Year 250,000 40,000 290,000 - Bonds Payable--Due in More Than One Year 1,535,000 2,575,000 4,110,000 - Other Postemployment Benefits 153,130-153,130 - Net Pension Liability 2,704,179-2,704,179 - Total Long-Term Liabilities 4,671,960 2,615,000 7,286,960 - Total Liabilities 4,737,009 2,659,095 7,396,104 8,638 NET POSITION Net Investment in Capital Assets 1,153,918 2,959,016 4,112,934 295,485 Restricted for Major Street 249,626-249,626 - Municipal Street 86,131-86,131 - Nonmajor Governmental 293,058-293,058 - Downtown Development Authority - - - 71,188 Restricted Debt Service - 430,399 430,399 - Unrestricted (2,400,452) 607,449 (1,793,003) - Total Net Position $ (617,719) $ 3,996,864 $ 3,379,145 $ 366,673 The Notes to Financial Statements are an integral part of this statement. PRIMARY GOVERNMENT 8

VILLAGE OF CHESANING--SAGINAW COUNTY GOVERNMENT-WIDE STATEMENT OF ACTIVITIES EXHIBIT B PROGRAM REVENUES PRIMARY GOVERNMENT Operating Charges for Grants and Governmental Business-Type Component Functions/Programs Expenses Services Contributions Activities Activities Total Units Primary Government Governmental Activities General Government $ 426,011 $ - $ 22,178 $ (403,833) $ - $ (403,833) $ - Public Safety 201,874 24,067 2,051 (175,756) - (175,756) - Public Works 1,239,314 268,714 235,898 (734,702) - (734,702) - Community and Economic Development 29,054 50 - (29,004) - (29,004) - Recreation and Culture 90,585 12,757 - (77,828) - (77,828) - Other 98,959 - - (98,959) - (98,959) - Interest 587 - (587) - (587) - Total Governmental Activities 2,086,384 305,588 260,127 (1,520,669) - (1,520,669) - Business-Type Activities Sewer 598,304 650,116 - - 51,812 51,812 - Water 343,549 373,585 - - 30,036 30,036 - Non-Major 48 641 - - 593 593 - Total Business-Type Activities 941,901 1,024,342 - - 82,441 82,441 - Total Primary Government $ 3,028,285 $ 1,329,930 $ 260,127 (1,520,669) 82,441 (1,438,228) - Component Units Downtown Development Authority $ 52,390 $ - $ - - - - (52,390) Total Component Units $ 52,390 $ - $ - - - - (52,390) The Notes to Financial Statements are an integral part of this statement. NET (EXPENSE) REVENUE AND CHANGES IN NET POSITION General Revenues Property Taxes 1,023,822-1,023,822 43,450 State-Shared Revenues 218,396-218,396 - Unrestricted Investment Loss - (37,458) (37,458) 167 Rents/Royalties 47,529-47,529 - Village Contribution to DDA - - - 275,000 Other Revenues 131,935-131,935 - Total General Revenues 1,421,682 (37,458) 1,384,224 318,617 Change in Net Position (98,987) 44,983 (54,004) 266,227 Net Position--March 1, 2015 1,871,173 3,951,881 5,823,054 100,446 Restatement related to Pension Liability (Note N (2,389,905) - (2,389,905) - Total Net Position--March 1, 2015 - Restated (518,732) 3,951,881 3,433,149 100,446 Net Position--February 29, 2016 $ (617,719) $ 3,996,864 $ 3,379,145 $ 366,673 9

VILLAGE OF CHESANING--SAGINAW COUNTY BALANCE SHEET--GOVERNMENTAL FUNDS AND RECONCILIATION TO THE STATEMENT OF NET POSITION February 29, 2016 EXHIBIT C ASSETS MAJOR FUNDS Total Major Municipal Local Governmental General Street Street Street Funds Cash and Cash Equivalents $ 143,823 $ 224,625 $ 1,556,899 $ 280,787 $ 2,206,134 Receivables Taxes--Delinquent - - 29,493 4,425 33,918 Accounts 5,412 - - - 5,412 Due From State 34,101 26,506-9,614 70,221 Total Assets $ 183,336 $ 251,131 $ 1,586,392 $ 294,826 $ 2,315,685 LIABILITIES AND FUND BALANCE Liabilities Accounts Payable $ 24,880 $ 1,471 $ 261 $ 1,746 $ 28,358 Accrued Liabilities 18,905 34-22 18,961 Total Liabilities 43,785 1,505 261 1,768 47,319 Fund Balances Restricted for Major Street - 249,626 - - 249,626 Municipal Street - - 1,586,131-1,586,131 Local Street - - - 293,058 293,058 Unassigned 139,551 - - - 139,551 Total Fund Balance 139,551 249,626 1,586,131 293,058 2,268,366 Total Liabilities and Fund Balance $ 183,336 $ 251,131 $ 1,586,392 $ 294,826 $ 2,315,685 Fund Balances--Total Governmental Funds $ 2,268,366 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 1,183,569 Internal service funds are used by management to charge the costs of equipment to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Position. 381,902 Certain liabilities, such as bonds payable, compensated absences and other post-employment benefits are not due and payable in the current period and, therefore, are not reported in the funds. (4,451,556) Net Position of Governmental Activities $ (617,719) The Notes to Financial Statements are an integral part of this statement. 10

VILLAGE OF CHESANING--SAGINAW COUNTY EXHIBIT D STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES--GOVERNMENTAL FUNDS AND RECONCILIATION TO STATEMENT OF ACTIVITIES MAJOR FUNDS Total Major Municipal Local Governmental General Street Street Street Funds Revenues Taxes $ 541,608 $ - $ 268,574 $ 213,640 $ 1,023,822 Licenses and Permits 42,009 - - - 42,009 State Grants 220,447 162,386-73,512 456,345 Charges for Services 157,337 - - - 157,337 Fines and Forfeits 11,069 - - - 11,069 Interest and Rentals 18,568 - - - 18,568 Other Revenue 91,145 60,827-2,141 154,113 Total Revenues 1,082,183 223,213 268,574 289,293 1,863,263 Expenditures Current General Government 404,534 - - - 404,534 Public Safety 175,862 - - - 175,862 Public Works 578,584 215,978 46,551 157,125 998,238 Community and Economic Development 29,054 - - - 29,054 Recreation and Cultural 90,585 - - - 90,585 Other 89,014 - - - 89,014 Capital Outlay 18,440 - - - 18,440 Total Expenditures 1,386,073 215,978 46,551 157,125 1,805,727 Excess of Revenues Over (Under) Expenditures (303,890) 7,235 222,023 132,168 57,536 Other Financing Sources (Uses) Bond Proceeds 285,000-1,500,000-1,785,000 Interfund Transfers In - 157,186 128,104 113,655 398,945 Interfund Transfers (Out) (47,900) (40,102) (270,841) (40,102) (398,945) Total Other Financing Sources (Uses) 237,100 117,084 1,357,263 73,553 1,785,000 Net Change in Fund Balance (66,790) 124,319 1,579,286 205,721 1,842,536 Fund Balance --March 1, 2015 206,341 125,307 6,845 87,337 425,830 Fund Balance --February 29, 2016 $ 139,551 $ 249,626 $ 1,586,131 $ 293,058 $ 2,268,366 Net Change in Fund Balances--Total Governmental Funds $ 1,842,536 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. Add--Capital Outlay 57,984 Deduct--Depreciation Expense (104,253) Bond proceeds are reported as financing sources in the governmental funds and thus contribute to the change in fund balance. In the statement of net position, however it increases (long term liabilities) Bonds Payables. (1,785,000) Some capital additions were financed through capital leases. In the statement of position, the lease obligation is (29,651) shown as a liability. Internal service funds are used by management to charge the costs of equipment to individual funds. Net revenue of the internal service fund is reported within the governmental activities, net of depreciation expense and capital asset additions included above. 24,069 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 the funds: Net Increase (Decrease) in Vested Employee Benefits, OPEB, and Unfunded Pension Liability (104,672) Change in Net Position of Governmental Activities $ (98,987) The Notes to Financial Statements are an integral part of this statement. 11

VILLAGE OF CHESANING--SAGINAW COUNTY EXHIBIT E STATEMENT OF NET POSITION PROPRIETARY FUNDS February 29, 2016 INTERNAL SERVICE Major Funds Non-Major Equipment Pool ASSETS Sewer Water USDA Sewer Total Fund Current Assets Cash and Cash Equivalents $ 150,342 $ 44,632 $ 753 $ 195,727 $ 156,230 Investment 423,642 - - 423,642 232,758 Accounts Receivable 19,964 12,211-32,175 - Total Current Assets 593,948 56,843 753 651,544 388,988 Noncurrent Assets Restricted Cash 351,453 78,946-430,399 - Capital Assets--Nondepreciating 53,112 38,023-91,135 - Capital Assets--Depreciating 3,584,228 1,898,653-5,482,881 127,821 Total Noncurrent Assets 3,988,793 2,015,622-6,004,415 127,821 Total Assets 4,582,741 2,072,465 753 6,655,959 516,809 LIABILITIES Current Liabilities Accounts Payable 14,951 10,198-25,149 7,006 Other Current Liabilities 2,264 321-2,585 80 Vested Employee Benefits 3,600 12,761-16,361 - Total Current Liabilities 20,815 23,280-44,095 7,086 Noncurrent Liabilities Bonds Payable--Due Within One Year 35,000 5,000-40,000 12,653 Bonds Payable--Due in More Than One Year 1,825,000 750,000-2,575,000 16,998 Total Noncurrent Liabilities 1,860,000 755,000-2,615,000 29,651 Total Liabilities 1,880,815 778,280-2,659,095 36,737 NET POSITION BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS Net Investment in Capital Assets 1,777,340 1,181,676-2,959,016 98,170 Restricted 351,453 78,946-430,399 - Unrestricted 573,133 33,563 753 607,449 381,902 Total Net Position $ 2,701,926 $ 1,294,185 $ 753 $ 3,996,864 $ 480,072 The Notes to Financial Statements are an integral part of this statement. GOVERNMENTAL ACTIVITIES 12

VILLAGE OF CHESANING--SAGINAW COUNTY EXHIBIT F STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION--PROPRIETARY FUNDS BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS GOVERNMENTAL ACTIVITIES INTERNAL SERVICE Major Funds Sewer Water Non-Major USDA Sewer Total Enterprise Funds Equipment Pool Fund Operating Revenues Charges for Services $ 650,116 $ 373,585 $ - $ 1,023,701 $ 140,887 Miscellaneous - - 641 641 - Total Operating Revenues 650,116 373,585 641 1,024,342 140,887 Operating Expenses Wages and Fringes 223,068 104,213-327,281 57,134 Operating Expenses 79,976 72,540-152,516 23,593 Repairs and Maintenance 10,345 51,164-61,509 18,751 Contracted Services 32,837 22,749-55,586 - Utilities 50,693 28,314-79,007 - Insurance 4,220 724-4,944 - Miscellaneous - - 48 48 - Depreciation 143,775 57,210-200,985 28,172 Total Operating Expenses 544,914 336,914 48 881,876 127,650 Operating Income (Loss) 105,202 36,671 593 142,466 13,237 Nonoperating Revenues (Expenses) Investment Loss (32,249) (5,209) - (37,458) (16,753) Interest Expense (53,390) (6,635) - (60,025) (587) Total Nonoperating Revenues (Expenses) (85,639) (11,844) - (97,483) (17,340) Change in Net Position 19,563 24,827 593 44,983 (4,103) Total Net Position--March 1, 2015 2,682,363 1,269,358 160 3,951,881 484,175 Total Net Position--February 29, 2016 $ 2,701,926 $ 1,294,185 $ 753 $ 3,996,864 $ 480,072 The Notes to Financial Statements are an integral part of this statement. 13

VILLAGE OF CHESANING--SAGINAW COUNTY EXHIBIT G STATEMENT OF CASH FLOWS PROPRIETARY FUNDS BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS GOVERNMENTAL ACTIVITIES INTERNAL SERVICE Major Funds Non-Major USDA Sewer Total Enterprise Funds Equipment Pool Fund Sewer Water Cash Flows From Operating Activities Cash Received From Customers $ 651,554 $ 372,631 $ 641 $ 1,024,826 $ 140,887 Cash Payments to Employees for Services and Benefits (228,932) (106,009) - (334,941) (57,134) Cash Payments to Suppliers for Goods and Services (237,608) (172,640) (48) (410,296) (40,620) Net Cash Provided by Operating Activities 185,014 93,982 593 279,589 43,133 Cash Flows From Capital and Related Financing Activities Acquisition of Capital Assets (112,155) (775,198) - (887,353) (39,544) Proceeds From Issuance of Bonds/Lease 96,000 755,000-851,000 39,543 (Reduction) Increase of Debt (35,000) (80,000) - (115,000) (9,893) Interest Paid on Bonds (53,390) (6,635) - (60,025) (587) Net Cash Provided by Capital and Related Financing Activities (104,545) (106,833) - (211,378) (10,481) Cash Flows From Investing Activities Loss on Investment - (5,208) - (5,208) - Net Cash Provided by Investing Activities - (5,208) - (5,208) - Net Increase (Decrease) in Cash and Cash Equivalents 80,469 (18,059) 593 63,003 32,652 Cash and Cash Equivalents at Beginning of Year 421,326 141,637 160 563,123 123,578 Cash and Cash Equivalents at End of Year $ 501,795 $ 123,578 $ 753 $ 626,126 $ 156,230 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income (Loss) $ 105,202 $ 36,671 $ 593 $ 142,466 $ 13,237 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation Expense 143,775 57,210-200,985 28,172 (Increase) Decrease in Accounts Receivable 1,438 (954) - 484 - Increase (Decrease) in Accounts Payable (14,950) 2,851 - (12,099) 1,724 Increase (Decrease) in Accrued Liabilities (50,451) (1,796) - (52,247) - Net Cash Provided by Operating Activities $ 185,014 $ 93,982 $ 593 $ 279,589 $ 43,133 The Notes to Financial Statements are an integral part of this statement. 14

VILLAGE OF CHESANING--SAGINAW COUNTY STATEMENT OF NET POSITION COMPONENT UNIT February 29, 2016 EXHIBIT H ASSETS Downtown Development Authority Cash and Cash Equivalents $ 79,826 Capital Assets--Depreciating 295,485 Total Assets 375,311 LIABILITIES Accrued Liabilities 8,638 Total Liabilities 8,638 NET POSITION Net Investment in Capital Assets 295,485 Unrestricted 71,188 Total Net Position $ 366,673 The Notes to Financial Statements are an integral part of this statement. 15

VILLAGE OF CHESANING--SAGINAW COUNTY STATEMENT OF ACTIVITIES COMPONENT UNIT EXHIBIT I Downtown Development Authority Program Expenses Public Works $ 52,390 Total Program Expenses 52,390 Net Program Revenue (52,390) General Revenue Taxes 43,450 Interest 167 Village Contribution 275,000 Total General Revenue 318,617 Change in Net Position 266,227 Net Position Beginning of Year 100,446 End of Year $ 366,673 The Notes to Financial Statements are an integral part of this statement. 16

VILLAGE OF CHESANING-SAGINAW COUNTY NOTES TO FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Village of Chesaning (Village) 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 Village s accounting policies are described below. Reporting Entity The Village of Chesaning (Village) is located in Saginaw County and is a general law village form of government incorporated under Public Act 3 of 1895. The Village provides services to its 2,394 residents in many areas including: general government, public safety (police), highway and streets, public works, operation and maintenance of sewer and water systems. The Village is governed by a seven-member council, including a president elected by the citizens of the Village. The criteria established by the Governmental Accounting Standards Board (GASB) Statement No. 61, "The Financial Reporting Entity," for determining the reporting entity includes oversight responsibility, fiscal dependency and whether the financial statements would be misleading if data were not included. Based on the above criteria, these financial statements present the financial statements of the Village (the primary government) and its component unit. The individual component unit discussed below is included in the Village s reporting entity because of the significance of their operational or financial relationships with the Village. The following discretely presented component unit are reported within the "component unit" column in the government-wide financial statements. Downtown Development Authority The Downtown Development Authority (Authority) exists to encourage economic development in the downtown area of the Village. The governing body of the component unit is appointed by the Village Council. The component unit maintains a general fund as its sole operating fund. Separate financial statements of the individual component unit have not been issued as management believes these general purpose financial statements, including disclosures, contain complete information to constitute a fair presentation of the component unit. The Village has the ability to significantly influence operations of the Authority. Joint Fire Authority Under authorization of State statutes, the Village of Chesaning joined Chesaning Township and Brady Township to establish and operate a Joint Fire Protection Authority for the mutual advantage of the governments. Two members of the Board of Directors for the Authority are appointed by each township and one member is appointed by the Village. The records are maintained and funds held by Chesaning Township. The operating and capital budgets are to be funded by a millage from each government. The tax for the Fire Authority is collected by Chesaning Township on all Village assessed property. 17

VILLAGE OF CHESANING-SAGINAW COUNTY NOTES TO FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation--Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, normally 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 legally separate 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 is 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 revenue. Separate financial statements are provided for governmental funds and proprietary funds. 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 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 revenue 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. When an expense is incurred for purposes for which both restricted and unrestricted net position are available, restricted resources are applied first. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized when it is both measurable and available. Revenues are considered to be available if they are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, expenditures relating to compensated absences, and claims and judgments are recorded only when payment is due. 18

VILLAGE OF CHESANING-SAGINAW COUNTY NOTES TO FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenues are recognized in the accounting period in which they become susceptible to accrual, that is, when they become both measurable and available to finance expenditures of the fiscal period. Property taxes, intergovernmental revenue, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the Village. The Village reports the following major governmental funds: The General Fund is the Village s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Major Street Fund accounts for the resources of State gas and weight tax revenues that are restricted for use on major streets. The Local Street Fund accounts for the resources of State gas and weight tax revenues that are restricted for use on local streets. The Municipal Street Fund accounts for resources received from the extra voted millage levied for the purpose of street improvements The Village reports the following major proprietary funds: The Sewer Fund accounts for the sewer operations of the Village. The Water Fund accounts for the water operations of the Village. Additionally, the Village reports the following internal service activities: Internal Service - Equipment Pool Fund accounts for operations that provide services to other departments of the Village on a cost-reimbursement basis. As a general rule, the effect of inter-fund 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. Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services, or privileges provided; 2) operating grants and contributions; and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. 19