, MICHIGAN Financial Statements For The Year Ended December 31, 2016 STRALEY LAMP & KRAENZLEIN P.C.
, MICHIGAN ELECTED OFFICERS BOARD OF COMMISSIONERS Daryl Peterson Board Chairperson Albert LaFleche Commissioner Stacy Carroll Vice Chairperson Don Edwards Commissioner Dave Wagner Commissioner County Officials Clerk Cheryl A. Neilsen Treasurer Jean M. Klein Sheriff Chad Brown Prosecuting Attorney Vicki P. Kundinger Register of Deeds Teresa Walker Probate Judge Benjamin T. Bolser Population (2010 Census) 9,765 2016 Taxable Value - $609,934,994
TABLE OF CONTENTS ANNUAL FINANCIAL REPORT Montmorency County December 31, 2016 FINANCIAL SECTION Page Independent Auditor s Report 1 Management s Discussion and Analysis 3 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 17 Statement of Activities 18 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet 20 Reconciliation of the Balance Sheet to the Statement of Net Position 21 Statement of Revenues, Expenditures, and Changes in Fund Balances 22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 23 Statement of Revenues, Expenditures, and Changes in Fund Balances General Fund Budget and Actual 24 Police Fund Budget and Actual 26 Home improvement Fund Budget and Actual 27 Proprietary Fund Financial Statements Statement of Net Position 28 Statement of Revenues, Expenses, and Changes in Net Position 29 Statement of Cash Flows 30 Fiduciary Fund Statement of Fiduciary Net Position Agency Fund 31 Discretely Presented Component Unit Funds Combining Statement of Net Position 33 Combining Statement of Activities 34 Notes to Financial Statements 36
REQUIRED SUPPLEMENTARY INFORMATION Page Schedule of Changes in the Employer s Net Pension Liability and Related Ratios 66 Schedule of Employer s Pension Contributions 67 Schedule of Employer s OPEB Contributions 68 SUPPLEMENTARY INFORMATION Combining Fund Statements Nonmajor Governmental Funds Combining Balance Sheet 70 Combining Statement of Revenues Expenditures and Changes in Fund Balances 76 Fiduciary Funds Combining Statement of Fiduciary Assets and Liabilities - Agency Funds 82 Combining Statement of Fiduciary Changes in Assets and Liabilities - Agency Funds 83 Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 84 Schedule of Findings and Questioned Costs 86
Philip T. Straley, CPA/PFS Bernard R. Lamp, CPA James E. Kraenzlein, CPA/ABV/CFF Gary C. VanMassenhove, CPA J. Michael Kearly, CPA Robert D. Ilsley, CPA Mark L. Sandula, CPA Jeffrey A. Taphouse, CPA John D. Faulman, CPA Andrew R. Lamp, CPA Donald C. Levren Gordon A. Nethercut, CPA-Retired INDEPENDENT AUDITOR S REPORT To the Board of Commissioners Montmorency County Atlanta, Michigan Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Montmorency County, Michigan as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise Montmorency County, Michigan s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Montmorency County Road Commission, representing 96% of the assets, 97% of the net position, and 78% of the revenues of the aggregate discretely presented component units; the Montmorency County Public Library, representing 3% of the assets, 2% of the net position, and 8% of the revenues of the aggregate discretely presented component units; or the Montmorency County Commission on Aging, representing 1% of the assets, 1% of the net position and 14% of the revenues of the aggregate discretely presented component units. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as they related to the amounts included for the Montmorency County Road Commission, Montmorency County Public Library and the Montmorency County Commission on Aging is based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial 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. 2106 US 23 South, PO Box 738, Alpena, MI 49707 Telephone (989) 356-4531 Facsimile (989) 356-0494 Website silcpa.com
Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Montmorency County, Michigan, as of December 31, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, pension and other post-employment obligations and budgetary comparison information as identified in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Montmorency County, Michigan s basic financial statements. The combining nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements The combining nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 29, 2017, on our consideration of the Montmorency County, Michigan s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Montmorency County, Michigan s internal control over financial reporting and compliance. June 29, 2017-2-
Management s Discussion and Analysis As management of the Montmorency County, Michigan we offer readers of Montmorency County s financial statements this narrative overview and analysis of the financial activities of Montmorency County for the fiscal year ended December 31, 2016. Financial Highlights The liabilities and deferred inflows of resources of Montmorency County exceeded its assets and deferred outflows at the close of the most recent fiscal year by $(3,078,709) (negative total net position). Of this amount, there was a deficit of $(6,013,328) in unrestricted net position. The Montmorency County primary government s total net position decreased by $(1,242,675). In addition, Montmorency County experienced a decrease in net position of governmental activities of $(1,277,720), offset by an increase in the net position of its business-type activities of $35,045. Montmorency County provided services of $6,587,545 in governmental activities and $40,762 of business-type activities for expenses totaling $6,628,307 during the year ended December 31, 2016. At December 31, 2016, the unassigned fund balance for the General Fund was $2,111,009 or (49.2%) of total General Fund expenditures and transfers out. This was a decrease of $209,241 compared to the prior year. The primary government of the Montmorency County did not issue any additional long-term debt obligations during the year ended December 31, 2016 and ended the year with a total long-term debt obligations of $92,255, an increase of $11,316. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Montmorency County s basic financial statements. Montmorency County s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of Montmorency County s finances, in a manner similar to a privatesector business. The statement of net position presents information on all of Montmorency County s assets, deferred outflows of resources, liabilities and deferred inflows of resources with the difference being reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of Montmorency County is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). - 3 -
Management s Discussion and Analysis Both of the government-wide financial statements distinguish functions of Montmorency County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of Montmorency County include legislative, judicial, general government, public safety, health and welfare, recreation and cultural, and others. The business-type activities of Montmorency County include the Delinquent Tax Payment Funds. The government-wide financial statements include not only Montmorency County itself (known as the primary government), but also the Montmorency County Road Commission, Montmorency County Library, and Montmorency County Commission on Aging which Montmorency County is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. The government-wide financial statements can be found as stated in the table of contents of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Montmorency County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. All of the funds of Montmorency County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the governmentwide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Montmorency County maintains twenty-five individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, Police Fund, and Home Improvement Fund, all of which are considered to be major funds. Data from the other twenty-two governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found as stated in the table of contents of this report. Proprietary funds. Montmorency County maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Montmorency County uses enterprise funds to account for its delinquent tax payments. The basic proprietary fund financial statements can be found as stated in the table of contents of this report. - 4 -
Management s Discussion and Analysis Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support Montmorency County s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found as stated in the table of contents of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found as stated in the table of contents of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning Montmorency County s general and major governmental funds budget comparisons and net pension liability, employer s pension contributions, and other postemployment healthcare benefit contributions. Required supplementary information can be found as stated in the table of contents of this report. Combining and individual fund statements and schedules can be found as stated in the table of contents of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of Montmorency County, assets and deferred outflows exceeded liabilities and deferred inflows of resources by $255,390 at the close of the most recent fiscal year. A significant portion of Montmorency County s net position $(2,743,484) reflects its unrestricted net position which represents funds available to meet the government s ongoing obligations to citizens and creditors. The investment in capital assets $2,211,265 (e.g., land, buildings, and equipment); less any related debt used to acquire those assets that are still outstanding. Montmorency County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. - 5 -
Management s Discussion and Analysis Governmental Activities Business-type Activities Total 2016 2015 2016 2015 2016 2015 Current and other assets $ 4,937,740 $ 4,064,932 $ 3,339,837 $ 3,303,655 $ 8,277,577 $ 7,368,587 Capital assets 2,211,265 2,298,627 - - 2,211,265 2,298,627 Total assets 7,149,005 6,363,559 3,339,837 3,303,655 10,488,842 9,667,214 Deferred outflow s of resources 541,320 944,613 - - 541,320 944,613 Current liabilities 298,561 148,445 5,738 4,601 304,299 153,046 Non-current liabilities 8,791,340 8,437,224 - - 8,791,340 8,437,224 Total liabilities 9,089,901 8,585,669 5,738 4,601 9,095,639 8,590,270 Deferred inflow s of resources 1,679,133 523,492 - - 1,679,133 523,492 Net Position: Invested in capital assets, net of related debt 2,211,265 2,298,627 - - 2,211,265 2,298,627 Restricted 723,354 1,073,170 64,255-787,609 1,073,170 Unrestricted (6,013,328) (5,172,786) 3,269,844 3,299,054 (2,743,484) (1,873,732) $ (3,078,709) $ (1,800,989) $ 3,334,099 $ 3,299,054 $ 255,390 $ 1,498,065 As noted previously, net position serves over time as a useful indicator of a government s financial position. In the case of Montmorency County, liabilities exceeded assets by $3,078,709 at the close of the fiscal year. This includes other noncurrent liabilities of a net pension liability of $5,648,559 and a net other postemployment benefits of $3,142,781. The primary government s net position includes approximately $2,211,265 in capital assets comprised of land, buildings, vehicles and equipment less any outstanding related debt used to acquire those assets. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Certain other limitations on the use of net position apply primarily to legal restrictions on the use of special revenue funds. At December 31, 2016 this total was $723,354. Business-type activities closed the year with a net position of $3,334,099. - 6 -
Management s Discussion and Analysis Governmental Activities Business-type Activities Total 2016 2015 2016 2015 2016 2015 Revenues: Program revenues: Charges for services $ 1,182,993 $ 1,485,061 $ 308,980 $ 388,722 $ 1,491,973 $ 1,873,783 Operating grants 637,401 660,488 - - 637,401 660,488 General revenues: Property taxes 3,029,284 3,395,829 - - 3,029,284 3,395,829 State shares revenue 216,670 177,959 - - 216,670 177,959 Investment earnings 7,260 54,344 5,257 5,672 12,517 60,016 Transfers 238,430 141,000 (238,430) (141,000) - - Total revenues and transfers 5,312,038 5,914,681 75,807 253,394 5,387,845 6,168,075 Expenses: Legislative 113,114 174,272 - - 113,114 174,272 Judicial 782,232 751,038 - - 782,232 751,038 General government 1,612,021 1,579,079 - - 1,612,021 1,579,079 Public safety 3,012,885 2,816,280 - - 3,012,885 2,816,280 Health and welfare 536,114 604,719 - - 536,114 604,719 Other expenses 355,529 440,135 - - 355,529 440,135 Capital outlay 177,863 195,372 - - 177,863 195,372 Delinquent tax funds - - 40,762 54,066 40,762 54,066 Total expenses 6,589,758 6,560,895 40,762 54,066 6,630,520 6,614,961 Change in net position (1,277,720) (646,214) 35,045 199,328 (1,242,675) (446,886) Net position - beginning of the year as previously stated (1,800,989) 3,001,789 3,299,054 3,099,726 1,498,065 6,101,515 Prior period adjustments - (4,156,564) - - - (4,156,564) Net position - beginning of the year as restated (1,800,989) (1,154,775) 3,299,054 3,099,726 1,498,065 1,944,951 Net position - end of the year $ (3,078,709) $ (1,800,989) $ 3,334,099 $ 3,299,054 $ 255,390 $ 1,498,065 The preceding table shows that the governmental activities reflected a negative change in net position due to operations of ($1,277,720). This was the result of an increase in expenses of $28,863. This was not enough to offset the decrease of revenues of $602,643 along with a subsidy from the business-type activities of $238,430. Montmorency County experienced a decrease of $631,506 in comparison to 2015 activity. The net position of Montmorency County s business-type activities increased by $35,045 after the subsidy to the General Fund of $238,430 for the year ended December 31, 2016. - 7 -
Management s Discussion and Analysis Governmental activities. The following chart depicts revenues of the governmental activities for the year ended December 31, 2016: Revenues by source - governmental activities. State shared 4.1% Investing earnings 0.1% Charges for services 22.3% Property taxes 57.0% Transfers 4.5% Operating grants and contributions 12.0% In total, 2016 governmental activities program revenues decreased by $(325,155) in comparison to 2015 revenues. This net decrease reflects a decrease in charges for services of $(302,068) and a decrease in operating grants of $(23,087). Property tax revenue, which is not assigned to any particular activity, remains a major support for governmental activities at 57.0%. The property tax revenue in Montmorency County has decreased by $(366,545) in 2016 from the previous year. The taxable values of real and personal property decreased in 2016 to $609,934,994 from $613,881,730 in 2015. The investment earnings of the governmental activities decreased in 2016 to $7,260 compared to $54,344 in 2015. - 8 -
Management s Discussion and Analysis Expenses by function/program - governmental activities. Other expenses Capital Outlay 5.4% 2.7% Health and Welfare 8.1% Legislative 1.7% Judicial 11.9% Public Safety 45.7% Other General Government 24.5% Total governmental activity expenses increased in 2016 by $(26,650) over 2015 expenses. Montmorency County continues to attempt to make reductions in expenditures to match the potential elimination of state shared revenue. Public safety continues to be the largest governmental activity, expending $3,012,885 of the $6,587,545 total (45.7%). General government expenses are the second largest category at $1,609,808 (24.5%). Judicial Government expenses are the third largest category at $782,232 (11.9%). Over eighty-two percent (82.1%) of the 2016 governmental activity expenses are a result of these three activities. - 9 -
Management s Discussion and Analysis Business-type activities. County Tax Foreclosure Fund continues to provide local units within the County payment for their delinquent real property taxes. The operation of these funds also continues to be a source of revenue to the County. As a result of a carryover net position of $3,299,054 and earning $35,045 in the operation of the business-type activities in 2016, $238,430 was able to be transferred as an appropriation to Montmorency County s General Fund to subsidize the governmental activity expenses. Total Cost of Program Net Cost of Services Revenues Services Function/Programs: Business-type activities $ 40,762 $ 308,980 $ (268,218) Revenues by source - business type activities. Investing earnings 1% Charges for services 99% Financial Analysis of the Government s Funds As noted earlier, Montmorency County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of Montmorency County s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing Montmorency County s financing requirements. In particular unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. - 10 -
Management s Discussion and Analysis As of the end of the current fiscal year, Montmorency County s governmental funds reported combined ending fund balances of $3,052,301 a decrease of $340,694 in comparison with the prior year. Approximately $2,111,009 or (69.2%) of this total amount constitutes unassigned fund balance, which is available for spending at the government s discretion. The remainder of fund balance of $723,354 is restricted to indicate that it is for the specific purpose of the fund, and $217,938 was committed by a Board of Commissioner action. The General Fund is the chief operating fund of Montmorency County. At the end of the current fiscal year, the fund balance of the General Fund was $2,111,009 of which all of it was unassigned. As a measure of the General Fund s liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. Unassigned fund balance represented (51.0%) of total general fund expenditures and operating transfers to other funds. The fund balance of Montmorency County s General Fund was decreased by $209,241 during the current fiscal year. Key factors are as follows: The General Funds tax revenues decreased by $360,486. Overall the General Fund experienced a decrease in revenues of $525,098. The Business-type activity fund was able to subsidize General Fund operations by $238,430. Public safety activity decreased in the amount of $49,009. Transfers into the General Fund increased by $55,176 compared to the prior year and the transfers out of the General Fund increased by $44,000. Proprietary funds. Montmorency County s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the business-type activities at the end of the year amounted to $3,334,099 and the change in net position for the funds was $35,045. Factors concerning the finances of this fund have already been addressed in the discussion of Montmorency County s business-type activities. Capital Asset and Debt Administration Capital assets. Montmorency County s investment in capital assets for its governmental and business type activities as of December 31, 2016, amounts to $2,211,265 (net of accumulated depreciation). This investment in capital assets includes land, land improvements, building and improvements, office and computer equipment and vehicles. - 11 -
Management s Discussion and Analysis Montmorency County s Capital Assets Governmental Activities 2016 2015 Historical cost: Land $ 69,078 $ 69,078 Buildings and improvements 3,002,423 3,002,423 Office and computer equipment 1,107,418 1,195,321 Vehicles 868,485 839,574 5,047,404 5,106,396 Accumulated depreciation: Buildings and improvements (1,199,619) (1,137,942) Office and computer equipment (945,946) (1,009,836) Vehicles (690,574) (659,991) (2,836,139) (2,807,769) Net capital assets $ 2,211,265 $ 2,298,627 Depreciation expense of $177,863 was charged to function / programs of the primary government. Long-term debt. At the end of the current fiscal year, Montmorency County had total long-term liabilities of $92,255. The full amount of debt represents future compensated absences of $92,255. Governmental Activities 2016 2015 Compensated absenses $ 92,255 $ 80,939 $ 92,255 $ 80,939 The County is required to report the actuarially computed liability for Pension and Other Postemployment Healthcare Benefits (OPEB). The total actuarial calculated liability is approximately $11,849,000 for the pension liability and $4,823,000 for the OPEB liability. If the County were required to fund that liability the estimated annual contribution would be approximately $500,000 for each liability. The net pension liability at the end of the fiscal year amounted to approximately $5,648,559 for the pension and $3,142,781 for the OPEB liability. - 12 -
Management s Discussion and Analysis Economic Factors and Next Year s Budget and Rates The following factors were considered in preparing the County s budget for the 2017 fiscal year: Continued annual unemployment rates of 9.7% through 2016 is highest of any County in the State of Michigan. Median household income continues to be well below the State average. Management continues to be concerned about levels of state revenue sharing amounts in FY 2017. Property tax values have not increased like many areas in the State. The County is need of capital outlay in FY 2017 related to improvements in the County building and the jail, as well expending resources necessary to complete certain deferred maintenance on various County assets. Requests for Information The financial report is designed to provide a general overview of Montmorency County s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Office of the Board of Commissioners, P.O. Box 789, Atlanta, Michigan, 49709. - 13 -
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BASIC FINANCIAL STATEMENTS - 15 -
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Statement of Net Position December 31, 2016 Primary Government Governmental Business-type Component Activities Activities Total Units ASSETS Cash and cash equivalents $ 2,948,183 $ 2,327,157 $ 5,275,340 $ 302,824 Investments 126,728 280,829 407,557 1,561,161 Receivables (net): Taxes 777,958 731,851 1,509,809 779,555 Accounts and interest 93,169-93,169 32,055 Mortgage loans 990,842-990,842 - Inventories - - - 472,283 Due from other governmental units - - - 405,423 Prepaid items 860-860 28,671 Capital assets not being depreciated 69,078-69,078 11,485,423 Capital assets being depreciated, net 2,142,187-2,142,187 8,217,819 Total assets 7,149,005 3,339,837 10,488,842 23,285,214 DEFERRED OUTFLOWS OF RESOURCES Deferred pension amounts 541,320-541,320 - LIABILITIES Accounts payable 60,781 753 61,534 46,745 Checks written in excess of cash balance 21,949-21,949 - Accrued liabilities 92,526-92,526 100,614 Due to other governmental units 31,050 4,985 36,035 - Long-term liabilities: Due within one year 92,255-92,255 220,815 Due in more than one year - - - 555,991 Other noncurrent liabilities: Net pension liability 5,648,559-5,648,559 - Net other post-employment benefits 3,142,781-3,142,781 841,571 Total liabilities 9,089,901 5,738 9,095,639 1,765,736 DEFERRED INFLOWS OF RESOURCES Property taxes levied for subsequent period 777,958-777,958 779,555 Unavailable revenue - mortgage loans 901,175-901,175 - Total deferred inflows of resources 1,679,133-1,679,133 779,555 NET POSITION Net investment in capital assets 2,211,265-2,211,265 19,040,472 Restricted 723,354 64,255 787,609 1,699,451 Unrestricted (deficit) (6,013,328) 3,269,844 (2,743,484) - TOTAL NET POSITION $ (3,078,709) $ 3,334,099 $ 255,390 $ 20,739,923 The accompanying notes to financial statements are an integral part of this statement. - 17 -
Statement of Activities For the Year Ended December 31, 2016 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Functions/Programs: Primary Government: Governmental activities General government - Legislative $ 113,114 $ 100 $ - $ - General government - Finance and tax 730,185 38,622 - - General government - Other 880,823 192,296 124,698 - Judicial 782,232 224,972 225,243 - Public safety 3,012,887 404,459 184,340 - Health and welfare 536,114 322,544 103,120 - Other 354,327 - - - Capital outlay 177,863 - - - Total governmental activities 6,587,545 1,182,993 637,401 - Business-type activities: County tax foreclosure 39,114 95,815 - - 100% tax collection 1,050 213,165 - - Treasurer's administration 598 - - - Total business-type activities 40,762 308,980 - - Total primary government $ 6,628,307 $ 1,491,973 $ 637,401 $ - Component Units: Montmorency County Road Commission $ 2,995,733 $ 30,012 $ 2,115,734 $ 1,350,664 Montmorency County Public Library 350,189 46,293 1,577 - Montmorency County Commission on Aging 754,882 373,764 158,253 - Total component units $ 4,100,804 $ 450,069 $ 2,275,564 $ 1,350,664 General revenues: Property taxes State shared revenue Investment earnings Transfers Gain (loss) on disposal of assets Total general revenues and transfers Change in net position Net position, beginning of the year Net position, end of the year - 18 -
Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Component Activities Activities Total Unit $ (113,014) $ - $ (113,014) $ - (691,563) - (691,563) - (563,829) - (563,829) - (332,017) - (332,017) - (2,424,088) - (2,424,088) - (110,450) - (110,450) - (354,327) - (354,327) - (177,863) - (177,863) - (4,767,151) - (4,767,151) - - 56,701 56,701 - - 212,115 212,115 - - (598) (598) - - 268,218 268,218 - $ (4,767,151) $ 268,218 $ (4,498,933) $ - $ - $ - $ - $ 500,677 - - - (302,319) - - - (222,865) $ - $ - $ - $ (24,507) $ 3,029,284 $ - $ 3,029,284 $ 1,023,288 216,670-216,670 11,740 7,260 5,257 12,517 2,411 238,430 (238,430) - - (2,213) - (2,213) (317) 3,489,431 (233,173) 3,256,258 1,037,122 (1,277,720) 35,045 (1,242,675) 1,012,615 (1,800,989) 3,299,054 1,498,065 19,727,308 $ (3,078,709) $ 3,334,099 $ 255,390 $ 20,739,923 The accompanying notes to financial statements are an integral part of this statement. -19-
Governmental Funds - Balance Sheet December 31, 2016 Home Nonmajor Total Police Improvement Governmental Governmental General Fund Fund Program Funds Funds ASSETS Cash and cash equivalents $ 2,200,320 $ 151,380 $ 5 $ 596,482 $ 2,948,187 Investments - - 10,994 115,730 126,724 Receivables, (net): Taxes 286,660 491,298 - - 777,958 Accounts and interest 28,971 - - 64,198 93,169 Mortgage loans - - 901,175 89,667 990,842 Due from other funds 10,000 - - - 10,000 Prepaid items - - - 860 860 Total assets $ 2,525,951 $ 642,678 $ 912,174 $ 866,937 $ 4,947,740 LIABILITIES Accounts payable $ 30,775 $ 241 $ - $ 29,765 $ 60,781 Checks written in excess of cash balance - - - 21,949 21,949 Accrued liabilities 66,457 12,726-13,343 92,526 Due to other governments 31,050 - - - 31,050 Due to other funds - - - 10,000 10,000 Total liabilities 128,282 12,967-75,057 216,306 DEFERRED INFLOWS OF RESOURCES Property taxes levied for a subsequent period 286,660 491,298 - - 777,958 Unavailable revenue - mortgage loans - - 901,175-901,175 Total deferred inflows of resources 286,660 491,298 901,175-1,679,133 FUND BALANCES Restricted - 138,413 10,999 573,942 723,354 Committed - - - 217,938 217,938 Unassigned 2,111,009 - - - 2,111,009 Total fund balances 2,111,009 138,413 10,999 791,880 3,052,301 Total liabilities, deferred inflows of resources and fund balances $ 2,525,951 $ 642,678 $ 912,174 $ 866,937 $ 4,947,740 The accompanying notes to financial statements are an integral part of this statement. - 20 -
Governmental Funds - Reconciliation of the Balance Sheet to the Statement of Net Position As of December 31, 2016 Fund balances - total governmental funds $ 3,052,301 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. Governmental capital assets $ 5,047,404 Less accumulated depreciation (2,836,139) 2,211,265 Long-term liabilities, including bonds payable are not due and payable in the current period and therefore are not reported in the governmental funds. Compensated absences (92,255) (92,255) Certain pension related amounts, such as net pension liability and deferred amounts are not due and payable in the current period or do not represent current financial resources and therefore are not reported in the government funds. Net OPEB obligation (3,142,781) Net pension liability (5,648,559) Deferred outflows related to the net pension liability 541,320 (8,250,020) Net position of governmental activities $ (3,078,709) The accompanying notes to financial statements are an integral part of this statement. - 21 -
Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances For the year Ended December 31, 2016 Home Nonmajor Total Police Improvement Governmental Governmental General Fund Fund Program Funds Funds REVENUES Taxes $ 2,538,419 $ 490,865 $ - $ - $ 3,029,284 Licenses and permits 7,617 - - 133,804 141,421 Federal grants 18,663 - - - 18,663 State grants 519,581 546-315,281 835,408 Charges for services 615,371-98,926 226,508 940,805 Fines and forfeitures 7,109 - - 2,000 9,109 Interest and rentals 5,072 899 77 1,311 7,359 Other revenue 57,184 6,850-27,525 91,559 Total revenues 3,769,016 499,160 99,003 706,429 5,073,608 EXPENDITURES Current General government - Legislative 89,221 - - - 89,221 General government - Financial and tax 624,301 - - - 624,301 General government - Other 702,346 - - 49,676 752,022 Judicial 638,779 - - 11,075 649,854 Public Safety 1,496,737 460,876-525,737 2,483,350 Health and welfare 166,174-129,737 234,921 530,832 Other expenditures 345,289 - - - 345,289 Capital outlay 72,340 88,676-16,847 177,863 Total expenditures 4,135,187 549,552 129,737 838,256 5,652,732 REVENUES OVER (UNDER) EXPENDITURES (366,171) (50,392) (30,734) (131,827) (579,124) OTHER FINANCING SOURCES (USES) Transfers in 240,930 - - 84,000 324,930 Transfers (out) (84,000) - - (2,500) (86,500) Total other financing sources (uses) 156,930 - - 81,500 238,430 NET CHANGE IN FUND BALANCES (209,241) (50,392) (30,734) (50,327) (340,694) FUND BALANCES, beginning of the year 2,320,250 188,805 41,733 842,207 3,392,995 FUND BALANCES, end of the year $ 2,111,009 $ 138,413 $ 10,999 $ 791,880 $ 3,052,301 The accompanying notes to financial statements are an integral part of this statement. - 22 -
Governmental Funds - Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended December 31, 2016 Net change in fund balances - total governmental funds $ (340,694) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlay expenditures for capital assets $ 88,117 Depreciation expense (173,267) Loss on disposal of capital assets (2,213) (87,363) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Net pension liability and related deferred amounts (527,575) Change in compensated absences (11,316) Change in net other postemployment benefits obligation (310,772) (849,663) Change in net position of governmental activities $ (1,277,720) - 23 -
Statement of Revenues, Expenditures and Changes in Fund Balances General Fund - Budget and Actual Year Ended December 31, 2016 Variance with Final Budget Budgeted Amounts Actual Favorable Original Final Amounts (Unfavorable) REVENUES Taxes $ 2,893,700 $ 2,960,700 $ 2,538,419 $ (422,281) Licenses and permits 9,000 9,000 7,617 (1,383) Federal grants 13,000 8,000 18,663 10,663 State grants 423,600 495,600 519,581 23,981 Charges for services 716,000 659,000 615,371 (43,629) Fines and forfeitures 6,700 6,700 7,109 409 Interest and rentals (5,700) 14,300 5,072 (9,228) Other revenue 5,300 5,300 57,184 51,884 Total revenues 4,061,600 4,158,600 3,769,016 (389,584) EXPENDITURES General government - Legislative Board of Commissioners 199,800 196,000 89,221 106,779 General government - Financial and tax Clerk 189,800 193,800 195,302 (1,502) Data processing 90,400 127,400 136,148 (8,748) Treasurer 153,800 157,550 152,271 5,279 Assessor / equalization 147,500 161,500 139,243 22,257 P.R.A. summer tax 2,450 1,450 1,337 113 583,950 641,700 624,301 17,399 General government - Other: General services 83,000 113,000 90,880 22,120 Mail services 10,600 10,600 14,988 (4,388) Cooperative extension 51,400 51,400 51,535 (135) Elections 13,400 32,400 11,154 21,246 Building and grounds 129,100 163,100 158,734 4,366 Prosecuting attorney 222,400 221,400 209,062 12,338 Register of deeds 134,300 130,300 130,900 (600) Civil service 18,900 18,900 18,869 31 Drain commissioner 17,200 17,200 16,224 976 680,300 758,300 702,346 55,954 Judicial Circuit court 102,000 109,000 109,143 (143) DOC Corrections 500 500 283 217 District court 200,300 198,300 197,428 872 Friend of the court 47,000 30,000 28,289 1,711 Assign council / OPA 63,000 63,000 62,500 500 Jury commission 1,400 1,400 1,062 338 Probate court 244,000 246,000 240,074 5,926 658,200 648,200 638,779 9,421-24 -
Statement of Revenues, Expenditures and Changes in Fund Balances General Fund - Budget and Actual Year Ended December 31, 2016 Variance with Final Budget Budgeted Amounts Actual Favorable Original Final Amounts (Unfavorable) Public safety: Police / Sheriff $ 709,650 $ 734,650 $ 711,888 $ 22,762 Auto repair and maintenance 51,500 51,500 56,376 (4,876) Corrections / Jail 775,500 760,300 724,127 36,173 Soil erosion 400 400 174 226 Animal shelter / dog warden 9,500 6,500 4,172 2,328 1,546,550 1,553,350 1,496,737 56,613 Health and welfare: Health department 85,000 85,000 81,154 3,846 Substance abuse 56,000 18,000 24,623 (6,623) Medical examiner 12,200 12,200 11,963 237 Mental health 38,800 38,800 33,406 5,394 State institutions 1,200 1,200-1,200 Social services 4,300 4,300 4,180 120 Veterans programs 300 300-300 Veterans service board 7,700 8,700 10,848 (2,148) 205,500 168,500 166,174 2,326 Other: Huron Pines 300 300-300 Employee fringe benefits 99,500 72,500 85,031 (12,531) Retiree health insurance 129,300 126,300 127,729 (1,429) General insurance 119,000 129,000 128,063 937 Workmen's compensation 3,500 3,500 (8,246) 11,746 N.E.M.C.O.G. 4,000 4,000 3,924 76 Government associations 9,400 9,400 8,788 612 Contingencies 18,000 - - - 383,000 345,000 345,289 (289) Capital Outlay: Capital equipment 10,000 38,300 72,340 (34,040) Total expenditures 4,267,300 4,349,350 4,135,187 214,163 REVENUES OVER (UNDER) EXPENDITURES (205,700) (190,750) (366,171) (175,421) OTHER FINANCING SOURCES (USES) Transfers in 190,000 205,000 240,930 35,930 Transfers out (72,000) (77,000) (84,000) (7,000) Total other financing sources (uses) 118,000 128,000 156,930 28,930 NET CHANGE IN FUND BALANCE (87,700) (62,750) (209,241) (146,491) FUND BALANCE, beginning of year 2,320,250 2,320,250 2,320,250 - FUND BALANCE, end of year $ 2,232,550 $ 2,257,500 $ 2,111,009 $ (146,491) The accompanying notes to financial statements are an integral part of this statement. - 25 -
Statement of Revenues, Expenditures and Changes in Fund Balance Police Fund - Budget and Actual For the Year Ended December 31, 2016 Variance with Final Budget Budgeted Amounts Actual Favorable Original Final Amount (Unfavorable) REVENUES Taxes $ 435,200 $ 495,200 $ 490,865 $ (4,335) State grants - - 546 546 Interest and rents - - 899 899 Other revenue - - 6,850 6,850 Total revenues 435,200 495,200 499,160 3,960 EXPENDITURES Public safety 449,100 538,100 460,876 77,224 Capital outlay 45,000 137,000 88,676 48,324 Total expenditures 494,100 675,100 549,552 125,548 REVENUES OVER (UNDER) EXPENDITURES (58,900) (179,900) (50,392) 129,508 FUND BALANCE, beginning of year 188,805 188,805 188,805 - FUND BALANCE, end of year $ 129,905 $ 8,905 $ 138,413 $ 129,508 The accompanying notes to financial statements are an integral part of this statement. - 26 -
Statement of Revenues, Expenditures and Changes in Fund Balance Home Improvement Fund - Budget and Actual For the Year Ended December 31, 2016 Variance with Final Budget Budgeted Amounts Actual Favorable Original Final Amount (Unfavorable) REVENUES Charges for services $ 13,800 $ 13,800 $ 98,926 $ 85,126 Interest and rentals 100 100 77 (23) Total revenues 13,900 13,900 99,003 85,103 EXPENDITURES Health and welfare 14,100 14,100 129,737 (115,637) Total expenditures 14,100 14,100 129,737 (115,637) REVENUES OVER (UNDER) EXPENDITURES (200) (200) (30,734) (30,534) FUND BALANCE, beginning of year 41,733 41,733 41,733 - FUND BALANCE, end of year $ 41,533 $ 41,533 $ 10,999 $ (30,534) The accompanying notes to financial statements are an integral part of this statement. - 27 -
Proprietary Funds Statement of Net Position December 31, 2016 Business-type Activities - Enterprise Funds County Total Tax 100% Tax Treasurer's Enterprise Foreclosure Collection Administration Funds ASSETS Cash and cash equivalents $ 401,753 $ 1,925,404 $ - $ 2,327,157 Investments 168,010 102,662 10,157 280,829 Receivables, (net): Taxes 36,185 695,666-731,851 Total assets 605,948 2,723,732 10,157 3,339,837 LIABILITIES Current liabilities Accounts payable 753 - - 753 Due to other governments 4,985 - - 4,985 Total current liabilities 5,738 - - 5,738 NET POSITION Restricted 64,255 - - 64,255 Unrestricted 535,955 2,723,732 10,157 3,269,844 Total net position $ 600,210 $ 2,723,732 $ 10,157 $ 3,334,099 The accompanying notes to financial statements are an integral part of this statement. -28-
Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position December 31, 2016 Business-type Activities - Enterprise Funds County Total Tax 100% Tax Treasurer's Enterprise Foreclosure Collection Administration Funds OPERATING REVENUES Charges for services $ 95,815 $ 51,307 $ - $ 147,122 Interest on taxes - 161,858-161,858 Total operating revenues 95,815 213,165-308,980 OPERATING EXPENSES Contracted services 39,114 1,050 598 40,762 Total operating expenses 39,114 1,050 598 40,762 OPERATING INCOME (LOSS) 56,701 212,115 (598) 268,218 NONOPERATING REVENUES (EXPENSES) Investment income and rents 1,327 3,909 21 5,257 Net income before transfers 58,028 216,024 (577) 273,475 OTHER FINANCING SOURCES (USES) Transfers out (238,430) - - (238,430) Change in net position (180,402) 216,024 (577) 35,045 NET POSITION, beginning of the year 780,612 2,507,708 10,734 3,299,054 NET POSITION, end of the year $ 600,210 $ 2,723,732 $ 10,157 $ 3,334,099 The accompanying notes to financial statements are an integral part of this statement. -29-
Proprietary Funds Statement of Cash Flows December 31, 2016 Business-type Activities - Enterprise Funds County Total Tax 100% Tax Treasurer's Enterprise Foreclosure Collection Administration Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash payments for delinquent taxes $ 97,541 $ 215,047 $ - $ 312,588 Payments to suppliers (37,977) (1,050) (598) (39,625) Net cash provided (used) by operating activities 59,564 213,997 (598) 272,963 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers (to) other funds (238,430) - - (238,430) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from the sale of investments - - 577 577 Purchase of investments - (84) - (84) Interest and dividends received 1,327 3,909 21 5,257 1,327 3,825 598 5,750 Net increase (decrease) in cash and cash equivalents (177,539) 217,822-40,283 CASH AND CASH EQUIVALENTS Beginning of the year 579,292 1,707,582-2,286,874 CASH AND CASH EQUIVALENTS End of the year $ 401,753 $ 1,925,404 $ - $ 2,327,157 Reconciliation of operating income to net cash provided by (used in) operating activities Operating income (loss) $ 56,701 $ 212,115 $ (598) $ 268,218 Adjustments to reconcile operating income to net cash provided by operating activities (Increase) decrease in taxes receivable 1,726 1,882-3,608 Increase (decrease) in accounts payable 753 - - 753 Increase (decrease) in due to governments 384 - - 384 Net cash provided by (used in) operating activities $ 59,564 $ 213,997 $ (598) $ 272,963 The accompanying notes to financial statements are an integral part of this statement. -30-