REQUEST FOR PROPOSAL FOR PROFESSIONAL FINANCIAL AUDIT SERVICES

207 David St. PO Box 206 Forsyth, MO 65653 p: 417-546-7220 f: 417-546-4837 tcrsd.org REQUEST FOR PROPOSAL FOR PROFESSIONAL FINANCIAL AUDIT SERVICES The Taney County Regional Sewer District (TCRSD), Forsyth, Missouri invites your firm to submit a proposal to perform an annual financial audit and federal financial assistance audit, if the latter becomes applicable, in accordance with the following specifications and requirements. Background: TCRSD is a common sewer district formed in 1983 and organized under Chapter 204 RSMo. The District has 11 employees. Presently serving over 2,800 Customers the District continues to expand sewer infrastructure into unincorporated areas of the county using Sewer Sales Tax monies for these Capital expenditures. Submittal Deadline: January 3, 2019 10:30 AM Please provide three (3) paper copies and a pdf copy of the proposal in a sealed envelope. The envelope to be clearly marked PROFESSIONAL FINANCIAL AUDIT SERVICES and mailed or delivered to: Terry Ratcliffe Finance & Administration Manager Taney County Regional Sewer District 207 David, PO Box 206 Forsyth, MO 65653 The TCRSD will not accept any proposals received after 10:30 AM, January 3, 2019.

Taney County Regional Sewer District Period of Services: The initial financial audit service term shall be for the fiscal year ending December 31, 2018 and is subject to automatic renewal for four (4) additional fiscal year audits (a maximum total of five (5) fiscal year audits). TCRSD reserves the right to non-renew this audit service, prior to commencing subsequent year audits, in the sole discretion of TCRSD. TCRSD will authorize a letter of engagement for each years Audit Service which should be submitted to the TCRSD by 31 st January each year. Scope of Services: I. Audit. A. The financial audit shall include an audit of the financial statements of all funds and account groups which are incorporated in the Taney County Regional Sewer District s Annual Audit Report including those relating to participation in the State Revolving Fund Program. 1. The District s 2017 audit is available on the District web site tcrsd. org/2018 Audit Services RFP for informational purposes. B. The audit shall be performed in order to determine the following: 1. The financial statements present fairly the financial position of all fund types and account groups and the results of operations in conformity with generally accepted accounting principles, and local statutory requirements. 2. The audit is made in accordance with generally accepted auditing standards. II. Audit Firm Responsibilities: A. Perform a financial audit in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards. B. When applicable, prepare all schedules and disclosures required for the Single Audit Reports in accordance with the Federal Single Audit Circular A-133. C. Prepare a detailed management letter of District issues with recommendations for improvement in internal controls, accounting systems, and procedures. This letter shall be issued under separate cover and submitted to the Taney County Sewer District Board of Trustees and the District Administrator. D. If applicable, prepare and complete the data collection form SF-SAC for remittance to the Single Audit Clearing House. E. Assemble and print ten copies of the Annual Audit Report including all required financial statements, schedules, and other disclosures. F. Provide submittal of PDF audit copy. G. Make final audit presentation of audit to the District Board of Trustees at its regularly scheduled board meeting. Page 2 of 4

Taney County Regional Sewer District III. TCRSD Responsibilities: A. Prepare draft and final Basic Financial Statements, Management s Discussion and Analysis, Required Supplementary Information and Other Supplementary Information. B. Make all necessary records available for examination by the independent accountants on the premises of the TCRSD at any time during normal working hours. C. The TCRSD Finance Manager will provide copies of accounting records, reports, and balances of financial statements, cash and investment information and other such schedules and analyses as required and identified in advance in the Prepared by Client (PBC) listing. D. Prepare letters of confirmation as requested. Meetings and Timing: The audit firm selected will be required to conduct a pre-audit conference with District staff to discuss the scope of the audit at an appropriate time mutually acceptable to all parties involved. The independent auditors may commence with the examination after the pre-audit conference has been held. The Taney County Regional Sewer District will make every effort to close the books later than two weeks after December 31 when the fiscal year ends. During the audit, the auditors may be required to further meet with District staff to discuss the audit or related matters. A post-audit conference will be held with the District Administrator and staff. A final audit presentation will be held with the District Board of Trustees to review and clarify the District s financial statements, the report of the independent auditors and major management recommendations for strengthening and improving internal account controls and procedures. The District would like the Annual Audit Report to be completed by April 30 of each year. Required information to be submitted with Proposal. TCRSD requests this be limited to no more than ten pages: I. A written description of your audit approach. II. Describe the experience of your local practice office (not your firm as a whole) in performing audits contained in Government Auditing Standards. Include a list of government entities that you have audited with references. III. Disclose any potential conflict of interest that may occur because of acceptance of this engagement. IV. Is your firm currently involved in any litigation, mainly in the area of government, where your audit opinion and work are being challenged in court? If yes, explain in detail. V. A copy of the most recent Peer Review Report for the practice. Page 3 of 4

Taney County Regional Sewer District VI. VII. Evidence of Malpractice Insurance coverage. Two separate price proposals that includes the following items: A. A firm, lump sum price for the Annual Financial Audit, required reports, preparation and printing the District s Annual Audit Report, including final Audit presentation. B. A firm lump sum price for the federal financial assistance audit, should it be required in the future. C. A maximum percentage increase that may be requested for each of the renewal periods, (Years 2 thru 5). D. Alternative pricing for Item A above based on varying levels of District responsibilities. E. A cost per copy for duplication of the Annual Audit Report, if applicable. F. A fee schedule, list of hourly rates, travel and out-of-pocket expenses for the reviews detailed in Scope of Services, Section II. Evaluation Process: Quotations and required information submitted will be reviewed by District staff and forwarded to the District Board of Trustees. A recommendation will be made to the District Board for their review and final approval is expected to be made on Tuesday, January 15, 2019. The District reserves the right to accept or reject any and all quotations, or to request any firm to meet with appropriate District staff, if necessary. All costs associated with preparing this proposal shall be borne solely by the submitting firm. Questions: All information requests should be addressed in writing to Terry Ratcliffe, Taney County Regional Sewer District, 207 David, PO Box 206, Forsyth, MO 65653 tratcliffe@tcrsd.org Page 4 of 4

Taney County Regional Sewer District Forsyth, Missouri Component Unit Financial Statement Year Ended December 31, 2017

TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT... 3 BASIC FINANCIAL STATEMENTS Statement of Net Assets Proprietary Fund... 6 Statement of Revenues, Expenses and Changes in Net Position Proprietary Fund... 7 Statement of Cash Flows Proprietary Fund... 8 Notes to Financial Statements... 9 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Net Pension Liability and Related Ratios... 23 Schedule of Contributions... 24 Notes to Schedule of Contributions... 25 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... 26 2

INDEPENDENT AUDITORS' REPORT Board of Trustees Taney County Regional Sewer District Forsyth, Missouri Report on the Financial Statements We have audited the accompanying financial statements of the Taney County Regional Sewer District as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the Organization 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. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. www.kpmcpa.com 1445 E. Republic Road Springfield, MO 65804 417-882-4300 fax 417-882-4343 500 W. Main Street, Suite 200 Branson, MO 65616 417-334-2987 fax 417-336-3403 Member of The Leading Edge Alliance 3

Board of Trustees Taney County Regional Sewer District Forsyth, Missouri An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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 District 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 District 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Taney County Regional Sewer District as of December 31, 2017, 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 Schedule of Changes in Net Pension Liability and Related Ratios, Schedule of Contributions, and Notes to Schedule of Contributions 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. 4

Board of Trustees Taney County Regional Sewer District Forsyth, Missouri Management has omitted the Management s Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 7, 2018, on our consideration of Taney County Regional Sewer District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Taney County Regional Sewer District's internal control over financial reporting and compliance. KPM CPAs, PC Springfield, Missouri May 7, 2018 5

STATEMENT OF NET POSITION PROPRIETARY FUND December 31, 2017 Sewer Fund ASSETS Current Assets Cash and cash equivalents $ 2,294,061 Investments 115,186 Utilities receivable, net 127,445 Intergovernmental receivable 85,304 Prepaid expenses 17,945 TOTAL CURRENT ASSETS 2,639,941 Restricted Assets Cash and cash equivalents 625,099 Investments 103,928 TOTAL RESTRICTED ASSETS 729,027 Capital Assets: Depreciable, net 46,727,053 Nondepreciable 15,323,360 TOTAL CAPITAL ASSETS 62,050,413 TOTAL ASSETS 65,419,381 DEFERRED OUTFLOW OF RESOURCES Deferred pension outflows 106,156 LIABILITIES Current Liabilities Accounts payable 40,495 Accrued expenses 3,846 Deposits payable 165,708 Accrued interest payable 76,125 TOTAL CURRENT LIABILITIES 286,174 Long-Term Liabilities Revenue bonds payable 2,900,000 Net Pension Liability 174,163 TOTAL LONG-TERM LIABILITIES 3,074,163 TOTAL LIABILITIES 3,360,337 NET POSITION Net investment in capital assets 59,150,413 Restricted for debt service 563,319 Unrestricted 2,451,468 TOTAL NET POSITION $ 62,165,200 See accompanying notes. 6

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUND Year Ended December 31, 2017 Sewer Fund OPERATING REVENUES Charges for services $ 1,589,874 TOTAL OPERATING REVENUES 1,589,874 OPERATING EXPENSES Salaries and wages 530,171 Employee benefits 212,421 Cost of treatment 479,214 Contracted services 2,590 Professional 48,808 Telephone and utilities 155,832 Repairs and maintenance 130,705 Supplies 173,650 Insurance 19,933 Depreciation 2,448,200 Miscellaneous 109,577 TOTAL OPERATING EXPENSES 4,311,101 OPERATING (LOSS) (2,721,227) NONOPERATING REVENUES (EXPENSES) Interest expense (152,250) Connection fees 49,425 Interest income 91,502 Intergovernmental 9,911,039 Other 72,758 TOTAL NONOPERATING REVENUES (EXPENSES) 9,972,474 INCREASE IN NET POSITION 7,251,247 NET POSITION, January 1 54,913,953 NET POSITION, December 31 $ 62,165,200 See accompanying notes. 7

STATEMENT OF CASH FLOWS PROPRIETARY FUND Year Ended December 31, 2017 Sewer Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,593,094 Cash paid to suppliers (1,159,608) Cash paid to employees (727,270) Other cash received 122,183 NET CASH (USED) BY OPERATING ACTIVITIES (171,601) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of fixed assets (9,474,445) County sales tax 9,903,707 Interest paid on bonds (152,250) NET CASH PROVIDED BY CAPITAL AND RELATED FINANCING ACTIVITIES 277,012 CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 91,502 (Purchase) of investments (874) NET CASH PROVIDED BY INVESTING ACTIVITIES 90,628 NET INCREASE IN CASH AND CASH EQUIVALENTS 196,039 CASH AND CASH EQUIVALENTS, Beginning of year 2,723,121 CASH AND CASH EQUIVALENTS, End of year 2,919,160 LESS RESTRICTED CASH AND CASH EQUIVALENTS 625,099 UNRESTRICTED CASH AND CASH EQUIVALENTS $ 2,294,061 RECONCILIATION OF OPERATING (LOSS) TO NET CASH (USED) BY OPERATING ACTIVITIES: Operating (loss) $ (2,721,227) Adjustments to reconcile operating (loss) to net cash (used) by operating activities: Depreciation 2,448,200 (Increase) decrease in: Accounts receivable (11,955) Prepaid expenses (4,514) Deferred pension outflows (15,843) Increase (decrease) in: Accounts payable (34,785) Accrued expenses 3,846 Deposits payable 15,175 Net pension liability 27,319 Other receipts 122,183 NET CASH (USED) BY OPERATING ACTIVITIES $ (171,601) See accompanying notes. 8

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Taney County Regional Sewer District (the District) is a public utility responsible for the construction, operation and maintenance of sanitary sewer facilities in the unincorporated portion of Taney County, Missouri. The District is a component unit of Taney County (the County) government, and members of the District s Board of Trustees are appointed by the County Commission. Reporting Entity The financial reporting entity consists of (a) the primary government, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not financially accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. A component unit is a legally separate organization for which the elected officials of its primary government are financially accountable. The Taney County Regional Sewer District is a component unit of Taney County, Missouri, and is included as a component unit in the Taney County, Missouri s basic financial statements. These component unit financial statements present only the operations of the Taney County Regional Sewer District. Basis of Accounting Taney County Regional Sewer District s accounting policies are consistent with enterprise fund accounting. Enterprise funds are established to account for the financing of self-supporting activities, which render services on a user charge basis to the general public. The accrual basis of accounting is used under which expenses are recorded when the liability is incurred and revenue are recorded when earned. Cash and Cash Equivalents The District considers all accounts subject to withdrawal by check or on demand to be cash equivalents, which includes money market funds. 9

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Capital Assets Capital assets include land, buildings, improvements, equipment, and infrastructure assets (e.g., sewer system). Capital assets, excluding land, are defined by the District as assets with a cost of $5,000 or greater and an estimated useful life of at least five years. All land purchases are capitalized regardless of cost. All purchased fixed assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives on the straight-line basis. The service lives by type of asset are as follows: Sewer system Machinery and equipment 30 years 5-7 years Expenses for maintenance and repairs are charged to expense; renewals and betterments are capitalized. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Interest Capitalization Interest expense that relates to the cost of acquiring or constructing fixed assets in the Enterprise Funds is capitalized. Interest expense incurred in connection with construction of capital assets has been reduced by interest earned on the investment of funds borrowed for construction in accordance with GASB 1400-120-137. There was no interest capitalized during the current fiscal year. 10

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net Position In the proprietary fund financial statements, equity is displayed in three components as follows: Net Investment in Capital Assets This consists of capital assets, net of accumulated depreciation, less the outstanding balances of any bonds, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted This consists of net assets that are legally restricted by outside parties or by law through constitutional provisions or enabling legislation. Unrestricted This consists of net assets that do not meet the definition of restricted or invested in capital assets, net of related debt. When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the District first applies restricted net assets. Deferred Outflows/Inflows of Resources In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. Currently, the District has one item that qualifies for reporting in this category, deferred amounts relating to employer contributions to the retirement plan. In addition to liabilities, the Balance Sheet and Statement of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of fund balance/net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has no items that qualify for reporting in this category. 11

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Pensions For purposes of measuring the net pension asset, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Missouri Local Government Employees Retirement System (LAGERS) and additions to/deductions from LAGERS fiduciary net position have been determined on the same basis as they are reported by LAGERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. NOTE B CASH AND CASH EQUIVALENTS State statute requires that the District s deposits be insured or collateralized in the name of the District by the trust department of a bank that does not hold the collateralized deposits. As of December 31, 2017, all bank deposits are entirely insured or collateralized. NOTE C INVESTMENTS The District s investments at December 31, 2017, are as follows: Investment Type Maturity Fair Value Certificates of Deposit 1/28/2018 $ 219,114 Certificates of Deposit Certificates of deposit are classified as investments but are considered deposits for custodial risk determination. State statutes require that the District s deposits be collateralized in the name of the District by the trust department of a bank that does not hold the collateralized deposits. As of December 31, 2017, all certificates of deposit are entirely insured or collateralized with securities. Certificates of deposit are held to maturity. The District does not have a policy on interest rate risk. 12

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE D RESTRICTED CASH/INVESTMENTS AND NET POSITION The 1995 Sewerage System revenue bond ordinance and 2004 State Revolving Fund revenue bond ordinance established amounts required to be deposited in certain sinking and reserve funds. All required deposits to these funds have been made. These special cash reserves are reported in the accompanying balance sheet as restricted cash and cash equivalents, restricted investments, and restricted net position. Cash/investments have also been restricted for customer deposits. These restrictions are as follows: Sewer Fund Restricted Cash Restricted and Investments Net Position 2004 Debt Service Reserve $ 531,899 $ 531,899 2004 Principal and Interest 31,420 31,420 Customer Deposits 165,708 - $ 729,027 $ 563,319 NOTE E ACCOUNTS RECEIVABLE Accounts receivable is presented net of an allowance for doubtful accounts as follows: Accounts Net Accounts Receivable Allowance Receivable UTILITIES RECEIVABLE Sewer Fund $ 249,217 $ (121,772) $ 127,445 13

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE F LONG-TERM DEBT 2004 Water Pollution Control Revenue Bonds: During 2004, the District entered into an agreement with the Missouri Leveraged State Water Pollution Control Revolving Fund Program to sell $15,590,000 in Wastewater System Revenue Bonds, Series 2004C. The bonds bear interest at 3.0% to 5.25%. The interest paid is offset by an interest subsidy from the State of Missouri s 50% bond reserves. Interest payments are due semi-annually on January 1 and July 1 of each year with annual principal payments due January 1 of each year. The bonds also require an administrative fee payable annually on January 1 of each year at.714% of the outstanding principal balance. The bonds outstanding at December 31, 2017, are due as follows: Year Ended Administrative December 31, Principal Interest Fee Total 2018 $ - $ 152,250 $ 17,091 $ 169,341 2019 940,000 127,575 16,950 1,084,525 2020 965,000 77,569 11,390 1,053,959 2021 995,000 26,119 5,696 1,026,815 $ 2,900,000 $ 383,513 $ 51,127 $ 3,334,640 Changes in Long-Term Debt The following table is a summary of the changes in the long-term debt for the year ended December 31, 2017: Balance Balance December 31, New December 31, 2016 Obligations Retired 2017 2004 SRF Revenue Bonds Payable $ 2,900,000 $ - $ - $ 2,900,000 14

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE G CAPITAL ASSETS Capital asset activity for the year ended December 31, 2017, was as follows: Balance Balance December 31, December 31, 2015 Additions Deletions 2016 Sewer Nondepreciable capital assets: Land $ 161,576 $ - $ - $ 161,576 Construction in progress 5,874,988 9,286,796-15,161,784 Total Nondepreciable Capital Assets 6,036,564 $ 9,286,796 $ - 15,323,360 Depreciable capital assets: Sewer System 70,430,603 $ 153,422 $ - 70,584,025 Equipment 822,178 34,227-856,405 71,252,781 $ 187,649 $ - 71,440,430 Less accumulated depreciation Sewer System 21,856,034 $ 2,352,800 $ - 24,208,834 Equipment 409,143 95,400-504,543 22,265,177 $ 2,448,200 $ - 24,713,377 Total Depreciable Capital Assets, net 48,987,604 46,727,053 Total Capital Assets, net $ 55,024,168 $ 62,050,413 NOTE H CONTINGENCIES Grants The District participates in a number of federal and state programs that are fully or partially funded by grants received from other governmental units. Disbursements financed by grants are subject to audit by the appropriate grantor government. If disbursements are disallowed due to noncompliance with grant program regulations, the District may be required to reimburse the grantor government. As of December 31, 2017, significant amounts of grantor disbursements have not been audited by grantor governments, but the District believes that disallowed disbursements, if any, based on subsequent audits will not have a material effect on any of the individual governmental funds or the overall financial position of the District. 15

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE I RISK MANAGEMENT The District is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District has transferred its risk by obtaining coverage from commercial insurance companies. In addition, it has effectively managed risk through various employee education and prevention programs. There has been no significant reduction in insurance coverage from the previous year. NOTE J 2002 BOND ELECTION On April 2, 2002, the Taney County Regional Sewer District passed a $30,000,000 bond issue for the purpose of extending and improving the sewerage system of the District. The Capital Improvement Sales Tax passed by voters on April 4, 2000, has been pledged for the repayment of these bonds. As of December 31, 2017, only $15,590,000 of these bonds has been issued. NOTE K EMPLOYEE PENSION PLAN General Information about the Pension Plan Plan Description. The District s defined benefit pension plan provides certain retirement, disability and death benefits to plan members and beneficiaries. The District participates in the Missouri Local Government Employees Retirement System (LAGERS). LAGERS is an agent multiple-employer, statewide public employee pension plan established in 1967 and administered in accordance with RSMo. 70.600-70.755. As such, it is LAGERS responsibility to administer the law in accordance with the expressed intent of the General Assembly. The plan is qualified under the Internal Revenue Code Section 401(a) and is tax exempt. The responsibility for the operations and administration of LAGERS is vested in the LAGERS Board of Trustees consisting of seven persons. LAGERS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by accessing the LAGERS website at www.molagers.org. 16

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE K EMPLOYEE PENSION PLAN (continued) Benefits Provided. LAGERS provides retirement, death and disability benefits. Benefit provisions are adopted by the governing body of the employer, within the options available in the state statutes governing LAGERS. All benefits vest after 5 years of credited service. Employees who retire on or after age 60 with 5 or more years of service are entitled to an allowance for life based upon the benefit program information provided below. Employees may retire with an early retirement benefit with a minimum of 5 years of credited service and after attaining age 55 and receive a reduced allowance. 2016 Valuation Benefit Multiplier 1.50% Final Average Salary 5 Years Member Contributions 0% Benefit terms provide for annual post retirement adjustments to each member s retirement allowance subsequent to the member s retirement date. The annual adjustment is based on the increase in the Consumer Price Index and is limited to 4% per year. Employees Covered by Benefit Terms. At June 30, 2017, the following employees were covered by the benefit terms: General Inactive employees or beneficiaries currently receiving benefits 1 Inactive employees entitled to but not yet receiving benefits 2 Active employees 10 13 Contributions. The employer is required to contribute amounts at least equal to the actuarially determined rate, as established by LAGERS. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year. With an additional amount to finance an unfunded accrued liability. Full-time employees of the employer do not contribute to the pension plan. Employer contribution rates are 16.9% for General of annual covered payroll. Net Pension Asset. The employer s net pension asset was measured as of June 30, 2017, and the total pension liability used to calculate the net pension asset was determined by an actuarial valuation as of February 29, 2016. 17

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE K EMPLOYEE PENSION PLAN (continued) Actuarial Assumptions. The total pension liability in the June 30, 2016, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary Increase Investment rate of return 3.25% wage inflation; 2.50% price inflation 3.25% to 6.55% including wage inflation 7.25%, net of investment and administrative expenses The healthy retiree mortality tables, for post-retirement mortality, were the RP-2014 Healthy Annuitant mortality table for males and females. The disabled retiree mortality tables, for post-retirement mortality, were the RP-2014 disabled mortality table for males and females. The pre-retirement mortality tables used were the RP-2014 employees mortality table for males and females. Both the post-retirement and pre-retirement tables were adjusted for mortality improvement back to the observation period base year of 2006. The base year for males was then established to be 2017. Mortality rates for a particular calendar year are determined by applying the MP-2015 mortality improvement scale to the above described tables. The actuarial assumptions used in the February 29, 2016, valuation were based on the results of an actuarial experience study for the period March 1, 2010, through February 28, 2015. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimate of arithmetic real rates of return for each major asset class are summarized in the following table: Target Long-Term Expected Asset Class Allocation Real Rate of Return Equity 43.00% 5.29% Fixed Income 26.00% 2.93% Real Assets 21.00% 3.31% Strategic Assets 10.00% 5.73% 18

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE K EMPLOYEE PENSION PLAN (continued) Discount Rate. The discount rate used to measure the total pension liability is 7.25%. The projection of cash flows used to determine the discount rate assumes that employer and employee contributions will be made at the rates agreed upon for employees and the actuarially determined rates for employers. Based on these assumptions, the pension plan s fiduciary net position was projected to be available to pay all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payment to determine the total pension liability. Changes in the Net Pension Liability Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability General (a) (b) (a) - (b) Balance at beginning of year $ 357,030 $ 210,186 $ 146,844 Changes for the year: Service cost 59,847-59,847 Interest on total pension liability 27,930-27,930 Difference between expected and actual experiences 41,347-41,347 Contributions - employer - 76,101 (76,101) Net investment income - 28,033 (28,033) Benefits paid, including refunds (2,412) (2,412) - Pension plan administrative expenses - (1,012) 1,012 Other (net transfer) - (1,317) 1,317 Net Changes 126,712 99,393 27,319 Balance at end of year $ 483,742 $ 309,579 $ 174,163 19

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE K EMPLOYEE PENSION PLAN (continued) Sensitivity of the Net Pension Asset to Changes in the Discount Rate. The following present the Net Pension Asset of the employer, calculated using the discount rate of 7.25%, as well as what the employer s Net Pension Asset would be using a discount rate that is one percentage point lower (6.25%) or one percentage point higher (8.25%) than the current rate. Current Single Discount Rate 1% Decrease Assumption 1% Increase General 6.25% 7.25% 8.25% Total Pension Liability $ 561,226 $ 483,742 $ 420,734 Fiduciary Net Position 309,579 309,579 309,579 Net Pension Liability $ 251,647 $ 174,163 $ 111,155 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended December 31, 2017, the employer recognized pension expense of $142,136. The employer reported deferred outflows and inflows of resources related to pensions from the following sources. Deferred Deferred Net Deferred Outflows of Inflows of Outflows of Resources Resources Resources Differences in experiences $ 56,739 $ - $ 56,739 Assumption changes 9,855-9,855 Net differences between projected and actual earnings on pension plan investments 1,797-1,797 Contributions subsequent to the measurement date* 37,765-37,765 $ 106,156 $ - $ 106,156 *The amount reported as deferred outflows of resources resulting from contributions subsequent to the measurement date will be recognized as an addition in the Net Pension Asset for the year ending December 31, 2018. 20

NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE K EMPLOYEE PENSION PLAN (continued) Amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Net Deferred Year Ending Outflows of December 31, Resources 2018 $ 55,804 2019 18,038 2020 13,376 2021 9,789 2022 8,200 Thereafter 949 Total $ 106,156 Payable to the Pension Plan At December 31, 2017, the District had no outstanding contributions reported as payable to the pension plan. NOTE L COMMITMENTS At December 31, 2017, the District was committed to the following contracts for utility improvements: McClanahan Construction Company, Inc. in the amount of $139,214 Excel Excavating in the amount of $1,408,533 Tom Boyce Excavating in the amount of $2,621,206 21

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF CHANGES IN NET PENSION LIABILTY AND RELATED RATIOS Year Ended December 31, 2017 Missouri Local Government Employees Retirement System (LAGERS) TOTAL PENSION LIABILITY June 30, June 30, June 30, 2017 2016 2015 Service Cost $ 59,847 $ 40,371 $ 32,040 Interest on the Total Pension Liability 27,930 14,149 9,161 Changes of Benefit Terms - 95,092 - Difference between expected and actual experience 41,347 17,646 23,503 Changes of Assumptions - 14,451 - Benefit Payments (2,412) - NET CHANGE IN TOTAL PENSION LIABILITY 126,712 181,709 64,704 PLAN FIDUCIARY NET POSITION TOTAL PENSION LIABILITY, BEGINNING 357,030 175,321 110,617 TOTAL PENSION LIABILITY, ENDING 483,742 357,030 175,321 Contributions - employer 76,101 57,247 44,458 Net Investment Income 28,033 948 2,359 Benefit Payments (2,412) - Pension Plan Administrative Expense (1,012) (926) (1,025) Other (Net Transfer) (1,317) (1,063) 8,326 NET CHANGE IN PLAN FIDUCIARY NET POSITION 99,393 56,206 54,118 PLAN FIDUCIARY NET POSITION, BEGINNING 210,186 153,980 99,862 PLAN FIDUCIARY NET POSITION, ENDING 309,579 210,186 153,980 EMPLOYER NET PENSION LIABILITY $ 174,163 $ 146,844 $ 21,341 Plan fiduciary net position as a percentage of the total pension liability 64.00% 58.87% 87.83% Covered employee payroll $ 447,287 $ 410,622 $ 389,550 Employer's net pension liability as a percentage of covered employee payroll 38.94% 35.76% 5.48% Note: This schedule is intended to show information for ten years. Additional years will be displayed as they become available. 23

SCHEDULE OF CONTRIBUTIONS Year Ended December 31, 2017 Missouri Local Government Employees Retirement System (LAGERS) Schedule of Contributions Last 5 Fiscal Years 2017 2016 2015 2014 2013 2012 Actuarially determined contribution $ 84,025 $ 66,937 $ 48,659 $ 38,555 $ 31,334 $ 23,062 Contributions in relation to the actuarially determined contribution 78,890 66,937 48,659 38,555 31,334 23,062 Contribution deficiency (excess) $ 5,135 $ - $ - $ - $ - $ - Covered-employee payroll $ 466,803 $ 420,985 $ 419,476 $ 332,367 $ 256,834 $ 192,180 Contributions as a percentage of covered-employee payroll 16.90% 15.90% 11.60% 11.60% 12.20% 12.00% See accompanying notes to the required schedules. 24

NOTES TO SCHEDULE OF CONTRIBUTIONS Year Ended December 31, 2017 Valuation Date: February 29, 2016 Notes: The roll-forward of total pension liability from February 29, 2016, to June 30, 2016, reflects expected service cost and interest reduced by actual benefit payments and administrative expenses. Methods and Assumptions Used to Determine Contribution Rates Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period Multiple bases from 14 to 25 years Asset Valuation Method 5-Year smoothed market; 20% corridor Inflation 3.25% wage inflation; 2.50% price inflation Salary Increases 3.25% to 6.55% including wage inflation Investment Rate of Return 7.25%, net of investment and administrative expenses Retirement Age Experience-based table of rates that are specific to the type of eligibility condition Mortality The healthy retiree mortality tables, for post-retirement mortality, were the RP-2014 Healthy Annuitant mortality table for males and females. The disabled retiree mortality tables, for post-retirement mortality, were the RP-2014 disabled mortality table for males and females. The pre-retirement mortality tables used were the RP-2014 employees mortality table for males and females. Both the post-retirement and pre-retirement tables were adjusted for mortality improvement back to the observation period base year of 2006. The base year for males was then established to be 2017. Mortality rates for a particular calendar year are determined by applying the MP-2015 mortality improvement scale to the above described tables. Other Information New assumptions adopted based on the 5-year experience study for the period March 1, 2010, through February 28, 2015. 25

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 Board of Trustees Taney County Regional Sewer District Forsyth, Missouri We have audited 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, the financial statements of the business-type activities and the major fund of the Taney County Regional Sewer District, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise Taney County Regional Sewer District s financial statements, and have issued our report thereon, dated May 7, 2018. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the District s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Taney County Regional Sewer District s internal control. Accordingly, we do not express an opinion on the effectiveness of Taney County Regional Sewer District s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. www.kpmcpa.com 1445 E. Republic Road Springfield, MO 65804 417-882-4300 fax 417-882-4343 500 W. Main Street, Suite 200 Branson, MO 65616 417-334-2987 fax 417-336-3403 Member of The Leading Edge Alliance 26

Board of Trustees Taney County Regional Sewer District Forsyth, Missouri Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Taney County Regional Sewer District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. KPM CPAs, PC Springfield, Missouri May 7, 2018 27