Document otsegocountymi_gov_doc_61b7463e8a

County of Otsego, Michigan BASIC FINANCIAL STATEMENTS December 31, 2023 ---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 MORGAN KWAPIS 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 66 Schedule of Employer Contributions 67 Schedule of Changes in OPEB Liability and Related Rations 68 Budgetary Comparison Schedules – Major Funds: General Fund 69 Housing Commission 71 Library 72 American Rescue Plan Act (ARPA) 73 ---PAGE BREAK--- ii TABLE OF CONTENTS (Continued) SUPPLEMENTARY INFORMATION: Combining Balance Sheet – General Funds 74 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – General Funds 75 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 99 Schedule of Findings and Questioned Costs: Section I – Summary of Auditor’s Results 100 Section II – Financial Statement 101 Section III – Federal Award Findings 103 Summary Schedule of Prior Audit Findings: Section III – Federal Award Findings 104 ---PAGE BREAK--- 1 INDEPENDENT AUDITOR’S REPORT To the 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, 2023, 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, 2023, 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 6 percent, 92 and 2 percent, and 69 and 10 percent, respectively, of the assets, net position, and revenues of the aggregate discretely presented component units as of December 31, 2023. 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.  ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 (906) 495-5952 Fax (906) 495-7312 [EMAIL REDACTED] ---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 August 8, 2025, 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 August 8, 2025 ---PAGE BREAK--- Management’s Discussion and Analysis ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2023 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, 2023. 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 $38,737,243 for 2022 and was $42,652,169 for 2023, a increase of 10.1%. For 2023, net position for our business-type activities was $13,613,928 or 32.0% of total net position, while net position in our governmental activities was $29,038,241 or 68.0% of total net position.  At December 31, 2023, Otsego County’s governmental funds report a combined fund balance of $21,577,813 compared to $17,845,728 in 2022.  At December 31, 2023, the fund balance for the general fund was $9,214,691 with $22,024 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 Judicial, General Government, Public Safety, Public Works, Health and Welfare, Community & Economic Development and Culture and Recreation. The business-type activities of the County include the Otsego County Bus System, Delinquent Tax Revolving, Tax Foreclosure, 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, 2023 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, 2023 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 $42,652,169 at the close of the most recent fiscal year. Otsego County Net Position 2023 2022 2023 2022 2023 2022 Current Assets 29,323,653 $ 27,363,207 $ 9,949,289 $ 8,233,613 $ 39,272,942 $ 35,596,820 $ Capital Assets 13,161,931 13,635,527 4,124,616 4,424,160 17,286,547 18,059,687 Total Assets 42,485,584 40,998,734 14,073,905 12,657,773 56,559,489 53,656,507 Deferred Outflows of Resources 3,453,144 2,806,905 278,004 138,895 3,731,148 2,945,800 Current Liabilities 4,062,895 1,318,226 330,682 146,490 4,393,577 1,464,716 Noncurrent Liabilities 10,612,444 7,886,493 189,682 - 10,802,126 7,886,493 Total Liabilities 14,675,339 9,204,719 520,364 146,490 15,195,703 9,351,209 Deferred Inflows of Resources 2,225,148 8,204,339 217,617 309,516 2,442,765 8,513,855 Net Position Net Investment in Capital Assets 13,155,063 13,629,051 4,124,616 4,424,160 17,279,679 18,053,211 Restricted 9,193,714 8,008,925 - - 9,193,714 8,008,925 Unrestricted 6,689,464 4,758,605 9,489,312 7,916,502 16,178,776 12,675,107 Total Net Position 29,038,241 $ 26,396,581 $ 13,613,928 $ 12,340,662 $ 42,652,169 $ 38,737,243 $ 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, 2023 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 $9,193,714. The remaining balance of unrestricted net position of $16,178,776 may be used to meet the government’s ongoing obligations to citizens and creditors. Otsego County Changes in Net Position 2023 2022 2023 2022 2023 2022 Program Revenues Charges for Services 4,479,262 $ 2,472,005 $ 2,517,540 $ 2,222,471 $ 6,996,802 $ 4,694,476 $ Operating Grants and Contributions 3,232,950 2,360,322 1,053,980 1,396,620 4,286,930 3,756,942 Capital Grants and Contributions 1,685,000 42,982 595,275 - 2,280,275 42,982 General Revenues Property Taxes 8,246,247 8,053,305 872,295 835,050 9,118,542 8,888,355 State Revenue Sharing 563,503 532,851 - - 563,503 532,851 Investment Earnings 492,483 261,492 472,066 (3,560,336) 964,549 (3,298,844) Other Revenue - 1,545,845 97,624 380,769 97,624 1,926,614 Total Revenues 18,699,445 15,268,802 5,608,780 1,274,574 24,308,225 16,543,376 Program Expenses Judicial 3,145,496 2,013,346 - - 3,145,496 2,013,346 General Government 2,735,610 3,952,050 - - 2,735,610 3,952,050 Public Safety 5,759,502 4,602,711 - - 5,759,502 4,602,711 Public Works 409,326 594 - - 409,326 594 Health and Welfare 1,153,614 1,052,945 - - 1,153,614 1,052,945 Communtiy and Economic Development 298,008 457,849 - - 298,008 457,849 Recreation and Culture 1,951,754 1,780,155 - - 1,951,754 1,780,155 Interest Expense - Unallocated - 6,196 - - - 6,196 Other Expenses 613,475 - - - 613,475 - Delinquent Tax Collection - - 209,404 189,584 209,404 189,584 Bus System - - 1,719,141 1,141,574 1,719,141 1,141,574 Airport - - 2,143,847 2,166,653 2,143,847 2,166,653 Other Expenses - - 254,122 266,925 254,122 266,925 Total Expenses 16,066,785 13,865,846 4,326,514 3,764,736 20,393,299 17,630,582 Excess (Deficiency) Before Transfers 2,632,660 1,402,956 1,282,266 (2,490,162) 3,914,926 (1,087,206) Transfers 9,000 297,672 (9,000) (297,672) - - Changes in Net Position 2,641,660 1,700,628 1,273,266 (2,787,834) 3,914,926 (1,087,206) Net Position - Beginning 26,396,581 24,695,953 12,340,662 15,128,496 38,737,243 39,824,449 Net Position - Ending 29,038,241 $ 26,396,581 $ 13,613,928 $ 12,340,662 $ 42,652,169 $ 38,737,243 $ Total Governmental Business-type Activities Activities ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2023 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 $9,214,691. General Fund Budgetary Highlights The General Fund realized $85,123 more in revenues than anticipated for the fiscal year. The General Fund operations also expended $668,803 less than appropriated and resulted in a net budget variance of $753,296. All of the General Fund services departments expended less than the budgeted amount for departmental operations in 2023. 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, 2023 the County had $17,286,547 invested in a range of assets. This includes a net decrease of $773,411 from last year as depreciation and deletions exceed additions. Otsego County Capital Assets (net of depreciation) 2023 2022 2023 2022 2023 2022 Land 2,986,892 $ 2,849,995 $ 99,998 $ 99,998 $ 3,086,890 $ 2,949,993 $ Construction in Progress 17,705 32,092 - - 17,705 32,092 Buildings 8,181,448 8,799,077 772,267 886,582 8,953,715 9,685,659 Furniture & Fixtures - - - - - - Equipment 1,529,857 1,463,618 9,727 33,503 1,539,584 1,497,121 Vehicles 424,783 467,049 1,079,990 664,385 1,504,773 1,131,434 Infrastructure 21,246 23,696 2,162,634 2,739,692 2,183,880 2,763,388 Total 13,161,931 $ 13,635,527 $ 4,124,616 $ 4,424,160 $ 17,286,547 $ 18,059,687 $ 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, 2023 9 Debt Administration At the end of fiscal year 2023, the County had paid off its outstanding bond debt. All notes 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/retiree health care liabilities. Debt Administration 2023 2022 2023 2022 2023 2022 Note Payable - Vehicle Lease 21,877 28,353 - - 21,877 28,353 Compensated Absences 266,031 210,533 - - 266,031 210,533 Total 287,908 $ 238,886 $ - $ - $ 287,908 $ 238,886 $ 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 2024 Budget:  Property tax revenues are projected to increase approximately Highlight of the 2024 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, Equivalents & Investments 24,219,379 $ 8,566,976 $ 32,786,355 $ 14,916,205 $ Receivables: Taxes 2,198,277 624,623 2,822,900 1,579,733 Accounts 148,217 127,476 275,693 3,647,310 Interest - 85,702 85,702 - Loans 1,372,166 - 1,372,166 - Leases-Due in less than one year 1,878 4,311 6,189 - Leases-Due in more than one year 135,037 97,672 232,709 - Due from Governmental Units 1,044,476 406,097 1,450,573 - Inventories 4,412 36,326 40,738 917,618 Prepaid Items 149,114 106 149,220 72,464 Advance to Component Unit 50,697 - 50,697 - Capital Assets Not Depreciated 3,004,597 99,998 3,104,595 13,523,841 Capital Assets (Net of Accumulated Depreciation) 10,157,334 4,024,618 14,181,952 32,856,206 TOTAL ASSETS 42,485,584 14,073,905 56,559,489 67,513,377 DEFERRED OUTFLOWS OF RECOURSES: Pension Related Items 3,453,144 $ 278,004 3,731,148 $ 685,390 $ OPEB Related Items - - - 69,529 TOTAL DEFERRED OUTFLOWS 3,453,144 $ 278,004 $ 3,731,148 $ 754,919 $ LIABILITIES: Accounts Payable 535,880 308,586 844,466 153,448 Accrued Liabilities 157,362 15,096 172,458 201,236 Due from Governmental Units 76 - 76 - Advance from Government Units - - - 391,221 Unearned Revenue 3,362,709 7,000 3,369,709 23,558 Advance from Primary Government - - - 50,697 Vested Employee Benefits - Due in more than one year 266,031 - 266,031 253,995 Net OPEB Liability - Due in more than one year 632,799 - 632,799 329,386 Net Pension Liability - Due in more than one year 9,698,605 189,682 9,888,287 3,634,012 Note Payable - Due within one year 6,868 - 6,868 191,204 Note Payable - Due in more than one year 15,009 - 15,009 2,599,216 TOTAL LIABILITIES 14,675,339 520,364 15,195,703 7,827,973 DEFERRED INFLOWS OF RESOURCES: Leases 133,424 99,090 232,514 - Pension Related Items 251,366 118,527 369,893 228,192 Taxes Levied for a Subsequent Period 1,840,358 - 1,840,358 2,904,497 TOTAL DEFERRED INFLOWS 2,225,148 217,617 2,442,765 3,132,689 NET POSITION: Net Investment in Capital Assets 13,155,063 4,124,616 17,279,679 43,714,361 Restricted 9,193,714 - 9,193,714 2,911,218 Unrestricted 6,689,464 9,489,312 16,178,776 10,682,055 TOTAL NET POSITION 29,038,241 $ 13,613,928 $ 42,652,169 $ 57,307,634 $ County of Otsego, Michigan Statement of Net Position December 31, 2023 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: Judicial 3,145,496 $ 547,279 $ 1,300,864 $ - $ (1,297,353) $ - $ (1,297,353) $ - $ General Government 2,735,610 691,201 94,121 - (1,950,288) - (1,950,288) - Public Safety 5,759,502 1,877,138 416,721 - (3,465,643) - (3,465,643) - Public Works 409,326 175 - - (409,151) - (409,151) - Health and Welfare 1,153,614 267,167 1,323,752 1,685,000 2,122,305 - 2,122,305 - Community/Economic Development 298,008 224,419 60,115 - (13,474) - (13,474) - Recreation and Culture 1,951,754 871,883 37,377 - (1,042,494) - (1,042,494) - Other 613,475 - - - (613,475) - (613,475) - Total Governmental Activities 16,066,785 4,479,262 3,232,950 1,685,000 (6,669,573) - (6,669,573) - Business-type Activities: Delinquent Tax Collection 209,404 255,552 - - - 46,148 46,148 - Tax Foreclosure 101,866 370,846 - - - 268,980 268,980 - Airport 2,143,847 1,550,111 - - - (593,736) (593,736) - Public Transit 1,719,141 243,656 1,053,980 595,275 - 173,770 173,770 - Non-Major Enterprise Funds 152,256 97,375 - - - (54,881) (54,881) - Total Business-type Activities 4,326,514 2,517,540 1,053,980 595,275 - (159,719) (159,719) - Total Primary Government 20,393,299 $ 6,996,802 $ 4,286,930 $ 2,280,275 $ (6,669,573) (159,719) (6,829,292) - Component Units: Road Commission 8,852,496 $ 2,430,265 $ 7,659,147 $ 4,342,060 $ 5,578,976 Ambulance 3,287,941 2,432,645 20,631 - (834,665) Commission on Aging 9/30/2022 2,287,400 44,760 597,960 - (1,644,680) 1,086,906 699,602 - - (387,304) Total Component Units 15,514,743 5,607,272 8,277,738 4,342,060 2,712,327 Total 35,908,042 $ 12,604,074 $ 12,564,668 $ 6,622,335 $ General Revenues and Transfers: Taxes 8,246,247 872,295 9,118,542 2,934,317 State Revenue Sharing 563,503 - 563,503 - Investment Earnings 492,483 472,066 964,549 427,657 Transfers 9,000 (9,000) - - Other - 97,624 97,624 120,058 Total General Revenues and Transfers 9,311,233 1,432,985 10,744,218 3,482,032 Changes in Net Position 2,641,660 1,273,266 3,914,926 6,194,359 Net Position - Beginning 26,396,581 12,340,662 38,737,243 51,113,275 Net Position - Ending 29,038,241 $ 13,613,928 $ 42,652,169 $ 57,307,634 $ Program Revenues Primary Government County of Otsego, Michigan Statement of Activities For the Year Ended December 31, 2023 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 Investments 8,912,151 $ 109,313 $ 1,095,806 $ 3,215,345 $ 27,768 $ 10,603,912 $ 23,964,295 $ Receivables: Taxes 357,919 - 610,017 - 1,931 1,228,410 2,198,277 Accounts - - - - - 135,933 135,933 Loans - 1,372,166 - - - - 1,372,166 Advance to Other Funds - - - - - 50,697 50,697 Due from Governmental Units 399,784 - - - - 644,692 1,044,476 Inventories 4,412 - - - - - 4,412 Prepaid Items 17,612 - - - - 23,429 41,041 TOTAL ASSETS 9,691,878 $ 1,481,479 $ 1,705,823 $ 3,215,345 $ 29,699 $ 12,687,073 $ 28,811,297 $ LIABILITIES: Accounts Payable 361,756 $ 203 $ 31 $ - $ - $ 147,600 $ 509,590 $ Due to Other Governments - 76 - - - - 76 Accrued Liabilities 104,616 - 10,999 - - 32,970 148,585 Unearned Revenue 10,815 - - 3,106,470 - 245,424 3,362,709 TOTAL LIABILITIES 477,187 279 11,030 3,106,470 - 425,994 4,020,960 DEFERRED INFLOWS OF RESOURCES: Unavailable Resources - 1,372,166 - - - - 1,372,166 Taxes Levied for a Subsequent Period - - 610,017 - 1,931 1,228,410 1,840,358 TOTAL DEFERRED INFLOW OF RESOURCES - 1,372,166 610,017 - 1,931 1,228,410 3,212,524 FUND BALANCES: Nonspendable 22,024 - - - - 23,429 45,453 Restricted - 109,034 1,084,776 108,875 - 7,891,029 9,193,714 Committed - - - - 27,768 3,118,211 3,145,979 Assigned 1,042,380 - - - - - 1,042,380 Unassigned 8,150,287 - - - - - 8,150,287 TOTAL FUND BALANCES 9,214,691 109,034 1,084,776 108,875 27,768 11,032,669 21,577,813 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 9,691,878 $ 1,481,479 $ 1,705,823 $ 3,215,345 $ 29,699 $ 12,687,073 $ Reconciliation to amounts reported for governmental activities in the statement of net position: Capital Assets used by Governmental Activities 13,161,931 Long-term Debt Payable for Governmental Activities (21,877) Vested Employee Benefits (266,031) Pension Liability and Deferred Items (6,496,827) OPEB Liability and Deferred Items (632,799) Deferred Revenue Recognized as Current Revenue 1,372,166 Internal Service Funds 343,865 Net position of governmental activities 29,038,241 $ December 31, 2023 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 6,494,742 $ - $ 584,901 $ - $ 982 $ 1,165,622 $ 8,246,247 $ Licenses and Permits 57,731 - - - - - 57,731 Federal Sources 127,285 60,115 - 1,685,000 - 309,440 2,181,840 State Sources 1,693,820 - 37,377 - - 1,533,840 3,265,037 Local Sources 34,576 - - - - - 34,576 Charges for Services 1,042,099 - - - - 1,946,093 2,988,192 Fines and Forfeits 9,288 - 151,648 - - 53 160,989 Interest and Rentals 215,234 58 23,540 95,210 184 154,690 488,916 Other Revenue 286,437 3,217 28,485 - - 849,619 1,167,758 TOTAL REVENUES 9,961,212 63,390 825,951 1,780,210 1,166 5,959,357 18,591,286 EXPENDITURES: Judicial 2,154,018 - - - - 877,168 3,031,186 General Government 2,050,731 - - - - 24,957 2,075,688 Public Safety 3,182,897 - - - - 2,000,742 5,183,639 Public Works 4,539 - - - - 366,883 371,422 Health and Welfare 755,613 - - 29,175 - 334,318 1,119,106 Community/Economic Development 113,305 177,753 - - - - 291,058 Recreation and Culture - - 731,169 - - 832,555 1,563,724 Other Expenditures 410,986 - - - - - 410,986 Capital Outlay - - - - - 823,892 823,892 TOTAL EXPENDITURES 8,672,089 177,753 731,169 29,175 - 5,260,515 14,870,701 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,289,123 (114,363) 94,782 1,751,035 1,166 698,842 3,720,585 OTHER FINANCING SOURCES (USES): Transfers In 1,742,871 76,433 - - - 1,025,819 2,845,123 Transfers Out (809,397) (77,129) - (1,685,000) - (262,097) (2,833,623) Total Other Financing Sources (Uses) 933,474 (696) - (1,685,000) - 763,722 11,500 NET CHANGE IN FUND BALANCE 2,222,597 (115,059) 94,782 66,035 1,166 1,462,564 3,732,085 FUND BALANCES BEGINNING OF YEAR 6,992,094 224,093 989,994 42,840 26,602 9,570,105 17,845,728 FUND BALANCES END OF YEAR 9,214,691 $ 109,034 $ 1,084,776 $ 108,875 $ 27,768 $ 11,032,669 $ 21,577,813 $ For the Year Ended December 31, 2023 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 3,732,085 $ 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, ($1,088,523) reduced by capital outlay, $614,928. (473,596) Repayment of principal is an expenditure in the governmental funds but reduces the liability in the statement of net position. Principal repayments: Bonds Payable 6,476 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 104,592 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 (55,498) OPEB Liability & Related Deferred Items 176,784 Pension Liability & Related Deferred Items (698,339) Internal service fund activity (150,844) Changes in net position of governmental activities 2,641,660 $ For the Year Ended December 31, 2023 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 9/30/2023 Funds Funds Funds ASSETS: Current Assets: Cash, Equivalents & Investments 3,559,433 $ 1,308,173 $ 201,105 $ 3,221,266 $ 276,999 $ 8,566,976 $ 255,084 $ Taxes Receivable 600,317 - - 24,306 - 624,623 - Interest Receivable 85,702 - - - - 85,702 - Accounts Receivable 3,675 - 113,327 24 10,450 127,476 12,284 Lease Receivable-Due in less than one year - - 4,311 - - 4,311 1,878 Lease Receivable-Due in more than one year - - 97,672 - - 97,672 135,037 Due from Governmental Units - - - 406,097 - 406,097 - Prepaid Items 53 53 - - - 106 108,073 Inventory - - 36,326 - - 36,326 - Total Current Assets 4,249,180 1,308,226 452,741 3,651,693 287,449 9,949,289 512,356 Noncurrent Assets: Capital Assets (Not Depreciated) - - - 99,998 - 99,998 - Capital Assets (Net of Accumulated Depreciation) - - 2,850,378 1,173,970 270 4,024,618 - Total Noncurrent Assets - - 2,850,378 1,273,968 270 4,124,616 - TOTAL ASSETS 4,249,180 1,308,226 3,303,119 4,925,661 287,719 14,073,905 512,356 DEFERRED OUTFLOWS OF RESOURCES: Pension Related Items - - - 278,004 - 278,004 - LIABILITIES: Current Liabilities: Accounts Payable 100 461 7,522 272,113 28,390 308,586 26,290 Accrued Liabilities 4,115 666 10,315 - - 15,096 8,777 Unearned Revenue - - 7,000 - - 7,000 - Total Current Liabilities 4,215 1,127 24,837 272,113 28,390 330,682 35,067 Noncurrent Liabilities Net Pension Liability - - - 189,682 - 189,682 - TOTAL LIABILITIES 4,215 1,127 24,837 461,795 28,390 520,364 35,067 DEFERRED INFLOWS OF RESOURCES: Leases - - 99,090 - - 99,090 133,424 Pension Related Items - - - 118,527 - 118,527 - Total Deferred Inflows of Resourses - - 99,090 118,527 - 217,617 133,424 NET POSITION: Net Investment in Capital Assets - - 2,850,378 1,273,968 270 4,124,616 - Unrestricted 4,244,965 1,307,099 328,814 3,349,375 259,059 9,489,312 343,865 TOTAL NET POSITION 4,244,965 $ 1,307,099 $ 3,179,192 $ 4,623,343 $ 259,329 $ 13,613,928 $ 343,865 $ Major Business-type Activities - Enterprise Funds County of Otsego, Michigan Statement of Net Position Proprietary Funds December 31, 2023 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 9/30/2023 Funds Funds Funds OPERATING REVENUES: Charges for Services 87,182 $ 69,818 $ 1,426,204 $ 243,656 $ 97,375 $ 1,924,235 $ 2,531,154 $ Interest on Delinquent Taxes 165,365 - - - - 165,365 - Other Revenues 3,005 301,028 123,907 - - 427,940 - TOTAL REVENUES 255,552 370,846 1,550,111 243,656 97,375 2,517,540 2,531,154 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 103,822 95,291 259,731 1,182,759 - 1,641,603 2,242,436 Contractual Services 96,897 2,596 50,836 - 102,666 252,995 91,288 Materials and Supplies 2,084 1,494 1,022,200 - 37,317 1,063,095 92,191 Equipment Repair and Maintenance - 642 50,800 - - 51,442 17,754 Utilities - - 51,876 - - 51,876 217,798 Depreciation - - 654,738 228,072 12,008 894,818 - Other Expenses 6,601 1,843 53,666 308,310 265 370,685 21,598 TOTAL EXPENSES 209,404 101,866 2,143,847 1,719,141 152,256 4,326,514 2,683,065 OPERATING INCOME (LOSS) 46,148 268,980 (593,736) (1,475,485) (54,881) (1,808,974) (151,911) NON-OPERATING REVENUES (EXPENSES): State Grants - - - 514,048 - 514,048 - Federal Grants - - - 539,932 - 539,932 - Interest Earned on Investments 1,998,631 (1,530,398) 2,645 - 1,188 472,066 3,567 Property Taxes Levied - - - 872,295 - 872,295 - Other - - 34,222 63,402 - 97,624 - TOTAL NONOPERATING REVENUES (EXPENSES) 1,998,631 (1,530,398) 36,867 1,989,677 1,188 2,495,965 3,567 INCOME (LOSS) BEFORE INTERFUND TRANSFERS 2,044,779 (1,261,418) (556,869) 514,192 (53,693) 686,991 (148,344) INTERFUND TRANSFERS: Capital Contributions - - - 595,275 - 595,275 - Transfers In - - 100,000 - 11,000 111,000 - Transfers Out (75,000) - (45,000) - - (120,000) (2,500) CHANGES IN NET POSITION 1,969,779 (1,261,418) (501,869) 1,109,467 (42,693) 1,273,266 (150,844) NET POSITION, BEGINNING OF YEAR 2,275,186 2,568,517 3,681,061 3,513,876 302,022 12,340,662 494,709 NET POSITION, END OF YEAR 4,244,965 $ 1,307,099 $ 3,179,192 $ 4,623,343 $ 259,329 $ 13,613,928 $ 343,865 $ 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, 2023 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 9/30/2023 Funds Funds Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 301,553 $ 370,871 $ 1,548,038 $ 246,529 $ 97,725 $ 2,564,716 $ 2,522,512 $ Payments to Suppliers (105,480) (6,490) (1,214,867) (308,310) (127,433) (1,762,580) (446,892) Payments to Employees for Services and Benefits (103,552) (98,470) (261,645) (1,209,454) - (1,673,121) (2,253,335) Net Cash Provided (Used) by Operating Activities 92,521 265,911 71,526 (1,271,235) (29,708) (870,985) (177,715) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: State Grants - - - 500,886 - 500,886 - Federal Grants - - - 255,478 - 255,478 - Property Tax - - - 871,924 - 871,924 - Other - - 34,222 63,402 - 97,624 - Transfers In - - 100,000 - 11,000 111,000 - Transfers Out (75,000) - (45,000) - - (120,000) (2,500) Net Cash Provided (Used) by Noncapital and Related Financing Activities (75,000) - 89,222 1,691,690 11,000 1,716,912 (2,500) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of Capital Assets - - - (230,446) - (230,446) - Federal Capital Grant - - - 595,275 - 595,275 - Net Cash Provided (Used) by Capital and Related Financing Activities - - - 364,829 - 364,829 - CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings 1,998,631 (1,530,398) 2,645 - 1,188 472,066 3,567 Net Cash Provided (Used) by Investing Activities 1,998,631 (1,530,398) 2,645 - 1,188 472,066 3,567 Net Increase (Decrease) in Cash and Equivalents 2,016,152 (1,264,487) 163,393 785,284 (17,520) 1,682,822 (176,648) Balances - Beginning of the Year 1,543,281 2,572,660 37,712 2,435,982 294,519 6,884,154 431,732 Balances - End of the Year 3,559,433 $ 1,308,173 $ 201,105 $ 3,221,266 $ 276,999 $ 8,566,976 $ 255,084 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) 46,148 $ 268,980 $ (593,736) $ (1,475,485) $ (54,881) $ (1,808,974) $ (151,911) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - - 654,738 228,072 12,008 894,818 - Change in Assets and Liabilities: Taxes Receivable 42,996 - - - - 42,996 - Interest Receivable (635) - - - (635) - Accounts Receivable 3,640 - (2,073) 2,873 350 4,790 (8,642) Prepaid Items 2 25 - - - 27 (11,437) Inventory - - 21,054 - - 21,054 - Accounts Payable 100 85 (6,543) 182,655 12,815 189,112 (6,906) Accrued Liabilities 270 (3,179) (1,914) - - (4,823) 1,181 Change in Pension Liability and Deferred Amounts - - - (209,350) - (209,350) - Net Cash Provided (Used) by Operating Activities 92,521 $ 265,911 $ 71,526 $ (1,271,235) $ (29,708) $ (870,985) $ (177,715) $ Business-type Activities - Enterprise Funds Major County of Otsego, Michigan Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2023 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 1,494,235 $ 76,343 $ 137,697 $ 1,708,275 $ Taxes for Other Governments 1,498,271 - - 1,498,271 TOTAL ASSETS 2,992,506 $ 76,343 $ 137,697 $ 3,206,546 $ LIABILITIES: Undistributed Tax Collections 2,344,320 $ - $ - $ 2,344,320 $ Due to Other Governments 414,319 76,343 - 490,662 Bonds, Restitutions and Payables to Others 233,867 - - 233,867 TOTAL LIABILITIES 2,992,506 76,343 - 3,068,849 Net Position Restricted - $ - $ 137,697 $ 137,697 $ Statement of Fiduciary Net Position Fiduciary Funds December 31, 2023 See accompanying notes to financial statements. 18 ---PAGE BREAK--- Michigan General Library Municipal Risk Agency Penal Management ADDITIONS: Fund Fines Authority Total Contributions Members - $ - $ 25,000 $ 25,000 $ Interest - - 5,674 5,674 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 30,674 31,651,633 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 - - 157,181 157,181 Beneficiary Payments to Individuals 27,859 - - 27,859 TOTAL DEDUCTIONS 31,460,589 254,701 157,181 31,872,471 Change in Net Position - (94,331) (126,507) (220,838) Net Position, Beginning of Year - 94,331 264,204 358,535 Net Position, End of Year - $ - $ 137,697 $ 137,697 $ County of Otsego, Michigan Statement of Changes of Fiduciary Net Position Fiduciary Funds December 31, 2023 19 ---PAGE BREAK--- Component Units ---PAGE BREAK--- Commission Road Ambulance on Aging Commission Corporation 9/30/2023 Totals ASSETS: Cash and Investments 12,314,461 $ 935,402 $ 1,370,526 $ 295,816 $ 14,916,205 $ Receivables: Taxes - 1,198,367 - 381,366 1,579,733 Accounts (Net of Allowance) 3,092,873 501,068 17,517 35,852 3,647,310 Inventories 906,224 - 2,332 9,062 917,618 Prepaid Items 72,464 - - - 72,464 Capital Assets (Not Depreciated) 13,523,841 - - - 13,523,841 Capital Assets (Net of Accumulated Depreciation) 28,759,057 1,406,093 2,691,056 - 32,856,206 TOTAL ASSETS 58,668,920 4,040,930 4,081,431 722,096 67,513,377 DEFERRED OUTFLOWS OF RESOURCES Pension Related Items 685,390 $ - $ - $ - $ 685,390 $ OPEB Related Items 69,529 - - - 69,529 TOTAL DEFFERED OUTFLOWS 754,919 - - - 754,919 LIABILITIES: Accounts Payable 126,586 4,558 4,566 17,738 153,448 Accrued Liabilities 170,730 7,166 21,367 1,973 201,236 Advance from Governmental Units 391,221 - - - 391,221 Unearned Revenues - - - 23,558 23,558 Installment Notes Payable - Due within one year - 124,734 66,470 - 191,204 Installment Notes Payable - Due in more than one year - - 2,599,216 - 2,599,216 Advance from Primary Government - 50,697 - - 50,697 Net Pension Liabilities- Due in more than one year 3,634,012 - - - 3,634,012 (OPEB) Labilities - Due in more than one year 329,386 - - - 329,386 Vested Employee Benefits - Due in more than one year 253,995 - - - 253,995 TOTAL LIABILITIES 4,905,930 187,155 2,691,619 43,269 7,827,973 DEFERRED INFLOWS OF RESOURCES: Pension Related Items 228,192 - - - 228,192 OPEB Related Items - - - - - Taxes Levied for a Subsequent Period 1,324,764 1,198,367 - 381,366 2,904,497 Total Deferred Inflows of Resources 1,552,956 1,198,367 - 381,366 3,132,689 NET POSITION: Net Investment in Capital Assets 42,282,898 1,406,093 25,370 - 43,714,361 Restricted for Ambulance and Emergency Services - 1,249,315 - - 1,249,315 Restricted for - - - 297,461 297,461 Restricted for Commission on Aging - - 1,364,442 - 1,364,442 Restricted for Road Commission 10,682,055 - - - 10,682,055 TOTAL NET POSITION 52,964,953 $ 2,655,408 $ 1,389,812 $ 297,461 $ 57,307,634 $ County of Otsego, Michigan Statement of Net Position Component Units December 31, 2023 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 9/30/2023 Total Road Commission: Public Works 8,852,496 $ 2,430,265 $ 7,659,147 $ 4,342,060 $ 5,578,976 $ - $ - $ - $ 5,578,976 $ Ambulance Corporation: Health and Welfare 3,287,941 2,432,645 20,631 - - (834,665) - - (834,665) Commission on Aging 9/30/2023: Health and Welfare 2,287,400 44,760 597,960 - - - (1,644,680) - (1,644,680) Recreation and Culture 1,086,906 699,602 - - - - - (387,304) (387,304) Total Component Units 15,514,743 $ 5,607,272 $ 8,277,738 $ 4,342,060 $ 5,578,976 (834,665) (1,644,680) (387,304) 2,712,327 General Revenues: Property Tax - 1,120,339 1,453,413 360,565 2,934,317 Investment Earnings 366,131 25,181 29,452 6,893 427,657 Other 87,767 8,922 20,510 2,859 120,058 Total General Revenues 453,898 1,154,442 1,503,375 370,317 3,482,032 Changes in Net Position 6,032,874 319,777 (141,305) (16,987) 6,194,359 Net Position - Beginning 46,932,079 2,335,631 1,531,117 314,448 51,113,275 Net Position - Ending 52,964,953 $ 2,655,408 $ 1,389,812 $ 297,461 $ 57,307,634 $ Net (Expense) Revenue and Changes in Net Position County of Otsego, Michigan Statement of Activities Component Units For the Year Ended December 31, 2023 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, 2023 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, 2023 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 2023 was $255,000. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 24 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Joint Ventures (Continued) Financial information as of September 30, 2023 (the most recent audited financial statements) is as follows: Assets $ 13,438,280 Deferred outflows of resources 624,056 Liabilities 9,109,118 Deferred inflows of resources 476,453 Net position 4,953,218 Change in net position 1,098,832 Participant payments Total participant payments 1,127,537 County of Otsego 255,000 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 2023 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, 2023 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, 2023, except for the following component unit and enterprise fund: Fund Fund Presentation Fiscal Year End Commission on Aging Component Unit September 30, 2023 Bus System Enterprise Fund September 30, 2023 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, 2023 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 2023 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, 2023 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, 2023 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 $500,000. 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, 2023 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. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 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 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 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, 2023 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 $45,453 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 $9,193,714 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 $3,145,979 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, 2023 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, 2023 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, & Investments $ 24,219,379 $ 8,566,976 $ 32,786,355 $ 1,708,275 $ 14,916,205 Total $ 24,219,379 $ 8,566,976 $ 32,786,355 $ 1,708,275 $ 14,916,205 The breakdown between deposits and investments is as follows: Primary Fiduciary Component Government Funds Units Bank Deposits (checking and savings accounts, and money markets) $ 11,715,540 $ 1,708,275 $ 11,075,784 Investments 21,056,235 - 3,838,911 Petty Cash and Cash on Hand 14,580 - 1,510 Total $ 32,786,355 $ 1,708,275 $ 14,916,205 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 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* $ 5,048,258 $ 5,048,258 $ - $ - $ - Governmental Fixed Income 19,846,888 244,532 695,776 - 18,906,580 Total Investments $ 24,895,146 $ 5,292,790 $ 695,776 $ - $ 18,906,580 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, 2023: 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, $11,851,239 of the County’s bank balance of $14,174,032 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, 2023 35 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) The County has the following fair value measurements as of December 31, 2023: Total Level 1 Level 2 Level 3 Governmental Fixed Income $ 19,846,888 $ - $ 19,846,888 $ - Total $ 19,846,888 $ - $ 19,846,888 $ - *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, 2023 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. 01/01/23 Increases Decreases 12/31/23 Lease Receivable $ 244,892 $ - $ (5,994 ) $ 238,898 The subsequent payments made to the County relating to the assets leased by other organizations are as follows: Principal Interest Year Amount Amount Total 2024 $ 6,189 $ 7,736 $ 13,925 2025 6,391 7,534 13,925 2026 6,600 7,326 13,926 2027 6,816 7,110 13,926 2028 7,038 6,888 13,926 2029-2033 38,790 30,838 69,628 2034-2038 45,550 24,078 69,628 2039-2043 36,637 16,574 53,211 2044-2048 19,197 12,303 31,500 2049-2053 22,580 8,920 31,500 2054-2058 26,558 4,942 31,500 2059-2061 16,552 773 17,325 Total $ 238,898 $ 135,022 $ 373,920 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 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 $ 2,849,995 $ 136,897 $ - $ 2,986,892 Construction in Progress 32,092 17,705 (32,092 ) 17,705 Subtotal 2,882,087 154,602 (32,092 ) 3,004,597 Capital assets being depreciated: Buildings 22,648,127 34,600 - 22,682,727 Leasehold Improvements 24,854 - - 24,854 Furniture & Fixtures 895,452 - - 895,452 Equipment: Data Handling 2,272,534 - - 2,272,534 Other Equipment 2,731,416 204,824 - 2,936,240 Vehicles 2,497,505 224,324 (6,647 ) 2,715,182 Infrastructure 51,530 - - 51,530 Subtotal 31,121,418 463,748 (6,647 ) 31,578,519 Less accumulated depreciation for Buildings (13,849,050 ) (652,545 ) 316 (14,501,279 ) Leasehold improvements (24,854 ) - - (24,854 ) Furniture & Fixtures (895,452 ) - - (895,452 ) Equipment: Data Handling (2,025,858 ) (71,072 ) - (2,096,930 ) Other Equipment (1,514,474 ) (67,513 ) - (1,581,987 ) Vehicles (2,030,456 ) (295,943 ) 35,000 (2,290,399 ) Infrastructure (27,834 ) (2,450 ) - (30,284 ) Subtotal (20,367,978 ) (1,088,523 ) 35,316 (21,421,185 ) Net Capital Assets Being Depreciated 10,753,440 (624,775 ) 28,669 10,157,334 Capital Assets – Net $ 13,635,527 $ (470,173 ) $ (3,423 ) $ 13,161,931 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 38 NOTE 5 - CAPITAL ASSETS (Continued) Depreciation expense was charged to programs of the primary government as follows: Governmental Activities: General Government $ 308,875 Judicial 26,995 Public Safety 355,079 Public Works 37,904 Recreation and Culture 359,670 Total Governmental Activities $ 1,088,523 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 2,343,719 595,275 - 2,938,994 Equipment 392,227 - (8 ) 392,219 Infrastructure 12,779,602 - - 12,779,602 Subtotal 18,267,682 595,275 (8 ) 18,862,949 Less accumulated depreciation for: Buildings (1,859,552 ) (114,315 ) - (1,973,867 ) Furniture & Fixtures (6,000 ) - - (6,000 ) Vehicles (1,679,334 ) (179,670 ) - (1,859,004 ) Equipment (358,724 ) (23,775 ) 7 (382,492 ) Infrastructure (10,039,910 ) (577,058 ) - (10,616,968 ) Subtotal (13,943,520) (894,818 ) 7 (14,838,331) Net Capital Assets Being Depreciated 4,324,162 (299,543 ) 4,024,618 Capital Assets – Net $ 4,424,160 $ (299,543 ) $ $ 4,124,616 Depreciation expense was charged to the business-type activities as follows: Business-type Activities: Bus System 9/30/2023 $ 228,072 Airport 654,738 University Center Metropolitan Area Network 12,008 Total Business-Type Activities $ 894,818 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 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 957,573 337,043 - 1,294,616 Vehicles 2,672,981 52,799 - 2,725,780 Subtotal 5,231,098 389,842 - 5,620,940 Less Accumulated Depreciation: Buildings (970,154 ) (35,022 ) - (1,005,176 ) Other Equipment (763,786 ) (102,261 ) - (866,047 ) Vehicles (2,237,232 ) (106,392 ) - (2,343,624 ) Subtotal (3,971,172 ) (243,675 ) - (4,214,847 ) Net Capital Assets Being Depreciated 1,259,926 146,167 - 1,406,093 Total Net Capital Assets $ 1,259,926 $ 146,167 $ - $ 1,406,093 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 4,200,190 105,541 - 4,305,731 Road Equipment 9,068,681 876,947 (288,613 ) 9,657,015 Shop Equipment 97,486 - - 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 37,576,691 5,484,934 - 43,061,625 Subtotal 52,496,666 6,467,422 (288,613 ) 58,675,475 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 40 NOTE 5 - CAPITAL ASSETS (Continued) Beginning Adjustments/ Ending Balances Additions Deductions Balances Less Accumulated Depreciation Buildings (2,331,674 ) (113,647 ) - (2,445,321 ) Road Equipment (8,221,179 ) (425,858 ) 288,613 (8,358,424 ) Shop Equipment (94,393 ) (644 ) - (95,037 ) Office Equipment (45,323 ) (1,065 ) - (46,388 ) Engineers’ Equipment (8,583 ) - - (8,583 ) Yard and Storage Equipment (1,800 ) - - (1,800 ) Traffic Signals (46,996 ) (320 ) - (47,316 ) Infrastructure – Bridges (456,306 ) (39,534 ) - (495,840 ) Infrastructure – Roads (16,628,441 ) (1,789,268 ) - (18,417,709 ) Subtotal (27,834,695 ) (2,370,336 ) 288,613 (29,916,418 ) Net Capital Assets Being Depreciated 24,661,971 4,097,086 - 28,759,057 Capital Assets - Net $ 38,185,812 $ 4,097,086 $ - $ 42,282,898 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 $ 2,757,521 $ 26,782 $ - $ 2,784,303 Less accumulated depreciation (18,421 ) (74,826 ) - (93,247 ) Net Capital Assets $ 2,739,100 $ (48,044 ) $ - $ 2,691,056 NOTE 6 - RECEIVABLES Governmental Business-type Component Activities Activities Units Taxes $ 2,198,277 $ 624,623 $ 1,579,733 Accounts 148,217 127,476 3,647,310 Less: Allowance for uncollectible accounts - - (500,000 ) Due from other governments 1,044,476 406,097 - Loans 1,372,166 - - Interest - 85,702 - Totals $ 4,763,136 $ 1,243,998 $ 4,727,043 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 41 NOTE 7 - INTERFUND RECEIVABLES, PAYABLES, & TRANSFERS The composition of interfund balances as of December 31, 2023, 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 $ 50,697 $ - Ambulance - 50,697 $ 50,697 $ 50,697 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 $1,742,871 $ 809,397 Housing Commission 76,433 77,129 ARPA - 1,685,000 Nonmajor governmental funds 1,025,819 262,097 Delinquent Tax Fund - 75,000 Airport 100,000 45,000 Nonmajor enterprise funds 11,000 - Internal service funds - 2,500 $ 2,956,123 $ 2,956,123 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, 2023 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: NOTE 8 - LONG-TERM DEBT Changes in Long-term Debt. Long-term liability activity for the year ended December 31, 2023, 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 $ 28,353 $ - $ (6,476 ) $ 21,877 $ 6,476 Accrued Compensated Absences 210,533 498,848 (443,350 ) 266,013 - Total Governmental Activities Debt $ 238,886 $ 498,848 $ (449,826 ) $ 287,908 $ 6,476 Annual debt service requirements to maturity for the above obligations are as follows: Installments Payable Year End December 31 Principal Interest 2024 $ 6,868 $ 1,324 2025 7,[PHONE REDACTED] 7,725 467 Total $ 21,877 $ 2,699 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. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 43 NOTE 8 - LONG-TERM DEBT (Continued) 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. $ 159,234 $ - $ 159,234 $ - $ - Equipment, payable in annual installments of $14,122 including interest of 4.18%, due 2023. 112,976 - 112,976 - - Subtotal 272,210 - 272,210 - $ - Vested Employee Benefits 303,176 - 49.181 253,995 TOTAL LONG-TERM DEBT $ 575,386 $ - $ 321,391 $ 253,995 Net increase 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. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 44 NOTE 9 - RISK MANAGEMENT (Continued) 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, 2023, the balance of the County's member retention was $137,697. Changes in the balances of claims liabilities are as follows: Fiscal Year Ended December 31, 2023 2022 Estimated liability, beginning of year $ (102,394) $ 16,232 Receipts 30,674 57,511 Estimated claims incurred - - Claim payments (157,181) (176,137) Estimated liability (asset), end of year $ (228,901) $ ( 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 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, 2023 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. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 45 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, 2023, there were no claims that exceeded insurance coverage. The Ambulance Corporation did not have any significant reduction in insurance coverage from previous years. 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, 2023, 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: NOTE 9 - RISK MANAGEMENT (Continued) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 46 NOTE 10 - TAX ABATEMENTS (Continued) City of Gaylord Tax Abatements: For the year ended December 31, 2023, Otsego County property taxes were reduced by $24,690 under this program. Bagley Township Tax Abatements: For the year ended December 31, 2023, Otsego County property taxes were reduced by $0 under this program. Corwith Township Tax Abatements: For the year ended December 31, 2023, Otsego County property taxes were reduced by $4,384 under this program. Livingston Township Tax Abatements: For the year ended December 31, 2023, Otsego County property taxes were reduced by $4,138 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, 2023, Otsego County property taxes abated were an unavailable amount under this program. 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, 2023, Otsego County property taxes that were abated were an unavailable amount 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. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 47 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 2022 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 07 – All Library EEs: Closed to new hires 2022 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 DC Plan for New Hires: 0.00% 5/1/2020 Act 88: No 10 – Gnrl Local 214 Bus: Closed to new hires 2022 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 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 48 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 11 – POAM: Closed to new hires, linked to Division HC 2022 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% 3/1/2022 Act 88: No 13 – Elected/Appt Spvs: Closed to new hires 2022 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 14 – 46th Trial Court: Closed to new hires 2022 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 2022 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 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 49 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 17 – 87-A Judge/FOC pre 9/1/14: Closed to new hires 2022 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: 0.00% 1/1/2020 Act 88: No 20 – Sheriff Union: Closed to new hires, linked to Division HG 2022 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 2022 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 HA – Elected Apptd Spvs af 1/1/09: Closed to new hires 2022 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, 2023 50 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) HB – General Non Union after 1/1/09: Closed to new hires 2022 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 2022 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 2022 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 2022 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, 2023 51 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) HF – Bus hired af 1/1/2011: Closed to new hires 2022 Valuation Benefit Multiplier: Frozen Benefit as of 1/1/2020 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 2022 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, 2022, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 118 Inactive employees entitled to but not yet receiving benefits 63 Active employees 73 254 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, 2023 52 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Net Pension Liability The County’s net pension liability was measured as of December 31, 2022, 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, 2022 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 2014-2018. 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% 2.70% Global Fixed Income 20.00% 0.40% Private Investment 20.00% 1.40% 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, 2023 53 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, 2021 27,249,281 $ 20,362,816 $ 6,886,465 $ Service cost 267,984 - 267,984 Interest on total pension liability 2,014,669 - 2,014,669 Changes in benefits - - - Difference between expected and actual experience (130,817) - (130,817) Changes in assumptions - - - Employer contributions - 1,431,552 (1,431,552) Employee contributions - 38,261 (38,261) Net investment income - (2,115,394) 2,115,394 Benefit payments, including employee refunds (1,529,402) (1,529,402) - Other 166,835 166,837 Administrative expense - (37,568) 37,568 Net changes 789,269 (2,212,553) 3,001,822 Balances as of December 31, 2022 28,038,550 $ 18,150,263 $ 9,888,287 $ 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 7.25%, 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 $9,888,287 $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, 2023 54 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, 2023, the County recognized pension expense of $1,239,066. At December 31, 2023, 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 - $ 369,893 $ Changes in assumptions 709,471 - Net difference between projected and actual earnings on pension plan investments 1,827,479 - Contributions subsequent to the measurement date 1,194,198 - Total 3,731,148 $ 369,893 $ 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: 2024 $ 381,012 2025 415,128 2026 654,600 2027 716,317 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, 2022. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 55 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 2022 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 2022 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 2022 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, 2023 56 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Employees Covered by Benefit Terms At December 31, 2022, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 49 Inactive employees entitled to but not yet receiving benefits 10 Active employees 33 92 Net Pension Liability The Road Commission’s net pension liability was measured as of December 31, 2023, 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, 2022 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, 2023 57 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, 2023 14,728,195 $ 10,332,420 $ 4,395,775 $ Service cost 229,192 - 229,192 Interest on total pension liability 1,040,666 - 1,040,666 Changes in benefits - - - Difference between expected and actual experience (120,577) - (120,577) Changes in assumptions - - - Employer contributions - 711,683 (711,683) Employee contributions - 132,192 (132,192) Net investment income - 1,145,037 (1,145,037) Benefit payments, including employee refunds (977,538) (977,538) - Administrative expense - (24,298) 24,298 Other changes 53,570 - 53,570 Net changes 225,313 987,076 (761,763) Balances as of December 31, 2023 14,953,508 $ 11,319,496 $ 3,634,012 $ 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 $5,294,974 $3,634,012 $2,232,184 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, 2023 58 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, 2023, the Road Commission recognized pension expense of $572,311. At December 31, 2023, 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 - $ - $ Difference between expected and actual experience - 228,192 Changes in assumptions 170,706 - Net difference between projected and actual earnings on pension plan investments 514,684 - Total 685,390 $ 228,192 $ 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: 2024 $ 66,406 2025 147,181 2026 323,943 2027 (80,332) 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, 2023 59 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, 2023, the date of the last plan valuation, the County’s healthcare plan covered 11 members of which 1 were active plan members and 10 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 2023, the County contributed $48,112 to the plan. Employees Covered by Benefit Terms As of December 31, 2023, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 10 Inactive employees entitled to but not yet receiving benefits - Active employees 1 Total participants covered by OPEB Plan 11 Total OPEB Liability and Trust Assets - The County’s total OPEB liability of $632,799 was measured as of December 31, 2023, and was determined by an actuarial valuation as of that date. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 60 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) As of December 31, 2023, 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, 2023 and the following actuarial assumptions, applies to all periods included in the measurement: Inflation N/A Salary Increases Not applicable (for purposes of allocating liability) Investment rate of return NA; this is not a pre-funded 20-year Aa Municipal bond rate 4.00% 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 4.00%. 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, 2022 810,295 $ - $ 810,295 $ Service cost 1,553 - 1,553 Interest 33,954 - 33,954 Change in plan term - - - Difference between expected and actual experience (184,138) - (184,138) Assumptions 19,247 - 19,247 Employer contributions - 48,112 (48,112) Net investment income - - - Benfit Payments (48,112) (48,112) - Administrative expense - - - Net changes (177,496) - (177,496) Balances as of December 31, 2023 632,799 $ - $ 632,799 $ Increases (Decreases) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 61 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 $684,632 $632,799 $587,774 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $587,681 $632,799 $683,711 OPEB Expense - Components of County’s OPEB Expense for the fiscal year ending December 31, 2023 are as follows: 12/31/2023 Service Cost $ 1,553 Interest on Total OPEB Liability 33,954 Experience (Gains)/Losses (184,138 ) Changes of Assumptions 19,247 Changes in Plan Terms - Other Changes in Fiduciary Net Position - Total OPEB Expense $ (129,384 ) 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: 2024 $ - 2025 - 2026 - 2027 - ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 62 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 7.00% 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, 2023 63 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) The long-term expected rate of return on OPEB 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 7.00%. The projection of cash flows used to determine the discount rate assumed that Employer would contribute general fund dollars to pay benefits until the plan is fully funded and then will use plan assets to pay benefits. Based on those assumptions, the retirement plan’s fiduciary net position was 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 were not projected to be covered by the projected assets, 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. The discount rate utilized for the 2023 valuation was 7.00%. Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balances at January 1, 2023 3,305,616 $ 2,567,234 $ 738,382 $ Change in assumptions 108,799 - 108,799 Service cost 16,850 - 16,850 Interest 239,181 - 239,181 Experience (Gains)/Losses (132,012) - (132,012) Contributions to OPEB Trust - - - Contributions paid from operations - 223,957 (223,957) Net investment income - 431,853 (431,853) Benefit payments (223,957) (223,957) - Administrative expense - (13,996) 13,996 Net changes 8,861 417,857 (408,996) Balances as December 31, 2023 3,314,477 $ 2,985,091 $ 329,386 $ ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 64 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 $ 532,200 $ 329,386 $ 147,967 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $ 136,229 $ 329,386 $ 543,869 OPEB Expense – Components of Road Commission’s OPEB Expense for the fiscal year ending December 31, 2023 recognized expense of $55,672. Deferred Outflows and Inflows of Resources Related to OPEB Plan Deferred Outflows Deferred Inflows of Resources of Resources Investment Earnings (Gains)/Losses $ 69,529 $ - 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: 2024 14,974 $ 2025 42,239 2026 60,539 2027 (48,223) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2023 65 NOTE 15- IMPLEMENTATION OF GASB STATEMENT NO. 96, SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS In May of 2020, the GASB Statement No. 96, Subscription-Based Information Technology Arrangements, was issued. The requirements of this Statement will take effect for financial statements starting with the fiscal year that ends December 31, 2023. The Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users. This Statement defines a SBITA; establishes that a SBITA results in a right-to-use subscription asset, or an intangible asset, and a corresponding subscription liability; provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and requires note disclosures regarding SBITA. To the extent relevant, the standards for SBITA are based on the standards established in Statement No. 87, Leases, as amended. The County implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements, for the period ending December 31, 2023. There were no subscription-based information technology arrangements held by the County that meet the definition of recognition under GASB Statement No. 96, therefore, the financial statements have not been affected by such implementation. NOTE 16 - DEFICIT UNRESTRICTED/UNASSIGNED NET POSITION/FUND BALANCE An unrestricted/unassigned net position/fund balance deficits existed in the following funds as indicated: Legal Defense $ (12,797) Facilities Planning Fund $ (990) Building & Grounds $ (57,483) NOTE 17 - EXCESS EXPENDITURES OVER APPROPRIATIONS Public Act 621 of 1978, Section 18(1), as amended, provides that a local unit shall not incur expenditures in excess of the amount appropriated. In the body of the financial statements, the County’s actual expenditures were in excess of amounts appropriated as follows: Total Amount of Budget Appropriations Expenditures Variance General Fund: General Government $ 2,004,692 $ 2,050,731 $ (46,039) Transfers Out 610,480 809,397 (917 ) ARPA Health & Welfare - 29,175 (29,175) Transfers Out - 1,685,000 (1,685,000) ---PAGE BREAK--- Required Supplementary Information ---PAGE BREAK--- 2022 2021 2020 2019 2018 2017 2016 2015 2014 Total pension liability Service cost 267,984 $ 279,127 $ 313,918 $ 388,399 $ 370,158 $ 336,412 $ 349,718 $ 348,000 $ 338,932 $ Interest 2,014,669 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 (130,817) (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 (1,529,402) (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 166,835 (6,105) (12,291) 80,821 14,309 (54) - - - Net change in total pension liability 789,269 1,071,024 1,858,048 1,129,139 772,162 645,120 322,971 2,548,216 840,003 Total pension liability - beginning 27,249,281 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 28,038,550 $ 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 1,431,552 $ 1,336,715 $ 1,329,086 $ 1,062,073 $ 1,128,063 $ 1,096,794 $ 865,641 $ 693,476 $ 640,433 $ Contributions - employee 38,261 43,585 45,526 49,203 46,517 30,679 7,937 5,905 3,630 Net investment income (2,115,394) 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 (1,529,402) (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 (37,568) (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 (2,212,553) 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 20,362,816 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 18,150,263 $ 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 9,888,287 $ 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 64.7% 74.2% 68.2% 65.3% 61.4% 67.3% 61.9% 57.9% 68.9% Covered - employee payroll 3,757,770 $ 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 263.1% 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, 2023 Employee Retirement and Benefit Systems See accompanying notes to financial statements 66 ---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, 2023 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 16 years 10-years smoothed market 2.50% See accompanying notes to financial statements. 67 ---PAGE BREAK--- 2023 2022 2021 2020 2019 2018 Total OPEB Liability - Beginning of Year 810,295 $ 1,011,280 $ 1,339,595 $ 1,220,934 $ 1,930,701 $ 1,848,952 $ Service cost 1,553 3,987 5,020 4,303 48,184 46,710 Interest 33,954 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 (164,891) (172,555) (291,256) 150,130 (236,836) 48,727 Benefit payments (48,112) (54,646) (67,380) (74,500) (71,219) (72,446) OPEB Liability - End of Year 632,799 810,295 1,011,280 1,339,595 1,220,934 1,930,701 Plan fiduciary net position Contributions - employer 48,112 54,646 67,380 74,500 71,219 72,446 Net investment income - - - - - - Benefits payments, including refunds of member contributions (48,112) (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 632,799 $ 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 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Covered Payroll 13,198 $ 61,095 $ 81,566 $ 59,734 $ 1,259,742 $ 4,401,556 $ Net OPEB liability as a percentage of covered payroll 4794.7% 1326.3% 1239.8% 2242.6% 33.1% 33.1% Schedule of Employer Contributions Actuarially determined employer contribution 69,837 73,023 90,008 88,495 155,657 155,520 Employer contribution (48,112) (54,646) (67,380) (74,500) (71,219) (72,446) Contribution deficiency/(excess) 21,725 18,377 22,628 13,995 84,438 83,074 Covered Payroll 13,198 $ 61,095 $ 81,566 $ 59,734 $ 4,401,556 $ 4,401,556 $ ADC as percentage of covered payroll 529.1% 119.5% 110.3% 148.1% 11.2% 11.2% Notes to Schedule: Actuarial cost method Entry age normal Discount rate 4.00%, 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 Public General 2010 Employee and Heathly Retiree, Headcount weighted with MP-2021 Improvement Scale County of Otsego, Michigan Required Supplementary Information Schedule of Changes in OPEB Liability and Related Ratios Year Ended December 31, 2023 Actuarially determined contribution rates are calculated as of December 31, 2023 Methods and assumptions used to determine contribution rates: Employee Retirement and Benefit Systems See accompanying notes to financial statements. 68 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 6,326,743 $ 6,326,743 $ 6,494,742 $ 167,999 $ Licenses and Permits 49,900 49,900 57,731 7,831 Federal Sources 222,300 222,300 127,285 (95,015) State Sources 1,553,199 1,606,715 1,693,820 87,105 Local Contributions 74,901 74,901 34,576 (40,325) Charges for Services 1,186,730 1,186,730 1,042,099 (144,631) Fines and Forfeits 13,000 13,000 9,288 (3,712) Interest and Rentals 99,000 99,000 215,234 116,234 Other Revenues 296,800 296,800 286,437 (10,363) TOTAL REVENUES 9,822,573 9,876,089 9,961,212 85,123 EXPENDITURES: Judicial: Circuit Court 1,241,383 1,192,478 994,706 197,772 Lien Fees 20,000 20,000 17,532 2,468 Drug Court 158,298 158,298 147,214 11,084 RDSS Transport 15,000 15,000 919 14,081 District Court 15,900 15,900 15,309 591 Jury Commission 43,000 30,500 30,458 42 Probate Court 210,832 210,832 217,738 (6,906) Probation/Parole - 1,414 1,414 - Prosecuting Attorney 779,579 784,579 728,728 55,851 Family Counseling 3,500 3,500 - 3,500 Total Judicial 2,487,492 2,432,501 2,154,018 278,483 General Government: Board of Commissioners 248,239 202,088 $ 190,789 $ 11,299 Administrative Services 201,041 201,041 201,041 - Building and Grounds 380,475 380,475 405,475 (25,000) Clerk and Register of Deeds 369,778 373,278 377,915 (4,637) Audit Services 23,000 23,000 22,400 600 IT Department 120,660 120,660 104,545 16,115 Equalization 211,949 232,949 272,146 (39,197) Treasurer 136,449 136,449 135,917 532 Cooperative Extension 66,691 66,691 66,469 222 Elections 25,800 26,375 74,422 (48,047) Legal Defense 40,000 51,152 57,405 (6,253) Human Resources 81,963 81,963 81,963 - Surveyor 49,671 49,671 49,671 - Soil Conservation 10,000 58,900 10,573 48,327 Total General Government 1,965,716 2,004,692 2,050,731 (46,039) Public Safety: Sheriff 1,491,744 1,479,299 1,321,923 157,376 Civil Division 86,239 88,739 89,995 (1,256) School Resource Officer 63,901 63,901 64,705 (804) Operation Stonegarden 75,000 75,000 2,751 72,249 SANE 88,038 88,038 85,790 2,248 Justice Training 3,000 3,000 - 3,000 Marine Safety 8,244 8,244 5,046 3,198 Safety Education 70,102 123,618 110,650 12,968 Snowmobile 10,961 10,961 2,178 8,783 Secondary Road Patrol 102,999 101,356 78,424 22,932 ORV 10,161 10,161 3,022 7,139 Jail 1,354,242 1,368,416 1,358,413 10,003 Emergency Services 60,000 60,000 60,000 - Total Public Safety 3,424,631 3,480,733 3,182,897 297,836 For the Year Ended December 31, 2023 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund 69 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) For the Year Ended December 31, 2023 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund Public Works: Drains 6,000 6,000 4,539 1,461 Health And Welfare: Communicable Diseases 500 500 500 - Medical Examiner 82,000 82,000 78,268 3,732 District Health 255,000 255,000 255,000 - Mental Health 94,003 94,003 94,003 - Soldiers and Sailors Relief 5,000 10,000 1,879 8,121 Veterans' Burial 6,650 6,650 4,347 2,303 Veterans' Affairs 201,302 219,302 218,927 375 Substance Abuse 88,483 88,483 102,689 (14,206) Total Health and Welfare 732,938 755,938 755,613 325 Community and Economic Development: Planning and Zoning 135,186 123,498 113,305 10,193 Other Expenditures: Appropriations 21,500 21,500 21,500 - Bonds and Insurance 245,000 280,000 267,999 12,001 Retiree Insurance 40,000 40,000 32,718 7,282 Additional Pension Contribution 55,788 55,788 55,788 - Other 151,142 140,242 32,981 107,261 Total Other Expenditures 513,430 537,530 410,986 126,544 TOTAL EXPENDITURES 9,265,393 9,340,892 8,672,089 668,803 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 557,180 535,197 1,289,123 753,926 OTHER FINANCING SOURCES (USES): Transfers In 52,300 72,300 1,742,871 1,670,571 Transfers Out (610,480) (610,480) (809,397) (198,917) Total Other Financing Sources (Uses) (558,180) (538,180) 933,474 1,471,654 NET CHANGE IN FUND BALANCES (1,000) $ (2,983) $ 2,222,597 2,225,580 $ FUND BALANCES BEGINNING OF YEAR 6,992,094 FUND BALANCES END OF YEAR 9,214,691 $ 70 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Federal Sources - $ - $ 60,115 $ 60,115 $ Local Sources - - - - Interest and Rentals 80 80 58 (22) Other Revenues 149,385 149,385 3,217 (146,168) TOTAL REVENUES 149,465 149,465 63,390 (86,075) EXPENDITURES: Community and Economic Development 156,847 213,294 177,753 35,541 TOTAL EXPENDITURES 156,847 213,294 177,753 35,541 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (7,382) (63,829) (114,363) (50,534) OTHER FINANCING SOURCES (USES): Transfers In 162,180 162,180 76,433 (85,747) Transfers Out (162,180) (166,133) (77,129) 89,004 Total Other Financing Sources (Uses) - $ (3,953) $ (696) $ 3,257 $ NET CHANGE IN FUND BALANCES (7,382) $ (67,782) $ (115,059) (47,277) $ FUND BALANCES BEGINNING OF YEAR 224,093 FUND BALANCES END OF YEAR 109,034 $ For the Year Ended December 31, 2023 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Housing Commission Fund 71 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 907,899 $ 907,899 $ 584,901 $ (322,998) $ State Sources - - 37,377 37,377 Fines and Forfeits - - 151,648 151,648 Interest and Rentals - - 23,540 23,540 Other Revenues - - 28,485 28,485 TOTAL REVENUES 907,899 907,899 825,951 (81,948) EXPENDITURES: Recreation & Culture 907,899 907,899 731,169 176,730 TOTAL EXPENDITURES 907,899 907,899 731,169 176,730 NET CHANGE IN FUND BALANCES - $ - $ 94,782 94,782 $ FUND BALANCES BEGINNING OF YEAR 989,994 FUND BALANCES END OF YEAR 1,084,776 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Library For the Year Ended December 31, 2023 72 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Federal Sources - $ - $ 1,685,000 $ 1,685,000 $ Interest and Rentals - - 95,210 95,210 TOTAL REVENUES - - 1,780,210 1,780,210 EXPENDITURES: Health and Welfare - - 29,175 (29,175) TOTAL EXPENDITURES - - 29,175 (29,175) EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) - - 1,751,035 1,751,035 OTHER FINANCING SOURCES (USES): Transfers Out - - (1,685,000) (1,685,000) NET CHANGE IN FUND BALANCES - $ - $ 66,035 $ 66,035 $ FUND BALANCES BEGINNING OF YEAR 42,840 FUND BALANCES END OF YEAR 174,910 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule American Rescue Plan Act (ARPA) Fund For the Year Ended December 31, 2023 73 ---PAGE BREAK--- Supplementary Information ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals ASSETS: Cash and Investments 7,875,846 $ 1,042,380 $ (6,617) $ 542 $ 8,912,151 $ Receivables: Taxes 357,919 - - - 357,919 Due from Other Governmental Units 399,784 - - - 399,784 Inventories 4,412 - - - 4,412 Prepaid Expense 17,612 - - - 17,612 TOTAL ASSETS 8,655,573 $ 1,042,380 $ (6,617) $ 542 $ 9,691,878 $ LIABILITIES: Accounts Payable 355,576 $ - $ 6,180 $ - $ 361,756 $ Accrued Liabilities 104,616 - - - 104,616 Unearned Revenue 10,815 - - - 10,815 TOTAL LIABILITIES 471,007 - 6,180 - 477,187 FUND BALANCES: Nonspendable 22,024 - - - 22,024 Assigned - 1,042,380 - - 1,042,380 Unassigned 8,162,542 - (12,797) 542 8,150,287 TOTAL FUND BALANCES 8,184,566 1,042,380 (12,797) 542 9,214,691 TOTAL LIABILITIES AND FUND BALANCES 8,655,573 $ 1,042,380 $ (6,617) $ 542 $ 9,691,878 $ County of Otsego, Michigan Supplementary Information General Fund December 31, 2023 Combining Balance Sheet 74 ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals REVENUES: Taxes and Penalties 6,494,742 $ - $ - $ - $ 6,494,742 $ Licenses and Permits 57,731 - - - 57,731 Federal Sources 127,285 - - - 127,285 State Sources 1,693,820 - - - 1,693,820 Local Sources 34,576 - - - 34,576 Charges for Services 1,042,099 - - - 1,042,099 Interest and Rentals 203,283 11,897 54 - 215,234 Fines and Forfeitures 9,288 - - - 9,288 Other Revenue 286,437 - - - 286,437 TOTAL REVENUES 9,949,261 11,897 54 - 9,961,212 EXPENDITURES: Judicial 2,154,018 - - - 2,154,018 General Government 1,993,326 - 57,405 - 2,050,731 Public Safety 3,182,897 - - - 3,182,897 Public Works 4,539 - - - 4,539 Health and Welfare 753,734 - - 1,879 755,613 Community/Economic Development 113,305 - - - 113,305 Other Expenditures 410,986 - - - 410,986 TOTAL EXPENDITURES 8,612,805 - 57,405 1,879 8,672,089 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,336,456 11,897 (57,351) (1,879) 1,289,123 OTHER FINANCING SOURCES (USES): Transfers In 1,702,871 - 40,000 - 1,742,871 Transfers Out (809,397) - - - (809,397) Total Other Financing Sources (Uses) 893,474 - 40,000 - 933,474 NET CHANGE IN FUND BALANCES 2,229,930 11,897 (17,351) (1,879) 2,222,597 FUND BALANCES BEGINNING OF YEAR 5,954,636 1,030,483 4,554 2,421 6,992,094 FUND BALANCES END OF YEAR 8,184,566 $ 1,042,380 $ (12,797) $ 542 $ 9,214,691 $ County of Otsego, Michigan Supplementary Information Changes in Fund Balance - General Fund For the Year Ended December 31, 2023 Combining Statement of Revenues, Expenditures, and 75 ---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 Investments 30,708 $ 365,524 $ 169,154 $ 317,732 $ 454,131 $ 8,221 $ 337,230 $ 98,151 $ Taxes Receivable - - 1,839 - 457,621 - 384,299 - Accounts Receivable 8,735 - - - - - - - Advance to Component Units - - - - - - - - Due from Other Governmental Units - - - 74,933 - - - - Prepaid Items - - - 5,740 - - - - TOTAL ASSETS 39,443 $ 365,524 $ 170,993 $ 398,405 $ 911,752 $ 8,221 $ 721,529 $ 98,151 $ LIABILITIES: Accounts Payable 2,191 $ 6,139 $ - $ 19,010 $ 11,070 $ - $ 24,474 $ - $ Accrued Liabilities - 2,002 - 12,518 7,210 - - 154 Unearned Revenues - 241,847 - - - - - - TOTAL LIABILITIES 2,191 249,988 - 31,528 18,280 - 24,474 154 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - 1,839 - 457,621 - 384,299 - TOTAL DEFERRED INFLOWS OF RESOURCES - - 1,839 - 457,621 - 384,299 - FUND BALANCES: Nonspendable - - - 5,740 - - - - Restricted - 115,536 169,154 - 435,851 8,221 312,756 97,997 Committed 37,252 - - 361,137 - - - - TOTAL FUND BALANCES 37,252 115,536 169,154 366,877 435,851 8,221 312,756 97,997 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 39,443 $ 365,524 $ 170,993 $ 398,405 $ 911,752 $ 8,221 $ 721,529 $ 98,151 $ Supplementary Information Nonmajor Governmental Funds Combining Balance Sheet County of Otsego, Michigan December 31, 2023 Special Revenue Funds 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 Opioid Services ASSETS: Cash and Investments 351,699 $ 1,381,054 $ 159,931 $ 333,905 $ 43,068 $ 44,134 $ 21,047 $ 238,390 $ 20,792 $ Taxes Receivable - - - - - - - - - Accounts Receivable - - - 127,058 140 - - - - Advance to Component Units - - - - - - - - - Due from Other Governmental Units - 503 - - - - - - - Prepaid Items - - - 16,313 - - - - - TOTAL ASSETS 351,699 $ 1,381,557 $ 159,931 $ 477,276 $ 43,208 $ 44,134 $ 21,047 $ 238,390 $ 20,792 $ LIABILITIES: Accounts Payable - $ 20,002 $ 839 $ 10,191 $ - $ - $ 265 $ - $ 110 $ Accrued Liabilities - 4,653 - - 137 - - - - Unearned Revenues - - - - - - - - - TOTAL LIABILITIES - 24,655 839 10,191 137 - 265 - 110 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - - - - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - - - - FUND BALANCES: Nonspendable - - - 16,313 - - - - - Restricted 351,699 1,356,902 159,092 450,772 43,071 44,134 20,782 238,390 20,682 Committed - - - - - - - - - TOTAL FUND BALANCES 351,699 1,356,902 159,092 467,085 43,071 44,134 20,782 238,390 20,682 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 351,699 $ 1,381,557 $ 159,931 $ 477,276 $ 43,208 $ 44,134 $ 21,047 $ 238,390 $ 20,792 $ County of Otsego, Michigan Combining Balance Sheet Special Revenue Funds Supplementary Information Nonmajor Governmental Funds December 31, 2023 78 ---PAGE BREAK--- Debt Service Fund Child Iron Belle Michigan Bradford Care Trail Indigent Equipment Lake Park & Technology Marijuana Debt Probate Maintenance Defense Revolving Dam Recreation Funds Funds Service ASSETS: Cash and Investments 354,647 $ 8,705 $ 77,727 $ 189,600 $ 17,955 $ 694,284 $ 6,444 $ 66,250 $ - $ Taxes Receivable - - - - - 384,115 - - - Accounts Receivable - - - - - - - - - Advance to Component Units - - - - - - - - - Due from Other Governmental Units 30,479 - - - - 6,362 638 531,777 - Prepaid Items 1,146 - - - - 230 - - - TOTAL ASSETS 386,272 $ 8,705 $ 77,727 $ 189,600 $ 17,955 $ 1,084,991 $ 7,082 $ 598,027 $ - $ LIABILITIES: Accounts Payable 7,336 $ - $ 24,622 $ 7,724 $ - $ 13,452 $ - $ - $ - $ Accrued Liabilities 4,291 - - - - 2,005 - - - Unearned Revenues - - - - - 3,577 - - - TOTAL LIABILITIES 11,627 - 24,622 7,724 - 19,034 - - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - 384,115 - - - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - 384,115 - - - FUND BALANCES: Nonspendable 1,146 - - - - 230 - - - Restricted - 8,705 53,105 - 17,955 - - 598,027 - Committed 373,499 - - 181,876 - 681,612 7,082 - - TOTAL FUND BALANCES 374,645 8,705 53,105 181,876 17,955 681,842 7,082 598,027 - TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 386,272 $ 8,705 $ 77,727 $ 189,600 $ 17,955 $ 1,084,991 $ 7,082 $ 598,027 $ - $ Special Revenue Funds December 31, 2023 County of Otsego, Michigan Supplementary Information Nonmajor Governmental Funds Combining Balance Sheet 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 Investments 19,945 $ 1,911,055 $ 149,694 $ 350,433 $ 2,135 $ 429 $ 491,964 $ 848,316 $ Taxes Receivable - - - - - - 536 - Accounts Receivable - - - - - - - - Advance to Component Units - 50,697 - - - - - - Due from Other Governmental Units - - - - - - - - Prepaid Items - - - - - - - - TOTAL ASSETS 19,945 $ 1,961,752 $ 149,694 $ 350,433 $ 2,135 $ 429 $ 492,500 $ 848,316 $ LIABILITIES: 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 - 1,961,752 - - - - 491,964 848,316 Committed 19,945 - 149,694 350,433 2,135 429 - TOTAL FUND BALANCES 19,945 1,961,752 149,694 350,433 2,135 429 491,964 848,316 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 19,945 $ 1,961,752 $ 149,694 $ 350,433 $ 2,135 $ 429 $ 492,500 $ 848,316 $ County of Otsego, Michigan Capital Project Funds Supplementary Information Nonmajor Governmental Funds December 31, 2023 Combining Balance Sheet 80 ---PAGE BREAK--- EMS Building Library Capital Capital Capital Project Projects Trail Head Capital Facilities Project Sinking Sheriff Bond Fund Capital Project Projects Planning Fund Fund Fund Equipment Total ASSETS: Cash and Investments 11,072 $ 86,166 $ 617,673 $ (990) $ 4,006 $ 317,904 $ 3,627 $ 10,603,912 $ Taxes Receivable - - - - - - - 1,228,410 Accounts Receivable - - - - - - - 135,933 Advance to Component Units - - - - - - - 50,697 Due from Other Governmental Units - - - - - - - 644,692 Prepaid Items - - - - - - - 23,429 TOTAL ASSETS 11,072 $ 86,166 $ 617,673 $ (990) $ 4,006 $ 317,904 $ 3,627 $ 12,687,073 $ LIABILITIES: Accounts Payable - $ - $ 175 $ - $ - $ - $ - $ 147,600 $ Accrued Liabilities - - - - - - - 32,970 Unearned Revenues - - - - - - - 245,424 TOTAL LIABILITIES - - 175 - - - - 425,994 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - - 1,228,410 TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - - 1,228,410 FUND BALANCES: Nonspendable - - - - - - - 23,429 Restricted - 86,166 - - - - - 7,891,029 Committed 11,072 - 617,498 (990) 4,006 317,904 3,627 3,118,211 TOTAL FUND BALANCES 11,072 86,166 617,498 (990) 4,006 317,904 3,627 11,032,669 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 11,072 $ 86,166 $ 617,673 $ (990) $ 4,006 $ 317,904 $ 3,627 $ 12,687,073 $ County of Otsego, Michigan Supplementary Information Combining Balance Sheet Nonmajor Governmental Funds December 31, 2023 Capital Project Funds 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 - $ - $ 395 $ - $ 436,059 $ - $ 366,026 $ - $ Federal Sources - - - 309,440 - - - - State Sources - - - 41,510 10,000 - - - Charges for Services 129,158 - - 33,980 43,467 - - - Fines and Forfeits - - - - 53 - - - Interest and Rentals - - - - 10,806 3 6,308 339 Other Revenues 185 313,694 6,777 - 255,094 - - - TOTAL REVENUES 129,343 313,694 7,172 384,930 755,479 3 372,334 339 EXPENDITURES: Judicial - - - 488,969 - - - - General Government - - - - - - - - Public Safety 187,602 - - - 540,132 - - - Public Works - - - - - - 366,883 - Health And Welfare - - - - - - - 4,011 Recreation and Culture - 311,395 - - - - - - Capital Outlay - 195,453 - - 44,495 - - - Debt Service - - - - - - - - TOTAL EXPENDITURES 187,602 506,848 - 488,969 584,627 - 366,883 4,011 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (58,259) (193,154) 7,172 (104,039) 170,852 3 5,451 (3,672) OTHER FINANCING SOURCES (USES): Transfers In 66,000 - - 105,000 - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) 66,000 - - 105,000 - - - - NET CHANGE IN FUND BALANCES 7,741 (193,154) 7,172 961 170,852 3 5,451 (3,672) FUND BALANCES BEGINNING OF YEAR 29,511 308,690 161,982 365,916 264,999 8,218 307,305 101,669 FUND BALANCES END OF YEAR 37,252 $ 115,536 $ 169,154 $ 366,877 $ 435,851 $ 8,221 $ 312,756 $ 97,997 $ Special Revenue Funds Supplementary Information Combining Statement of Revenues, Expenditures, County of Otsego, Michigan and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2023 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 Opioid Services REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ - $ - $ - $ Federal Sources - - - - - - - - - State Sources - - - 157,115 - - - - - Charges for Services - 746,088 32,725 532,478 14,128 6,768 - - - Fines and Forfeits - - - - - - - - - Interest and Rentals 881 23,978 - 654 - - - - 35 Other Revenues - - 968 2,520 - 3,500 238,390 - TOTAL REVENUES 881 770,066 32,725 691,215 16,648 6,768 3,500 238,390 35 EXPENDITURES: Judicial - - - - - - 3,800 - - General Government - - 24,957 - - - - - - Public Safety - 591,048 - 659,475 20,625 1,860 - - - Public Works - - - - - - - - - Health And Welfare - - - - - - - - 2,506 Recreation and Culture - - - - - - - - - Capital Outlay - 13,416 - 144,188 - - - - - Debt Service - - - - - - - - - TOTAL EXPENDITURES - 604,464 24,957 803,663 20,625 1,860 3,800 - 2,506 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 881 165,602 7,768 (112,448) (3,977) 4,908 (300) 238,390 (2,471) OTHER FINANCING SOURCES (USES): Transfers In - - 125 239,797 - - - - 9,480 Transfers Out - - - (17,300) - - - - - TOTAL OTHER FINANCING SOURCES (USES) - - 125 222,497 - - - - 9,480 NET CHANGE IN FUND BALANCES 881 165,602 7,893 110,049 (3,977) 4,908 (300) 238,390 7,009 FUND BALANCES BEGINNING OF YEAR 350,818 1,191,300 151,199 357,036 47,048 39,226 21,082 - 13,673 FUND BALANCES END OF YEAR 351,699 $ 1,356,902 $ 159,092 $ 467,085 $ 43,071 $ 44,134 $ 20,782 $ 238,390 $ 20,682 $ Supplementary Information and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2023 Combining Statement of Revenues, Expenditures, Special Revenue Funds County of Otsego, Michigan 83 ---PAGE BREAK--- Debt Service Fund Child Iron Belle Michigan Bradford Care Trail Indigent Equipment Lake Park & Technology Marijuana Debt Probate Maintenance Defense Revolving Dam Recreation Funds Funds Service REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ 363,142 $ - $ - $ - $ Federal Sources - - - - - - - - - State Sources 174,090 - 308,301 - - - - 842,824 - Charges for Services 10 - - - - 369,987 3,463 - - Fines and Forfeits - - - - - - - - - Interest and Rentals - - 22 - 525 16,513 - - - Other Revenues 16,795 5,000 - - - 3,069 - - - TOTAL REVENUES 190,895 5,000 308,323 - 525 752,711 3,463 842,824 - EXPENDITURES: Judicial - - 384,399 - - - - - - General Government - - - - - - - - - Public Safety - - - - - - - - - Public Works - - - - - - - - - Health And Welfare 327,801 - - - - - - - - Recreation and Culture - 2,515 - - - 518,645 - - - Capital Outlay - - - 171,188 - 48,987 - - - Debt Service - - - - - - - - - TOTAL EXPENDITURES 327,801 2,515 384,399 171,188 - 567,632 - - - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (136,906) 2,485 (76,076) (171,188) 525 185,079 3,463 842,824 - OTHER FINANCING SOURCES (USES): Transfers In 290,000 2,500 82,917 175,000 - - - - - Transfers Out - - - - - - - (244,797) - TOTAL OTHER FINANCING SOURCES (USES) 290,000 2,500 82,917 175,000 - - - (244,797) - NET CHANGE IN FUND BALANCES 153,094 4,985 6,841 3,812 525 185,079 3,463 598,027 - FUND BALANCES BEGINNING OF YEAR 221,551 3,720 46,264 178,064 17,430 496,763 3,619 - - FUND BALANCES END OF YEAR 374,645 $ 8,705 $ 53,105 $ 181,876 $ 17,955 $ 681,842 $ 7,082 $ 598,027 $ - $ Special Revenue Funds Supplementary Information Combining Statement of Revenues, Expenditures, Nonmajor Governmental Funds For the Year Ended December 31, 2023 and Changes in Fund Balance County of Otsego, Michigan 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 - $ - $ - $ - $ - $ - $ - $ - $ Federal Sources - - - - - - - - State Sources - - - - - - - - Charges for Services - - 33,841 - - - - - Fines and Forfeits - - - - - - - - Interest and Rentals 273 59,366 - - 882 176 14,251 14,594 Other Revenues - - - - - - - - TOTAL REVENUES 273 59,366 33,841 - 882 176 14,251 14,594 EXPENDITURES: Judicial - - - - - - - - General Government - - - - - - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare - - - - - - - - Recreation and Culture - - - - - - - - Capital Outlay - 14 51,236 10,000 83 - 85,731 - Debt Service - - - - - - - - TOTAL EXPENDITURES - 14 51,236 10,000 83 - 85,731 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 273 59,352 (17,395) (10,000) 799 176 (71,480) 14,594 OTHER FINANCING SOURCES (USES): Transfers In - - - 50,000 - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) - - - 50,000 - - - - NET CHANGE IN FUND BALANCES 273 59,352 (17,395) 40,000 799 176 (71,480) 14,594 FUND BALANCES BEGINNING OF YEAR 19,672 1,902,400 167,089 310,433 1,336 253 563,444 833,722 FUND BALANCES END OF YEAR 19,945 $ 1,961,752 $ 149,694 $ 350,433 $ 2,135 $ 429 $ 491,964 $ 848,316 $ Capital Project Funds For the Year Ended December 31, 2023 County of Otsego, Michigan Supplementary Information and Changes in Fund Balance Combining Statement of Revenues, Expenditures, Nonmajor Governmental Funds 85 ---PAGE BREAK--- EMS Building Library Capital Capital Capital Projects Trail Head Capital Facilities Project Project Sheriff Bond Fund Capital Projects Projects Planning Fund Fund Sinking Fund Equipment Total REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ - $ 1,165,622 $ Federal Sources - - - - - - - 309,440 State Sources - - - - - - - 1,533,840 Charges for Services - - - - - - - 1,946,093 Fines and Forfeits - - - - - - - 53 Interest and Rentals - 292 3,764 - 70 958 - 154,690 Other Revenues - - - - - - 3,627 849,619 TOTAL REVENUES - 292 3,764 - 70 958 3,627 5,959,357 EXPENDITURES: Judicial - - - - - - - 877,168 General Government - - - - - - - 24,957 Public Safety - - - - - - - 2,000,742 Public Works - - - - - - - 366,883 Health And Welfare - - - - - - - 334,318 Recreation and Culture - - - - - - - 832,555 Capital Outlay - - 26,568 990 - 31,543 - 823,892 Debt Service - - - - - - - - TOTAL EXPENDITURES - - 26,568 990 - 31,543 - 5,260,515 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) - 292 (22,804) (990) 70 (30,585) 3,627 698,842 OTHER FINANCING SOURCES (USES): Transfers In - - 5,000 - - - - 1,025,819 Transfers Out - - - - - - - (262,097) TOTAL OTHER FINANCING SOURCES (USES) - - 5,000 - - - - 763,722 NET CHANGE IN FUND BALANCES - 292 (17,804) (990) 70 (30,585) 3,627 1,462,564 FUND BALANCES BEGINNING OF YEAR 11,072 85,874 635,302 - 3,936 348,489 - 9,570,105 FUND BALANCES END OF YEAR 11,072 $ 86,166 $ 617,498 $ (990) $ 4,006 $ 317,904 $ 3,627 $ 11,032,669 $ Capital Project Funds County of Otsego, Michigan Supplementary Information and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2023 Combining Statement of Revenues, Expenditures, 86 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total ASSETS: Cash, Equivalents & Investments (37,740) $ 76,824 $ 216,000 $ 255,084 $ Accounts Receivable 8,079 152 4,053 12,284 Lease Receivable-Due in less than one year 1,878 - - 1,878 Lease Receivable-Due in more than one year 135,037 - - 135,037 Prepaid Items - - 108,073 108,073 TOTAL ASSETS 107,254 $ 76,976 $ 328,126 $ 512,356 $ LIABILITIES: Accounts Payable 26,019 $ 271 $ - $ 26,290 $ Accrued Liabilities 5,294 3,483 - 8,777 TOTAL LIABILITIES 31,313 3,754 - 35,067 DEFERRED INFLOWS OF RESOURCES: Leases 133,424 - - 133,424 NET POSITION: Unrestricted (57,483) 73,222 328,126 343,865 TOTAL NET POSITION (57,483) 73,222 328,126 343,865 TOTAL LIABILITIES AND NET POSITION 107,254 $ 76,976 $ 328,126 $ 512,356 $ County of Otsego, Michigan Supplementary Information Internal Service Funds December 31, 2023 Combining Statement of Net Position 87 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total OPERATING REVENUES: Charges for Services 555,066 $ 604,447 $ 1,371,641 $ 2,531,154 $ TOTAL OPERATING REVENUES 555,066 604,447 1,371,641 2,531,154 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 213,823 625,327 1,403,286 2,242,436 Contractual Services 85,695 5,593 - 91,288 Materials and Supplies 81,741 10,450 - 92,191 Equipment Repair and Maintenance 17,754 - - 17,754 Utilities 217,798 - - 217,798 Other 383 20,572 643 21,598 TOTAL OPERATING EXPENSES 617,194 661,942 1,403,929 2,683,065 OPERATING INCOME (LOSS) (62,128) (57,495) (32,288) (151,911) Non Operating Revenues (Expenses): Interest Earnings - - 3,567 3,567 Total Non Operating Revenues (Expenses): - - 3,567 3,567 INCOME (LOSS) BEFORE TRANSFERS (62,128) (57,495) (28,721) (148,344) Operating Transfers In(Out) (2,500) - - (2,500) Changes in Net Position (64,628) (57,495) (28,721) (150,844) Net Position Beginning of Year 7,145 130,717 356,847 494,709 Net Position End of Year (57,483) $ 73,222 $ 328,126 $ 343,865 $ County of Otsego, Michigan Supplementary Information in Net Position - Internal Service Funds For the Year Ended December 31, 2023 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 548,580 $ 604,499 $ 1,369,433 $ 2,522,512 $ Payments to Suppliers (408,776) (38,116) - (446,892) Payments to Employees for Services and Benefits (208,529) (629,440) (1,415,366) (2,253,335) Net Cash Used by Operating Activities (68,725) (63,057) (45,933) (177,715) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Operating Transfers In (2,500) - - (2,500) Net Cash Used by Noncapital and Related Financing Activities (2,500) - - (2,500) CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - 3,567 3,567 Net Sale or (Purchase) of Investments - - - - Net Cash Provided by Investing Activities - - 3,567 3,567 Net Decrease in Cash and Equivalents (71,225) (63,057) (42,366) (176,648) Balances - Beginning of the Year 33,485 139,881 258,366 431,732 Balances - End of the Year (37,740) $ 76,824 $ 216,000 $ 255,084 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (62,128) $ (57,495) $ (32,288) $ (151,911) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Change in Assets and Liabilities: Accounts Receivable (6,486) 52 (2,208) (8,642) Prepaid Expense - - (11,437) (11,437) Accounts Payable (5,405) (1,501) - (6,906) Accrued Liabilities 5,294 (4,113) - 1,181 Net Cash Used by Operating Activities (68,725) $ (63,057) $ (45,933) $ (177,715) $ County of Otsego, Michigan Supplementary Information Internal Service Funds For the Year Ended December 31, 2023 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 43,291 $ 148,895 $ 44,347 $ 1,071 $ 9,775 $ 29,620 $ 276,999 $ Accounts Receivable - 900 - - 9,550 - 10,450 Total Current Assets 43,291 149,795 44,347 1,071 19,325 29,620 287,449 Noncurrent Assets Capital Assets (Net of Accumulated Depreciation) - 270 - - - - 270 TOTAL ASSETS 43,291 $ 150,065 $ 44,347 $ 1,071 $ 19,325 $ 29,620 $ 287,719 $ LIABILITIES: Accounts Payable 12,000 $ 1,708 $ 132 $ - $ 14,550 $ - $ 28,390 $ TOTAL LIABILITIES 12,000 1,708 132 - 14,550 - 28,390 NET POSITION: Net Investment in Capital Assets - 270 - - - - 270 Unrestricted 31,291 148,087 44,215 1,071 4,775 29,620 259,059 TOTAL NET POSITION 31,291 $ 148,357 $ 44,215 $ 1,071 $ 4,775 $ 29,620 $ 259,329 $ County of Otsego, Michigan Supplementary Information Nonmajor Enterprise Funds December 31, 2023 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 16,750 $ 56,070 $ - $ - $ 20,913 $ 3,642 $ 97,375 $ TOTAL OPERATING REVENUES 16,750 56,070 - - 20,913 3,642 97,375 OPERATING EXPENSES: Contractual Services 38,881 61,530 - 252 1,260 743 102,666 Materials and Supplies - 912 965 - 35,405 35 37,317 Depreciation - 12,008 - - - - 12,008 Other Expenses - - - - - 265 265 TOTAL OPERATING EXPENSES 38,881 74,450 965 252 36,665 1,043 152,256 OPERATING INCOME (LOSS) (22,131) (18,380) (965) (252) (15,752) 2,599 (54,881) NON OPERATING REVENUES (EXPENSES): Interest Earnings - - - - - 1,188 1,188 TOTAL NONOPERATING REVENUES (ESPENSES): - - - - - 1,188 1,188 INCOME (LOSS) BEFORE TRANSFERS (22,131) (18,380) (965) (252) (15,752) 3,787 (53,693) Transfers In 11,000 - - - - - 11,000 Changes in Net Position (11,131) (18,380) (965) (252) (15,752) 3,787 (42,693) NET POSITION BEGINNING OF YEAR 42,422 166,737 45,180 1,323 20,527 25,833 302,022 NET POSITION END OF YEAR 31,291 $ 148,357 $ 44,215 $ 1,071 $ 4,775 $ 29,620 $ 259,329 $ County of Otsego, Michigan Supplementary Information in Net Position - Nonmajor Enterprise Funds For the Year Ended December 31, 2023 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 16,750 $ 56,420 $ - $ - $ 20,913 $ 3,642 $ 97,725 $ Payments to Suppliers (29,089) (66,621) (898) (252) (29,524) (1,049) (127,433) Net Cash Provided (Used) by Operating Activities (12,339) (10,201) (898) (252) (8,611) 2,593 (29,708) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Transfers In 11,000 - - - - - 11,000 Net Cash Provided by Noncapital and Related Financing Activities 11,000 - - - - - 11,000 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - - - - 1,188 1,188 Net Cash Provided by Investing Activities - - - - - 1,188 1,188 Net Increase (Decrease) in Cash and Equivalents (1,339) (10,201) (898) (252) (8,611) 3,781 (17,520) Balances - Beginning of the Year 44,630 159,096 45,245 1,323 18,386 25,839 294,519 Balances - End of the Year 43,291 $ 148,895 $ 44,347 $ 1,071 $ 9,775 $ 29,620 $ 276,999 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (22,131) $ (18,380) $ (965) $ (252) $ (15,752) $ 2,599 $ (54,881) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - 12,008 - - - - 12,008 Change in Assets and Liabilities: Accounts Receivable - 350 - - - - 350 Accounts Payable 9,792 (4,179) 67 - 7,141 12,815 Net Cash Provided (Used) by Operating Activities (12,339) $ (10,201) $ (898) $ (252) $ (8,611) $ 2,593 $ (29,708) $ County of Otsego, Michigan Supplementary Information Nonmajor Enterprise Funds For the Year Ended December 31, 2023 Combining Statement of Cash Flows 92 ---PAGE BREAK--- Reports on Compliance ---PAGE BREAK--- 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, 2023, 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 August 8, 2025. 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 was 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.  ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 (906) 495-5952 Fax (906) 495-7312 [EMAIL REDACTED] ---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 two instances of noncompliance or other matters that is required to be reported under Government Auditing Standards as items 2023-1 and 2023-2 County of Otsego, Michigan’s Response to Findings Government Auditing Standards requires the auditor to perform limited procedures on the County of Otsego, Michigan’s responses to the findings identified in our audit and described in the accompanying schedule of findings and questioned costs. The County of Otsego, Michigan’s responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the responses. 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 August 8, 2025 ---PAGE BREAK--- 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, 2023. 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 $1.303,419 and $166,299 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, 2023. 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, 2023. 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. 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 (906) 495-5952 Fax (906) 495-7312 [EMAIL REDACTED]  ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN ---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 August 8, 2025 ---PAGE BREAK--- Assistance Agency or Passed Federal Grantor/Pass-through Listing 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 2023 - $ 60,115 $ Total U.S. Department of Housing and Urban Development - 60,115 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 - 499,862 Formula Grants for Rural Areas and Tribal Transit Programs Yes 20.509 CARES Act - 40,070 Federal Transit Cluster Grants for Buses and Bus Facilities Program No 20.526 N/A - 595,275 Subtotal MDOT - 1,135,207 Pass-through the Michigan State Police Hazardous Material Emergency Prepardness Grant No 20.703 N/A - 1,500 Total U.S. Department of Transportation - 1,136,707 U.S. DEPARTMENT OF TREASURY: Direct Award: Coronavirus State and Local Fiscal Recovery Funds Yes 21.027 N/A 1,685,000 Local Assistanceand Tribal Consistency Fund Yes 21.032 N/A - 50,000 Total U.S. Deparment of Treasury - 1,735,000 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-17-69002 - 42,096 Child Support Enforcement No 93.563 CSPA-24-69002 - 13,022 Child Support Enforcement No 93.563 CSFOC17-69001 194,088 Child Support Enforcement No 93.563 CSFOC24-69001 - 67,293 Child Support Enforcement Incentive No 93.563 CSFOC17-69001 36,484 Child Support Enforcement Incentive No 93.563 CSFOC24-69001 - 11,575 Total U.S. Department of Health and Human Services - 364,558 U.S. DEPARTMENT OF HOMELAND SECURITY: Pass-through from the Michigan Department of Natural Resources No 97.012 N/A - 4,039 Pass-through from the Michigan State Police Emergency Management Performance Grants No 97.042 EMC-2024-EP-00001 - 11,361 Emergency Management Performance Grants Yes 97.042 EMC-2024-EP-00001 - 5,267 Subtotal - MSP - 16,628 Total U.S. Department of Homeland Security - 20,667 TOTAL EXPENDITURES OF FEDERAL AWARDS - $ 3,317,047 $ County of Otsego, Michigan Supplementary Information Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2023 See accompanying notes to scheduled of expenditures of federal awards. 98 ---PAGE BREAK--- County of Otsego, Michigan Notes to Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2023 99 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, 2023. 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, 2023, the federal aid received and expended by the Otsego County Road Commission was $1,142,349 for contracted projects and $161,070 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. NOTE E - RECONCILIATION TO THE BASIC FINANCIAL STATEMENTS: The following is a reconciliation of the amounts reported on the basic financial statements to the Schedule of Expenditures of Federal Awards: Total Federal Sources per Financial Statements: Federal Grants of Governmental Funds $ 2,181,840 Federal Grants of Proprietary Funds 1,135,207 Total Federal Revenue Recognized per Schedule of Expenditures of Federal Awards $ 3,317,047 NOTE F - SUBRECIPIENTS: There were no awards passed through to subrecipients. ---PAGE BREAK--- County of Otsego, Michigan Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 100 Section I – Summary of Auditor’s Results Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: · Material weaknesses identified? No · Significant deficiencies identified that are not considered to be material weaknesses? No Noncompliance material to financial statements noted? Yes Federal Awards Internal control over major programs: · Material weaknesses identified? No · 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 21.027 ARPA 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, 2023 101 Section II – Financial Statement Findings Noncompliance with State Statutes Deficit Unrestricted/Unassigned Net Position/Fund Balance Finding 2023-001 Criteria: The deficit in unrestricted net position and unassigned fund balance is contrary to the provisions of Public Act 140 of 1971. Condition: The County’s Building & Grounds, Legal Defense, Facilities Planning funds have a deficit in unrestricted net position of $(57,483), and unassigned fund balance of $(12,797) and $(990), respectively. Cause: Unknown. Effect: The County is in noncompliance with the provisions of Public Act 140 of 1971. Recommendation: We recommend that the County develop a plan to eliminate the deficits as soon as possible. Planned Corrective Action: The County contacted the State and was told at that time a deficit reduction plan should not be filed until the State contacted them, through a letter, to submit a deficit reduction plan.  Contact Person(s) Responsible for Correction: Morgan Kwapis, Finance Director  Anticipated Completion Date: As soon as possible. ---PAGE BREAK--- County of Otsego, Michigan Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 102 Section II – Financial Statement Findings (Continued) Noncompliance with State Statutes Expenditures in Excess of Appropriations—Budgetary Funds Finding 2023-002 Criteria: The expenditures of funds in excess of appropriations are contrary to the provisions of Section 16 of Public Act 2 of 1968, as amended. Condition: Our examination of procedures used by the County to adopt and maintain operating budgets for the County’s budgetary fund revealed the following instances of noncompliance with the provisions of Public Act 2 of 1968, as amended, the Uniform Budget and Accounting Act. The County’s 2023 General Appropriations Act (budget) provided for expenditures of the General Fund to be controlled to the activity level. As detailed, actual 2023 expenditures exceeded the board’s approved budget allocations for some general fund activities. During the fiscal year ended December 31, 2023, expenditures were incurred in excess of amounts appropriated in the amended budgets for the General Fund and ARPA Fund. Effect: Condition’s may violate State Law. Cause: Expenditure classifications resulted in unbudgeted line items. Recommendation: We recommend that the County and personnel responsible for administering the activities of the various funds of the County, develop budgetary control procedures for the general fund and special revenues funds, which will assure that expenditures do not exceed amounts authorized in the General Appropriations Act, or amendments thereof. Planned Corrective Action: Management has agreed to correct the problem by monitoring the budgets more closely and performing budget amendments on a timely basis.  Contact Person(s) Responsible for Correction: Morgan Kwapis, County Finance Director  Anticipated Completion Date: As soon as possible. ---PAGE BREAK--- County of Otsego, Michigan Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 103 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, 2023 104 Section III – Federal Award Findings and Questioned Costs NONE. ---PAGE BREAK--- 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, 2023, and have issued our report thereon dated August 8, 2025. 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 January 10, 2025. 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 15 to the financial statements, the County of Otsego Michigan changed accounting policies related to subscription-based information technology arrangements (SBITAs) by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 96, Subscription-Based Information Technology Arrangements in 2023. 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:  ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL TORI N. KRUISE, CPA MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MICPA OFFICES IN MICHIGAN 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 (906) 495-5952 Fax (906) 495-7312 [EMAIL REDACTED] ---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 $500,000. • 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 August 8, 2025. 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: Corrected Bank Reconciliations (Prior Year) 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: Corrected Upcoming Accounting Standards GASB Statement No. 100, Accounting Changes and Error Corrections In June 2022, the GASB issued Statement No. 100, Accounting Changes and Error Corrections - an amendment of GASB Statement No. 62. This statement prescribes the accounting and financial reporting for each type of accounting change and error corrections. This Statement requires that changes in accounting principles and error corrections be reported retroactively by restating prior period, changes to or within the financial reporting entity be reported by adjusting beginning balances of the current period, and changes in accounting estimates be reported prospectively by recognizing the change in the current period. This Statement improves the clarity of the accounting and financial reporting requirements for accounting changes and error corrections, which will result in greater consistency in application in practice. More understandable, reliable, relevant, consistent, and comparable information will be provided to financial statement users for making decisions or assessing accountability. Additionally, the display and note disclosure requirements will result in more consistent, decision useful, understandable, and comprehensive information for users about accounting changes and error corrections. This statement is effective for the year ending December 31, 2024. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 4 GASB Statement No. 101, Compensated Absences In June 2022, the GASB issued Statement No. 101, Compensated Absences. This statement updates the recognition and measurement guidance for compensated absences. This is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. This Statement requires that liabilities for compensated absences be recognized for leave that has not been used and leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if the leave is attributable to services already rendered, the leave accumulates, and the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. This Statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements. This statement is effective for the year ending December 31, 2024. 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 5 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 August 8, 2025