ABRAHAM & GAFFNEY, P.C. Certified Public Accountants

Principals --- -- Dale J. Abraham, CPA Steven R. Kirinovic, CPA Aaron M. Stevens, CPA Eric J. Glashouwer, CPA Alan D. Panter, CPA William I. Tucker IV, CPA ABRAHAM & GAFFNEY, P.C. Certified Public Accountants 3511 Coolidge Road Suite 100 East Lansing, MI 48823 (517) 351-6836 FAX: (517) 351-6837 To the Board of Commissioners of Ionia County Ionia, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Ionia County, Michigan (the County) for the year ended December 31, 2016. We did not audit the financial statements of the Ionia County Road Commission (discretely presented component unit) which represents 86 percent, 86 percent, and 95 percent, respectively, of the assets, net position, and revenues of the aggregate discretely presented component units. Professional standards require that we provide you with information about our audit responsibilities under generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Ionia County are described in Note A to the financial statements. As described in Note P to the financial statements, the County adopted Governmental Accounting Standards Board (GASB) Statement 72, Fair Value Measurement and Application, and (GASB) Statement 77, Tax Abatement Disclosures, during the year ended December 31, 2016. Accordingly, the effect of the accounting change is reported in the applicable financial statements. We noted no transactions entered into by the County during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the governmental activities, business-type activities, the aggregate discretely presented component units, and the aggregate remaining fund information was: Management s calculation of depreciation expense for the current period is based on an estimate of the useful lives of the capital assets. Certain financial statement disclosures are particularly sensitive because of their significance to the financial statement users. The most sensitive estimates affecting the governmental activities financial statements were: Management s calculation for current and noncurrent compensated absence payments is based on an estimate of the percentage of employees use of compensated absences. Management s calculation of the net post-employment benefits obligation is based on an actuarial study which utilized certain assumptions. Auburn Hills East Lansing Grand Rapids St. Johns

Management s calculation of the net pension liability and changes therein was based on actuarial assumptions and the use of a specialist (actuary). Investments are carried at fair value, which is defined as the amount that the County could reasonably expect to receive for an investment in a current sale between a willing buyer and a willing seller and is generally measured by quoted market prices. We evaluated the key factors and assumptions that were used to develop the estimates in determining that they appeared reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. The following material misstatements detected as a result of audit procedures were corrected by management: taxes receivable and related unavailable revenue, accumulated depreciation and depreciation expense, and changes in pension investment balances. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 05, 2017. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the County s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the County s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to the management s discussion and analysis, budgetary comparison information, and the pension system schedules, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI.

We were engaged to report on other supplementary information, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Restriction on Use This information is intended solely for the information and use of Board of Commissioners and management of Ionia County and is not intended to be, and should not be, used by anyone other than these specified parties. ABRAHAM & GAFFNEY, P.C. Certified Public Accountants June 5, 2017

FINANCIAL STATEMENTS December 31, 2016

December 31, 2016 BOARD OF COMMISSIONERS Jack Shattuck James L. Banks Julie Calley David Hodges Scott Wirtz Larry Tiejema Brenda Cowling-Cronk Chairperson Vice-chair Commissioner Commissioner Commissioner Commissioner Commissioner ADMINISTRATION AND OTHER ELECTED OFFICIALS Stephanie Fox Judith Clark Tonda Rich Diane Adams Robert Rose Kyle Butler Dale Miller Administrator Treasurer Clerk Register of Deeds Drain Commissioner Prosecuting Attorney Sheriff

TABLE OF CONTENTS December 31, 2016 Page INDEPENDENT AUDITOR S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS i-iii iv-viii BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position 1 Statement of Activities 2 Fund Financial Statements Governmental Funds Balance Sheet 3-4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 5 Statement of Revenues, Expenditures, and Changes in Fund Balances 6-7 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 8 Proprietary Funds Statement of Net Position 9 Statement of Revenues, Expenses, and Changes in Net Position 10 Statement of Cash Flows 11 Fiduciary Funds Statement of Net Position 12 Statement of Changes in Plan Net Position - Pension Trust Fund 13 Component Unit Financial Statements Combining Statement of Net Position 14 Combining Statement of Activities 15 Notes to Financial Statements 16-47 REQUIRED SUPPLEMENTARY INFORMATION General Fund Budgetary Comparison Schedule - Revenues and Other Financing Sources 48-50 Budgetary Comparison Schedule - Expenditures and Other Financing Uses by Activity 51-52 Friend of the Court Budgetary Comparison Schedule 53 Public Health Fund Budgetary Comparison Schedule 54 Commission on Aging Budgetary Comparison Schedule 55 Schedule of Changes in County s Net Pension Liability and Related Ratios 56-57 Schedule of County Contributions 58 Schedule of Employer Contributions 59 Schedule of Investment Returns 60 Note to Required Supplementary Information 61

TABLE OF CONTENTS - CONTINUED December 31, 2016 Page OTHER SUPPLEMENTARY INFORMATION General Fund Combining Balance Sheet 62-63 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances 64-65 Nonmajor Governmental Funds Combining Balance Sheet 66-71 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 72-77 Nonmajor Enterprise Funds Statement of Net Position 78 Statement of Revenues, Expenses, and Changes in Net Position 79 Statement of Cash Flows 80 Agency Funds Combining Statement of Fiduciary Assets and Liabilities 81-82 COMPONENT UNIT FUNDS DRAINAGE DISTRICTS Combining Balance Sheet/Statement of Net Position 83 Reconciliation of the Combining Balance Sheet to the Statement of Net Position 84 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 85 Reconciliation of the Combining Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 86 Proprietary Fund Statement of Revenues, Expenses, and Changes in Net Position 87 Statement of Cash Flows 88 LAND BANK AUTHORITY Statement of Net Position 89 Statement of Revenues, Expenses, and Changes in Net Position 90 Statement of Cash Flows 91

Principals --- -- Dale J. Abraham, CPA Steven R. Kirinovic, CPA Aaron M. Stevens, CPA Eric J. Glashouwer, CPA Alan D. Panter, CPA William I. Tucker IV, CPA ABRAHAM & GAFFNEY, P.C. Certified Public Accountants 3511 Coolidge Road Suite 100 East Lansing, MI 48823 (517) 351-6836 FAX: (517) 351-6837 INDEPENDENT AUDITOR S REPORT Board of Commissioners of Ionia County Ionia, 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 (the County), as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the County s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Ionia County Road Commission which represents 86 percent, 86 percent, and 95 percent, respectively, of the assets, net position, and revenue of the aggregate discretely presented component units. Those statements were audited by other auditors whose report has been furnished to us, and in our opinion, insofar as it relates to the amounts included for the Ionia County Road Commission, is based solely on the report 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. Auburn Hills East Lansing Grand Rapids St. Johns - i -

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the 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, as of December 31, 2016, and the respective changes in financial position, and, where applicable, cash flows, thereof for the year ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principles As described in Note P to the financial statements, the County implemented GASB Statement No. 72, Fair Value Measurement and Application, during the year. As a result, the County has applied fair value to certain investments and disclosures related to all fair value measurements. Our opinions are not modified with respect to this matter. As described in Note P to the financial statements, the County implemented GASB Statement No. 77, Tax Abatement Disclosures, during the year. The statement improves financial reporting through the disclosure of information about the nature and magnitude of tax abatements. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information, and pension system schedules, 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 inquires 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 County s basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual 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 and individual nonmajor fund financial statements are fairly stated in all material respects in relation to the basic financial statements as a whole. - ii -

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 05, 2017 on our consideration of the 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 Ionia County s internal control over financial reporting and compliance. ABRAHAM & GAFFNEY, P.C. Certified Public Accountants June 5, 2017 - iii -

Ionia County MANAGEMENT S DISCUSSION AND ANALYSIS December 31, 2016 As management of the County of Ionia, we offer this narrative overview and analysis of the financial activities of the County of Ionia for the fiscal year ended December 31, 2016. The purpose of this overview and discussion is to provide a narrative insight into the financial structure and position of the County of Ionia. This Discussion and Analysis should be read in conjunction with the financial statements contained herein. Financial Highlights * Net Position of the County of Ionia decreased by 3.71 percent during 2016. * The ratio of Current Assets to Current Liabilities is over 11 to 1. * The current debt load for Ionia County is approximately less than one percent of that which is allowable by state law. There is significant capacity for Ionia County to incur additional debt. USING THIS REPORT As stated above, this discussion and analysis is intended to serve as an introduction to the County of Ionia basic financial statements. The basic financial statements have three components: Government-Wide Financial Statements; Fund Financial Statements; and Notes to Financial Statements. This report also contains other supplementary information in addition to the basic financial statements. Government-Wide Financial Statements Government-Wide Financial Statements are intended to report information about the County as a whole using accounting methods similar to those used in the private sector. The Government-Wide Financial Statements are used to provide a long-term view of the financial stability of the County and are divided into the Statement of Net Position and the Statement of Activities. The Statement of Net Position includes all of the County of Ionia s Assets and Liabilities. The difference between Assets and Liabilities is reported as Net Position. Over time, increases or decreases in Net Position may serve as a useful indicator of the financial position of the County of Ionia. The Statement of Activities provides summary information regarding the revenue and expenses relating to specific programs within the County of Ionia. Both of the Government-Wide Financial Statements distinguish functions of Ionia County that are principally supported by taxes and intergovernmental revenues (Governmental-Type Activities) or 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-Type Activities for Ionia County are combined into program areas such as General Government, Public Safety, Public Works, Health & Welfare, Community & Economic Development, Recreation & Cultural, and Other Activities. The Business-Type Activities include the Delinquent Tax Revolving Fund and the Airport Fund, both of which are Enterprise Funds. The Government-Wide Financial Statements include the activities for the County of Ionia and three legally separate entities for which the County of Ionia is financially accountable: the Ionia County Road Commission, County Drainage Districts, and the Brownfield Redevelopment Authority. These activities are known as Component Units, because they are reported in the County of Ionia financial statements, but are not combined with total figures for County finances. Fund Financial Statements A Fund is used to group related accounts to maintain control over resources that have been segregated for specific activities or objectives. Ionia County, as with other state and local units of government, uses fund accounting to control and manage resources for particular purposes and to ensure compliance with financerelated legal requirements. All of the Funds of Ionia County can be grouped into three categories: Governmental Funds, Proprietary Funds, and Fiduciary Funds. - iv -

Ionia County MANAGEMENT S DISCUSSION AND ANALYSIS December 31, 2016 Governmental Funds: Governmental Funds are used to account for a majority of the basic services provided by the County, essentially those same functions reported as Governmental Activities under the Government- Wide Financial Statements. The Governmental Fund Financial Statements, however, focus on the short-term financial position, such as how cash and assets can be converted into cash flow and what balances remain at the end of a fiscal year for spending. 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. The Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison. The County of Ionia maintains several individual Governmental Funds. The General Fund is the primary fund used to account for main activities of the County of Ionia. Of special note is that activities for the operation of Friend of the Court, Public Health, Resource Recovery, Building Inspector, Central Dispatch, Commission on Aging, and Courts Security are contained within the Other Governmental Funds. The County of Ionia adopts an annual budget for its General Fund, Special Revenue Funds, and the Airport Fund. Budgetary comparison statements have been provided for the General Fund, Friend of the Court, Public Health Fund, and Commission on Aging Fund to demonstrate compliance with this budget. Proprietary Funds: The County of Ionia maintains two different types of proprietary funds: Enterprise and Internal Service. Enterprise Funds are used to report the same functions presented as Business-Type Activities in the Government-Wide Financial Statements. The County of Ionia uses enterprise funds to account for its Delinquent Tax Revolving and Airport activities. Internal Service Funds are an accounting device used to accumulate and allocate costs internally among the County s various functions. Fiduciary Funds: Fiduciary Funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the Government-Wide Financial Statements because the resources of those funds are not available to support the County of Ionia s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to the financial statements: The Notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. GOVERNMENT-WIDE FINANCIAL INFORMATION AND ANALYSIS As noted earlier, Net Position may serve over time as a useful indicator of a government s financial position. During the current period, the County of Ionia experienced a 3.71 percent decrease in Net Position for a total of $15.26 million. Governmental Business-Type Activities Activities Total 2015 2016 2015 2016 2015 2016 Percent Change Assets Current Assets Cash $ 8,686,361 $ 8,260,914 $ 3,661,650 $ 3,980,506 $ 12,348,011 $ 12,241,420-0.86% Investments 342,832 394,243 - - 342,832 394,243 15.00% Other assets 2,452,572 2,385,017 1,613,043 1,548,108 4,065,615 3,933,125-3.26% Non-Current Assets Capital assets 5,497,452 5,838,724 675,014 600,846 6,172,466 6,439,570 4.33% Investments 848,925 848,925 - - 848,925 848,925 0.00% Total Assets $ 17,828,142 $ 17,727,823 $ 5,949,707 $ 6,129,460 $ 23,777,849 $ 23,857,283 0.33% Deferred Outflows of Resources $ 2,209,255 $ 2,209,255 $ - $ - $ 2,209,255 $ 2,209,255 100.00% - v -

Ionia County MANAGEMENT S DISCUSSION AND ANALYSIS December 31, 2016 Governmental Activities Business-Type Activities Total Percent Change 2015 2016 2015 2016 2015 2016 Liabilities Current Liabilities $ 923,349 $ 1,451,003 $ 21,749 $ 9,695 $ 945,098 $ 1,460,698 54.56% Non-Current Liabilities Other Liabilities 8,311,921 8,311,921 - - 8,311,921 8,311,921 0.00% Total Liabilities $ 9,235,270 $ 9,762,924 $ 21,749 $ 9,695 $ 9,257,019 $ 9,772,619 5.57% Deferred Inflows of Resources 887,032 887,032 - - 887,032 887,032 100.00% Net Position Net investment in capital assets 5,497,452 5,838,724 675,014 600,846 6,172,466 6,439,570 4.33% Restricted 3,630,626 4,146,720 - - 3,630,626 4,146,720 14.22% Unrestricted 787,017 (849,407) 5,252,944 5,518,919 6,039,961 4,669,512-22.69% Total Net Position $ 9,915,095 $ 9,136,037 $ 5,927,958 $ 6,119,765 $ 15,843,053 $ 15,255,802-3.71% A further breakdown of the County of Ionia s $15.26 million in Net Position, and the change in Net Position during 2016, is shown in the following table. Governmental Activities Business-Type Activities Total Percent 2015 2016 2015 2016 2015 2016 Change Revenue: Program Revenue Charges for Services $ 4,349,198 $ 4,512,667 $ 922,877 $ 921,635 $ 5,272,075 $ 5,434,302 3.08% Operating Grants & Contributions 5,149,945 4,722,428 - - 5,149,945 4,722,428-8.30% Capital Grants & Contributions - 11,457 43-43 11,457 26544.19% General Revenue Property Taxes 7,762,310 7,765,108 - - 7,762,310 7,765,108 0.04% Other 2,646,900 2,224,203 1,636 1,303 2,648,536 2,225,506-15.97% Total Revenue $ 19,908,353 $ 19,235,863 $ 924,556 $ 922,938 $ 20,832,909 $ 20,158,801-3.24% Expenses: General Government $ 7,763,152 $ 8,387,650 $ 7,763,152 $ 8,387,650 8.04% Public Safety 6,856,054 6,887,725 6,856,054 6,887,725 0.46% Public Works 322,902 361,826 322,902 361,826 12.05% Health & Welfare 4,298,844 4,474,098 4,298,844 4,474,098 4.08% Other 358,348 262,613 358,348 262,613-26.72% Interest on Long-Term Debt 1,935-1,935 - -100.00% Delinquent Tax Revolving 5,577 4,527 5,577 4,527-18.83% Tax Foreclosures 205,831 213,095 205,831 213,095 3.53% Airport 184,614 154,518 184,614 154,518-16.30% Total Expenses $ 19,601,235 $ 20,373,912 $ 396,022 $ 372,140 $ 19,997,257 $ 20,746,052 3.74% Increase (Decrease) before Transfers $ 307,118 $ (1,138,049) $ 528,534 $ 550,798 $ 835,652 $ (587,251) -170.27% Transfers 1,396,485 358,991 (1,396,485) (358,991) - - 0.00% Increase (Decrease) of Net Assets $ 1,703,603 $ (779,058) $ (867,951) $ 191,807 $ 835,652 $ (587,251) -170.27% Net Assets, January 1 $ 13,320,895 $ 9,915,095 $ 6,795,909 $ 5,927,958 $ 20,116,804 $ 15,843,053-21.24% Prior Period Adjustments (5,109,403) - - - (5,109,403) - 0% Net Assets, December 31 $ 9,915,095 $ 9,136,037 $ 5,927,958 $ 6,119,765 $ 15,843,053 $ 15,255,802-3.71% This table perhaps more appropriately illustrates the increase in revenue with additional detail. ANALYSIS OF INDIVIDUAL FUNDS The County of Ionia uses fund accounting in order to ensure and demonstrate compliance with finance-related legal requirements. - vi -

Ionia County MANAGEMENT S DISCUSSION AND ANALYSIS December 31, 2016 Governmental Funds: Most governmental activities are accounted for in the General Fund, although some governmental activities, particularly those with a dedicated source of revenue, are accounted for in Special Revenue Funds. The focus of these Governmental Funds is to provide information on near-term inflows, outflows, and balances of available resources. The chief operating fund of the County of Ionia, the General Fund, finished with a balance of $4.97 million. Of this, $2.84 million is considered committed, which means it is available for spending at the government s discretion. A common financial management practice is to assign a portion of fund balance toward maintaining current services during unexpected, catastrophic events. A common suggested benchmark is 15 to 20 percent of expenditures (including transfers to other funds), or about two months of services. At $1.63 million, the Unassigned Fund Balance in the General Fund represents a 33 percent of the total Fund Balance. The County of Ionia continues to be committed to remaining financially strong. Proprietary Funds: The County of Ionia s proprietary funds provide the same type of information found in the Government-Wide Financial Statements, but in more detail. The Delinquent Tax Revolving Fund is used for the administration of delinquent tax payments to local units of government, and the collection of payments and penalties from delinquent taxpayers. The County of Ionia uses interest earned from the Delinquent Tax Revolving Fund to finance various capital and other projects. Interest is earned on the fund through investments, but also from penalties assessed to delinquent taxpayers. The Tax Foreclosure Fund is used to track foreclosure activity in the County. BUDGET VARIANCE ANALYSIS Significant budget variances in the General Fund include: Charges for services - Increased approximately $ 24,000 primarily due to the charge for the printing of tax bills and the Register of Deeds fees, transfer tax and adjustments made to other revenue accounts. Other reimbursements - Increase of approximately $188,000 primarily due to the reimbursement received from our liability insurance for distribution of excess of net assets. General government - Increase of approximately $54,000 due to several reasons. There were several areas that were decreased, but an overall increase of $54,000 with data processing receiving the biggest increase. Public Safety - Increase of approximately $ 168,000 due to the sheriff and jail. - vii -

Ionia County MANAGEMENT S DISCUSSION AND ANALYSIS December 31, 2016 CAPITAL ASSETS AND DEBT ADMINISTRATION The County of Ionia s investment in Fixed (Capital) Assets was as follows: Governmental Activities Business-Type Activities Total Percent 2015 2016 2015 2016 2015 2016 Change Non-Depreciated Assets Land & CIP $ 495,403 $ 643,095 $ 210,060 $ 210,060 $ 530,168 $ 853,155 60.92% Depreciated Assets Buildings & Improvements 9,126,723 9,346,150 2,372,097 2,372,097 11,267,811 11,718,247 4.00% Equipment & Furniture 1,586,923 1,959,032 5,556 5,556 1,528,870 1,964,588 28.50% Vehicles 1,118,685 1,200,147 - - 1,107,328 1,200,147 8.38% Less: Accumulated Depreciation 6,830,282 7,309,700 1,912,699 1,986,867 8,273,336 9,296,567 12.37% Net Capital Assets $ 5,497,452 $ 5,838,724 $ 675,014 $ 600,846 $ 6,160,841 $ 6,439,570 4.52% State statutes limit the amount of general obligation debt a governmental entity may issue to 10 percent of its total assessed valuation (i.e., State Equalized Value). This would allow the County of Ionia to issue debt in the amount of approximately $200 million. Ionia County s current debt load is approximately less than one percent of the allowable limit imposed by state law. The County of Ionia has been able to leverage its tax base and bond rating to the benefit of its local units of government, particularly the Ionia Area Sewage Disposal System, the City of Ionia, and the Ionia County Road Commission. Gross Debt Outstanding Component Units Road Commission Installment Loans $ 467,612 Various Drainage District Bonds 1,530,866 Total Outstanding Debt $ 1,998,478 ECONOMIC FACTORS AND NEXT YEAR S BUDGETS Ionia County continues to remain financially strong. In 2016, Ionia County is currently exploring a new building for our Friend of the Court, Juvenile Court and other administrative offices. REQUESTS FOR INFORMATION This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a general overview of the County s finances and to demonstrate the County s accountability for the money it receives. Any questions about this report, or requests for additional financial information, may be directed to: Ionia County Administration Finance Department 100 West Main Street Ionia, MI 48846 - viii -

BASIC FINANCIAL STATEMENTS

STATEMENT OF NET POSITION December 31, 2016 Governmental Activities Primary Government Business-type Activities Total Component Units ASSETS Current assets Cash and cash equivalents $ 8,260,914 $ 3,980,506 $ 12,241,420 $ 1,888,159 Investments 394,243-394,243 - Receivables 1,727,654 1,548,108 3,275,762 943,932 Due from other governmental units 635,674-635,674 1,406,888 Prepaid expenses 17,760-17,760 97,898 Inventories 3,929-3,929 644,178 Total current assets 11,040,174 5,528,614 16,568,788 4,981,055 Noncurrent assets Investments 848,925-848,925 - Capital assets not being depreciated 643,095 210,060 853,155 17,158,649 Capital assets, net of accumulated depreciation 5,195,629 390,786 5,586,415 39,604,539 Total noncurrent assets 6,687,649 600,846 7,288,495 56,763,188 TOTAL ASSETS 17,727,823 6,129,460 23,857,283 61,744,243 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 2,749,700-2,749,700 2,046,636 LIABILITIES Current liabilities Accounts payable 529,509 7,471 536,980 172,245 Other payables 160-160 - Accrued liabilities 206,610 2,224 208,834 80,660 Due to other governmental units - - -0-115,922 Accrued interest payable - - -0-21,896 Unearned revenue 25,223-25,223 11,114 Advances - - -0-312,915 Current portion of compensated absences 689,501-689,501 - Current portion of long-term debt - - -0-683,850 Total current liabilities 1,451,003 9,695 1,460,698 1,398,602 Noncurrent liabilities Net OPEB obligation 541,077-541,077 1,524,711 Noncurrent portion of long-term debt - - -0-1,482,418 Net pension liability 3,798,947-3,798,947 10,528,227 Total noncurrent liabilities 4,340,024-0- 4,340,024 13,535,356 TOTAL LIABILITIES 5,791,027 9,695 5,800,722 14,933,958 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 4,798,314-4,798,314 200,642 Taxes levied for subsequent period 752,145-752,145 - TOTAL DEFERRED INFLOWS OF RESOURCES 5,550,459-0- 5,550,459 200,642 NET POSITION Net investment in capital assets 5,838,724 600,846 6,439,570 54,764,710 Restricted Nonexpendable 262,928-262,928 - Expendable 3,883,792-3,883,792 980,684 Unrestricted (849,407) 5,518,919 4,669,512 (7,089,115) TOTAL NET POSITION $ 9,136,037 $ 6,119,765 $ 15,255,802 $ 48,656,279 See accompanying note to financial statements. - 1 -

STATEMENT OF ACTIVITIES Year Ended December 31, 2016 Functions/Programs Expenses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Net (Expense) Revenue and Changes in Net Position Primary Government Business-type Activities Total Component Units Primary government Governmental activities General government $ 8,387,650 $ 1,650,997 $ 1,763,531 $ - $ (4,973,122) $ - $ (4,973,122) $ - Public safety 6,887,725 2,405,928 314,881 11,457 (4,155,459) - (4,155,459) - Public works 361,826-125,927 - (235,899) - (235,899) - Health and welfare 4,474,098 398,106 2,483,560 - (1,592,432) - (1,592,432) - Community and economic development 103,141 15,663 - - (87,478) - (87,478) - Recreation and cultural 159,472 41,973 34,529 - (82,970) - (82,970) - Total governmental activities 20,373,912 4,512,667 4,722,428 11,457 (11,127,360) -0- (11,127,360) -0- Business-type activities Delinquent Tax Revolving 4,527 428,617 - - - 424,090 424,090 - Airport 154,518 77,951 - - - (76,567) (76,567) - Tax Foreclosure 211,470 410,843 - - - 199,373 199,373 - Principal Residence Denial Interest 1,625 4,224 - - - 2,599 2,599 - Total business-type activities 372,140 921,635-0- -0- -0-549,495 549,495 549,495 Total primary government $ 20,746,052 $ 5,434,302 $ 4,722,428 $ 11,457 (11,127,360) 549,495 (10,577,865) 549,495 Component units Road Commission $ 12,315,376 $ 5,324,639 $ 5,208,576 $ 2,149,523 - - -0-367,362 Drainage Districts 872,855 19,057 800 636,371 - - -0- (216,627) Land Bank Authority 1,271 7,920 - - - - -0-6,649 Total component units $ 13,189,502 $ 5,351,616 $ 5,209,376 $ 2,785,894-0- -0- -0-157,384 General revenues Property taxes 7,765,108-7,765,108 134 State shared revenue 1,181,057-1,181,057 - Investment earnings 22,145 1,303 23,448 4,177 Miscellaneous 1,021,001-1,021,001 - Gain on sale of assets - - -0-72,903 Transfers 358,991 (358,991) -0- - Total general revenues and transfers 10,348,302 (357,688) 9,990,614 77,214 Change in net position (779,058) 191,807 (587,251) 234,598 Net position, beginning of year 9,915,095 5,927,958 15,843,053 48,421,681 Net position, end of the year $ 9,136,037 $ 6,119,765 $ 15,255,802 $ 48,656,279 See accompanying notes to financial statements. - 2 -

Governmental Funds BALANCE SHEET December 31, 2016 General Friend of the Court Public Health ASSETS Cash and cash equivalents $ 3,355,751 $ 31,554 $ 1,811,235 Investments 993,168 - - Receivables Accounts 189,975-23,549 Taxes 520,628 - - Due from other funds 232,829 - - Due from other governmental units Federal/State 128,832 152,652 32,007 Local 108,640 - - Prepaids 17,760 - - Inventory - - - TOTAL ASSETS $ 5,547,583 $ 184,206 $ 1,866,791 LIABILITIES Accounts payable $ 411,912 $ 8,537 $ 2,641 Other payables - - 160 Accrued liabilities 142,469 10,976 20,920 Due to other funds - 160,100 900 Unearned revenue 25,223 - - TOTAL LIABILITIES 579,604 179,613 24,621 DEFERRED INFLOWS OF RESOURCES Taxes levied for subsequent period - - - FUND BALANCES Nonspendable 17,760 - - Restricted 82,753-1,155,452 Committed 2,836,429 4,593 416,718 Assigned 404,069-270,000 Unassigned 1,626,968 - - TOTAL FUND BALANCES 4,967,979 4,593 1,842,170 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES $ 5,547,583 $ 184,206 $ 1,866,791 See accompanying notes to financial statements. - 3 -

Commission on Aging Nonmajor Governmental Funds Total Governmental Funds $ 756,447 $ 2,305,927 $ 8,260,914-250,000 1,243,168 6,657 316,972 537,153 669,873-1,190,501 - - 232,829 48,146 165,397 527,034 - - 108,640 - - 17,760 3,929-3,929 $ 1,485,052 $ 3,038,296 $ 12,121,928 $ 24,919 $ 81,500 $ 529,509 - - 160 10,637 21,608 206,610 66,000 5,829 232,829 - - 25,223 101,556 108,937 994,331 752,145-752,145 3,929 262,928 284,617 627,422 2,014,236 3,879,863-117,900 3,375,640-534,295 1,208,364 - - 1,626,968 631,351 2,929,359 10,375,452 $ 1,485,052 $ 3,038,296 $ 12,121,928-4 -

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RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION December 31, 2016 Total fund balances - governmental funds $ 10,375,452 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in the governmental funds. The cost of capital assets is $ 13,148,424 Accumulated depreciation is (7,309,700) Capital assets, net 5,838,724 Governmental funds report actual pension expenditures for the fiscal year, whereas the governmental activities will recognize the net pension liability as of the measurement date. Pension contributions subsequent to the measurement date will be deferred in the statement of net position. In addition, resources related to changes of assumptions, differences between expected and actual experience, and differences between projected and actual pension plan investment earnings will be deferred over time in the governmentwide financial statements. These amounts consist of: Deferred outflows of resources related to pensions 2,749,700 Deferred inflows of resources related to pensions (4,798,314) Long-term liabilities are not due and payable in the current period and therefore are not reported in the Governmental Funds Balance Sheet. Long-term liabilities at year-end consist of: Net pension liability (3,798,947) Net other post-employment benefits obligation (541,077) Compensated absences (689,501) (5,029,525) Net position of governmental activities $ 9,136,037 See accompanying notes to financial statements. - 5 -

Governmental Funds STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES Year Ended December 31, 2016 General Friend of the Court Public Health REVENUES Taxes $ 7,006,482 $ - $ - Licenses and permits 129,732 - - Intergovernmental 2,561,818 656,376 1,322,285 Charges for services 1,681,209-307,755 Fines and forfeits 115,037 89,716 - Interest and rents 137,046 - - Other 1,150,069-10,054 TOTAL REVENUES 12,781,393 746,092 1,640,094 EXPENDITURES Current General government 6,685,155 746,066 - Public safety 4,497,537 - - Public works 284,657 - - Health and welfare 1,287,417-1,940,497 Community and economic development 25,000 - - Recreation and cultural 111,940 - - Other 480,070 - - Capital outlay 658,544 - - TOTAL EXPENDITURES 14,030,320 746,066 1,940,497 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (1,248,927) 26 (300,403) OTHER FINANCING SOURCES (USES) Transfers in 487,830-270,000 Transfers out (401,027) - - TOTAL OTHER FINANCING SOURCES (USES) 86,803-0- 270,000 NET CHANGE IN FUND BALANCES (1,162,124) 26 (30,403) Fund balances, beginning of year 6,130,103 4,567 1,872,573 Fund balances, end of year $ 4,967,979 $ 4,593 $ 1,842,170 See accompanying notes to financial statements. - 6 -

Commission on Aging Nonmajor Governmental Funds Total Governmental Funds $ 758,627 $ - $ 7,765,109-455,842 585,574 323,136 397,879 5,261,494 51,983 1,682,429 3,723,376-13,374 218,127-1,390 138,436 164,355 219,270 1,543,748 1,298,101 2,770,184 19,235,864-239,421 7,670,642-1,938,914 6,436,451-65,696 350,353 996,082 10,680 4,234,676-69,942 94,942-24,308 136,248-165 480,235 425 131,752 790,721 996,507 2,480,878 20,194,268 301,594 289,306 (958,404) - 131,027 888,857 - (128,839) (529,866) -0-2,188 358,991 301,594 291,494 (599,413) 329,757 2,637,865 10,974,865 $ 631,351 $ 2,929,359 $ 10,375,452-7 -

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended December 31, 2016 Net change in fund balances - total governmental funds $ (599,413) Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported as expenditures in governmental funds. However, in the statement of activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital outlay $ 820,690 Depreciation expense (479,418) Excess of capital outlay over depreciation expense 341,272 Some items 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. These activities consist of: Decrease in net pension liability 3,753,587 Increase in deferred outflows related to pensions 540,445 (Increase) in deferred inflows related to pensions (4,663,805) (Increase) in other post-employment benefits obligation (101,737) (Increase) in accrued compensated absences (49,407) (520,917) Change in net position of governmental activities $ (779,058) See accompanying notes to financial statements. - 8 -

Proprietary Funds STATEMENT OF NET POSITION December 31, 2016 Delinquent Tax Revolving ASSETS Current assets Cash and cash equivalents 2,598,099 Business-type Activities Tax Foreclosure Nonmajor Enterprise Funds Total Enterprise Funds $ $ 1,302,148 $ 80,259 $ 3,980,506 Taxes receivable 1,548,108 - - 1,548,108 Total current assets 4,146,207 1,302,148 80,259 5,528,614 Noncurrent assets Capital assets not being depreciated - - 210,060 210,060 Capital assets, net of accumulated depreciation - - 390,786 390,786 Total noncurrent assets -0- -0-600,846 600,846 TOTAL ASSETS 4,146,207 1,302,148 681,105 6,129,460 LIABILITIES Current liabilities Accounts payable - 7,471-7,471 Accrued liabilities - - 2,224 2,224 TOTAL LIABILITIES -0-7,471 2,224 9,695 NET POSITION Investment in capital assets - - 600,846 600,846 Unrestricted 4,146,207 1,294,677 78,035 5,518,919 TOTAL NET POSITION $ 4,146,207 $ 1,294,677 $ 678,881 $ 6,119,765 See accompanying notes to financial statements. - 9 -

Proprietary Funds STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION Year Ended December 31, 2016 Business-type Activities Delinquent Tax Revolving Tax Foreclosure Nonmajor Enterprise Funds Total Enterprise Funds OPERATING REVENUES Interest and penalties on delinquent taxes $ 310,672 $ 1,136 $ 4,224 $ 316,032 Charges for services 117,945 409,707 77,951 605,603 TOTAL OPERATING REVENUES 428,617 410,843 82,175 921,635 OPERATING EXPENSES Operating expenses - 142,811 17,259 160,070 Contracted services - 68,659 57,574 126,233 Salaries - - 550 550 Fringe benefits - - 549 549 Depreciation - - 74,168 74,168 Other 4,527-6,043 10,570 TOTAL OPERATING EXPENSES 4,527 211,470 156,143 372,140 OPERATING INCOME (LOSS) 424,090 199,373 (73,968) 549,495 NONOPERATING REVENUES Interest revenue 576 727-1,303 INCOME (LOSS) BEFORE TRANSFERS 424,666 200,100 (73,968) 550,798 TRANSFERS OUT (346,637) - (12,354) (358,991) CHANGE IN NET POSITION 78,029 200,100 (86,322) 191,807 Net position, beginning of year 4,068,178 1,094,577 765,203 5,927,958 Net position, end of year $ 4,146,207 $ 1,294,677 $ 678,881 $ 6,119,765 See accompanying notes to financial statements. - 10 -