Document otsegocountymi_gov_doc_2698f9e6f2

Page 1 COUNTY OF OTSEGO MICHIGAN BUDGET AND FINANCE COMMITTEE REQUEST FOR PROPOSALS (RFP 2025-10) FOR PROFESSIONAL AUDITING SERVICES 225 West Main Street Gaylord, Michigan 49735 ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 2 TABLE OF CONTENTS I. INTRODUCTION A. General Information B. Term of Engagement C. Subcontracting II. NATURE OF SERVICES REQUIRED A. General B. Scope of Work to be Performed C. Auditing Standards to be Followed D. Reports to be Issued E. Special Considerations F. Working Paper Retention and Access to Working Papers III. DESCRIPTION OF THE GOVERNMENT A. Contact Person B. Background Information C. Fund Structure D. Budgetary Basis of Accounting E. Federal Financial Assistance F. Pension Plans G. Component Units H. Joint Ventures I. Magnitude of Finance Operations J. Computer Systems K. Availability of Prior Reports and Working Papers IV. TIME REQUIREMENTS A. Proposal Calendar B. Notification and Contract Dates C. General Timeframe of Audit D. Schedule for the 2024 Fiscal Year Audit 1. Interim Work 2. Detail Audit Plan and Programs 3. Fieldwork 4. Draft Reports ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 3 V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department and Clerical Assistance B. Work Area, Telephone, Photocopying and FAX Machines C. Report Preparation VI. PROPOSAL REQUIREMENTS A. General Requirements 1. Inquiries 2. Submission of Proposals B. Technical Proposal 1. General Requirements 2. Independence 3. License to Practice in Michigan 4. Firm Qualifications and Experience 5. Partner, Supervisory and Staff Qualifications and Experience 6. Prior Engagements with the County of Otsego 7. Similar Engagements with Other Government Entities 8. Specific Audit Approach 9. Identification of Anticipated Potential Audit Problems 10. Report Format C. Sealed Dollar Cost Bid 1. Total All-Inclusive Maximum Price 2. Rates by Partner, Specialist, Supervisory and Staff Level Times Hours Anticipated for Each 3. Out-of-pocket Expenses in the Total All-inclusive Maximum Price 4. Rates for Additional Professional Services 5. Manner of Payment ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 4 VII. EVALUATION PROCEDURES A. Budget and Finance Committee B. Review of Proposals C. Evaluation Criteria 1. Mandatory Elements 2. Technical Qualifications 3. Price D. Final Selection E. Right to Reject Proposals APPENDICES A. Copy of 2022 Audit Report, including Findings and Recommendations B. Proposer Guarantees C. Proposer Warranties D. Format for Schedule of Professional Fees and Expenses to Support the Total All-Inclusive Maximum Price ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 5 COUNTY OF OTSEGO REQUEST FOR PROPOSALS I. INTRODUCTION A. General Information The COUNTY OF OTSEGO is requesting proposals from qualified firms of certified public accountants to audit its financial statements for the fiscal year ending December 31, 2024. This audit is to be performed in accordance with generally accepted auditing standards, the standards set forth for financial audits in the General Accounting Office's (GAO) Government Auditing Standards, the provisions of the federal Single Audit Act of 1984 (as amended in 1996) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the OMB Compliance Supplement; the AICPA Audit Guide for Audits of State and Local Governmental Units; and applicable OMB Circulars, audit standards, and audit guides. There is no expressed or implied obligation for the COUNTY OF OTSEGO to reimburse responding firms for any expenses incurred in preparing proposals in response to this request. Any inquiries concerning the request for proposals prior to or after the proposal conference should be addressed to Morgan Kwapis, Finance Director. To be considered, six copies of a proposal must be received by Morgan Kwapis, Finance Director, at 225 West Main Street by 10a.m. on July 14, 2025. Proposals will be opened at 12 (noon), in Room 100, 225 West Main Street. The COUNTY OF OTSEGO reserves the right to reject any or all proposals submitted. Proposals will be evaluated by the Budget and Finance Committee. During the evaluation process, the Budget and Finance Committee and the COUNTY OF OTSEGO reserve the right, where it may serve the COUNTY OF OTSEGO's best interest, to request additional information or clarifications from proposers, or to allow corrections of errors or omissions. At the discretion of the COUNTY OF OTSEGO or the Budget and Finance Committee, firms submitting proposals may be requested to make oral presentations as part of the evaluation process. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 6 The COUNTY OF OTSEGO reserves the right to retain all proposals submitted and to use any ideas in a proposal regardless of whether that proposal is selected. Submission of a proposal indicates acceptance by the firm of the conditions contained in this request for proposals, unless clearly and specifically noted in the proposal submitted and confirmed in the contract between the COUNTY OF OTSEGO and the firm selected. It is anticipated the selection of a firm will be completed by July 22, 2025. Following the notification of the selected firm it is expected a contract will be executed between both parties no later than July 31, 2025. B. Term of Engagement A one-year contract is contemplated, subject to recommendation of the Budget and Finance Committee, the satisfactory negotiation of terms (including a price acceptable to both the COUNTY OF OTSEGO and the selected firm), and the concurrence of the Board of Commissioners. C. Subcontracting Firms submitting proposals are encouraged to consider subcontracting portions of the engagement to small audit firms or audit firms owned and controlled by socially and economically disadvantaged individuals. If this is to be done, that fact, and the name of the proposed subcontracting firms, must be clearly identified in the proposal. Following the award of the audit contract, no additional subcontracting will be allowed without the express prior written consent of the COUNTY OF OTSEGO. II. NATURE OF SERVICES REQUIRED A. General The COUNTY OF OTSEGO is soliciting the services of qualified firms of certified public accountants to audit its financial statements for the fiscal year ending December 31, 2024.This audit is to be performed in accordance with the provisions contained in this request for proposals. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 7 B. Scope of Work to be Performed The COUNTY OF OTSEGO desires the auditor to express an opinion on the fair presentation of its basic financial statements in conformity with generally accepted accounting principles. The auditor shall also be responsible for performing certain limited procedures involving required supplementary information required by the Governmental Accounting Standards Board as mandated by generally accepted auditing standards. C. Auditing Standards To Be Followed To meet the requirements of this request for proposals, the audit shall be performed in accordance with generally accepting auditing standards as set forth by the American Institute of Certified Public Accountants, the standards for financial audits set forth in the U.S. General Accounting Office's Government Auditing Standards, the provisions of the Single Audit Act of 1984 (as amended in 1996) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the OMB Compliance Supplement; the AICPA Audit Guide for Audits of State and Local Governmental Units; and applicable OMB Circulars, audit standards, and audit guides. D. Reports to be Issued Following the completion of the audit of the fiscal year's financial statements, the auditor shall issue: 1. A report on the fair presentation of the financial statements in conformity with generally accepted accounting principles, including an opinion on the fair presentation of the supplementary schedule of expenditures of federal awards “in relation to” the audited financial statements. 2. A report on compliance and internal control over financial reporting based on an audit of the financial statements 3. A report on compliance and internal control over compliance applicable to each major federal program. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 8 In the required reports on compliance and internal controls, the auditor shall communicate any reportable conditions found during the audit. A reportable condition shall be defined as a significant deficiency in the design or operation of the internal control structure, which could adversely affect the organization's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. Reportable conditions that are also material weaknesses shall be identified as such in the report. Nonreportable conditions discovered by the auditors shall be reported in a separate letter to management, which shall be referred to in the reports on compliance and internal controls. The report on compliance and internal controls shall include all material instances of noncompliance. All nonmaterial instances of noncompliance shall be reported in a separate management letter, which shall be referred to in the report on compliance and internal controls. Irregularities and illegal acts. Auditors shall be required to make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the following parties: Matt Barresi County Administrator Morgan Kwapis Finance Director Brett McVannel Chairman of the Board Reporting to the audit committee. The Budget and Finance Committee shall serve as the audit committee. The primary contact person shall be Morgan Kwapis, Finance Director. Auditors shall assure themselves that the COUNTY OF OTSEGO's Budget and Finance Committee is informed of each of the following: 1. The auditor's responsibility under generally accepted auditing standards 2. Significant accounting policies 3. Management judgments and accounting estimates 4. Significant audit adjustments 5. Other information in documents containing audited financial statements ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 9 6. Disagreements with management 7. Management consultation with other accountants 8. Major issues discussed with management prior to retention 9. Difficulties encountered in performing the audit E. Special Considerations The Schedule of Expenditures of Federal Awards and related auditor's report, as well as the reports on compliance and internal controls are to be prepared by the auditor and issued as part of the audited financial statements. A copy of the COUNTY OF OTSEGO's most recent financial statement audit, which includes a list of findings and recommendations, is attached to this document (Appendix The COUNTY OF OTSEGO may request that the auditor maintain fixed asset and depreciation schedules. F. Working Paper Retention and Access to Working Papers All working papers and reports must be retained, at the auditor's expense, for a minimum of five years, unless the firm is notified in writing by the COUNTY OF OTSEGO of the need to extend the retention period. The auditor will be required to make working papers available, upon request, to the following parties or their designees: COUNTY OF OTSEGO Federal Cognizant Agency Parties designated by the federal or state governments or by the COUNTY OF OTSEGO as part of an audit quality review process Auditors of entities of which the COUNTY OF OTSEGO is a subrecipient of grant funds In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 10 III. DESCRIPTION OF THE GOVERNMENT A. Contact Person The auditor's principal contact with the COUNTY OF OTSEGO will be Morgan Kwapis, Finance Director, who will coordinate the assistance to be provided by the COUNTY OF OTSEGO to the auditor. B. Background Information The COUNTY OF OTSEGO serves an area of approximately 527 square miles with a population of approximately 25,000. The COUNTY OF OTSEGO's fiscal year begins on January 1st and ends on December 31st. The COUNTY OF OTSEGO provides the following services to its citizens: General government Public Safety Recreation and Culture Economic Development Transit Services to the Elderly Veterans Housing The COUNTY OF OTSEGO has a total payroll of approximately $6,800,000, covering 175 employees. The COUNTY OF OTSEGO is organized into several different departments and agencies. The accounting and financial reporting functions of the COUNTY OF OTSEGO are centralized, with the exception of the Otsego County Library. More detailed information on the government and its finances can be found in the attached audit report. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 11 C. Fund Structure The COUNTY OF OTSEGO uses the following fund types and account groups in its financial reporting: Number of Number With Individual Legally Adopted Fund Type Funds Annual Budgets General fund 4 4 Special revenue funds 25 25 Debt service funds 1 1 Capital projects funds 6 6 Enterprise funds 10 10 Internal service funds 4 4 Pension (and other employee benefits) trust funds 1 0 Agency funds 3 0 Discreetly presented component units 3 3 Blended component units 1 1 D. Budgetary Basis of Accounting The COUNTY OF OTSEGO prepares its budgets on a basis consistent with generally accepted accounting principles. E. Federal Awards During the fiscal year to be audited, the COUNTY OF OTSEGO received federal awards that are consistent with the previous fiscal year. F. Pension Plans The COUNTY OF OTSEGO participates in the following pension plan: Municipal Employees Retirement System (MERS), Multiple Employer Defined Benefit Plan, Multiple Employer Defined Contribution Plan and a MERS Hybrid Plan, which combines the features of a defined benefit and a defined contribution plan. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 12 G. Component Units The COUNTY OF OTSEGO is defined, for financial reporting purposes, in conformity with the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards, Section 2100. Using these criteria, component units are included in the COUNTY OF OTSEGO's financial statements. The management of the COUNTY OF OTSEGO identified the following component units for inclusion in the COUNTY OF OTSEGO's financial statements: Audited Name of Entity Fiscal Year End Separately Audit Firm Otsego County Commission on Aging 9/30/24 Yes Dan Smith, CPA Otsego County 12/31/24 No* Otsego County Ambulance Corp. 12/31/24 No* * This component unit is to be audited as part of the audit of the COUNTY OF OTSEGO's financial statements. The auditors of the component units are contractually obligated to provide information needed for the audit of the COUNTY OF OTSEGO. H. Joint Ventures The COUNTY OF OTSEGO participates in joint ventures with other governments, as follows: Northwest Michigan Community Health Agency Michigan Technical Education Center (M-TEC) North Country Community Mental Health ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 13 I. Magnitude of Finance Operations The finance department is headed by Morgan Kwapis and consists of four employees. The County Administrator serves as the Chief Financial Officer. The principal functions performed and the number of employees assigned to each are as follows: Function Number of Employees Finance Clerk 1 Deputy Finance Director 1 Finance Director 1 County Administrator 1 J. Computer Systems The COUNTY OF OTSEGO uses BSA software for its general ledger, accounts payable, and payroll functions. BSA was installed in July 2008. K. Availability of Prior Audit Reports The 2022 audit report is included in this document at Appendix A. Interested proposers who wish to review audit reports from prior years should contact Morgan Kwapis. The COUNTY OF OTSEGO will use its best efforts to make prior audit reports available to proposers to aid their response to this request for proposals. IV. TIME REQUIREMENTS A. Proposal Calendar The following is a list of key dates up to and including the date proposals are due to be submitted: Request for proposal issued July 3, 2025 Due date for proposals July 14, 2025 Proposals evaluated by Budget & Finance Committee July 16, 2025 ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 14 B. Notification and Contract Dates Firm selected by Board of Commissioners July 22, 2025 Selected firm notified July 22, 2025 Contract date no later than July 31,2025 C. General Timeframe of Audit The COUNTY OF OTSEGO will have all records ready for audit and all management personnel available to meet with the firm's personnel no later than August 1, 2025. D. Schedule for the 2024 Fiscal Year Audit Each of the following should be completed by the auditor no later than the dates indicated. 1. Detailed Audit Plan The auditor shall provide the COUNTY OF OTSEGO by August 15, 2025, both a detailed audit plan and a list of all schedules to be prepared by the COUNTY OF OTSEGO. 2. Fieldwork The auditor shall complete all fieldwork by September 30, 2025. 3. Draft Reports The auditor shall have drafts of the audit report[s] and recommendations to management available for review by the Budget and Finance Committee and the County Administrator by October 15, 2025. V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department and Clerical Assistance The finance department staff and responsible management personnel will be available during the audit to assist the firm by providing information, ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 15 documentation and explanations. The preparation of confirmations will be the responsibility of the COUNTY OF OTSEGO. B. Work Area, Telephones, Photocopying and FAX Machines The COUNTY OF OTSEGO will provide the auditor with reasonable work space, desks and chairs. The auditor will also be provided with access to one telephone lines, photocopying facilities and FAX machines subject to the following restrictions: Use of work space, photocopying, and telecommunications equipment is limited to activity related to the County of Otsego’s audit. C. Report Preparation Report preparation, editing and printing shall be the responsibility of the auditor. VI. PROPOSAL REQUIREMENTS A. General Requirements 1. Inquiries Inquiries concerning the request for proposals and the subject of the request for proposals must be made to: Morgan Kwapis Otsego County Finance Director 225 West Main Gaylord, MI 49735 (989) 731-7527 CONTACT WITH PERSONNEL OF THE COUNTY OF OTSEGO OTHER THAN THE FINANCE DIRECTOR REGARDING THIS REQUEST FOR PROPOSALS MAY BE GROUNDS FOR ELIMINATION FROM THE SELECTION PROCESS. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 16 2. Submission of Proposals The following material is required to be received by July 14, 2025 by 10 a.m. for a proposing firm to be considered: a. Six copies of a Technical Proposal to include the following: i. Title Page Title page showing the request for proposals subject; the firm's name; the name, address and telephone number of the contact person; and the date of the proposal. ii. Table of Contents iii. Transmittal Letter A signed letter of transmittal briefly stating the proposer's understanding of the work to be done, the commitment to perform the work within the time period, a statement why the firm believes itself to be best qualified to perform the engagement and a statement that the proposal is a firm and irrevocable offer for a one-month period. iv. Detailed Proposal The detailed proposal should follow the order set forth in Section VI B of this request for proposals. v. Executed copies of Proposer Guarantees and Proposer Warranties, attached to this request for proposal (Appendix B and Appendix C) ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 17 b. The proposer shall submit six copies of a dollar cost bid in a separate sealed envelope marked as follows: SEALED DOLLAR COST BID PROPOSAL FOR COUNTY OF OTSEGO FOR PROFESSIONAL AUDITING SERVICES c. Proposers should send the completed proposal consisting of the two separate envelopes to the following address: Morgan Kwapis Otsego County Finance Director 225 West Main Street Gaylord, MI 49735 B. Technical Proposal 1. General Requirements The purpose of the Technical Proposal is to demonstrate the qualifications, competence and capacity of the firms seeking to undertake an independent audit of the COUNTY OF OTSEGO in conformity with the requirements of this request for proposals. As such, the substance of proposals will carry more weight than their form or manner of presentation. The Technical Proposal should demonstrate the qualifications of the firm and of the particular staff to be assigned to this engagement. It should also specify an audit approach that will meet the request for proposals requirements. THERE SHOULD BE NO DOLLAR UNITS OR TOTAL COSTS INCLUDED IN THE TECHNICAL PROPOSAL DOCUMENT. The Technical Proposal should address all the points outlined in the request for proposals (excluding any cost information which should only be included in the sealed dollar cost bid). The Proposal should be prepared simply and economically, providing a straightforward, concise description of the proposer's capabilities to satisfy the requirements of the request for proposals. While additional data may be presented, the following subjects, items Nos. 2 through 10, must be included. They represent the criteria against which the proposal will be evaluated. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 18 2. Independence The firm should provide an affirmative statement that is independent of the COUNTY OF OTSEGO as defined by [generally accepted auditing standards/the U.S. General Accounting Office's Government Auditing Standards] The firm also should provide an affirmative statement that it is independent of all of the component units of the COUNTY OF OTSEGO as defined by those same standards. The firm should also list and describe the firm's (or proposed subcontractors') professional relationships involving the COUNTY OF OTSEGO or any of its [agencies/ agencies or component units/ agencies, component units or primary government] for the past five years, together with a statement explaining why such relationships do not constitute a conflict of interest relative to performing the proposed audit. In addition, the firm shall give the COUNTY OF OTSEGO written notice of any professional relationships entered into during the period of this agreement. 3. License to Practice in Michigan An affirmative statement should be included that the firm and all assigned key professional staff are properly [registered/licensed] to practice in Michigan. 4. Firm Qualifications and Experience The proposer should state the size of the firm, the size of the firm's governmental audit staff, the location of the office from which the work on this engagement is to be performed and the number and nature of the professional staff to be employed in this engagement on a full-time basis and the number and nature of the staff to be so employed on a part-time basis. If the proposer is a joint venture or consortium, the qualifications of each firm comprising the joint venture or consortium should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 19 The firm is also required to submit a copy of the report on its most recent external quality control review, with a statement whether that quality control review included a review of specific government engagements. The firm shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three years. In addition, the firm shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three years with state regulatory bodies or professional organizations. 5. Partner, Supervisory and Staff Qualifications and Experience Identify the principal supervisory and management staff, including engagement partners, managers, other supervisors and specialists, who would be assigned to the engagement. Indicate whether each such person is registered or licensed to practice as a certified public accountant in Michigan. Provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three years and membership in professional organizations relevant to the performance of this audit. Indicate the number of hours the principal/supervisory staff will be on- site during audit fieldwork. Provide as much information as possible regarding the number, qualifications, experience and training, including relevant continuing professional education, of the specific staff to be assigned to this engagement. Indicate how the quality of staff over the term of the agreement will be assured. The proposer should identify the extent to which staff to be assigned to the audit reflect the COUNTY OF OTSEGO's commitment to Affirmative Action. Engagement partners, managers, other supervisory staff and specialists may be changed if those personnel leave the firm, are promoted or are assigned to another office. These personnel may also be changed for other reasons with the express prior written permission of the COUNTY OF OTSEGO. However, in either case, the COUNTY OF OTSEGO retains the right to approve or reject replacements. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 20 Consultants and firm specialists mentioned in response to this request for proposal can only be changed with the express prior written permission of the COUNTY OF OTSEGO, which retains the right to approve or reject replacements. Other audit personnel may be changed at the discretion of the proposer provided that replacements have substantially the same or better qualifications or experience. 6. Prior Engagements with the COUNTY OF OTSEGO List separately all engagements within the last five years, ranked on the basis of total staff hours, for the COUNTY OF OTSEGO by type of engagement audit, management advisory services, other). Indicate the scope of work, date, engagement partners, total hours, the location of the firm's office from which the engagement was performed, and the name and telephone number of the principal client contact. 7. Similar Engagements with Other Government Entities For the firm's office that will be assigned responsibility for the audit, list the most significant engagements (maximum of 5) performed in the last five years that are similar to the engagement described in this request for proposal. These engagements should be ranked on the basis of total staff hours. Indicate the scope of work, date, engagement partners, total hours, and the name and telephone number of the principal client contact. 8. Specific Audit Approach The proposal should set forth a work plan, including an explanation of the audit methodology to be followed, to perform the services required in Section II of this request for proposal. In developing the work plan, reference should be made to such sources of information as COUNTY OF OTSEGO's budget and related materials, organizational charts, manuals and programs, and financial and other management information systems. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 21 Proposers will be required to provide the following information on their audit approach: a. Proposed segmentation of the engagement b. Level of staff and number of hours to be assigned to each proposed segment of the engagement NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL c. Sample size and the extent to which statistical sampling is to be used in the engagement d. Extent of use of EDP software in the engagement e. Type and extent of analytical procedures to be used in the engagement f. Approach to be taken to gain and document an understanding of the COUNTY OF OTSEGO's internal control structure g. Approach to be taken in determining laws and regulations that will be subject to audit test work h. Approach to be taken in drawing audit samples for purposes of tests of compliance 9. Identification of Anticipated Potential Audit Problems The proposal should identify and describe any anticipated potential audit problems, the firm's approach to resolving these problems and any special assistance that will be requested from the COUNTY OF OTSEGO. 10. Report Format The proposal should include sample formats for required reports. NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 22 C. Sealed Dollar Cost Bid 1. Total All-Inclusive Maximum Price The sealed dollar cost bid should contain all pricing information relative to performing the audit engagement as described in this request for proposal. The total all-inclusive maximum price to be bid is to contain all direct and indirect costs including all out-of-pocket expenses. The COUNTY OF OTSEGO will not be responsible for expenses incurred in preparing and submitting the technical proposal or the sealed dollar cost bid. Such costs should not be included in the proposal. The first page of the sealed dollar cost bid should include the following information: a. Name of Firm b. Certification that the person signing the proposal is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with the COUNTY OF OTSEGO. c. A Total All-Inclusive Maximum Price for the 2024 engagement. 2. Rates by Partner, Specialist, Supervisory and Staff Level Times Hours Anticipated for Each The second page of the sealed dollar cost bid should include a schedule of professional fees and expenses, presented in the format provided in the attachment (Appendix D) that supports the total all- inclusive maximum price. The cost of special services described in Section I E of this request for proposal should be disclosed as separate components of the total all-inclusive maximum price. 3. Out-of-pocket Expenses Included in the Total All-inclusive Maximum Price All out-of-pocket expenses for travel, meals, lodging, etc, must be factored into the standard hourly rate for each individual and will not be billed separately to the COUNTY OF OTSEGO. 4. Rates for Additional Professional Services ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 23 If it should become necessary for COUNTY OF OTSEGO to request the auditor to render any additional services to either supplement the services requested in this RFP or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only if set forth in an addendum to the contract between COUNTY OF OTSEGO and the firm. Any such additional work agreed to between COUNTY OF OTSEGO and the firm shall be performed at the same rates set forth in the schedule of fees and expenses included in the sealed dollar cost bid. 5. Manner of Payment Progress payments will be made on the basis of hours of work completed during the course of the engagement and out-of-pocket expenses incurred in accordance with the firm's dollar cost bid proposal. Interim billing shall cover a period of not less than a calendar month. Ten percent (10%) will be withheld from each billing pending delivery of the firm's final reports. VII. EVALUATION PROCEDURES A. Budget and Finance Committee Proposals submitted will be evaluated by the COUNTY OF OTSEGO’S seven (7)-member Budget and Finance Committee, consisting of: Commissioner Dana Wingo, Budget and Finance Committee Chair Commissioner Terra Deming Commissioner Neil Drzewiecki Commissioner Rob Weaver County Administrator Matt Barresi Treasurer Paula Wright Finance Director Morgan Kwapis B. Review of Proposals The Committee will use a point formula during the review process to score proposals. Each member of the Committee will first score each technical proposal by each of the criteria described in Section VII C below. The full Committee will then convene to review and discuss these evaluations and to ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 24 combine the individual scores to arrive at a composite technical score for each firm. At this point, firms with an unacceptably low technical score will be eliminated from further consideration. After the composite technical score for each firm has been established, the sealed dollar cost bid will be opened and additional points will be added to the technical score based on the price bid. The maximum score for price will be assigned to the firm offering the lowest total all-inclusive maximum price. Appropriate fractional scores will be assigned to other proposers. The COUNTY OF OTSEGO reserves the right to retain all proposals submitted and use any idea in a proposal regardless of whether that proposal is selected. C. Evaluation Criteria Proposals will be evaluated using three sets of criteria. Firms meeting the mandatory criteria will have their proposals evaluated and scored for both technical qualifications and price. The following represent the principal selection criteria which will be considered during the evaluation process. 1. Mandatory Elements a. The audit firm is independent and licensed to practice in Michigan b. The firm has no conflict of interest with regard to any other work performed by the firm for the COUNTY OF OTSEGO c. The firm adheres to the instructions in this request for proposal on preparing and submitting the proposal d. The firm submits a copy of its last external quality control review report and the firm has a record of quality audit work. 2. Technical Quality: (Maximum Points - 35) a. Expertise and Experience (1)The firm's past experience and performance on comparable government engagements – a higher score will be assigned to firms that audit other counties The quality of the firm's professional personnel to be assigned to the engagement and the quality of the firm's ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 25 management support personnel to be available for technical consultation The availability of the firm’s upper management staff during audit fieldwork The availability of professional staff throughout the year for assistance with and discussion of technical issues. b. Audit Approach (1)Adequacy of proposed staffing plan for various segments of the engagement (2)Adequacy of sampling techniques (3)Adequacy of analytical procedures 3. Price: (Maximum Points -25) COST WILL NOT BE THE PRIMARY FACTOR IN THE SELECTION OF AN AUDIT FIRM D. Final Selection The COUNTY OF OTSEGO Board of Commissioners will select a firm based upon the recommendation of the Budget and Finance Committee. It is anticipated that a firm will be selected on July 22, 2025. Following notification of the firm selected, it is expected a contract will be executed between both parties no later than July 31,2025. E. Right to Reject Proposals Submission of a proposal indicates acceptance by the firm of the conditions contained in this request for proposal unless clearly and specifically noted in the proposal submitted and confirmed in the contract between the COUNTY OF OTSEGO and the firm selected. The COUNTY OF OTSEGO reserves the right without prejudice to reject any or all proposals. ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 26 APPENDICES A. Copy of 2022 Audited Financial Statements B. Proposer Guarantees C. Proposer Warranties D. Format for Schedule of Professional Fees and Expenses to Support the Total All-inclusive Maximum Price ---PAGE BREAK--- County of Otsego, Michigan BASIC FINANCIAL STATEMENTS December 31, 2022 APPENDIX A ---PAGE BREAK--- OTSEGO COUNTY, MICHIGAN ORGANIZATION MEMBERS OF THE COUNTY COMMISSION CHAIR PERSON DOUGLAS C. JOHNSON VICE CHAIR PERSON BRETT MCVANNEL COMMISSIONER TERRA DEMING COMMISSIONER HENRY MASON COMMISSIONER JASON CLEMENT COMMISSIONER TREVOR BURROUGHS COMMISSIONER KYLE YOHE COMMISSIONER DANA WINGO COMMISSIONER JONATHAN TURNBULL APPOINTED/ELECTED OFFICIALS COUNTY ADMINISTRATOR MATT BARRESI FINANCE DIRECTOR MEL MAIER COUNTY TREASURER PAULA WRIGHT COUNTY CLERK SUSAN I. DEFEYTER ---PAGE BREAK--- i TABLE OF CONTENTS Page INDEPENDENT AUDITOR’S REPORT 1 MANAGEMENT’S DISCUSSION AND ANALYSIS 4 BASIC FINANCIAL STATEMENTS: Government-Wide Financial Statements: Statement of Net Position 10 Statement of Activities 11 Fund Financial Statements: Balance Sheet – Governmental Funds 12 Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Funds 13 Reconciliation of Governmental Funds: Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities 14 Proprietary Funds: Statement of Net Position 15 Statement of Revenues, Expenses, and Changes in Net Position 16 Statement of Cash Flows 17 Fiduciary Funds: Statement of Fiduciary Net Position 18 Statement of Changes in Fiduciary Net Position 19 COMPONENT UNIT FINANCIAL STATEMENTS: Statement of Net Position 20 Statement of Activities 21 NOTES TO FINANCIAL STATEMENTS 22 REQUIRED SUPPLEMENTARY INFORMATION: Employee Retirement and Benefit Systems: Schedule of Changes in Pension Liability 67 Schedule of Employer Contributions 68 Schedule of Changes in OPEB Liability and Related Rations 69 Budgetary Comparison Schedules – Major Funds: General Fund 70 Housing Commission 72 Library 73 American Rescue Plan Act (ARPA) 74 ---PAGE BREAK--- ii TABLE OF CONTENTS (Continued) SUPPLEMENTARY INFORMATION: Combining Balance Sheet – General Funds 75 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – General Funds 76 Combining Balance Sheet – Nonmajor Governmental Funds 77 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds 82 Combining Statement of Net Position – Internal Service Funds 87 Combining Statement of Revenues, Expenses, and Changes in Net Position – Internal Service Funds 88 Combining Statement of Cash Flows – Internal Service Funds 89 Combining Statement of Net Position – Nonmajor Enterprise Funds 90 Combining Statement of Revenues, Expenses, and Changes in Net Position – Nonmajor Enterprise Funds 91 Combining Statement of Cash Flows – Nonmajor Enterprise Funds 92 REPORTS ON COMPLIANCE: Independent Auditor’s 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 93 Independent Auditor’s Report on Compliance for each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 95 Schedule of Expenditures of Federal Awards 98 Notes to Schedule of Expenditures of Federal Awards 100 Schedule of Findings and Questioned Costs: Section I – Summary of Auditor’s Results 101 Section II – Financial Statement 102 Section III – Federal Award Findings 102 Summary Schedule of Prior Audit Findings: Section III – Federal Award Findings 103 ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 1 INDEPENDENT AUDITOR’S REPORT Members of the Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan, as of and for the year ending December 31, 2022, and the related notes to the financial statements, which collectively comprise the County of Otsego’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, as of December 31, 2022, 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. We did not audit the financial statements of the Otsego County Road Commission and the Otsego County Commission on Aging, which represent 86 and 7 percent, 82 and 3 percent, and 66 and 11 percent, respectively, of the assets, net position, and revenues of the aggregate discretely presented component units as of December 31, 2022. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Otsego County Road Commission and Otsego County Commission on Aging, is based solely on the report of the other auditors. Basis for Opinions 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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the County of Otsego and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. ---PAGE BREAK--- 2 Members of the Board of Commissioners County of Otsego, Michigan Responsibilities of Management 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; and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the County of Otsego’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently know information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgement made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgement and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatements of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit 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 County of Otsego’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about the County of Otsego’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. ---PAGE BREAK--- 3 Members of the Board of Commissioners County of Otsego, Michigan Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, employee retirement and benefits systems, and budgetary comparison schedules on pages 4 through 9, pages 67 through 69, and pages 70 through 74 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County of Otsego, Michigan’s basic financial statements. The accompanying combining major and nonmajor fund financial statements, and schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basis financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statement themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining major and nonmajor fund financial statements and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 12, 2023, on our consideration of the County of Otsego, Michigan's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely 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 effectiveness of the County of Otsego, Michigan's 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 County of Otsego, Michigan's internal control over financial reporting and compliance. Anderson, Tackman & Company, PLC Certified Public Accountants Kincheloe, Michigan September 12, 2023 ---PAGE BREAK--- Management’s Discussion and Analysis ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2022 4 As managers of the County of Otsego, Michigan, we offer readers of the County’s financial statements this narrative overview and analysis of the financial activities of the County for the fiscal year ended December 31, 2022. We encourage readers to consider the information presented here, in conjunction with additional information that is furnished in the financial statements and notes to the financial statements. Financial Highlights  Net position for the County was reported at $39,824,449 for 2021 and was $38,737,243 for 2022, a decrease of 3.0%. For 2022, net position for our business-type activities was $12,340,662 or 32.0% of total net position, while net position in our governmental activities was $26,396,581 or 68.0% of total net position.  At December 31, 2022, Otsego County’s governmental funds report a combined fund balance of $17,845,728 compared to $16,741,810 in 2021.  At December 31, 2022, the fund balance for the general fund was $6,992,094 with $29,426 nonspendable for prepaid and inventory items. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the County’s basic financial statements. The County’s basic financial statements are comprised of five components: 1) government-wide financial statements, 2) fund financial statements, 3) notes to the financial statements, 4) required supplementary information and 5) supplementary information. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the County’s assets, deferred outflows and inflows of resources and liabilities, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Both of the government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include Legislative, Judicial, General Government, Public Safety, Public Works, Health and Welfare, and Culture and Recreation. The business-type activities of the County include the Otsego County Bus System, Delinquent Tax Revolving, and Airport. The government-wide financial statements include not only the County itself (known as the primary government), but also legally separate component units for which the County is financially accountable. Component Units include the Otsego County Road Commission, Otsego County Ambulance Corporation, Otsego County Commission on Aging, and the Otsego County Financial information for component units is reported separately from the financial information presented for the primary government itself. The government-wide financial statements can be found on pages 10-11 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2022 5 Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. All of the funds of the County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement on revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The County maintains many individual funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the General, Housing Commission, Library, ARPA, and Library Construction Millage Capital Project, each of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these Nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The County adopts an annual appropriated budget for its general and special revenue funds. The governmental fund financial statements can be found on pages 12-14 of this report. Proprietary funds. Proprietary funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Services for which the County charges customers a fee are generally reported in proprietary funds. The Otsego County Bus System, Delinquent Tax Revolving, Tax Foreclosure and Airport are reported as major proprietary funds. The proprietary fund financial statements can be found on pages 15-17 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary fund financial statements can be found on pages 18-19 of this report. Notes to the financial statements. The notes provide additional information that is essential to fully understanding the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 22-66 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2022 6 Required supplementary information. Required supplementary information related to the County’s pension and OPEB can be found on pages 67-69 and budgetary comparison information related to the County’s major governmental funds can be found on pages 70-74 of this report. Supplementary information. In addition to the basic financial statements and accompanying notes, this report also presents certain supplementary information. This includes the combining major and nonmajor fund financial statements and the schedule of expenditures of federal awards. Combining major and nonmajor fund financial statements can be found on pages 75-92 and the schedule of expenditures of federal awards can be found on pages 98-99 of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of Otsego County, net position exceeded liabilities by $38,737,243 at the close of the most recent fiscal year. Otsego County Net Position 2022 2021 2022 2021 2022 2021 Current Assets 27,363,207 $ 24,462,873 $ 8,233,613 $ 10,489,693 $ 35,596,820 $ 34,952,566 $ Capital Assets 13,635,527 13,881,384 4,424,160 4,999,884 18,059,687 18,881,268 Total Assets 40,998,734 38,344,257 12,657,773 15,489,577 53,656,507 53,833,834 Deferred Outflows of Resources 2,806,905 2,513,606 138,895 197,328 2,945,800 2,710,934 Current Liabilities 1,318,226 1,842,613 146,490 210,772 1,464,716 2,053,385 Noncurrent Liabilities 7,886,493 9,178,817 - 230,034 7,886,493 9,408,851 Total Liabilities 9,204,719 11,021,430 146,490 440,806 9,351,209 11,462,236 Deferred Inflows of Resources 8,204,339 5,140,480 309,516 117,603 8,513,855 5,258,083 Net Position Net Investment in Capital Assets 13,629,051 13,482,876 4,424,160 4,999,884 18,053,211 18,482,760 Restricted 8,008,925 7,796,835 - - 8,008,925 7,796,835 Unrestricted 4,758,605 3,416,242 7,916,502 10,128,612 12,675,107 13,544,854 Total Net Position 26,396,581 $ 24,695,953 $ 12,340,662 $ 15,128,496 $ 38,737,243 $ 39,824,449 $ Total Governmental Business-type Activities Activities A large portion of the County’s net position reflects its investment in capital assets land, buildings, equipment and construction in progress); less any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay the debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2022 7 In addition to the net position invested in capital assets, certain other restrictions on use of net position apply due primarily to legal guidelines. The restricted net position total was $8,008,925. The remaining balance of unrestricted net position of $12,675,107 may be used to meet the government’s ongoing obligations to citizens and creditors. Otsego County Changes in Net Position 2022 2021 2022 2021 2022 2021 Program Revenues Charges for Services 2,472,005 $ 2,663,003 $ 2,222,471 $ 1,790,954 $ 4,694,476 $ 4,453,957 $ Operating Grants and Contributions 2,360,322 2,453,110 1,396,620 1,047,332 3,756,942 3,500,442 Capital Grants and Contributions 42,982 153,118 - - 42,982 153,118 General Revenues Property Taxes 8,053,305 7,656,518 835,050 806,333 8,888,355 8,462,851 State Revenue Sharing 532,851 516,280 - - 532,851 516,280 Investment Earnings 261,492 194,091 (3,560,336) (459,366) (3,298,844) (265,275) Other Revenue 1,545,845 1,832,029 380,769 128,638 1,926,614 1,960,667 Total Revenues 15,268,802 15,468,149 1,274,574 3,313,891 16,543,376 18,782,040 Program Expenses Legislative 278,686 206,570 - - 278,686 206,570 Judicial 2,013,346 1,947,336 - - 2,013,346 1,947,336 General Government 3,673,364 3,180,430 - - 3,673,364 3,180,430 Public Safety 4,602,711 4,503,686 - - 4,602,711 4,503,686 Public Works 594 323,484 - - 594 323,484 Health and Welfare 1,052,945 895,483 - - 1,052,945 895,483 Communtiy and Economic Development 457,849 321,644 - - 457,849 321,644 Recreation and Culture 1,780,155 1,703,088 - - 1,780,155 1,703,088 Interest Expense - Unallocated 6,196 (142,013) - - 6,196 (142,013) Other Expenses - - - - - - Delinquent Tax Collection - - 189,584 199,656 189,584 199,656 Bus System - - 1,141,574 1,292,243 1,141,574 1,292,243 Airport - - 2,166,653 1,831,124 2,166,653 1,831,124 Other Expenses - - 266,925 271,295 266,925 271,295 Total Expenses 13,865,846 12,939,708 3,764,736 3,594,318 17,630,582 16,534,026 Excess (Deficiency) Before Transfers 1,402,956 2,528,441 (2,490,162) (280,427) (1,087,206) 2,248,014 Transfers 297,672 51,870 (297,672) (51,870) - - Changes in Net Position 1,700,628 2,580,311 (2,787,834) (332,297) (1,087,206) 2,248,014 Net Position - Beginning 24,695,953 22,115,642 15,128,496 15,460,793 39,824,449 37,576,435 Net Position - Ending 26,396,581 $ 24,695,953 $ 12,340,662 $ 15,128,496 $ 38,737,243 $ 39,824,449 $ Total Governmental Business-type Activities Activities ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2022 8 Financial Analysis of the Government Funds As noted earlier, Otsego County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds: The focus of the County’s governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is useful in accessing the County’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The County’s general fund is the chief operating fund of the County. The County’s ending fund balance for the general fund was $6,992,094. General Fund Budgetary Highlights The General Fund realized $37,737 more in revenues than anticipated for the fiscal year. The General Fund operations also expended $538,822 less than appropriated and resulted in a net budget variance of $564,259. All of the General Fund services departments expended less than the budgeted amount for departmental operations in 2022. Elected Officials and Department Heads continue to exhibit diligence across the board of keeping within budget parameters or identifying problems before they occur. Over the course of the year the County Board amended the General Fund budget to reflect adjustments in revenues and expenditures that developed in the year. Capital Assets and Debt Administration Capital Assets: At December 31, 2022 the County had $18,059,687 invested in a range of assets. This includes a net decrease of $821,581 from last year as depreciation and deletions exceed additions. Otsego County Capital Assets (net of depreciation) 2022 2021 2022 2021 2022 2021 Land 2,849,995 $ 2,810,482 $ 99,998 $ 99,998 $ 2,949,993 $ 2,910,480 $ Construction in Progress 32,092 32,092 - - 32,092 32,092 Buildings 8,799,077 9,128,515 886,582 997,297 9,685,659 10,125,812 Furniture & Fixtures - 1,242 - - - 1,242 Equipment 1,463,618 1,464,453 33,503 57,128 1,497,121 1,521,581 Vehicles 467,049 418,747 664,385 588,963 1,131,434 1,007,710 Infrastructure 23,696 25,853 2,739,692 3,256,498 2,763,388 3,282,351 Total 13,635,527 $ 13,881,384 $ 4,424,160 $ 4,999,884 $ 18,059,687 $ 18,881,268 $ Total Governmental Business-type Activities Activities Additional information on the County’s capital assets can be found in Note 5 on pages 37-40 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2022 9 Debt Administration At the end of fiscal year 2022, the County had paid off its outstanding bond debt. This was due to the final payment amount of its bond debt in the amount of $395,000. All bonds are backed by the County’s full faith and credit of the government. The remainder of the County’s debt is comprised of notes payable, vested employee benefits, and net pension liabilities. Debt Administration 2022 2021 2022 2021 2022 2021 Installment and Bond Debt - 395,000 - - - 395,000 Premium on Bond Issuance - 3,508 - - - 3,508 Note Payable - Vehicle Lease 28,353 - - - 28,353 - Compensated Absences 210,533 235,607 - - 210,533 235,607 Total 238,886 $ 634,115 $ - $ - $ 238,886 $ 634,115 $ Total Governmental Business-type Activities Activities Additional information on the County’s long-term debt can be found in Note 7 on pages 40-41 of this report. Economic Factors and Next Year’s Budgets and Rates The following factors were considered in preparing the County’s 2023 Budget:  Property tax revenues are projected to increase approximately Highlight of the 2022 budget is as follows:  The cost of employee benefits continues to rise and will be monitored throughout the year. Requests for Information This financial report is designed to provide a general overview of the County’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Otsego County, 225 W Main, Gaylord, Michigan, 49735. ---PAGE BREAK--- Basic Financial Statements ---PAGE BREAK--- Governmental Business-type Component Activities Activities Totals Units ASSETS: Cash and Equivalents 14,073,427 $ 3,258,207 $ 17,331,634 $ 12,929,326 $ Investments 8,802,979 3,625,947 12,428,926 950,081 Receivables: Taxes 2,049,346 667,248 2,716,594 3,101,506 Accounts 1,454,839 135,158 1,589,997 2,144,076 Interest - 85,067 85,067 - Leases-Due in less than one year 1,818 4,175 5,993 - Leases-Due in more than one year 136,915 101,984 238,899 - Due from Governmental Units 569,756 108,578 678,334 - Inventories 6,748 57,380 64,128 855,376 Prepaid Items 152,762 133 152,895 161,080 Advance to Component Unit 114,617 - 114,617 - Net pension asset - 189,736 189,736 - Capital Assets Not Depreciated 2,882,087 99,998 2,982,085 13,523,841 Capital Assets (Net of Accumulated Depreciation) 10,753,440 4,324,162 15,077,602 28,660,997 TOTAL ASSETS 40,998,734 12,657,773 53,656,507 62,326,283 DEFERRED OUTFLOWS OF RECOURSES: Pension & OPEB Related Items 2,806,905 138,895 2,945,800 1,810,251 LIABILITIES: Accounts Payable 537,327 119,571 656,898 421,490 Accrued Liabilities 240,959 19,919 260,878 150,110 Advance from Government Units - - - 507,113 Unearned Revenue 301,054 7,000 308,054 96,429 Advance from Primary Government - - - 109,798 Vested Employee Benefits - Due in more than one year 210,533 - 210,533 303,176 Net OPEB Liability - Due in more than one year 810,295 - 810,295 738,382 Net Pension Liability - Due in more than one year 7,076,198 - 7,076,198 4,395,775 Note Payable - Due within one year 6,476 - 6,476 381,443 Note Payable - Due in more than one year 21,877 - 21,877 2,792,580 TOTAL LIABILITIES 9,204,719 146,490 9,351,209 9,896,296 DEFERRED INFLOWS OF RESOURCES: Leases 138,733 106,159 244,892 Pension & OPEB Related Items 1,528,483 203,357 1,731,840 420,422 Taxes Levied for a Subsequent Period 6,537,123 - 6,537,123 2,706,541 TOTAL DEFERRED INFLOWS 8,204,339 309,516 8,513,855 3,126,963 NET POSITION: Net Investment in Capital Assets 13,629,051 4,424,160 18,053,211 39,185,445 Restricted 8,008,925 - 8,008,925 2,909,353 Unrestricted 4,758,605 7,916,502 12,675,107 9,018,477 TOTAL NET POSITION 26,396,581 $ 12,340,662 $ 38,737,243 $ 51,113,275 $ County of Otsego, Michigan Statement of Net Position December 31, 2022 Primary Government See accompanying notes to financial statements. 10 ---PAGE BREAK--- Operating Capital Charges for Grants and Grants and Governmental Business-type Component Functions/Programs Expenses Services Contributions Contributions Activities Activities Totals Units Primary Government: Governmental Activities: Legislative 278,686 $ - $ - $ - $ (278,686) $ - $ (278,686) $ - $ Judicial 2,013,346 496,358 972,686 - (544,302) - (544,302) - General Government 3,673,364 683,713 165,256 - (2,824,395) - (2,824,395) - Public Safety 4,602,711 1,011,898 146,786 - (3,444,027) - (3,444,027) - Public Works 594 - - 42,982 42,388 - 42,388 - Health and Welfare 1,052,945 - 236,743 - (816,202) - (816,202) - Community/Economic Development 457,849 43,347 459 - (414,043) - (414,043) - Recreation and Culture 1,780,155 236,689 838,392 - (705,074) - (705,074) - Interest - Unallocated 6,196 - - - (6,196) - (6,196) - Total Governmental Activities 13,865,846 2,472,005 2,360,322 42,982 (8,990,537) - (8,990,537) - Business-type Activities: Delinquent Tax Collection 189,584 229,761 - - - 40,177 40,177 - Tax Foreclosure 127,161 82,012 - - - (45,149) (45,149) - Airport 2,166,653 1,583,904 - - - (582,749) (582,749) - Public Transit 1,141,574 209,114 1,396,620 - - 464,160 464,160 - Non-Major Enterprise Funds 139,764 117,680 - - - (22,084) (22,084) - Total Business-type Activities 3,764,736 2,222,471 1,396,620 - - (145,645) (145,645) - Total Primary Government 17,630,582 $ 4,694,476 $ 3,756,942 $ 42,982 $ (8,990,537) (145,645) (9,136,182) - Component Units: Road Commission 9,654,638 $ 2,714,507 $ 7,242,790 $ 2,100,014 $ 2,402,673 Ambulance 3,262,541 2,013,106 433,776 - (815,659) Commission on Aging 9/30/2022 2,130,824 - 646,129 - (1,484,695) 1,034,714 754,561 - - (280,153) Total Component Units 16,082,717 5,482,174 8,322,695 2,100,014 (177,834) Total 33,713,299 $ 10,176,650 $ 12,079,637 $ 2,142,996 $ General Revenues and Transfers: Taxes 8,053,305 835,050 8,888,355 4,010,097 State Revenue Sharing 532,851 - 532,851 Investment Earnings 261,492 (3,560,336) (3,298,844) 141,151 Transfers 297,672 (297,672) - - Other 1,545,845 380,769 1,926,614 121,118 Total General Revenues and Transfers 10,691,165 (2,642,189) 8,048,976 4,272,366 Changes in Net Position 1,700,628 (2,787,834) (1,087,206) 4,094,532 Net Position - Beginning 24,695,953 15,128,496 39,824,449 47,018,743 Net Position - Ending 26,396,581 $ 12,340,662 $ 38,737,243 $ 51,113,275 $ Program Revenues Primary Government County of Otsego, Michigan Statement of Activities For the Year Ended December 31, 2022 Net (Expense) Revenue and Changes in Net Position See accompanying notes to financial statements. 11 ---PAGE BREAK--- Capital Project ` American Library Construction Total Housing Rescue Plan Millage Capital Nonmajor Governmental General Commission Library Act Project Fund Governmental Funds ASSETS: Cash and Equivalents - Unrestricted 4,730,975 $ 235,684 $ 137,520 $ 1,506,568 $ 26,602 $ 7,169,494 $ 13,806,843 $ Investments - Unrestricted 1,994,718 - 869,498 3,327,742 - 2,445,873 8,637,831 Receivables: Taxes 325,664 - 571,146 - 2,077 1,150,459 2,049,346 Accounts 43,609 - - - - 137,844 181,453 Loans - 1,267,574 - - - - 1,267,574 Due from Other Funds 27,000 - - - - - 27,000 Advance to Other Funds - - - - - 114,617 114,617 Due from Governmental Units 313,619 - - - - 256,137 569,756 Inventories 6,748 - - - - - 6,748 Prepaid Items 22,678 - - - - 33,448 56,126 TOTAL ASSETS 7,465,011 $ 1,503,258 $ 1,578,164 $ 4,834,310 $ 28,679 $ 11,307,872 $ 26,717,294 $ LIABILITIES: Accounts Payable 265,032 $ 11,432 $ 17,024 $ - $ - $ 226,180 $ 519,668 $ Due to Other Funds - - - - - 27,000 27,000 Accrued Liabilities 197,070 159 - - - 43,889 241,118 Unearned Revenue 10,815 - - 4,791,470 - 290,239 5,092,524 TOTAL LIABILITIES 472,917 11,591 17,024 4,791,470 - 587,308 5,880,310 DEFERRED INFLOWS OF RESOURCES: Unavailable Resources - 1,267,574 - - - - 1,267,574 Taxes Levied for a Subsequent Period - - 571,146 - 2,077 1,150,459 1,723,682 TOTAL DEFERRED INFLOW OF RESOURCES - 1,267,574 571,146 - 2,077 1,150,459 2,991,256 FUND BALANCES: Nonspendable 29,426 - - - - 33,448 62,874 Restricted - 224,093 989,994 42,840 - 6,751,998 8,008,925 Committed - - - - 26,602 2,784,659 2,811,261 Assigned 1,037,458 - - - - - 1,037,458 Unassigned 5,925,210 - - - - - 5,925,210 TOTAL FUND BALANCES 6,992,094 224,093 989,994 42,840 26,602 9,570,105 17,845,728 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 7,465,011 $ 1,503,258 $ 1,578,164 $ 4,834,310 $ 28,679 $ 11,307,872 $ Reconciliation to amounts reported for governmental activities in the statement of net position: Capital Assets used by Governmental Activities 13,635,527 Long-term Debt Payable for Governmental Activities (28,353) Vested Employee Benefits (210,533) Pension Liability and Deferred Items (5,797,776) OPEB Liability and Deferred Items (810,295) Deferred Revenue Recognized as Current Revenue 1,267,574 Internal Service Funds 494,709 Net position of governmental activities 26,396,581 $ December 31, 2022 Governmental Funds Balance Sheet County of Otsego, Michigan Special Revenue Funds See accompanying notes to financial statements. 12 ---PAGE BREAK--- American Library Construction Total Housing Rescue Plan Millage Capital Nonmajor Governmental General Commission Library Act Project Fund Governmental Funds REVENUES: Taxes 5,874,424 $ - $ 551,713 $ - $ 509,296 $ 1,104,621 $ 8,040,054 $ Licenses and Permits 55,505 - - - - - 55,505 Federal Sources 135,380 68,639 13,250 - - 274,900 492,169 State Sources 1,506,939 - 30,141 - - 574,089 2,111,169 Local Sources 33,229 459 - - - - 33,688 Charges for Services 1,123,016 - - - - 1,676,506 2,799,522 Fines and Forfeits 9,150 - 186,526 - - 300 195,976 Interest and Rentals 138,776 59 13,661 33,783 200 69,377 255,856 Other Revenue 601,123 118,751 38,885 - - 525,009 1,283,768 TOTAL REVENUES 9,477,542 187,908 834,176 33,783 509,496 4,224,802 15,267,707 EXPENDITURES: Legislative 278,686 - - - - - 278,686 Judicial 2,074,553 - - - - 765,199 2,839,752 General Government 1,752,730 - - - - 210,054 1,962,784 Public Safety 2,912,011 - - - - 1,940,591 4,852,602 Public Works 7 - - - - 311,253 311,260 Health and Welfare 702,150 - - - - 381,675 1,083,825 Community/Economic Development 122,307 153,757 - - - - 276,064 Recreation and Culture - - 773,388 - - 813,946 1,587,334 Other Expenditures 392,505 - - - - - 392,505 Capital Outlay - - - - - 475,749 475,749 Debt Service - - - - - 403,400 403,400 TOTAL EXPENDITURES 8,234,949 153,757 773,388 - 5,301,867 14,463,961 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,242,593 34,151 60,788 33,783 509,496 (1,077,065) 803,746 OTHER FINANCING SOURCES (USES): Transfers In 50,000 161,128 - - - 1,481,907 1,693,035 Transfers Out (728,334) (161,128) - - (503,400) (1,392,863) Total Other Financing Sources (Uses) (678,334) - - - (503,400) 1,481,906 300,172 NET CHANGE IN FUND BALANCE 564,259 34,151 60,788 33,783 6,096 404,841 1,103,918 FUND BALANCES BEGINNING OF YEAR 6,427,835 189,942 929,206 9,057 20,506 9,165,264 16,741,810 FUND BALANCES END OF YEAR 6,992,094 $ 224,093 $ 989,994 $ 42,840 $ 26,602 $ 9,570,105 $ 17,845,728 $ For the Year Ended December 31, 2022 Changes in Fund Balance - Governmental Funds Statement of Revenues, Expenditures, and County of Otsego, Michigan See accompanying notes to financial statements. 13 ---PAGE BREAK--- Net changes in fund balances - total governmental funds 1,103,918 $ The change in net position reported for governmental activities in the statement of activities is different because: Governmental funds reported capital outlays as expenditures. However, in the statement of activities the cost of those assets is capitalized and the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation and loss on disposal, ($790,180) reduced by capital outlay, $530,055. (260,125) Repayment of principal is an expenditure in the governmental funds but reduces the liability in the statement of net position. Principal repayments: Recognition of Bond Premium 3,508 Bonds Payable 395,000 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds, but rather are deferred until the following year. Change in unavailable revenue (192,473) Under the modified accrual basis of accounting used in governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the statement of activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available. In addition, interest on long-term debt is not recognized under the modified accrual basis of accounting until due, rather than as it accrues. This adjustment combines the following net changes: Vested employee benefits 4,209 Accrued Interest Payable (9,413) OPEB Liability & Related Deferred Items 381,219 Pension Liability & Related Deferred Items 378,211 Internal service fund activity (103,426) Changes in net position of governmental activities 1,700,628 $ For the Year Ended December 31, 2022 County of Otsego, Michigan Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities See accompanying notes to financial statements. 14 ---PAGE BREAK--- Governmental Activities Tax Bus Nonmajor Total Internal Delinquent Foreclosure System Enterprise Enterprise Service Tax Fund Fund Airport 9/30/2022 Funds Funds Funds ASSETS: Current Assets: Cash and Equivalents 634,158 $ 1,182,289 $ 37,712 $ 1,109,529 $ 294,519 $ 3,258,207 $ 266,584 $ Investments 909,123 1,390,371 - 1,326,453 - 3,625,947 165,148 Taxes Receivable 643,313 - - 23,935 - 667,248 - Interest Receivable 85,067 - - - - 85,067 - Accounts Receivable 7,315 - 114,146 2,897 10,800 135,158 7,133 Lease Receivable-Due in less than one year - - 4,175 - - 4,175 1,818 Lease Receivable-Due in more than one year - - 101,984 - - 101,984 136,915 Due from Governmental Units - - - 108,578 - 108,578 - Prepaid Items 55 78 - - - 133 96,636 Inventory - - 57,380 - - 57,380 - Total Current Assets 2,279,031 2,572,738 315,397 2,571,392 305,319 8,043,877 674,234 Noncurrent Assets: Net Pension Asset - - - 189,736 - 189,736 - Capital Assets (Not Depreciated) - - - 99,998 - 99,998 - Capital Assets (Net of Accumulated Depreciation) - - 3,505,117 806,767 12,278 4,324,162 - Total Noncurrent Assets - - 3,505,117 1,096,501 12,278 4,613,896 - TOTAL ASSETS 2,279,031 2,572,738 3,820,514 3,667,893 317,597 12,657,773 674,234 DEFERRED OUTFLOWS OF RESOURCES: Pension Related Items - - - 138,895 - 138,895 - LIABILITIES: Current Liabilities: Accounts Payable - 376 14,065 89,555 15,575 119,571 33,196 Accrued Liabilities 3,845 3,845 12,229 - - 19,919 7,596 Unearned Revenue - - 7,000 - - 7,000 - Total Current Liabilities 3,845 4,221 33,294 89,555 15,575 146,490 40,792 TOTAL LIABILITIES 3,845 4,221 33,294 89,555 15,575 146,490 40,792 DEFERRED INFLOWS OF RESOURCES: Leases - - 106,159 - - 106,159 138,733 Pension Related Items - - - 203,357 - 203,357 - Total Deferred Inflows of Resourses - - 106,159 203,357 - 309,516 138,733 NET POSITION: Net Investment in Capital Assets - - 3,505,117 906,765 12,278 4,424,160 - Unrestricted 2,275,186 2,568,517 175,944 2,607,111 289,744 7,916,502 494,709 TOTAL NET POSITION 2,275,186 $ 2,568,517 $ 3,681,061 $ 3,513,876 $ 302,022 $ 12,340,662 $ 494,709 $ Major Business-type Activities - Enterprise Funds County of Otsego, Michigan Statement of Net Position Proprietary Funds December 31, 2022 See accompanying notes to financial statements. 15 ---PAGE BREAK--- Governmental Activities Tax Bus Nonmajor Total Internal Delinquent Foreclosure System Enterprise Enterprise Service Tax Fund Fund Airport 9/30/2022 Funds Funds Funds OPERATING REVENUES: Charges for Services 60,902 $ 82,012 $ 1,583,904 $ 209,114 $ 117,680 $ 2,053,612 $ 2,412,671 $ Interest on Delinquent Taxes 168,859 - - - - 168,859 - Other Revenues - - 33,814 - - 33,814 - TOTAL REVENUES 229,761 82,012 1,617,718 209,114 117,680 2,256,285 2,412,671 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 97,869 91,160 252,950 636,602 - 1,078,581 2,131,103 Contractual Services 56,901 - 18,392 - - 75,293 59,083 Materials and Supplies 4,800 1,446 1,127,912 - 51,854 1,186,012 43,603 Equipment Repair and Maintenance - - - - - - 18,288 Utilities - - - - - - 216,955 Depreciation - - 592,221 201,648 12,301 806,170 - Other Expenses 30,014 34,555 175,178 303,324 75,609 618,680 50,201 TOTAL EXPENSES 189,584 127,161 2,166,653 1,141,574 139,764 3,764,736 2,519,233 OPERATING INCOME (LOSS) 40,177 (45,149) (548,935) (932,460) (22,084) (1,508,451) (106,562) NON-OPERATING REVENUES (EXPENSES): State Grants - - - 609,475 - 609,475 - Federal Grants - - - 787,145 - 787,145 - Interest Earned on Investments (3,615,398) 40,834 12,629 - 1,599 (3,560,336) 5,636 Property Taxes Levied - - - 835,050 - 835,050 - Other 2,787 291,614 - 52,554 - 346,955 - TOTAL NONOPERATING REVENUES (EXPENSES) (3,612,611) 332,448 12,629 2,284,224 1,599 (981,711) 5,636 INCOME (LOSS) BEFORE INTERFUND TRANSFERS (3,572,434) 287,299 (536,306) 1,351,764 (20,485) (2,490,162) (100,926) INTERFUND TRANSFERS: Transfers In 100,001 - 57,533 - 6,000 163,534 - Transfers Out (461,206) - - - - (461,206) (2,500) CHANGES IN NET POSITION (3,933,639) 287,299 (478,773) 1,351,764 (14,485) (2,787,834) (103,426) NET POSITION, BEGINNING OF YEAR 6,208,825 2,281,218 4,159,834 2,162,112 316,507 15,128,496 598,135 NET POSITION, END OF YEAR 2,275,186 $ 2,568,517 $ 3,681,061 $ 3,513,876 $ 302,022 $ 12,340,662 $ 494,709 $ County of Otsego, Michigan Major Business-type Activities - Enterprise Funds Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds For the Year Ended December 31, 2022 See accompanying notes to financial statements. 16 ---PAGE BREAK--- Governmental Activities Tax Bus Nonmajor Total Internal Delinquent Foreclosure System Enterprise Enterprise Service Tax Fund Fund Airport 9/30/2022 Funds Funds Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 255,318 $ 82,142 $ 1,600,777 $ 239,102 $ 120,230 $ 2,297,569 $ 2,415,457 $ Payments to Suppliers (98,236) (35,986) (1,393,497) (303,324) (142,251) (1,973,294) (391,543) Payments to Employees for Services and Benefits (98,505) (89,978) (251,044) (891,471) - (1,330,998) (2,150,023) Net Cash Provided (Used) by Operating Activities 58,577 (43,822) (43,764) (955,693) (22,021) (1,006,723) (126,109) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: State Grants - - - 464,776 - 464,776 - Federal Grants - - - 558,197 - 558,197 - Property Tax - - - 814,235 - 814,235 - Other 2,787 291,614 7,000 52,554 - 353,955 - Transfers In 100,001 - 57,533 - 6,000 163,534 - Transfers Out (461,206) - - - - (461,206) (2,500) Net Cash Provided (Used) by Noncapital and Related Financing Activities (358,418) 291,614 64,533 1,889,762 6,000 1,893,491 (2,500) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of Capital Assets - - - (230,446) - (230,446) - Federal Capital Grant - - - 214,436 - 214,436 - State Capital Grant - - - 16,010 - 16,010 - Net Cash Provided (Used) by Capital and Related Financing Activities - - - - - - - CASH FLOWS FROM INVESTING ACTIVITIES: Net Sale or (Purchase) of Investments 2,409,588 197,744 - - - 2,607,332 5,113 Interest Earnings (3,615,398) 40,834 12,629 - 1,599 (3,560,336) 5,636 Net Cash Provided (Used) by Investing Activities (1,205,810) 238,578 12,629 - 1,599 (953,004) 10,749 Net Increase (Decrease) in Cash and Equivalents (1,505,651) 486,370 33,398 934,069 (14,422) (66,236) (117,860) Balances - Beginning of the Year 2,139,809 695,919 4,314 1,501,913 308,941 4,650,896 384,444 Balances - End of the Year 634,158 $ 1,182,289 $ 37,712 $ 2,435,982 $ 294,519 $ 4,584,660 $ 266,584 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) 40,177 $ (45,149) $ (548,935) $ (932,460) $ (22,084) $ (1,508,451) $ (106,562) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - - 592,221 201,648 12,301 806,170 - Change in Assets and Liabilities: Taxes Receivable 22,497 - - - - 22,497 - Interest Receivable 1,363 - - - 1,363 - Accounts Receivable (5,456) - (16,941) 29,988 2,550 10,141 2,786 Interfund Advances, Payables, & Receivables 7,000 - - - - 7,000 - Prepaid Items 153 130 208 - 1,988 2,479 (14,693) Inventory - - (34,392) - - (34,392) - Accounts Payable (6,521) 15 (37,831) 20,714 (16,776) (40,399) (5,739) Accrued Liabilities (636) 1,182 1,906 - - 2,452 (1,901) Change in Pension Liability and Deferred Amounts - - - (275,583) - (275,583) - Net Cash Provided (Used) by Operating Activities 58,577 $ (43,822) $ (43,764) $ (955,693) $ (22,021) $ (1,006,723) $ (126,109) $ Business-type Activities - Enterprise Funds Major County of Otsego, Michigan Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2022 See accompanying notes to financial statements. 17 ---PAGE BREAK--- County of Otsego, Michigan Michigan General Library Municipal Risk Agency Penal Management Fund Fines Authority Total ASSETS: Cash and Equivalents 1,446,274 $ 79,287 $ 264,204 $ 1,789,765 $ Taxes for Other Governments 1,341,554 - - 1,341,554 TOTAL ASSETS 2,787,828 $ 79,287 $ 264,204 $ 3,131,319 $ LIABILITIES: Undistributed Tax Collections 2,159,186 $ - $ - $ 2,159,186 $ Due to Other Governments 376,651 79,287 - 455,938 Bonds, Restitutions and Payables to Others 251,991 - - 251,991 TOTAL LIABILITIES 2,787,828 79,287 - 2,867,115 Net Position Restricted - $ - $ 264,204 $ 264,204 $ Statement of Fiduciary Net Position Fiduciary Funds December 31, 2022 See accompanying notes to financial statements. 18 ---PAGE BREAK--- Michigan General Library Municipal Risk Agency Penal Management ADDITIONS: Fund Fines Authority Total Contributions Members - $ - $ 50,000 $ 50,000 $ Interest - - 7,511 7,511 Taxes Collected for Other Governments 28,340,658 - - 28,340,658 Fees and Fines Collected on behalf of Other Governments 328,707 160,370 - 489,077 Fees and Fines Collected on behalf of Other Agencies 2,589,353 - - 2,589,353 Collections from or On Behalf of Inmates 179,842 - - 179,842 Gifts and Bequests 22,029 - - 22,029 TOTAL ADDITIONS 31,460,589 160,370 57,511 31,678,470 DEDUCTIONS: Payment of Taxes to Other Governments 28,252,489 - - 28,252,489 Fees and Fines Remitted to Other Units of Government 399,754 - - 399,754 Fees and Fines Remitted to Other Agencies 2,591,084 254,701 - 2,845,785 Payments on Behalf of Inmates 189,402 - - 189,402 Bonds, Restitutions, and Payables to Others - - 176,136 176,136 Beneficiary Payments to Individuals 27,859 - - 27,859 TOTAL DEDUCTIONS 31,460,589 254,701 176,136 31,891,426 Change in Net Position - (94,331) (118,625) (212,956) Net Position, Beginning of Year - 94,331 382,829 477,160 Net Position, End of Year - $ - $ 264,204 $ 264,204 $ County of Otsego, Michigan Statement of Changes of Fiduciary Net Position Fiduciary Funds December 31, 2022 19 ---PAGE BREAK--- Component Units ---PAGE BREAK--- Commission Road Ambulance on Aging Commission Corporation 9/30/2022 Totals ASSETS: Cash and Equivalents 10,950,684 $ 241,993 $ 1,675,742 $ 60,907 $ 12,929,326 $ Investments - 726,681 - 223,400 950,081 Receivables: Taxes 1,630,488 1,113,950 - 357,068 3,101,506 Accounts (Net of Allowance) 1,643,963 417,500 38,917 43,696 2,144,076 Inventories 845,288 - 2,697 7,391 855,376 Prepaid Items 161,080 - - - 161,080 Capital Assets (Not Depreciated) 13,523,841 - - - 13,523,841 Capital Assets (Net of Accumulated Depreciation) 24,661,971 1,259,926 2,739,100 - 28,660,997 TOTAL ASSETS 53,417,315 3,760,050 4,456,456 692,462 62,326,283 DEFERRED OUTFLOWS OF RESOURCES Pension & OPEB Related Items 1,810,251 - - - 1,810,251 LIABILITIES: Accounts Payable 297,931 20,965 81,998 20,596 421,490 Accrued Liabilities 124,955 5,076 20,079 - 150,110 Advance from Governmental Units 507,113 - - - 507,113 Unearned Revenues - - 96,079 350 96,429 Installment Notes Payable - Due within one year 136,548 174,630 70,265 - 381,443 Installment Notes Payable - Due in more than one year 135,662 - 2,656,918 - 2,792,580 Advance from Primary Government - 109,798 - - 109,798 Net Pension Liabilities- Due in more than one year 4,395,775 - - - 4,395,775 (OPEB) Labilities - Due in more than one year 738,382 - - - 738,382 Vested Employee Benefits - Due in more than one year 303,176 - - - 303,176 TOTAL LIABILITIES 6,639,542 310,469 2,925,339 20,946 9,896,296 DEFERRED INFLOWS OF RESOURCES: Pension & OPEB Related Items 420,422 - - - 420,422 Taxes Levied for a Subsequent Period 1,235,523 1,113,950 - 357,068 2,706,541 Total Deferred Inflows of Resources 1,655,945 1,113,950 - 357,068 3,126,963 NET POSITION: Net Investment in Capital Assets 37,913,602 1,259,926 11,917 - 39,185,445 Restricted for Ambulance and Emergency Services - 1,075,705 - - 1,075,705 Restricted for - - - 314,448 314,448 Restricted for Commission on Aging - - 1,519,200 - 1,519,200 Restricted for Road Commission 9,018,477 - - - 9,018,477 TOTAL NET POSITION 46,932,079 $ 2,335,631 $ 1,531,117 $ 314,448 $ 51,113,275 $ County of Otsego, Michigan Statement of Net Position Component Units December 31, 2022 See accompanying notes to financial statements. 20 ---PAGE BREAK--- Operating Capital Commission Charges for Grants and Grants and Road Ambulance on Aging Functions/Programs Expenses Services Contributions Contributions Commission Corporation 9/30/2022 Total Road Commission: Public Works 9,654,638 $ 2,714,507 $ 7,242,790 $ 2,100,014 $ 2,402,673 $ - $ - $ - $ 2,402,673 $ Ambulance Corporation: Health and Welfare 3,262,541 2,013,106 433,776 - - (815,659) - - (815,659) Commission on Aging 9/30/2022: Health and Welfare 2,130,824 - 646,129 - - - (1,484,695) - (1,484,695) Recreation and Culture 1,034,714 754,561 - - - - - (280,153) (280,153) Total Component Units 16,082,717 $ 5,482,174 $ 8,322,695 $ 2,100,014 $ 2,402,673 (815,659) (1,484,695) (280,153) (177,834) General Revenues: Property Tax 1,192,357 1,080,866 1,391,679 345,195 4,010,097 Investment Earnings 116,180 13,029 8,583 3,359 141,151 Other 34,179 - 84,152 2,787 121,118 Total General Revenues 1,342,716 1,093,895 1,484,414 351,341 4,272,366 Changes in Net Position 3,745,389 278,236 (281) 71,188 4,094,532 Net Position - Beginning 43,186,690 2,057,395 1,531,398 243,260 47,018,743 Net Position - Ending 46,932,079 $ 2,335,631 $ 1,531,117 $ 314,448 $ 51,113,275 $ Net (Expense) Revenue and Changes in Net Position County of Otsego, Michigan Statement of Activities Component Units For the Year Ended December 31, 2022 Program Revenues See accompanying notes to financial statements. 21 ---PAGE BREAK--- Notes to Financial Statements ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 22 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Otsego County (the "County" or the "Government") was organized in 1840 and covers an area of approximately 527 square miles divided into nine Townships, one village, and one city. The County seat is located in the City of Gaylord. The County operates under an elected board of commissioners (nine members) with an appointed County Administrator who assists with day-to-day operations. The County provides services to its more than 24,000 residents in many areas including law enforcement, administration of justice, community enrichment, economic development, and human services. The financial statements of the County have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The County's significant accounting policies are described below. A – Reporting Entity: As required by generally accepted accounting principles, these financial statements present the government and its component units, entities for which the County is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations and as such, data from these units are combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize that they are legally separate from the government. Blended Component Units Otsego County Building Authority (the "Building Authority") - The Building Authority is governed by a three- member board appointed by the County Board of Commissioners. Although it is legally separate from the County, the Building Authority is reported as if it were part of the primary government because its sole purpose is to finance and construct the County's public buildings. The financial statements of the Otsego County Building Authority are reported in the County's Debt Service Fund and Capital Projects Funds as presented in this report. Discretely Presented Component Units The component unit’s column in the government-wide financial statements include the financial data of the other component units of the County. The following is a summary of the component units: Otsego County Road Commission (the "Road Commission") - The Road Commission which is established pursuant to the County Road Law (MCL 224.1) is governed by a three-member Board of County Road Commissioners elected biannually to serve a six-year term. The Road Commission is responsible for the maintenance and construction of the County Road System. It may not issue debt without the County's approval and the tax levy is subject to the County Board of Commissioners' approval. If approval is granted, Road Commission taxes are levied under the taxing authority of the County, as approved by the County electors, and would be included as part of the County's total tax levy as well as reported in the County Road Fund. Otsego County Ambulance Corporation, Inc. (the "Ambulance Corporation") - The Ambulance Corporation, a nonprofit corporation which was established pursuant to the provisions of Public Act 327 of 1931, as amended, and Public Act 284 of 1972, has an agreement with Otsego County to provide ambulance service in and about Otsego County. A nine-member board governs the Ambulance Corporation. The Ambulance Corporation may not issue debt without the County's approval and a tax levy is subject to the County Board of Commissioners' approval. If approval is granted, the Ambulance Corporation's taxes are levied under the taxing authority of the County, as approved by the County electors, and would be included as part of the County's total tax levy as well as in the Ambulance Corporation Fund. All assets are in the name of the County. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 23 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Otsego County Commission on Aging (the "Commission") - The Commission is legally separable and administered by an advisory Board of Directors (the "Board") with twelve members. The Commission may not issue debt and the tax levy is subject to the County Board of Commissioners' approval. The Commission's taxes are levied under the taxing authority of the County, as approved by the County electors, and is included as part of the County's total tax levy as well as reported in the Commission on Aging Fund. Otsego County (the - The a nonprofit corporation that was established pursuant to the provisions of Public Act 162 of 1982, has an agreement with Otsego County to operate and maintain a recreational and sports complex for Otsego County. The agreement was amended on December 15, 2015 and expires on December 15, 2030. The sports complex was constructed during 1995 and opened in early 1996. The is operated by a Board of Directors, which consists of between seven and fifteen members. Members recommended by the Board of Directors and forwarded to the County Board of Commissioners for review and approval. The may not issue debt without the County's approval and the tax levy is subject to the County Board of Commissioners' approval. The taxes are levied under the taxing authority of the County, as approved by the County electors, and are included as part of the County's total tax levy recorded in the County's Fund. The County Board of Commissioners also approves the budget and fee charges. Although this is a nonprofit corporation, the activities fit the description of a governmental special revenue fund type and, accordingly, are reported as a component unit in this report. Complete financial statements of the individual component units can be obtained from their respective administrative offices as listed below or from the County Clerk's Office at 225 West Main Street, Gaylord, MI 49735. Administrative Offices Otsego County Otsego County Road Commission 1250 Gornick Avenue Industrial Park, PO Box 537 Gaylord, MI 49735 Gaylord, MI 49735 Otsego County Ambulance Corporation, Inc. Otsego County Commission on Aging 100 McLouth, PO Box 642 120 Grandview Boulevard Gaylord, MI 49735 Gaylord, MI 49735 Joint Ventures Health Department of Northwest Michigan - The Health Department of Norwest Michigan (formerly known as the Northwest Michigan Community Health Agency) (the Department) is a Michigan municipal body, created under Act 368 of the Public Acts of 1978. The Department is a component unit of the County of Charlevoix, Michigan which is funded through agreements with the State of Michigan, local appropriations and charges for services rendered. Otsego County's appropriation to the Health Agency recorded in the General fund in 2022 was $251,102. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 24 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Joint Ventures (Continued) Financial information as of September 30, 2022 (the most recent audited financial statements) is as follows: Assets $ 10,426,279 Deferred outflows of resources 155,844 Liabilities 6,251,284 Deferred inflows of resources 476,453 Net position 3,854,386 Change in net position 254,095 Participant payments Total participant payments 1,111,492 County of Otsego 251,102 County of Otsego percentage of total 23% Michigan Technical Education Center - Kirtland Community College, a community college district established pursuant to the provisions of Public Act 331 of 1996, obtained funding through the Michigan Economic Development Corporation ("MEDC") to construct and equip Michigan Technical Education Center ("M-TEC"), an educational facility in Otsego County. On December 7, 1999, the electors of the County authorized a tax levy not to exceed .6464 mills for a period of twenty years for the purpose of generating funds to operate the facility. The facility provides vocational, technical, job skills, or workforce development programs and services. Pursuant to the operating agreement, Kirtland established an advisory board (which includes representatives of the County) and is to report its preliminary, final, and amended M-TEC budgets to the County's board. Financial records for M-TEC are recorded and maintained by the Kirtland Community College and are audited separately. M-TEC is used in conjunction with and occupied by the University Center established and operated by the University Center of Gaylord, a non-profit corporation. North Country Community Mental Health Authority (the "CMH Authority") - The CMH Authority consists of the counties of Antrim, Charlevoix, Cheboygan, Emmet, Kalkaska, and Otsego. Financial records for the CMH Authority are recorded and maintained by the Authority and audited separately. The funding formula for the community mental health operations and services is in accordance with an agreement approved by each county. The current agreement provides that each county will pay at an agreed upon rate. The Otsego County 2022 local match, recorded in the General fund, was $94,003. Otsego County University Center (the "Facility") - Effective January 1, 2017, management of the Facility transferred to Kirtland Community College (the "College"). The terms of the agreement between the County and the College are effective January 1, 2017, through December 31, 2020, which will automatically be extended unless otherwise modified. The Governance Advisory Board (the "GAB") serves as citizen input on the operations of the Facility under the College's management. Membership of the GAB will consist of 16 to 20 members, of which, 2 will be members from the Otsego County Board of Commissioners or the County Administrator and the remaining members shall represent a broad variety of interests in Otsego County to include but not limited to those banking and financial services, medical, manufacturing, independent business owners and education. Further information regarding the Facility's operation is presented in a separately issued College report. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 25 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Component Unit and Enterprise Fund with Different Fiscal Year Ends The financial information presented in this report is for the year ended December 31, 2022, except for the following component unit and enterprise fund: Fund Fund Presentation Fiscal Year End Commission on Aging Component Unit September 30, 2022 Bus System Enterprise Fund September 30, 2022 B – Government-Wide and Fund Financial Statements The government-wide financial statements the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenue. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C – Measurement Focus, Basis of Accounting and Financial Statement Presentation: The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Agency funds, a type of fiduciary fund, are unlike all other types of funds, reporting only assets and liabilities. Therefore, agency funds cannot be said to have a measurement focus. They do, however, use the accrual basis of accounting to recognize receivables and payables. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 26 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. A 60-day availability period is used for revenue recognition for all governmental fund revenues, except for expenditure-driven grants, which must be collected within one year, and property taxes. Property taxes for the County, levied and payable within the current fiscal year, are fully recognized inasmuch as any uncollected taxes are settled with the Delinquent Tax Revolving fund not later than March 1 of the following fiscal year. While this schedule exceeds the normal availability period for property taxes of 60 days, management believes that fully recognizing property taxes in the year they are intended to finance better reflects the matching concept of generally accepted accounting principles. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, intergovernmental revenue, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and as such have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. Under the terms of grant agreements, the County funds certain programs by a combination of specific cost- reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net position available to finance the program. It is the County’s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants, and then by general revenues. The 2022 taxable valuation of the County of Otsego totaled $1,441,146,322, on which ad valorem taxes levied consisted of 4.0214 mills for General Operations, 0.2978 mills for Animal Control Operations, 0.9929 mills for Commission on Aging, 0.7744 mills for EMS Operations, 0.5957 mills for Transportation authority, 0.2500 mills for Park and Recreation Operations, 0.9929 mills for County Roads, 0.3971 mills for the Library Operations, 0.2500 mills for County Recycling Operations, 0.2482 mills for Operations, and 0.9730 mills for M- Tec/UC Center of Gaylord Operations. These amounts are recognized in the respective General, Special Revenue, Debt Service, Component Units and Enterprise Fund financial statements as tax revenue, with the exception of the M-Tec/UC Center of Gaylord levy as this is run through the agency funds. The County reports the following major governmental funds: General Fund This is the County’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Housing Commission Fund This fund accounts for grant revenue and contributions restricted for the improvement of housing within the County. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 27 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Library Fund This fund accounts for grant revenue, taxes, charges for service, and contributions restricted for the maintenance and operations of library operations run by the County. The Library Construction Millage Fund This fund accounts for and reports for the tax revenue collections and distributions related to the millage for the construction of the library building. The American Rescue Plan Act Fund This fund accounts for the receipt of the American Rescue Plan Act (ARPA) funds. The county reports the following major proprietary funds: The Delinquent Tax Revolving Fund This fund accounts for the purchase of and subsequent collection of delinquent taxes. The Tax Foreclosure Fund This fund accounts for the activities and proceeds of the activities related to the sales of homes foreclosed on within the county related to unpaid taxes. The Airport Fund This fund accounts for the financial activity of the Gaylord Regional Airport. The Bus System Fund This fund accounts for the operation of the public transit system. Additionally, the County reports the following fund types: Special Revenue Funds The special revenue funds account for revenue sources that are legally restricted to expenditures for specific purposes (not including major capital projects). Capital Project Fund The capital project fund is used to account for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). Enterprise Funds These funds account for the County’s business-type operations that provide services to residents of the County for a fee. Internal Service Funds These funds account for operations that provide building and ground services, administration, and health insurance to other departments of the County on a cost-reimbursement basis. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 28 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Agency Funds Agency Funds are used to account for assets held by the County as an agent for individuals, private organizations, other governments, and/or other funds. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government’s tax collection function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenue include: charges to customers or applicants for goods, services or privileges provided; operating grants and contributions; and capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes. Proprietary funds distinguish operating revenue and expenses from nonoperating items. Operating revenue and expenses generally result from providing services in connection with a proprietary fund’s principal ongoing operations. The principal operating revenue of our proprietary funds relate to charges to customers for tax collections. Operating expenses for proprietary funds include the cost of sales and services, and administrative expenses. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. D - Assets, Liabilities, Deferred Outflows/Inflows of Resources and Net Position/Fund Balance Bank Deposits and Investments – Deposits and investments are considered to be cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income from all funds is allocated to each fund based on the average cash balances. Deposits are recorded at cost. Receivables and Payables – In general, outstanding balances between funds are reported as “due to/from other funds.” Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as “advances to/from other funds. Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as “internal balances.” All trade and property tax receivables are shown as net of allowance for uncollectible amounts. Property taxes are levied on each December 1st and July 1st on the taxable valuation of property as of the preceding December 31st. Taxes are considered delinquent on March 1st of the following year, at which time penalties and interest are assessed. The accounts receivable for the Ambulance Corporation component unit is presented net of allowance for doubtful accounts of $417,500. Inventories and Prepaid Items – All inventories, including the cost of supplies, are expensed when purchased. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 29 Leases (Lessee) – The lease liability is measured at the present value of the payments expected to be made during the lease term and subsequent extensions, if they are reasonably certain to be exercised. The lease liability is subsequently reduced by the principal portion of the lease payments. Lease assets are recorded at the amount of the initial measurement of the lease liabilities and modified by any prepayments made at or before the commencement of the lease, less any lease incentives received from the lessor. Lease assets are amortized using the straight-line method over the shorter of the useful life of the underlying asset or the lease term, unless the lease contains an option to purchase the underlying asset at the end of the term. The useful life will be used to amortize the lease if a purchase option is present, and it is reasonably certain the entity will exercise that option. Key estimates and judgements related to leases include the discount rate used to discount the expected lease payments to present value, the lease term, and lease payments. The County uses the interest rate charged by the lessor as the discount rate, when available. When this rate is not provided, the County generally uses the estimated incremental borrowing rate. The lease term is the non-cancellable period if the lease, which is the initial term of the lease and any options to extend if they are reasonably certain to be exercised. Payments included in the measurement of the lease liability are composed of fixed payments and purchase option prices that are reasonably certain to be exercised. The County monitors changes in circumstances that would require a remeasurement of its leases and will remeasure the lease asset and liability if changes occur that are anticipated to significantly affect the amount of the lease asset and liability. The County does not currently have any items that require reporting in this category. Leases (Lessor) – The County recognizes leases receivable and deferred inflows related to lease items in the financial statements. Variable payments based on the future performance of the lessee are not included in the measurement of the lease receivable. At the commencement of a lease, the lease receivable is measured at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflows of resources are measured as the initial amount of the lease receivable and is subsequently adjusted for lease payments received at or before the commencement of the lease. Deferred inflows of resources related to lease items are recognized as revenue over the lease term in a systematic and rational method. Key estimates and judgements related to lease receivables and deferred inflows include the discount rate used to discount the expected lease payments to present value and the lease term. The County uses its estimated incremental borrowing rate as the lease discount rate. The lease term is the non-cancellable period of the lease, which is the initial term of the lease and any options to extend if they are reasonably certain to be exercised. Payments included in the measurement of the lease receivable are composed of fixed payments expected to be received from the lessee. The County monitors changes in circumstances that would require a remeasurement of its leases and will remeasure the lease receivable if changes occur that are anticipated to significantly affect the amount of the lease receivable. The County does have items that qualify for reporting in this category. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 30 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets – Capital assets, which include property, plant and equipment, are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined by the government as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Property, plant, and equipment are depreciated using the straight-line method over the following useful lives: Buildings 40 years Bus Operating Facility 12 - 20 years Shop Equipment & Furniture 3 - 10 years Vehicles 3 - 7 years Equipment 3 - 10 years Infrastructure 20 years Vested Employee Benefits Payable – County General Employees - It is the County's policy to permit employees to accumulate earned but unused sick pay for the library employees and vacation pay benefits for all of the employees with certain limitations which vary among employee classification. Vacation and sick pay are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee retirements. Long-Term Obligations – In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts, are deferred and amortized over the life of the bonds using the straight-line basis. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as expense when incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Deferred Outflows 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/expenditure) until then. The government has pension and OPEB items that qualify for reporting in this category. Deferred Inflows of Resources – In addition to liabilities, the statement of net position and governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of 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 government has lease, pension, and OPEB items and taxes levied for a subsequent period that qualify for reporting in this category. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 31 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Pensions and OPEB – For purposes of measuring the net pension liability, OPEB obligation, deferred outflows of resources and deferred inflows of resources, and expense information about the fiduciary net position of the Plans and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported. 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. Fund Balance Classification – The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the County is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows:  Nonspendable: This classification includes amounts that cannot be spent because they are either not in spendable form or are legally or contractually required to be maintained intact. The County has classified Prepaid Items and Inventory as being Nonspendable as these items are not expected to be converted to cash within the next year. The County has $62,874 in Nonspendable fund balance.  Restricted: This classification includes amounts for which constraints have been placed on the use of the resources either externally imposed by creditors (such as through a debt covenant), grantors, contributors, or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. The County has restricted $8,008,925 for fund and/or debt specific purposes.  Committed: This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the County. These amounts cannot be used for any other purpose unless the County removes or changes the specified use by taking the same type of action that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. The County has committed $2,811,261 for special fund purposes.  Assigned: This classification includes amounts that are constrained by the County’s intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the County through the budgetary process. This classification also includes the remaining positive fund balance for all governmental funds except for the General Fund.  Unassigned: This classification includes the residual fund balance for the General Fund. The unassigned classification also includes negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of Assigned fund balance amounts. The County would typically use Restricted fund balances first, followed by Committed resources, and then Assigned resources, as appropriate opportunities arise, but reserves the right to selectively spend Unassigned resources first to defer the use of these other classified funds. Unearned Revenues – Unearned revenues are those where asset recognition criteria have been met, but for which revenue recognition criteria have not. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 32 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Interfund Transfers – During the course of normal operations, the County has numerous transactions between funds, including expenditures and transfers of resources to provide services, construct assets, and service debt. The accompanying financial statements generally reflect such transactions as operating transfers. The classification of amounts recorded as subsidies, advances, or equity contributions is determined by County management. Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, outflows, liabilities and inflows and disclosure of contingent assets and liabilities at the date of the reporting period. Actual results could differ from those estimates. Significant estimates of the County include management's estimate of the useful lives of depreciable capital assets, management’s estimate of the accrued compensated absences, management’s estimate of the allowance for uncollectible receivable balances and the assumptions used in the actuarial valuations of the pension and other postemployment benefit plans. The County utilizes various investment instruments which are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements. Grants and other Intergovernmental Revenues - Federal grants and assistance awards for all governmental type funds are recorded as federal sources in accordance with the terms of the representative grants. Budget Stabilization Arrangement - The Otsego County Board of Commissioners has established a Budget Stabilization arrangement for the following purposes: to preserve current levels of services provided by the County's general fund, to cover potential general fund deficits, to cover potential expenses arising due to a natural disaster, and to assist with the County's cash flow during the fiscal year, in accordance with Public Act 30 of 1978. The Board appropriates funds as available and as deemed necessary during the budget process. Assigned fund balance of the general fund includes $1,030,483 related to this stabilization arrangement. NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary Information – Annual budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. Budgets and Budgetary Control – The County follows these procedures in establishing the budgetary data reflected in the financial statements: a. Each December, after receiving input from the individual departments, Administration and the County Budget and Finance Committee prepare a proposed operating budget for the fiscal period commencing January 1st and lapses on December 31st. The operating budget includes proposed expenditures and the means of financing them. b. Public hearings are conducted to obtain taxpayer comments. c. Prior to January 1, the budget is legally enacted through a resolution passed by the Board of Commissioners. d. Budgetary control is exercised at the departmental level of the General Fund and Special Revenue Funds. Any revisions that alter the total expenditures of any department or fund budget amendments) require approval by the Board of Commissioners. Such amendments are made in accordance with the procedures prescribed under Public Act 621 of 1978. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 33 NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) e. The budget and approved appropriations lapse at the end of the fiscal year. f. The County does not record encumbrances in the accounting records during the year as normal practice and, therefore, no outstanding encumbrances exist at year end. Budgeted amounts are as originally adopted or amended by the Board of Commissioners during the year. Individual amendments were not material in relation to the original appropriations which were amended. The modified accrual basis of accounting is used for budgetary purposes. The General Fund revenue budget was adopted on the basis of activities or programs financed by the General Fund. Michigan Public Act 621 of 1978 (the Budgeting Act) requires that budgets be adopted for Governmental Funds. U.S. generally accepted accounting principles require that the financial statements present budgetary comparisons for the Governmental Fund Types for which budgets were legally adopted. The original budget adopted for the General fund was modified throughout the year through various budget amendments. The budget document presents information by fund, function, department and line items. The legal level of budgetary control adopted by the governing body is the department level. NOTE 3 - DEPOSITS AND INVESTMENTS At year end, the County’s deposits and investments were reported in the basic financial statements in the following categories: Governmental Business-type Total Primary Fiduciary Component Activities Activities Government Funds Units Cash Equivalents - Unrestricted $ 14,073,427 $ 3,258,207 $ 17,331,634 $ 1,789,765 $ 12,929,326 Investments 8,802,979 3,625,947 12,428,926 - 950,081 Total $ 22,876,406 $ 6,884,154 $ 29,760,560 $ 1,789,765 $ 13,879,407 The breakdown between deposits and investments is as follows: Primary Fiduciary Component Government Funds Units Bank Deposits (checking and savings accounts, and money markets) $ 17,317,054 $ 1,789,765 $ 12,927,934 Investments 12,428,926 - 950,081 Petty Cash and Cash on Hand 14,580 - 1,392 Total $ 29,760,560 $ 1,789,765 $ 13,879,407 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 34 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) Maturities in Years Fair Value Less Than 1 1 – 5 6 – 10 More Than 10 Investments: CD’s* $ 201,166 $ 201,166 $ - $ - $ - Governmental Fixed Income 13,177,841 252,635 656,625 245,739 12,022,842 Total Investments $ 13,379,007 $ 453,801 $ 656,625 $ 245,739 $ 12,022,842 Interest rate risk. The County does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit risk. State law limits investments in commercial paper, corporate bonds, and mutual bond funds to the top two ratings issued by nationally recognized statistical rating organizations. The County has no investment policy that would further limit its investment choices. The County had investments in the following funds at December 31, 2022: Fund Name Ticker/CUSIP S&P Rating Governmental Fixed Income multiple AAA+ CD’s N/A N/A Custodial credit risk. Investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the County will not be able to recover the value of its investments or securities that are in the possession of an outside party. Custodial deposit credit risk. Custodial deposit credit risk is the risk that in the event of a bank failure, the County’s deposits may not be returned. State law does not require and the County does not have a policy for deposit custodial credit risk. As of year-end, $16,069,890 of the County’s bank balance of $17,696,345 was exposed to credit risk because it was uninsured and uncollateralized. Money market accounts are not rated investments and are not subject to custodial credit risk. Fair value measurement. The County categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Investments that are measured at fair value using the net asset value per share (or equivalent) as a practical expedient are not classified in the fair value hierarchy below. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the measurements required judgement and considers factors specific to each asset or liability. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 35 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) The County has the following fair value measurements as of December 31, 2022: Total Level 1 Level 2 Level 3 Governmental Fixed Income $ 13,177,841 $ - $ 13,177,841 $ - Total $ 13,177,841 $ - $ 13,177,841 $ - *CD’s are exempt from classification in the fair value hierarchy. Statutory Authority: An act (PA 152) to amend 1943 PA 20, entitled “An act relative to the investment of funds of public corporations of the state; and to validate certain investments,” by amending section 1 (MCL 129.91), as amended by 2009 PA 21. Except as provided in section 5, the governing body by resolution may authorize its investment officer to invest the funds of that public corporation in one or more of the following: a. Bonds, securities, and other obligations of the United States or an agency or instrumentality of the United States. b. Certificates of deposit, savings accounts, or depository receipts of a financial institution, but only if the financial institution complies with subsection certificates of deposit obtained through a financial institution as provided in subsection or deposit accounts of a financial institution as provided in subsection c. Commercial paper rated at the time of purchase within the two highest classifications established by not less than two standard rating services and matures not more than 270 days after the date of purchase. d. Repurchase agreements consisting of instruments listed in subdivision e. Bankers’ acceptances of United States banks. f. Obligations of this state or any of its political subdivisions that at the time of purchase are rated as investment grade by not less than one standard rating service. g. Mutual funds registered under the investment company act of 1940, 15 USC 80a-1 to 80a-64, with authority to purchase only investment vehicles that are legal for direct investment by a public corporation. However, a mutual fund is not disqualified as a permissible investment solely by reason of any of the following: The purchase of securities on a when-issued or delayed delivery basis. (ii) The ability to lend portfolio securities as long as the mutual fund receives collateral at all times equal to at least 100% of the value of the securities loaned. (iii) The limited ability to borrow and pledge a like portion of the portfolio’s assets for temporary or emergency purposes. h. Obligations described in subdivisions through if purchased through an interlocal agreement under the urban cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512. i. Investment pools organized under the surplus funds investment pool act, 1982 PA 367, MCL 129.111 to 129.118. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 36 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) j. The investment pools organized under the local government investment pool act, 1985 PA 121, MCL 129.141 to 129.150. The County’s deposits and investment policy are in accordance with statutory authority. These deposits are in various financial institutions in varying amounts. All accounts are in the name of the County and specific funds. They are recorded in County records at cost. Interest is recorded when the deposits mature or is credited to the applicable account. NOTE 4- LEASE RECEIVABLE The County is the lessor of communications towers to multiple organizations. These lease agreements are non- cancelable operating leases with fixed minimum rentals and non-cancelable operating use and lease agreements. The initial lease receivable and deferred inflow of resources related to leases was calculated at $250,695 as of January 1, 2022. 01/01/22 Increases Decreases 12/31/22 Lease Receivable $ 250,695 $ - $ 5,803 $ 244,892 The subsequent payments made to the County relating to the assets leased by other organizations are as follows: Principal Interest Year Amount Amount Total 2023 $ 5,993 $ 7,932 $ 13,925 2024 6,189 7,736 13,925 2025 6,392 7,534 13,926 2026 6,600 7,326 13,926 2027 6,816 7,110 13,926 2028-2032 37,564 32,064 69,628 2033-2037 44,109 25,519 69,628 2038-2042 42,862 17,975 60,837 2043-2047 18,584 12,916 31,500 2048-2052 21,859 9,641 31,500 2053-2057 25,710 5,790 31,500 2058-2061 22,214 1,411 23,625 Total $ 244,892 $ 142,954 $ 387,846 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 37 NOTE 5 - CAPITAL ASSETS Capital asset activity for the primary government for the current year was as follows: Beginning Adjustments/ Ending Balances Additions Deductions Balances Governmental Activities: Capital assets not being depreciated: Land $ 2,810,482 $ 39,513 $ - $ 2,849,995 Construction in Progress 32,092 - - 32,092 Subtotal 2,842,574 39,513 - 2,882,087 Capital assets being depreciated: Buildings 22,395,152 252,975 - 22,648,127 Leasehold Improvements 24,854 - - 24,854 Furniture & Fixtures 895,452 - - 895,452 Equipment: Data Handling 2,207,290 65,244 - 2,272,534 Other Equipment 2,712,692 18,724 - 2,731,416 Vehicles 2,329,638 167,867 - 2,497,505 Infrastructure 51,530 - - 51,530 Subtotal 30,616,608 504,810 - 31,121,418 Less accumulated depreciation for: Buildings (13,266,637 ) (582,413 ) - (13,849,050 ) Leasehold improvements (24,854 ) - - (24,854 ) Furniture & Fixtures (894,210 ) (1,242 ) - (895,452 ) Equipment: Data Handling (1,963,526 ) (62,332 ) - (2,025,858 ) Other Equipment (1,492,006 ) (22,468 ) - (1,514,474 ) Vehicles (1,910,888 ) (119,568 ) - (2,030,456 ) Infrastructure (25,677 ) (2,157 ) - (27,834 ) Subtotal (19,577,798 ) (790,180 ) - (20,367,978 ) Net Capital Assets Being Depreciated 11,038,810 (285,370 ) - 10,753,440 Capital Assets – Net $ 13,881,384 $ (245,857 ) $ - $ 13,635,527 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 38 NOTE 5 - CAPITAL ASSETS (Continued) Depreciation expense was charged to programs of the primary government as follows: Governmental Activities: General Government $ 268,491 Judicial 2,615 Public Safety 213,251 Recreation and Culture 305,823 Total Governmental Activities $ 790,180 Beginning Adjustments/ Ending Balances Additions Deductions Balances Business-type Activities: Capital assets not being depreciated: Land $ 99,998 $ - $ - $ 99,998 Capital assets being depreciated: Buildings 2,746,134 - - 2,746,134 Furniture & Fixtures 6,000 - - 6,000 Vehicles 2,357,197 230,446 (243,924 ) 2,343,719 Equipment 392,227 - - 392,227 Infrastructure 12,779,602 - - 12,779,602 Subtotal 18,281,160 230,446 (243,924 ) 18,267,682 Less accumulated depreciation for: Buildings (1,748,837 ) (110,715 ) - (1,859,552 ) Furniture & Fixtures (6,000 ) - - (6,000 ) Vehicles (1,768,234 ) (155,024 ) 243,924 (1,679,334 ) Equipment (335,099 ) (23,625 ) - (358,724 ) Infrastructure (9,523,104 ) (516,806 ) - (10,039,910 ) Subtotal (13,381,274 ) (806,170 ) 243,924 (13,943,520 ) Net Capital Assets Being Depreciated 4,899,886 (575,724 ) - 4,324,162 Capital Assets – Net $ 4,999,884 $ (575,724 ) $ - $ 4,424,160 Depreciation expense was charged to the business-type activities as follows: Business-type Activities: Bus System 9/30/2022 $ 201,648 Airport 592,221 University Center Metropolitan Area Network 12,301 Total Business-Type Activities $ 806,170 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 39 NOTE 5 - CAPITAL ASSETS (Continued) OTSEGO COUNTY AMBULANCE CORPORATION Capital asset activity of the Otsego County Ambulance Corporation for the current year was as follows: Beginning Adjustments/ Ending Balances Additions Deductions Balances Capital Assets Being Depreciated: Buildings $ 1,600,544 $ - $ - $ 1,600,544 Other Equipment 947,873 9,700 - 957,573 Vehicles 2,672,981 - - 2,672,981 Subtotal 5,221,398 9,700 - 5,231,098 Less Accumulated Depreciation: Buildings (935,132 ) (35,022 ) - (970,154 ) Other Equipment (714,130 ) (49,656 ) - (763,786 ) Vehicles (2,130,446 ) (106,786 ) - (2,237,232) Subtotal (3,779,708 ) (191,464 ) - (3,971,172 ) Net Capital Assets Being Depreciated 1,441,690 (181,764 ) - 1,259,926 Total Net Capital Assets $ 1,441,690 $ (181,764 ) $ - $ 1,259,926 OTSEGO COUNTY ROAD COMMISSION Capital asset activity of the Otsego County Road Commission for the current year was as follows: Beginning Adjustments/ Ending Balances Additions Deductions Balances Capital Assets Not Being Depreciated Land $ 125,501 $ - $ - $ 125,501 Land Improvements – Infrastructure 13,398,340 - - 13,398,340 Subtotal 13,523,841 - - 13,523,841 Capital Assets Being Depreciated Buildings 3,936,130 264,060 - 4,200,190 Road Equipment 8,984,899 83,782 - 9,068,681 Shop Equipment 94,266 3,220 - 97,486 Office Equipment 46,844 - - 46,844 Engineers’ Equipment 8,583 - - 8,583 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 49,557 - - 49,557 Infrastructure – Bridges 1,446,834 - - 1,446,834 Infrastructure – Roads 35,235,127 3,058,977 717,413 37,576,691 Subtotal 49,804,040 3,410,039 717,413 52,496,666 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 40 NOTE 5 - CAPITAL ASSETS (Continued) Beginning Adjustments/ Ending Balances Additions Deductions Balances Less Accumulated Depreciation Buildings 2,240,032 91,642 - 2,331,674 Road Equipment 7,655,933 565,246 - 8,221,179 Shop Equipment 94,266 127 - 94,393 Office Equipment 43,650 1,673 - 45,323 Engineers’ Equipment 8,583 - - 8,583 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 46,676 320 - 46,996 Infrastructure – Bridges 416,774 39,532 - 456,306 Infrastructure – Roads 15,652,352 1,693,502 717,413 16,628,441 Subtotal 26,160,066 2,392,042 717,413 27,834,695 Net Capital Assets Being Depreciated 23,643,974 1,017,997 - 24,661,971 Capital Assets - Net $ 37,167,815 $ 1,017,997 $ - $ 38,185,812 OTSEGO COUNTY COMMISSION ON AGING Capital asset activity of the Otsego County Commission on Aging for the current year was as follows: Beginning Adjustments/ Ending Balances Additions Deductions Balances Capital assets being depreciated: Leasehold Improvements & Equipment $ 2,890,187 $ 7,523 $ (140,189 ) $ 2,757,521 Less accumulated depreciation (140,189 ) (18,421 ) 140,189 (18,421 ) Net Capital Assets $ 2,749,998 $ (10,898 ) $ - $ 2,739,100 NOTE 6 - RECEIVABLES Governmental Business-type Component Activities Activities Units Taxes $ 2,049,346 $ 667,248 $ 3,101,506 Accounts 187,265 135,158 2,561,576 Less: Allowance for uncollectible accounts - - (417,500 ) Due from other governments 569,756 108,578 - Loans 1,267,574 - - Interest - 85,067 - Totals $ 4,073,941 $ 996,051 $ 5,245,582 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 41 NOTE 7 - INTERFUND RECEIVABLES, PAYABLES, & TRANSFERS The composition of interfund balances as of December 31, 2022, was as follows: These balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. Advances to and from component units Advance to Component Unit Advance From Primary Government Primary Government $ 114,617 $ - Ambulance - 109,798 $ 114,617 $ 109,798 Advances differ because of the timing of a principal payment of $4,819 between the Ambulance and the County. All balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payment between funds are made. Transfers In Transfers Out General Fund $ 50,000 $ 728,334 Housing Commission 161,128 161,128 Library Construction - 503,400 Nonmajor governmental funds 1,481,907 1 Delinquent Tax Fund 100,001 461,206 Airport 57,533 - Nonmajor enterprise funds 6,000 - Internal service funds - 2,500 $ 1,856,569 $ 1,856,569 Transfers are used to: move revenues from the fund that is required to collect them to the fund that is required or allowed to expend them; move receipts restricted to or allowed for debt service from the funds collecting the receipts to the debt service fund as debt service payments become due; and use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 42 NOTE 7 - INTERFUND RECEIVABLES, PAYABLES, & TRANSFERS (Continued) The County reports interfund balances between many of its funds. Some of the balances are considered immaterial and are aggregated into a single column or row. The total of all balances agrees with the sum of interfund balances presented in the statements of net position/balance sheet for governmental funds, proprietary funds, and fiduciary funds. Interfund transactions resulting in interfund receivables and payables are as follows: Nonmajor Governmental General $ 27,000 Total $ 27,000 NOTE 8 - LONG-TERM DEBT Changes in Long-term Debt. Long-term liability activity for the year ended December 31, 2022, was as follows: Due Interest Principal Beginning Ending Within Rate Matures Balance Increases Decreases Balance One Year Governmental Activities: Otsego County Installment Note 2022 GMC Acadia 2.0-6.05% 2027 $ - $ 36,545 $ (8,192 ) $ 28,353 $ 6,476 Otsego County Building Authority Series 2017 Bonds, maturing serially in annual installments ranging from $360,000 to $395,000. 1.75-2.0% 2022 395,000 - (395,000 ) - - . Total Installment Debt 395,000 - (403,192 ) 28,353 6,476 Premium on Bond Issuance 3,508 - (3,508 ) - - Accrued Compensated Absences 235,607 543,178 (568,252 ) 210,533 - Total Governmental Activities Debt $ 634,115 $ 579,723 $ (974,952 ) $ 238,886 $ 6,476 Annual debt service requirements to maturity for the above obligations are as follows: Installments Payable Year End December 31 Principal Interest 2023 $ 6,476 $ 1,715 2024 6,868 1,324 2025 7,[PHONE REDACTED] 7,725 467 Total $ 28,353 $ 4,414 DUE TO OTHER FUNDS DUE FROM OTHER FUNDS ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 43 NOTE 8 - LONG-TERM DEBT (Continued) Vested Employee Benefits – Governmental Activities Substantially all County employees are entitled to certain vacation and sick pay benefits that accrue and vest under various parameters including individual labor contracts. Accrued benefits for all governmental fund types are reported as long-term debt. OTSEGO COUNTY ROAD COMMISSION The long-term debt of the Road Commission is summarized as follows: Due Beginning Ending Within Balance Additions Reductions Balance One Year Installment payable secured by equipment, payable in installments of $28,859 including interest of 3.32%, due 2025. $ 182,049 $ - $ 22,815 $ 159,234 $ 23,572 Equipment, payable in annual installments of $14,122 including interest of 4.18%, due 2023. 121,928 - 8,952 112,976 112,976 Subtotal 303,977 - 31,767 272,210 $ 136,548 Vested Employee Benefits 224,969 78,207 - 303,176 TOTAL LONG-TERM DEBT $ 528,946 $ 78,207 $ 31,767 $ 575,386 Net increase. Installments Payable Year End December 31 Principal Interest 2023 $ 136,548 $ 10,077 2024 24,355 4,504 2025 111,307 3,693 Total $ 272,210 $ 18,274 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 44 NOTE 9 - RISK MANAGEMENT Primary Government The County is exposed to risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The government manages its risk exposures and provides certain employee benefits through a combination of self-insurance programs, risk management pools and commercial insurance and excess coverage policies. The following is a summary of these self-insurance programs and risk management pool participation. The County participates in the Michigan Municipal Risk Management Authority (MMRMA) for general and automobile liability, motor vehicle physical damage, and property damage coverages. The MMRMA was established in January 1980, pursuant to laws of the State of Michigan, which authorize local units of government to jointly exercise any power, privilege or authority which each might exercise separately. The purpose of the Authority is to provide cooperative and comprehensive risk financing and risk control services. The MMRMA provides risk management, underwriting, reinsurance and claim review and processing services for all member governments pursuant to its charter. The County makes annual contributions to MMRMA based on actuarial studies using historical data and insurance industry statistics. These contributions are paid from the General Fund using premiums paid into it by other funds of the government. Such contributions that are received by MMRMA are allocated between its general and member retention funds. Economic resources in the MMRMA's General Fund are expended for reinsurance coverage, claim payments and certain general and administrative costs, whereas resources in the member retention funds are used for loss payments and defense costs up to the members' self-insurance retention limits along with certain other member-specific costs. Accordingly, because contributions to the member retention fund are essentially recognized as revenue by MMRMA to the extent of expenditures, the government records an asset and a related liability, equal to the loss reserves estimated by MMRMA, for its portion of the unexpended member retention fund in the Michigan Municipal Risk Agency Fund. At December 31, 2022, the balance of the County's member retention was $264,204. Changes in the balances of claims liabilities are as follows: Fiscal Year Ended December 31, 2021 2022 Estimated liability, beginning of year $ 43,253 $ 16,232 Receipts 58,700 57,511 Estimated claims incurred (65,608) - Claim payments (20,113) (176,137) Estimated liability (asset), end of year $ 16,232 $ ( 102,394) Coverage Self-Insured Retention Liability $75,000 Vehicle Physical Damage $15,000 per vehicle $1,000 Member Deductible $30,000 per occurrence Property and crime $1,000 deductible per occurrence 10% of the next $100,000 Employee Benefits Commercial Insurance Provider ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 45 NOTE 9 - RISK MANAGEMENT (Continued) Workers' Compensation The County is a member of the Michigan Counties Workers' Compensation Fund. Full statutory coverage for workers' disability compensation and employers' liability is guaranteed by the fund for Michigan operations through authority granted by the State of Michigan under Chapter 6, Section 418.611, Paragraph of the Workers' Disability Compensation Act of 1969, as amended. At December 31, 2022 there were no claims that exceeded insurance coverage. The County had no significant reduction in insurance coverage from previous years. Component Unit - Road Commission The Road Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Road Commission was unable to obtain general liability insurance at a cost it considered to be economically justifiable. The Road Commission joined together with other Road Commissions and created a public entity risk pool currently operating as a common risk management and insurance program. The Road Commission pays an annual premium to the pool for its general insurance coverage. The agreement provides that the pool will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of $1,000 ($2,000 for errors and omissions) for each insured event. The maximum limit of liability for each occurrence is $10,500,000. The pooling agreement allows for the pool to make additional assessments to make the pool self-sustaining. The Road Commission is unable to provide an estimate of the amounts of additional assessments. The Road Commission from time to time is named as a defendant in accident claims and lawsuits requesting damages of various amounts, the majority of which do not state a specific maximum. Insurance coverage related to these claims and lawsuits, if any, is categorized under the general liability insurance program. It is the opinion of management and legal counsel that reasonable estimates of the Road Commission's current liability for these matters, if any, have been recorded. There are non-accident liability and condemnation lawsuits sometimes pending against the Road Commission claiming amounts for damages and relief without stated limitations. It is the opinion of management and legal counsel that reasonable estimates of the Road Commission's current liability for these matters, if any, have been recorded. Component Unit - Ambulance Corporation The Ambulance Corporation is exposed to risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Ambulance Corporation's general liability, property, and vehicle insurance is included in the County's plan. Additional vehicle insurance, health insurance, and workers' compensation is obtained through commercial insurance providers. At December 31, 2022, there were no claims that exceeded insurance coverage. The Ambulance Corporation did not have any significant reduction in insurance coverage from previous years. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 46 NOTE 9 - RISK MANAGEMENT (Continued) Component Unit - Commission on Aging The Commission on Aging has insurance coverage provided by independent insurance companies for property, general liability, fire, workers' compensation and employee bond coverage. The Commission on Aging liability is normally limited to the deductible. Component Unit - The is exposed to risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Health insurance and workers' compensation is obtained through commercial insurance providers. At December 31, 2022, there were no claims that exceeded insurance coverage. The did not have any significant reduction in insurance coverage from previous years. NOTE 10 - TAX ABATEMENTS Industrial Facilities Exemption Municipalities within the County's boundaries entered into property tax abatement agreements with local businesses under the Plant Rehabilitation and Industrial Development Districts Act, known as the Industrial Facilities Exemption (IFT) PA 198 of 1974, as amended. The purpose of the exemption is to provide a tax incentive to manufacturers to enable renovation and expansion of aging facilities, assist in the building of new facilities, and to promote the establishment of high-tech facilities. IFT on such properties have resulted in an abatement of property taxes which reduced the property taxes collected by Otsego County and its component units as follows: City of Gaylord Tax Abatements: For the year ended December 31, 2022, Otsego County property taxes were reduced by $11,317 under this program. Bagley Township Tax Abatements: For the year ended December 31, 2022, Otsego County property taxes were reduced by $7,785 under this program. Corwith Township Tax Abatements: For the year ended December 31, 2022, Otsego County property taxes were reduced by $1,318 under this program. Livingston Township Tax Abatements: For the year ended December 31, 2022, Otsego County property taxes were reduced by $1,207 under this program. Commercial Facilities Exemption Municipalities within the County's boundaries entered into property tax abatement agreements with local businesses under the Commercial Redevelopment Act, known as the Commercial Facilities Exemption (CFT) PA 255 of 1978, as amended. The purpose of the exemption is to provide a tax incentive to businesses to establish themselves in the designated commercial redevelopment district. CFT on such properties have resulted in an abatement of property taxes which reduced the property taxes collected by Otsego County and its component units as follows: City of Gaylord Tax Abatements: For the year ended December 31, 2022, Otsego County property taxes were reduced by $3,234 under this program. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 47 NOTE 10 - TAX ABATEMENTS (Continued) Brownfield Redevelopment Financing Municipalities within the County's boundaries entered into property tax abatement agreements with local businesses under the Brownfield Redevelopment Financing Act, PA 381 of 1996, as amended. The purpose of the exemption is to provide a tax incentive to businesses to establish themselves in a Brownfield Redevelopment Zone to promote the revitalization, redevelopment, and reuse of certain property that had been deemed obsolete due to blight, environmental matters, or being tax reverted. The cost to clean up the property to make it usable was initially paid for by the State of Michigan under the Brownfield provisions, creating a loan to be repaid over a 20-year period. Once the property sold, the owner's taxes were abated to be used toward loan repayment, which reduced the property taxes collected by Otsego County and its component units as follows: City of Gaylord Tax Abatements: For the year ended December 31, 2022, Otsego County property taxes were reduced by $700 under this program. NOTE 11 - CONTINGENT LIABILITIES Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the Federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the County expects such amounts, if any, to be immaterial. NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS PRIMARY GOVERNMENT General Information about the Pension Plan Plan Description. The employer’s defined benefit pension plan provides certain retirement, disability and death benefits to plan members and beneficiaries. The employer participates in the Municipal Employees Retirement System (MERS) of Michigan. MERS is an agent multiple-employer, statewide public employee pension plan established by the Michigan Legislature under Public Act 135 of 1945 and administered by a nine-member Retirement Board. MERS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained accessing the MERS website at www.mersofmich.com. 01 – Gnrl Non Union: Closed to new hires 2021 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: DC Plan for New Hires: 2.00% 1/1/2020 Act 88: No ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 48 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 07 – Library NonUnion: Open Division 2021 Valuation Benefit Multiplier: 2.00% Multiplier (no max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 0.00% Act 88: No 10 – Gnrl Local 214 Bus: Closed to new hires 2021 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: DC Plan for New Hires: 1.00% 1/1/2020 Act 88: No 11 – POAM: Closed to new hires, linked to Division HC 2021 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 2.00% Act 88: No 13 – Elected/Appt Spvs: Closed to new hires 2021 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 8 Years Early Retirement (Unreduced): 55/30 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: DC Plan for New Hires: 2.00% 1/1/2020 Act 88: No ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 49 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 14 – 46th Trial Court: Closed to new hires 2021 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: DC Plan for New Hires: 2.00% 1/1/2020 Act 88: No 16 – Gnrl Local 214 Clerical: Closed to new hires 2021 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): 55/30 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: DC Plan for New Hires: 2.00% 1/1/2020 Act 88: No 17 – 87-A Judge/FOC pre 9/1/14: Closed to new hires 2021 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 8 Years Early Retirement (Unreduced): 55/30 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 0.00% Act 88: No ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 50 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 20 – Sheriff Union: Closed to new hires, linked to Division HG 2021 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): 55/15 Early Retirement (Reduced): 50/25 Final Average Compensation: 5 years Employee Contributions 0.00% Act 88: No 21 – Sheriff Un New Hires after 6/1/10: Closed to new hires, Linked to Division HG 2021 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): 55/15 Early Retirement (Reduced): 50/25 Final Average Compensation: 5 years Employee Contributions 4.00% Act 88: No 70 – Library Director: Open Division 2021 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 8 Years Early Retirement (Unreduced): 55/30 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 0.00% Act 88: No HA – Elected Apptd Spvs af 1/1/09: Closed to new hires 2021 Valuation Benefit Multiplier: 1.25% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): - Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions: DC Plan for New Hires: 0.00% 1/1/2020 Act 88: No ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 51 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) HB – General Non Union after 1/1/09: Closed to new hires 2021 Valuation Benefit Multiplier: 1.25% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): - Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions: DC Plan for New Hires: 0.00% 1/1/2020 Act 88: No HC – POAM hired after 1/1/11: Open Division, linked to Division 11 2021 Valuation Benefit Multiplier: 1.25% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): - Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions 0.00% Act 88: No HD – 46th Trial Ct hired af 6/1/11: Closed to new hires 2021 Valuation Benefit Multiplier: 1.25% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): - Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions: DC Plan for New Hires: 0.00% 1/1/2020 Act 88: No HE – Clerical Loc#214 af 1/1/2012: Closed to new hires 2021 Valuation Benefit Multiplier: 1.25% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): - Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions: DC Plan for New Hires: 0.00% 1/1/2020 Act 88: No ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 52 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) HF – Bus hired af 1/1/2011: Closed to new hires 2021 Valuation Benefit Multiplier: 1.25% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): - Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions: DC Plan for New Hires: 0.00% 1/1/2020 Act 88: No HG – All FT POLC on/aftr 1/1/16: Open Division, linked to Divisions 20, 21 2021 Valuation Benefit Multiplier: 1.50% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): 55/25 Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions 0.00% Act 88: No Employees Covered by Benefit Terms At December 31, 2021, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 113 Inactive employees entitled to but not yet receiving benefits 63 Active employees 82 258 Funding Policy The obligation to contribute to and maintain the system for these employees was established by negotiation with the County’s competitive bargaining unit and personnel policy, which require employees to contribute to the plan. The County is required to contribute on a basis at an actuarially determined rate for each division follows: 01 $ 10,078 21 $ 620 07 $ 59 70 $ - 10 $ - HA $ - 11 $ 4,826 HB $ 1,934 13 $ 31,673 HC $ 1,568 14 $ 13,741 HD $ 316 16 $ 5,144 HE $ 426 17 $ 3,106 HF $ - 20 $ 11,763 HG $ 2,242 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 53 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Net Pension Liability The County’s net pension liability was measured as of December 31, 2021, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2021 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50% Salary increases 3.00% in the long-term Investment rate of return 7.00%, net of investment and administrative expense including inflation Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of 2009-2013. 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 and administrative 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 estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Global Equity 60.00% 4.50% Global Fixed Income 20.00% 2.00% Private Investment 20.00% 7.00% 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 well 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 payments to determine the total pension liability. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 54 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Changes in the Net Pension Liability: Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Balances at December 31, 2020 26,367,990 $ 17,970,419 $ 8,397,571 $ Service cost 279,127 - 279,127 Interest on total pension liability 1,956,993 - 1,956,993 Changes in benefits - - - Difference between expected and actual experience (660,349) - (660,349) Changes in assumptions 992,080 - 992,080 Employer contributions - 1,336,715 (1,336,715) Employee contributions - 43,585 (43,585) Net investment income - 2,531,817 (2,531,817) Benefit payments, including employee refunds (1,490,722) (1,490,722) - Other (6,105) - (6,105) Administrative expense - (28,998) 28,998 Net changes 1,071,024 2,392,397 (1,321,373) Balances as of December 31, 2021 27,439,014 $ 20,362,816 $ 7,076,198 $ Increases (Decreases) Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability of the County, calculated using the discount rate of 7.60%, as well as what the County’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.25%) or 1- percentage-point higher (8.25%) than the current rate: 1% Decrease Current Discount Rate 1% Increase (6.25%) (7.25%) (8.25%) County’s net pension liability $10,001,428 $7,076,198 $4,623,772 Pension plan fiduciary net position. Detailed information about the pension plan’s fiduciary net position is available in the separately issued MERS financial report. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 55 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended December 31, 2022, the County recognized pension expense of $1,239,066. At December 31, 2022, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Difference between expected and actual experience 111,339 $ 250,068 $ Changes in assumptions 1,409,437 - Net difference between projected and actual earnings on pension plan investments - 1,481,772 Contributions subsequent to the measurement date 1,425,024 - Total 2,945,800 $ 1,731,840 $ Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recorded in pension expense as follows: Year Ended December 31: 2023 $ 257,125 2024 (147,374 ) 2025 (106,273 ) 2026 (214,542 ) OTSEGO COUNTY ROAD COMMISSION Description of Plan and Plan Assets The Road Commission is in an agent multiple-employer defined benefit pension plan with the Municipal Employees’ Retirement System (MERS). The system provides the following provisions: normal retirement, deferred retirement and service retirement to plan members and their beneficiaries. The service requirement is computed using credited service at the time of termination of membership multiplied by the sum of 2.50% times the final compensation (FAC). The most recent period of which actuarial data was available was for year ended December 31, 2021. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 56 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) General Information about the Pension Plan Plan Description. The employer’s defined benefit pension plan provides certain retirement, disability and death benefits to plan members and beneficiaries. The employer participates in the Municipal Employees Retirement System (MERS) of Michigan. MERS is an agent multiple-employer, statewide public employee pension plan established by the Michigan Legislature under Public Act 135 of 1945 and administered by a nine-member Retirement Board. MERS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained accessing the MERS website at www.mersofmich.com. 01 – General: Closed Division 2021 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): 55/25 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: 4.0% Act 88: Yes (Adopted 11/23/1970) 02 – General: Open Division 2021 Valuation Benefit Multiplier: 2.00% Multiplier (no max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: 4.0% Act 88: Yes (Adopted 11/23/1970) NonUnion: Open Division 2021 Valuation Benefit Multiplier: 2.50% Multiplier (no max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): 55/25 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: 4.0% Act 88: Yes (Adopted 11/23/1970) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 57 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Employees Covered by Benefit Terms At December 31, 2021, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 48 Inactive employees entitled to but not yet receiving benefits 10 Active employees 33 91 Net Pension Liability The Road Commission’s net pension liability was measured as of December 31, 2021, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50 % Salary increases 3.00 % Investment rate of return 7.00 net of interest and administrative expense including inflation Mortality rates used for non-disabled plan member were based on a weighted blend of MP-2019 mortality tables of a 50% Male and 50% Female blend. Mortality rates used for disabled plan member were based on a blend of MP- 2019 disabled retiree mortality tables of a 50% Male and 50% Female blend of disabled retirees. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of January 1, 2014, through December 31, 2018. 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 and administrative 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 estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Global Equity 60.00% 4.50% Global Fixed Income 20.00% 2.00% Private Investments 20.00% 7.00% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 58 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (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 payments to determine the total pension liability. Changes in the Net Pension Liability: Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Balances at January 1, 2022 14,265,082 $ 11,498,773 $ 2,766,309 $ Service cost 200,152 - 200,152 Interest on total pension liability 1,011,374 - 1,011,374 Changes in benefits (11,654) - (11,654) Difference between expected and actual experience (443,420) - (443,420) Changes in assumptions 512,119 - 512,119 Employer contributions - 717,585 (717,585) Employee contributions - 154,684 (154,684) Net investment income - (1,186,967) 1,186,967 Benefit payments, including employee refunds (830,351) (830,351) - Administrative expense - (21,304) 21,304 Other changes 24,893 - 24,893 Net changes 463,113 (1,166,353) 1,629,466 Balances as of December 31, 2022 14,728,195 $ 10,332,420 $ 4,395,775 $ Increases (Decreases) Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability of the Road Commission, calculated using the discount rate of 7.25%, as well as what the Road Commission’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.25%) or 1-percentage-point higher (8.25%) than the current rate: 1% Decrease Current Discount Rate 1% Increase (6.25%) (7.25%) (8.25%) Road Commission’s net pension liability $6,040,564 $4,395,775 $3,007,021 Pension plan fiduciary net position. Detailed information about the pension plan’s fiduciary net position is available in the separately issued MERS financial report. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 59 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended December 31, 2022, the Road Commission recognized pension expense of $780,939. At December 31, 2022, the Road Commission reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Change in benefits - $ 295,614 $ Difference between expected and actual experience 341,412 - Changes in assumptions 1,033,791 - Net difference between projected and actual earnings on pension plan investments - - Total 1,375,203 $ 295,614 $ Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recorded in pension expense as follows: Year Ended December 31: 2023 $ 220,676 2024 186,931 2025 267,707 2026 404,275 NOTE 13 - DEFERRED COMPENSATION PLANS Primary Government Otsego County offers its employees a deferred compensation plan created in accordance with IRC Section 457. Effective January 1, 1997, the assets of the plan were held in a trust, custodial account or annuity contract described in IRC Section 457(g) for the exclusive benefit for the participants (employees) and their beneficiaries. The custodial account is held by the custodian for the exclusive benefit of the participants and beneficiaries of these Section 457 plans and the assets may not be diverted to any other use. The administrator (Nationwide Retirement Solutions) is an agent of the employer. The Administrator provides direction to the custodian, from time to time, regarding the investment of the funds held in the account, transfer of assets to or from the account and all other matters. GASB 32 does not require inclusion of the deferred compensation balances in a trust and agency fund. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 60 NOTE 13 - DEFERRED COMPENSATION PLANS (Continued) Commission on Aging The Otsego County Commission on Aging offers its employees a deferred compensation plan created in accordance with IRC Section 457. The plan, available to all employees, permits them to defer a portion of their current earnings until the employee's termination, retirement, death, or unforeseeable emergency. The Commission's liability to each participant is equal to the participant's deferred compensation adjusted by an amount equal to the investment performance in a related assets account. Investments are managed by a trustee, and investment decisions are made by individual employees. The Commission, through Otsego County, provides the duty of due care that would be required of an ordinary prudent investor. Component Unit - The Otsego County offers its employees a Saving Incentive Match Plan for Employees (SIMPLE plan) Individual Retirement Account (IRA) in accordance with IRC Section 408(p). The plan, available to employees earning at least $5,000 in annual compensation, permits them to defer a portion of their current salary until future years. The deferred compensation is not available to the employees until termination, retirement, death, or unforeseeable emergency. The employer matches employee contributions up to 3% of the employee's elected salary contribution. NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN PRIMARY GOVERNMENT Plan Description. Otsego County administers a single-employer defined benefit healthcare plan (the “Plan”). The plan provides healthcare benefits for eligible employees upon retirement, through the County's group health insurance plan, which covers both active and retired members. The benefits are provided under the collective bargaining agreement for union employees and by personnel policies for nonunion employees. At December 31, 2022, the date of the last plan valuation, the County’s healthcare plan covered 15 members of which 2 were active plan members and 13 were retirees receiving benefits. Funding policy. Contribution requirements also are negotiated between the County and employees. The County contributes 80% of the cost of current-year premiums for eligible retired plan members. For fiscal year 2022, the County contributed $54,646 to the plan. Employees Covered by Benefit Terms As of December 31, 2020, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 13 Inactive employees entitled to but not yet receiving benefits - Active employees 2 Total participants covered by OPEB Plan 15 Total OPEB Liability and Trust Assets - The County’s total OPEB liability of $810,295 was measured as of December 31, 2022, and was determined by an actuarial valuation as of that date. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 61 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) As of December 31, 2022, there was $0 in assets in the County’s OPEB trust as the County is treating this a pay-as- you-go plan. Actuarial assumptions and other inputs - The total OPEB liability was determined by an actuarial valuation as of December 31, 2021 and the following actuarial assumptions, applies to all periods included in the measurement: Inflation Included in investment rate Salary Increases 3.0% Investment rate of return NA 20-year Aa Municipal bond rate 4.31% Mortality Public General and Police, Headcount-weighted 2010 Employee and Healthy Retiree with MP-2021 Mortality Improvement Scale Discount Rate - The discount rate used to measure the total OPEB liability was 4.31%. Because the plan does not have a dedicated OPEB trust, there are not assets projected to be sufficient to make projected future benefit payments of current plan members. For projected benefits that are covered by projected assets, the long-term expected rate was used to discount the projected benefits. From the year that benefit payments ere not projected to be covered by the projects assets (“the depletion date”), projected benefits were discounted at a discount rate that reflects a 20-year AA/Aa tax-exempt municipal bond yield. A single equivalent discount rate that yields the same present value of benefits is calculated. This discount rate is used to determine the Total OPEB Liability. The discount rate used as of December 31, 2022 was 4.31%. Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balances at December 31, 2021 1,011,280 $ - $ 1,011,280 $ Service cost 3,987 - 3,987 Interest 22,229 - 22,229 Change in plan term - - - Difference between expected and actual experience (12,893) - (12,893) Assumptions (159,662) - (159,662) Employer contributions - 54,646 (54,646) Net investment income - - - Benfit Payments (54,646) (54,646) - Administrative expense - - - Net changes (200,985) - (200,985) Balances as of December 31, 2022 810,295 $ - $ 810,295 $ Increases (Decreases) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 62 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) Net OPEB Liability – Discount and Trend Rate Sensitivities – The following presents the net OPEB Liability (NOL), calculated using trend and discount rates 1% higher and lower than base assumptions: Discount 1% Decrease Current Rate 1% Increase Net OPEB Liability $881,424 $810,295 $749,000 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $740,943 $810,295 $889,741 OPEB Expense - Components of County’s OPEB Expense for the fiscal year ending December 31, 2022 are as follows: 12/31/2022 Service Cost $ 3,987 Interest on Total OPEB Liability 22,229 Experience (Gains)/Losses (12,893 ) Changes of Assumptions (159,662 ) Changes in Plan Terms - Other Changes in Fiduciary Net Position - Total OPEB Expense $ (146,339 ) Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ended December 31: 2023 $ - 2024 - 2025 - 2026 - ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 63 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) OTSEGO COUNTY ROAD COMMISSION The Otsego County Road Commission provides hospitalization and medical coverage for eligible retirees and their spouses through the Road Commission’s group health insurance plan, which covers both active and retired members. The following are the Governmental Accounting Standards Board Statement 74 and 75 required disclosures which have been implemented prospectively by the Road Commission.  Employees hired prior to December 31, 2008, and retire with 20 years of employment and age 55 years, or greater, will receive health insurance comparable to that provided to the current employees until age 65 years and supplemental health insurance for the employee and spouse for their lifetimes. The plan does not issue a separate stand-alone financial statement. Employees Covered by Benefit Terms As of December 31, 2022, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 29 Inactive employees entitled to but not yet receiving benefits - Active employees 14 Total participants covered by OPEB Plan 43 Actuarial assumptions and other inputs - The total OPEB liability was determined by an actuarial valuation as of December 31, 2022 and the following actuarial assumptions, applies to all periods included in the measurement: Inflation Included in investment rate of return Salary Increases 3.00% Investment rate of return 7.45% Mortality 2010 Public General Employees and Healthy Retirees, head with MP-2021 mortality improvement. 20 year Aa Municipality Bond rate 4.31% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 64 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) The long-term expected rate of return on plan investments was determined using a building-block method in which best-estimate ranges of expected future rates of return (expected returns, net of retirement 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 rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in the retirement plan’s target asset allocation are summarized in the following table: Long-Term Expected Asset Class Target Allocation Rate of Return Global Equity 64.00% 9.00% Global Fixed Income 26.00% 4.70% Real Assets 5.00% 6.40% Diversifying Strategies 5.00% 3.00% Cash 0.00% 2.40% Discount Rate - The discount rate used to measure the total OPEB liability was 7.45%. The projection of cash flows used to determine the discount rate assumed that Employer contributions of $800,000 will be made to the trust. Based on those assumptions, the retirement plan’s fiduciary net position was not projected to be sufficient to make all projected future benefit payments of current plan members. For projected benefits that are covered by projected assets, the long-term expected rate was used to discount the projected benefits. From the year that benefit payments were not projected to be covered by the projected assets (the “depletion date”), projected benefits were discounted at a discount rate reflecting the 20-year AA/Aa tax-exempt bond yield. A single equivalent discount rate that yields the same present value of benefits is calculated. This discount rate is used to determine the Total OPEB Liability. Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balances at January 1, 2022 3,305,616 $ 2,567,234 $ 738,382 $ Change in assumptions (88,989) - (88,989) Service cost 28,150 - 28,150 Interest 240,238 - 240,238 Experience (Gains)/Losses (167,156) - (167,156) Contributions to OPEB Trust - 200,004 (200,004) Contributions paid from operations - 220,867 (220,867) Net investment income - (346,410) 346,410 Benefit payments (220,867) (220,867) - Administrative expense - (12,748) 12,748 Net changes (208,624) (159,154) (49,470) Balances as December 31, 2022 3,096,992 $ 2,408,080 $ 688,912 $ ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 65 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) Net OPEB Liability – Discount and Trend Rate Sensitivities – The following presents the net OPEB Liability (NOL) of the Road Commission, calculated using trend and discount rates 1% higher and lower than base assumptions: Discount 1% Decrease Current Rate 1% Increase Net OPEB Liability $ 942,521 $ 738,382 $ 555,809 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $ 569,123 $ 738,382 $ 925,997 OPEB Expense – Components of Road Commission’s OPEB Expense for the fiscal year ending December 31, 2022 recognized expense of ($115,109) Deferred Outflows and Inflows of Resources Related to OPEB Plan Deferred Outflows Deferred Inflows of Resources of Resources Investment Earnings (Gains)/Losses $ 435,048 $ 124,808 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ended December 31: 2023 47,819 $ 2024 63,197 2025 90,462 2026 108,762 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2022 66 NOTE 15 - CHANGE IN ACCOUNTING PRINCIPLES AND RESTATEMENT For 2022, the County implemented Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. GASB Statement No. 87 enhances the relevance and consistency of information of the government’s leasing activities. It establishes requirements for lease accounting based on the principle that leases are financings of the right to use an underlying asset. A lessor is required to recognize a lease receivable and a deferred inflow of resources, except for certain regulated leases. The County’s 2022 financial statements will include a prior period adjustment to account for the Lease Receivable and related Deferred Inflow. This change in accounting principle had no effect on the beginning net position for governmental activities. The implementation of GASB Statement No. 87 had the following effect on net position as reported December 31, 2022: Net Position December 31, 2021 $ 15,128,496 Adjustments: Lease Receivable 250,695 Deferred Inflows – Leases (250,695 ) Restated Net Position December 31, 2021 $ 15,128,496 Net Effect of Implementation of GASB 87 on Net Position $ - ---PAGE BREAK--- Required Supplementary Information ---PAGE BREAK--- 2021 2020 2019 2018 2017 2016 2015 2014 Total pension liability Service cost 279,127 $ 313,918 $ 388,399 $ 370,158 $ 336,412 $ 349,718 $ 348,000 $ 338,932 $ Interest 1,956,993 1,819,682 1,749,783 1,767,809 1,719,681 1,696,843 1,543,901 1,479,439 Changes in benefits - (196,491) (386,275) 391 (91,145) (10,695) - - Difference between expected and actual experience (660,349) 378,255 (65,132) 11,745 (48,394) (503,144) 724,207 - Changes in assumptions 992,080 1,002,405 746,482 - - - 1,036,885 - Benefit payments, including refund of member contributions (1,490,722) (1,447,430) (1,384,939) (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Other changes (6,105) (12,291) 80,821 14,309 (54) - - - Net change in total pension liability 1,071,024 1,858,048 1,129,139 772,162 645,120 322,971 2,548,216 840,003 Total pension liability - beginning 26,367,990 24,509,942 23,380,803 22,608,641 21,963,521 21,640,550 19,092,334 18,252,331 Total pension liability - ending 27,439,014 $ 26,367,990 $ 24,509,942 $ 23,380,803 $ 22,608,641 $ 21,963,521 $ 21,640,550 $ 19,092,334 $ Plan fiduciary net position Contributions - employer 1,336,715 $ 1,329,086 $ 1,062,073 $ 1,128,063 $ 1,096,794 $ 865,641 $ 693,476 $ 640,433 $ Contributions - employee 43,585 45,526 49,203 46,517 30,679 7,937 5,905 3,630 Net investment income 2,531,817 2,073,805 1,942,926 (598,116) 1,806,557 1,422,497 (195,083) 800,044 Benefit payments, including refunds of member contributions (1,490,722) (1,447,430) (1,384,939) (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Administrative expense (28,998) (32,315) (33,464) (29,330) (28,580) (28,053) (28,591) (29,357) Other changes - - - (12,290) (57) - - - Net change in plan fiduciary net position 2,392,397 1,968,672 1,635,799 (857,406) 1,634,013 1,058,271 (629,070) 436,382 Plan fiduciary net position - beginning 17,970,419 16,001,747 14,365,948 15,223,354 13,589,341 12,531,070 13,160,140 12,723,758 Plan fiduciary net position - ending 20,362,816 $ 17,970,419 $ 16,001,747 $ 14,365,948 $ 15,223,354 $ 13,589,341 $ 12,531,070 $ 13,160,140 $ County's net pension liability - ending 7,076,198 $ 8,397,571 $ 8,508,195 $ 9,014,855 $ 7,385,287 $ 8,374,180 $ 9,109,480 $ 5,932,194 $ Plan fiduciary net position as a percentage of the total pension liability 74.2% 68.2% 65.3% 61.4% 67.3% 61.9% 57.9% 68.9% Covered - employee payroll 5,284,388 $ 5,146,779 $ 5,065,928 $ 4,741,881 $ 4,575,021 $ 4,547,735 $ 4,390,047 $ 4,188,926 $ County's net pension liability as a percentage of covered-employee payroll 133.9% 163.2% 167.9% 190.1% 161.4% 184.1% 207.5% 141.6% Note: Amounts presented on financial statements are determined as of December 31st of the preceding year. For MERS Years Ending 12/31 County of Otsego, Michigan Required Supplementary Information Schedule of Changes in Pension Liability Year Ended December 31, 2022 Employee Retirement and Benefit Systems See accompanying notes to financial statements 67 ---PAGE BREAK--- 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Actuarially determined contribution 1,190,722 $ 1,047,430 $ 959,573 $ 878,063 $ 934,199 $ 856,396 $ 715,641 $ 693,477 $ 640,433 $ 727,962 $ Contributions in relation to the actuarially determined contribution (1,490,722) (1,447,430) (1,062,073) (1,128,063) (1,184,199) (1,106,396) (865,641) (693,477) (640,433) (727,962) Contribution deficiency (excess) (300,000) $ (400,000) $ (102,500) $ (250,000) $ (250,000) $ (250,000) $ (150,000) $ - $ - $ - $ Covered - employee payroll 5,284,388 $ 5,146,779 $ 5,065,928 $ 4,741,881 $ 4,401,566 $ 4,575,021 $ 4,547,735 $ 4,390,047 $ 4,188,926 $ 4,080,889 $ Contributions as a percentage of covered-employee payroll 28% 28% 21% 24% 27% 24% 19% 16% 15% 18% Notes to Schedule: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality Significant Changes from the Previous Actuarial Valuation: Investment Rate of return changes from 7.35% to 7.00% Discount Rate Changes from 7.60% to 7.25% Employee Retirement and Benefit Systems Schedule of Employer Contributions For the Year Ended December 31, 2022 3.00% in the long-term 7.00%, net of investment and administrative expense 60 years Actuarially determined contribution rates are calculated as of December 31st, two years prior to the end of the fiscal year in which contributions are reported. For MERS Years Ending 12/31 County of Otsego, Michigan Required Supplementary Information Assumptions were based on the RP-2014 Group Annuity Mortality Table - Blended 50% Male / 50% Female Methods and assumptions used to determine contribution rates Entry age Level percentage of payroll, closed 18 years 10-years smoothed market 2.50% See accompanying notes to financial statements. 68 ---PAGE BREAK--- 2022 2021 2020 2019 2018 Total OPEB Liability - Beginning of Year 1,011,280 $ 1,339,595 $ 1,220,934 $ 1,930,701 $ 1,848,952 $ Service cost 3,987 5,020 4,303 48,184 46,710 Interest 22,229 25,301 38,728 60,282 58,758 Change in Plan Term - - - (510,178) - Assumption changes and differences between actual and expected experience (172,555) (291,256) 150,130 (236,836) 48,727 Benefit payments (54,646) (67,380) (74,500) (71,219) (72,446) OPEB Liability - End of Year 810,295 1,011,280 1,339,595 1,220,934 1,930,701 Plan fiduciary net position Contributions - employer 54,646 67,380 74,500 71,219 72,446 Net investment income - - - - - Benefits payments, including refunds of member contributions (54,646) (67,380) (74,500) (71,219) (72,446) Administrative expense - - - - - Net change in plan fiduciary net position - - - - - Plan fiduciary net position - Beginning of Year - - - - - Plan fiduciary net position - End of Year - - - - - Net OPEB liability - End of Year 810,295 $ 1,011,280 $ 1,339,595 $ 1,220,934 $ 1,930,701 $ Plan fiduciary net position as a percentage of the total OPEB liability 42.9% 42.9% 42.9% 42.9% 42.9% Covered Payroll 61,095 $ 81,566 $ 59,734 $ 1,259,742 $ 4,401,556 $ Net OPEB liability as a percentage of covered payroll 1326.3% 1239.8% 2242.6% 33.1% 33.1% Schedule of Employer Contributions Actuarially determined employer contribution 73,023 90,008 88,495 155,657 155,520 Employer contribution (54,646) (67,380) (74,500) (71,219) (72,446) Contribution deficiency/(excess) 18,377 22,628 13,995 84,438 83,074 Covered Payroll 61,095 $ 81,566 $ 59,734 $ 4,401,556 $ 4,401,556 $ ADC as percentage of covered payroll 119.5% 110.3% 148.1% 11.2% 11.2% Notes to Schedule: Actuarial cost method Entry age normal Discount rate 4.31%, 20 year Aa Municipal Band Rate Salary increases 3.0%, average Investment rate of return NA (pay-as-you-go plan) Healthcare cost trend rate 5.75% in 2020 graded down .25% per year to 4.5% Mortality rate Police: PublicSafety 2010 Employee and Heathly Retiree, Headcount weighted with MP-2020 Improvement Scale County of Otsego, Michigan Required Supplementary Information Schedule of Changes in OPEB Liability and Related Ratios Year Ended December 31, 2022 Actuarially determined contribution rates are calculated as of December 31, 2022 Methods and assumptions used to determine contribution rates: Employee Retirement and Benefit Systems See accompanying notes to financial statements. 69 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 5,771,358 $ 5,771,358 $ 5,874,424 $ 103,066 $ Licenses and Permits 47,810 47,810 55,505 7,695 Federal Sources 140,000 140,000 135,380 (4,620) State Sources 1,325,529 1,411,844 1,506,939 95,095 Local Contributions 23,720 23,720 33,229 9,509 Charges for Services 1,257,715 1,263,569 1,123,016 (140,553) Fines and Forfeits 12,035 12,035 9,150 (2,885) Interest and Rentals 80,000 80,000 138,776 58,776 Other Revenues 635,193 689,469 601,123 (88,346) TOTAL REVENUES 9,293,360 9,439,805 9,477,542 37,737 EXPENDITURES: Legislative: Board of Commissioners 223,905 289,014 278,686 10,328 Judicial: Circuit Court 1,111,457 1,111,457 1,034,123 77,334 Lien Fees 13,720 13,720 13,177 543 Drug Court 183,324 183,324 120,803 62,521 RDSS Transport 15,000 15,000 1,493 13,507 District Court 15,730 15,730 15,375 355 Jury Commission 43,000 43,000 25,002 17,998 Probate Court 206,911 212,835 207,786 5,049 Probation/Parole 1,500 1,500 1,393 107 Prosecuting Attorney 670,602 670,602 654,433 16,169 Family Counseling 3,500 3,500 968 2,532 Total Judicial 2,264,744 2,270,668 2,074,553 196,115 General Government: Administrative Services 257,377 257,377 257,377 - Building and Grounds 309,101 309,101 309,101 - Clerk and Register of Deeds 402,454 403,994 394,948 9,046 Audit Services 16,000 16,000 14,485 1,515 IT Department 106,450 106,450 101,395 5,055 Equalization 203,616 215,466 215,465 1 Treasurer 162,403 162,403 139,913 22,490 Cooperative Extension 63,371 63,371 62,557 814 Elections 26,415 27,960 27,958 2 Legal Defense 30,000 70,000 68,261 1,739 Human Resources 108,088 108,088 108,088 - Surveyor 200 200 200 - Soil Conservation 4,000 10,000 10,000 - Survey and Remonumentation 42,982 42,982 42,982 - Total General Government 1,732,457 1,793,392 1,752,730 40,662 Public Safety: Sheriff 1,475,507 1,445,726 1,299,209 146,517 Civil Division 93,129 93,129 77,734 15,395 Justice Training 3,000 3,000 - 3,000 Marine Safety 7,029 7,029 6,296 733 Safety Education 81,102 81,102 59,227 21,875 Snowmobile 10,200 10,200 884 9,316 Secondary Road Patrol 96,008 103,898 103,898 - ORV 11,000 11,000 5,841 5,159 Jail 1,282,292 1,330,574 1,318,922 11,652 Emergency Services 40,000 40,000 40,000 - Total Public Safety 3,099,267 3,125,658 2,912,011 213,647 For the Year Ended December 31, 2022 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund 70 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) For the Year Ended December 31, 2022 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund Public Works: Drains 6,000 6,094 7 6,087 Health And Welfare: Communicable Diseases 500 500 500 - Medical Examiner 73,900 73,900 59,911 13,989 District Health 251,102 251,102 251,102 - Mental Health 94,003 94,003 94,003 - Soldiers and Sailors Relief 5,000 5,510 4,113 1,397 Veterans' Burial 6,550 6,550 6,249 301 Veterans' Affairs 192,705 202,195 199,006 3,189 Substance Abuse 88,496 88,496 87,266 1,230 Total Health and Welfare 712,256 722,256 702,150 20,106 Community and Economic Development: Planning and Zoning 120,075 122,675 122,307 368 Other Expenditures: Appropriations 21,500 21,500 21,500 - Bonds and Insurance 232,700 237,200 236,390 810 Retiree Insurance 55,100 52,500 43,221 9,279 Additional Pension Contribution 50,169 50,169 50,169 - Other 150,086 82,645 41,225 41,420 Total Other Expenditures 509,555 444,014 392,505 51,509 TOTAL EXPENDITURES 8,668,259 8,773,771 8,234,949 538,822 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 625,101 666,034 1,242,593 576,559 OTHER FINANCING SOURCES (USES): Transfers In 52,300 72,300 50,000 (22,300) Transfers Out (677,401) (738,334) (728,334) 10,000 Total Other Financing Sources (Uses) (625,101) (666,034) (678,334) (12,300) NET CHANGE IN FUND BALANCES - $ - $ 564,259 564,259 $ FUND BALANCES BEGINNING OF YEAR 6,427,835 FUND BALANCES END OF YEAR 6,992,094 $ 71 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Federal Sources 109,788 $ 148,288 $ 68,639 $ (79,649) $ Local Sources 3,000 3,000 459 (2,541) Interest and Rentals 15 15 59 44 Other Revenues 9,335 79,335 118,751 39,416 TOTAL REVENUES 122,138 230,638 187,908 (42,730) EXPENDITURES: Community and Economic Development 122,138 199,738 153,757 45,981 TOTAL EXPENDITURES 122,138 199,738 153,757 45,981 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) - 30,900 34,151 3,251 OTHER FINANCING SOURCES (USES): Transfers In 130,412 132,623 161,128 28,505 Transfers Out (130,412) (163,523) (161,128) 2,395 Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES - $ - $ 34,151 34,151 $ FUND BALANCES BEGINNING OF YEAR 189,942 FUND BALANCES END OF YEAR 224,093 $ For the Year Ended December 31, 2022 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Housing Commission Fund 72 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 557,280 $ 557,280 $ 551,713 $ (5,567) $ Federal Sources 9,250 9,250 13,250 4,000 State Sources 28,008 28,008 30,141 2,133 Fines and Forfeits 171,835 171,835 186,526 14,691 Interest and Rentals 16,200 16,200 13,661 (2,539) Other Revenues 18,000 18,000 38,885 20,885 TOTAL REVENUES 800,573 800,573 834,176 33,603 EXPENDITURES: Recreation & Culture 803,175 853,265 773,388 79,877 TOTAL EXPENDITURES 803,175 853,265 773,388 79,877 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (2,602) (52,692) 60,788 113,480 OTHER FINANCING SOURCES (USES): Transfers In 2,602 52,692 - (52,692) NET CHANGE IN FUND BALANCES - $ - $ 60,788 60,788 $ FUND BALANCES BEGINNING OF YEAR 929,206 FUND BALANCES END OF YEAR 989,994 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Library For the Year Ended December 31, 2022 73 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Interest and Rentals 1,000 $ 1,000 $ 33,783 $ 32,783 $ TOTAL REVENUES 1,000 1,000 33,783 32,783 EXPENDITURES: General Government 1,000 1,000 - 1,000 TOTAL EXPENDITURES 1,000 1,000 - 1,000 NET CHANGE IN FUND BALANCES - $ - $ 33,783 33,783 $ FUND BALANCES BEGINNING OF YEAR 9,057 FUND BALANCES END OF YEAR 42,840 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule American Rescue Plan Act (ARPA) Fund For the Year Ended December 31, 2022 74 ---PAGE BREAK--- Supplementary Information ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals ASSETS: Cash and Equivalents 3,939,581 $ 780,792 $ 8,181 $ 2,421 $ 4,730,975 $ Investments 1,745,027 249,691 - - 1,994,718 Receivables: Taxes 325,664 - - - 325,664 Accounts 43,609 - - - 43,609 Due from Other Funds 27,000 - - - 27,000 Due from Other Governmental Units 313,619 - - - 313,619 Inventories 6,748 - - - 6,748 Prepaid Expense 22,678 - - - 22,678 TOTAL ASSETS 6,423,926 $ 1,030,483 $ 8,181 $ 2,421 $ 7,465,011 $ LIABILITIES: Accounts Payable 261,405 $ - $ 3,627 $ - $ 265,032 $ Accrued Liabilities 197,070 - - - 197,070 Unearned Revenue 10,815 - - - 10,815 TOTAL LIABILITIES 469,290 - 3,627 - 472,917 FUND BALANCES: Nonspendable 29,426 - - - 29,426 Assigned - 1,030,483 4,554 2,421 1,037,458 Unassigned 5,925,210 - - - 5,925,210 TOTAL FUND BALANCES 5,954,636 1,030,483 4,554 2,421 6,992,094 TOTAL LIABILITIES AND FUND BALANCES 6,423,926 $ 1,030,483 $ 8,181 $ 2,421 $ 7,465,011 $ County of Otsego, Michigan Supplementary Information General Fund December 31, 2022 Combining Balance Sheet 75 ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals REVENUES: Taxes and Penalties 5,874,424 $ - $ - $ - $ 5,874,424 $ Licenses and Permits 55,505 - - - 55,505 Federal Sources 135,380 - - - 135,380 State Sources 1,506,939 - - - 1,506,939 Local Sources 33,229 - - - 33,229 Charges for Services 1,123,016 - - - 1,123,016 Interest and Rentals 133,365 5,401 10 - 138,776 Fines and Forfeitures 9,150 - - - 9,150 Other Revenue 600,613 - - 510 601,123 TOTAL REVENUES 9,471,621 5,401 10 510 9,477,542 EXPENDITURES: Legislative 278,686 - - - 278,686 Judicial 2,074,553 - - - 2,074,553 General Government 1,682,456 - 70,274 - 1,752,730 Public Safety 2,912,011 - - - 2,912,011 Public Works 7 - - - 7 Health and Welfare 698,037 - - 4,113 702,150 Community/Economic Development 122,307 - - - 122,307 Other Expenditures 392,505 - - - 392,505 TOTAL EXPENDITURES 8,160,562 - 70,274 4,113 8,234,949 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,311,059 5,401 (70,264) (3,603) 1,242,593 OTHER FINANCING SOURCES (USES): Transfers In - - 50,000 - 50,000 Transfers Out (728,334) - - - (728,334) Total Other Financing Sources (Uses) (728,334) - 50,000 - (678,334) NET CHANGE IN FUND BALANCES 582,725 5,401 (20,264) (3,603) 564,259 FUND BALANCES BEGINNING OF YEAR 5,371,911 1,025,082 24,818 6,024 6,427,835 FUND BALANCES END OF YEAR 5,954,636 $ 1,030,483 $ 4,554 $ 2,421 $ 6,992,094 $ County of Otsego, Michigan Supplementary Information Changes in Fund Balance - General Fund For the Year Ended December 31, 2022 Combining Statement of Revenues, Expenditures, and 76 ---PAGE BREAK--- Animal Groen Friend Control Spongy Work Nature University of the Animal Forfeited Moth Camp Preserve Center Court Control Funds Recycling Control ASSETS: Cash and Equivalents 6,773 $ 446,649 $ 168,759 $ 323,799 $ 44,189 $ 8,218 $ 169,580 $ 101,669 $ Investments - - - - 237,933 - 180,723 - Taxes Receivable - - 2,019 - 428,457 - 359,816 - Accounts Receivable - - - 127 - - - - Advance to Component Units - - - - - - - - Due from Other Governmental Units 29,794 - - 65,272 4,278 - - - Prepaid Items - - - 5,755 - - - - TOTAL ASSETS 36,567 $ 446,649 $ 170,778 $ 394,953 $ 714,857 $ 8,218 $ 710,119 $ 101,669 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ - $ - $ Accounts Payable 3,143 3,239 6,777 12,798 12,575 - 42,998 - Accrued Liabilities 3,913 2,720 - 16,239 8,826 - - - Unearned Revenues - 132,000 - - - - - - TOTAL LIABILITIES 7,056 137,959 6,777 29,037 21,401 - 42,998 - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - 2,019 - 428,457 - 359,816 - TOTAL DEFERRED INFLOWS OF RESOURCES - - 2,019 - 428,457 - 359,816 - FUND BALANCES: Nonspendable - - - 5,755 - - - - Restricted - 308,690 161,982 - 264,999 8,218 307,305 101,669 Committed 29,511 - - 360,161 - - - - TOTAL FUND BALANCES 29,511 308,690 161,982 365,916 264,999 8,218 307,305 101,669 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 36,567 $ 446,649 $ 170,778 $ 394,953 $ 714,857 $ 8,218 $ 710,119 $ 101,669 $ Supplementary Information Nonmajor Governmental Funds Combining Balance Sheet December 31, 2022 Special Revenue Funds County of Otsego, Michigan 77 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Department Redevelopment Building Automation 911 Pistol Officers Law of Human Authority Department Fund Funds Licensing Training Library Services ASSETS: Cash and Equivalents 292,144 $ 874,812 $ 152,483 $ 218,953 $ 47,452 $ 39,226 $ 22,342 $ 8,673 $ Investments 58,674 329,220 - - - - - 5,000 Taxes Receivable - - - - - - - - Accounts Receivable - 3,359 - 126,900 - - - - Advance to Component Units - - - - - - - - Due from Other Governmental Units - - - - - - - - Prepaid Items - - - 11,183 - - - - TOTAL ASSETS 350,818 $ 1,207,391 $ 152,483 $ 357,036 $ 47,452 $ 39,226 $ 22,342 $ 13,673 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ - $ - $ Accounts Payable - 13,211 1,284 - - - 1,260 - Accrued Liabilities - 2,880 - - 404 - - - Unearned Revenues - - - - - - - - TOTAL LIABILITIES - 16,091 1,284 - 404 - 1,260 - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - - - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - - - FUND BALANCES: Nonspendable - - - 11,183 - - - - Restricted 350,818 1,191,300 151,199 345,853 47,048 39,226 21,082 13,673 Committed - - - - - - - - TOTAL FUND BALANCES 350,818 1,191,300 151,199 357,036 47,048 39,226 21,082 13,673 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 350,818 $ 1,207,391 $ 152,483 $ 357,036 $ 47,452 $ 39,226 $ 22,342 $ 13,673 $ County of Otsego, Michigan Combining Balance Sheet Special Revenue Funds Supplementary Information Nonmajor Governmental Funds December 31, 2022 78 ---PAGE BREAK--- Debt Service Fund Child Iron Belle Michigan Bradford Care Trail Indigent Equipment Lake Park & Technology Debt Probate Maintenance Defense Revolving Dam Recreation Funds Service ASSETS: Cash and Equivalents 170,694 $ 3,720 $ 1,832 $ 178,852 $ 17,430 $ 86,556 $ 3,619 $ - $ Investments - - - - - 579,136 - - Taxes Receivable - - - - - 359,631 - - Accounts Receivable - - - - - - - - Advance to Component Units - - - - - - - - Due from Other Governmental Units 86,568 - 70,225 - - - - - Prepaid Items 2,592 - 13,918 - - - - - TOTAL ASSETS 259,854 $ 3,720 $ 85,975 $ 178,852 $ 17,430 $ 1,025,323 $ 3,619 $ - $ LIABILITIES: Due to Other Funds - $ - $ 27,000 $ - $ - $ - $ - $ - $ Accounts Payable 30,173 - 12,711 788 - 9,913 - - Accrued Liabilities 8,130 - - - - 777 - - Unearned Revenues - - - - - 158,239 - - TOTAL LIABILITIES 38,303 - 39,711 788 - 168,929 - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - 359,631 - - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - 359,631 - - FUND BALANCES: Nonspendable 2,592 - 13,918 - - - - - Restricted - 3,720 32,346 - 17,430 - - - Committed 218,959 - - 178,064 - 496,763 3,619 - TOTAL FUND BALANCES 221,551 3,720 46,264 178,064 17,430 496,763 3,619 - TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 259,854 $ 3,720 $ 85,975 $ 178,852 $ 17,430 $ 1,025,323 $ 3,619 $ - $ Special Revenue Funds County of Otsego, Michigan Supplementary Information Nonmajor Governmental Funds Combining Balance Sheet December 31, 2022 79 ---PAGE BREAK--- Groen Nature Public Court Groen Preserve University Library Improvements Restoration Airport Capital Capital Building Center Capital Building Capital Project Building Construction Projects II Projects Maintenance Projects Fund ASSETS: Cash and Equivalents 19,672 $ 1,261,259 $ 167,089 $ 310,433 $ 1,336 $ 253 $ 43,697 $ 819,929 $ Investments - 519,066 - - - - 519,747 13,793 Taxes Receivable - - - - - - 536 - Accounts Receivable - 7,458 - - - - - - Advance to Component Units - 114,617 - - - - - - Due from Other Governmental Units - - - - - - - - Prepaid Items - - - - - - - - TOTAL ASSETS 19,672 $ 1,902,400 $ 167,089 $ 310,433 $ 1,336 $ 253 $ 563,980 $ 833,722 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ - $ - $ Accounts Payable - - - - - - - - Accrued Liabilities - - - - - - - - Unearned Revenues - - - - - - - - TOTAL LIABILITIES - - - - - - - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - 536 - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - 536 - FUND BALANCES: Nonspendable - - - - - - - Restricted - 1,902,400 - - - - 563,444 833,722 Committed 19,672 - 167,089 310,433 1,336 253 - TOTAL FUND BALANCES 19,672 1,902,400 167,089 310,433 1,336 253 563,444 833,722 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 19,672 $ 1,902,400 $ 167,089 $ 310,433 $ 1,336 $ 253 $ 563,980 $ 833,722 $ County of Otsego, Michigan Capital Project Funds Supplementary Information Nonmajor Governmental Funds December 31, 2022 Combining Balance Sheet 80 ---PAGE BREAK--- EMS Building Library Capital Capital Capital Project Projects Trail Head Capital Facilities Project Sinking Bond Fund Capital Project Projects Planning Fund Fund Fund Total ASSETS: Cash and Equivalents 11,072 $ 85,874 $ 710,612 $ - $ 1,355 $ 348,489 $ 7,169,494 $ Investments - - - - 2,581 - 2,445,873 Taxes Receivable - - - - - - 1,150,459 Accounts Receivable - - - - - - 137,844 Advance to Component Units - - - - - - 114,617 Due from Other Governmental Units - - - - - - 256,137 Prepaid Items - - - - - - 33,448 TOTAL ASSETS 11,072 $ 85,874 $ 710,612 $ - $ 3,936 $ 348,489 $ 11,307,872 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ 27,000 $ Accounts Payable - - 75,310 - - - 226,180 Accrued Liabilities - - - - - - 43,889 Unearned Revenues - - - - - - 290,239 TOTAL LIABILITIES - - 75,310 - - - 587,308 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - 1,150,459 TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - 1,150,459 FUND BALANCES: Nonspendable - - - - - - 33,448 Restricted - 85,874 - - - - 6,751,998 Committed 11,072 - 635,302 - 3,936 348,489 2,784,659 TOTAL FUND BALANCES 11,072 85,874 635,302 - 3,936 348,489 9,570,105 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 11,072 $ 85,874 $ 710,612 $ - $ 3,936 $ 348,489 $ 11,307,872 $ County of Otsego, Michigan Capital Project Funds Supplementary Information Nonmajor Governmental Funds December 31, 2022 Combining Balance Sheet 81 ---PAGE BREAK--- Animal Groen Friend Control Spongy Work Nature University of the Animal Forfeited Moth Camp Preserve Center Court Control Funds Recycling Control REVENUES: Taxes and Penalties - $ - $ 16 $ - $ 414,194 $ - $ 345,147 $ - $ Federal Sources - - - 274,900 - - - - State Sources - - - 37,825 - - - - Charges for Services 144,892 - - 28,753 44,712 - - - Fines and Forfeits - - - - 300 - - - Interest and Rentals 122 - - - 10,893 5 3,832 91 Other Revenues - 359,907 - - 29,965 - 2,787 - TOTAL REVENUES 145,014 359,907 16 341,478 500,064 5 351,766 91 EXPENDITURES: Judicial - - - 447,117 - - - - General Government - - 6,777 - - - - - Public Safety 209,890 - - - 499,119 - - - Public Works - - - - - - 311,253 - Health And Welfare - - - - - - - 10,745 Recreation and Culture - 152,657 - - - - - - Capital Outlay - - - - 128,028 - - - Debt Service - - - - - - - - TOTAL EXPENDITURES 209,890 152,657 6,777 447,117 627,147 - 311,253 10,745 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (64,876) 207,250 (6,761) (105,639) (127,083) 5 40,513 (10,654) OTHER FINANCING SOURCES (USES): Transfers In 87,000 - - 78,400 - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) 87,000 - - 78,400 - - - - NET CHANGE IN FUND BALANCES 22,124 207,250 (6,761) (27,239) (127,083) 5 40,513 (10,654) FUND BALANCES BEGINNING OF YEAR 7,387 101,440 168,743 393,155 392,082 8,213 266,792 112,323 FUND BALANCES END OF YEAR 29,511 $ 308,690 $ 161,982 $ 365,916 $ 264,999 $ 8,218 $ 307,305 $ 101,669 $ County of Otsego, Michigan and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2022 Supplementary Information Combining Statement of Revenues, Expenditures, Special Revenue Funds 82 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Department Redevelopment Building Automation 911 Pistol Officers Law of Human Authority Department Fund Funds Licensing Training Library Services REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ - $ - $ Federal Sources - - - - - - - - State Sources 74,000 - - 151,834 - - - - Charges for Services - 593,752 38,425 534,856 11,632 3,715 - - Fines and Forfeits - - - - - - - - Interest and Rentals 883 7,309 - 97 - - - 17 Other Revenues - - - - - - 3,500 - TOTAL REVENUES 74,883 601,061 38,425 686,787 11,632 3,715 3,500 17 EXPENDITURES: Judicial - - - - - - 2,836 - General Government 73,960 - 22,372 - - - - - Public Safety - 561,020 - 657,694 11,252 1,616 - - Public Works - - - - - - - - Health And Welfare - - - - - - - 3,772 Recreation and Culture - - - - - - - - Capital Outlay - - - - - - - - Debt Service - - - - - - - - TOTAL EXPENDITURES 73,960 561,020 22,372 657,694 11,252 1,616 2,836 3,772 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 923 40,041 16,053 29,093 380 2,099 664 (3,755) OTHER FINANCING SOURCES (USES): Transfers In - - - - - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) - - - - - - - - NET CHANGE IN FUND BALANCES 923 40,041 16,053 29,093 380 2,099 664 (3,755) FUND BALANCES BEGINNING OF YEAR 349,895 1,151,259 135,146 327,943 46,668 37,127 20,418 17,428 FUND BALANCES END OF YEAR 350,818 $ 1,191,300 $ 151,199 $ 357,036 $ 47,048 $ 39,226 $ 21,082 $ 13,673 $ Special Revenue Funds County of Otsego, Michigan Supplementary Information and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2022 Combining Statement of Revenues, Expenditures, 83 ---PAGE BREAK--- Debt Service Fund Child Iron Belle Michigan Bradford Care Trail Indigent Equipment Lake Park & Technology Debt Probate Maintenance Defense Revolving Dam Recreation Funds Service REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ 345,121 $ - $ - $ Federal Sources - - - - - - - - State Sources 128,680 - 181,750 - - - - - Charges for Services - - - - - 236,689 2,144 - Fines and Forfeits - - - - - - - - Interest and Rentals - - 29 - 79 15,393 - - Other Revenues 23,752 - - 11,564 - 27,425 - - TOTAL REVENUES 152,432 - 181,779 11,564 79 624,628 2,144 - EXPENDITURES: Judicial - - 315,246 - - - - - General Government - - - 1,024 - - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare 367,158 - - - - - - - Recreation and Culture - 5,561 - - 900 587,236 - - Capital Outlay - - - 181,827 - - - - Debt Service - - - - - - - 403,400 TOTAL EXPENDITURES 367,158 5,561 315,246 182,851 900 587,236 - 403,400 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (214,726) (5,561) (133,467) (171,287) (821) 37,392 2,144 (403,400) OTHER FINANCING SOURCES (USES): Transfers In 300,000 2,500 81,468 339,000 - - - 403,400 Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) 300,000 2,500 81,468 339,000 - - - 403,400 NET CHANGE IN FUND BALANCES 85,274 (3,061) (51,999) 167,713 (821) 37,392 2,144 - FUND BALANCES BEGINNING OF YEAR 136,277 6,781 98,263 10,351 18,251 459,371 1,475 - FUND BALANCES END OF YEAR 221,551 $ 3,720 $ 46,264 $ 178,064 $ 17,430 $ 496,763 $ 3,619 $ - $ For the Year Ended December 31, 2022 and Changes in Fund Balance County of Otsego, Michigan Supplementary Information Combining Statement of Revenues, Expenditures, Nonmajor Governmental Funds Special Revenue Funds 84 ---PAGE BREAK--- Groen Nature Public Court Groen Preserve University Library Improvements Restoration Airport Capital Capital Building Center Capital Building Capital Project Building Construction Projects II Projects Maintenance Projects Fund REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ 32 $ 111 $ Federal Sources - - - - - - - - State Sources - - - - - - - - Charges for Services - - 36,936 - - - - - Fines and Forfeits - - - - - - - - Interest and Rentals 39 14,055 - - 344 26 14,485 1,196 Other Revenues - - - - 66,109 - - - TOTAL REVENUES 39 14,055 36,936 - 66,453 26 14,517 1,307 EXPENDITURES: Judicial - - - - - - - - General Government - - - 4,500 - - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare - - - - - - - - Recreation and Culture - - - - - - 64,973 - Capital Outlay - - - - 86,310 - 14,340 - Debt Service - - - - - - - - TOTAL EXPENDITURES - - - 4,500 86,310 - 79,313 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 39 14,055 36,936 (4,500) (19,857) 26 (64,796) 1,307 OTHER FINANCING SOURCES (USES): Transfers In - - - 50,000 - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) - - - 50,000 - - - - NET CHANGE IN FUND BALANCES 39 14,055 36,936 45,500 (19,857) 26 (64,796) 1,307 FUND BALANCES BEGINNING OF YEAR 19,633 1,888,345 130,153 264,933 21,193 227 628,240 832,415 FUND BALANCES END OF YEAR 19,672 $ 1,902,400 $ 167,089 $ 310,433 $ 1,336 $ 253 $ 563,444 $ 833,722 $ Nonmajor Governmental Funds Supplementary Information and Changes in Fund Balance Combining Statement of Revenues, Expenditures, Capital Project Funds For the Year Ended December 31, 2022 County of Otsego, Michigan 85 ---PAGE BREAK--- EMS Building Library Capital Capital Capital Projects Trail Head Capital Facilities Project Project Bond Fund Capital Projects Projects Planning Fund Fund Sinking Fund Total REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ 1,104,621 $ Federal Sources - - - - - - 274,900 State Sources - - - - - - 574,089 Charges for Services - - - - - - 1,676,506 Fines and Forfeits - - - - - - 300 Interest and Rentals - 67 - - 42 373 69,377 Other Revenues - - - - - - 525,009 TOTAL REVENUES - 67 - - 42 373 4,224,802 EXPENDITURES: Judicial - - - - - - 765,199 General Government - - 89,866 - - 11,555 210,054 Public Safety - - - - - - 1,940,591 Public Works - - - - - - 311,253 Health And Welfare - - - - - - 381,675 Recreation and Culture 2,030 589 - - - - 813,946 Capital Outlay - - 65,244 - - - 475,749 Debt Service - - - - - - 403,400 TOTAL EXPENDITURES 2,030 589 155,110 - - 11,555 5,301,867 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (2,030) (522) (155,110) - 42 (11,182) (1,077,065) OTHER FINANCING SOURCES (USES): Transfers In - - 127,206 - - 12,933 1,481,907 Transfers Out - - - - - TOTAL OTHER FINANCING SOURCES (USES) - - 127,206 - 12,933 1,481,906 NET CHANGE IN FUND BALANCES (2,030) (522) (27,904) 42 1,751 404,841 FUND BALANCES BEGINNING OF YEAR 13,102 86,396 663,206 1 3,894 346,738 9,165,264 FUND BALANCES END OF YEAR 11,072 $ 85,874 $ 635,302 $ - $ 3,936 $ 348,489 $ 9,570,105 $ For the Year Ended December 31, 2022 Combining Statement of Revenues, Expenditures, Capital Project Funds County of Otsego, Michigan Supplementary Information and Changes in Fund Balance Nonmajor Governmental Funds 86 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total ASSETS: Cash and Equivalents 33,485 $ 139,881 $ 93,218 $ 266,584 $ Investments - - 165,148 165,148 Accounts Receivable 5,084 204 1,845 7,133 Lease Receivable-Due in less than one year 1,818 - - 1,818 Lease Receivable-Due in more than one year 136,915 - - 136,915 Prepaid Items - - 96,636 96,636 TOTAL ASSETS 177,302 $ 140,085 $ 356,847 $ 674,234 $ LIABILITIES: Accounts Payable 31,424 $ 1,772 $ - $ 33,196 $ Accrued Liabilities - 7,596 - 7,596 TOTAL LIABILITIES 31,424 9,368 - 40,792 DEFERRED INFLOWS OF RESOURCES: Leases 138,733 - - 138,733 NET POSITION: Unrestricted 7,145 130,717 356,847 494,709 TOTAL NET POSITION 7,145 130,717 356,847 494,709 TOTAL LIABILITIES AND NET POSITION 177,302 $ 140,085 $ 356,847 $ 674,234 $ County of Otsego, Michigan Supplementary Information Internal Service Funds December 31, 2022 Combining Statement of Net Position 87 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total OPERATING REVENUES: Charges for Services 443,375 $ 645,058 $ 1,324,238 $ 2,412,671 $ TOTAL OPERATING REVENUES 443,375 645,058 1,324,238 2,412,671 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 157,848 637,853 1,335,402 2,131,103 Contractual Services 59,083 - - 59,083 Materials and Supplies 35,475 7,955 173 43,603 Equipment Repair and Maintenance 17,638 650 - 18,288 Utilities 216,055 900 - 216,955 Other 4,509 45,692 - 50,201 TOTAL OPERATING EXPENSES 490,608 693,050 1,335,575 2,519,233 OPERATING INCOME (LOSS) (47,233) (47,992) (11,337) (106,562) Non Operating Revenues (Expenses): Interest Earnings 4,540 - 1,096 5,636 Total Non Operating Revenues (Expenses): 4,540 - 1,096 5,636 INCOME (LOSS) BEFORE TRANSFERS (42,693) (47,992) (10,241) (100,926) Operating Transfers In(Out) (2,500) - - (2,500) Changes in Net Position (45,193) (47,992) (10,241) (103,426) Net Position Beginning of Year 52,338 178,709 367,088 598,135 Net Position End of Year 7,145 $ 130,717 $ 356,847 $ 494,709 $ County of Otsego, Michigan Supplementary Information in Net Position - Internal Service Funds For the Year Ended December 31, 2022 Combining Statement of Revenues, Expenses, and Changes 88 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Totals CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 446,585 $ 644,895 $ 1,323,977 $ 2,415,457 $ Payments to Suppliers (338,410) (53,133) - (391,543) Payments to Employees for Services and Benefits (157,848) (639,754) (1,352,421) (2,150,023) Net Cash Used by Operating Activities (49,673) (47,992) (28,444) (126,109) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Operating Transfers Out (2,500) - - (2,500) Net Cash Used by Noncapital and Related Financing Activities (2,500) - - (2,500) CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings 4,540 - 1,096 5,636 Net Sale or (Purchase) of Investments - - 5,113 5,113 Net Cash Provided by Investing Activities 4,540 - 6,209 10,749 Net Decrease in Cash and Equivalents (47,633) (47,992) (22,235) (117,860) Balances - Beginning of the Year 81,118 187,873 115,453 384,444 Balances - End of the Year 33,485 $ 139,881 $ 93,218 $ 266,584 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (47,233) $ (47,992) $ (11,337) $ (106,562) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Change in Assets and Liabilities: Accounts Receivable 3,210 (163) (261) 2,786 Prepaid Expense 104 605 (15,402) (14,693) Accounts Payable (5,754) 1,459 (1,444) (5,739) Accrued Liabilities - (1,901) - (1,901) Net Cash Used by Operating Activities (49,673) $ (47,992) $ (28,444) $ (126,109) $ County of Otsego, Michigan Supplementary Information Internal Service Funds For the Year Ended December 31, 2022 Combining Statement of Cash Flows 89 ---PAGE BREAK--- Global University Positioning Center Airport Advertising System Metropolitan Special I-75 Sign Jail Homestead Fund Area Network Events Fund Commissary Audit Total ASSETS: Current Assets Cash and Equivalents 44,630 $ 159,096 $ 45,245 $ 1,323 $ 18,386 $ 25,839 $ 294,519 $ Accounts Receivable - 1,250 - - 9,550 - 10,800 Total Current Assets 44,630 160,346 45,245 1,323 27,936 25,839 305,319 Noncurrent Assets Capital Assets (Net of Accumulated Depreciation) - 12,278 - - - - 12,278 TOTAL ASSETS 44,630 $ 172,624 $ 45,245 $ 1,323 $ 27,936 $ 25,839 $ 317,597 $ LIABILITIES: Accounts Payable 2,208 $ 5,887 $ 65 $ - $ 7,409 $ 6 $ 15,575 $ TOTAL LIABILITIES 2,208 5,887 65 - 7,409 6 15,575 NET POSITION: Net Investment in Capital Assets - 12,278 - - - - 12,278 Unrestricted 42,422 154,459 45,180 1,323 20,527 25,833 289,744 TOTAL NET POSITION 42,422 $ 166,737 $ 45,180 $ 1,323 $ 20,527 $ 25,833 $ 302,022 $ County of Otsego, Michigan Supplementary Information Nonmajor Enterprise Funds December 31, 2022 Combining Statement of Net Position 90 ---PAGE BREAK--- Global University Positioning Center Airport Advertising System Metropolitan Special I-75 Sign Jail Homestead Fund Area Network Events Fund Commissary Audit Total OPERATING REVENUES: Charges for Services - $ 72,615 $ - $ - $ 35,109 $ 9,956 $ 117,680 $ TOTAL OPERATING REVENUES - 72,615 - - 35,109 9,956 117,680 OPERATING EXPENSES: Materials and Supplies 21,039 - - - 30,815 - 51,854 Depreciation - 12,301 - - - - 12,301 Other Expenses - 74,583 - 252 - 774 75,609 TOTAL OPERATING EXPENSES 21,039 86,884 - 252 30,815 774 139,764 OPERATING INCOME (LOSS) (21,039) (14,269) - (252) 4,294 9,182 (22,084) NON OPERATING REVENUES (EXPENSES): Interest Earnings - - - - - 1,599 1,599 TOTAL NONOPERATING REVENUES (ESPENSES): - - - - - 1,599 1,599 INCOME (LOSS) BEFORE TRANSFERS (21,039) (14,269) - (252) 4,294 10,781 (20,485) Transfers In 6,000 - - - - - 6,000 Changes in Net Position (15,039) (14,269) - (252) 4,294 10,781 (14,485) NET POSITION BEGINNING OF YEAR 57,461 181,006 45,180 1,575 16,233 15,052 316,507 NET POSITION END OF YEAR 42,422 $ 166,737 $ 45,180 $ 1,323 $ 20,527 $ 25,833 $ 302,022 $ County of Otsego, Michigan Supplementary Information in Net Position - Nonmajor Enterprise Funds For the Year Ended December 31, 2022 Combining Statement of Revenues, Expenses, and Changes 91 ---PAGE BREAK--- Global University Positioning Center Airport Advertising System Metropolitan Special I-75 Sign Jail Homestead Fund Area Network Events Fund Commissary Audit Totals CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 4,132 $ 74,389 $ - $ - $ 31,753 $ 9,956 $ 120,230 $ Payments to Suppliers (42,943) (66,872) (300) (252) (31,116) (768) (142,251) Net Cash Provided (Used) by Operating Activities (38,811) 7,517 (300) (252) 637 9,188 (22,021) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Transfers In 6,000 - - - - - 6,000 Net Cash Provided by Noncapital and Related Financing Activities 6,000 - - - - - 6,000 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - - - - 1,599 1,599 Net Cash Provided by Investing Activities - - - - - 1,599 1,599 Net Increase (Decrease) in Cash and Equivalents (32,811) 7,517 (300) (252) 637 10,787 (14,422) Balances - Beginning of the Year 77,441 151,579 45,545 1,575 17,749 15,052 308,941 Balances - End of the Year 44,630 $ 159,096 $ 45,245 $ 1,323 $ 18,386 $ 25,839 $ 294,519 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (21,039) $ (14,269) $ - $ (252) $ 4,294 $ 9,182 $ (22,084) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - 12,301 - - - - 12,301 Change in Assets and Liabilities: Accounts Receivable 4,132 1,774 - - (3,356) - 2,550 Prepaid Expenses - 1,988 - - - - 1,988 Accounts Payable (21,904) 5,723 (300) - (301) 6 (16,776) Net Cash Provided (Used) by Operating Activities (38,811) $ 7,517 $ (300) $ (252) $ 637 $ 9,188 $ (22,021) $ County of Otsego, Michigan Supplementary Information Nonmajor Enterprise Funds For the Year Ended December 31, 2022 Combining Statement of Cash Flows 92 ---PAGE BREAK--- Reports on Compliance ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 93 INDEPENDENT AUDITOR’S 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 To the Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 We have audited, in accordance with the 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 governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan, as of and for the year ended December 31, 2022, and the related notes to the financial statements, which collectively comprise the County of Otsego, Michigan’s basic financial statements and have issued our report thereon dated September 12, 2023. Our report includes a reference to other auditors who audited the financial statements of the Otsego County Road Commission and the Otsego County Commission on Aging as described in our report on the County of Otsego, Michigan’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. The financial statements of the Otsego Commission on Aging were not audited in accordance with Governmental Auditing Standards. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the County of Otsego, Michigan’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County of Otsego, Michigan’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County of Otsego, Michigan’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 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. ---PAGE BREAK--- 94 To the Board of Commissioners Otsego County 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 or significant deficiencies may exist that were not identified. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the County of Otsego, Michigan's financial statements are free from 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 financial statements. 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 instance of noncompliance or other matters that is 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 entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Anderson, Tackman & Company, PLC Certified Public Accountants Kincheloe, Michigan September 12, 2023 ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 95 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited the County of Otsego, Michigan’s compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the County of Otsego, Michigan’s major federal programs for the year ended December 31, 2022. The County of Otsego, Michigan’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. The County of Otsego, Michigan’s basic financial statements include the operations of the Otsego County Road Commission and the Otsego County Commission on Aging, which received $811,917 and $235,042 in federal awards, respectively, which are not included in the County of Otsego, Michigan’s schedule of expenditures of federal awards during the year ended December 31, 2022. Our audit, described below, did not include the operations of the Otsego County Road Commission and the Otsego County Commission on Aging because they were engaged by other auditors to perform a separate financial audit and it did not meet compliance requirements for a single audit in accordance with the Uniform Guidance, as expenditures of directly administered federal awards did not exceed $750,000. In our opinion, the County of Otsego, Michigan complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2022. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and 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). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the County of Otsego, Michigan and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the County of Otsego, Michigan’s compliance requirements referred to above. ---PAGE BREAK--- 96 To the Board of Commissioners County of Otsego Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the County of Otsego, Michigan’s federal programs. Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the County of Otsego, Michigan’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgement made by a reasonable user of the report on compliance about the County of Otsego, Michigan’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we:  Exercise professional judgement and maintain professional skepticism throughout the audit.  Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basiss, evidence regarding the County of Otsego, Michigan’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.  Obtain an understanding of the County of Otsego, Michigan’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the County of Otsego, Michigan’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on 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, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. 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 type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. ---PAGE BREAK--- 97 To the Board of Commissioners County of Otsego Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Anderson, Tackman and Company, PLC Certified Public Accountants Kincheloe, Michigan September 12, 2023 ---PAGE BREAK--- Federal Agency or Passed Federal Grantor/Pass-through CFDA Pass-through Through to Federal Grantor/Program Title COVID-19 Number Number Subrecipients Expenditures U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT: Pass-through from the Michigan State Development Authority Community Development Block Grants/State Program and Non-Entitlement Grants in Hawaii No 14.228 PI 2021 - $ 68,639 $ Non-Entitlement Grants in Hawaii No 14.228 PI 2022 - 81,650 Total U.S. Department of Housing and Urban Development - 150,289 U.S. DEPARTMENT OF JUSTICE: Pass-through Michigan State Police Bulletproof Vest Partnership No 16.607 N/A - 2,645 Total U.S. Department of Justice - 2,645 U.S. DEPARTMENT OF TRANSPORTATION: Pass-through the Michigan Department of Transportation Formula Grants for Rural Areas and Tribal Transit Programs No 20.509 N/A - 149,476 Formula Grants for Rural Areas and Tribal Transit Programs Yes 20.509 CARES Act - 423,233 Grants for Buses and Bus Facilities Program No 20.526 N/A - 214,436 Subtotal MDOT - 787,145 Total U.S. Department of Transportation - 787,145 U.S. DEPARTMENT OF TREASURY: Direct Award: Local Assistant and Tribal Consistancy Fund Yes 21.032 N/A - 50,000 Total U.S. Deparment of Treasury - 50,000 County of Otsego, Michigan Supplementary Information For the Year Ended December 31, 2022 Schedule of Expenditures of Federal Awards See accompanying notes to scheduled of expenditures of federal awards. 98 ---PAGE BREAK--- Federal Agency or Passed Federal Grantor/Pass-through CFDA Pass-through Through to Federal Grantor/Program Title COVID-19 Number Number Subrecipients Expenditures County of Otsego, Michigan Supplementary Information For the Year Ended December 31, 2022 Schedule of Expenditures of Federal Awards U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES: Pass-through from the State of Michigan Department of Health and Human Services Child Support Enforcement No 93.563 CSPA-13-69002 - 54,314 Child Support Enforcement No 93.563 CSFOC13-69001 - 44,731 Child Support Enforcement No 93.563 CSFOC17-69001 - 230,169 Total U.S. Department of Health and Human Services - 329,214 U.S. DEPARTMENT OF HOMELAND SECURITY: Pass-through from the Michigan Department of Natural Resources Boating Safety Financial Assistence No 97.012 N/A - 6,120 Pass-through from the Michigan State Police Pre-Disaster Mitigation Program No 97.042 N/A - 15,617 Pre-Disaster Mitigation Program No 97.067 2019--SS-00013 - 6,684 Subtotal - MSP - 22,301 Total U.S. Department of Homeland Security - 28,421 TOTAL EXPENDITURES OF FEDERAL AWARDS - $ 1,347,714 $ See accompanying notes to scheduled of expenditures of federal awards. 99 ---PAGE BREAK--- County of Otsego, Michigan Notes to Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2022 100 NOTE A - BASIS OF PRESENTATION: The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the County of Otsego, Michigan under programs of the federal government for the year ended December 31, 2022. The information in this Schedule is presented 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 County of Otsego, Michigan, it is not intended to and does not present the financial position, changes in net position, or cash flows of the County of Otsego, Michigan. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. NOTE C - INDIRECT COST: For purposes of charging indirect costs to federal awards, the County has not elected to use the 10% de minimis cost rate as permitted by CFR Section 200.414 of the Uniform Guidance. NOTE D - MDOT ADMINISTRATION: The Michigan Department of Transportation (MDOT) requires that all Road Commissions report all federal and state grants pertaining to their county. During the year ended December 31, 2022, the federal aid received and expended by the Otsego County Road Commission was $477,532 for contracted projects and $334,385 for negotiated projects. Contracted projects are defined as projects performed by private contractors paid for and administrated by MDOT. The contracted federal projects are not subject to Single Audit. Negotiated projects are defined as projects performed by Road Commission employees or private contractors paid for and administered by the Road Commission. The amount subject to Single Audit Requirements is less than the $750,000 threshold and, therefore, no single audit was performed. ---PAGE BREAK--- County of Otsego, Michigan Schedule of Findings and Questioned Costs For the Year Ended December 31, 2022 101 Section I – Summary of Auditor’s Results Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: ꞏ Material weaknesses identified? No ꞏ Significant deficiencies identified that are not considered to be material weaknesses? No Noncompliance material to financial statements noted? No Federal Awards Internal control over major programs: ꞏ Material weaknesses identified? No ꞏ Significant deficiencies identified that are not considered to be material weaknesses? No Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Title 2 (CFR) part 200, Uniform Guidance? No Identification of Major Programs CFDA Numbers Name of Federal Program or Cluster 20.509 US DOT Operating Grant (Section 5311) Dollar threshold used to distinguish between types A and type B programs: $750,000 Auditee qualified as low-risk auditee? No ---PAGE BREAK--- County of Otsego, Michigan Schedule of Findings and Questioned Costs For the Year Ended December 31, 2022 102 Section II – Financial Statement Findings NONE. Section III – Federal Award Findings and Questioned Costs NONE. ---PAGE BREAK--- County of Otsego, Michigan Summary Schedule of Prior Audit Findings For the Year Ended December 31, 2022 103 Section III – Federal Award Findings and Questioned Costs NONE. ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE Members of the Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan for the year ended December 31, 2022, and have issued our report thereon dated September 12, 2023. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated July 19, 2023. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the County of Otsego, Michigan are described in Note 1 to the financial statements. As described in Note 1 to the financial statements, the County of Otsego changed accounting policies related to leases by adopting Statement of Governmental Standards (GASB Statement) No. 87, “Leases”, in 2022. Accordingly, the lease receivables and their related deferred inflows were reflected in the current year financial statements for the implementation of GASB Statement No. 87. We noted no transactions entered into by the County of Otsego during the year for which there is a lack of authoritative guidance or consensus. All significant have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 2  Management’s estimate of the depreciation expense is based on estimated lives. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the financial statements taken as a whole.  Management’s estimate of the vested employee benefits is based on current hourly rates and policies regarding payment of sick and vacation banks.  Management’s estimate of the allowance for uncollectible accounts receivable is based on past experience and future expectations for collection of various account balances and has been determined to be $417,500.  Management’s estimate of the Annual Required Contribution and liabilities actuarial for OPEB Obligations and net pension liability was based on various assumptions regarding life expectancies, inflation, premium increases, and investment rates.  Management’s estimate of the discount rate used in the present value of leases were based on the interest rate charged by the lessor, when available. If unavailable, the estimated incremental borrowing rate is used. The financial statement disclosures are neutral, consistent and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole. Disagreements with Management For the purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated September 12, 2023. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit’s financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 3 Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Comments and Recommendations Taxes Receivable (Prior Year) It was noted in our review of the general operations tax receivable, that the County is currently only recording the amount related to next year’s tax settlement as a receivable at year end. Not the total amount of the tax levy left to be collected as the county revenue recognition policy requires. We recommend that the county begin recording the total amount of taxes left to be collected as of December 31, as revenue and receivable as of December 31 to ensure that the revenue is recorded in the year of the of levy to be in compliance with county policy. Status: In the process of being corrected Bank Reconciliations It was noted in our review of the County’s cash accounts that a few of the reconciliations had not been performed in a timely manner and some were missing approval signatures. We recommend that the County review all bank reconciliations to ensure proper signatures are present and reconciliations are performed in a timely manner. Status: Uncorrected Other Matters We applied certain limited procedures to the management’s discussion and analysis, schedule of funding progress and budgetary comparison schedules, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquires of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquires, the basic financial statements, and our knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the combining major and nonmajor fund financial statements and schedule of federal awards, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquires of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 4 Restriction on Use The information is intended solely for the information and use of those charged with governance and management of Otsego County and is not intended to be, and should not be, used by anyone other than those specified parties. Conclusion We would like to express our appreciation, as well as that of our staff, for the excellent cooperation we received while performing the audit. If we can be of assistance in implementing the above recommendations, please contact us. Anderson, Tackman & Company, PLC Certified Public Accountants Kincheloe, Michigan September 12, 2023 ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 27 APPENDIX B PROPOSER GUARANTEES I. The proposer certifies it can and will provide and make available, as a minimum, all services set forth in Section II, Nature of Services Required. Signature of Official: Name (typed): Title: Firm: Date: ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 28 APPENDIX C PROPOSER WARRANTIES A. Proposer warrants that it is willing and able to comply with State of Michigan laws and licensing requirements. B. Proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing a minimum of $1,000,000 coverage for the willful or negligent acts, or omissions of any officers, employees or agents thereof. C. Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the prior written permission of the COUNTY OF OTSEGO. D. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. Signature of Official: Name (typed): Title: Firm: Date: ---PAGE BREAK--- Request for Proposals Professional Auditing Services Page 29 APPENDIX D SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE [YEAR] FINANCIAL STATEMENTS Standard Quoted Hourly Hourly Hours Rates Rates Total Partners Managers Supervisory staff Staff Other (specify): Subtotal Total for services Described in Section II E of the RFP (Detail on subsequent pages) Other (specify): Total all-inclusive maximum price for 2024 audit Note: The rate quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all-inclusive maximum price