& Associates. NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY RALEIGH COUNTY Single Audit For the Year Ended June 30, 2017 RFP #17-321

bli ic Ac cc counta A.C. Accountants, Public Publi Certified PERRY P&P &PE & RY & Associates A & P & P & P & P ts 313 Second St. Marietta, OH 45750 740.373.0056 1907 Grand Central Ave. Vienna, WV 26105 304.422.2203 104 South Sugar St. St. Clairsville, OH 43950 740.695.1569 1310 Market Street, Suite 300 Wheeling, WV 26003 304.232.1358 NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY RALEIGH COUNTY Single Audit For the Year Ended June 30, 2017 RFP #17-321 www.perrycpas.com

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY Table of Contents For the Year Ended June 30, 2017 TITLE PAGE Independent Auditor s Report... 1 Basic Financial Statements: Statement of Net Position... 4 Statement of Activities... 5 Statement of Cash Flows... 6 Notes to Financial Statements... 7 Required Supplementary Information: Schedule of Proportionate Share of Net Pension Liability... 19 Schedule of Contributions... 20 Other Supplementary Information: Schedule of Expenditures of Federal Awards 21 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Required by Government Auditing Standards... 22 Independent Auditor s Report on Compliance with Requirements Applicable to the Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance... 24 Schedule of Audit Findings... 26 i

INDEPENDENT AUDITOR S REPORT March 30, 2018 New River Gorge Regional Development Authority Raleigh County 116 N. Heber Street, Suite B Beckley, WV 25801 To the Board of Directors: Report on the Financial Statements We have audited the accompanying financial statements of the New River Gorge Regional Development Authority, Raleigh County, West Virginia (the Authority), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for preparing and fairly presenting these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes designing, implementing, and maintaining internal control relevant to preparing and fairly presenting financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to opine on these financial statements based on our audit. We audited in accordance with auditing standards generally accepted in the United States of America and the financial audit standards in the Comptroller General of the United States Government Auditing Standards. Those standards require us to plan and perform the audit to reasonably assure the financial statements are free from material misstatement. An audit requires obtaining evidence about financial statement amounts and disclosures. The procedures selected depend on our judgment, including assessing the risks of material financial statement misstatement, whether due to fraud or error. In assessing those risks, we consider internal control relevant to the Authority s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not to the extent needed to opine on the effectiveness of the Authority's internal control. Accordingly, we express no opinion. An audit also includes evaluating the appropriateness of management s accounting policies and the reasonableness of their significant accounting estimates, as well as our evaluation of the overall financial statement presentation. We believe the audit evidence we obtained is sufficient and appropriate to support our audit opinion. 1

New River Gorge Regional Development Authority Raleigh County Independent Auditor s Report Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New River Gorge Regional Development Authority, as of June 30, 2017, and the changes in financial position and cash flows thereof for the year then ended in accordance with the accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information 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 part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB) 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. Accounting principles generally accepted in the United States of America require this presentation to include schedules of net pension liabilities and pension contributions listed in the table of contents, to supplement the basic financial statements. Although this information is not part of the basic financial statements, the Governmental Accounting Standards Board considers it essential for placing the basic financial statements in an appropriate operational, economic, or historical context. We applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, consisting of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, to the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not opine or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to opine or provide any other assurance. Supplementary and Other Information Our audit was conducted to opine on the Authority s basic financial statements taken as a whole. The Schedule of Expenditures of Federal Awards presents additional analysis as required by the U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and is not a required part of the financial statements. The schedules are the responsibility of management and derive from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. We subjected the schedules to the auditing procedures we applied to the basic financial statements. We also applied certain additional procedures, including comparing and reconciling the schedules directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. 2

New River Gorge Regional Development Authority Raleigh County Independent Auditor s Report Page 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 30, 2018, on our consideration of the Authority 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. That report describes the scope of our internal control testing over financial reporting and compliance, and the results of that testing, and does not opine on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority s internal control over financial reporting and compliance. Perry and Associates Certified Public Accountants, A.C. Marietta, Ohio 3

NEW RIVER GORGE REGIONAL DEVELOPMENTAL AUTHORITY STATEMENT OF NET POSITION AS OF JUNE 30, 2017 ASSETS, DEFERRED OUTFLOWS OF RESOURCES Assets: Cash and Cash Equivalents $ 686,690 Investments - Bank CDs 399,593 Restricted Cash and Cash Equivalents Coal Bed Methane Tax 1,286,812 ARC Loans 293,297 WVCAP 254,160 Rahall Building Maintenance 22,363 Committed Cash and Cash Equivalents Other Loan Programs 129,478 Loans Receivable, Net ARC Loans 1,011,824 MICRO and USDA 319,811 Prepaid Expenses 2,926 Capital Assets Not Being Depreciated 55,742 Capital Assets Being Depreciated, Net 1,422,277 TOTAL ASSETS 5,884,973 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows of Resources - Pensions 130,757 TOTAL DEFERRED OUTFLOWS OF RESOURCES 130,757 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 6,015,730 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities: Accounts Payable $ 5,310 WVCAP Collateral Support 254,160 Net Pension Liability 185,705 Compensated Absences 20,371 Other Post Employment Benefits Payable 86,259 Rahall Building Maintenance Projects 60,823 Coal Bed Methane Projects 1,215,501 Total Liabilities 1,828,129 DEFERRED INFLOWS OF RESOURCES Deferred Inflows of Resources - Pensions 9,047 TOTAL DEFERRED INFLOWS OF RESOURCES 9,047 Net Position: Investment in Capital Assets 1,478,019 Restricted 2,868,456 Unrestricted (deficit) (167,921) Total Net Position 4,178,554 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 6,015,730 See notes to the financial statements. 4

OPERATING REVENUES: Member and State Support $ 206,310 Charges For Services 176,351 Interest Income - Revolving Loans 54,829 Interest Income - Other 11,275 Loan Program - WVAC Loan Service 21,100 WV USDA Program Grant 356,800 General Development Program Grants 37,018 HIVE Buisness Development Program 211,873 Operating Grants 151,797 Total Operating Revenues 1,227,353 OPERATING EXPENSES: NEW RIVER GORGE REGIONAL DEVELOPMENTAL AUTHORITY STATEMENT OF ACTIVITIES Wages, Salaries and Employee Benefits 362,529 Administration and General 107,327 Building Maintenance 10,130 Liability Insurance 11,082 Leagal and Other Professional Services 40,720 Training Confrences 3,275 County Staff Match 80,000 Marketing 42,876 WV USDA Program 18,325 HIVE Business Development Program 57,500 General Development Programs 102,043 Rahall Technology Building - Operating 41,808 Depreciation 49,157 Total Operating Expenses 926,772 Operating Gain / (Loss) 300,581 NON-OPERATING REVENUES (EXPENSE): Gain / (Loss) on Disposal of Capital Assets (59,283) Coal Bed Methan Revenue 60,563 Coal Bed Methane Expense (31,341) Non-Operating Gain / (Loss) (30,061) Change in Net Assets 270,520 Net Postion at Beginning of Year 3,908,034 Net Position at End of Year $ 4,178,554 See notes to the financial statements. 5

NEW RIVER GORGE REGIONAL DEVELOPMENTAL AUTHORITY STATEMENT OF CASH FLOWS AS OF JUNE 30, 2017 Cash flows from operating activities: Cash received from members and others $ 1,478,570 Cash paid to suppliers and employees (1,249,749) Net cash provided by operating activities 228,821 Cash flows from financing activities: Non-operating grant revenue 60,565 Non-operating grant expense (31,341) (Increase) Decrease in restricted assets 95,265 Net cash provided by financing activities 124,489 Net increase (decrease) in cash and equivalents 353,310 Cash and equivalents, beginning 333,380 Cash and equivalents, ending $ 686,690 Reconciliation of Operating Income Operating(loss) gain $ 300,581 Adjustments: Depreciation 49,157 (Increase) Decrease in Loans Receivable 184,842 (Increase) Decrease in Investments in CDs 101,348 (Increase) Decrease in Prepaid Expenses (2,926) (Increase) Decrease in Deferred Outflows (55,841) Increase (Decrease) in Accounts Payable 2,581 Increase (Decrease) in Coal Methane Projects Liabilities (18,000) Increase (Decrease) in Collateral Support (355,551) Increase (Decrease) in OPEB 5,499 Increase (Decrease) in Deferred Inflows (57,964) Increase (Decrease) in NPL 81,758 Increase (Decrease) in Compensated Absences (6,663) Total adjustments (71,760) Net cash provided by operating activities $ 228,821 See notes to the financial statements. 6

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - NATURE OF ORGANIZATION AND REPORTING ENTITY The New River Gorge Regional Development Authority (Authority) was established to plan and coordinate economic development within the counties of Fayette, Raleigh, Nicholas and Summers as well as the participating municipality. Management and control of the Authority, its property, operations, and business affairs are conducted by a board of directors, consisting of thirteen directors, all to be considered at large and to be appointed by the county commissions of the member counties and the mayors of the participating municipality. Reporting Entity The Authority complies with GASB Statement No. 14, The Financial Reporting Entity. This statement establishes standards for defining and reporting on the financial reporting entity. It defines component units as legally separate organizations for which the elected officials of the primary government are financially accountable and other organizations for which the nature and significance of their relationship with a primary government are such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. The Authority considered all potential component units in determining what organizations should be included in the financial statements. Based on the criteria, there are no component units to include in the Authority s financial statements. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Authority prepares its financial statements in accordance with accounting principles generally accepted in the United States of America as applied to governmental units. The Governmental Accounting Standards Board is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Significant accounting policies of the Authority are described below. A. Basis of Presentation The General Fund is the general operating fund of the Authority. It is used to account for all financial resources. The General Fund is treated as a proprietary type fund and is accounted for using the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. Unrestricted grants and non-loan interest may be used for either operations or capital expenditures at the discretion of the Authority are recognized as operating revenues in the accounting period in which they are earned and become measurable 7

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus and Basis of Accounting Measurement focus is a term used to describe which transactions are recorded within the various financial statements. Basis of accounting refers to when transactions are recorded regardless of the measurement focus applied. The proprietary funds utilize an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net assets (or cost recovery), financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net assets. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with a proprietary fund s principle ongoing operation. The principle operating revenues of the Authority are member and state support and loan interest. Operating expenses include wages, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. C. Unrestricted Cash and Cash Equivalents Cash on hand and deposits with banking institutions either in checking, savings, or money market sweep accounts are presented as cash unrestricted in the accompanying financial statements. For purposes of the Statement of Cash Flows, the New River Gorge Regional Development Authority considers cash to be unrestricted cash. D. Investments Bank CDs New River Gorge Regional Development Authority is authorized to provide excess funds to either the State Investment Pool or the Municipal Bond Commission for investment purposes, or to invest such funds in the following classes of securities: obligations of the United States or any agency thereof, certificates of deposit, and repurchase agreements. At year end the Authority s investment was in certificates of deposit with local banks with a total balance of $1,086,591. E. Restricted Assets Restricted Cash ARC Loans is reserved by the Appalachian Regional Commission for their revolving loan funds. Borrowers meeting requirements set forth in the grant agreement may receive loans from the loan funds. Payments of principal and interest received on these loans, other than a reasonable administrative expense, are re-deposited in the loan funds as is all interest earned from the temporary investment loan funds. At year s end the Authority s restricted cash for ARC loans balance was $293,297 and loans receivable, net was $1,011,824. Restricted Cash Coal Bed Methane Severance Tax is reserved by legislation for projects designated by participating County Commissions for regional development projects. As of June 30, 2017, the Authority s restricted cash for Coal Bed Methane balance of the severance tax collected and distributed by the State of West Virginia to the Authority balance was $1,286,812. At year s end the remaining uncommitted funds of $1,286,812 is earmarked as follows: $73,138 for Summers County and the remaining $1,213,674 is for Raleigh County as of June 30, 2017. 8

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Restricted Assets (Continued) Restricted Cash West Virginia Capital Asset Program (WVCAP) is reserved for collateral support up to 20% of loan amount to augment the collateral that borrowers provide banks for approved projects related to business development. As of June 30, 2017, a balance of $254,160 is being held as collateral against business development loans. The Authority is approved to provide up to $609,711 of collateral support plus interest earned. The Authority is seeking additional projects with the $355,551 held by the State and approval to increase the magnitude of WVCAP. Restricted Cash Rahall building maintenance is restricted, per the lease, for projects and equipment derived from the building rent revenues for the ongoing and future maintenance requirements of the building to maintain the useful life of the building and the day to day operational function of the building. At years end the Authority s restricted cash for Rahall Building Maintenance was $22,363 and the amount committed had reached the estimated fund level need for the committed purpose with the only increase being the interest earned from the funds. Committed Cash other loan program and payroll benefits is reserved for development loans, other than ARC loans under the control of the Authority. Borrowers meeting the loan agreement requirements may receive loans from the USDA, HIVE and WVDO micro loan requirements as fund are available. At years end the Authority s earmarked cash for other loan program is summarized as the following: Loan fund USDA rural development $ 54,548 Loan fund WVDO micro 20,048 Hive Technical 54,882 Total Committed for other loans $ 129,478 F. Capital Assets Capital assets include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items). Capital assets are defined by the government as assets with an initial, individual cost of $5,000 or more and estimated to have a useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased of constructed. Donated capital assets are recorded at acquisition value at the date of donation. The Authority s capital assets are depreciated using the straight-line method over the following estimated useful lives: Buildings Land improvements Furniture and equipment Computer and Network equipment 40 years 15 years 5 years 3 years 9

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. Components of Net Position The net investment in capital assets component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt also should be included in this component of net position. If there are significant unspent related debt proceeds or deferred inflows of resources at the end of the reporting period, the portion of the debt or deferred inflows of resources attributable to the unspent amount should not be included in the calculation of net investment in capital assets. Instead, that portion of the debt or deferred inflows of resources should be included in the same net position component (restricted or unrestricted) as the unspent amount. The restricted component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Generally, a liability relates to restricted assets if the asset results from a resource flow that also results in the recognition of a liability or if the liability will be liquidated with the restricted assets reported. The unrestricted component of net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. The Authority applies restricted resources first when an expense is incurred for purposes for which both restricted and unrestricted net position is available. $2,868,456 of the Authority s net position was restricted at June 30, 2017. H. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from these estimates. I. Pensions For purposes of measuring the net pension liability and deferred outflows/inflows of the resources related to pensions, and pension expense, information about the fiduciary net position of the Authority's Public Employee Retirement System (PERS) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by the PERS. 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. J. Deferred Outflows/Inflows of Resources In addition to assets and liabilities, the statement of financial position may report deferred outflows/inflows of resources. Deferred outflows of resources represent a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (expense/expenditure) until that time. Deferred inflows of resources represent an acquisition of net position that applies to a future period and will not be recognized as an inflow of resources (revenue) until that time. The Authority reported deferred inflows and outflows of resources related to pensions for 2017 in the Statement of Net Position. 10

NOTE 3 CASH AND CASH EQUIVALENTS NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS Custodial credit risk is the risk that in the event of a bank failure, the government s deposits may not be returned. The Authority s bank deposits at June 30, 2017, were insured by Federal Depository Insurance Corporation (FDIC) and collateral held in the Authority s name by the financial institutions above the FDIC insurance limit. Cash and cash equivalents at June 30, 2017 were as follows: Book Value Bank Balance Unrestricted cash deposits in bank checking account $ 686,690 $ 687,926 Investment bank CD s 399,593 399,593 Restricted cash 1,856,632 1,868,305 Earmarked cash deposits in bank checking accounts 129,478 129,671 Total cash restricted, earmarked, and unrestricted $ 3,072,393 $ 3,085,495 NOTE 4 LOANS RECEIVABLE The Authority s loans receivable balances of $1,331,635 are stated at face value, net of an estimated allowance for doubtful accounts of $96,003. Management estimates the allowance for doubtful accounts based on its assessment of individual loan balances, collection history, and the debtors current financial condition. 11

NOTE 5 CAPITAL ASSETS NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS Capital assets activity for the fiscal year ended June 30, 2017 was as follows: Totals Totals June 30, 2016 Additions Deletions June 30, 2017 Capital assets not being depreciated Land $ 55,742 $ - $ - $ 55,742 Mega site project 59,283 - (59,283) - Total capital assets not being depreciated 115,025 - (59,283) 55,742 Capital assets being depreciated Buildings 1,841,801 - - 1,841,801 Land improvements 46,683 - - 46,683 Furniture and equipment 25,598 - (25,598) - Total capital assets being depreciated 1,914,082 - (25,598) 1,888,484 Less accumulated depreciation for Buildings 391,381 46,045-437,426 Land improvements 25,669 3,112-28,781 Furniture and equipment 25,598 - - 25,598 Total accumulated depreciation 442,648 49,157-491,805 Total capital assets being depreciated, net 1,471,434 (49,157) (25,598) 1,396,679 Total capital assets, net $ 1,586,459 $ (49,157) $ (84,881) $ 1,452,421 Public Employee Retirement System (PERS) The Authority participates in a statewide, cost-sharing, multiple employer defined benefit plan on behalf of the general Authority employees. The system is administered by agencies of the State of West Virginia and funded by contributions from participants, employers, and State appropriations, as necessary. The Authority s cost-sharing multiple-employer plan is administered by the Consolidated Public Retirement Authority (CPRB), which acts as a common investment and administrative agent for all of the participating employers. CPRB issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CPRB website at www.wvretirement.com. The following is a summary of eligibility factors, contribution methods, and benefits provisions: Eligibility to participate: All Authority full-time employees, except those covered by other pension plans 12

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS Public Employee Retirement System (PERS) (Continued) Authority establishing contribution obligations and benefit provisions: State statute Tier 1 Plan member s contribution rate: 4.50% (Employees hired before July 1, 2015) Tier 2 Plan member s contribution rate: 6.00% (Employee hired after July 1, 2015) Authority s contribution rate: 12.00% for fiscal year 2017 Period required to vest: 5 years for Tier 1 members 10 years for Tier 2 members Benefits and eligibility for distribution: Tier 1 A member who has attained age 60 and has earned 5 years or more of contributing service or age 55 if the sum of his/her age plus years of credited service is equal to or greater than 80. The final average salary (three highest consecutive years in the last 15) times the years of service times 2% equals the annual retirement benefit. Tier 2 Qualification for normal retirement is age 62 with 10 years of services or at least age 55 with and service equal to 80 or greater. The average salary is the average of the five consecutive highest annual earnings out of the last fifteen years of earnings) times the years of service times 2% equals the retirement benefit. Deferred portion No Provision for: Cost of living Death benefits No Yes The Authority s contributions to the West Virginia Public Employees Retirement System for the year ended June 30, 2017 is as follows: Percentage of Payroll Total Wages Coverage Wages Amount Contributed Employer Share - 12% $ 298,833 $ 298,833 $ 35,860 Tier 1 Employee Share - 4.5% 262,833 262,833 11,827 Tier 2 Employee Share - 6% 36,000 36,000 2,160 13

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 6 - EMPLOYEE RETIREMENT SYSTEMS AND PLANS (CONTINUED) Public Employee Retirement System (PERS) (Continued) Trend Information Annual Percent Fiscal Year Pension Cost Contributed 2017 $ 35,860 91.75% 2016 $ 38,121 100.00% 2015 $ 35,051 100.00% For 2017, the required contribution was $35,860. Of this amount $2,960 is reported in accounts payable. PERS issues a publicly available financial report that includes financial statements and required supplementary information. That information may be obtained by writing to the Public Employees Retirement System, 4101 MacCorkle Avenue, SE, Charleston, WV 25304. Pension Liabilities, Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions At fiscal year-end, the Authority reported the following liabilities for its proportionate share of the net pension liabilities. The net pension liabilities were measured as of June 30, 2016 for the Authority fiscal year ended June 30, 2017, respectively. The total pension liability used to calculate the net pension liabilities were determined by an actuarial valuation as of June 30, 2015 and rolled forward to June 30, 2016 using the actuarial assumptions and methods described in the appropriate section of this note. The Authority's proportion of the net pension liabilities was based on a projection of the Authority's long-term share of contributions to the pension plans relative to the projected contributions of all participating governments, actuarially determined. At June 30, 2017, the Authority reported the following proportions and increase/decreases from its proportion measured as of June 30, 2016: 2017 Amount for proportionate share of net pension liability $ 185,705 Percentage for proportionate share of net pension liability 0.020205% Increase/(decrease) in % from prior proportion measured 0.001590% For the years ended June 30, 2017, the Authority recognized the following pension expense: 2017 PERS Pension Expense $4,000 14

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 6 - EMPLOYEE RETIREMENT SYSTEMS AND PLANS (CONTINUED) Public Employee Retirement System (PERS) (Continued) The Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources for the year ended June 30, 2017: Deferred Outflows of Resources Deferred Inflows of Resources Net difference between projected and actual earnings on pension plan investments $ 58,355 $ - Net differences between projected and actual experiences 15,486 - Deferred differences in assumptions - 9,047 Changes in proportion and differences between contributions and proportionate share of contributions 21,056 - Contributions subsequent to measurement date 35,860 - Totals $ 130,757 $ 9,047 The amount reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended June 30: 2017 2018 $ 21,042 2019 17,456 2020 29,084 2021 18,268 Total $ 85,850 Actuarial assumptions The total pension liability was determined by an actuarial valuation as of July 1, 2015 and rolled forward to June 30, 2016 for all plans, using the following actuarial assumptions, applied to all periods included in the measurement. 15

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 6 - EMPLOYEE RETIREMENT SYSTEMS AND PLANS (CONTINUED) Public Employee Retirement System (PERS) (Continued) PERS June 30, 2016 Individual entry age normal cost with Actuarial Cost Method level percentage of payroll Asset Valuation Method Fair value Amortization Method Level dollar, fixed period Amortization Period Through Fiscal Year 2035 Actuarial Assumptions: Investment Rate of Return 7.50% Projected Salary Increases: PERS: State 3.0-4.6% Nonstate 3.35-6% Inflation Rate 3.00% Discount Rate 7.50% Healthy males - 110% of RP-2000 Non-Annuitant, Scale AA fully generational; Healthy females - Mortality Rates 101% of RP-2000, Non-Annuitant, Scale AA fully generational; Disabled males - 96% of RP-2000 Disabled Annuitant, Scale AA fully generational; Disabled females - Withdrawal Rates: State 1.75-35.1% Nonstate 2-35.8% Disability Rates 0-.675% Retirement Rates 15-100% Date Range in Most Recent Experience Study 2009-2014 The long-term expected rate of return on pension plan investments were determined using a building-block method in which estimates of expected real rates of returns (expected returns, net of pension plan investment expense 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 estimates of arithmetic real rates of return for each asset class are summarized in the following tables: 16

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 6 - EMPLOYEE RETIREMENT SYSTEMS AND PLANS (CONTINUED) Public Employee Retirement System (PERS) (Continued) 2016 Long-term Expected PERS Rate Target Asset Asset Class of Return Allocation US Equity 7.0% 27.5% International Equity 7.7% 27.5% Core Fixed Income 2.7% 7.5% High Yield Fixed Income 5.5% 7.5% TPS 2.7% 0.0% Real Estate 7.0% 10.0% Private Equity 9.4% 10.0% Hedge Funds 4.7% 10.0% 100.0% Discount Rate The discount rate used to measure the total pension liability was 7.5 percent for all defined benefit plans. The projection of cash flows used to determine the discount rates assumed that employer contributions will continue to follow the current funding policies. Based on those assumptions, the fiduciary net position for each defined benefit pension plan was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rates of return on pension plan investments were applied to all periods of projected benefit payments to determine the total pension liabilities of each plan. The following chart presents the sensitivity of the net pension liability to changes in the discount rate, calculated using the discount rates as used in the actuarial evaluation, and what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage point higher than the current rate: 2017 1% Decrease 6.50% Current Discount Rate 7.50% 1% Increase 8.50% Proportionate share of PERS's Net pension liability $ 336,161 $ 185,705 $ 57,934 Detailed information about the pension plans' fiduciary net position is available in the separately issued financial report available at the Consolidated Public Retirement Authority's website at www.wvretirement.com. That information can also be obtained by writing to the West Virginia Consolidated Public Retirement Authority, 4101 MacCorkle Avenue SE, Charleston, WV 25304. 17

NEW RIVER GORGE REGIONAL DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 7 LONG-TERM LIABILITIES Changes in long-term obligations of the Authority during the year ended June 30, 2017 were as follows: Balance at Balance at Due Within June 30, 2016 Additions Reductions June 30, 2017 One Year Compensated Absences $27,034 $27,311 $(33,974) $20,371 $20,371 Net Pension Liability 103,947 81,758-185,705 - Total $130,981 $109,069 $(33,974) $206,076 $20,371 NOTE 8 RETIREMENT HEALTH PLAN The Board contributes to the West Virginia Retiree Health Benefits Trust (RHBT), a cost-sharing, multiple employer defined benefit post-employment healthcare plan administered by the West Virginia Public Employees Insurance Agency (PEIA). RHBT provides medical benefit to eligible retired employees of participating employers. RHBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to: West Virginia Retiree health Benefits Trust, Building 5, Room 1001, 1900 Kanawha Boulevard East, Charleston, West Virginia, 25305-0710. Chapter 5, Article 16D of the West Virginia Code assigns the authority to establish and amend benefits and provisions to the RHBT. Plan members are currently required to contribute $135 per month per active health policy. Participating employers are contractually required to contribute at a rate assessed each year by RHBT. The RHBT board sets the employer contribution rate based on the annual required contributions (ARC) of the plan, an amount actuarially determined in accordance with the parameters of Governmental Accounting Standards Board (GASB) Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) of the plan over a period not to exceed thirty years. NOTE 9 RISK MANAGEMENT The Authority is exposed to various risks of losses related to torts; theft; damage to and destruction of assets; errors and omissions; and natural disasters. The government carries insurance with the State Board of Risk for umbrella (general liability) insurance for these various risks. The Authority provides insurance coverage to employees for job related injuries through BrickStreet Insurance. Liabilities for contingencies are reported when it is probable a loss has occurred and the amount of the loss can be reasonably estimated. NOTE 10 - SUBSEQUENT EVENTS Management has evaluated events subsequent to the date of the statement of financial position through March 30, 2018, the date the financial statements were available to be issued. No events have occurred subsequent to the statement of financial position date through March 30, 2018 that would require adjustment or disclosure in the financial statements. 18

Public Employees Retirement System 2016 2015 2014 2013 Authority's proportion of the net pension liability (asset) (percentage) 0.020050% 0.018615% 0.016720% 0.014420% Authority's proportionate share of the net pension liability (asset) $ 185,705 $ 103,947 $ 61,709 $ 131,456 Authority's covered payroll $ 282,378 $ 250,364 $ 241,538 $ 286,593 Authority's proportionate share of the net pension liability (asset) as a percentage of its covered payroll 65.76% 41.52% 25.55% 45.87% Plan fiduciary net position as a percentage of the total pension liability 86.11% 94.23% 91.29% 79.70% Information prior to 2013 is not available. This chart will be built prospectively. 19

NEW RIVER GORGE DEVELOPEMENT AUTHORITY SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY June 30, 2017 Public Employees Retirement System 2017 2016 2015 2014 2013 Contractually required contribution $ 35,860 $ 38,121 $ 35,051 $ 35,023 $ 40,123 Contributions in relation to contractually (35,860) (38,121) (35,051) (35,023) (40,123) required contribution Contribution deficit (surplus) $ - $ - $ - $ - $ - Authority's covered payroll $ 298,833 $ 282,378 $ 250,364 $ 241,538 $ 286,593 Contributions as a percentage of covered payroll 12.00% 13.50% 14.00% 14.50% 14.00% Information prior to 2013 is not available. The schedule will be built prospectively. 20

NEW RIVER GORGE REGIONAL DEVELOPMENTAL AUTHORITY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Federal Total FEDERAL GRANTOR/ CFDA Federal Program Title Number Expenditures APPALACHIAN REGIONAL COMMISSION Direct Awards Appalachian State Research, Technical Assistance and 23.011 $ 1,025,289 Demonstration Projects Appalachian Area Development 23.002 36,226 TOTAL APPALACHIAN REGIONAL COMMISSION 1,061,515 Total Federal Awards Expenditures $ 1,061,515 NOTE A BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal award activity of New River Gorge Regional Developmental Authority (the Authority) under programs of the federal government for the year ended June 30, 2017. The information on this Schedule is prepared in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Authority, it is not intended to and does not present the financial position, changes in net position, or cash flows of the Authority. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the cash basis of accounting. Such expenditures are recognized following the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures may or may not be allowable or may be limited as to reimbursement. The Authority has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. 21

INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS REQUIRED BY GOVERNMENT AUDITING STANDARDS March 30, 2018 New River Gorge Regional Development Authority Raleigh County 116 N. Heber Street, Suite B Beckley, WV 25801 To the Board of Directors: We have audited, in accordance with auditing standards generally accepted in the United States and the Comptroller General of the United States Government Auditing Standards, the financial statements of the New River Gorge Regional Development Authority, Raleigh County, (the Authority) as of and for the year end June 30, 2017, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements and have issued our report thereon dated March 30, 2018. Internal Control Over Financial Reporting As part of our financial statement audit, we considered the Authority s internal control over financial reporting (internal control) to determine the audit procedures appropriate in the circumstances to the extent necessary to support our opinion on the financial statements, but not to the extent necessary to opine on the effectiveness of the Authority s internal control. Accordingly, we have not opined on it. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, when performing their assigned functions, to prevent, or detect and timely correct misstatements. A material weakness is a deficiency, or combination of internal control deficiencies resulting in a reasonable possibility that internal control will not prevent or detect and timely correct a material misstatement of the Authority s financial statements. A significant deficiency is a deficiency, or a 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. 22

New River Gorge Regional Development Authority Raleigh County Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Required by Government Auditing Standards Page 2 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 internal control deficiencies that might be material weaknesses or significant deficiencies. Given these limitations, we did not identify any deficiencies in internal control that we consider material weaknesses. However, unidentified material weaknesses may exist. Compliance and Other Matters As part of reasonably assuring whether the Authority s financial statements are free of material misstatement, we tested its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could directly and materially affect the determination of financial statement amounts. However, opining on compliance with those provisions was not an objective of our audit and accordingly, we do not express an opinion. The results of our tests disclosed no instances of noncompliance or other matters we must report under Government Auditing Standards. Purpose of this Report This report only describes the scope of our internal control and compliance testing and our testing results, and does not opine on the effectiveness of the Authority s internal control or on compliance. This report is an integral part of an audit performed under Government Auditing Standards in considering the Authority s internal control and compliance. Accordingly, this report is not suitable for any other purpose. Perry and Associates Certified Public Accountants, A.C. Marietta, Ohio 23

INDEPENDENT AUDITOR S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE March 30, 2018 New River Gorge Regional Development Authority 116 N. Heber Street, Suite B Beckley, WV 25801 To the Board of Directors: Report on Compliance for the Major Federal Program We have audited the New River Gorge Regional Development Authority s (the Authority) compliance with the applicable requirements described in the U.S. Office of Management and Budget (OMB), Compliance Supplement that could directly and materially affect the Authority s major federal program for the year ended June 30, 2017. The Summary of Auditor s Results in the accompanying schedule of audit findings identifies the Authority s major federal program. Management s Responsibility The Authority s management is responsible for complying with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal program. Auditor s Responsibility Our responsibility is to opine on the Authority s compliance for the Authority s major federal program based on our audit of the applicable compliance requirements referred to above. Our compliance audit followed auditing standards generally accepted in the United States of America; the standards for financial audits included in the Comptroller General of the United States Government Auditing Standards; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). These standards and the Uniform Guidance require us to plan and perform the audit to reasonably assure whether noncompliance with the applicable compliance requirements referred to above that could directly and materially affect a major federal program occurred. An audit includes examining, on a test basis, evidence about the Authority s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe our audit provides a reasonable basis for our compliance opinion on the Authority s major program. However, our audit does not provide a legal determination of the Authority s compliance. 24

New River Gorge Regional Development Authority Independent Auditor s Report on Compliance with Requirements Applicable to the Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance Page 2 Opinion on the Major Federal Program In our opinion, the Authority complied, in all material respects with the compliance requirements referred to above that could directly and materially affect its major federal program for the year ended June 30, 2017. Report on Internal Control Over Compliance The Authority s management is responsible for establishing and maintaining effective internal control over compliance with the applicable compliance requirements referred to above. In planning and performing our compliance audit, we considered the Authority s internal control over compliance with the applicable requirements that could directly and materially affect a major federal program, to determine our auditing procedures appropriate for opining on each major federal program s compliance and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not to the extent needed to opine on the effectiveness of internal control over compliance. Accordingly, we have not opined on the effectiveness of the Authority s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, when performing their assigned functions, to prevent, or to timely detect and correct, noncompliance with a federal program s applicable compliance requirement. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a federal program compliance requirement will not be prevented, or timely detected and corrected. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with federal program s applicable compliance requirement that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. This report only describes the scope of our internal control compliance tests and the results of this testing based on the Uniform Guidance requirements. Accordingly, this report is not suitable for any other purpose. Perry and Associates Certified Public Accountants, A.C. Marietta, Ohio 25